##### 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 January 31, 2010
 Commission file number 0-10146
 SERVIDYNE, INC.
  Georgia
    
    58-0522129(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 1945 The Exchange, Suite 300, Atlanta, GA 30339-2029
    þ o
  o o
  Large accelerated filer o
    
    Accelerated Filer o
    
    Non-accelerated filer o
    
    Smaller Reporting Company þ(Do not check if a smaller reporting company)
  o þ




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TABLE OF CONTENTS  ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 4. CONTROLS AND PROCEDURESPART II. OTHER INFORMATIONITEM 1A. RISK FACTORSITEM 6. EXHIBITSSIGNATURESEX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  SERVIDYNE, INC.
 January 31, 2010
    
    
    April 30, 2009ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    2,299,200
    
    
    $
    4,821,126Receivables (Note 5):Trade accounts and notes, net of allowance for doubtful accounts of
$88,718 and $121,463, respectively
    
    
    1,209,192
    
    
    
    1,277,508Contracts, net of allowance for doubtful accounts of $4,294 and
$4,294, respectively, including retained amounts of $487,706 and
$219,385, respectively
    
    
    1,820,248
    
    
    
    1,764,327Costs and earnings in excess of billings
    
    
    486,201
    
    
    
    408,950Assets of discontinued operations (Note 10)
    
    
    
    
    
    
    314,906Deferred income taxes
    
    
    463,745
    
    
    
    529,708Other current assets
    
    
    1,254,446
    
    
    
    1,485,599Total current assets
    
    
    7,533,032
    
    
    
    10,602,124INCOME-PRODUCING PROPERTIES, net
    
    
    17,407,778
    
    
    
    17,630,790PROPERTY AND EQUIPMENT, net
    
    
    702,544
    
    
    
    797,556ASSETS OF DISCONTINUED OPERATIONS (Note 10)
    
    
    
    
    
    
    1,909,434OTHER ASSETS:Real estate held for future development or sale
    
    
    853,109
    
    
    
    853,109Intangible assets, net (Note 8)
    
    
    2,900,141
    
    
    
    2,832,286Goodwill (Note 8)
    
    
    6,354,002
    
    
    
    6,354,002Other assets
    
    
    2,979,113
    
    
    
    2,665,355Total assets
    
    $
    38,729,719
    
    
    $
    43,644,656LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    1,137,791
    
    
    $
    851,633Accrued expenses
    
    
    1,229,569
    
    
    
    1,388,229Deferred revenue
    
    
    460,654
    
    
    
    601,347Billings in excess of costs and earnings
    
    
    925,894
    
    
    
    28,215Liabilities of discontinued operations (Note 10)
    
    
    
    
    
    
    175,541Short-term debt and current maturities of long-term debt
    
    
    608,452
    
    
    
    526,287Total current liabilities
    
    
    4,362,360
    
    
    
    3,571,252DEFERRED INCOME TAXES
    
    
    1,484,602
    
    
    
    2,246,919LIABILITIES OF DISCONTINUED OPERATIONS (Note 10)
    
    
    
    
    
    
    3,370,826OTHER LIABILITIES
    
    
    1,009,366
    
    
    
    824,877MORTGAGE NOTES PAYABLE, less current maturities
    
    
    14,820,699
    
    
    
    15,092,252OTHER LONG-TERM DEBT, less current maturities
    
    
    850,000
    
    
    
    1,000,000Total liabilities
    
    
    22,527,027
    
    
    
    26,106,126COMMITMENTS AND CONTINGENCIES (Note 12)SHAREHOLDERS EQUITY:Common stock, $1 par value; 10,000,000 shares authorized;
3,919,473 issued and 3,676,083 outstanding at January 31, 2010;
3,917,778 issued and 3,691,369 outstanding at April 30, 2009
    
    
    3,919,473
    
    
    
    3,917,778Additional paid-in capital
    
    
    6,161,710
    
    
    
    6,026,101Retained earnings
    
    
    7,127,654
    
    
    
    8,569,451Treasury stock (common shares) of 243,390 and 226,409, respectively
    
    
    (1,006,145
    )
    
    
    (974,800
    )Total shareholders equity
    
    
    16,202,692
    
    
    
    17,538,530Total liabilities and shareholders equity
    
    $
    38,729,719
    
    
    $
    43,644,656
 See accompanying notes to condensed consolidated financial statements.
 1




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##### Table of Contents



SERVIDYNE, INC.
 THIRD QUARTER ENDED
    
    
    NINE MONTHS ENDEDJANUARY 31,
    
    
    JANUARY 31,2010
    
    
    2009
    
    
    2010
    
    
    2009REVENUES:Building Performance Efficiency (BPE)
    
    $
    4,119,890
    
    
    $
    3,338,921
    
    
    $
    11,915,539
    
    
    $
    9,493,104Real Estate
    
    
    717,899
    
    
    
    716,102
    
    
    
    2,080,802
    
    
    
    2,099,0334,837,789
    
    
    
    4,055,023
    
    
    
    13,996,341
    
    
    
    11,592,137COST OF REVENUES:BPE
    
    
    2,651,957
    
    
    
    2,098,300
    
    
    
    7,947,470
    
    
    
    6,018,788Real Estate
    
    
    458,561
    
    
    
    444,588
    
    
    
    1,388,890
    
    
    
    1,334,1503,110,518
    
    
    
    2,542,888
    
    
    
    9,336,360
    
    
    
    7,352,938SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
    
    
    2,454,058
    
    
    
    2,469,754
    
    
    
    7,144,254
    
    
    
    7,567,681OTHER (INCOME) AND EXPENSES:Other income
    
    
    (5,752
    )
    
