##### 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, 2007
 Commission file number 0-10146
 SERVIDYNE, INC.
 (Exact name of registrant as specified in its charter)
 Georgia
    
    58-0522129(State or other jurisdiction of
    
    (I.R.S. Employer identification No.)incorporation or organization)
 1945 The Exchange, Suite 300, Atlanta, GA 30339-2029
 (770) 953-0304
 N/A
  þ o
  o o þ
  o þ




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TABLE OF CONTENTS  PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II. OTHER INFORMATIONITEM 1A. RISK FACTORSITEM 6. EXHIBITSSIGNATURESEX-31.(A) SECTION 302 CERTIFICATION OF THE CEOEX-31.(B) SECTION 302 CERTIFICATION OF THE CFOEX-32.(A) SECTION 906 CERTIFICATION OF THE CEOEX-32.(B) SECTION 906 CERTIFICATION OF THE CFO    Table of Contents  
  
 ITEM 1. FINANCIAL STATEMENTS
 SERVIDYNE, INC.
 (UNAUDITED)July 31, 2007
    
    
    April 30, 2007ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    3,999,755
    
    
    $
    5,662,894Receivables (Note 4)
    
    
    3,549,224
    
    
    
    2,229,813Less: Allowance for doubtful accounts
    
    
    (14,713
    )
    
    
    (14,713
    )Costs and earnings in excess of billings
    
    
    1,114,472
    
    
    
    265,540Deferred income taxes
    
    
    706,800
    
    
    
    443,030Other
    
    
    1,303,018
    
    
    
    1,623,535Total current assets
    
    
    10,658,556
    
    
    
    10,210,099INCOME-PRODUCING PROPERTIES, net
    
    
    28,979,054
    
    
    
    29,090,789ASSETS OF
DISCONTINUED OPERATIONS (Notes 5 and 9)
    
    
    
    
    
    
    2,898,275PROPERTY AND EQUIPMENT, net
    
    
    829,892
    
    
    
    838,886RESTRICTED
CASH (Note 9)
    
    
    6,462,743
    
    
    
    OTHER ASSETS:Real estate held for future development or sale
    
    
    1,124,850
    
    
    
    1,124,850Intangible assets, net (Note 8)
    
    
    3,782,284
    
    
    
    3,919,455Goodwill (Note 8)
    
    
    5,458,717
    
    
    
    5,458,717Other
    
    
    3,109,132
    
    
    
    3,852,350Total assets
    
    $
    60,405,228
    
    
    $
    57,393,421LIABILITIES
AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    867,063
    
    
    $
    635,308Accrued expenses
    
    
    2,240,415
    
    
    
    2,011,711Accrued incentive compensation
    
    
    577,500
    
    
    
    584,416Liabilities
of discontinued operations (Note 5)
    
    
    
    
    
    
    32,559Billings in excess of costs and earnings
    
    
    351,917
    
    
    
    219,305Current maturities of long-term debt
    
    
    885,282
    
    
    
    1,002,718Total current liabilities
    
    
    4,922,177
    
    
    
    4,486,017DEFERRED INCOME TAXES
    
    
    5,357,760
    
    
    
    4,233,498OTHER LIABILITIES
    
    
    1,549,789
    
    
    
    2,074,954LIABILITIES
OF DISCONTINUED OPERATIONS (Note 5)
    
    
    
    
    
    
    375,776MORTGAGE NOTES PAYABLE, less current maturities (Note 10)
    
    
    24,486,035
    
    
    
    23,587,965OTHER LONG-TERM DEBT, less current maturities
    
    
    1,167,500
    
    
    
    1,175,000Total liabilities
    
    
    37,483,261
    
    
    
    35,933,210COMMITMENTS AND CONTINGENCIES (Note 11)SHAREHOLDERS EQUITY:Common stock, $1 par value; 5,000,000 shares authorized;
3,697,636 issued and 3,529,370 outstanding at July 31, 2007
3,695,336 issued and 3,527,070 outstanding at April 30, 2007
    
    
    3,697,636
    
    
    
    3,695,336Additional paid-in capital
    
    
    4,903,435
    
    
    
    4,875,160Retained earnings
    
    
    15,115,960
    
    
    
    13,684,779Treasury
stock (common shares) 168,266 at July 31, 2007, and 168,266 at April 30, 2007
    
    
    (795,064
    )
    
