##### 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, 2004

Commission file number 0-10146

ABRAMS INDUSTRIES, INC.




(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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




(Address of principal executive offices) (Zip Code)


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
o

Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).

Yes
o      No þ

The number of shares of $1.00 par value Common Stock of the
Registrant outstanding as of February 29, 2004, was 3,057,793.





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TABLE OF CONTENTS



|                                               |                                                                                               |                                            |  |  |  |  |  | 
|---------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                 
|                                               | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                                               |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                                               |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                                               |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                               |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                               | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                               | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                                               | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II. OTHER INFORMATION                    
|                                               | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                                               | ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES     
|                                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                                    
|EX-31.(A) SECTION 302 CERTIFICATION OF THE CEO
|EX-31.(B) SECTION 302 CERTIFICATION OF THE CFO
|EX-32.(A) SECTION 906 CERTIFICATION OF THE CEO
|EX-32.(B) SECTION 906 CERTIFICATION OF THE CFO



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##### Table of Contents



PART I. FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS 
 ABRAMS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED) January 31, 2004
    
    April 30, 2003ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    4,048,172
    
    
    $
    5,157,639Short-term investments
    
    
    200,000
    
    
    
    Receivables (Note 4)
    
    
    7,667,127
    
    
    
    12,902,281Less: Allowance for doubtful accounts
    
    
    (477,377
    )
    
    
    (492,045
    )Assets of discontinued operations (Note 5)
    
    
    
    
    
    
    102,146Costs and earnings in excess of billings
    
    
    289,597
    
    
    
    503,113Income tax receivable
    
    
    171,907
    
    
    
    171,907Deferred income taxes
    
    
    607,845
    
    
    
    610,980Other
    
    
    877,182
    
    
    
    554,396Total current assets
    
    
    13,384,453
    
    
    
    19,510,417INCOME-PRODUCING PROPERTIES, net
    
    
    42,891,231
    
    
    
    43,179,037PROPERTY AND EQUIPMENT, net
    
    
    686,326
    
    
    
    471,813OTHER ASSETS:Real estate held for future development or sale
    
    
    3,952,812
    
    
    
    3,952,812Intangible assets, net (Note 8)
    
    
    2,594,930
    
    
    
    2,335,827Goodwill (Note 8)
    
    
    4,611,257
    
    
    
    1,741,831Other
    
    
    2,777,622
    
    
    
    2,605,361$
    70,898,631
    
    
    $
    73,797,098LIABILITIES
AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    3,924,541
    
    
    $
    6,163,796Accrued expenses
    
    
    1,884,082
    
    
    
    1,831,990Liabilities of discontinued operations (Note 5)
    
    
    
    
    
    
    563,584Billings in excess of costs and earnings
    
    
    426,553
    
    
    
    682,674Bank loans payable
    
    
    3,000,000
    
    
    
    Current maturities of long-term debt
    
    
    2,792,837
    
    
    
    2,630,282Total current liabilities
    
    
    12,028,013
    
    
    
    11,872,326DEFERRED INCOME TAXES
    
    
    1,839,792
    
    
    
    2,772,132OTHER LIABILITIES
    
    
    6,530,455
    
    
    
    4,371,374MORTGAGE NOTES PAYABLE, less current maturities
    
    
    22,442,198
    
    
    
    23,216,407OTHER LONG-TERM DEBT, less current maturities
    
    
    9,511,738
    
    
    
    10,306,907Total liabilities
    
    
    52,352,196
    
    
    
    52,539,146COMMITMENTS AND CONTINGENCIES (Note 9)SHAREHOLDERS EQUITY:Common stock, $1 par value; 5,000,000 shares authorized;
3,204,081 issued and 3,057,793 outstanding in January 2004,
3,060,239 issued and 2,914,351 outstanding in April 2003
    
    
    3,204,081
    
    
    
    3,060,239Additional paid-in capital
    
    
    2,562,639
    
    
    
    2,153,505Deferred stock compensation
    
    
    (41,414
    )
    
    
    (16,598
    )Retained earnings
    
    
    13,496,776
    
    
    
    16,734,753Treasury stock, common shares, 146,288 in January 2004 and 145,888 in April 2003
    
    
    (675,647
    )
    
    
    (673,947
    )Total shareholders equity
    
    
    18,546,435
    
    
    
    21,257,952$
    70,898,631
    
    
    $
    73,797,098
 See accompanying notes to consolidated financial statements. 1




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##### Table of Contents



ABRAMS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) FIRSTTHIRD QUARTER ENDED
    
    NINE MONTHS ENDEDJANUARY 31,
    
    JANUARY 31,2004
    
    2003
    
    2004
    
    2003REVENUES:Energy management
    
    $
    756,981
    
    
    $
    723,490
    
    
    $
    2,132,265
    
    
    $
    2,122,032Facility services (Note 10)
    
    
    546,744
    
    
    
    
    
    
    
    546,744
    
    
    
    Construction
    
    
    2,378,540
    
    
    
    11,824,634
    
    
    
    23,787,165
    
    
    
    46,353,243Rental income
    
    
    2,589,705
    
    
    
    2,818,376
    
    
    
    7,964,982
    
    
    
    8,005,919Real estate sales
    
    
    
    
    
    
    434,561
    
    
    
    
    
    
    
    434,5616,271,970
    
    
    
    15,801,061
    
    
    
    34,431,156
    
    
    
    56,915,755Interest
    
    
    322
    
    
    
    13,484
    
    
    
    10,274
    
    
    
    48,869Other
    
    
    23,328
    
    
    
    10,737
    
    
    
    85,198
    
    
    
    53,1056,295,620
    
    
    
    15,825,282
    
    
    
    34,526,628
    
    
    
    57,017,729COSTS AND EXPENSES:Energy management
    
    
    383,263
    
    
    
    432,551
    
    
    
    1,205,870
    
    
    
    1,165,153Facility services (Note 10)
    
    
    369,192
    
    
    
    
    
    
    
    369,192
    
    
    
    Construction
    
    
    2,581,359
    
    
    
    11,460,006
    
    
    
    23,198,804
    
    
    
    45,482,225Rental property operating expenses, excluding interest
    
    
    1,597,335
    
    
    
    1,824,637
    
    
    
    4,894,705
    
    
    
    5,050,997Cost of real estate sold
    
    
    
    
    
    
    196,087
    
    
    
    
    
    
    
    196,0874,931,149
    
    
    
