##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q/A
 QUARTERLY REPORT
Amendment No. 1
 Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
 For the quarter ended July 31, 2010
 Commission file number 0-10146
 SERVIDYNE, INC.
  Georgia
    
    58-0522129(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 
 (770) 953-0304
 N/A
  þ o
  o o
  Large accelerated filer o
Accelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ  o þ




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TABLE OF CONTENTS  ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 4. CONTROLS AND PROCEDURESPART II. OTHER INFORMATIONITEM 6. EXHIBITSSIGNATURESEX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  Explanatory Note
  Accounting for Income Taxes
      
    
    Part I  Item 1  Financial Statements
    
    Part I  Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    Part I  Item 4  Controls and Procedures
   1




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##### Table of Contents



SERVIDYNE, INC.
 July 31, 2010
    
    
    April 30, 2010(Restated)
    
    
    (Restated)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    1,797,486
    
    
    $
    1,923,641Receivables (Note 5):Trade accounts and notes, net of allowance for doubtful accounts of
$90,892 and $58,989, respectively
    
    
    1,012,619
    
    
    
    953,075Contracts, net of allowance for doubtful accounts of $54,804 and
$22,530, respectively, including retained amounts of $719,344 and
$675,281, respectively (Note 11)
    
    
    2,783,576
    
    
    
    3,337,177Costs and earnings in excess of billings (Note 11)
    
    
    724,948
    
    
    
    715,129Assets of discontinued operations (Note 9)
    
    
    133,665
    
    
    
    188,827Deferred income taxes (Note 13)
    
    
    326,907
    
    
    
    360,097Other current assets
    
    
    1,684,187
    
    
    
    1,247,844Total current assets
    
    
    8,463,388
    
    
    
    8,725,790PROPERTY AND EQUIPMENT, net (Note 2)
    
    
    4,737,797
    
    
    
    4,805,542ASSETS OF DISCONTINUED OPERATIONS (Note 9)
    
    
    4,850,312
    
    
    
    13,767,227DEFERRED INCOME TAXES (Note 13)
    
    
    407,090
    
    
    
    1,160,371OTHER ASSETS:Real estate held for future development or sale
    
    
    853,109
    
    
    
    853,109Intangible assets, net (Note 8)
    
    
    2,291,057
    
    
    
    2,395,874Goodwill (Note 8)
    
    
    6,354,002
    
    
    
    6,354,002Other assets
    
    
    2,885,195
    
    
    
    2,890,357Total assets
    
    $
    30,841,950
    
    
    $
    40,952,272LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    1,113,249
    
    
    $
    2,465,112Accrued expenses
    
    
    1,478,197
    
    
    
    1,378,538Deferred revenue
    
    
    430,457
    
    
    
    507,383Billings in excess of costs and earnings
    
    
    479,036
    
    
    
    53,100Liabilities of discontinued operations (Note 9)
    
    
    180,576
    
    
    
    520,308Short-term debt and current maturities of long-term debt
    
    
    272,944
    
    
    
    270,592Total current liabilities
    
    
    3,954,459
    
    
    
    5,195,033LIABILITIES OF DISCONTINUED OPERATIONS (Note 9)
    
    
    5,693,908
    
    
    
    13,587,832OTHER LIABILITIES
    
    
    1,000,020
    
    
    
    1,039,633MORTGAGE NOTES PAYABLE, less current maturities
    
    
    4,076,348
    
    
    
    4,107,996OTHER LONG-TERM DEBT, less current maturities
    
    
    1,832,000
    
    
    
    1,832,000Total liabilities
    
    
    16,556,735
    
    
    
    25,762,494COMMITMENTS AND CONTINGENCIES (Note 12)SHAREHOLDERS EQUITY:Common stock, $1 par value; 10,000,000 shares authorized;
3,919,673 issued and 3,676,283 outstanding at July 31, 2010;
3,919,773 issued and 3,676,383 outstanding at April 30, 2010
    
    
    3,919,673
    
    
    
    3,919,773Additional paid-in capital
    
    
    6,251,691
    
    
    
    6,206,521Retained earnings
    
    
    5,119,996
    
    
    
    6,069,629Treasury stock (common shares) of 243,390 and 243,390, respectively
    
    
    (1,006,145
    )
    
    
    (1,006,145
    )Total shareholders equity
    
    
    14,285,215
    
    
    
    15,189,778Total liabilities and shareholders equity
    
    $
    30,841,950
    
    
    $
    40,952,272
 See accompanying notes to condensed consolidated financial statements.
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SERVIDYNE, INC.
 FIRST QUARTER ENDEDJULY 31,2010
    
    
    2009(Restated)
    
    
    (Restated)REVENUES:Building Performance Efficiency (BPE) (Note 11)
    
    $
    4,841,727
    
    
    $
    3,873,108Other
    
    
    103,868
    
    
    
    101,0354,945,595
    
    
    
    3,974,143COST OF REVENUES:BPE
    
    
    3,565,017
    
    
    
    2,624,609Other
    
    
    174,306
    
    
    
    184,5043,739,323
    
    
    
    2,809,113SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    2,494,548
    
    
    
    2,383,909OTHER (INCOME) AND EXPENSES:Other expense (income)
    
    
    22,991
    
    
    
    (12,902
    )Interest income
    
    
    (17
    )
    
    
    (5,284
    )Interest expense
    
    
    108,990
    
    
    
    100,057131,964
    
    
    
    81,871LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    (1,420,240
    )
    
    
    (1,300,750
    )INCOME TAX BENEFIT (Note 13)
    
    
    (432,204
    )
    
    
    (444,986
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (988,036
    )
    
    
    (855,764
    )DISCONTINUED OPERATIONS (Note 9):Earnings from discontinued operations, adjusted for applicable income
tax (benefit) expense of ($8,615) and $27,153, respectively
    
    
    24,369
    
    
    
    78,873Earnings on disposition of income-producing properties, adjusted for applicable
income tax expense of $63,998 and $0, respectively
    
    
    50,940
    
    
    
    EARNINGS FROM DISCONTINUED OPERATIONS
    
    
    75,309
    
    
    
    78,873NET LOSS
    
    $
    (912,727
    )
    
    $
    (776,891
    )NET (LOSS) EARNINGS PER SHARE (Note 7):From continuing operations  basic and diluted
    
    $
    (0.27
    )
    
    $
    (0.23
    )From discontinued operations  basic and diluted
    
    
    .02
    
    
    
    .02NET LOSS PER SHARE  BASIC AND DILUTED
    
    $
    (0.25
    )
    
    $
    (0.21
    )WEIGHTED AVERAGE SHARES OUTSTANDING  BASIC AND DILUTED
    
    
    3,676,367
    
    
    
    3,691,294
 See accompanying notes to condensed consolidated financial statements.
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SERVIDYNE, INC.
 FIRST QUARTER ENDEDJULY 31,2010
    
    
    2009(Restated)
    
    
    (Restated)Cash flows from operating activities:Net loss
    
    $
    (912,727
    )
    
    $
    (776,891
    )Adjustments to reconcile net loss to net
cash used in operating activities:Earnings from discontinued operations, net of tax
    
    
    (75,309
    )
    
    
    (78,873
    )Gain on disposal of assets
    
    
    (1,385
    )
    
    
    Depreciation and amortization
    
    
    265,912
    
    
    
    238,567Deferred tax benefit (Note 13)
    
    
    (428,054
    )
    