    
    (795,064
    )Total shareholders equity
    
    
    22,921,967
    
    
    
    21,460,211Total
liabilities and shareholders equity
    
    $
    60,405,228
    
    
    $
    57,393,421
 See accompanying notes to consolidated financial statements.
 1




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##### Table of Contents



SERVIDYNE, INC.
 FIRST QUARTER ENDEDJULY 31,2007
    
    
    2006REVENUES:BPE services
    
    $
    4,766,392
    
    
    $
    2,615,415Rental income
    
    
    2,907,387
    
    
    
    1,299,0157,673,779
    
    
    
    3,914,430Interest
    
    
    12,884
    
    
    
    93,657Other
    
    
    69,617
    
    
    
    65,0487,756,280
    
    
    
    4,073,135COSTS AND EXPENSES:BPE services
    
    
    3,185,584
    
    
    
    1,716,030Rental property operating expenses, excluding interest
    
    
    970,472
    
    
    
    901,7254,156,056
    
    
    
    2,617,755Selling, general and administrativeBPE segment
    
    
    1,324,025
    
    
    
    1,154,576Real estate segment
    
    
    183,019
    
    
    
    206,704Parent
    
    
    1,288,613
    
    
    
    772,3172,795,657
    
    
    
    2,133,597Interest costs incurred
    
    
    448,064
    
    
    
    349,5537,399,777
    
    
    
    5,100,905EARNINGS (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
    
    
    356,503
    
    
    
    (1,027,770
    )INCOME TAX EXPENSE (BENEFIT)
    
    
    76,783
    
    
    
    (390,795
    )EARNINGS (LOSS) FROM CONTINUING OPERATIONS
    
    
    279,720
    
    
    
    (636,975
    )DISCONTINUED OPERATIONS:Earnings from discontinued operations, adjusted for applicable
income tax expense of $54,755 and $52,759, respectively
    
    
    89,337
    
    
    
    86,080Gain on sale
of income producing real estate, adjusted for applicable
income tax expense of $728,954 and $0, respectively
    
    
    1,189,347
    
    
    
    EARNINGS FROM DISCONTINUED OPERATIONS
    
    
    1,278,684
    
    
    
    86,080NET EARNINGS (LOSS)
    
    $
    1,558,404
    
    
    $
    (550,895
    )NET EARNINGS (LOSS) PER SHARE  BASICFrom continuing operations
    
    $
    0.08
    
    
    $
    (0.18
    )From discontinued operations
    
    
    .36
    
    
    
    .02NET EARNINGS (LOSS) PER SHARE  BASIC
    
    $
    0.44
    
    
    $
    (0.16
    )NET EARNINGS (LOSS) PER SHARE  DILUTEDFrom continuing operations
    
    $
    0.07
    
    
    $
    (0.18
    )From discontinued operations
    
    
    .35
    
    
    
    .02NET EARNINGS (LOSS) PER SHARE  DILUTED
    
    $
    0.42
    
    
    $
    (0.16
    )DIVIDENDS PER SHARE
    
    $
    0.036
    
    
    $
    0.036WEIGHTED AVERAGE SHARES OUTSTANDING  BASIC
    
    
    3,529,144
    
    
    
    3,532,100WEIGHTED AVERAGE SHARES OUTSTANDING  DILUTED
    
    
    3,689,085
    
    
    
    3,532,100
 See accompanying notes to consolidated financial statements.
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##### Table of Contents



SERVIDYNE, INC.
 Additional
    
    DeferredCommon Stock
    
    Paid-In
    
    Stock
    
    Retained
    
    TreasuryShares
    
    Amount
    
    Capital
    
    Compensation
    
    Earnings
    
    Stock
    
    TotalBALANCES at April 30, 2005
    
    
    3,357,601
    
    
    $
    3,357,601
    
    
    $
    3,067,982
    
    
    $
    (14,162
    )
    
    $
    15,186,932
    
    
    $
    (684,942
    )
    
    $
    20,913,411Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    525,766
    
    
    
    
    
    
    
    525,766Common stock issued
    
    
    1,800
    
    
    
    1,800
    
    
    
    6,660
    
    
    
    (8,460
    )
    
    
    
    
    
    
    
    
    
    
    Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,202
    
    
    
    
    
    
    
    (1,871
    )
    
    
    16,331Stock option exercise
    
    
    732
    
    
    
    732
    
    
    