    13,913,281
    
    
    
    29,668,571
    
    
    
    51,894,462Selling, general and administrativeEnergy management
    
    
    487,378
    
    
    
    442,380
    
    
    
    1,689,134
    
    
    
    1,286,024Facility services (Note 10)
    
    
    244,388
    
    
    
    
    
    
    
    244,388
    
    
    
    Construction
    
    
    607,077
    
    
    
    734,505
    
    
    
    2,904,568
    
    
    
    1,649,312Real estate
    
    
    217,900
    
    
    
    263,381
    
    
    
    588,672
    
    
    
    716,451Parent
    
    
    393,445
    
    
    
    631,347
    
    
    
    1,549,549
    
    
    
    1,816,5021,950,188
    
    
    
    2,071,613
    
    
    
    6,976,311
    
    
    
    5,468,289Interest costs incurred
    
    
    730,464
    
    
    
    818,074
    
    
    
    2,198,029
    
    
    
    2,271,1777,611,801
    
    
    
    16,802,968
    
    
    
    38,842,911
    
    
    
    59,633,928LOSS BEFORE INCOME TAXES FROM
CONTINUING OPERATIONS
    
    
    (1,316,181
    )
    
    
    (977,686
    )
    
    
    (4,316,283
    )
    
    
    (2,616,199
    )INCOME TAX BENEFIT
    
    
    (433,000
    )
    
    
    (375,000
    )
    
    
    (1,428,000
    )
    
    
    (1,012,000
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (883,181
    )
    
    
    (602,686
    )
    
    
    (2,888,283
    )
    
    
    (1,604,199
    )DISCONTINUED OPERATIONS (Note 5):Earnings (loss) from discontinued operations, adjusted
for applicable income tax expense of $0,
$0, $0, and $3,413, respectively
    
    
    
    
    
    
    (479
    )
    
    
    
    
    
    
    4,283Gain on sale of assets of discontinued operations,
adjusted for applicable income tax expense of $0, $0,
$0 and $372,228, respectively
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    617,987EARNINGS (LOSS) FROM
DISCONTINUED OPERATIONS
    
    
    
    
    
    
    (479
    )
    
    
    
    
    
    
    622,270NET LOSS
    
    $
    (883,181
    )
    
    $
    (603,165
    )
    
    $
    (2,888,283
    )
    
    $
    (981,929
    )NET EARNINGS
(LOSS) PER SHARE -
BASIC AND DILUTED (Note 9):From continuing operations
    
    $
    (.30
    )
    
    $
    (.21
    )
    
    $
    (.98
    )
    
    $
    (.55
    )From discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    .21NET EARNINGS
(LOSS) PER SHARE -
BASIC AND DILUTED
    
    $
    (.30
    )
    
    $
    (.21
    )
    
    $
    (.98
    )
    
    $
    (.34
    )DIVIDENDS PER SHARE
    
    $
    .04
    
    
    $
    .04
    
    
    $
    .12
    
    
    $
    .12WEIGHTED
AVERAGE SHARES OUTSTANDING -
BASIC AND DILUTED
    
    
    2,980,878
    
    
    
    2,910,051
    
    
    
    2,936,438
    
    
    
    2,909,771
 See accompanying notes to consolidated financial statements. 2




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##### Table of Contents



ABRAMS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) NINE MONTHS ENDED JANUARY 31,2004
    
    2003Cash flows from operating activities:Net loss
    
    $
    (2,888,283
    )
    
    $
    (981,929
    )Adjustments to reconcile net loss to net
cash used in operating activities:Income from discontinued operations, net of tax
    
    
    
    
    
    
    (622,270
    )Depreciation and amortization
    
    
    1,809,232
    
    
    
    1,910,170Gain on sale of real estate
    
    
    
    
    
    
    (238,474
    )Deferred tax benefit
    
    
    (1,485,598
    )
    
    
    Recovery of doubtful accounts, net
    
    
    (14,668
    )
    
    
    (516,936
    )Changes in assets and liabilities:Receivables
    
    
    5,737,170
    
    
    
    388,796Costs and earnings in excess of billings
    
    
    309,756
    
    
    
    (707,828
    )Other current assets
    
    
    (255,268
    )
    
    
    (27,904
    )Other assets
    
    
    (172,261
    )
    
    
    244,023Trade and subcontractors payable
    
    
    (2,778,923
    )
    
    
    (2,266,944
    )Accrued expenses
    
    
    (26,699
    )
    
    
    (167,269
    )Billings in excess of costs and earnings
    
    
    (511,841
    )
    
    
    422,883Other liabilities
    
    
    212,451
    
    
    
    (71,815
    )Net cash used in operating activities
    
    
    (64,932
    )
    
    
    (2,635,497
    )Cash flows from investing activities:Proceeds from sale of real estate, net
    
    
    
    
    
    
    422,048Additions to income-producing properties, net
    
    
    (899,456
    )
    
    
    (36,185
    )Additions to property and equipment, net
    
    
    (46,922
    )
    
    
    (68,597
    )Additions to intangible assets
    
    
    (65,339
    )
    
    
    (202,168
    )Acquisition, net of cash acquired
    
    
    (1,059,210
    )
    
    
    Purchase of short-term investments
    
    
    (200,000
    )
    
    
    Repayments received on notes receivable
    
    
    66,147
    
    
    
    7,543Net cash (used in) provided by investing activities
    
    
    (2,204,780
    )
    
    
    122,641Cash flows from financing activities:Debt proceeds
    
    
    
    
    
    
    4,900,000Proceeds from line of credit
    
    
    3,000,000
    
    
    
    Debt repayments
    
    
    (1,583,304
    )
    
    
    (6,015,320
    )Deferred loan costs paid
    
    
    
    
    
    
    (107,788
    )Repurchase of common stock
    
    
    (1,700
    )
    
    
    (470
    )Cash dividends
    
    
    (349,706
    )
    
    
    (349,177
    )Net cash provided by (used in) financing activities
    
    
    1,065,290
    
    
    
    (1,572,755
    )Cash flows from discontinued operations:Operating activities
    
    
    94,955
    
    
    
    (138,787
    )Mortgage payoff
    
    
    
    
    
    
    (12,206,700
    )Proceeds from sale of property, net of costs of sale
    
    
    
    
    
    
    13,489,901Net cash provided by discontinued operations
    
    
    94,955
    
    
    
    1,144,414Net decrease in cash and cash equivalents
    
    
    (1,109,467
    )
    