    
    (444,986
    )Stock compensation expense
    
    
    45,074
    
    
    
    50,298Adjustment to cash surrender value of life insurance
    
    
    (32,233
    )
    
    
    (29,310
    )Straight-line rent
    
    
    1,053
    
    
    
    (1,274
    )Provision for doubtful accounts, net
    
    
    64,177
    
    
    
    (26,511
    )Changes in assets and liabilities:Receivables
    
    
    429,880
    
    
    
    (139,618
    )Costs and earnings in excess of billings
    
    
    (9,819
    )
    
    
    (288,894
    )Other current and long-term assets
    
    
    (436,343
    )
    
    
    (259,844
    )Trade and subcontractors payable
    
    
    (1,351,863
    )
    
    
    58,888Accrued expenses and deferred revenue
    
    
    22,733
    
    
    
    (286,905
    )Billings in excess of costs and earnings
    
    
    425,936
    
    
    
    715,968Other liabilities
    
    
    (750
    )
    
    
    1,400Net cash used in operating activities
    
    
    (1,993,718
    )
    
    
    (1,267,985
    )Cash flows from investing activities:Premiums paid on officers life insurance policies
    
    
    (2,521
    )
    
    
    (5,464
    )Additions to property and equipment
    
    
    (28,175
    )
    
    
    (143,570
    )Additions to intangible assets
    
    
    (69,244
    )
    
    
    (64,377
    )Proceeds from sale of property and equipment
    
    
    5,454
    
    
    
    Net cash used in investing activities
    
    
    (94,486
    )
    
    
    (213,411
    )Cash flows from financing activities:Mortgage repayments
    
    
    (29,296
    )
    
    
    (27,116
    )Debt repayments
    
    
    
    
    
    
    (100,000
    )Cash dividends paid to shareholders
    
    
    (36,910
    )
    
    
    (74,788
    )Net cash used in financing activities
    
    
    (66,206
    )
    
    
    (201,904
    )DISCONTINUED OPERATIONS:Operating activities
    
    
    119,637
    
    
    
    196,764Investing activities
    
    
    1,937,202
    
    
    
    56,058Financing activities
    
    
    (28,584
    )
    
    
    (66,345
    )Net cash provided by discontinued operations
    
    
    2,028,255
    
    
    
    186,477Net decrease in cash and cash equivalents
    
    
    (126,155
    )
    
    
    (1,496,823
    )Cash at beginning of period
    
    
    1,923,641
    
    
    
    4,821,126Cash at end of period
    
    $
    1,797,486
    
    
    $
    3,324,303
 See accompanying notes to condensed consolidated financial statements.
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SERVIDYNE, INC.
 NOTE 1. ORGANIZATION AND BUSINESS
   NOTE 2. UNAUDITED STATEMENTS
  Property, Plant and Equipment
 5




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NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS
 Revenue Recognition (Topic 605)Multiple-Deliverable Revenue
Arrangements Software (Topic 985)Certain Revenue Arrangements That Include
Software Elements
 NOTE 4. EQUITY-BASED COMPENSATION
   6




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Stock Options
  WeightedOptions to
    
    
    AveragePurchase
    
    
    ExerciseShares
    
    
    PriceOutstanding at April 30, 2010
    
    
    482,486
    
    
    $
    4.46Granted
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Outstanding at July 31, 2010
    
    
    482,486
    
    
    $
    4.46Vested at July 31, 2010
    
    
    482,486
    
    
    $
    4.46Non-vested at July 31, 2010, that are expected to vest
    
    
    
    
    
    $
    
   Weighted AverageExercise
    
    Number of
    
    Remaining ContractualPrice
    
    Outstanding Options
    
    Term (Years)$4.42
    
    
    415,629
    
    
    
    2.28$4.59
    
    
    55,440
    
    
    
    4.65$5.19
    
    
    917
    
    
    
    3.88$5.24
    
    
    10,500
    
    
    
    2.87
   7




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Stock Appreciation Rights (SARs)
  WeightedAverageExerciseSARs
    
    
    PriceOutstanding at April 30, 2010
    
    
    927,425
    
    
    $
    3.85Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (52,500
    )
    
    
    4.76Outstanding at July 31, 2010
    
    
    874,925
    
    
    $
    3.79Vested at July 31, 2010
    
    
    145,499
    
    
    $
    3.91Non-vested at July 31, 2010, that are expected to vest
    
    
    515,930
    
    
    $
    3.84
 rd th th
  Weighted AverageExercise
    
    Outstanding
    
    Vested
    
    Remaining ContractualPrice
    
    SARs
    
    SARs
    
    Term (Years)$3.94
    
    
    180,495
    
    
    
    108,959
    
    
    
    5.91$3.79
    
    
    109,830
    
    
    
    33,390
    
    
    
    6.36$4.19
    
    
    10,500
    
    
    
    3,150
    
    
    
    6.87$6.19
    
    
    33,600
    
    
    
    0
    
    
    
    7.17$5.00
    
    
    52,500
    
    
    
    0
    
    
    
    7.73$4.76
    
    
    84,000
    
    
    
    0
    
    
    
    7.87$4.00
    
    
    22,500
    
    
    
    0
    
    
    
    8.13$2.30
    
    
    30,000
    
    
    
    0
    
    
    
    8.86$4.00
    
    
    200,000
    
    
    
    0
    
    
    
    9.29$2.12
    
    
    20,000
    
    
    
    0
    
    
    
    9.36$2.09
    
    
    131,500
    
    
    
    0
    
    
    
    9.65
  8




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Shares of Restricted Stock
    Number of
    
    
    Weighted AverageShares of
    
    
    Fair ValueRestricted
    
    
    per ShareStock
    
    
    on Grant DateNon-vested restricted stock at April 30, 2010
    
    
    3,150
    
    
    $
    2.99Granted
    
    
    
    
    
    
    Forfeited
    
    
    (100
    )
    
    
    2.12Vested
    
    
    (1,050
    )
    
    
    4.76Non-vested restricted stock at July 31, 2010
    
    
    2,000
    
    
    $
    2.11
 NOTE 5. RECEIVABLES
  NOTE 6. SEGMENT REPORTING
 Segment Reporting
 9




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For the Quarter Ended July 31, 2010
    
    BPE
    
    Corporate (1)
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    3,018,592
    
    
    
    
    
    
    
    
    
    
    $
    3,018,592Lighting products
    
    
    684,735
    
    
    
    
    
    
    
    
    
    
    
    684,735Energy management services
    
    
    340,090
    
    
    
    
    
    
    
    
    
    
    
    340,090Fifth fuel management services
    
    
    57,059
    
    
    
    
    
    
    
    
    
    
    
    57,059Productivity software
    
    
    741,251
    
    
    
    
    
    
    
    
    
    
    
    741,251Total revenues from unaffiliated customers
    
    $
    4,841,727
    
    
    $
    103,868
    
    
    $
    
    
    
    $
    4,945,595Intersegment revenue
    
    
    
    
    
    
    68,304
    
    
    
    (68,304
    )
    
    
    Total revenues from continuing
operations
    
    $
    4,841,727
    
    
    $
    172,172
    
    
    $
    (68,304
    )
    
    $
    4,945,595Loss from continuing operations
before income taxes
    
    $
    (601,376
    )
    
    $
    (818,218
    )
    
    $
    (646
    )
    