    2,196
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,928Cash dividends declared 
$.144 per share (adjusted for
subsequent stock dividend)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (511,688
    )
    
    
    
    
    
    
    (511,688
    )Stock dividend declared 
10% at market value
on date declared
    
    
    335,203
    
    
    
    335,203
    
    
    
    1,726,295
    
    
    
    
    
    
    
    (1,973,934
    )
    
    
    (87,564
    )
    
    
    BALANCES at April 30, 2006
    
    
    3,695,336
    
    
    
    3,695,336
    
    
    
    4,803,133
    
    
    
    (4,420
    )
    
    
    13,227,076
    
    
    
    (774,377
    )
    
    
    20,946,748Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    966,626
    
    
    
    
    
    
    
    966,626Common stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,747
    )
    
    
    (19,747
    )Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    72,027
    
    
    
    4,420
    
    
    
    
    
    
    
    (940
    )
    
    
    75,507Cash dividends declared $.144 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (508,923
    )
    
    
    
    
    
    
    (508,923
    )BALANCES at April 30, 2007
    
    
    3,695,336
    
    
    
    3,695,336
    
    
    
    4,875,160
    
    
    
    
    
    
    
    13,684,779
    
    
    
    (795,064
    )
    
    
    21,460,211Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,558,404
    
    
    
    
    
    
    
    1,558,404Common stock issued
    
    
    2,300
    
    
    
    2,300
    
    
    
    (2,300
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    30,575
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,575Cash dividends declared 
$.036 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (127,223
    )
    
    
    
    
    
    
    (127,223
    )BALANCES at July 31, 2007
    
    
    3,697,636
    
    
    $
    3,697,636
    
    
    $
    4,903,435
    
    
    $
    
    
    
    $
    15,115,960
    
    
    $
    (795,064
    )
    
    $
    22,921,967
 See accompanying notes to consolidated financial statements.
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##### Table of Contents



SERVIDYNE, INC.
 FIRST QUARTER ENDEDJULY 31,2007
    
    
    2006CONTINUING OPERATIONS:Cash flows from operating activities:Net earnings (loss)
    
    $
    1,558,404
    
    
    $
    (550,895
    )Earnings from discontinued operations, net of tax
    
    
    (1,278,684
    )
    
    
    (86,080
    )Adjustments to reconcile net earnings (loss) to
net cash provided by (used in) operating activities:Write off in
conjunction with sale of assets
    
    
    83,194
    
    
    
    Depreciation and amortization
    
    
    477,246
    
    
    
    366,140Deferred tax expense (benefit)
    
    
    76,783
    
    
    
    (338,037
    )Stock compensation expense
    
    
    30,575
    
    
    
    6,278Adjustment
to cash surrender value of life insurance
    
    
    (33,948
    )
    
    
    Straight-line rent
    
    
    (236
    )
    
    
    Changes in assets and liabilities:Receivables
    
    
    (1,319,411
    )
    
    
    305,708Costs and earnings in excess of billings
    
    
    (848,932
    )
    
    
    (159,681
    )Note receivables
    
    
    
    
    
    
    530,815Other current assets
    
    
    320,517
    
    
    
    (258,911
    )Trade and subcontractors payable
    
    
    231,755
    
    
    
    231,154Accrued expenses
    
    
    228,704
    
    
    
    152,442Accrued incentive compensation
    
    
    (6,916
    )
    
    
    (279,120
    )Billings in excess of costs and earnings
    
    
    132,612
    
    
    
    13,062Other liabilities
    
    
    412,820
    
    
    
    4,457Net cash provided by (used in) operating activities
    
    
    64,483
    
    
    
    (62,668
    )Cash flows from investing activities:Deposit of cash proceeds from sale of
real estate temporarily held as restricted cash in escrow
    
    
    (6,462,743
    )
    
    
    Release of restricted cash held in escrow
    
    
    
    
    
    
    418,594Additions to income-producing properties, net
    
    
    (136,387
    )
    
    
    (98,352
    )Additions to property and equipment, net
    
    
    (37,900
    )
    
    
    (42,543
    )Additions to intangible assets, net
    
    
    (78,407
    )
    
    
    (219,755
    )Additions to real estate held for sale or future development
    
    
    
    
    
    
    (34,657
    )Acquisition, net of escrowed cash
    
    
    
    
    
    
    (1,870,447
    )Net cash
(used in) investing activities
    
    
    (6,715,437
    )
    