    
    (2,941,197
    )Cash and cash equivalents at beginning of period
    
    
    5,157,639
    
    
    
    7,911,205Cash and cash equivalents at end of period
    
    $
    4,048,172
    
    
    $
    4,970,008Supplemental disclosure of noncash financing activities:Issuance of common stock under Stock Award Plan
    
    $
    41,700
    
    
    $
    5,500
 See accompanying notes to consolidated financial statements. 3




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##### Table of Contents



ABRAMS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2004, AND APRIL 30, 2003
(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 management and maintenance management services; (ii) provides facility
services including energy efficient lighting system installation services;
(iii) provides commercial construction services; and (iv) engages in real
estate investment and development. 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 to make the information
presented not misleading. 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, 2003. Results of operations for interim periods are not necessarily
indicative of annual results. NOTE 3. SIGNIFICANT ACCOUNTING POLICIES As of January 31, 2003, the Company adopted the fair value disclosure
provisions of Statement of Financial Accounting Standards (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
(loss) earnings 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
nine months ended January 31, 2004, and January 31, 2003, using the
Black-Scholes option pricing model. Options to purchase 690,592 shares were outstanding at January 31, 2004,
of which 303,592 options were vested. The Company granted 186,000 stock
options and 10,000 shares of stock in the third quarter and in the
nine months ended January 31,
2004. No options or shares of stock were granted in the third quarter ended January 31, 2003,
and 609,000 options and 1,100 shares of stock were granted in the nine months
ended January 31, 2003. The number of options forfeited in the third quarter
of fiscal 2004 and fiscal 2003 was 23,294 and 12,683, respectively. The number
of options forfeited in the nine months of fiscal 2004 and fiscal 2003 was
237,294 and 17,183, respectively. 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: 4




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##### Table of Contents



Quarter
    
    Nine MonthsEnded January 31,
    
    Ended January 31,2004
    
    2003
    
    2004
    
    2003Net loss, as reported
    
    $
    (883,181
    )
    
    $
    (603,165
    )
    
    $
    (2,888,283
    )
    
    $
    (981,929
    )Deduct: Total stock-based compensation
expense as determined under fair value
based method for all awards, net of
related tax effects
    
    
    (62,920
    )
    
    
    (51,098
    )
    
    
    (136,042
    )
    
    
    (114,974
    )Add: Forfeitures, net of related tax effects
    
    
    10,631
    
    
    
    1,630
    
    
    
    119,778
    
    
    
    1,947Pro forma net loss
    
    $
    (935,470
    )
    
    $
    (652,633
    )
    
    $
    (2,904,547
    )
    
    $
    (1,094,956
    )Net loss per share:Basic and
diluted - as reported
    
    $
    (0.30
    )
    
    $
    (0.21
    )
    
    $
    (0.98
    )
    
    $
    (0.34
    )Basic and
diluted - pro forma
    
    $
    (0.31
    )
    
    $
    (0.22
    )
    
    $
    (0.99
    )
    
    $
    (0.38
    )
 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 Statement of Financial Accounting Standards
(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 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 standard, as of January 31, 2004, the Company
had no assets that were classified as held for disposition or sale. In
February 2004, however, the Company entered into a contract to sell its
shopping center located in North Fort Myers, Florida, which sale closed in
March 2004. See Note 11 to the consolidated financial statements. On June 28, 2002, the Company sold its shopping center located in Englewood,
Florida, and recognized a pretax gain of $990,215. As a result of the sale, the
Companys financial statements have been prepared with the propertys assets
and liabilities, results of operations, cash flows, and the gain from the sale
shown as discontinued operations. Summarized financial information for
discontinued operations for the third quarter and nine months ended January 31
is as follows: 5




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##### Table of Contents



Quarter endedJanuary 31,Results of operations
    
    2004
    
    2003Revenues
    
    $
    
    
    
    $
    Operating expenses, including amortization and interest
    
    
    
    
    
    
    479$
    
    
    
    $
    (479
    )
 Nine months endedJanuary 31,Results of operations
    
    2004
    
    2003Revenues
    
    $
    
    
    
    $
    289,173Operating expenses, including amortization and interest
    
    
    
    
    
    
    281,477$
    
    
    
    $
    7,696
 Balances atAssets of discontinued operations
    
    January 31, 2004
    
    April 30, 2003Receivables
    
    $
    
    
    
    $
    57,020Other
    
    
    
    
    
    
    45,126$
    
    
    
    $
    102,146
 Balances atLiabilities of discontinued operations
    
    January 31, 2004
    
    April 30, 2003Income taxes
    
    $
    
    
    
    $
    476,635Accrued expenses
    
    
    
    
    
    
    86,949$
    
    
    
    $
    563,584
 NOTE 6. OPERATING SEGMENTS 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. 6