    
    (281,323
    )
    
    
    (73,634
    )
    
    
    (316,907
    )Interest income
    
    
    (25
    )
    
    
    (7,622
    )
    
    
    (7,650
    )
    
    
    (108,024
    )Interest expense
    
    
    269,958
    
    
    
    269,956
    
    
    
    812,402
    
    
    
    835,860264,181
    
    
    
    (18,989
    )
    
    
    731,118
    
    
    
    410,929LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    (990,968
    )
    
    
    (938,630
    )
    
    
    (3,215,391
    )
    
    
    (3,739,411
    )INCOME TAX BENEFIT
    
    
    (452,064
    )
    
    
    (465,830
    )
    
    
    (1,313,781
    )
    
    
    (1,535,354
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (538,904
    )
    
    
    (472,800
    )
    
    
    (1,901,610
    )
    
    
    (2,204,057
    )DISCONTINUED OPERATIONS (Note 10):Loss from discontinued operations, adjusted for applicable income
tax benefit of $19,451, $11,377, $50,649 and $24,778, respectively
    
    
    (31,736
    )
    
    
    (18,562
    )
    
    
    (82,638
    )
    
    
    (40,428
    )Gain on disposition of income-producing properties, adjusted for applicable
income tax expense of $498,017, $0, $498,017 and $0, respectively
    
    
    690,622
    
    
    
    
    
    
    
    690,622
    
    
    
    EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS
    
    
    658,886
    
    
    
    (18,562
    )
    
    
    607,984
    
    
    
    (40,428
    )NET EARNINGS (LOSS)
    
    $
    119,982
    
    
    $
    (491,362
    )
    
    $
    (1,293,626
    )
    
    $
    (2,244,485
    )NET EARNINGS (LOSS) PER SHARE (Note 7):From continuing operations  basic and diluted
    
    $
    (0.15
    )
    
    $
    (0.12
    )
    
    $
    (0.52
    )
    
    $
    (0.59
    )From discontinued operations  basic and diluted
    
    
    .18
    
    
    
    (.01
    )
    
    
    .16
    
    
    
    (.01
    )NET EARNINGS (LOSS) PER SHARE  BASIC AND DILUTED
    
    $
    0.03
    
    
    $
    (0.13
    )
    
    $
    (0.36
    )
    
    $
    (0.60
    )WEIGHTED
AVERAGE SHARES OUTSTANDING  BASIC AND DILUTED
    
    
    3,685,268
    
    
    
    3,711,559
    
    
    
    3,688,952
    
    
    
    3,726,066
 See accompanying notes to condensed consolidated financial statements.
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##### Table of Contents



SERVIDYNE, INC.
 NINE MONTHS ENDEDJANUARY 31,2010
    
    
    2009Cash flows from operating activities:Net loss
    
    $
    (1,293,626
    )
    
    $
    (2,244,485
    )Adjustments to reconcile net loss to net
cash used in operating activities:Earnings from discontinued operations, net of tax
    
    
    (607,984
    )
    
    
    40,428Loss on disposal of assets
    
    
    1,378
    
    
    
    9,683Depreciation and amortization
    
    
    1,022,030
    
    
    
    1,081,000Amortization of mortgage discount
    
    
    
    
    
    
    (20,000
    )Deferred tax benefit
    
    
    (1,336,445
    )
    
    
    (1,560,134
    )Stock compensation expense
    
    
    137,711
    
    
    
    151,927Adjustment to cash surrender value of life insurance
    
    
    (75,122
    )
    
    
    (76,150
    )Straight-line rent
    
    
    (23,108
    )
    
    
    (27,160
    )Provision for doubtful accounts, net
    
    
    (32,745
    )
    
    
    (16,162
    )Changes in assets and liabilities:Receivables
    
    
    45,140
    
    
    
    313,161Costs and earnings in excess of billings
    
    
    (77,251
    )
    
    
    (110,752
    )Other current and long-term assets
    
    
    98,847
    
    
    
    (111,825
    )Trade and subcontractors payable
    
    
    286,158
    
    
    
    (120,163
    )Accrued expenses and deferred revenue
    
    
    (299,353
    )
    
    
    (201,097
    )Accrued incentive compensation
    
    
    
    
    
    
    (494,000
    )Billings in excess of costs and earnings
    
    
    897,679
    
    
    
    108,178Other liabilities
    
    
    (4,000
    )
    
    
    (14,222
    )Net cash
used in operating activities
    
    
    (1,260,691
    )
    
    
    (3,291,773
    )Cash flows from investing activities:Acquisition, net of cash acquired
    
    
    
    
    
    
    (902,657
    )Premiums paid on officers life insurance policies
    
    
    (27,464
    )
    
    
    (27,464
    )Release of restricted cash held in escrow
    
    
    
    
    
    
    3,470,700Deposit of restricted cash
    
    
    
    
    
    
    (139,833
    )Purchase of held to maturity investments
    
    
    
    
    
    
    (150,000
    )Additions to income-producing properties
    
    
    (135,523
    )
    
    
    (163,462
    )Additions to property and equipment
    
    
    (74,617
    )
    
    
    (147,631
    )Additions to intangible assets
    
    
    (432,368
    )
    
    
    (263,005
    )Proceeds from sale of property and equipment
    
    
    2,000
    
    
    
    Net cash (used in) provided by investing activities
    
    
    (667,972
    )
    
    
    1,676,648Cash flows from financing activities:Short-term loan proceeds
    
    
    100,000
    
    
    
    Mortgage repayments
    
    
    (254,389
    )
    
    
    (237,926
    )Debt repayments
    
    
    (185,000
    )
    
    
    (280,875
    )Repurchase of common stock
    
    
    (31,345
    )
    