    
    (1,847,160
    )Cash flows from financing activities:Real estate loan proceeds
    
    
    3,200,000
    
    
    
    2,600,000Loan repayments
    
    
    (2,579,950
    )
    
    
    (157,240
    )Deferred loan costs paid
    
    
    (57,346
    )
    
    
    (39,154
    )Cash
dividends paid to shareholders
    
    
    (127,223
    )
    
    
    (127,262
    )Net cash provided by financing activities
    
    
    435,481
    
    
    
    2,276,344DISCONTINUED OPERATIONS:Operating activities
    
    
    151,101
    
    
    
    96,314Investing activities
    
    
    4,809,567
    
    
    
    Financing activities
    
    
    (408,334
    )
    
    
    (142,632
    )Net cash provided by (used in ) discontinued operations
    
    
    4,552,334
    
    
    
    (46,318
    )Net (decrease) increase in cash and cash equivalents
    
    
    (1,663,139
    )
    
    
    320,198Cash and cash equivalents at beginning of period
    
    
    5,662,894
    
    
    
    7,329,805Cash and cash equivalents at end of period
    
    $
    3,999,755
    
    
    $
    7,650,003Supplemental disclosure of noncash financing activities:Issuance of common stock under Stock Award Plan
    
    $
    9,889
    
    
    $
    4,455
 See accompanying notes to consolidated financial statements.
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##### Table of Contents



SERVIDYNE, INC.
 NOTE 1. ORGANIZATION AND BUSINESS
  NOTE 2. UNAUDITED STATEMENTS
  NOTE 3. SIGNIFICANT ACCOUNTING POLICIES
  Share-Based Payment (revised 2004)
   5




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##### Table of Contents



Stock Options
  WeightedOptions to
    
    
    AveragePurchase
    
    
    ExerciseShares
    
    
    PriceOutstanding at April 30, 2007
    
    
    567,181
    
    
    $
    4.66Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited / Expired
    
    
    (40,670
    )
    
    
    4.65Outstanding at July 31, 2007
    
    
    526,511
    
    
    $
    4.66Vested at July 31, 2007
    
    
    526,511
    
    
    $
    4.66
  Number of
    
    Weighted AverageExercise
    
    Outstanding and
    
    Remaining ContractualPrice
    
    Exercisable Options
    
    Life (Years)$4.64
    
    
    461,838
    
    
    
    5.41$4.82
    
    
    63,800
    
    
    
    7.65$5.45
    
    
    873
    
    
    
    6.88
 Stock Appreciation Rights (SARs)
  WeightedSARs to
    
    
    AveragePurchase
    
    
    GrantShares
    
    
    PriceOutstanding at April 30, 2007
    
    
    430,000
    
    
    $
    4.06Granted
    
    
    20,000
    
    
    
    4.35Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (5,000
    )
    
    
    3.98Outstanding at July 31, 2007
    
    
    445,000
    
    
    $
    4.07Vested at July 31, 2007
    
    
    
    
    
    $
    
  6




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##### Table of Contents



Expected life (years)
    
    
    5Dividend yield
    
    
    3.41
    %Expected stock price volatility
    
    
    35.20
    %Risk free interest rate
    
    
    4.81
    %Fair value of SARs granted
    
    $
    0.78
  Shares of Restricted Stock
  Weighted AverageNumber of
    
    
    Grant DateRestricted
    
    
    Fair ValueShares of Stock
    
    
    per ShareNon-vested restricted stock at April 30, 2007
    
    
    
    
    
    $
    Granted
    
    
    2,300
    
    
    
    4.30Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Non-vested restricted stock at July 31, 2007
    
    
    2,300
    
    
    $
    4.30
 NOTE 4. RECEIVABLES
  NOTE 5. DISCONTINUED OPERATIONS
 Sales of Income-Producing Properties
 Accounting
for the Impairment or Disposal of Long-Lived Assets
 7




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##### Table of Contents



First Quarter EndedJuly 31,2007
    
    2006REAL
ESTATE SEGMENTRental revenues
    
    $
    173,592
    
    
    $
    226,128Rental property operating expenses, including depreciation
    
    
    (23,025
    )
    
    
    (30,955
    )Interest expense and loan prepayment fees
    
    
    (6,475
    )
    
    
    (56,335
    )Operating earnings from discontinued operations before income taxes
    
    
    144,092
    
    
    