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##### Table of Contents



|                                                               |                                           |            |           |           |  |              |          |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |            |   |   |            |            | 
|-------------------------------------------------------------- | ----------------------------------------- | ---------- | --------- | --------- |  | ------------ | -------- | ----------- |  | ------ | ---------- | ------------ |  | ------------ | --------- | --------- |  | - | ---------- | ------ |  | - | ---------- | ---------- | - | - | ---------- | ---------- | 
|                                                               |                                           |            |           |           |  |              | Facility |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |            |   |   |           
|For the Quarter Ended                                          |                                           | Energy     |           | Services  |  |              |          |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |           
|January 31, 2004                                               |                                           | Management |           | (Note 10) |  | Construction |          | Real Estate |  | Parent |            | Eliminations |  | Consolidated
|                                                               |                                           |            |           |           |  |              |          |             |  |        |            |              |  |             
|Revenues from unaffiliated
customers                           |                                           | $          | 756,981   |           |  | $            | 546,744  |             |  | $      | 2,378,540  |              |  | $            | 2,589,705 |           |  | $ |           |        |  | $ |           |            |   | $ | 6,271,970  |           
|Interest and other income                                      |                                           |            |          |           |  |              |          |             |  |        | 12,820     |              |  |              | 10,656    |           |  |   | 174        |        |  |   |           |            |   |   | 23,650     |           
|Intersegment revenue                                           |                                           |            |          |           |  |              |          |             |  |        | 702,977    |              |  |              | 117,041   |           |  |   |           |        |  |   | (820,018   | )          |   |   |           |           
|                                                               |                                           |            |           |           |  |              |          |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |            |   |   |            |           
|                                                               | Total revenues from
continuing operations |            | $         | 756,981   |  |              | $        | 546,744     |  |        | $          | 3,094,337    |  |              | $         | 2,717,402 |  |   | $          | 174    |  |   | $          | (820,018   | ) |   | $          | 6,295,620  | 
|                                                               |                                           |            |           |           |  |              |          |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |            |   |   |            |           
|Earnings (loss) before
income taxes from
continuing operations |                                           | $          | (114,025  | )         |  | $            | (70,559  | )           |  | $      | (849,530   | )            |  | $            | 188,056   |           |  | $ | (450,150   | )      |  | $ | (19,973    | )          |   | $ | (1,316,181 | )         
|                                                               |                                           |            |           |           |  |              |          |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |            |   |   |            |           
|                                                              
|                                                               |                                           |            |           |           |  |              | Facility |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |            |   |   |           
|For the Quarter Ended                                          |                                           | Energy     |           | Services  |  |              |          |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |           
|January 31, 2003                                               |                                           | Management |           | (Note 10) |  | Construction |          | Real Estate |  | Parent |            | Eliminations |  | Consolidated
|                                                               |                                           |            |           |           |  |              |          |             |  |        |            |              |  |             
|Revenues from unaffiliated
customers                           |                                           | $          | 723,490   |           |  | $            |         |             |  | $      | 11,824,634 |              |  | $            | 3,252,937 |           |  | $ |           |        |  | $ |           |            |   | $ | 15,801,061 |           
|Interest and other income                                      |                                           |            |          |           |  |              |         |             |  |        | 1,256      |              |  |              | 20,160    |           |  |   | 2,805      |        |  |   |           |            |   |   | 24,221     |           
|Intersegment revenue                                           |                                           |            |          |           |  |              |         |             |  |        |           |              |  |              | 113,493   |           |  |   |           |        |  |   | (113,493   | )          |   |   |           |           
|                                                               |                                           |            |           |           |  |              |          |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |            |   |   |            |           
|                                                               | Total revenues from
continuing operations |            | $         | 723,490   |  |              | $        |            |  |        | $          | 11,825,890   |  |              | $         | 3,386,590 |  |   | $          | 2,805  |  |   | $          | (113,493   | ) |   | $          | 15,825,282 | 
|                                                               |                                           |            |           |           |  |              |          |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |            |   |   |            |           
|Earnings (loss) before
income taxes from
continuing operations |                                           | $          | (151,717  | )         |  | $            |         |             |  | $      | (436,126   | )            |  | $            | 280,670   |           |  | $ | (766,563   | )      |  | $ | 96,050     |            |   | $ | (977,686   | )         
|                                                               |                                           |            |           |           |  |              |          |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |            |   |   |            |           
|                                                              
|                                                               |                                           |            |           |           |  |              | Facility |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |            |   |   |           
|For the Nine Months Ended                                      |                                           | Energy     |           | Services  |  |              |          |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |           
|January 31, 2004                                               |                                           | Management |           | (Note 10) |  | Construction |          | Real Estate |  | Parent |            | Eliminations |  | Consolidated
|                                                               |                                           |            |           |           |  |              |          |             |  |        |            |              |  |             
|Revenues from unaffiliated
customers                           |                                           | $          | 2,132,265 |           |  | $            | 546,744  |             |  | $      | 23,787,165 |              |  | $            | 7,964,982 |           |  | $ |           |        |  | $ |           |            |   | $ | 34,431,156 |           
|Interest and other income                                      |                                           |            |          |           |  |              |         |             |  |        | 14,110     |              |  |              | 79,823    |           |  |   | 1,539      |        |  |   |           |            |   |   | 95,472     |           
|Intersegment revenue                                           |                                           |            |          |           |  |              |         |             |  |        | 801,399    |              |  |              | 344,973   |           |  |   |           |        |  |   | (1,146,372 | )          |   |   |           |           
|                                                               |                                           |            |           |           |  |              |          |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |            |   |   |            |           
|                                                               | Total revenues from
continuing operations |            | $         | 2,132,265 |  |              | $        | 546,744     |  |        | $          | 24,602,674   |  |              | $         | 8,389,778 |  |   | $          | 1,539  |  |   | $          | (1,146,372 | ) |   | $          | 34,526,628 | 
|                                                               |                                           |            |           |           |  |              |          |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |            |   |   |            |           
|Earnings (loss) before
income taxes from
continuing operations |                                           | $          | (763,879  | )         |  | $            | (70,559  | )           |  | $      | (2,485,373 | )            |  | $            | 717,815   |           |  | $ | (1,705,045 | )      |  | $ | (9,242     | )          |   | $ | (4,316,283 | )         
|                                                               |                                           |            |           |           |  |              |          |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |            |   |   |            |           
|                                                              
|                                                               |                                           |            |           |           |  |              | Facility |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |            |   |   |           
|For the Nine Months Ended                                      |                                           | Energy     |           | Services  |  |              |          |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |           
|January 31, 2003                                               |                                           | Management |           | (Note 10) |  | Construction |          | Real Estate |  | Parent |            | Eliminations |  | Consolidated
|                                                               |                                           |            |           |           |  |              |          |             |  |        |            |              |  |             
|Revenues from unaffiliated
customers                           |                                           | $          | 2,122,032 |           |  | $            |         |             |  | $      | 46,353,243 |              |  | $            | 8,440,480 |           |  | $ |           |        |  | $ |           |            |   | $ | 56,915,755 |           
|Interest and other income                                      |                                           |            |          |           |  |              |         |             |  |        | 9,372      |              |  |              | 76,945    |           |  |   | 21,991     |        |  |   | (6,334     | )          |   |   | 101,974    |           
|Intersegment revenue                                           |                                           |            |          |           |  |              |         |             |  |        |           |              |  |              | 336,056   |           |  |   |           |        |  |   | (336,056   | )          |   |   |           |           
|                                                               |                                           |            |           |           |  |              |          |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |            |   |   |            |           
|                                                               | Total revenues from
continuing operations |            | $         | 2,122,032 |  |              | $        |            |  |        | $          | 46,362,615   |  |              | $         | 8,853,481 |  |   | $          | 21,991 |  |   | $          | (342,390   | ) |   | $          | 57,017,729 | 
|                                                               |                                           |            |           |           |  |              |          |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |            |   |   |            |           
|Earnings (loss) before
income taxes from
continuing operations |                                           | $          | (336,400  | )         |  | $            |         |             |  | $      | (968,368   | )            |  | $            | 611,996   |           |  | $ | (2,033,802 | )      |  | $ | 110,375    |            |   | $ | (2,616,199 | )         
|                                                               |                                           |            |           |           |  |              |          |             |  |        |            |              |  |              |           |           |  |   |            |        |  |   |            |            |   |   |            |           

