##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION   FORM 10-Q
QUARTERLY REPORT  Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 For the quarter ended January 31, 2005 Commission file number 0-10146 ABRAMS INDUSTRIES,
INC.   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   Registrants telephone number, including area code: (770) 953-0304 Former name, former address, former fiscal year, if changed since last report: N/A Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes þ            No  ̈ Indicate by check mark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act). Yes  ̈            No þ The number of shares of $1.00 par value Common Stock of the Registrant outstanding as of February
28, 2005, was 3,207,613.




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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 3. LEGAL PROCEEDINGSITEM 4. CONTROLS AND PROCEDURESPART II. OTHER INFORMATIONITEM 6. EXHIBITSSIGNATURESEX-31.(A) CERTIFICATION OF THE CEOEX-31.(B) CERTIFICATION OF THE CFOEX-32.(A) CERTIFICATION OF THE CEOEX-32.(B) CERTIFICATION OF THE CEO    Table of Contents  
 PART I. FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS ABRAMS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED) January 31, 2005
    
    April 30, 2004ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    3,507,233
    
    
    $
    6,379,679Short-term investment
    
    
    
    
    
    
    200,000Receivables (Note 4)
    
    
    1,751,869
    
    
    
    1,785,411Less: Allowance for doubtful accounts
    
    
    (112,772
    )
    
    
    (48,512
    )Assets of
discontinued operations (Note 5)
    
    
    161,835
    
    
    
    4,296,642Real estate held for sale
    
    
    2,595,493
    
    
    
    Costs and earnings in excess of billings
    
    
    341,446
    
    
    
    481,480Deferred income taxes
    
    
    613,916
    
    
    
    623,001Other
    
    
    851,197
    
    
    
    634,700Total current assets
    
    
    9,710,217
    
    
    
    14,352,401INCOME-PRODUCING PROPERTIES, net
    
    
    26,666,580
    
    
    
    27,078,380PROPERTY AND EQUIPMENT, net
    
    
    850,074
    
    
    
    605,967OTHER ASSETS:Real estate held for future development or sale
    
    
    3,692,731
    
    
    
    6,593,317Intangible assets, net (Note 8)
    
    
    3,326,090
    
    
    
    3,479,744Goodwill (Note 8)
    
    
    5,458,717
    
    
    
    4,998,242Investment held to maturity
    
    
    2,000,000
    
    
    
    2,000,000Other
    
    
    3,159,645
    
    
    
    2,767,968$
    54,864,054
    
    
    $
    61,876,019LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    977,454
    
    
    $
    965,610Accrued expenses
    
    
    2,145,848
    
    
    
    1,928,423Liabilities
of discontinued operations (Note 5)
    
    
    214,084
    
    
    
    2,859,927Billings in excess of costs and earnings
    
    
    287,116
    
    
    
    98,439Current maturities of long-term debt
    
    
    1,235,790
    
    
    
    1,292,669Total current liabilities
    
    
    4,860,292
    
    
    
    7,145,068DEFERRED INCOME TAXES
    
    
    2,054,188
    
    
    
    2,677,141OTHER LIABILITIES
    
    
    1,572,119
    
    
    
    4,644,630MORTGAGE NOTES PAYABLE, less current maturities (Note 9)
    
    
    26,060,687
    
    
    
    25,509,868OTHER LONG-TERM DEBT, less current maturities
    
    
    1,914,501
    
    
    
    1,901,785Total liabilities
    
    
    36,461,787
    
    
    
    41,878,492COMMITMENTS AND CONTINGENCIES (Note 10)SHAREHOLDERS EQUITY:Common
stock, $1 par value; 5,000,000 shares authorized; 3,355,901 issued and 3,207,913 outstanding in January 2005,
3,327,628 issued and 3,180,340 outstanding in April 2004
    
    
    3,355,901
    
    
    
    3,327,628Additional paid-in capital
    
    
    3,061,080
    
    
    
    2,963,874Deferred stock compensation
    
    
    (14,548
    )
    
    
    (26,855
    )Retained earnings
    
    
    12,682,536
    
    
    
    14,412,663Treasury stock, common shares, 147,988 in January 2005 and 147,288 in April 2004
    
    
    (682,702
    )
    
    
    (679,783
    )Total shareholders equity
    
    
    18,402,267
    
    
    
    19,997,527$
    54,864,054
    
    
    $
    61,876,019
 See accompanying notes to consolidated financial statements. 1




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ABRAMS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) THIRD QUARTER
    
    FIRST NINE MONTHSENDED JANUARY 31,
    
    ENDED JANUARY 31,2005
    
    2004
    
    2005
    
    2004REVENUES:Energy and facilities solutions
    
    $
    839,864
    
    
    $
    756,981
    
    
    $
    2,670,159
    
    
    $
    2,132,265Energy services
    
    
    2,478,420
    
    
    
    546,744
    
    
    
    6,434,818
    
    
    
    546,744Rental income
    
    
    1,783,994
    
    
    
    1,697,211
    
    
    
    7,780,719
    
    
    
    5,320,330Real estate sales
    
    
    515,000
    
    
    
    
    
    
    
    515,000
    
    
    
    5,617,278
    
    
    
    3,000,936
    
    
    
    17,400,696
    
    
    
    7,999,339Interest
    
    
    20,706
    
    
    
    (496
    )
    
    
    59,608
    
    
    
    6,512Other
    
    
    6,635
    
    
    
    23,328
    
    
    
    42,699
    
    
    
    85,1985,644,619
    
    
    
    3,023,768
    
    
    
    17,503,003
    
    
    
    8,091,049COSTS AND EXPENSES:Energy and facilities solutions
    
    
    466,942
    
    
    
    383,263
    
    
    
    1,500,700
    
    
    
    1,205,870Energy services
    
    
    1,668,661
    
    
    
    369,192
    
    
    
    4,528,388
    
    
    
    369,192Rental property operating expenses, excluding interest
    
    
    1,243,659
    
    
    
    1,103,703
    
    
    
    3,955,443
    
    
    
    3,418,036Cost of real estate sold
    
    
    323,874
    
    
    
    
    
    
    
    323,874
    
    
    
    3,703,136
    
    
    
    1,856,158
    
    
    
    10,308,405
    
    
    
    4,993,098Selling, general and administrativeEnergy and facilities solutions
    
    
    621,510
    
    
    
    487,378
    
    
    
    1,720,473
    
    
    
    1,689,134Energy services
    
    
    494,414
    
    
    
    244,388
    
    
    
    1,616,105
    
    
    
    244,388Real estate
    
    
    188,731
    
    
    
    217,900
    
    
    
    1,178,138
    
    
    
    582,404Parent
    
    
    626,969
    
    
    
    393,445
    
    
    
    2,227,691
    
    
    
    1,549,5491,931,624
    
    
    
    1,343,111
    
    
    
    6,742,407
    
    
    
    4,065,475Extinguishment of debt (Note 9)
    
    
    
    
    
    
    
    
    
    
    218,071
    
    
    
    Interest costs incurred
    
    
    545,070
    
    
    
    610,113
    
    
    
    1,731,578
    
    
    
    1,824,2886,179,830
    
    
    
    3,809,382
    
    
    
    19,000,461
    
    
    
    10,882,861LOSS BEFORE
INCOME TAXES FROM
CONTINUING OPERATIONS
    
    
    (535,211
    )
    
    
    (785,614
    )
    
    
    (1,497,458
    )
    
    
    (2,791,812
    )INCOME TAX BENEFIT
    
    
    (253,343
    )
    
    
    (266,000
    )
    
    
    (598,528
    )
    
    
    (943,000
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (281,868
    )
    
    
    (519,614
    )
    
    
    (898,930
    )
    
    
    (1,848,812
    )DISCONTINUED OPERATIONS (Note 5):Earnings (loss) from discontinued operations, net of
income tax expense (benefit) of $27,293, ($167,000),
$55,114 and ($485,000), respectively
    
    
    33,628
    
    
    
    (363,567
    )
    
    
    66,576
    
    
    
    (1,039,471
    )EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS
    
    
    33,628
    
    
    
    (363,567
    )
    
    
    66,576
    
    
    
    (1,039,471
    )NET LOSS
    
    $
    (248,240
    )
    
    $
    (883,181
    )
    
    $
    (832,354
    )
    
    $
    (2,888,283
    )NET EARNINGS (LOSS) PER SHARE  BASIC AND DILUTED (Note 7):From continuing operations
    
