##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT
 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 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 1945 The Exchange, Suite 300, Atlanta, GA 30339-2029
    þ o
  o o
  Large accelerated filer o
    
    Accelerated Filer o
    
    Non-accelerated filer o
    
    Smaller Reporting Company þ(Do not check if a smaller reporting company)
  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 1A. RISK FACTORSITEM 6. EXHIBITSSIGNATURESEX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  SERVIDYNE, INC.
 July 31, 2010
    
    
    April 30, 2010ASSETSCURRENT 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
    
    
    1,043,748
    
    
    
    973,442Contracts, net of allowance for doubtful accounts of $54,804 and
$22,530, respectively, including retained amounts of $719,344 and
$675,281, respectively
    
    
    2,783,576
    
    
    
    3,337,177Costs and earnings in excess of billings
    
    
    724,948
    
    
    
    715,129Assets of discontinued operations (Note 9)
    
    
    67,880
    
    
    
    150,970Deferred income taxes
    
    
    375,604
    
    
    
    401,223Other current assets
    
    
    1,707,104
    
    
    
    1,265,326Total current assets
    
    
    8,500,346
    
    
    
    8,766,908INCOME-PRODUCING PROPERTIES, net
    
    
    8,638,902
    
    
    
    8,701,893PROPERTY AND EQUIPMENT, net
    
    
    651,398
    
    
    
    682,445ASSETS OF DISCONTINUED OPERATIONS (Note 9)
    
    
    
    
    
    
    8,881,447DEFERRED INCOME TAXES
    
    
    
    
    
    
    6,666OTHER ASSETS:Real estate held for future development or sale
    
    
    853,109
    
    
    
    853,109Intangible assets, net (Note 8)
    
    
    2,570,670
    
    
    
    2,684,057Goodwill (Note 8)
    
    
    6,354,002
    
    
    
    6,354,002Other assets
    
    
    2,903,391
    
    
    
    2,909,158Total assets
    
    $
    30,471,818
    
    
    $
    39,839,685LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    1,113,249
    
    
    $
    2,465,112Accrued expenses
    
    
    1,580,905
    
    
    
    1,429,321Deferred revenue
    
    
    430,457
    
    
    
    507,383Billings in excess of costs and earnings
    
    
    479,036
    
    
    
    53,100Liabilities of discontinued operations (Note 9)
    
    
    26,024
    
    
    
    417,681Short-term debt and current maturities of long-term debt
    
    
    324,788
    
    
    
    322,436Total current liabilities
    
    
    3,954,459
    
    
    
    5,195,033DEFERRED INCOME TAXES
    
    
    641,547
    
    
    
    LIABILITIES OF DISCONTINUED OPERATIONS (Note 9)
    
    
    
    
    
    
    7,943,165OTHER LIABILITIES
    
    
    1,000,020
    
    
    
    1,039,633MORTGAGE NOTES PAYABLE, less current maturities
    
    
    7,995,892
    
    
    
    8,040,375OTHER LONG-TERM DEBT, less current maturities
    
    
    1,832,000
    
    
    
    1,832,000Total liabilities
    
    
    15,423,918
    
    
    
    24,050,206COMMITMENTS AND CONTINGENCIES (Note 11)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
    
    
    5,882,681
    
    
    
    6,669,330Treasury stock (common shares) of 243,390 and 243,390, respectively
    
    
    (1,006,145
    )
    
    
    (1,006,145
    )Total shareholders equity
    
    
    15,047,900
    
    
    
    15,789,479Total liabilities and shareholders equity
    
    $
    30,471,818
    
    
    $
    39,839,685
 See accompanying notes to condensed consolidated financial statements.
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SERVIDYNE, INC.
 FIRST QUARTER ENDEDJULY 31,2010
    
    
    2009REVENUES:Building Performance Efficiency (BPE)
    
    $
    4,841,727
    
    
    $
    3,873,108Real Estate
    
    
    249,467
    
    
    
    242,3075,091,194
    
    
    
    4,115,415COST OF REVENUES:BPE
    
    
    3,565,017
    
    
    