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NOTE 7. EARNINGS (LOSS) PER
SHARE

Basic earnings 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 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 the first nine months of fiscal 2004
was 264 and 0, respectively and was 0 and 12,602 for the third quarter and the
first nine months of fiscal 2003, 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, 2004, are as follows:

|                              |                                         |   |                |           |              |   |              |         |  |   |           |           | 
|----------------------------- | --------------------------------------- | - | -------------- | --------- | ------------ | - | ------------ | ------- |  | - | --------- | --------- | 
|                              |                                         |   | Gross Carrying |           | Accumulated  |   | Net Carrying
|                              |                                         |   | Amount         |           | Amortization |   | Amount      
|                              |                                         |   |                |           |              |   |             
|Amortized
intangible assets   |                                         |   |                |           |              |   |              |         |  |   |           |          
|                              | Proprietary customer
software solutions |   | $              | 969,384   |              |   | $            | 534,656 |  |   | $         | 434,728   | 
|                              | Computer software                       |   |                | 394,777   |              |   |              | 309,018 |  |   |           | 85,759    | 
|                              | Real estate lease costs                 |   |                | 1,643,256 |              |   |              | 819,906 |  |   |           | 823,350   | 
|                              | Deferred loan costs                     |   |                | 946,954   |              |   |              | 527,813 |  |   |           | 419,141   | 
|                              | Customer relationships                  |   |                | 218,000   |              |   |              | 5,087   |  |   |           | 212,913   | 
|                              | Other                                   |   |                | 31,660    |              |   |              | 7,882   |  |   |           | 23,778    | 
|                              |                                         |   |                |           |              |   |              |         |  |   |           |           | 
|                              |                                         | $ | 4,204,031      |           |              | $ | 2,204,362    |         |  | $ | 1,999,669 |          
|                              |                                         |   |                |           |              |   |              |         |  |   |           |          
|Unamortized
intangible assets |                                         |   |                |           |              |   |              |         |  |   |           |          
|                              | Trademark                               |   |                |           |              |   |              |         |  |   | $         | 595,261   | 
|                              | Goodwill                                |   |                |           |              |   |              |         |  |   |           | 4,611,257 | 
|                              |                                         |   |                |           |              |   |              |         |  |   |           |          
|                              |                                         |   |                |           |              |   |              |         |  | $ | 5,206,518 |          
|                              |                                         |   |                |           |              |   |              |         |  |   |           |          

NOTE 9. COMMITMENTS AND
CONTINGENCIES

As previously disclosed on Form 10-K for the year ended April 30, 2003,
the Company announced on July 7, 2003, that an internal investigation, which
was conducted by the Companys legal counsel at the request of senior
management, revealed information suggesting that activities in violation of
Federal antitrust laws may have taken place in a certain job bidding process
for one customer of the Companys subsidiary, Abrams Construction, Inc. The
results of this investigation were reported to the Board of Directors of the
Company on June 9, 2003. The Company also voluntarily communicated the results
of its investigation to the United States Department of Justice
(DOJ) and continues to fully cooperate in the inquiry that resulted. The DOJ, on July 1, 2003,
issued a conditional letter of amnesty to the Company and its subsidiaries for
their cooperation in recognizing and then immediately reporting the
irregularities. The Company believes, based on its internal investigation, that
the specific improprieties were confined to a bidding process for The Home
Depot, Inc. (Home Depot), its largest customer. At this time, the Company has
no reason to believe that any other customers were affected by such
inappropriate activity. The Company also communicated its concerns about the
job bidding process to Home Depot. The Company has conducted extensive
additional training of all employees and has implemented additional

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procedures
to prevent a recurrence of this behavior. Costs associated with this matter,
including the Companys internal investigation and its ongoing cooperation with
the DOJ, are currently estimated to approximate $1.45 million in the current
fiscal year ending April 30, 2004. Such cost estimates, however, are
particularly difficult to make with any precision, and as a result the actual
costs may be lower or higher than this amount. To date, no third party has
made, or threatened to make, any claim in connection with this matter. It is
possible, however, that claims could be made as a result of this situation.

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. The defendant subsequently made a
demand against API for arbitration and filed a counterclaim. In January 2003,
the Cobb County Superior Court denied the defendants demand for arbitration,
but in July 2003 this decision was reversed by the Georgia Court of Appeals.
The Company sought certiorari from the state of Georgia Supreme Court, which
was denied in November 2003. The case will now be arbitrated. The dispute
arises out of the defendants former provision of real estate asset management
services to API. The Company believes APIs claims against its former asset
manager and its defenses to the managers claims are meritorious and intends to
continue to vigorously pursue its claims and assert its defenses.

Other than the costs of the Companys internal investigation and ongoing
cooperation associated with the DOJ, the Company believes the ultimate
disposition of the above noted legal proceedings and
claims or potential claims, and those previously disclosed on Form 10-K
for the year ended April 30, 2003, will not have a material adverse affect on
the financial condition, cash flows, or results of operations of the Company;
however, the Company cannot predict the ultimate disposition of the above noted
claims, potential claims and proceedings, and therefore, the Company cannot be
certain that the above noted legal proceedings and claims or potential claims
will not have a material adverse affect on the financial condition, cash flows,
or results of operations of the Company.

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.

NOTE 10. ACQUISITION

On December 19, 2003, WEGI Acquisition, LLC (Purchaser), an indirect
wholly-owned subsidiary of the Company, acquired substantially all of the
assets and assumed certain liabilities of The Wheatstone Energy Group, Inc.
(Seller). The Seller was engaged in the business of providing energy efficient
lighting system installation services, including electrical and other related
energy conservation services, and the Company intends to continue to offer
these services. The acquisition was made pursuant to an Agreement and Plan of
Reorganization dated December 19, 2003, between the Company, the Purchaser,
the Seller and the shareholders of the Seller (the Agreement). The consideration
consisted of 23,842 newly-issued shares of the Companys common stock, par
value $1.00 per share, the payment by the Purchaser of approximately $1.3 million
to certain trade creditors of the Seller from the available cash of
the Purchaser, and
the assumption by the Purchaser of approximately $2.9 million of
the Sellers
liabilities. Also in connection with the transaction, the Company issued
110,000 shares of the Companys common stock with a fair value of $424,380, and
a warrant to purchase an additional 40,000 shares of the Companys common stock
at an exercise price of $5.10 per share, with a fair value of $36,800
determined using the Black-Scholes option pricing model, to a lender
of the Seller.
The amount and type of consideration was determined by negotiation among the
parties.