    $
    (.09
    )
    
    $
    (.18
    )
    
    $
    (.28
    )
    
    $
    (.63
    )From discontinued operations
    
    $
    .01
    
    
    $
    (.12
    )
    
    $
    .02
    
    
    $
    (.35
    )NET EARNINGS (LOSS) PER SHARE  BASIC AND DILUTED
    
    $
    (.08
    )
    
    $
    (.30
    )
    
    $
    (.26
    )
    
    $
    (.98
    )DIVIDENDS PER SHARE
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    0.28
    
    
    $
    0.12WEIGHTED AVERAGE SHARES OUTSTANDING  BASIC AND DILUTED
    
    
    3,207,913
    
    
    
    2,980,878
    
    
    
    3,204,061
    
    
    
    2,936,438
 See accompanying notes to consolidated financial statements. 2




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ABRAMS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(UNAUDITED) Common Stock
    
    Additional
    
    DeferredPaid-In
    
    Stock
    
    Retained
    
    TreasuryShares
    
    Amount
    
    Capital
    
    Compensation
    
    Earnings
    
    Stock
    
    TotalBALANCES at April 30, 2002
    
    
    3,054,439
    
    
    $
    3,054,439
    
    
    $
    2,135,005
    
    
    $
    (12,744
    )
    
    $
    18,273,853
    
    
    $
    (671,677
    )
    
    $
    22,778,876Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,073,524
    )
    
    
    
    
    
    
    (1,073,524
    )Common stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,270
    )
    
    
    (2,270
    )Common stock issued
    
    
    5,800
    
    
    
    5,800
    
    
    
    18,500
    
    
    
    (24,300
    )
    
    
    
    
    
    
    
    
    
    
    Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,446
    
    
    
    
    
    
    
    
    
    
    
    20,446Cash dividends declared -
$.16 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (465,576
    )
    
    
    
    
    
    
    (465,576
    )BALANCES at April 30, 2003
    
    
    3,060,239
    
    
    
    3,060,239
    
    
    
    2,153,505
    
    
    
    (16,598
    )
    
    
    16,734,753
    
    
    
    (673,947
    )
    
    
    21,257,952Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,850,126
    )
    
    
    
    
    
    
    (1,850,126
    )Common stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,836
    )
    
    
    (5,836
    )Common stock issued
    
    
    267,389
    
    
    
    267,389
    
    
    
    810,369
    
    
    
    (41,700
    )
    
    
    
    
    
    
    
    
    
    
    1,036,058Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,443
    
    
    
    
    
    
    
    
    
    
    
    31,443Cash
dividends declared -
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $.16 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (471,964
    )
    
    
    
    
    
    
    (471,964
    )BALANCES at April 30, 2004
    
    
    3,327,628
    
    
    
    3,327,628
    
    
    
    2,963,874
    
    
    
    (26,855
    )
    
    
    14,412,663
    
    
    
    (679,783
    )
    
    
    19,997,527Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (832,354
    )
    
    
    
    
    
    
    (832,354
    )Common stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,919
    )
    
    
    (2,919
    )Common stock issued
    
    
    28,273
    
    
    
    28,273
    
    
    
    97,206
    
    
    
    (30,573
    )
    
    
    
    
    
    
    
    
    
    
    94,906Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,880
    
    
    
    
    
    
    
    
    
    
    
    42,880Cash dividends declared -
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $.28 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (897,773
    )
    
    
    
    
    
    
    (897,773
    )BALANCES at January 31, 2005
    
    
    3,355,901
    
    
    $
    3,355,901
    
    
    $
    3,061,080
    
    
    $
    (14,548
    )
    
    $
    12,682,536
    
    
    $
    (682,702
    )
    
    $
    18,402,267
 See accompanying notes to consolidated financial statements. 3




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ABRAMS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) NINE MONTHS ENDED JANUARY 31,2005
    
    2004Cash flows from operating activities:Net loss
    
    $
    (832,354
    )
    
    $
    (2,888,283
    )(Income) loss from discontinued operations, net of tax
    
    
    (66,576
    )
    
    
    1,039,471Adjustments to reconcile net loss to net
cash used in operating activities:Gain on sale of real estate, net of tax
    
    
    (118,499
    )
    
    
    Depreciation and amortization
    
    
    1,520,807
    
    
    
    780,063Deferred tax benefit
    
    
    (613,868
    )
    
    
    (1,030,922
    )Provision for (recovery of) doubtful accounts, net
    
    
    52,298
    
    
    
    (9,955
    )Extinguishment of debt
    
    
    218,071
    
    
    
    Changes in assets and liabilities, net of effect of acquisition:Receivables, net
    
    
    33,592
    
    
    
    402,882Costs and earnings in excess of billings
    
    
    140,034
    
    
    
    Other current assets
    
    
    (216,497
    )
    
    
    (202,382
    )Other assets
    
    
    (391,677
    )
    
    
    (121,346
    )Trade and subcontractors payable
    
    
    282,921
    
    
    
    (324,050
    )Accrued expenses
    
    
    (251,166
    )
    
    
    132,399Billings in excess of costs and earnings
    
    
    188,677
    
    
    
    Other liabilities
    
    
    13,336
    
    
    
    48,865Net cash used in operating activities
    
    
    (40,901
    )
    
    
    (2,173,258
    )Cash flows from investing activities:Proceeds from sale of real estate held for future development or sale
    
    
    515,000
    
    
    
    Proceeds from maturity of short-term investment
    
    
    200,000
    
    
    
    Additions to income-producing properties, net
    
    
    (416,615
    )
    
    
    (154,296
    )Additions to property and equipment, net
    
    
    (450,482
    )
    
    
    (22,658
    )Additions to intangible assets, net
    
    
    (380,683
    )
    
    
    (57,975
    )Acquisition, net of cash acquired
    
    
    (183,224
    )
    
    
    Repayments received on notes receivable
    
    
    
    
    
    
    66,147Net cash used in investing activities
    
    
    (716,004
    )
    
    
    (168,782
    )Cash flows from financing activities:Debt repayments
    
    
    (867,284
    )
    
    
    (520,230
    )Mortgage repayment
    
    
    (1,974,042
    )
    
    
    Deferred loan costs paid
    
    
    (50,000
    )
    
    
    Cash dividends
    
    
    (897,773
    )
    
    
    (233,144
    )Net cash used in financing activities
    
    
    (3,789,099
    )
    
    
    (753,374
    )Cash flows from discontinued operations:Operating activities
    
    
    1,673,558
    
    
    
    1,629,204Mortgage repayments
    
    
    
    
    
    
    (525,663
    )Net cash provided by discontinued operations
    
    
    1,673,558
    
    
    
    1,103,541Net decrease in cash and cash equivalents
    
    
    (2,872,446
    )
    
    
    (1,991,873
    )Cash and cash equivalents at beginning of period
    
    
    6,379,679
    
    
    
    5,157,639Cash and cash equivalents at end of period
    
    $
    3,507,233
    
    
    $
    3,165,766Supplemental disclosure of non-cash financing activities:Issuance of common stock under Stock Award Plan
    
    $
    7,500
    
    
    $
    41,700
 See accompanying notes to consolidated financial statements. 4




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ABRAMS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2005, AND APRIL 30, 2004
(UNAUDITED) NOTE 1. ORGANIZATION AND BUSINESS Abrams Industries, Inc. (together with its subsidiaries, the Company) was organized under
Delaware law in 1960. In 1984, the Company changed its state of incorporation from Delaware to
Georgia. The Company (i) provides energy engineering services and develops, implements and supports
maintenance and service request solutions for facilities; (ii) implements energy saving lighting
programs and provides other energy services, including facility-related improvements that reduce
energy and operating costs; and (iii) engages in real estate investment and development. The
Company also formerly provided commercial construction services as a general contractor. NOTE 2. UNAUDITED STATEMENTS The accompanying unaudited consolidated financial statements have been prepared by the Company
in accordance with accounting principles generally accepted in the United States of America,
pursuant to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements have been condensed
or omitted pursuant to such rules and regulations, although management believes that the
accompanying disclosures are adequate. In the opinion of management, the accompanying financial
statements contain all adjustments, consisting of normal recurring accruals, that are necessary for
a fair statement of the results for the interim periods presented. These financial statements
should be read in conjunction with the consolidated financial statements and the notes thereto
included in the Companys Annual Report on Form 10-K for the year ended April 30, 2004. Results of
operations for interim periods are not necessarily indicative of annual results. Certain reclassifications have been made to the fiscal 2004 consolidated financial statements
to conform to classification adopted in the fiscal 2005. NOTE 3. SIGNIFICANT ACCOUNTING POLICIES As
of October 31, 2004, the Company elected to early adopt EITF 03-13 issued by Emerging
Issues Task Force, Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining
Whether to Report Discontinued Operations. During its fiscal year ended April 30, 2004, the
Company made the decision to discontinue its operations as a general contractor, and pursuant to
this decision, all general contracting operating activities have ceased. The Construction Segment
has been classified as a discontinued operation, and the historical assets, liabilities, operating
results and cash flows of the Segment have been reclassified to discontinued operations pursuant to
SFAS No. 144. In December 2004, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standard (SFAS) No. 123(R) which replaces SFAS No. 123, Accounting for Stock-Based
Compensation,and supercedes Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees. SFAS No. 123(R) applies to all transactions involving the issuance, by the
Company, of its own equity securities (stock, stock options, or other equity instruments) in
exchange for goods or services, including employee services. It requires that all stock option
awards to employees be 5