    $
    (1,420,240
    )
 For the Quarter Ended July 31, 2009
    
    BPE
    
    Corporate (1)
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    2,012,844
    
    
    
    
    
    
    
    
    
    
    $
    2,012,844Lighting products
    
    
    456,450
    
    
    
    
    
    
    
    
    
    
    
    456,450Energy management services
    
    
    563,800
    
    
    
    
    
    
    
    
    
    
    
    563,800Fifth fuel management services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Productivity software
    
    
    840,014
    
    
    
    
    
    
    
    
    
    
    
    840,014Total revenues from unaffiliated customers
    
    $
    3,873,108
    
    
    $
    101,035
    
    
    $
    
    
    
    $
    3,974,143Intersegment revenue
    
    
    141,545
    
    
    
    69,868
    
    
    
    (211,413
    )
    
    
    Total revenues from continuing
operations
    
    $
    4,014,653
    
    
    $
    170,903
    
    
    $
    (211,413
    )
    
    $
    3,974,143Loss from continuing operations
before income taxes
    
    $
    (390,485
    )
    
    $
    (894,825
    )
    
    $
    (15,440
    )
    
    $
    (1,300,750
    )
  (1)
    
    The Corporate net loss in each period was derived from corporate headquarters
activities, which consist primarily of the following: rental revenues from tenants in
the Companys corporate headquarters building and related rental and operating costs,
salaries and benefits of Corporate Headquarters executive officers and staff,
equity-based compensation expenses, depreciation and amortization expenses, and costs
related to the Companys status as a publicly-held company, which include, among other
items, legal fees, non-employee directors fees, consulting expenses, investor relations
expenses, corporate audit and tax fees, Nasdaq listing fees, and other Securities &
Exchange Commission (SEC) and Sarbanes-Oxley compliance and financial reporting costs.
All relevant costs related to the business operations of the Companys BPE Segment are
either paid directly by BPE or are allocated to BPE by the Corporate Headquarters. The
allocation method is dependent on the nature of each expense item. Allocated expenses
include, among other items, accounting services, information technology services,
insurance costs, and audit and tax preparation fees. 10




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NOTE 7. EARNINGS (LOSS) PER SHARE
  11




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NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
  July
31, 2010Gross Carrying
    
    
    AccumulatedAmount
    
    
    AmortizationIntangible assets, subject to amortization:Proprietary BPE technology solutions
    
    $
    4,161,615
    
    
    $
    2,969,160Acquired computer software
    
    
    681,032
    
    
    
    506,235Real estate lease costs
    
    
    49,170
    
    
    
    21,834Customer relationships
    
    
    404,632
    
    
    
    295,764Deferred loan costs
    
    
    122,686
    
    
    
    98,149Non-compete agreements
    
    
    63,323
    
    
    
    63,323Tradename
    
    
    61,299
    
    
    
    8,854Other
    
    
    44,882
    
    
    
    42,970$
    5,588,639
    
    
    $
    4,006,289Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707Goodwill
    
    $
    6,354,002
 April 30, 2010Gross Carrying
    
    
    AccumulatedAmount
    
    
    AmortizationIntangible assets, subject to amortization:Proprietary BPE technology solutions
    
    $
    4,096,802
    
    
    $
    2,827,071Acquired computer software
    
    
    676,837
    
    
    
    493,885Real estate lease costs
    
    
    49,170
    
    
    
    19,459Customer relationships
    
    
    404,632
    
    
    
    286,433Deferred loan costs
    
    
    122,686
    
    
    
    95,082Non-compete agreements
    
    
    63,323
    
    
    
    60,684Tradename
    
    
    61,299
    
    
    
    7,834Other
    
    
    44,882
    
    
    
    42,016$
    5,519,631
    
    
    $
    3,832,464Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707Goodwill
    
    $
    6,354,002
 Aggregate amortization expense for all amortizable intangible assets:For the quarter ended July 31, 2010
    
    $
    174,062For the quarter ended July 31, 2009
    
    
    144,643Estimated future amortization expenses for all amortized
intangible assets for the fiscal years ended:Remainder of 2011
    
    $
    294,1762012
    
    
    467,7202013
    
    
    319,6742014
    
    
    223,6082015
    
    
    178,4532016
    
    
    69,776Thereafter
    
    
    28,943$
    1,582,350
 12




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NOTE 9. DISCONTINUED OPERATIONS
    13




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First Quarter EndedJuly 31,2010
    
    2009Rental revenues
    
    $
    296,159
    
    
    $
    655,060Rental property operating expenses, including depreciation
    
    
    280,405
    
    
    
    549,034Operating earnings from discontinued operations
    
    
    15,754
    
    
    
    106,026Income tax benefit (expense)
    
    
    8,615
    
    
    
    (27,153
    )Operating earnings from discontinued operations, net of tax
    
    
    24,369
    
    
    
    78,873Gain on disposition of income-producing properties
    
    
    114,938
    
    
    
    Income tax expense
    
    
    (63,998
    )
    
    
    Gain on disposition of income-producing properties, net of tax
    
    
    50,940
    
    
    
    Earnings from discontinued operations, net of tax
    
    $
    75,309
    
    
    $
    78,873
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As of July 31, 2010ReclassificationRelated to
    
    As Recast forDiscontinuance
    
    DiscontinuedAdjustments for
    
    of Real Estate
    
    Operations andAs Originally
    
    Discontinued
    
    Segment
    
    Segment ChangeReported
    
    Operations
    
    Reporting
    
    (Note 13)Consolidated balance sheetASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    1,797,486
    
    
    $
    
    
    
    $
    
    
    
    $
    1,797,486Receivables:Trade accounts and notes, net of allowance for doubtful accounts
    
    
    1,043,748
    
    
    
    (31,129
    )
    
    
    
    
    
    
    1,012,619Contracts, net of allowance for doubtful accounts
    
    
    2,783,576
    
    
    
    
    
    
    
    
    
    
    
    2,783,576Costs and earnings in excess of billings
    
    
    724,948
    
    
    
    
    
    
    
    
    
    
    
    724,948Assets of discontinued operations
    
    
    67,880
    
    
    
    65,785
    
    
    
    
    
    
    
    133,665Deferred income taxes
    
    
    375,604
    
    
    
    (11,739
    )
    
    
    
    
    
    
    363,865Other current assets
    
    
    1,707,104
    
    
    
    (22,917
    )
    
    
    
    
    
    
    1,684,187Total current assets
    
    
    8,500,346
    
    
    
    
    
    
    
    
    
    
    
    8,500,346INCOME-PRODUCING PROPERTIES, net
    
    
    8,638,902
    
    
    
    (4,552,503
    )
    
    
    (4,086,399
    )
    
    
    PROPERTY AND EQUIPMENT, net
    
    
    651,398
    
    
    
    
    
    
    
    4,086,399
    
    
    
    4,737,797ASSETS OF DISCONTINUED OPERATIONS
    
    
    
    
    
    
    4,850,312
    
    
    
    
    
    
    
    4,850,312DEFERRED INCOME TAXES
    
    
    
    
    
    
    1,132,817
    
    
    
    
    
    
    
    1,132,817OTHER ASSETS:Real estate held for sale
    
    
    853,109
    
    
    
    
    
    
    
    
    
    
    
    853,109Intangible assets, net
    
    
    2,570,670
    
    
    
    (279,613
    )
    
    
    
    
    
    
    2,291,057Goodwill
    
    
    6,354,002
    
    
    