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Pursuant to the Agreement, the Purchaser acquired substantially all of the
assets of the Seller, including accounts, inventory, personal property and
equipment, proprietary information, intellectual property and the Sellers
right, title and interest to assigned contracts. As described in the Agreement,
the Purchaser assumed only specified liabilities of the Seller, including executory
obligations under disclosed assigned contracts, current balance sheet
liabilities of the Seller and certain debt for borrowed funds from two lenders
of the Seller. Pursuant to the Agreement, after the closing of the acquisition,
the Purchaser changed its name to The Wheatstone Energy Group, LLC,
(Wheatstone) and the Seller adopted a dissimilar name. Debt assumed in the amount of $1 million from one
of the lenders of the Seller is collateralized by all general assets of
Wheatstone.

The acquisition is being accounted for using the purchase method of
accounting in accordance with Statement of Financial Accounting Standards No.
141, Business Combinations (SFAS 141), whereby the total cost of the
acquisition has been allocated to tangible and intangible assets acquired and
liabilities assumed based upon their fair values at the effective date of the
acquisition. The Company allocated the purchase price to the fair value of
identifiable long-lived assets and intangibles based on an independent third
party appraisal. The allocation of the purchase price is subject to refinement
due to a working capital adjustment provision in the Agreement. The following
table summarizes the estimated fair values of the assets acquired and
liabilities assumed at the date of acquisition.

|                                       |                       |   |               |           |                |               |  |  | 
|-------------------------------------- | --------------------- | - | ------------- | --------- | -------------- | ------------- |  |  | 
|                                       |                       |   | Operations    |           |                |               | 
|                                       |                       |   | Acquired from |           |                |               | 
|                                       |                       |   | Wheatstone    |           | Estimated Life
|                                       |                       |   |               |           |               
|Current assets                         |                       | $ | 933,982       |           |                |               |  | 
|Property, furniture and equipment, net |                       |   | 346,118       |           |                | Various (3-5)
|Customer relationships                 |                       |   | 218,000       |           |                | 5 years      
|Trademark                              |                       |   | 280,000       |           |                | Indefinite   
|Non-competes                           |                       |   | 3,000         |           |                | 2 years      
|Website/Software                       |                       |   | 32,437        |           |                | 3 years      
|Goodwill                               |                       |   | 2,869,426     |           |                | Indefinite   
|                                       |                       |   |               |           |                |               |  | 
|                                       | Total assets acquired |   | $             | 4,682,963 |                |               |  |  | 
|                                       |                       |   |               |           |                |               |  |  | 
|Current liabilities                    |                       |   | 995,604       |           |                |               |  | 
|Long term liabilities                  |                       |   | 1,878,000     |           |                |               |  | 
|                                       |                       |   |               |           |                |               |  | 
|                                       | Net assets acquired   |   | $             | 1,809,359 |                |               |  |  | 
|                                       |                       |   |               |           |                |               |  | 

The trademarks and goodwill are not subject to amortization and none of
the amount assigned to goodwill is deductible for tax purposes. The goodwill
amount has been assigned to the facility services segment.

The following table summarizes the results of the Company on a pro forma
basis for the three and nine months ended January 31, 2004, and January 31,
2003, as if the acquisition of Wheatstone had occurred at the beginning of each
period. 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).

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|                                       |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|-------------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                       |  | Three Months Ended |        | Nine Months Ended
|                                       |  | January 31,        |        | January 31,      
|                                       |  |                    |        |                  
|                                       |  | 2004               |        | 2003              |  | 2004 |        | 2003
|                                       |  |                    |        |                   |  |      |        |     
|Revenues                               |  | $                  | 6,991  |                   |  | $    | 16,345 |      |  | $ | 37,583 |   |  | $ | 62,370 |  
|Net loss                               |  |                    | (1,333 | )                 |  |      | (1,772 | )    |  |   | (4,055 | ) |  |   | (1,907 | )
|Net loss per share - basic and diluted |  | $                  | (0.45  | )                 |  | $    | (0.61  | )    |  | $ | (1.38  | ) |  | $ | (0.66  | )

NOTE 11. SUBSEQUENT EVENT

On March 12, 2004, the Company closed on the sale of its shopping center
located in North Fort Myers, Florida, for a sales price of $21.8 million,
resulting in a pre-tax gain of approximately $4.1 million. After repayment of
the loan secured by the shopping center and other expenses, the sale generated
net cash proceeds of approximately $10.6 million. The sale did not include any
of the Companys real estate held for future development or
sale. In addition to repaying its lines of credit, the Company intends
to use the proceeds from this sale as a source of cash for strategic
acquisitions and for additional investments in income-producing
properties, and is considering a number of other alternative uses,
including possibly distributing a portion as a special dividend,
funding working capital needs, or other corporate purposes.

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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, 2003.

The Companys fiscal year 2004 ends April 30, 2004.

Changes in CONSOLIDATED BALANCE SHEETS between April 30, 2003, and January 31,
2004

Net accounts receivable decreased by $5,220,486, primarily due to the
timing of the submission and payment of invoices for construction work
performed and a decrease in construction revenues.

Goodwill increased by $2,869,426, due to the acquisition of the assets and
the assumption of certain liabilities of The Wheatstone Energy Group, Inc. See
Note 10 to the consolidated financial statements.

Trade and subcontractors payable decreased by $2,239,255, primarily due to
the payment of invoices to subcontractors for construction work performed.

Bank loans payable increased by $3,000,000, due to the draws on the
Companys available lines of credit. In March 2004, these lines of credit were
re-paid in full.

Other liabilities increased by $2,159,081, primarily due to the debt
assumed in conjunction with The Wheatstone Energy Group, Inc. transaction. See
Note 10 to the consolidated financial statements.