    138,838Income tax expense
    
    
    (54,755
    )
    
    
    (52,758
    )Operating earnings from discontinued operations, net of tax
    
    
    89,337
    
    
    
    86,080Gain on sales of income-producing real estate
    
    
    1,918,301
    
    
    
    Income tax expense
    
    
    (728,954
    )
    
    
    Gain on sales of income-producing real estate, net of tax
    
    
    1,189,347
    
    
    
    Earnings from discontinued operations, net of tax
    
    $
    1,278,684
    
    
    $
    86,080
 Balances atJuly 31, 2007
    
    
    April 30, 2007Assets of Discontinued OperationsIncome-producing properties
    
    $
    
    
    
    $
    2,870,240Intangible assets
    
    
    
    
    
    
    28,035$
    
    
    
    $
    2,898,275Liabilities of Discontinued OperationsCurrent maturities of long-term debt
    
    $
    
    
    
    $
    32,559Mortgage notes payable
    
    
    
    
    
    
    375,776$
    
    
    
    $
    408,335
 8




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##### Table of Contents



NOTE 6. OPERATING SEGMENTS
  For the Quarter Ended
    
    
    
    
    
    Real EstateJuly 31, 2007
    
    BPE
    
    (1)
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated
customers
    
    $
    4,766,392
    
    
    $
    2,907,387
    
    
    $
    
    
    
    $
    
    
    
    $
    7,673,779Interest and other income
    
    
    55,094
    
    
    
    292,246
    
    
    
    12,770
    
    
    
    (277,609
    )
    
    
    82,501Intersegment revenue
    
    
    
    
    
    
    147,541
    
    
    
    
    
    
    
    (147,541
    )
    
    
    Total revenues from
continuing
operations
    
    $
    4,821,486
    
    
    $
    3,347,174
    
    
    $
    12,770
    
    
    $
    (425,150
    )
    
    $
    7,756,280Net earnings (loss)
    
    $
    34,595
    
    
    $
    2,340,159
    
    
    $
    (810,326
    )
    
    $
    (6,024
    )
    
    $
    1,558,404
 For the Quarter Ended
    
    
    
    
    
    Real EstateJuly 31, 2006
    
    BPE
    
    (1)
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated
customers
    
    $
    2,615,415
    
    
    $
    1,299,015
    
    
    $
    
    
    
    $
    
    
    
    $
    3,914,430Interest and other income
    
    
    47,077
    
    
    
    345,221
    
    
    
    16,687
    
    
    
    (250,281
    )
    
    
    158,704Intersegment revenue
    
    
    
    
    
    
    124,143
    
    
    
    
    
    
    
    (124,143
    )
    
    
    Total revenues from
continuing
operations
    
    $
    2,662,492
    
    
    $
    1,768,379
    
    
    $
    16,687
    
    
    $
    (374,424
    )
    
    $
    4,073,134Net (loss) earnings
    
    $
    (292,628
    )
    
    $
    268,965
    
    
    $
    (530,730
    )
    
    $
    3,498
    
    
    $
    (550,895
    )
 
 (1)
    
    The Company is in the business of creating long-term value by periodically realizing
gains through the sale of income-producing properties and the sale of real estate held
for future development or sale; therefore, in this presentation the Real Estate Segments
net earnings includes earnings from discontinued operations, pursuant to SFAS 144, that
resulted from the sales of certain income-producing properties, and earnings included in
continuing operations that resulted from the gains on sale of certain other real estate
assets. 9




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NOTE 7. EARNINGS (LOSS) PER SHARE
  For the quarter ended July 31, 2007Per shareEarnings
    
    Shares
    
    amountBasic EPS  earnings per share from continuing operations
    
    $
    279,720
    
    
    
    3,529,144
    
    
    $
    0.08Basic EPS  earnings per share from discontinued
operations
    
    
    1,278,684
    
    
    
    3,529,144
    
    
    
    0.36Effect of dilutive securities:Options
    
    
    
    
    
    
    56,048Warrants
    
    
    
    
    
    
    6,111SARs
    
    
    
    
    
    
    97,782159,941
    
    
    
    (0.02
    )Diluted EPS  earnings per share
    
    $
    1,558,404
    
    
    
    3,689,085
    
    
    $
    0.42
 For the quarter ended July 31, 2006Per share(Loss) Earnings
    
    
    Shares
    
    
    amountBasic EPS  loss per share from continuing operations
    
    $
    (636,975
    )
    