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expensed by the Company over any related vesting period. The Company will apply this standard
on a modified prospective method. Under this method, the Company records compensation expense for
all awards it grants after the date it adopts the standard. In addition, the Company is required
to record compensation expense for the unvested portion of the previously granted awards that
remain outstanding at the date of adoption. SFAS
No. 123(R) is effective for the Company as of the
beginning of the first interim period that begins after June 15, 2005. The adoption of this
statement is not expected to have a material effect on the Companys financial position or results
of operations. As of January 31, 2003, the Company adopted the fair value disclosure provisions of SFAS No.
123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure. Under SFAS No. 148, the Company is required
to disclose the effects on reported net earnings (loss) with respect to stock-based compensation. For purposes of the required pro forma disclosures, the Company has computed the value of all
stock option awards granted for the third quarter and for the nine months ended January 31, 2005,
and January 31, 2004, using the Black-Scholes option pricing model. Options to purchase 720,492 shares were outstanding at January 31, 2005, of which 560,028
options were vested. No stock options or shares of restricted stock were granted in the third
quarter ended January 31, 2005, and 84,900 stock options and 7,500 shares of restricted stock were
granted in the nine months ended January 31, 2005. The Company granted 186,000 stock options and
10,000 shares of restricted stock in the third quarter and in the nine months ended January 31,
2004. The number of options forfeited in the third quarter and nine months ended January 31, 2005,
was 2,000 and 62,000, respectively, and 26,294 and 237,294 for the third quarter and nine months
ended January 31, 2004, respectively. There were 6,592 stock options outstanding that were
in-the-money as of January 31, 2005. If the Company had accounted for its stock-based compensation awards in accordance with SFAS
No. 123, pro forma results would have been as follows: Quarter
    
    Nine MonthsEnded January 31,
    
    Ended January 31,2005
    
    2004
    
    2005
    
    2004Net loss, as reported
    
    $
    (248,240
    )
    
    $
    (883,181
    )
    
    $
    (832,354
    )
    
    $
    (2,888,283
    )Deduct: Total stock-based compensation
expense as determined under fair value
based method for all awards, net of
related tax effects
    
    
    (18,898
    )
    
    
    (36,319
    )
    
    
    (91,886
    )
    
    
    (109,441
    )Add: Forfeitures, net of related tax effects
    
    
    1,128
    
    
    
    11,172
    
    
    
    33,558
    
    
    
    121,988Pro forma net loss
    
    $
    (266,010
    )
    
    $
    (908,328
    )
    
    $
    (890,682
    )
    
    $
    (2,875,736
    )Net loss per share:Basic and diluted  as reported
    
    $
    (0.08
    )
    
    $
    (0.30
    )
    
    $
    (0.26
    )
    
    $
    (0.98
    )Basic and diluted  pro forma
    
    $
    (0.08
    )
    
    $
    (0.30
    )
    
    $
    (0.28
    )
    
    $
    (0.98
    )
 6




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##### Table of Contents



NOTE 4. RECEIVABLES All net contract and trade receivables are expected to be collected within one year. NOTE 5. DISCONTINUED OPERATIONS The Company is in the business of creating long-term value by periodically realizing gains
through the sale of existing real estate assets, and then redeploying its capital by reinvesting
the proceeds from such sales. Effective May 1, 2002, the Company adopted SFAS No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets, which requires, among other things, that the
operating results of certain income-producing assets, sold subsequent to April 30, 2002, be
included in discontinued operations in the statements of operations for all periods presented. The
Company classifies an asset as held for sale when the asset is under a binding sales contract with
minimal contingencies, and the prospective buyer is materially at risk if the buyer fails to
complete the transaction. However, each potential transaction is evaluated based on its separate
facts and circumstances. Pursuant to this criteria, as of January 31, 2005, the Company classified
its shopping center located in Cincinnati, Ohio, as held for sale. As such, the financial
statements have been prepared with the results of operations and cash flows related to the shopping
center now shown as discontinued operations. This sale of the shopping center subsequently closed
in February 2005. See Note 12 to the consolidated financial statements. There were no other
assets classified as held for sale as of January 31, 2005. During its fiscal year ended April 30, 2004, the Company made the decision to discontinue its
operations as a general contractor, and pursuant to this decision, all general contracting
operating activities have ceased. The Construction Segment has been classified as a discontinued
operation, and the historical assets, liabilities, operating results and cash flows of the Segment
have been reclassified to discontinued operations pursuant to SFAS No. 144. On March 12, 2004, the Company sold its shopping center located in North Fort Myers, Florida,
and recognized a pretax gain of approximately $4.0 million. As a result of this transaction, the
Companys financial statements have been prepared with the results of operations and cash flows
related to the North Fort Myers shopping center shown as discontinued operations. Summarized financial information for discontinued operations is as follows: Balances atAssets of discontinued operations
    
    January 31, 2005
    
    April 30, 2004Receivables
    
    $
    157,182
    
    
    $
    3,757,896Cost and earnings in excess of billings
    
    
    
    
    
    
    379,460Other current assets
    
    
    4,653
    
    
    
    159,286$
    161,835
    
    
    $
    4,296,642
 Balances atLiabilities of discontinued operations
    
    January 31, 2005
    
    April 30, 2004Trade and subcontractors payable
    
    $
    49,380
    
    
    $
    2,234,458Accrued expenses
    
    
    164,704
    
    
    
    515,426Billings in excess of cost and earnings
    
    
    

    
    
    
    110,043$
    214,084
    
    
    $
    2,859,927
 7




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##### Table of Contents



Third Quarter Ended
    
    Nine Months EndedJanuary 31,
    
    January 31,2005
    
    2004
    
    2005
    
    2004REVENUES:Construction
    
    $
    
    
    
    $
    2,378,824
    
    
    $
    145,513
    
    
    $
    23,788,739Real estate
    
    
    183,522
    
    
    
    893,028
    
    
    
    510,726
    
    
    
    2,646,840Total revenues
    
    
    183,522
    
    
    
    3,271,852
    
    
    
    656,239
    
    
    
    26,435,579COSTS AND EXPENSES:Construction costs
    
    
    
    
    
    
    2,581,359
    
    
    
    114,734
    
    
    
    23,198,804Rental property operating expenses,
including depreciation and interest
    
    
    141,269
    
    
    
    613,652
    
    
    
    289,490
    
    
    
    1,856,347Construction selling, general & administrative
    
    
    (18,668
    )
    
    
    607,408
    
    
    
    130,325
    
    
    
    2,904,899Total costs and expenses
    
    
    122,601
    
    
    
    3,802,419
    
    
    
    534,549
    
    
    
    27,960,050Earnings (loss) from discontinued operations
    
    
    60,921
    
    
    
    (530,567
    )
    
    
    121,690
    
    
    
    (1,524,471
    )Income tax expense (benefit)
    
    
    27,293
    
    
    
    (167,000
    )
    
    
    55,114
    
    
    
    (485,000
    )Earnings (loss) from discontinued operations, net of tax
    
    $
    33,628
    
    
    $
    (363,567
    )
    