    
    
    
    
    
    
    
    
    6,354,002Other assets
    
    
    2,903,391
    
    
    
    (18,196
    )
    
    
    
    
    
    
    2,885,195Total assets
    
    $
    30,471,818
    
    
    $
    1,132,817
    
    
    $
    
    
    
    $
    31,604,635LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    1,113,249
    
    
    $
    
    
    
    $
    
    
    
    $
    1,113,249Accrued expenses
    
    
    1,580,905
    
    
    
    (102,708
    )
    
    
    
    
    
    
    1,478,197Deferred revenue
    
    
    430,457
    
    
    
    
    
    
    
    
    
    
    
    430,457Billings in excess of costs and earnings
    
    
    479,036
    
    
    
    
    
    
    
    
    
    
    
    479,036Liabilities of discontinued operations
    
    
    26,024
    
    
    
    154,552
    
    
    
    
    
    
    
    180,576Short-term debt and current maturities of long-term debt
    
    
    324,788
    
    
    
    (51,844
    )
    
    
    
    
    
    
    272,944Total current liabilities
    
    
    3,954,459
    
    
    
    
    
    
    
    
    
    
    
    3,954,459DEFERRED INCOME TAXES
    
    
    641,547
    
    
    
    (641,547
    )
    
    
    
    
    
    
    LIABILITIES OF DISCONTINUED OPERATIONS
    
    
    
    
    
    
    5,693,908
    
    
    
    
    
    
    
    5,693,908OTHER LIABILITIES
    
    
    1,000,020
    
    
    
    
    
    
    
    
    
    
    
    1,000,020MORTGAGE NOTES PAYABLE, less current maturities
    
    
    7,995,892
    
    
    
    (3,919,544
    )
    
    
    
    
    
    
    4,076,348OTHER LONG-TERM DEBT, less current maturities
    
    
    1,832,000
    
    
    
    
    
    
    
    
    
    
    
    1,832,000Total liabilities
    
    
    15,423,918
    
    
    
    1,132,817
    
    
    
    
    
    
    
    16,556,735COMMITMENTS
AND CONTINGENCIES SHAREHOLDERS EQUITY:Common stock
    
    
    3,919,673
    
    
    
    
    
    
    
    
    
    
    
    3,919,673Additional
paid-in capital
    
    
    6,251,691
    
    
    
    
    
    
    
    
    
    
    
    6,251,691Retained earnings
    
    
    5,882,681
    
    
    
    
    
    
    
    
    
    
    
    5,882,681Treasury stock (common shares)
    
    
    (1,006,145
    )
    
    
    
    
    
    
    
    
    
    
    (1,006,145
    )Total shareholders equity
    
    
    15,047,900
    
    
    
    
    
    
    
    
    
    
    
    15,047,900Total liabilities and shareholders equity
    
    $
    30,471,818
    
    
    $
    1,132,817
    
    
    $
    
    
    
    $
    31,604,635
 15




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##### Table of Contents



As of April 30, 2010ReclassificationRelated to
    
    As Recast forDiscontinuance
    
    DiscontinuedAdjustments for
    
    of Real Estate
    
    Operations andAs Originally
    
    Discontinued
    
    Segment
    
    Segment ChangeReported
    
    Operations
    
    Reporting
    
    (Note 13)Consolidated balance sheetASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    1,923,641
    
    
    $
    
    
    
    $
    
    
    
    $
    1,923,641Receivables:Trade accounts and notes, net of allowance for doubtful accounts
    
    
    973,442
    
    
    
    (20,367
    )
    
    
    
    
    
    
    953,075Contracts, net of allowance for doubtful accounts
    
    
    3,337,177
    
    
    
    
    
    
    
    
    
    
    
    3,337,177Costs and earnings in excess of billings
    
    
    715,129
    
    
    
    
    
    
    
    
    
    
    
    715,129Assets of discontinued operations
    
    
    150,970
    
    
    
    37,857
    
    
    
    
    
    
    
    188,827Deferred income taxes
    
    
    401,223
    
    
    
    (8
    )
    
    
    
    
    
    
    401,215Other current assets
    
    
    1,265,326
    
    
    
    (17,482
    )
    
    
    
    
    
    
    1,247,844Total current assets
    
    
    8,766,908
    
    
    
    
    
    
    
    
    
    
    
    8,766,908INCOME-PRODUCING PROPERTIES, net
    
    
    8,701,893
    
    
    
    (4,578,796
    )
    
    
    (4,123,097
    )
    
    
    PROPERTY AND EQUIPMENT, net
    
    
    682,445
    
    
    
    
    
    
    
    4,123,097
    
    
    
    4,805,542ASSETS OF DISCONTINUED OPERATIONS
    
    
    8,881,447
    
    
    
    4,885,780
    
    
    
    
    
    
    
    13,767,227DEFERRED INCOME TAXES
    
    
    6,666
    
    
    
    1,712,288
    
    
    
    
    
    
    
    1,718,954OTHER ASSETS:Real estate held for sale
    
    
    853,109
    
    
    
    
    
    
    
    
    
    
    
    853,109Intangible assets, net
    
    
    2,684,057
    
    
    
    (288,183
    )
    
    
    
    
    
    
    2,395,874Goodwill
    
    
    6,354,002
    
    
    
    
    
    
    
    
    
    
    
    6,354,002Other assets
    
    
    2,909,158
    
    
    
    (18,801
    )
    
    
    
    
    
    
    2,890,357Total assets
    
    $
    39,839,685
    
    
    $
    1,712,288
    
    
    $
    
    
    
    $
    41,551,973LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    2,465,112
    
    
    $
    
    
    
    $
    
    
    
    $
    2,465,112Accrued expenses
    
    
    1,429,321
    
    
    
    (50,783
    )
    
    
    
    
    
    
    1,378,538Deferred revenue
    
    
    507,383
    
    
    
    
    
    
    
    
    
    
    
    507,383Billings in excess of costs and earnings
    
    
    53,100
    
    
    
    
    
    
    
    
    
    
    
    53,100Liabilities of discontinued operations
    
    
    417,681
    
    
    
    102,627
    
    
    
    
    
    
    
    520,308Short-term debt and current maturities of long-term debt
    
    
    322,436
    
    
    
    (51,844
    )
    
    
    
    
    
    
    270,592Total current liabilities
    
    
    5,195,033
    
    
    
    
    
    
    
    
    
    
    
    5,195,033LIABILITIES OF DISCONTINUED OPERATIONS
    
    
    7,943,165
    
    
    
    5,644,667
    
    
    
    
    
    
    
    13,587,832OTHER LIABILITIES
    
    
    1,039,633
    
    
    
    
    
    
    
    
    
    
    
    1,039,633MORTGAGE NOTES PAYABLE, less current maturities
    
    
    8,040,375
    
    
    
    (3,932,379
    )
    
    
    
    
    
    
    4,107,996OTHER LONG-TERM DEBT, less current maturities
    
    
    1,832,000
    
    
    
    
    
    
    
    
    
    
    
    1,832,000Total liabilities
    
    
    24,050,206
    
    
    
    1,712,288
    
    
    
    
    
    
    
    25,762,494COMMITMENTS
AND CONTINGENCIES SHAREHOLDERS EQUITY:Common stock
    
    
    3,919,773
    
    
    
    
    
    
    
    
    
    
    
    3,919,773Additional
paid-in capital
    
    
    6,206,521
    
    
    