Results of operations of the third quarter and first nine months of fiscal 2004
compared to the third quarter and first nine months of fiscal 2003

REVENUES From Continuing Operations

For the third quarter of fiscal 2004, consolidated revenues from
continuing operations, including interest income and other income, and net of
intersegment eliminations, were $6,295,620, compared to $15,825,282 for the
third quarter of fiscal 2003, a decrease of 60%. For the first nine months of
fiscal 2004, consolidated revenues from continuing operations were $34,526,628,
compared to $57,017,729 for the first nine months of fiscal 2003, a decrease of
39%.

The figures in Chart A are segment revenues from continuing operations,
net of intersegment eliminations, and do not include interest income or other
income.

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CHART A
REVENUES FROM CONTINUING OPERATIONS SUMMARY BY SEGMENT
(Dollars in Thousands)

|                      |  |                     |       |          |  |            |        |             |  |          |        |                   |  |            |     |            |  |   |        |  |  |   |        |  |  |   |         |   |  |  |     |  
|--------------------- |  | ------------------- | ----- | -------- |  | ---------- | ------ | ----------- |  | -------- | ------ | ----------------- |  | ---------- | --- | ---------- |  | - | ------ |  |  | - | ------ |  |  | - | ------- | - |  |  | --- | -
|                      |  | Third Quarter Ended |       |          |  |            |        |             |  |          |        | Nine Months Ended |  |            |     |            |  |   |        | 
|                      |  | January 31,         |       | Amount   |  | Percent    |        | January 31, |  | Amount   |        | Percent          
|                      |  |                     |       | Increase |  | Increase   |        |             |  | Increase |        | Increase         
|                      |  | 2004                |       | 2003     |  | (Decrease) |        | (Decrease)  |  | 2004     |        | 2003              |  | (Decrease) |     | (Decrease)
|                      |  |                     |       |          |  |            |        |             |  |          |        |                   |  |            |     |           
|Energy Management     |  | $                   | 757   |          |  | $          | 723    |             |  | $        | 34     |                   |  |            | 5   |            |  | $ | 2,132  |  |  | $ | 2,122  |  |  | $ | 10      |   |  |  |    |  
|Facility Services (1) |  |                     | 547   |          |  |            |       |             |  |          | 547    |                   |  |            |    |            |  |   | 547    |  |  |   |       |  |  |   | 547     |   |  |  |    |  
|Construction (2)      |  |                     | 2,378 |          |  |            | 11,825 |             |  |          | (9,447 | )                 |  |            | (80 | )          |  |   | 23,787 |  |  |   | 46,353 |  |  |   | (22,566 | ) |  |  | (49 | )
|Real Estate (3)       |  |                     | 2,590 |          |  |            | 3,253  |             |  |          | (663   | )                 |  |            | (20 | )          |  |   | 7,965  |  |  |   | 8,441  |  |  |   | (476    | ) |  |  | (6  | )
|                      |  |                     |       |          |  |            |        |             |  |          |        |                   |  |            |     |            |  |   |        |  |  |   |        |  |  |   |         |   |  |  |     |  
|                      |  | $                   | 6,272 |          |  | $          | 15,801 |             |  | $        | (9,529 | )                 |  |            | (60 | )          |  | $ | 34,431 |  |  | $ | 56,916 |  |  | $ | (22,485 | ) |  |  | (40 | )
|                      |  |                     |       |          |  |            |        |             |  |          |        |                   |  |            |     |            |  |   |        |  |  |   |        |  |  |   |         |   |  |  |     |  

NOTES TO CHART A



|(1) |  | The facility services segment was formed in December 2003. See Note 10
to the consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Revenues decreased for the third quarter and the first nine months of
fiscal 2004 from the comparable periods in fiscal 2003, primarily due to
the Companys ongoing election to reduce revenue volume rather than
contract at prices that offer the Company unacceptable levels of
potential profitability. As a result, the Company has materially
decreased the size of its construction segment operations and currently
expects to substantially deemphasize its role as a general contractor.
Instead, the Company currently intends to focus on providing construction
services in conjunction with the Companys energy management and facility
services offerings. These services are expected to generate lower
revenues, but at higher margins, than the historical construction
operations.
|   
|(3) |  | Revenues for third quarter and nine months of fiscal 2004 decreased
from the comparable periods in fiscal 2003 primarily due to: (a) no sale
of land in fiscal 2004, whereas there was a sale in fiscal 2003 of an
outparcel and an anchor store pad located in Davenport, Iowa, for
approximately $434,000; (b) the decrease in common area maintenance
income of approximately $183,000 in the third quarter of fiscal 2004
(this income varies with the level of common area maintenance
expenses, which were lower - see Note 2 to Chart B); and (c) the decrease
of leaseback rental income of approximately $64,000 in the third quarter
of fiscal 2004 due to the assignment of the Fort Smith, Arkansas, Kmart
leaseback to the fee owner in October 2003.                                     

The following table indicates the backlog of contracts and rental income
for the next twelve months, by industry segment.

13



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##### Table of Contents



January 31,2004
    
    2003Energy Management (1)
    
    $
    495,000
    
    
    $
    683,000Facility Services (2)
    
    
    1,394,000
    
    
    
    Construction (3)
    
    
    1,051,000
    
    
    
    12,554,000Real Estate-rental income (4)
    
    
    9,174,000
    
    
    
    9,353,000Real Estate-sales (5)
    
    
    
    
    
    
    425,000Less: Intersegment eliminations
    
    
    (488,000
    )
    
    
    (467,000
    )Total Backlog
    
    $
    11,626,000
    
    
    $
    22,548,000
  (1)
    
    The decrease in energy management backlog is primarily due to normal
fluctuations and the timing of orders, and does not represent a trend. No
energy management contracts that can be cancelled with less than one
years notice are included in backlog. As of January 31, 2004, and 2003,
such contracts totaled $1.2 million and $1.1 million, respectively, in
potential revenue over the next twelve months, assuming cancellation
provisions are not invoked.(2)
    
    The facility services segment was formed in December 2003. See Note 10
to the consolidated financial statements.(3)
    
    See Note 1 to Chart A above. The intersegment eliminations reported
include intercompany revenues of approximately $46,000 related to
construction work to be performed for the real estate segment at one of
its shopping centers.(4)
    
    Included in Real Estate-rental income at January 31, 2003, is
approximately $255,000 related to a Kmart leaseback that was assigned to
the fee owner by the Company in October 2003. This amount is partially
offset by new leases and several lease renewals in fiscal 2004. As of
January 31, 2004, included in Real Estate-rental income is approximately
$2.19 million related to the Companys shopping center
located in North Fort Myers, Florida, which was sold in March 2004. See
Note 11 to the consolidated financial statements.(5)
    