    2,624,609Real Estate
    
    
    250,996
    
    
    
    270,4853,816,013
    
    
    
    2,895,094SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    2,496,444
    
    
    
    2,385,760OTHER (INCOME) AND EXPENSES:Other expense (income)
    
    
    26,632
    
    
    
    (10,264
    )Interest income
    
    
    (17
    )
    
    
    (5,284
    )Interest expense
    
    
    171,968
    
    
    
    163,810198,583
    
    
    
    148,262LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    (1,419,846
    )
    
    
    (1,313,701
    )INCOME TAX BENEFIT
    
    
    (609,640
    )
    
    
    (533,321
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (810,206
    )
    
    
    (780,380
    )DISCONTINUED OPERATIONS (Note 9):Earnings from discontinued operations, adjusted for applicable income
tax expense of $5,837 and $44,184, respectively
    
    
    9,523
    
    
    
    74,794Gain on disposition of income-producing properties, adjusted for applicable
income tax expense of $63,998 and $0, respectively
    
    
    50,940
    
    
    
    EARNINGS FROM DISCONTINUED OPERATIONS
    
    
    60,463
    
    
    
    74,794NET LOSS
    
    $
    (749,743
    )
    
    $
    (705,586
    )NET (LOSS) EARNINGS PER SHARE (Note 7):From continuing operations  basic and diluted
    
    $
    (0.22
    )
    
    $
    (0.21
    )From discontinued operations  basic and diluted
    
    
    .02
    
    
    
    .02NET LOSS PER SHARE  BASIC AND DILUTED
    
    $
    (0.20
    )
    
    $
    (0.19
    )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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##### Table of Contents



SERVIDYNE, INC.
 FIRST QUARTER ENDEDJULY 31,2010
    
    
    2009Cash flows from operating activities:Net loss
    
    $
    (749,743
    )
    
    $
    (705,586
    )Adjustments to reconcile net loss to net
cash used in operating activities:Earnings from discontinued operations, net of tax
    
    
    (60,463
    )
    
    
    (74,794
    )Gain on disposal of assets
    
    
    (1,385
    )
    
    
    Depreciation and amortization
    
    
    301,496
    
    
    
    264,956Deferred tax benefit
    
    
    (605,390
    )
    
    
    (533,321
    )Stock compensation expense
    
    
    45,074
    
    
    
    50,298Adjustment to cash surrender value of life insurance
    
    
    (32,233
    )
    
    
    (29,310
    )Straight-line rent
    
    
    1,658
    
    
    
    (2,825
    )Provision for doubtful accounts, net
    
    
    64,177
    
    
    
    (26,511
    )Changes in assets and liabilities:Receivables
    
    
    419,118
    
    
    
    (148,014
    )Costs and earnings in excess of billings
    
    
    (9,819
    )
    
    
    (288,894
    )Other current and long-term assets
    
    
    (441,778
    )
    
    
    (253,436
    )Trade and subcontractors payable
    
    
    (1,351,863
    )
    
    
    58,155Accrued expenses and deferred revenue
    
    
    74,658
    
    
    
    (269,823
    )Billings in excess of costs and earnings
    
    
    425,936
    
    
    
    715,968Other liabilities
    
    
    (750
    )
    
    
    1,400Net cash used in operating activities
    
    
    (1,921,307
    )
    
    
    (1,241,737
    )Cash flows from investing activities:Premiums paid on officers life insurance policies
    
    
    (2,521
    )
    
    
    (5,464
    )Additions to income-producing properties
    
    
    
    
    
    
    (128,724
    )Additions to property and equipment
    
    
    (28,175
    )
    
    
    (14,440
    )Additions to intangible assets
    
    
    (69,966
    )
    
    
    (65,899
    )Proceeds from sale of property and equipment
    
    
    5,454
    
    
    
    Net cash used in investing activities
    
    
    (95,208
    )
    
    
    (214,527
    )Cash flows from financing activities:Mortgage repayments
    
    
    (42,131
    )
    