    
    3,532,100
    
    
    $
    (0.18
    )Basic EPS  earnings per share from discontinued
operations
    
    
    86,080
    
    
    
    3,532,100
    
    
    
    0.02Effect of dilutive securities
    
    
    
    
    
    
    
    
    
    
    Diluted EPS  loss per share
    
    $
    (550,895
    )
    
    
    3,532,100
    
    
    $
    (0.16
    )
 10




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NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
  July 31, 2007Gross Carrying
    
    
    AccumulatedAmount
    
    
    AmortizationIntangible assets, subject to amortization:Proprietary BPE software solutions
    
    $
    3,268,285
    
    
    $
    1,410,273Computer software
    
    
    460,526
    
    
    
    437,880Real estate lease costs
    
    
    1,364,955
    
    
    
    502,608Customer relationships
    
    
    218,000
    
    
    
    156,233Deferred loan costs
    
    
    492,265
    
    
    
    223,460$
    5,804,031
    
    
    $
    2,730,454Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707
    
    
    $
    Goodwill
    
    $
    5,458,717
    
    
    $
    
 April 30, 2007Gross Carrying
    
    
    AccumulatedAmount
    
    
    AmortizationIntangible assets, subject to amortization:Proprietary BPE software solutions
    
    $
    3,186,699
    
    
    $
    1,271,190Computer software
    
    
    453,525
    
    
    
    431,551Real estate lease costs
    
    
    1,779,868
    
    
    
    818,054Customer relationships
    
    
    218,000
    
    
    
    145,393Deferred loan costs
    
    
    531,432
    
    
    
    304,049Other
    
    
    28,660
    
    
    
    17,199$
    6,198,184
    
    
    $
    2,987,436Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707
    
    
    $
    Goodwill
    
    $
    5,458,717
    
    
    $
    
 Aggregate amortization expense for all amortized intangible assetsFor the three months ended July 31, 2007
    
    $
    207,012For the three months ended July 31, 2006
    
    
    152,708
 11




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NOTE 9. DISPOSITIONS
  NOTE 10. MORTGAGE NOTES PAYABLE
  NOTE 11. COMMITMENTS AND CONTINGENCIES
  NOTE 12. SUBSEQUENT EVENT
  12




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     Results of operations of the first quarter of fiscal 2008, compared to the first quarter of
fiscal 2007
   CHART A
 First Quarter EndedJuly 31,
    
    Amount
    
    Percent2007
    
    2006
    
    Increase
    
    IncreaseBPE (1)
    
    $
    4,766
    
    
    $
    2,615
    
    
    $
    2,151
    
    
    
    82Real Estate (2)
    
    
    2,907
    
    
    
    1,299
    
    
    
    1,608
    
    
    
    124$
    7,673
    
    
    $
    3,914
    
    
    $
    3,759
    
    
    
    96
 13




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NOTES TO CHART A
 (1)
    
    BPE Segment revenues increased approximately $2,151,000, or 82%, for the first quarter of
fiscal 2008, compared to the same period in fiscal 2007, primarily due to:
 (a)
    
    an increase in revenues of approximately $1,805,000, or 118%, in
infrastructure upgrades and energy savings projects; and(b)
    
    an increase of approximately $320,000, or 74%, in a long term energy
management services contract and several large engineering energy audits.
 (2)
    
    Real Estate Segment revenues increased $1,608,000 or 124%, for the first quarter of fiscal
2008, compared to the same period in fiscal 2007, primarily due to:
 (a)
    
    revenues of approximately $1,553,000 related to the sale of the Companys
leasehold interest in its shopping center in Jacksonville, Florida; and(b)
    
    an increase in rental revenues of approximately $195,000 as the result of
the Companys acquisition of the shopping center located in Smyrna, Tennessee, in
July 2006, and the Companys acquisition of the office building located in Newnan,
Georgia, in March 2007;
 partially offset by:
 (c)
    
    a decrease in leaseback income of approximately $141,000, resulting from
the sale of the Companys former leaseback shopping center in Orange Park, Florida,
and the sale of its leaseback shopping center in Richfield, Minnesota, in fiscal
2007.
  IncreaseJuly 31, 2007
    
    
    (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    PercentBPE (1)
    
    $
    7,734,000
    
    
    $
    6,480,000
    
    
    $
    1,254,000
    
    
    