    
    (135,507
    )Cash dividends paid to shareholders
    
    
    (148,578
    )
    
    
    (426,467
    )Net cash used in financing activities
    
    
    (519,312
    )
    
    
    (1,080,775
    )DISCONTINUED OPERATIONS:Operating activities
    
    
    (13,319
    )
    
    
    71,344Investing activities
    
    
    (1,021
    )
    
    
    (6,776
    )Financing activities
    
    
    (59,611
    )
    
    
    (21,054
    )Net cash
(used in) provided by discontinued operations
    
    
    (73,951
    )
    
    
    43,514Net decrease in cash and cash equivalents
    
    
    (2,521,926
    )
    
    
    (2,652,386
    )Cash at beginning of period
    
    
    4,821,126
    
    
    
    8,382,947Cash at end of period
    
    $
    2,299,200
    
    
    $
    5,730,561
 See accompanying notes to condensed consolidated financial statements.
 3




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##### Table of Contents



Total assets acquired, net of cash
    
    $
    1,577,844Total liabilities assumed
    
    
    (583,937
    )Net assets acquired, net of cash
    
    
    993,907Less value of shares issued for acquisition
    
    
    (91,250
    )Total cash paid (including acquisition costs)
    
    $
    902,657
  Elimination of mortgage note payable
    
    $
    (3,159,348
    )Disposition of income-producing property, net
    
    
    1,727,165Disposition of other related assets and liabilities, net
    
    
    193,545
 See accompanying notes to condensed consolidated financial statements.
 4




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##### Table of Contents



SERVIDYNE, INC.
 NOTE 1. ORGANIZATION AND BUSINESS
  NOTE 2. UNAUDITED STATEMENTS
  Property, Plant and Equipment
 NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS
 The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting Principles
 5




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##### Table of Contents



Subsequent Events
 Subsequent Events
 Financial
Instruments
 Intangibles 
Goodwill and Other; General Intangibles Other than Goodwill Risks
and Uncertainties Intangibles  Goodwill and Other Business Combinations
 NOTE 4. EQUITY-BASED COMPENSATION
   6




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##### Table of Contents



Stock Options
  WeightedOptions to
    
    
    AveragePurchase
    
    
    ExerciseShares
    
    
    PriceOutstanding at April 30, 2009
    
    
    482,486
    
    
    $
    4.46Granted
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Outstanding at January 31, 2010
    
    
    482,486
    
    
    $
    4.46Vested at January 31, 2010
    
    
    471,986
    
    
    $
    4.44Non-vested at January 31, 2010, that are expected to vest
    
    
    10,500
    
    
    $
    5.24
   Weighted AverageExercise
    
    Number of
    
    Remaining ContractualPrice
    
    Outstanding Options
    
    Term (Years)$4.42
    
    
    415,629
    
    
    
    2.77$4.59
    
    
    55,440
    
    
    
    5.15$5.19
    
    
    917
    
    
    
    4.38$5.24
    
    
    10,500
    
    
    
    3.37
   7




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##### Table of Contents



Stock Appreciation Rights (SARs)
  WeightedAverageExerciseSARs
    
    
    PriceOutstanding at April 30, 2009
    
    
    565,350
    
    
    $
    4.37Granted
    
    
    250,000
    
    
    
    3.65Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (10,500
    )
    
    
    4.09Outstanding at January 31, 2010
    
    
    804,850
    
    
    $
    4.15Vested at January 31, 2010
    
    
    88,200
    
    
    $
    3.88Non-vested at January 31, 2010, that are expected to vest
    
    
    468,618
    
    
    $
    4.20
 rd th th
  Weighted AverageExercise
    
    Outstanding
    
    Vested
    
    Remaining ContractualPrice
    
    SARs
    
    SARs
    
    Term (Years)$3.94
    
    
    182,700
    
    
    
    88,200
    
    
    
    6.41$3.79
    
    
    111,300
    
    
    
    0
    
    
    
    6.85$4.19
    
    
    10,500
    
    
    
    0
    
    
    
    7.36$6.19
    
    
    38,850
    
    
    
    0
    
    
    
    7.66$5.00
    
    
    52,500
    
    
    
    0
    
    
    
    8.23$4.76
    
    
    136,500
    
    
    
    0
    
    
    
    8.37$4.00
    
    
    22,500
    
    
    
    0
    
    
    
    8.63$2.30
    
    
    30,000
    
    
    
    0
    
    
    
    9.36$4.00
    
    
    200,000
    
    
    
    0
    
    
    
    9.79$2.12
    
    
    20,000
    
    
    
    0
    
    
    
    9.85
  8




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Expected life (years)
    
    
    5Dividend yield
    
    
    4.25
    %Expected stock price volatility
    
    
    55.59
    %Risk-free interest rate
    
    
    2.35
    %Fair value of SARs granted
    
    $
    0.33
  Shares of Restricted Stock
    Weighted AverageNumber of
    
    
    Fair ValueShares of
    
    
    per ShareRestricted Stock
    
    
    on Grant DateNon-vested restricted stock at April 30, 2009
    
    
    5,295
    
    
    $
    4.61Granted
    
    
    2,000
    
    
    
    2.12Forfeited
    
    
    (200
    )
    
    
    2.12Vested
    
    
    (4,245
    )
    
    
    4.55Non-vested restricted stock at January 31, 2010
    
    
    2,850
    
    
    $
    3.09
 NOTE 5. RECEIVABLES
  9




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NOTE 6. OPERATING SEGMENTS
  For the Third Quarter
    
    
    
    
    
    
    
    
    