    
    
    
    
    
    
    
    
    6,206,521Retained earnings
    
    
    6,669,330
    
    
    
    
    
    
    
    
    
    
    
    6,669,330Treasury stock (common shares)
    
    
    (1,006,145
    )
    
    
    
    
    
    
    
    
    
    
    (1,006,145
    )Total shareholders equity
    
    
    15,789,479
    
    
    
    
    
    
    
    
    
    
    
    15,789,479Total liabilities and shareholders equity
    
    $
    39,839,685
    
    
    $
    1,712,288
    
    
    $
    
    
    
    $
    41,551,973
 16




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##### Table of Contents



First Quarter Ended July 31, 2010As Recast forAdjustments for
    
    DiscontinuedAs Originally
    
    Discontinued
    
    OperationsReported
    
    Operations
    
    (Note 13)Consolidated statement of operationsREVENUES:Building Performance Efficiency (BPE)
    
    $
    4,841,727
    
    
    $
    
    
    
    $
    4,841,727Other (formerly Real Estate)
    
    
    249,467
    
    
    
    (145,599
    )
    
    
    103,8685,091,194
    
    
    
    (145,599
    )
    
    
    4,945,595COST OF REVENUES:BPE
    
    
    3,565,017
    
    
    
    
    
    
    
    3,565,017Other (formerly Real Estate)
    
    
    250,996
    
    
    
    (76,690
    )
    
    
    174,3063,816,013
    
    
    
    (76,690
    )
    
    
    3,739,323SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    2,496,444
    
    
    
    (1,896
    )
    
    
    2,494,548OTHER (INCOME) AND EXPENSES:Other income
    
    
    26,632
    
    
    
    (3,641
    )
    
    
    22,991Interest income
    
    
    (17
    )
    
    
    
    
    
    
    (17
    )Interest expense
    
    
    171,968
    
    
    
    (62,978
    )
    
    
    108,990198,583
    
    
    
    (66,619
    )
    
    
    131,964LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    (1,419,846
    )
    
    
    (394
    )
    
    
    (1,420,240
    )INCOME TAX BENEFIT
    
    
    (609,640
    )
    
    
    14,452
    
    
    
    (595,188
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (810,206
    )
    
    
    (14,846
    )
    
    
    (825,052
    )DISCONTINUED OPERATIONS:Earnings from discontinued operations, adjusted for applicable
income tax benefit
    
    
    9,523
    
    
    
    14,846
    
    
    
    24,369Gain on disposition of income-producing properties, adjusted
for applicable income tax expense
    
    
    50,940
    
    
    
    
    
    
    
    50,940EARNINGS FROM DISCONTINUED OPERATIONS
    
    
    60,463
    
    
    
    14,846
    
    
    
    75,309NET LOSS
    
    $
    (749,743
    )
    
    $
    
    
    
    $
    (749,743
    )NET (LOSS) EARNINGS PER SHARE:From continuing operations  basic and diluted
    
    $
    (0.22
    )
    
    $
    
    
    
    $
    (0.22
    )From discontinuing operations  basic and diluted
    
    
    0.02
    
    
    
    
    
    
    
    .02NET LOSS PER SHARE  BASIC AND DILUTED
    
    $
    (0.20
    )
    
    $
    
    
    
    $
    (0.20
    )
 17




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##### Table of Contents



First Quarter Ended July 31, 2009As Recast forAdjustments for
    
    DiscontinuedAs Originally
    
    Discontinued
    
    OperationsReported
    
    Operations
    
    (Note 13)Consolidated statement of operationsREVENUES:BPE
    
    $
    3,873,108
    
    
    $
    
    
    
    $
    3,873,108Other (formerly Real Estate)
    
    
    242,307
    
    
    
    (141,272
    )
    
    
    101,0354,115,415
    
    
    
    (141,272
    )
    
    
    3,974,143COST OF REVENUES:BPE
    
    
    2,624,609
    
    
    
    
    
    
    
    2,624,609Other (formerly Real Estate)
    
    
    270,485
    
    
    
    (85,981
    )
    
    
    184,5042,895,094
    
    
    
    (85,981
    )
    
    
    2,809,113SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    2,385,760
    
    
    
    (1,851
    )
    
    
    2,383,909OTHER (INCOME) AND EXPENSES:Other income
    
    
    (10,264
    )
    
    
    (2,638
    )
    
    
    (12,902
    )Interest income
    
    
    (5,284
    )
    
    
    
    
    
    
    (5,284
    )Interest expense
    
    
    163,810
    
    
    
    (63,753
    )
    
    
    100,057148,262
    
    
    
    (66,391
    )
    
    
    81,871LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    (1,313,701
    )
    
    
    12,951
    
    
    
    (1,300,750
    )INCOME TAX BENEFIT
    
    
    (533,321
    )
    
    
    17,030
    
    
    
    (516,291
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (780,380
    )
    
    
    (4,079
    )
    
    
    (784,459
    )DISCONTINUED OPERATIONS:Earnings from discontinued operations, adjusted for applicable
income tax expense
    
    
    74,794
    
    
    
    4,079
    
    
    
    78,873EARNINGS FROM DISCONTINUED OPERATIONS
    
    
    74,794
    
    
    
    4,079
    
    
    
    78,873NET LOSS
    
    $
    (705,586
    )
    
    $
    
    
    
    $
    (705,586
    )NET (LOSS) EARNINGS PER SHARE:From continuing operations  basic and diluted
    
    $
    (0.21
    )
    
    $
    
    
    
    $
    (0.21
    )From discontinuing operations  basic and diluted
    
    
    0.02
    
    
    
    
    
    
    
    .02NET LOSS PER SHARE  BASIC AND DILUTED
    
    $
    (0.19
    )
    
    $
    
    
    
    $
    (0.19
    )
 18




---



##### Table of Contents



First Quarter Ended July 31, 2010ReclassificationRelated to
    
    As Recast forDiscontinuance
    
    DiscontinuedAdjustments for
    
    of Real Estate
    
    Operations andAs Originally
    
    Discontinued
    
    Segment
    
    Segment ChangeReported
    
    Operations
    
    Reporting
    
    (Note 13)Consolidated statement of cash flowsCash flows from operating activities:Net loss
    
    $
    (749,743
    )
    
    $
    
    
    
    $
    
    
    
    $
    (749,743
    )Adjustments to reconcile net loss to net
cash used in operating activities:Earnings from discontinued operations, net of tax
    
    
    (60,463
    )
    
    
    (14,846
    )
    
    
    
    
    
    
    (75,309
    )Gain on disposal of assets
    
    
    (1,385
    )
    
    
    
    
    
    
    
    
    
    
    (1,385
    )Depreciation and amortization
    
    
    301,496
    
    
    
    (35,584
    )
    
    
    
    
    
    
    265,912Deferred tax benefit
    
    
    (605,390
    )
    
    
    14,352
    
    
    
    
    
    
    
    (591,038
    )Stock compensation expense
    
    
    45,074
    
    
    
    
    
    
    
    
    
    
    
    45,074Adjustment to cash surrender value of life insurance
    
    
    (32,233
    )
    
    
    
    
    
    
    
    
    
    
    (32,233
    )Straight-line rent
    
    
    1,658
    
    
    
    (605
    )
    
    
    
    
    
    
    1,053Provision for doubtful accounts, net
    
    
    64,177
    
    
    
    
    
    
    
    
    