    19Real Estate (2)
    
    
    4,833,000
    
    
    
    5,467,000
    
    
    
    (634,000
    )
    
    
    (12
    )Less: Intersegment eliminations (3)
    
    
    (568,000
    )
    
    
    (552,000
    )
    
    
    (16,000
    )
    
    
    3Total Backlog
    
    $
    11,999,000
    
    
    $
    11,395,000
    
    
    $
    604,000
    
    
    
    5
 (1)
    
    BPE backlog increased $1,254,000 primarily due to:
 (a)
    
    an increase of approximately $1,317,000, or 122%, in energy management
services; and(b)
    
    an increase of approximately $440,000, or 17%, in building productivity
services;
 partially offset by:
 (c)
    
    a decrease of approximately $502,000, or 18%, in infrastructure upgrades
and energy savings projects.
 The Company estimates that the BPE backlog at July 31, 2007, will be recognized
prior to July 31, 2008, with the exception of approximately $986,000 in energy management
services from contracts that extended  longer than one year.BPE backlog includes some contracts that can be cancelled with less than one years notice, and
assumes cancellation provisions will not be invoked. The amount for such cancelled contracts
included in the prior years Backlog was approximately $252,000 or 3.9%.
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(2)
    
    The decrease in Real Estate backlog of $634,000 primarily
consisted of:
 (a)
    
    approximately $300,000 related to the Companys leasehold interest in a
shopping center located in Richfield, Minnesota, that was sold on
March 12, 2007;(b)
    
    approximately $303,000 related to the Companys leasehold interest in a
shopping center located in Jacksonville, Florida, that was sold on July 31, 2007;(c)
    
    approximately $264,000 related to the Companys leasehold interest in a
shopping center located in Orange Park, Florida, that was sold on July 31, 2007; and(d)
    
    rental revenues of $351,000 as a result of the pending expiration in
January 2008 of a third-party lease at the Companys headquarters building in
Atlanta, Georgia;partially offset by:(e)
    
    rental revenues of approximately $384,000 related to the
Companys acquisition of
the office building in Newnan, Georgia, in March 2007; and(f)
    
    an increase in net rental revenues of approximately $200,000 related to
successful leasing activities at other properties.
 (3)
    
    Represents rental income at the Companys headquarters building to be paid to the Real
Estate Segment by the Parent Company and the BPE Segment.
 
   CHART B
 Percent of SegmentRevenues forFirst Quarter Ended
    
    First Quarter EndedJuly 31,
    
    July 31,2007
    
    2006
    
    2007
    
    2006BPE (1)
    
    $
    3,186
    
    
    $
    1,716
    
    
    
    67
    
    
    
    66Real Estate (2)
    
    
    970
    
    
    
    902
    
    
    
    33
    
    
    
    69$
    4,156
    
    
    $
    2,618
    
    
    
    54
    
    
    
    67
 15




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NOTES TO CHART B
 (1)
    
    On a dollar basis, BPE Segment costs and expenses increased $1,470,000, or 86%, for the
first quarter of fiscal 2008, compared to the same period of fiscal 2007, primarily due to
the corresponding increase in revenues.(2)
    
    On a dollar basis, Real Estate Segment costs and expenses increased $68,000, or 8%, for the
first quarter of fiscal 2008, compared to the same period of fiscal 2007, primarily due to:
 (a)
    
    costs of approximately $95,000 from the sale of the Companys leasehold
interest in a shopping center located in Jacksonville, Florida; and(b)
    
    an increase in rental operating costs and expenses of approximately
$115,000 as the result of the Companys acquisition of the shopping center located
in Smyrna, Tennessee, and the Companys office building located in Newnan, Georgia,
in July 2006 and March 2007, respectively;partially offset by:(c)
    
    the absence of lease costs of approximately $156,000 as a result of the
sale of two of the Companys former leasehold interests in shopping centers located
in Orange Park, Florida, and Richfield, Minnesota, which were sold in July 2007 and
March 2007, respectively.
 Real Estate Segment costs and expenses as a percentage of revenues were lower for the first
quarter of fiscal 2008, compared to fiscal 2007, primarily due to revenues of $1,553,000
in the current year as a result of the sale of the Companys leasehold interest
in a shopping center located in Jacksonville, Florida, in July 2007; the costs of the sale
were approximately $95,000.
 