    
    (39,176
    )Debt repayments
    
    
    
    
    
    
    (100,000
    )Cash dividends paid to shareholders
    
    
    (36,910
    )
    
    
    (74,788
    )Net cash used in financing activities
    
    
    (79,041
    )
    
    
    (213,964
    )DISCONTINUED OPERATIONS:Operating activities
    
    
    47,227
    
    
    
    170,519Investing activities
    
    
    1,937,923
    
    
    
    57,170Financing activities
    
    
    (15,749
    )
    
    
    (54,284
    )Net cash provided by discontinued operations
    
    
    1,969,401
    
    
    
    173,405Net 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
 NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS
 Revenue Recognition (Topic 605)Multiple-Deliverable Revenue
Arrangements Software (Topic 985)Certain Revenue Arrangements That Include
Software Elements
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NOTE 4. EQUITY-BASED COMPENSATION
   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
    
    
    
    
    
    $
    
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##### Table of Contents



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
   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
 6




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##### Table of Contents



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
   Shares of Restricted Stock
  7




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Weighted AverageNumber of
    
    
    Fair ValueShares of
    
    
    per ShareRestricted Stock
    
    
    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
  8




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NOTE 6. OPERATING SEGMENTS
  For the Quarter Ended July 31, 2010
    
    BPE
    
    Real Estate
    
    Parent (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
    
    
    $
    249,467
    
    
    $
    
    
    
    $
    
    
    
    $
    5,091,194Intersegment revenue
    
    
    
    
    
    
    144,984
    
    
    
    
    
    
    
    (144,984
    )
    
    
    Total revenues from continuing
operations
    
    $
    4,841,727
    
    
    $
    394,451
    
    
    $
    
    
    
    $
    (144,984
    )
    
    $
    5,091,194(Loss) earnings from continuing
operations before income taxes
    
    $
    (601,376
    )
    
    $
    66,587
    
    
    $
    (884,411
    )
    
    $
    (646
    )
    
    $
    (1,419,846
    )
 For the Quarter Ended July 31, 2009
    
    BPE
    
    Real Estate
    
    Parent (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
    
    
    $
    242,307
    
    
    $
    
    
    
    $
    
    
    
    $
    4,115,415Intersegment revenue
    
    
    141,545
    
    
    
    136,042
    
    
    
    
    
    
    
    (277,587
    )
    
    
    Total revenues from continuing
operations
    
    $
    4,014,653
    
    
    $
    378,349
    
    
    $
    
    
    
    $
    (277,587
    )
    
    $
    4,115,415(Loss) earnings from continuing
operations before income taxes
    
    $
    (390,485
    )
    
    $
    (13,036
    )
    
    $
    (894,740
    )
    
    $
    (15,440
    )
    
    $
    (1,313,701
    )
 
 (1)
    
    The Parent Companys net loss in each period was derived from corporate headquarters
activities and consists primarily of the following: Parent Company executive officers
compensation and costs related to the Companys status as a publicly-held company, which
include, among other items, legal fees, compliance costs, non-employee directors fees,
consulting expenses, and other reporting costs. The corporate headquarters activities do
not earn revenue. All relevant costs related to the business operations of the Companys
operating segments are either paid directly by the respective operating segments or are
allocated to the segments by the Parent Company. 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. NOTE 7. EARNINGS (LOSS) PER SHARE
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NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
  July 31, 2010Gross Carrying
    
    
    AccumulatedIntangible assets, subject to amortization:
    
    Amount
    
    
    AmortizationProprietary BPE software solutions
    
    $
    4,161,615
    
    
    $
    2,969,160Acquired computer software
    
    
    681,032
    
    
    
    506,235Real estate lease costs
    
    
    390,038
    
    
    
    131,441Customer relationships
    
    
    404,632
    
    
    
    295,764Deferred loan costs
    
    
    202,109
    
    
    
    129,219Non-compete agreements
    
    
    63,323
    
    
    
    63,323Tradename
    
    
    61,299
    
    
    
    8,854Other
    
    
    44,882
    
    
    