    ParentEnded January 31, 2010
    
    BPE
    
    Real Estate
    
    Company (1)
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    2,533,469
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,533,469Lighting products
    
    
    379,244
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    379,244Energy management
services
    
    
    417,386
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    417,386Productivity software
    
    
    789,791
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    789,791Total revenues from unaffiliated customers
    
    $
    4,119,890
    
    
    $
    717,899
    
    
    $
    
    
    
    $
    
    
    
    $
    4,837,789Intersegment revenue
    
    
    
    
    
    
    136,041
    
    
    
    
    
    
    
    (136,041
    )
    
    
    Total revenues from continuing
operations
    
    $
    4,119,890
    
    
    $
    853,940
    
    
    $
    
    
    
    $
    (136,041
    )
    
    $
    4,837,789(Loss) earnings from continuing
operations before
income taxes
    
    $
    (353,718
    )
    
    $
    204,522
    
    
    $
    (851,719
    )
    
    $
    9,947
    
    
    $
    (990,968
    )
 For the Nine Months
    
    
    
    
    
    
    
    
    
    ParentEnded January 31, 2010
    
    BPE
    
    Real Estate
    
    Company (1)
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    6,594,695
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,594,695Lighting products
    
    
    1,319,982
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,319,982Energy management
services
    
    
    1,438,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,438,900Productivity software
    
    
    2,561,962
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,561,962Total revenues from unaffiliated customers
    
    $
    11,915,539
    
    
    $
    2,080,802
    
    
    $
    
    
    
    $
    
    
    
    $
    13,996,341Intersegment revenue
    
    
    141,545
    
    
    
    408,126
    
    
    
    
    
    
    
    (549,671
    )
    
    
    Total revenues from continuing
operations
    
    $
    12,057,084
    
    
    $
    2,488,928
    
    
    $
    
    
    
    $
    (549,671
    )
    
    $
    13,996,341(Loss) earnings from continuing
operations before
income taxes
    
    $
    (1,096,677
    )
    
    $
    468,894
    
    
    $
    (2,588,099
    )
    
    $
    491
    
    
    $
    (3,215,391
    )
 For the Third Quarter
    
    
    
    
    
    
    
    
    
    ParentEnded January 31, 2009
    
    BPE
    
    Real Estate
    
    Company (1)
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customersInterest and other incomeBPE Segment services and products:Energy savings projects
    
    $
    1,373,724
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,373,724Lighting products
    
    
    461,245
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    461,245Energy management
services
    
    
    520,761
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    520,761Productivity software
    
    
    983,191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    983,191Total revenues from unaffiliated customers
    
    $
    3,338,921
    
    
    $
    716,102
    
    
    $
    
    
    
    $
    
    
    
    $
    4,055,023Intersegment revenue
    
    
    
    
    
    
    126,356
    
    
    
    
    
    
    
    (126,356
    )
    
    
    Total revenues from continuing
operations
    
    $
    3,338,921
    
    
    $
    842,458
    
    
    $
    
    
    
    $
    (126,356
    )
    
    $
    4,055,023(Loss) earnings from continuing
operations before
income taxes
    
    $
    (481,401
    )
    
    $
    160,719
    
    
    $
    (615,926
    )
    
    $
    (2,022
    )
    
    $
    (938,630
    )
 For the Nine Months
    
    
    
    
    
    
    
    
    
    ParentEnded January 31, 2009
    
    BPE
    
    Real Estate
    
    Company (1)
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customersInterest and other incomeBPE Segment services and products:Energy savings projects
    
    $
    3,545,614
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,545,614Lighting products
    
    
    1,378,075
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,378,075Energy management
services
    
    
    1,762,224
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,762,224Productivity software
    
    
    2,807,191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,807,191Total revenues from unaffiliated customers
    
    $
    9,493,104
    
    
    $
    2,099,033
    
    
    $
    
    
    
    $
    
    
    
    $
    11,592,137Intersegment revenue
    
    
    
    
    
    
    409,388
    
    
    
    
    
    
    
    (409,388
    )
    
    
    Total revenues from continuing
operations
    
    $
    9,493,104
    
    
    $
    2,508,421
    
    
    $
    
    
    
    $
    (409,388
    )
    
    $
    11,592,137(Loss) earnings from continuing
operations before
income taxes
    
    $
    (1,861,363
    )
    
    $
    606,707
    
    
    $
    (2,472,217
    )
    
    $
    (12,538
    )
    
    $
    (3,739,411
    )
 10




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(1)
    
    The Parent Companys net loss in each period was derived from corporate headquarters
activities and consisted primarily of the following: Parent Company executive officers
compensation expenses and costs related to the Companys status as a publicly-held
company, which include, among other items, legal fees, NASDAQ fees, compliance costs,
investor relations expenses, non-employee directors fees, and other reporting costs.
The corporate headquarters activities do not earn revenue. All relevant costs related to
the business operations of the Companys operating segments either are paid directly by
the respective operating segments or are allocated to the segments by the Parent Company.
The allocation method is dependent on the nature of each expense item. Allocated
expenses include, among other items, accounting services, information technology
services, insurance costs, and audit and tax preparation fees. NOTE 7. EARNINGS (LOSS) PER SHARE
  11




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NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
  January 31, 2010Gross Carrying
    
    
    AccumulatedIntangible assets, subject to amortization:
    
    Amount
    
    
    AmortizationProprietary BPE software solutions
    
    $
    4,032,898
    
    
    $
    2,691,738Acquired computer software
    
    
    662,488
    
    
    
    481,316Real estate lease costs
    
    
    591,594
    
    
    
    239,573Customer relationships
    
    
    404,632
    
    
    
    280,212Deferred loan costs
    
    
    254,949
    
    
    