    
    
    64,177Changes in assets and liabilities:
    
    
    
    
    
    
    
    
    
    
    Receivables
    
    
    419,118
    
    
    
    10,762
    
    
    
    
    
    
    
    429,880Costs and earnings in excess of billings
    
    
    (9,819
    )
    
    
    
    
    
    
    
    
    
    
    (9,819
    )Other current and long-term assets
    
    
    (441,778
    )
    
    
    5,435
    
    
    
    
    
    
    
    (436,343
    )Trade and subcontractors payable
    
    
    (1,351,863
    )
    
    
    
    
    
    
    
    
    
    
    (1,351,863
    )Accrued expenses and deferred revenue
    
    
    74,658
    
    
    
    (51,925
    )
    
    
    
    
    
    
    22,733Billings in excess of costs and earnings
    
    
    425,936
    
    
    
    
    
    
    
    
    
    
    
    425,936Other liabilities
    
    
    (750
    )
    
    
    
    
    
    
    
    
    
    
    (750
    )Net cash used in operating activities
    
    
    (1,921,307
    )
    
    
    (72,411
    )
    
    
    
    
    
    
    (1,993,718
    )Cash flows from investing activities:Premiums paid on officers life insurance policies
    
    
    (2,521
    )
    
    
    
    
    
    
    
    
    
    
    (2,521
    )Additions to property and equipment
    
    
    (28,175
    )
    
    
    
    
    
    
    
    
    
    
    (28,175
    )Additions to intangible assets
    
    
    (69,966
    )
    
    
    722
    
    
    
    
    
    
    
    (69,244
    )Proceeds from sale of property and equipment
    
    
    5,454
    
    
    
    
    
    
    
    
    
    
    
    5,454Net cash used in investing activities
    
    
    (95,208
    )
    
    
    722
    
    
    
    
    
    
    
    (94,486
    )Cash flows from financing activities:Mortgage repayments
    
    
    (42,131
    )
    
    
    12,835
    
    
    
    
    
    
    
    (29,296
    )Cash dividends paid to shareholders
    
    
    (36,910
    )
    
    
    
    
    
    
    
    
    
    
    (36,910
    )Net cash used in financing activities
    
    
    (79,041
    )
    
    
    12,835
    
    
    
    
    
    
    
    (66,206
    )DISCONTINUED OPERATIONS:Operating activities
    
    
    47,227
    
    
    
    72,410
    
    
    
    
    
    
    
    119,637Investing activities
    
    
    1,937,923
    
    
    
    (721
    )
    
    
    
    
    
    
    1,937,202Financing activities
    
    
    (15,749
    )
    
    
    (12,835
    )
    
    
    
    
    
    
    (28,584
    )Net cash provided by discontinued operations
    
    
    1,969,401
    
    
    
    58,854
    
    
    
    
    
    
    
    2,028,255Net decrease in cash and cash equivalents
    
    
    (126,155
    )
    
    
    
    
    
    
    
    
    
    
    (126,155
    )Cash at beginning of period
    
    
    1,923,641
    
    
    
    
    
    
    
    
    
    
    
    1,923,641Cash at end of period
    
    $
    1,797,486
    
    
    $
    
    
    
    $
    
    
    
    $
    1,797,486
 19




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First Quarter Ended July 31, 2009ReclassificationRelated to
    
    As Recast forDiscontinuance
    
    DiscontinuedAdjustments for
    
    of Real Estate
    
    Operations andAs Originally
    
    Discontinued
    
    Segment
    
    Segment ChangeReported
    
    Operations
    
    Reporting
    
    (Note 13)Consolidated statement of cash flowsCash flows from operating activities:Net loss
    
    $
    (705,586
    )
    
    $
    
    
    
    $
    
    
    
    $
    (705,586
    )Adjustments to reconcile net loss to net cash used in operating activities:Earnings from discontinued operations, net of tax
    
    
    (74,794
    )
    
    
    (4,079
    )
    
    
    
    
    
    
    (78,873
    )Depreciation and amortization
    
    
    264,956
    
    
    
    (26,389
    )
    
    
    
    
    
    
    238,567Deferred tax benefit
    
    
    (533,321
    )
    
    
    17,030
    
    
    
    
    
    
    
    (516,291
    )Stock compensation expense
    
    
    50,298
    
    
    
    
    
    
    
    
    
    
    
    50,298Adjustment to cash surrender value of life insurance
    
    
    (29,310
    )
    
    
    
    
    
    
    
    
    
    
    (29,310
    )Straight-line rent
    
    
    (2,825
    )
    
    
    1,551
    
    
    
    
    
    
    
    (1,274
    )Provision for doubtful accounts, net
    
    
    (26,511
    )
    
    
    
    
    
    
    
    
    
    
    (26,511
    )Changes in assets and liabilities:
    
    
    
    
    
    
    
    
    
    
    Receivables
    
    
    (148,014
    )
    
    
    8,396
    
    
    
    
    
    
    
    (139,618
    )Costs and earnings in excess of billings
    
    
    (288,894
    )
    
    
    
    
    
    
    
    
    
    
    (288,894
    )Other current and long-term assets
    
    
    (253,436
    )
    
    
    (6,408
    )
    
    
    
    
    
    
    (259,844
    )Trade and subcontractors payable
    
    
    58,155
    
    
    
    733
    
    
    
    
    
    
    
    58,888Accrued expenses and deferred revenue
    
    
    (269,823
    )
    
    
    (17,082
    )
    
    
    
    
    
    
    (286,905
    )Billings in excess of costs and earnings
    
    
    715,968
    
    
    
    
    
    
    
    
    
    
    
    715,968Other liabilities
    
    
    1,400
    
    
    
    
    
    
    
    
    
    
    
    1,400Net cash used in operating activities
    
    
    (1,241,737
    )
    
    
    (26,248
    )
    
    
    
    
    
    
    (1,267,985
    )Cash flows from investing activities:Premiums paid on officers life insurance policies
    
    
    (5,464
    )
    
    
    
    
    
    
    
    
    
    
    (5,464
    )Additions to income-producing properties
    
    
    (128,724
    )
    
    
    (406
    )
    
    
    129,130
    
    
    
    Additions to property and equipment
    
    
    (14,440
    )
    
    
    
    
    
    
    (129,130
    )
    
    
    (143,570
    )Additions to intangible assets
    
    
    (65,899
    )
    
    
    1,522
    
    
    
    
    
    
    
    (64,377
    )Net cash used in investing activities
    
    
    (214,527
    )
    
    
    1,116
    
    
    
    
    
    
    
    (213,411
    )Cash flows from financing activities:Mortgage repayments
    
    
    (39,176
    )
    
    
    12,060
    
    
    
    
    
    
    
    (27,116
    )Debt repayments
    
    
    (100,000
    )
    
    
    
    
    
    
    
    
    
    
    (100,000
    )Cash dividends paid to shareholders
    
    
    (74,788
    )
    
    
    
    
    
    
    
    
    
    
    (74,788
    )Net cash used in financing activities
    
    
    (213,964
    )
    
    
    12,060
    
    
    
    
    
    
    
    (201,904
    )DISCONTINUED OPERATIONS:Operating activities
    
    
    170,519
    
    
    
    26,245
    
    
    
    
    
    
    
    196,764Investing activities
    
    
    57,170
    
    
    
    (1,112
    )
    
    
    
    
    
    
    56,058Financing activities
    
    
    (54,284
    )
    
    
    (12,061
    )
    
    
    
    
    
    
    (66,345
    )Net cash provided by discontinued operations
    
    
    173,405
    
    
    
    13,072
    
    
    
    
    
    
    
    186,477Net decrease in cash and cash equivalents
    
    
    (1,496,823
    )
    
    
    
    
    
    
    
    
    
    
    (1,496,823
    )Cash at beginning of period
    
    
    4,821,126
    
    
    
    
    
    
    
    
    
    
    
    4,821,126Cash at end of period
    
    $
    3,324,303
    
    
    $
    
    
    
    $
    
    
    
    $
    3,324,303
 NOTE 10. FAIR VALUE MEASUREMENTS
  
    
    Level 1 Quoted prices in active markets for identical assets or liabilities.
    