    42,971$
    6,008,930
    
    
    $
    4,146,967Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707Goodwill
    
    $
    6,354,002
 April 30, 2010Gross Carrying
    
    
    AccumulatedIntangible assets, subject to amortization:
    
    Amount
    
    
    AmortizationProprietary BPE software solutions
    
    $
    4,096,802
    
    
    $
    2,827,071Acquired computer software
    
    
    676,837
    
    
    
    493,885Real estate lease costs
    
    
    389,317
    
    
    
    121,762Customer relationships
    
    
    404,632
    
    
    
    286,433Deferred loan costs
    
    
    202,109
    
    
    
    124,166Non-compete agreements
    
    
    63,323
    
    
    
    60,684Tradename
    
    
    61,299
    
    
    
    7,834Other
    
    
    44,882
    
    
    
    42,016$
    5,939,201
    
    
    $
    3,963,851Intangible 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
    
    $
    183,352For the quarter ended July 31, 2009
    
    
    144,783
 Estimated future amortization expenses for all amortized intangible assets for the fiscal years ended:Remainder of 2011
    
    $
    321,9082012
    
    
    504,4372013
    
    
    357,8912014
    
    
    260,2562015
    
    
    214,1372016
    
    
    103,598Thereafter
    
    
    99,736$
    1,861,963
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NOTE 9. DISCONTINUED OPERATIONS
    First Quarter EndedJuly 31,2010
    
    
    2009REAL ESTATE SEGMENTRental revenues
    
    $
    150,722
    
    
    $
    515,784Rental property operating expenses, including depreciation
    
    
    135,362
    
    
    
    396,806Operating income from discontinued operations
    
    
    15,360
    
    
    
    118,978Income tax expense
    
    
    (5,837
    )
    
    
    (44,184
    )Operating income from discontinued operations, net of tax
    
    
    9,523
    
    
    
    74,794Gain 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
    
    $
    60,463
    
    
    $
    74,794
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NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS
  
    
    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, for substantially the full term of the
financial instrument.
    
    Level 3 Unobservable inputs for an asset or liability when little or no
market data is available.
      NOTE 11. COMMITMENTS AND CONTINGENCIES
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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
    OVERVIEW
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®
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RESULTS OF OPERATIONS
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CHART A
 First Quarter EndedJuly 31,
    
    Amount
    
    Percentage2010
    
    2009
    
    Change
    
    ChangeBPE (1)
    
    $
    4,842
    
    
    $
    3,873
    
    
    $
    969
    
    
    
    25Real Estate
    
    
    249
    
    
    
    242
    
    
    
    7
    
    
    
    3$
    5,091
    
    
    $
    4,115
    
    
    $
    976
    
    
    
    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;
 partially offset by:
 (c)
    
    a decrease in energy management services of approximately $224,000;
and(d)
    
    a decrease in productivity software revenues of approximately
$99,000.
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IncreaseJuly 31,
    
    (Decrease)2010
    
    2009
    
    Amount
    
    PercentageBPE (1)
    
    $
    13,489,000
    
    
    $
    8,234,000
    
    
    $
    5,255,000
    
    
    
    64Real Estate
    
    
    1,437,000
    
    
    
    1,380,000
    
    
    
    57,000
    
    
    
    4Less: Intersegment eliminations (2)
    
    
    (600,000
    )
    
    
    (551,000
    )
    
    
    (49,000
    )
    
    
    (9
    )Total Backlog
    
    $
    14,326,000
    
    
    $
    9,063,000
    
    
    $
    5,263,000
    
    
    
    58
 (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 TMservice 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;
 partially offset by:
 (e)
    
    a decrease of approximately $96,000 in productivity software products and services.
 BPE backlog includes some contracts that can be cancelled by customers with less than one
(1) years notice, and assumes that such cancellation provisions will not be invoked. The
value of such contracts included in the prior years backlog that were subsequently
cancelled was approximately $123,000, or 1.5%.(2)
    
    Represents rental revenues at the Companys owned headquarters building to be paid to
the Real Estate Segment by the Parent Company and the BPE Segment.
  