    130,912Non-compete agreements
    
    
    63,323
    
    
    
    52,769Tradename
    
    
    61,299
    
    
    
    6,811Other
    
    
    44,882
    
    
    
    41,300$
    6,116,065
    
    
    $
    3,924,631Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707Goodwill
    
    $
    6,354,002
 April 30, 2009Gross Carrying
    
    
    AccumulatedIntangible assets, subject to amortization:
    
    Amount
    
    
    AmortizationProprietary BPE software solutions
    
    $
    3,689,695
    
    
    $
    2,340,980Acquired computer software
    
    
    466,589
    
    
    
    458,883Real estate lease costs
    
    
    565,597
    
    
    
    190,189Customer relationships
    
    
    404,632
    
    
    
    252,216Deferred loan costs
    
    
    254,949
    
    
    
    114,163Non-compete agreements
    
    
    63,323
    
    
    
    29,023Tradename
    
    
    61,299
    
    
    
    3,746Other
    
    
    45,844
    
    
    
    39,149$
    5,551,928
    
    
    $
    3,428,349Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707Goodwill
    
    $
    6,354,002
 Aggregate amortization expense for all amortizable intangible assets:For the nine months ended January 31, 2010
    
    $
    498,919For the nine months ended January 31, 2009
    
    
    571,339For the quarter ended January 31, 2010
    
    
    174,130For the quarter ended January 31, 2009
    
    
    194,709
 Estimated future amortization expenses for all amortized intangible assets for the fiscal years ended:Remainder of fiscal year 2010
    
    $
    190,5982011
    
    
    636,9052012
    
    
    497,8672013
    
    
    341,7462014
    
    
    242,8062015
    
    
    113,921Thereafter
    
    
    167,591$
    2,191,434
 12




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13




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NOTE 9. ACQUISITIONS
 Fiscal 2010
  Fiscal 2009
   14




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Assets andLiabilitiesAcquiredfrom Seller
    
    
    Estimated LifeCurrent assets
    
    $
    322,514Property, furniture and equipment, net
    
    
    58,699
    
    
    Various (3-5)Trade name
    
    
    61,299
    
    
    15 yearsNon-compete agreements
    
    
    63,323
    
    
    2 yearsCustomer relationships
    
    
    186,632
    
    
    5 yearsGoodwill
    
    
    895,285
    
    
    IndefiniteTotal assets acquired
    
    $
    1,587,752Current liabilities
    
    
    (483,937
    )Long term liabilities
    
    
    (100,000
    )Net assets acquired
    
    $
    1,003,815
   Nine Months EndedJanuary 31, 2009Revenues
    
    $
    11,790Loss from continuing operations
    
    $
    (2,205
    )Loss from discontinued operations
    
    $
    (41
    )Net loss
    
    $
    (2,246
    )Loss per
share from continuing operations  basic and diluted
    
    $
    (0.59
    )Loss per
share from discontinued operations  basic and diluted
    
    $
    (0.01
    )Net loss per share  basic and diluted
    
    $
    (0.60
    )
 15




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NOTE 10. DISCONTINUED OPERATIONS
    Third Quarter Ended
    
    Nine Months EndedJanuary 31,
    
    January 31,2010
    
    2009
    
    2010
    
    2009REAL ESTATE SEGMENTRental revenues
    
    $
    9,677
    
    
    $
    44,373
    
    
    $
    50,572
    
    
    $
    158,297Rental property operating expenses, including depreciation
    
    
    60,864
    
    
    
    74,312
    
    
    
    183,859
    
    
    
    223,503Operating loss from discontinued operations
    
    
    (51,187
    )
    
    
    (29,939
    )
    
    
    (133,287
    )
    
    
    (65,206
    )Income tax benefit
    
    
    19,451
    
    
    
    11,377
    
    
    
    50,649
    
    
    
    24,778Operating loss from discontinued operations, net of tax
    
    
    (31,736
    )
    
    
    (18,562
    )
    
    
    (82,638
    )
    
    
    (40,428
    )Gain on disposition of income-producing properties
    
    
    1,188,639
    
    
    
    
    
    
    
    1,188,639
    
    
    
    Income tax expense
    
    
    (498,017
    )
    
    
    
    
    
    
    (498,017
    )
    
    
    Gain on disposition of income-producing properties, net of tax
    
    
    690,622
    
    
    
    
    
    
    
    690,622
    
    
    
    Earnings (loss) from discontinued operations, net of tax
    
    $
    658,886
    
    
    $
    (18,562
    )
    
    $
    607,984
    
    
    $
    (40,428
    )
 16




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NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
     NOTE 12. COMMITMENTS AND CONTINGENCIES
  17




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
        18




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®
   19




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Results of operations of the third quarter and first nine (9) months of fiscal 2010, compared
to the third quarter and first nine (9) months of fiscal 2009.
  
  20




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CHART A
 Third Quarter Ended
    
    
    
    
    
    
    
    
    
    Nine Months EndedJanuary 31,
    
    Amount
    
    Percentage
    
    January 31,
    
    Amount
    
    Percentage2010
    
    2009
    
    Change
    
    Change
    
    2010
    
    2009
    
    Change
    
    ChangeBPE (1)
    
    $
    4,120
    
    
    $
    3,339
    
    
    $
    781
    
    
    
    23
    
    
    $
    11,915
    
    
    $
    9,493
    
    
    $
    2,422
    
    
    
    26Real Estate
    
    
    718
    
    
    
    716
    
    
    
    2
    
    
    
    0
    
    
    
    2,081
    
    
    
    2,099
    
    
    
    (18
    )
    
    
    (1
    )$
    4,838
    
    
    $
    4,055
    
    
    $
    783
    
    
    