    Level 2 Inputs other than quoted prices which are observable for an asset or
liability, either directly or indirectly.
    
    Level 3 Unobservable inputs for an asset or liability when little or no market data
is available.
  20




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NOTE 11. RELATED PARTY TRANSACTIONS
  NOTE 12. COMMITMENTS AND CONTINGENCIES
  21




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NOTE 13. RESTATEMENT OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Accounting for Income Taxes
   22




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As of and for the First Quarter Ended July 31, 2010As Recast forDiscontinuedOperations(Note 9)
    
    Adjustments
    
    As RestatedConsolidated balance sheet accounts impacted by
restatement:Deferred income taxes (current)
    
    $
    363,865
    
    
    $
    (36,958
    )
    
    $
    326,907Total current assets
    
    
    8,500,346
    
    
    
    (36,958
    )
    
    
    8,463,388Deferred income taxes (non-current)
    
    
    1,132,817
    
    
    
    (725,727
    )
    
    
    407,090Total assets
    
    
    31,604,635
    
    
    
    (762,685
    )
    
    
    30,841,950Retained earnings
    
    
    5,882,681
    
    
    
    (762,685
    )
    
    
    5,119,996Total shareholders equity
    
    
    15,047,900
    
    
    
    (762,685
    )
    
    
    14,285,215Total liabilities and shareholders equity
    
    
    31,604,635
    
    
    
    (762,685
    )
    
    
    30,841,950Consolidated statement of operations accounts impacted by restatement:Income tax expense (benefit)
    
    $
    (595,188
    )
    
    $
    162,984
    
    
    $
    (432,204
    )Loss from continuing operations
    
    
    (825,052
    )
    
    
    (162,984
    )
    
    
    (988,036
    )Net loss
    
    
    (749,743
    )
    
    
    (162,984
    )
    
    
    (912,727
    )Net loss per share from continuing operations
    
    $
    (0.22
    )
    
    $
    (0.05
    )
    
    $
    (0.27
    )Net earnings per share from discontinued operations
    
    
    0.02
    
    
    
    
    
    
    
    0.02Net loss per share  basic and diluted
    
    
    (0.20
    )
    
    
    (0.05
    )
    
    
    (0.25
    )Consolidated statement of cash flows accounts impacted by restatement:Net loss
    
    $
    (749,743
    )
    
    $
    (162,984
    )
    
    $
    (912,727
    )Deferred tax benefit
    
    
    (591,038
    )
    
    
    162,984
    
    
    
    (428,054
    )As of April 30, 2010As Recast forDiscontinuedOperations(Note 9)
    
    Adjustments
    
    As RestatedConsolidated balance sheet accounts impacted by
restatement:Deferred income taxes (current)
    
    $
    401,215
    
    
    $
    (41,118
    )
    
    $
    360,097Total current assets
    
    
    8,766,908
    
    
    
    (41,118
    )
    
    
    8,725,790Deferred income taxes (non-current)
    
    
    1,718,954
    
    
    
    (558,583
    )
    
    
    1,160,371Total assets
    
    
    41,551,973
    
    
    
    (599,701
    )
    
    
    40,952,272Retained earnings
    
    
    6,669,330
    
    
    
    (599,701
    )
    
    
    6,069,629Total shareholders equity
    
    
    15,789,479
    
    
    
    (599,701
    )
    
    
    15,189,778Total liabilities and shareholders equity
    
    
    41,551,973
    
    
    
    (599,701
    )
    
    
    40,952,272First Quarter Ended July 31, 2009As Recast forDiscontinuedOperations(Note 9)
    
    Adjustments
    
    As RestatedConsolidated statement of operations accounts impacted by
restatement:Income tax expense (benefit)
    
    $
    (516,291
    )
    
    $
    71,305
    
    
    $
    (444,986
    )Loss from continuing operations
    
    
    (784,459
    )
    
    
    (71,305
    )
    
    
    (855,764
    )Net loss
    
    
    (705,586
    )
    
    
    (71,305
    )
    
    
    (776,891
    )Net loss per share from continuing operations
    
    $
    (0.21
    )
    
    $
    (0.02
    )
    
    $
    (0.23
    )Net earnings per share from discontinued operations
    
    
    0.02
    
    
    
    
    
    
    
    0.02Net loss per share  basic and diluted
    
    
    (0.19
    )
    
    
    (0.02
    )
    
    
    (0.21
    )Consolidated statement of cash flows accounts impacted by restatement:Net loss
    
    $
    (705,586
    )
    
    $
    (71,305
    )
    
    $
    (776,891
    )Deferred tax benefit
    
    
    (516,291
    )
    
    
    71,305
    
    
    
    (444,986
    )
  23




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
     OVERVIEW
   24




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25




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Discontinued Operations
   Liquidity
   RESULTS OF OPERATIONS
  26




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CHART A
 First Quarter EndedJuly 31,
    
    Amount
    
    Percentage2010
    
    2009
    
    Change
    
    ChangeBPE (1)
    
    $
    4,842
    
    
    $
    3,873
    
    
    $
    969
    
    
    
    25Other (2)
    
    
    104
    
    
    
    101
    
    
    
    3
    
    
    
    3$
    4,946
    
    
    $
    3,974
    
    
    $
    972
    
    
    
    24
 NOTES TO CHART A
 (1)
    
    The following table indicates the BPE Segment revenues by service and product type:
 
 First Quarter EndedJuly 31,
    
    Amount
    
    Percentage2010
    
    2009
    
    Change
    
    ChangeEnergy Savings Projects
    
    $
    3,019
    
    
    $
    2,013
    
    
    $
    1,006
    
    
    
    50Lighting Products
    
    
    685
    
    
    
    456
    
    
    
    229
    
    
    
    50Energy Management Services
    
    
    340
    
    
    
    564
    
    
    
    (224
    )
    
    
    (40
    )Fifth Fuel Management Services
    
    
    57
    
    
    
    
    
    
    
    57
    
    
    
    Productivity Software
    
    
    741
    
    
    
    840
    
    
    
    (99
    )
    
    
    (12
    )$
    4,842
    
    
    $
    3,873
    
    
    $
    969
    
    
    
    25
 BPE Segment revenues increased by approximately $969,000, or 25%, in the first quarter
of fiscal 2011 compared to the same period in fiscal 2010, primarily due to:
 (a)
    
    an increase in energy savings (lighting and mechanical) project
revenues of approximately $1,006,000; and(b)
    
    an increase in lighting product revenues of approximately $229,000;
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(c)
    
    a decrease in energy management services of approximately $224,000; and(d)
    
    a decrease in productivity software revenues of approximately $99,000.
  IncreaseJuly 31,
    