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CHART B
 Percentage of SegmentRevenues for theFirst Quarter Ended
    
    First Quarter EndedJuly 31,
    
    July 31,2010
    
    2009
    
    2010
    
    2009BPE (1)
    
    $
    3,565
    
    
    $
    2,625
    
    
    
    74
    
    
    
    68Real Estate
    
    
    251
    
    
    
    270
    
    
    
    101
    
    
    
    112$
    3,816
    
    
    $
    2,895
    
    
    
    75
    
    
    
    70
 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.
 
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CHART C
 Percentage of SegmentRevenues for theFirst Quarter Ended
    
    First Quarter EndedJuly 31,
    
    July 31,2010
    
    2009
    
    2010
    
    2009BPE (1)
    
    $
    1,577
    
    
    $
    1,360
    
    
    
    33
    
    
    
    35Real Estate
    
    
    135
    
    
    
    157
    
    
    
    54
    
    
    
    65Parent Company
    
    
    784
    
    
    
    869
    
    
    
    15
    
    
    
    21$
    2,496
    
    
    $
    2,386
    
    
    
    49
    
    
    
    58
 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
    )Real Estate (2)
    
    
    (284
    )
    
    
    (323
    )
    
    
    39Parent Company (3)
    
    
    (822
    )
    
    
    (867
    )
    
    
    45$
    (1,420
    )
    
    $
    (1,314
    )
    
    $
    (106
    )
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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)
    
    Real Estate Segment loss before income taxes decreased by approximately $39,000, or 12%,
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 $22,000 (see Chart C).
 (3)
    
    Parent Company loss before income taxes decreased by approximately $45,000, or 5%, 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 $85,000 (see Chart C), partially offset by an
increase in other expenses of approximately $41,000.
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LIQUIDITY AND CAPITAL RESOURCES
    (a)
    
    current year losses from continuing operations before depreciation,
amortization, and income taxes of approximately
$1,119,000;(b)
    
    an increase in other current and long-term assets of approximately
$442,000; and(c)
    
    a net decrease in trade accounts payable, accrued expenses, and other
liabilities of approximately $1,278,000;
 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 $483,000.
  (a)
    
    approximately $70,000 used for additions to intangible assets, primarily
related to enhancements to the BPE Segments proprietary building productivity
software solutions; and(b)
    
    approximately $28,000 used for additions to property and equipment,
primarily related to computer hardware purchases.
  (a)
    
    scheduled principal payments on real estate mortgage notes of
approximately $42,000; and(b)
    
    payment of the regular quarterly cash dividends to shareholders of
approximately $37,000.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
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CRITICAL ACCOUNTING POLICIES
  Revenue Recognition
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Long-Lived Assets: Income-Producing Properties, Capitalized Software, and Property and Equipment
    
    
    A significant decrease in the market price of a long-lived asset;
    
    A significant adverse change in the extent or manner in which a long-lived asset
is being used or in its physical condition;
    
    A significant adverse change in legal factors or in the business climate that
could affect the value of a long-lived asset, including an adverse action or
assessment by a regulator;
    
    An accumulation of costs significantly in excess of the amount originally
expected for the acquisition or construction 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;
    
    A current expectation that, more likely than not, a long-lived asset will be sold
or otherwise disposed of significantly before the end of its previously estimated
useful life;
    
    The Company has recently sold similar income-producing properties at losses;
    
    The Company has received purchase offers at prices below carrying value;
    
    Income-producing properties that have significant vacancy rates 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;
    
    Depressed market conditions;
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
    
    Presence of a new competitive property constructed in the assets market area;
and
    
    Evidence of significant corrective measures required to cure structural problems,
physical obsolescence, or deterioration of essential building components.
    
    
    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
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Income Taxes
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ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
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ITEM 1A. RISK FACTORS
  
 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: September 14, 2010
    /s/ Alan R. AbramsAlan R. AbramsChief Executive OfficerDate: September 14, 2010
    /s/ Rick A. PaternostroRick A. PaternostroChief Financial Officer 31