    19
    
    
    $
    13,996
    
    
    $
    11,592
    
    
    $
    2,404
    
    
    
    21
 NOTES TO CHART A
 
 (1)
    
    The following table indicates the BPE Segment revenues by service and product type: 
 Third Quarter Ended
    
    
    
    
    
    
    
    
    
    Nine Months EndedJanuary 31,
    
    Amount
    
    Percentage
    
    January 31,
    
    Amount
    
    Percentage2010
    
    2009
    
    Change
    
    Change
    
    2010
    
    2009
    
    Change
    
    ChangeEnergy Savings Projects
    
    $
    2,534
    
    
    $
    1,374
    
    
    $
    1,160
    
    
    
    84
    
    
    $
    6,594
    
    
    $
    3,546
    
    
    $
    3,048
    
    
    
    86Lighting Products
    
    
    379
    
    
    
    461
    
    
    
    (82
    )
    
    
    (18
    )
    
    
    1,320
    
    
    
    1,378
    
    
    
    (58
    )
    
    
    (4
    )Energy
Management Services
    
    
    417
    
    
    
    521
    
    
    
    (104
    )
    
    
    (20
    )
    
    
    1,439
    
    
    
    1,762
    
    
    
    (323
    )
    
    
    (18
    )Productivity Software
    
    
    790
    
    
    
    983
    
    
    
    (193
    )
    
    
    (20
    )
    
    
    2,562
    
    
    
    2,807
    
    
    
    (245
    )
    
    
    (9
    )$
    4,120
    
    
    $
    3,339
    
    
    $
    781
    
    
    
    23
    
    
    $
    11,915
    
    
    $
    9,493
    
    
    $
    2,422
    
    
    
    26
 BPE Segment revenues increased by approximately $781,000, or 23%, in the third quarter
of fiscal 2010 compared to the same period in fiscal 2009, due to:
 (a)
    
    an increase in energy savings (lighting and mechanical) project revenues
of approximately $1,160,000;
 partially offset by:
 (b)
    
    a decrease in lighting product revenues of approximately $82,000
generated by the Companys energy efficient lighting distribution business;(c)
    
    a decrease in energy management services revenues of approximately
$104,000; and(d)
    
    a decrease in productivity software revenues of approximately $193,000.
 BPE Segment revenues increased by approximately $2,422,000, or 26%, in the first nine (9)
months of fiscal 2010 compared to the same period in fiscal 2009, due to:
 (a)
    
    an increase in energy savings (lighting and mechanical) project revenues
of approximately $3,048,000;partially offset by:(b)
    
    a decrease in lighting product revenues of approximately $58,000
generated by the Companys energy efficient lighting distribution business;
 21




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##### Table of Contents



(c)
    
    a decrease in energy management services revenues of approximately
$323,000; and(d)
    
    a decrease in productivity software revenues of approximately $245,000.
  IncreaseJanuary 31,
    
    
    (Decrease)2010
    
    2009
    
    Amount
    
    PercentageBPE (1)
    
    $
    8,602,000
    
    
    $
    11,313,000
    
    
    $
    (2,711,000
    )
    
    
    (24
    )Real Estate
    
    
    2,715,000
    
    
    
    2,720,000
    
    
    
    (5,000
    )
    
    
    (0
    )Less: Intersegment
eliminations (2)
    
    
    (591,000
    )
    
    
    (543,000
    )
    
    
    (48,000
    )
    
    
    (9
    )Total Backlog
    
    $
    10,726,000
    
    
    $
    13,490,000
    
    
    $
    (2,764,000
    )
    
    
    (20
    )
 
 (1)
    
    BPE backlog at January 31, 2010, decreased by approximately $2,711,000, or 24%, compared
to the year-earlier period, primarily due to:
 (a)
    
    a decrease of approximately $1,662,000 in energy savings (lighting and
mechanical) projects, due primarily to the near completion during the current fiscal
year of an approximately $3.2 million project in the prior years backlog, partially
offset by new projects added in the current fiscal year;(b)
    
    a decrease of approximately $437,000 in productivity software products
and services; and(c)
    
    a decrease of approximately $612,000 in energy management consulting
services, primarily as a result of the successful completion of approximately
$700,000 of multi-year consulting services projects.
 Despite the decline in BPE backlog compared to the year-earlier period, BPE backlog at
January 31, 2010, increased by approximately $1,575,000, or 22%, compared to the immediately
prior quarter ended October 31, 2009.The Company estimates that the BPE backlog at January 31, 2010, will be recognized prior to
January 31, 2011.BPE backlog includes some contracts that can be cancelled by customers with less than one (1)
years notice, and assumes that such cancellation provisions will not be invoked. The value
of such contracts included in the prior years backlog that were subsequently cancelled was
approximately $126,000, or 1.1%
 (2)
    
    Represents rental revenues at the Companys corporate headquarters building to be paid to
the Real Estate Segment by the Parent Company and the BPE Segment.
 22




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CHART B
 Percentage of Segment
    
    
    
    
    
    
    
    
    
    Percentage of SegmentRevenues for the
    
    
    
    
    
    
    
    
    
    Revenues for theThird Quarter Ended
    
    Third Quarter Ended
    
    Nine Months Ended
    
    Nine Months EndedJanuary 31,
    
    January 31,
    
    January 31,
    
    January 31,2010
    
    2009
    
    2010
    
    2009
    
    2010
    
    2009
    
    2010
    
    2009BPE (1)
    
    $
    2,652
    
    
    $
    2,098
    
    
    
    64
    
    
    
    63
    
    
    $
    7,947
    
    
    $
    6,019
    
    
    
    67
    
    
    