    $
    66,576
    
    
    $
    (1,039,471
    )
 NOTE 6. OPERATING SEGMENTS The Company has three operating segments: Energy and Facilities Solutions, Energy Services,
and Real Estate. The Company also formerly provided commercial construction services as a general
contractor through its Construction Segment. The Construction Segment has been classified as a
discontinued operation, and the historical operating results of the Segment have been reclassified
to discontinued operations pursuant to SFAS No. 144. The table below exhibits selected financial
data on a segment basis. Earnings (loss) from continuing operations before income taxes are total
revenues of continuing operations less operating expenses of continuing operations, including
depreciation and interest. Parent company expenses have not been allocated to the subsidiaries. 8




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##### Table of Contents



Energy and
        
        EnergyFor the Quarter Ended
        
        Facilities
        
        ServicesJanuary 31,

2005
        
        Solutions
        
        (1)
        
        Real Estate
        
        Parent
        
        Eliminations
        
        ConsolidatedRevenues from unaffiliated
            customers
        
        $
        839,864
        
        
        $
        2,478,420
        
        
        $
        2,298,994
        
        
        $
        
        
        
        $
        
        
        
        $
        5,617,278Interest and other
            income
        
        
        
        
        
        
        (8,100
        )
        
        
        88,102
        
        
        
        6,717
        
        
        
        (59,378
        )
        
        
        27,341Intersegment revenue
        
        
        3,332
        
        
        
        
        
        
        
        125,134
        
        
        
        
        
        
        
        (128,466
        )
        
        
        Total revenues from
            continuing operations
        
        $
        843,196
        
        
        $
        2,470,320
        
        
        $
        2,512,230
        
        
        $
        6,717
        
        
        $
        (187,844
        )
        
        $
        5,644,619Earnings (loss) before
            income taxes from continuing operations
        
        $
        (308,343
        )
        
        $
        175,957
        
        
        $
        221,200
        
        
        $
        (731,708
        )
        
        $
        107,683
        
        
        $
        (535,211
        )
 Energy and
    
    EnergyFor the Quarter Ended
    
    Facilities
    
    ServicesJanuary 31, 2004
    
    Solutions
    
    (1)
    
    Real Estate
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated
customers
    
    $
    756,981
    
    
    $
    546,744
    
    
    $
    1,697,211
    
    
    $
    
    
    
    $
    
    
    
    $
    3,000,936Interest and other income
    
    
    
    
    
    
    12,536
    
    
    
    10,122
    
    
    
    174
    
    
    
    
    
    
    
    22,832Intersegment revenue
    
    
    
    
    
    
    
    
    
    
    117,041
    
    
    
    
    
    
    
    (117,041
    )
    
    
    Total revenues from
continuing operations
    
    $
    756,981
    
    
    $
    559,280
    
    
    $
    1,824,374
    
    
    $
    174
    
    
    $
    (117,041
    )
    
    $
    3,023,768Earnings (loss) before
income taxes from
continuing operations
    
    $
    (114,025
    )
    
    $
    (70,559
    )
    
    $
    (97,836
    )
    
    $
    (450,150
    )
    
    $
    (53,044
    )
    
    $
    (785,614
    )
 Energy and
        
        EnergyFor the Nine Months Ended
        
        Facilities
        
        ServicesJanuary 31,

2005
        
        Solutions
        
        (1)
        
        Real Estate
        
        Parent
        
        Eliminations
        
        ConsolidatedRevenues from unaffiliated
            customers
        
        $
        2,670,159
        
        
        $
        6,434,818
        
        
        $
        8,295,719
        
        
        $
        
        
        
        $
        
        
        
        $
        17,400,696Interest and other
            income
        
        
        
        
        
        
        3,025
        
        
        
        236,851
        
        
        
        21,923
        
        
        
        (159,492
        )
        
        
        102,307Intersegment revenue
        
        
        14,867
        
        
        
        
        
        
        
        371,352
        
        
        
        
        
        
        
        (386,219
        )
        
        
        Total revenues from
            continuing operations
        
        $
        2,685,026
        
        
        $
        6,437,843
        
        
        $
        8,903,922
        
        
        $
        21,923
        
        
        $
        (545,711
        )
        
        $
        17,503,003Earnings (loss) before
            income taxes from continuing operations
        
        $
        (660,892
        )
        
        $
        (82,092
        )
        
        $
        1,537,057
        
        
        $
        (2,516,037
        )
        
        $
        224,506
        
        
        $
        (1,497,458
        )
 Energy and
        
        EnergyFor the Nine Months Ended
        
        Facilities
        
        ServicesJanuary 31,

2004
        
        Solutions
        
        (1)
        
        Real Estate
        
        Parent
        
        Eliminations
        
        ConsolidatedRevenues from unaffiliated
            customers
        
        $
        2,132,265
        
        
        $
        546,744
        
        
        $
        5,320,330
        
        
        $
        
        
        
        $
        
        
        
        $
        7,999,339Interest and other
            income
        
        
        
        
        
        
        12,536
        
        
        
        77,635
        
        
        
        1,539
        
        
        
        
        
        
        
        91,710Intersegment revenue
        
        
        
        
        
        
        
        
        
        
        344,973
        
        
        
        
        
        
        
        (344,973
        )
        
        
        Total revenues from
            continuing operations
        
        $
        2,132,265
        
        
        $
        559,280
        
        
        $
        5,742,938
        
        
        $
        1,539
        
        
        $
        (344,973
        )
        
        $
        8,091,049Earnings (loss) before
            income taxes from continuing operations
        
        $
        (763,879
        )
        
        $
        (70,559
        )
        
        $
        (72,678
        )
        
        $
        (1,705,045
        )
        
        $
        (179,651
        )
        
        $
        (2,791,812
        )
 (1) The Energy Services Segment was formed in

December 2003. 9




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##### Table of Contents



NOTE 7. EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share are computed by dividing net earnings (loss) by the weighted
average shares outstanding during the reporting period. Diluted earnings per share are computed by
giving effect to dilutive stock equivalents resulting from outstanding stock options. The dilutive
effect on the number of common shares for the third quarter and nine months ended January 31, 2005,
was 711 and 287 shares, respectively, and was 264 and 0 shares for the third quarter and the first
nine months ended January 31, 2004, respectively. Since the Company had losses from continuing
operations for all periods presented, all stock equivalents were antidilutive during these periods,
and therefore, are excluded when determining the diluted weighted average shares outstanding. NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS The gross carrying amounts and accumulated amortization for all of the Companys intangible
assets as of January 31, 2005, are as follows: January 31, 2005Gross Carrying
    
    AccumulatedAmortized intangible assets:
    
    Amount
    
    AmortizationProprietary software solutions
    
    $
    1,541,661
    
    
    $
    510,294Applications software
    
    
    409,197
    
    
    
    344,795Real estate lease costs
    
    
    1,750,962
    
    
    
    748,959Customer relationships
    
    
    218,000
    
    
    
    47,233Deferred loan costs
    
    
    832,782
    
    
    
    524,276Other
    
    
    55,609
    
    
    
    15,271$
    4,808,211
    
    
    $
    2,190,828Unamortized intangible assets:Trademark
    
    $
    708,707
    
    
    $
    Goodwill
    
    $
    5,458,717
    
    
    $
    
 Goodwill
increased $460,475 from April 30, 2004, due to: (1) $313,035 from the acquisition of
Building Performance Engineers, Inc. (see Note 11.
Acquisitions); and (2) $147,440 in purchase
price adjustments from prior acquisitions. The Company tested goodwill and intangible assets, related to its Energy Services Segment,
with indefinite useful lives as of December 19, 2004, for impairment, as required by SFAS 142,
utilizing the expected present value of future cash flows. The analysis did not result in an
impairment. NOTE 9. MORTGAGE NOTES PAYABLE  On July 8, 2004, the Company restructured the loan on the Companys owned shopping center in
Jacksonville, Florida. The Company paid the lender $1.5 million as payment in full of the
Additional Interest Agreement, which was then terminated. The loan principal amount was reduced by
$474,042. The restructured loan principal amount was $7.8 million; the loan bears interest at
6.125% and will be 10




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##### Table of Contents



amortized until it matures on July 1, 2029, although the loan may be called by the lender for early
repayment any time after July 1, 2011, upon thirteen months notice. As a result of the loan
restructuring, the Companys annual debt service payment for the shopping center was reduced by
$299,448. The following table updates Footnote 7 Mortgage Notes Payable and Leases in the Companys
Annual Report on Form 10-K as of April 30, 2004, to reflect the restructuring of the loan mentioned
above. The expected future minimum principal and interest payments on mortgage notes payable on
the owned rental properties are as follows: Owned Rental PropertiesMortgage PaymentsPeriod ending April 30,
    