  CHART C
 Percent of SegmentRevenues forFirst Quarter Ended
    
    First Quarter EndedJuly 31,
    
    July 31,2007
    
    2006
    
    2007
    
    2006BPE (1)
    
    $
    1,324
    
    
    $
    1,155
    
    
    
    28
    
    
    
    44Real Estate (2)
    
    
    183
    
    
    
    207
    
    
    
    6
    
    
    
    16Parent (3)
    
    
    1,289
    
    
    
    772
    
    
    
    17
    
    
    
    20$
    2,796
    
    
    $
    2,134
    
    
    
    36
    
    
    
    55
 16




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NOTES TO CHART C
 (1)
    
    BPE SG&A expenses as a percentage of revenues from
continuing operations decreased in the
first quarter of fiscal 2008, compared to the same period of fiscal 2007, primarily because
the increase in revenues did not cause a proportional increase in SG&A expenses.On a dollar basis, BPE SG&A expenses increased $169,000 or 15%, for the first quarter of fiscal
2008, compared to the same period of fiscal 2007, primarily due to higher sales and marketing
expenses.(2)
    
    On percentage basis, Real Estate SG&A expenses as a percentage of revenues were lower for the
first quarter of fiscal 2008, compared to fiscal 2007, primarily due
to the increase in revenues.(3)
    
    On a dollar basis, Parent SG&A expenses increased $517,000 or 67%, for the first quarter of
fiscal 2008, compared to the same period of fiscal 2007, primarily due to:
 (a)
    
    incentive compensation accruals of approximately $577,000
pursuant to the Company's cash incentive compensation plan;
 partially offset by:
 (b)
    
    a decrease in consulting fees of approximately $67,000.
 Liquidity and capital resources
  (a)
    
    proceeds of approximately $1,540,000 related to the sale of the Companys
leasehold interest in a shopping center located in Jacksonville, Florida;(b)
    
    a net increase in BPE Segment trade and subcontractors payables, accrued
expenses, and billings in excess of costs of approximately $593,000
primarily as a result of the
timing and submission of payments; and(c)
    
    an increase in other liabilities of approximately $412,000 primarily
related to notes payable to the minority owners of the former leasehold interest
in the land and the interest in the shopping center building located in Columbus,
Georgia;
 partially offset by:
 (d)
    
    an increase in BPE Segment accounts receivable and costs and earnings in
excess of billings of approximately $2,168,000 primarily as a result
of the timing of
billing and receipt of payments.
  (a)
    
    the deposit with a qualified intermediary of cash proceeds of
approximately $6,463,000 from the sales described in Note 9 to the consolidated
financial statements in order to qualify the sales for federal income tax deferral
under Internal Revenue Code Section 1031;(b)
    
    additions to income-producing properties of $136,000, primarily related
to tenant and building improvements; and(c)
    
    additions to intangible assets of $78,000, primarily related to new
software development efforts for the Companys proprietary Web/wireless building
performance expert building productivity applications.
 17




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##### Table of Contents



(a)
    
    net proceeds of $700,000 from the permanent loan of $3,200,000 on the
Companys office building located in Newnan, Georgia, which replaced the interim
loan of $2,500,000;
 partially offset by:
 (b)
    
    scheduled principal payments on mortgage notes and other long-term debt
of approximately $80,000; and(c)
    
    payment of a regular quarterly cash dividend to shareholders of
approximately $127,000.
   Critical Accounting Policies
  Revenue Recognition
 Revenue Recognition
  18




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Income-Producing Properties and Property and Equipment
  19




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Valuation of Goodwill and Other Intangible Assets
  Income Taxes
  Discontinued Operations
 Accounting for the Impairment or Disposal of Long-Lived Assets,
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
   20




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ITEM 1A. RISK FACTORS
  
 ITEM 6. EXHIBITS
 31(a)
    
    Certification of Chief Executive Officer, pursuant to Rules 13a-14(a)/15d-14(a)31(b)
    
    Certification of Chief Financial Officer, pursuant to Rules 13a-14(a)/15d-14(a)32(a)
    
    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(b)
    
    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
 21




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SERVIDYNE, INC.
     (Registrant)Date: September 14, 2007
    /s/ Alan R. AbramsAlan R. AbramsChief Executive OfficerDate: September 14, 2007
    /s/ Mark J. ThomasMark J. ThomasChief Financial Officer 22