    63Real Estate
    
    
    459
    
    
    
    445
    
    
    
    64
    
    
    
    62
    
    
    
    1,389
    
    
    
    1,334
    
    
    
    67
    
    
    
    64$
    3,111
    
    
    $
    2,543
    
    
    
    64
    
    
    
    63
    
    
    $
    9,336
    
    
    $
    7,353
    
    
    
    67
    
    
    
    63
 NOTES TO CHART B
 
 (1)
    
    BPE Segment cost of revenues increased by approximately $554,000, or 26%, in the third
quarter of fiscal 2010, and increased by approximately $1,928,000, or 32%, in the first nine
(9) months of fiscal 2010, compared to the same respective periods in fiscal 2009, primarily
due to the corresponding increases in revenues (see Chart A).On a percentage-of-revenues basis, BPE Segment cost of revenues increased by approximately 1%
and 4% in the third quarter and first nine (9) months of fiscal 2010, respectively, compared
to the same periods in fiscal 2009, primarily due to a change in the mix of services and
products.
 
  23




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CHART C
 Percentage of Segment
    
    
    
    
    
    
    
    
    
    Percentage of SegmentRevenues for the
    
    
    
    
    
    
    
    
    
    Revenues for theThird Quarter Ended
    
    Third Quarter Ended
    
    Nine Months Ended
    
    Nine Months EndedJanuary 31,
    
    January 31,
    
    January 31,
    
    January 31,2010
    
    2009
    
    2010
    
    2009
    
    2010
    
    2009
    
    2010
    
    2009BPE (1)
    
    $
    1,530
    
    
    $
    1,418
    
    
    
    37
    
    
    
    42
    
    
    $
    4,252
    
    
    $
    4,440
    
    
    
    36
    
    
    
    47Real Estate (2)
    
    
    125
    
    
    
    167
    
    
    
    17
    
    
    
    23
    
    
    
    423
    
    
    
    497
    
    
    
    20
    
    
    
    24Parent Company (3)
    
    
    799
    
    
    
    885
    
    
    
    17
    
    
    
    22
    
    
    
    2,469
    
    
    
    2,630
    
    
    
    18
    
    
    
    23$
    2,454
    
    
    $
    2,470
    
    
    
    51
    
    
    
    61
    
    
    $
    7,144
    
    
    $
    7,567
    
    
    
    51
    
    
    
    65
 NOTES TO CHART C
 
 (1)
    
    BPE Segment SG&A expenses increased by approximately $112,000, or 8%, in the third quarter
of fiscal 2010, compared to the same period in fiscal 2009, primarily due to approximately
$71,000 of one-time, outside consulting costs.BPE Segment SG&A expenses decreased by approximately $188,000, or 4%, in the first nine (9)
months of fiscal 2010, compared to the same period in fiscal 2009, primarily due to a
decrease in general and administrative costs and product and project development expenses,
offset by approximately $166,000 of one-time, outside consulting costs.On a percentage-of-revenues basis, BPE Segment SG&A expenses decreased by 5% and 11% in the
third quarter and first nine (9) months of fiscal 2010, respectively, compared to the same
periods in fiscal 2009, primarily due to the increase in revenues (see Chart A) without
corresponding proportional increases in expenses.(2)
    
    Real Estate Segment SG&A expenses decreased by approximately $42,000, or 25%, in the third
quarter of fiscal 2010, compared to the same period in fiscal 2009, primarily due to a
decrease in personnel-related costs and legal fees.Real Estate Segment SG&A expenses decreased by approximately $74,000, or 15%, in the first
nine (9) months of fiscal 2010, compared to the same period in fiscal 2009, primarily due to
decreases in personnel-related costs, consulting fees and legal fees.(3)
    
    Parent Company SG&A expenses decreased by approximately $86,000, or 10%, in the third
quarter of fiscal 2010, and decreased by approximately $161,000, or 6%, in the first nine (9)
months of fiscal 2010, compared to the same periods in fiscal 2009, primarily due to a
decrease in legal fees related to costs incurred in the prior year to settle an insurance
claim.On a percentage-of-revenues basis, Parent Company SG&A expenses decreased by 5% in both the
third quarter and first nine (9) months of fiscal 2010, compared to the same periods in
fiscal 2009, due to the increase in revenues (see Chart A) and the decrease in expenses.
 24




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CHART D
 Third Quarter Ended
    
    
    (Increase)
    
    
    Nine Months Ended
    
    
    (Increase)January 31,
    

    Decrease
    

    January 31,
    

    Decrease2010
    
    
    2009
    
    
    Amount
    
    
    2010
    
    
    2009
    
    
    AmountBPE (1)
    
    $
    (76
    )
    
    $
    (183
    )
    
    $
    107
    
    
    $
    (275
    )
    
    $
    (989
    )
    
    $
    714Real Estate (2)
    
    
    (114
    )
    
    
    (148
    )
    
    
    34
    
    
    
    (474
    )
    
    
    (421
    )
    
    
    (53
    )Parent Company (3)
    
    
    (800
    )
    
    
    (608
    )
    
    
    (192
    )
    
    
    (2,466
    )
    
    
    (2,329
    )
    
    
    (137
    )Total
    
    $
    (990
    )
    
    $
    (939
    )
    
    $
    (51
    )
    
    $
    (3,215
    )
    
    $
    (3,739
    )
    
    $
    524
 NOTES TO CHART D
 
 (1)
    