    Principal
    
    Interest2005 (1)
    
    $
    774,364
    
    
    $
    1,457,9612006
    
    
    1,114,040
    
    
    
    1,968,4102007
    
    
    1,171,418
    
    
    
    1,877,9272008
    
    
    6,833,107
    
    
    
    1,647,1292009
    
    
    767,885
    
    
    
    1,282,956Thereafter
    
    
    17,007,471
    
    
    
    9,667,560$
    27,668,285
    
    
    $
    17,901,943
  (1)
    The amounts represent payments expected for the nine-month period from August 1,
2004, to April 30, 2005. The mortgage notes payable are due at various dates between January 1, 2008, and July 1, 2029,
and bear interest at rates ranging from 6.125% to 9.25%. Management has determined that the restructuring of the loan mentioned above was a material
modification of the original loan, and as a result, the Company recognized an expense relating to
the extinguishment of debt in the amount of $218,071, as shown on the accompanying statement of
operations. In conjunction with the restructured loan, the Company recorded $50,000 in deferred
loan costs to be amortized over the life of the loan. NOTE 10. COMMITMENTS AND CONTINGENCIES On September 20, 2002, the Companys subsidiary, Abrams Properties, Inc. (API), filed a
claim in the Superior Court of Cobb County, Georgia, against APIs former real estate asset
manager, who subsequently made a demand against API for arbitration and filed a counterclaim. On
December 1, 2004, the arbitrator made separate awards in favor of the claim and counterclaim, and
as a result, API incurred a net liability in the amount of approximately $247,000, of which $97,000
was accrued and expensed in a prior period. The remaining $150,000 was expensed in the second
quarter and nine months ending January 31, 2005, as selling, general and administrative costs in
the accompanying statements of operations. The Company is subject to various other legal proceedings and claims that arise in the
ordinary course of business. While the resolution of these matters cannot be predicted with
certainty, the Company believes that the final outcome of these matters will not have a material
adverse effect on the Companys financial position or results of operations. 11




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##### Table of Contents



NOTE 11. ACQUISITIONS AND DISPOSITIONS On September 29, 2004, the Company closed on the sale of its Kmart leaseback interest in a
shopping center in Minneapolis, Minnesota, for a price of $2.25 million, resulting in a pre-tax
gain of approximately $2.2 million and net cash proceeds of approximately $2.2 million. On May 26, 2004, Servidyne Systems, LLC (Servidyne), an indirect wholly-owned subsidiary of
the Company, acquired the operating business and assets of Building Performance Engineers, Inc.
(BPE) for a purchase price of $337,984, in order to expand the Companys capabilities in energy
engineering and design. The consideration consisted of 21,126 newly-issued shares of the Companys
common stock, with a fair value of $94,906 at the date of acquisition, a note payable in the amount
of $136,500, and cash of $106,578 (including direct acquisition expenses). The amount and type of
consideration was determined by negotiation among the parties. The following table summarizes the
estimated fair values of the assets acquired as of the date of acquisition: AssetsAcquired fromBPE
    
    Estimated LifeProperty, furniture and equipment, net
    
    $
    8,727
    
    
    3 yearsNon-competes
    
    
    16,222
    
    
    2 yearsGoodwill
    
    
    313,035
    
    
    IndefiniteTotal assets acquired
    
    $
    337,984
 The goodwill has been assigned to the Energy and Facilities Solutions Segment. The acquired
assets and the results of operations have been included in the Companys financial statements since
the date of acquisition. The Company will test goodwill for impairment related to its Energy and
Facilities Solutions Segment at April 30, 2005, pursuant to SFAS No. 142, Goodwill and Other
Intangible Assets. The
following table summarizes the results of the Company on a pro forma
basis for the third quarter
and nine months ended January 31, 2004, as if the acquisition of the assets and operating business
of BPE in May 2004, the acquisition of the assets and operating business of The Wheatstone Energy
Group, Inc., in December 2003, the acquisition of the assets and operating business of iTendant,
Inc. in April 2004, and the acquisition of a professional medical office building in Douglasville,
Georgia, in April 2004, had all occurred at the beginning of the third quarter and nine months
ended January 31, 2004. These results do not purport to represent what the results of operations
for the Company would have actually been or to be indicative of the future results of operations of
the Company (in thousands, except per share amounts): 12




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##### Table of Contents



Three Months Ended
    
    Nine Months EndedJanuary 31,
    
    January 31,2004
    
    2004
    
    2004
    
    2004(As Reported)
    
    (Pro Forma)
    
    (As Reported)
    
    (Pro Forma)Revenues
    
    $
    3,001
    
    
    $
    3,735
    
    
    $
    7,999
    
    
    $
    12,145Net loss
    
    
    (883
    )
    
    
    (1,517
    )
    
    
    (2,888
    )
    
    
    (4,378
    )Net loss per share  basic and diluted
    
    $
    (0.30
    )
    
    $
    (0.52
    )
    
    $
    (0.98
    )
    
    $
    (1.50
    )
 NOTE 12. SUBSEQUENT EVENT On February 9, 2005, the Company closed on the sale of its shopping center located in
Cincinnati, Ohio, for a sales price of $3.6 million, resulting in a pre-tax gain of approximately
$850,000. After selling expenses, the sale generated net cash proceeds of approximately $3.45
million. The Company intends to use the net proceeds from this sale to acquire an additional
income-producing property, in order to qualify the sale under the Internal Revenue Code Section
1031 for federal income tax deferral, and has placed the net proceeds with a third party
intermediary in connection therewith. There can be no assurance that the acquisition will take
place. 13




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS The following discussion should be read in conjunction with the consolidated financial
statements, including the notes to those statements, which are presented elsewhere in this report.
The Company also recommends that this discussion and analysis be read in conjunction with
managements discussion and analysis and consolidated financial statements included in the
Companys Annual Report on Form 10-K for the year ended April 30, 2004. The Companys fiscal year 2005 will end April 30, 2005. Changes in CONSOLIDATED BALANCE SHEETS between April 30, 2004, and January 31, 2005 Assets of discontinued operations decreased by $4,134,807 primarily as a result of the
cessation of operations of the Construction Segment, and the collection of receivables related to
construction work performed in prior periods. Real estate held for sale increased by $2,595,493, as a result of the classification of the
shopping center located Cincinnati, Ohio, as held for sale as of January 31, 2005. The shopping
center was sold in February 2005, at a gain. Real estate held for future development or sale decreased by $2,900,586, as a result of
classifying the shopping center located in Cincinnati, Ohio, as a current asset as discussed above
and the sale of an outparcel in North Fort Myers, Florida, in January 2005. Goodwill increased by $460,475, primarily due to the acquisition of the operating business and
assets of Building Performance Engineers, Inc. Liabilities of discontinued operations decreased by $2,645,843, primarily as a result of the
cessation of operations of the Construction Segment, and the payment of invoices to subcontractors
for construction work performed in prior periods. Other long-term liabilities decreased by $3,072,511, and mortgage notes payable increased by
$550,819, primarily due to the restructuring of the loan on the Companys owned shopping center
located in Jacksonville, Florida (See Liquidity and Capital Resources). Results of operations of the third quarter and first nine months of fiscal 2005, compared to
the third quarter and first nine months of fiscal 2004 REVENUES From Continuing Operations For the third quarter of fiscal 2005, consolidated revenues from continuing operations,
including interest income and other income, and net of intersegment eliminations, were $5,644,619,
compared to $3,023,768 for the third quarter of fiscal 2004, an increase of 87%. For the first
nine months of fiscal 2005, consolidated revenues from continuing operations were $17,503,003,
compared to $8,091,049 for the first nine months of fiscal 2004, an increase of 116%. The figures in Chart A are segment revenues from continuing operations, net of intersegment
eliminations, and do not include interest income or other income. 14




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##### Table of Contents



CHART A
REVENUES FROM CONTINUING OPERATIONS BY SEGMENT
(Dollars in Thousands) Third Quarter Ended
    
    Amount
    
    Percent
    
    Nine Months Ended
    
    Amount
    
    PercentJanuary 31,
    
    Increase
    
    Increase
    
    January 31,
    
    Increase
    
    Increase2005
    
    2004
    
    
    
    
    
    
    
    
    
    2005
    
    2004Energy and Facilities
Solutions (1)
    