    (Decrease)2010
    
    2009
    
    Amount
    
    PercentageBPE (1)
    
    $
    13,489,000
    
    
    $
    8,234,000
    
    
    $
    5,255,000
    
    
    
    64Other (2)
    
    
    403,000
    
    
    
    394,000
    
    
    
    9,000
    
    
    
    2Total Backlog
    
    $
    13,892,000
    
    
    $
    8,628,000
    
    
    $
    5,264,000
    
    
    
    61
 (1)
    
    BPE backlog at July 31, 2010, increased by approximately $5,255,000, or 64%, compared to
the year-earlier period, primarily due to: (a)
    
    an increase of approximately $4,580,000 in energy savings (lighting and
mechanical) projects;(b)
    
    approximately $642,000 in backlog from the BPE Segments new Fifth Fuel
Management TM service offering;(c)
    
    an increase of approximately $77,000 in energy management consulting
services; and(d)
    
    an increase of approximately $50,000 in lighting products from the
Companys lighting distribution business;
  (e)
    
    a decrease of approximately $96,000 in productivity software products
and services.
  
 (2)
    
    Other backlog represents rental income under lease agreements at the Companys corporate
headquarters building and other leasehold interests.  28




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CHART B
 Percentage ofRevenues for theFirst Quarter Ended
    
    First Quarter EndedJuly 31,
    
    July 31,2010
    
    2009
    
    2010
    
    2009BPE (1)
    
    $
    3,565
    
    
    $
    2,625
    
    
    
    74
    
    
    
    68Other
    
    
    174
    
    
    
    184
    
    
    
    168
    
    
    
    182$
    3,739
    
    
    $
    2,809
    
    
    
    76
    
    
    
    71
 NOTES TO CHART B
 
 (1)
    
    BPE Segment cost of revenues increased by approximately $940,000 , or 36%, in the first
quarter of fiscal 2011 compared to the same period in fiscal 2010, primarily due to a
corresponding increase in revenues (See Chart A).On a percentage-of-revenues basis, BPE Segment cost of revenues increased by approximately
6% in the first quarter of fiscal 2011 compared to the same period in fiscal 2010, primarily
due to a change in the mix of services and products and an increasingly competitive market
pricing environment for energy savings projects. 
  29




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CHART C
 Percentage ofRevenues for theFirst Quarter Ended
    
    First Quarter EndedJuly 31,
    
    July 31,2010
    
    2009
    
    2010
    
    2009BPE (1)
    
    $
    1,577
    
    
    $
    1,360
    
    
    
    33
    
    
    
    35Corporate
    
    
    917
    
    
    
    1,024
    
    
    
    19
    
    
    
    26\$
    2,494
    
    
    $
    2,384
    
    
    
    50
    
    
    
    60
 NOTES TO CHART C
 
 (1)
    
    BPE Segment SG&A expenses increased by approximately $217,000, or 16%, in the first quarter
of fiscal 2011 compared to the same period in fiscal 2010, primarily due to higher
personnel-related costs, product development expenses, and sales and marketing expenses.    CHART D
 First Quarter Ended
    
    (Increase)July 31,
    
    Decrease2010
    
    2009
    
    AmountBPE (1)
    
    $
    (314
    )
    
    $
    (124
    )
    
    $
    (190
    )Corporate (2)
    
    
    (1,106
    )
    
    
    (1,176
    )
    
    
    70Total
    
    $
    (1,420
    )
    
    $
    (1,300
    )
    
    $
    (120
    )
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NOTES TO CHART D
 (1)
    
    BPE Segment loss before income taxes increased by approximately $190,000, or 153%, in the
first quarter of fiscal 2011 compared to the same period in fiscal 2010, primarily due to an
increase in revenues of approximately $969,000 (see Chart A), an increase in gross margin of
approximately $28,000 offset by an increase in SG&A expenses of approximately $217,000 (see
Chart C).(2)
    
    Corporate loss before income taxes decreased by approximately $70,000, or 6%, in the first
quarter of fiscal 2011 compared to the same period in fiscal 2010, primarily due to a
decrease in SG&A expenses of approximately $107,000 (see Chart C), partially offset by an
increase in other expenses of approximately $41,000.
      31




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LIQUIDITY AND CAPITAL RESOURCES
    (a)
    
    current year losses from continuing operations before depreciation,
amortization, and income taxes of approximately $1,154,000;(b)
    
    an increase in other current and long-term assets of approximately
$436,000; and(c)
    
    a net decrease in trade accounts payable, accrued expenses, and other
liabilities of approximately $1,330,000;
 partially offset by:
 (d)
    
    an increase in billings in excess of costs and earnings of approximately
$426,000; and(e)
    
    a decrease in net accounts receivable of approximately $494,000.
  (a)
    
    approximately $69,000 used for additions to intangible assets, primarily
related to enhancements to the BPE Segments proprietary building productivity
technology solutions; and(b)
    
    approximately $28,000 used for additions to property and equipment,
primarily related to computer hardware purchases.
 32




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##### Table of Contents



(a)
    
    scheduled principal payments on mortgage notes related to the corporate
headquarters building of approximately $29,000; and(b)
    
    payment of the regular quarterly cash dividends to shareholders of
approximately $37,000.
     33




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®
 ®
 Capital Expenditures
  Significant Uses of Cash
  34




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Mortgage Notes and Other Long-Term Debt
   CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
  35




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CRITICAL ACCOUNTING POLICIES
  Revenue Recognition
    36




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Long-Lived Assets: Property & Equipment and Capitalized Software
    
    
    A significant decrease in the market price of a long-lived asset;
    
    A current-period operating or cash flow loss combined with a history of operating
or cash flow losses or a projection or forecast that demonstrates continuing losses
associated with the use of a long-lived asset;
    
    The Company has received purchase offers at prices below carrying value;
    
    A real estate asset that has a significant vacancy rate or significant rollover
exposure from one or more tenants;
    
    A major tenant experiencing financial difficulties that may jeopardize the
tenants ability to meet its lease obligations; and
    
    Depressed market conditions.
   37




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
    
    A change in the estimated remaining useful life of the asset;
    
    A change in the manner in which the asset is used in the income generating
business of the Company; or
    
    A current-period operating or cash flow loss combined with a history of operating
or cash flow losses, or a projection or forecast that demonstrates continuing losses
associated with the use of a long-lived asset.
  Valuation of Goodwill and Other Indefinite-Lived Intangible Assets
   Income Taxes
   38




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ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   39




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Changes in Internal Control Over Financial Reporting
  Accounting for Income Taxes,
 
    
    develop and implement additional procedures to increase the level of review, evaluation and validation of the Companys valuation of deferred
tax assets; and
    
    increase the level of knowledge among Company employees in the area of accounting for income taxes.
   40




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ITEM 6. EXHIBITS
 31.1
    
    Certification of Chief Executive Officer, pursuant to Rules 13a-14(a)/15d-14(a)31.2
    
    Certification of Chief Financial Officer, pursuant to Rules 13a-14(a)/15d-14(a)32.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes Oxley Act 200232.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes Oxley Act 2002
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SERVIDYNE, INC.
(Registrant)Date: June 2, 2011
    /s/ Alan R. AbramsAlan R. AbramsChief Executive OfficerDate: June 2, 2011
    /s/ Rick A. PaternostroRick A. PaternostroChief Financial Officer 42