    BPE Segment loss before income taxes decreased by approximately $107,000, or 58%, in the
third quarter of fiscal 2010 compared to the same period in fiscal 2009, primarily due to an
increase in revenues of approximately $781,000 (see Chart A) and an increase in gross margin
of approximately $227,000, partially offset by an increase in SG&A expenses of approximately
$112,000 (see Chart C).BPE Segment loss before income taxes decreased by approximately $714,000, or 72%, in the
first nine (9) months of fiscal 2010 compared to the same period in fiscal 2009, primarily
due to an increase in revenues of approximately $2,422,000 (see Chart A), an increase in
gross margin of approximately $494,000, a decrease in SG&A expenses of approximately $188,000
(see Chart C), and an increase in interest and other income of approximately $31,000.(2)
    
    Real Estate Segment loss before income taxes decreased by approximately $34,000, or 23%, in
the third quarter of fiscal 2010 compared to the same period in fiscal 2009, primarily due to
a decrease in SG&A expenses of approximately $42,000 (see Chart C).Real Estate Segment loss before income taxes increased by approximately $53,000, or 13%, in
the first nine (9) months of fiscal 2010 compared to the same period in fiscal 2009,
primarily due to a decrease in gross margin of approximately $73,000 and a decrease in
interest and other income of approximately $75,000, partially offset by a decrease in SG&A
expenses of approximately $74,000 (see Chart C) and a decrease in interest expense of approximately
$22,000. 25




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(3)
    
    Parent Company loss before income taxes increased by approximately $192,000, or 32%, in the
third quarter of fiscal 2010 compared to the same period in fiscal 2009, primarily due to
one-time other income of approximately $285,000 recognized in the third quarter of fiscal
2009 related to the settlement of an insurance claim, partially offset by a decrease in SG&A
expenses of approximately $86,000 (see Chart C).Parent Company loss before income taxes increased by approximately $137,000, or 6%, in the
first nine (9) months of fiscal 2010 compared to the same period in fiscal 2009, primarily
due to one-time other income of approximately $285,000 recognized in the third quarter of
fiscal 2009 related to the settlement of an insurance claim, partially offset by a decrease
in SG&A expenses of approximately $161,000 (see Chart C).      LIQUIDITY AND CAPITAL RESOURCES
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(a)
    
    current year losses from continuing operations before depreciation,
amortization and income taxes of approximately $2,193,000;partially offset by:(b)
    
    an increase in billings in excess of costs and earnings of approximately
$898,000.
  (a)
    
    approximately $432,000 used for additions to intangible assets, primarily
related to enhancements to the BPE Segments proprietary building productivity
software solutions, and to purchased accounting software;(b)
    
    approximately $136,000 used for additions to income-producing properties
related to building improvements; and(c)
    
    approximately $75,000 used for additions to property and equipment,
primarily related to vehicle and computer hardware purchases.
  (a)
    
    scheduled principal payments on real estate mortgage notes of
approximately $254,000;(b)
    
    payment of the regular quarterly cash dividends to shareholders of
approximately $149,000;(c)
    
    scheduled principal payments on other debt of approximately $185,000; and(d)
    
    repurchases of the Companys common stock of approximately $31,000;partially offset by:(e)
    
    short-term loan proceeds of approximately $100,000.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
  CRITICAL ACCOUNTING POLICIES
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Revenue Recognition
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Long-Lived Assets: Income-Producing Properties, Capitalized Software, and Property and
Equipment
    
    
    A significant decrease in the market price of a long-lived asset;
    
    A significant adverse change in the extent or manner in which a long-lived asset
is being used or in its physical condition;
    
    A significant adverse change in legal factors or in the business climate that
could affect the value of a long-lived asset, including an adverse action or
assessment by a regulator;
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
    
    An accumulation of costs significantly in excess of the amount originally
expected for the acquisition or construction of a long-lived asset;
    
    A current-period operating or cash flow loss combined with a history of operating
or cash flow losses or a projection or forecast that demonstrates continuing losses
associated with the use of a long-lived asset;
    
    A current expectation that, more likely than not, a long-lived asset will be sold
or otherwise disposed of significantly before the end of its previously estimated
useful life;
    
    The Company has recently sold similar income-producing properties at losses;
    
    The Company has received purchase offers at prices below carrying value;
    
    Income-producing properties that have significant vacancy rates or significant
rollover exposure from one or more tenants;
    
    A major tenant experiencing financial difficulties that may jeopardize the
tenants ability to meet its lease obligations;
    
    Depressed market conditions;
    
    Presence of a new competitive property constructed in the assets market area;
and
    
    Evidence of significant corrective measures required to cure structural problems,
physical obsolescence, or deterioration of essential building components.
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
    
    A change in the estimated remaining useful life of the asset;
    
    A change in the manner in which the asset is used in the income generating
business of the Company; or
    
    A current-period operating or cash flow loss combined with a history of operating
or cash flow losses, or a projection or forecast that demonstrates continuing losses
associated with the use of a long-lived asset.
  Valuation of Goodwill and Other Indefinite-Lived Intangible Assets
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Income Taxes
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ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
  
  
 ITEM 1A. RISK FACTORS
 The Companys earnings in a future period could be adversely affected by non-cash adjustments to
goodwill and other intangible assets, if a future test of these assets indicates a material
impairment of those assets.
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ITEM 6. EXHIBITS
 31.1
    
    Certification of Chief Executive Officer, pursuant to Rules 13a-14(a)/15d-14(a)31.2
    
    Certification of Chief Financial Officer, pursuant to Rules 13a-14(a)/15d-14(a)32.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes Oxley Act 200232.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes Oxley Act 2002
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SERVIDYNE, INC.
      (Registrant)Date: March 17, 2010
    /s/ Alan R. AbramsAlan R. AbramsChief Executive OfficerDate: March 17, 2010
    /s/ Rick A. PaternostroRick A. PaternostroChief Financial Officer 38