    $
    840
    
    
    $
    757
    
    
    $
    83
    
    
    
    11
    
    
    $
    2,670
    
    
    $
    2,132
    
    
    $
    538
    
    
    
    25Energy Services (2)
    
    
    2,478
    
    
    
    547
    
    
    
    1,931
    
    
    
    
    
    
    
    6,435
    
    
    
    547
    
    
    
    5,888
    
    
    
    Real Estate (3)
    
    
    2,299
    
    
    
    1,697
    
    
    
    602
    
    
    
    35
    
    
    
    8,296
    
    
    
    5,320
    
    
    
    2,976
    
    
    
    56$
    5,617
    
    
    $
    3,001
    
    
    $
    2,616
    
    
    
    87
    
    
    $
    17,401
    
    
    $
    7,999
    
    
    $
    9,402
    
    
    
    118
 NOTES TO CHART A  (1)
    Revenues for the Energy and Facilities Solutions Segment increased 11% for the third
quarter and 25% for the first nine months of fiscal 2005 compared to the same periods in
fiscal 2004, primarily due to an increase in revenues of approximately $129,000 in the third
quarter and $499,000 for the first nine months of fiscal 2005 derived from contributions from
the business and assets of iTendant, Inc. and Building Performance Engineers, Inc., which
were acquired in April 2004 and May 2004, respectively.  (2)
    The Energy Services Segment was formed in December 2003 and, therefore, a comparison of the
periods would not be meaningful.  (3)
    Real Estate Segment revenues increased 35% for the third quarter of fiscal 2005 compared to
the same period in fiscal 2004, primarily due to: (a) the sale of an outparcel located in
North Fort Myers, Florida for $515,000; (b) an increase in rental revenues of approximately
$169,000 related to the acquisition of the professional medical office building in
Douglasville, Georgia, in April 2004; offset by (c) a decrease in leaseback income of
approximately $86,000 related to the sale of the Companys Kmart leaseback interest in a
shopping center in Minneapolis, Minnesota, in September 2004. Real Estate Segment revenues
increased 56% for the first nine months of fiscal 2005 compared to the same period in fiscal
2004, primarily due to: (d) the sale of the Companys Kmart leaseback interest in a
shopping center in Minneapolis, Minnesota, for $2,250,000; (e) the sale of the outparcel for
$515,000 mentioned in (a) above; (f) an increase in rental revenues of approximately $477,000
related to the Companys acquisition mentioned in (b) above; offset by (g) a decrease in
leaseback income of approximately $128,000 related to another Kmart leaseback that was
assigned by the Company in October 2003 to the fee owner; and (h) a decrease in leaseback
income of approximately $116,000 related to the sale mentioned in (c) above. Pursuant to
SFAS No. 144, Real Estate Segment revenues for all periods presented do not include rental
revenues generated by certain owned income-producing properties which
are held for sale or have been sold; such revenues have been reclassified to discontinued operations. The following table indicates the backlog of contracts and rental income for the next twelve
months, by industry segment. 15




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January 31,2005
    
    2004Energy and Facilities Solutions (i)
    
    $
    786,000
    
    
    $
    495,000Energy Services (ii)
    
    
    4,439,000
    
    
    
    1,394,000Real Estate (iii)
    
    
    7,169,000
    
    
    
    6,526,000Less: Intersegment eliminations (iv)
    
    
    (528,000
    )
    
    
    (506,000
    )Total Backlog
    
    $
    11,866,000
    
    
    $
    7,909,000
  (i)
    The increase in backlog is primarily due to the result of the acquisitions of the operating
business and the assets of iTendant, Inc. and Building Performance Engineers, Inc. in April
2004 and May 2004, respectively. Revenues from contracts that can be cancelled with less than
one years notice are not included in backlog. As of January 31, 2005, and January 31, 2004,
such contracts not included in backlog totaled $1.3 million and $1.2 million, respectively, in
potential revenue over the ensuing twelve months, assuming cancellation provisions were not
invoked.  (ii)
    The increase in backlog is primarily due to an increase in customer contracts in the
school/government and retail sectors.  (iii)
    Included in Real Estate backlog at January 31, 2005, is approximately $510,000 related to
rental income from the Companys acquisition of the professional medical office building in
Douglasville, Georgia, in April 2004. Revenues from any contract in which the prospective
buyer is not materially at risk are not included in backlog.  (iv)
    The intersegment eliminations reported relate to intercompany rent. COSTS AND EXPENSES APPLICABLE TO REVENUES
From Continuing Operations As a percentage of total segment revenues from continuing operations (See Chart A), the total
applicable costs and expenses (See Chart B) were 66% and 62% for the third quarters of fiscal 2005
and 2004, respectively, and 59% and 62% for the first nine months of fiscal 2005 and 2004,
respectively. In reviewing Chart B, the reader should recognize that the volume of revenues
generally will affect the amounts and percentages. The figures in Chart B are net of intersegment eliminations. 16




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CHART B
COSTS AND EXPENSES APPLICABLE TO REVENUES
FROM CONTINUING OPERATIONS BY SEGMENT
(Dollars in Thousands) Percent of Segment
    
    
    
    
    
    
    
    
    
    Percent of SegmentRevenues for
    
    
    
    
    
    
    
    
    
    Revenues forThird Quarter Ended
    
    Third Quarter Ended
    
    Nine Months Ended
    
    Nine Months EndedJanuary 31,
    
    January 31,
    
    January 31,
    
    January 31,2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004Energy and FacilitiesSolutions (1)
    
    $
    467
    
    
    $
    383
    
    
    
    56
    
    
    
    51
    
    
    $
    1,501
    
    
    $
    1,206
    
    
    
    56
    
    
    
    57Energy Services (2)
    
    
    1,669
    
    
    
    369
    
    
    
    67
    
    
    
    67
    
    
    
    4,528
    
    
    
    369
    
    
    
    70
    
    
    
    67Real Estate (3)
    
    
    1,568
    
    
    
    1,104
    
    
    
    68
    
    
    
    65
    
    
    
    4,279
    
    
    
    3,418
    
    
    
    52
    
    
    
    64$
    3,704
    
    
    $
    1,856
    
    
    
    66
    
    
    
    62
    
    
    $
    10,308
    
    
    $
    4,993
    
    
    
    59
    
    
    
    62
 NOTES TO CHART B  (1)
    The increase in the dollar amount for the third quarter and for the first nine months of
fiscal 2005, compared to the same periods in fiscal 2004, is directly related to the increase
in revenues. The change in the percentage of costs and expenses applicable to revenues from
continuing operations of the Energy and Facilities Solutions Segment for the third quarter and
first nine months of fiscal 2005, compared to the same periods in fiscal 2004, is primarily a
result of the change in the mix of services and products.  (2)
    The Energy Services Segment was formed in December 2003 and, therefore, a comparison of the
periods would not be meaningful.  (3)
    The increase in the dollar amount and percentage of costs and expenses applicable to revenues
for the third quarter of fiscal 2005, compared to the same period in fiscal 2004, is primarily
due to: (a) the cost of sale of real estate related to an outparcel in North Fort Myers,
Florida, of approximately $324,000; and (b) rental operating costs and expenses of
approximately $132,000 generated by the Companys professional medical office building located
in Douglasville, Georgia, which was acquired in April 2004. The decrease in the percentage of
costs and expenses applicable to the Real Estate Segments revenues for the first nine months
of fiscal 2005, compared to the same period in fiscal 2004, is primarily due to the increased
revenues that resulted from the sale of the Companys Kmart leaseback interest in the shopping
center in Minneapolis, Minnesota. The cost of the sale of the leaseback interest was $42,115.
The increase in the dollar amount for the first nine months of fiscal 2005, compared to the
same period in fiscal 2004, is primarily due to: (c) the cost of sale of real estate of
approximately $324,000 mentioned in (a) above; and (d) rental operating costs and expenses of
approximately $415,000 due to the acquisition mentioned in
(b) above. Pursuant to SFAS No. 144, costs and expenses for all periods presented do not include the costs
and expenses of certain owned income-producing properties that are
held for sale or have been sold,
and do not include the costs of sale of these properties; those costs and expenses have been
reclassified to discontinued operations. 17




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##### Table of Contents



SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
From Continuing Operations For the third quarters of fiscal 2005 and 2004, total selling, general and administrative
expenses (SG&A) from continuing operations, net of intersegment eliminations, were $1,931,624 and
$1,343,111, respectively. As a percentage of consolidated revenues from continuing operations,
these expenses were 34% and 45% for the third quarters of fiscal 2005 and 2004, respectively. For
the first nine months of fiscal 2005 and 2004, total SG&A expenses from continuing operations, net
of intersegment eliminations, were $6,742,407 and $4,065,475, respectively. As a percentage of
consolidated revenues from continuing operations, these expenses were 39% and 51% for the first
nine months of fiscal 2005 and 2004, respectively. In reviewing Chart C, the reader should
recognize that the level of revenues generally will affect the amounts and percentages. The
percentages in Chart C are based upon expenses as they relate to segment revenues from continuing
operations (Chart A), except that parent and total expenses relate to consolidated revenues from
continuing operations. CHART C SELLING, GENERAL AND ADMINSTRATIVE EXPENSES
FROM CONTINUING OPERATIONS BY SEGMENT
(Dollars in Thousands) Percent of Segment
    
    
    
    
    
    
    
    
    
    Percent of SegmentRevenues for
    
    
    
    
    
    
    
    
    
    Revenues forThird Quarter Ended
    
    Third Quarter Ended
    
    Nine Months Ended
    
    Nine Months EndedJanuary 31,
    
    January 31,
    
    January 31,
    
    January 31,2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004Energy and Facilities
Solutions (1)
    
    $
    622
    
    
    $
    487
    
    
    
    74
    
    
    
    64
    
    
    $
    1,720
    
    
    $
    1,689
    
    
    
    64
    
    
    
    79Energy Services (2)
    
    
    494
    
    
    
    244
    
    
    
    20
    
    
    
    45
    
    
    
    1,616
    
    
    
    244
    
    
    
    25
    
    
    
    45Real Estate (3)
    
    
    189
    
    
    
    218
    
    
    
    8
    
    
    
    13
    
    
    
    1,178
    
    
    
    582
    
    
    
    14
    
    
    
    11Parent (4)
    
    
    627
    
    
    
    393
    
    
    
    11
    
    
    
    13
    
    
    
    2,228
    
    
    
    1,550
    
    
    
    13
    
    
    
    19$
    1,932
    
    
    $
    1,342
    
    
    
    34
    
    
    
    45
    
    
    $
    6,742
    
    
    $
    4,065
    
    
    
    39
    
    
    
    51
 NOTES TO CHART C  (1)
    On a dollar and percentage basis, SG&A expenses for the Energy and Facilities Solutions
Segment were higher for the third quarter of fiscal 2005, compared to the same period of
fiscal 2004, primarily due to: (a) an increase in bad debt expense related to one customer of
approximately $50,000; and (b) an increase in personnel and personnel related costs of
approximately $123,000; offset by (c) a decrease in rent expense of approximately $40,000.
For the first nine months of fiscal 2005, SG&A expenses were lower on a percentage basis due
to an increase in revenues, and were higher on a dollar basis, compared to the same period of
fiscal 2004, primarily due to: (d) an increase in bad debt expense related to one customer of
approximately $50,000; (e) an increase in personnel and personnel related costs of
approximately $203,000; offset by (f) a decrease in rent expense of approximately $92,000; and
(g) a decrease in temporary contract labor and consulting expense of $145,000.  (2)
    The Energy Services Segment was formed in December 2003 and, therefore, a comparison of the
periods would not be meaningful.  (3)
    On a percentage basis, SG&A expenses for the Real Estate Segment were lower for the third
quarter of fiscal 2005 primarily due to the increase in revenues. On a dollar and percentage
basis, 18




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##### Table of Contents



SG&A expenses for the Real Estate Segment were higher for the first nine months of fiscal
2005, compared to the same period in 2004, primarily due to: (a) an increase in personnel and
personnel costs of approximately $97,000; (b) an increase of approximately $410,000 related to
legal fees and the conclusion of an arbitration matter with the Companys former asset manager
in December 2004. See Footnote 10 to the consolidated financial statements. Pursuant to SFAS
No. 144, SG&A expenses for all periods presented do not include SG&A expenses of certain owned
income-producing properties that are held for sale or have been sold. These expenses have been
reclassified as discontinued operations.  (4)
    On a percentage basis SG&A expenses, for the third
quarter and first nine months of fiscal 2005 were lower due to
the increase in revenues. On a dollar basis, SG&A expenses were higher for the third quarter
of fiscal 2005, compared to the same periods in 2004, primarily due to: (a) an increase in
special tax consulting of approximately $23,000; and (b) an increase in consulting fees
related to Sarbanes-Oxley Act of 2002 of approximately $50,000. On a dollar basis, SG&A
expenses were higher for the first nine months of fiscal 2005, compared to the same periods in
2004, primarily due to: (c) an increase related to the restructuring of the accounting
department to a shared services support for all segments of approximately $261,000; and (d) an
increase in personnel and personnel related costs of approximately $264,000. Liquidity and capital resources Between April 30, 2004, and January 31, 2005, working capital decreased by $2,357,408,
primarily due to: (1) a cash payment of approximately $2.0 million utilized in the restructuring
of the loan related to the Companys owned shopping center in Jacksonville, Florida; (2) cash
payments of regular and special dividends totaling approximately $898,000; and (3) cash payments
of approximately $340,000 for leasehold improvements related to both the Energy and Facilities
Solutions Segment and Energy Services Segment relocating their main offices to the Companys
corporate headquarters building. Operating activities used cash of $40,901, primarily due to: (1) a net increase in other
current assets and other assets; offset by (2) the sale of the Companys Kmart leaseback interest
in a shopping center in Minneapolis, Minnesota; and (3) an increase in trade and subcontractors
payables and billings in excess of costs and earnings. Investing activities used cash of $716,004, primarily due to: (1) additions to property and
equipment, related to the leasehold improvements to the corporate headquarters building mentioned
above; (2) additions to income-producing properties and intangible assets; and (3) the acquisition
of the operating business and assets of Building Performance Engineers, Inc. Financing activities used cash of $3,789,099, primarily due to: (1) the payment related to
the restructuring of the loan on the Companys owned shopping center in Jacksonville, Florida; (2)
scheduled principal payments of mortgage notes and other debt obligations; and (3) the payments of
the regular and special dividends. Discontinued operations provided cash of $1,673,558, primarily due to a collection of accounts
receivable offset by payoffs of trade and subcontractor accounts in the Construction Segment. Except for certain real estate construction loans and occasional short-term operating loans,
the Company generally has been able to finance its working capital needs through funds generated
internally. If adequate funds are not generated through normal operations or from the sales of
real 19




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##### Table of Contents



estate, the Company has an available bank line of credit. The Companys line of credit, which
previously provided for $4 million in commitments, expired on January 31, 2005, and was renewed in
the amount of $1.5 million, of which $150,000 is restricted as it secures a letter of credit. The
bank line of credit is secured by the Companys investment in a long-term securities bond of $2.0
million that matures in April 2006, which is recorded on the accompanying balance sheet. The
Company can borrow an amount not to exceed 75% of the current market value of the bond, which was
approximately $1,970,000 as of January 31, 2005. The line of credit bears interest at the prime
rate or LIBOR plus 2%, and has a commitment fee of 0.375% on any unused portion. The bank line of
credit expires on January 31, 2006. No amounts were outstanding under the line of credit as of
January 31, 2005. In October 2004, the Company sold its leaseback interest in a shopping center in Minneapolis,
Minnesota, for a price of $2.25 million. The transaction generated cash proceeds of approximately
$2.2 million. On February 9, 2005, the Company closed on the sale of its shopping center located in
Cincinnati, Ohio, for a sales price of $3.6 million, resulting in a pre-tax gain of approximately
$850,000. After selling expenses, the sale generated net cash proceeds of approximately $3.45
million. The Company intends to use the net proceeds from this sale to acquire an additional
income-producing property, which would qualify the sale under the Internal Revenue Code Section
1031 for federal income tax deferral, and has placed the net proceeds with a third party
intermediary in connection therewith. The Company anticipates that its equity, line of credit, potential proceeds from sales of real
estate, potential cash flow provided by financing or refinancing of debt obligations, and cash flow
generated from operations will, for the foreseeable future, provide adequate liquidity and
financial flexibility to meet the Companys needs to fund working capital, capital expenditures,
and investment activities. 20




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Cautionary statement regarding forward-looking statements Certain statements contained or incorporated by reference in this Quarterly Report on Form
10-Q, including without limitation, statements containing the words believes, anticipates,
estimates, expects, plans, and words of similar import, are forward-looking statements within
the meaning of the federal securities laws. Such forward-looking statements involve known and
unknown risks, uncertainties and other matters which may cause the actual results, performance, or
achievements of the Company to be materially different from any future results, performance, or
uncertainties expressed or implied by such forward-looking statements. Factors relating to general global, national, regional, and local economic conditions,
including international political stability, national defense, homeland security, employment
levels, wage and salary levels, consumer confidence, availability of credit, taxation policies, the
Sarbanes-Oxley Act, SEC reporting requirements, interest rates, capital spending, deflation, and
inflation could negatively impact the Company and its customers, suppliers, and sources of capital.
Any significant negative impact from these factors could result in material adverse effects on the
Companys results of operations and financial condition. The Company is at risk for many other matters beyond its control, including, but not limited
to: the possible impact, if any, on the ultimate disposition of legal proceedings in which the
Company is involved, including the matters described in previous SEC reports; the potential loss of
significant customers; co-tenancy provisions in anchor tenant leases; the Companys ability to sell
or refinance its real estate; the possibility of not achieving projected backlog revenues or not
realizing earnings from such revenues; the cost and availability of insurance; the ability of the
Company to attract and retain key personnel; weather conditions; changes in laws and regulations,
including changes in accounting standards, generally accepted accounting principles, and regulatory
requirements of the SEC and NASDAQ; overall vacancy rates in markets where the Company leases
retail and office space; overall capital spending trends in the economy; the timing and amount of
earnings recognition related to the possible sale of real estate properties held for sale; delays
in or cancellations of customers orders; the level and volatility of interest rates; the level and
volatility of energy prices; the failure of a subcontractor to perform; and the deterioration in
the financial stability of an anchor tenant, significant subcontractor or other significant
customer. Critical Accounting Policies A critical accounting policy is one that is both important to the portrayal of the Companys
financial position and results of operations, and requires the Company to make estimates and
assumptions in certain circumstances that affect the amounts reported in the accompanying
consolidated financial statements and related notes. In preparing these financial statements, the
Company has made its best estimates and used its best judgments regarding certain amounts included
in the financial statements, giving due consideration to materiality. The application of these
accounting policies involves the exercise of judgment and the use of assumptions regarding future
uncertainties, and as a result, actual results could differ from those estimates. Summaries of the
Companys accounting policies that management believes are the most critical are as follows: Revenue recognition  21




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##### Table of Contents



Energy services revenues are reported on the percentage-of-completion method, using costs
incurred to-date in relation to estimated total costs of the contracts to measure the stage of
completion. Original contract prices are adjusted for cumulative effects of changes in estimated
total contract costs and revenues (change orders) in the amounts that are reasonably estimated
based on the Companys historical experience. The change orders are recorded in the period in which
the facts requiring such revisions become known, and are accounted for using the
percentage-of-completion method. At the time it is determined that a contract is expected to result
in a loss, the entire estimated loss is recorded. The Company leases space in its income-producing properties to tenants, and recognizes minimum
base rentals as revenue on a straight-line basis over the lease terms. Tenants may also be required
to pay additional rental amounts as partial reimbursements of property operating and common area
expenses, which are recognized when earned. In addition, certain tenants are required to pay
incremental rental amounts, which are contingent on their store sales. These percentage rents are
recognized only as earned. Revenues from the sale of real estate are recognized when all of the following has occurred:
(a) the property is transferred to the buyer; (b) the buyers initial and continuing investment is
adequate to demonstrate a commitment to pay for the property; and (c) the buyer has assumed all
future ownership risks of the property. Costs of sales related to real estate are based on the
specific property sold. When a portion or unit of a development property is sold, a proportionate share of the total cost of the
development is charged to cost of sales. Income-producing properties and property and equipment  Property and equipment are stated at cost, and are depreciated for financial reporting
purposes using the straight-line method over the estimated useful lives of the assets. Significant
additions that extend asset lives are capitalized. Normal maintenance and repair costs are
expensed as incurred. Interest and other carrying costs related to real estate assets under development are
capitalized. Costs of development and construction of real estate assets are also capitalized.
Capitalization of interest and other carrying costs is discontinued when a development project is
substantially completed or if active development ceases. Impairment of long-lived assets, including goodwill, and assets to be disposed of  Income taxes  22




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years in which those temporary differences are expected to be recovered or settled. The effect of
a change in tax rates on deferred tax assets and liabilities is recognized in income in the period
that includes the enactment date of such change. Discontinued operations Accounting for the Impairment or Disposal of Long- Lived Asset,
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK On July 8, 2004, the Company restructured the loan on the Companys owned shopping center in
Jacksonville, Florida. The Company paid the lender $1.5 million as payment in full of the
Additional Interest Agreement, which was then terminated. The restructured loan has a principal
amount of $7.8 million, bears interest at 6.125%, and matures on July 1, 2029, but may be called by
the lender after July 1, 2011, with thirteen months notice. Refer to the Companys Quarterly
Report on Form 10Q as of July 31, 2004, which updates the Companys disclosures about market risk
sensitive debt instruments as of April 30, 2004. The Companys line of credit, which previously provided for $4 million in commitments, expired
on January 31, 2005, and was renewed in the amount of $1.5 million, of which $150,000 is restricted
as it secures a letter of credit. The bank line of credit is secured by the Companys investment
in a long-term securities bond of $2.0 million that matures in April 2006, which is recorded on the
accompanying balance sheet. The Company can borrow an amount not to exceed 75% of the current
market value of the bond, which was approximately $1,970,000 as of January 31, 2005. The line of
credit bears interest at the prime rate or LIBOR plus 2%, and has a commitment fee of 0.375% on any
unused portion. The bank line of credit expires on January 31, 2006. There have been no other material changes since April 30, 2004, except as discussed above.
Refer to the Companys Annual Report on Form 10-K for the fiscal year ended April 30, 2004, for
detailed disclosures about quantitative and qualitative disclosures about market risk. 
 ITEM 3. LEGAL PROCEEDINGS On September 20, 2002, the Companys subsidiary, Abrams Properties, Inc. (API), filed a
claim in the Superior Court of Cobb County, Georgia, against APIs former real estate asset
manager, who subsequently made a demand against API for arbitration and filed a counterclaim. On
December 1, 2004, the arbitrator made separate awards in favor of the claim and counterclaim, and
as a result, API incurred a net liability in the amount of approximately $247,000, of which $97,000
was accrued and expensed in a prior period. The remaining $150,000 was expensed in the second
quarter and nine months ending January 31, 2005, as selling, general and administrative costs in
the accompanying statements of operations. 23




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ITEM 4. CONTROLS AND PROCEDURES Management has evaluated the Companys disclosure controls and procedures as defined by Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the
period covered by this report. This evaluation was carried out with the participation of the
Companys Chief Executive Officer and Chief Financial Officer. No system of controls, no matter
how well designed and operated, can provide absolute assurance that the objectives of the system of
controls are met, and no evaluation of controls can provide absolute assurance that the system of
controls has operated effectively in all cases. The Companys disclosure controls and procedures,
however, are designed to provide reasonable assurance that the objectives of disclosure controls
and procedures are met. Based on managements evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures were effective, as of the end of
the period covered by this report, to provide reasonable assurance that the objectives of
disclosure controls and procedures were met. There was no change in the Companys internal controls over financial reporting that occurred
during the period covered by this quarterly report on Form 10-Q that materially affected, or is
reasonably likely to materially affect, the Companys internal control over financial reporting. The Company continues to integrate and standardize internal accounting systems across
subsidiaries in an effort to prepare for Section 404 of the Sarbanes-Oxley Act, which becomes
effective for the Company April 30, 2007. 24




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##### Table of Contents



PART II. OTHER INFORMATION 
 ITEM 6. EXHIBITS 31(a)
    
    Certification of Chief Executive Officer, pursuant Rules 13a-14(a)/15d-14(a)31(b)
    
    Certification of Chief Financial Officer, pursuant 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
 25




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##### Table of Contents



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ABRAMS INDUSTRIES, INC.(Registrant)Date: March 17, 2005
    
    /s/ Alan R. AbramsAlan R. Abrams
Chief Executive OfficerDate: March 17, 2005
    
    /s/ Mark J. ThomasMark J. Thomas
Chief Financial Officer
  26