    A binding contract to sell an outparcel in Jackson, Michigan, was included in
Real Estate-sales backlog at January 31, 2003. The Jackson outparcel was
sold at a gain in April 2003.The intersegment eliminations reported include intercompany rent of
approximately $442,000 and $467,000, as of January 31, 2004, and 2003,
respectively.Backlog at January 31, 2004, does not include a fully
executed, non-binding contract, to sell the Companys undeveloped
land in Louisville, Kentucky, at a gain in fiscal 2005.
Backlog at January 31, 2004, also does not include the contract,
executed in February 2004, to sell the
Companys shopping center located in North Fort Myers, Florida, for $21.8
million, which sale closed in March 2004. See Note 11 to the consolidated
financial statements. 14




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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 79% and 88%
for the third quarter of fiscal 2004 and 2003, respectively, and 86% and 91%
for the first nine months of fiscal 2004 and 2003, 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. CHART B
COSTS AND EXPENSES APPLICABLE TO REVENUES
FROM CONTINUING OPERATIONS SUMMARY 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 31,2004
    
    2003
    
    2004
    
    2003
    
    2004
    
    2003
    
    2004
    
    2003Energy Management (1)
    
    $
    383
    
    
    $
    432
    
    
    
    51
    
    
    
    60
    
    
    $
    1,206
    
    
    $
    1,165
    
    
    
    57
    
    
    
    55Facility Services (2)
    
    
    369
    
    
    
    
    
    
    
    67
    
    
    
    
    
    
    
    369
    
    
    
    
    
    
    
    67
    
    
    
    Construction (3)
    
    
    2,582
    
    
    
    11,460
    
    
    
    109
    
    
    
    97
    
    
    
    23,199
    
    
    
    45,482
    
    
    
    98
    
    
    
    98Real Estate (4)
    
    
    1,597
    
    
    
    2,021
    
    
    
    62
    
    
    
    62
    
    
    
    4,895
    
    
    
    5,247
    
    
    
    61
    
    
    
    62$
    4,931
    
    
    $
    13,913
    
    
    
    79
    
    
    
    88
    
    
    $
    29,669
    
    
    $
    51,894
    
    
    
    86
    
    
    
    91
 NOTES TO CHART B  (1)
    
    The change in the dollar amount and percentage of costs and expenses
applicable to revenues from continuing operations for the third quarter
and first nine months of fiscal 2004, compared to the same periods in
2003, is primarily a result of the change in the mix of services and
products.(2)
    
    The facility services segment was formed in December 2003. See Note 10
to the consolidated financial statements.(3)
    
    The increase in the percentage of costs and expenses applicable to
revenues for the third quarter of fiscal 2004 compared to the same period
in 2003 is primarily attributable to losses taken on two jobs of
approximately $265,000 and the decrease in revenues (see Note 2 to Chart A).(4)
    
    The decrease in the dollar amount of costs and expenses applicable to
revenues from continuing operations for the third quarter of fiscal 2004
compared to the same period in 2003 is primarily attributable to: (a) no
cost of sale of real estate in fiscal 2004, whereas there was the cost of
sale of an outparcel and anchor pad located in Davenport, Iowa, of
approximately $196,000, in fiscal 2003; and (b) the decrease in common
area and maintenance expenses of approximately $153,000. The
decrease in the dollar amount of costs and expense from continuing
operations for the first nine months of fiscal 2004 compared to the same
period in 2003 is primarily attributable to: (a) no cost of sale of real
estate in fiscal 2004, whereas there was the cost of sale of an outparcel
and anchor pad located in Davenport, Iowa, of approximately $196,000 in
fiscal 2003; (b) recoveries of bad debt expense of approximately $61,000 in
fiscal 2003, which reduced costs and expenses for that period; 15




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and (c) the
Company no longer outsourcing asset management responsibilities, resulting
in a decrease in fiscal 2004 asset management fees of approximately
$110,000. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
From Continuing Operations For the third quarters of fiscal 2004 and 2003, selling, general and
administrative expenses from continuing operations, net of intersegment
eliminations, were $1,950,188 and $2,071,613, respectively. As a percentage of
consolidated revenues from continuing operations, these expenses were 31% and
13%, respectively. For the first nine months of 2004 and 2003, selling,
general and administrative expenses from continuing operations, net of
intersegment eliminations, were $6,976,311 and $5,468,289, respectively. As a
percentage of consolidated revenues from continuing operations, these expenses
were 20% and 10%, respectively. In reviewing Chart C, the reader should
recognize that the volume 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 ADMINISTRATIVE 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 31,2004
    
    2003
    
    2004
    
    2003
    
    2004
    
    2003
    
    2004
    
    2003Energy Management (1)
    
    $
    487
    
    
    $
    443
    
    
    
    64
    
    
    
    61
    
    
    $
    1,689
    
    
    $
    1,286
    
    
    
    79
    
    
    
    61Facility Services (2)
    
    
    244
    
    
    
    
    
    
    
    45
    
    
    
    
    
    
    
    244
    
    
    
    
    
    
    
    45
    
    
    
    Construction (3)
    
    
    607
    
    
    
    735
    
    
    
    26
    
    
    
    6
    
    
    
    2,905
    
    
    
    1,649
    
    
    
    12
    
    
    
    4Real Estate (4)
    
    
    218
    
    
    
    263
    
    
    
    8
    
    
    
    8
    
    
    
    589
    
    
    
    716
    
    
    
    7
    
    
    
    8Parent (5)
    
    
    394
    
    
    
    631
    
    
    
    6
    
    
    
    4
    
    
    
    1,549
    
    
    
    1,817
    
    
    
    4
    
    
    
    3$
    1,950
    
    
    $
    2,072
    
    
    
    31
    
    
    
    13
    
    
    $
    6,976
    
    
    $
    5,468
    
    
    
    20
    
    
    
    10
 NOTES TO CHART C  (1)
    
    On a dollar and percentage basis, selling, general and administrative
expenses were higher for the third quarter and first nine months of fiscal
2004 compared to the same periods in 2003, primarily due to an increase in
the number of personnel and other personnel costs. Such personnel-related
costs are primarily a result of higher sales and marketing expenses for
the third quarter and for the first nine months of fiscal 2004, as well as
severance costs for the first nine months of fiscal 2004.(2)
    
    The facility services segment was formed in December 2003. See Note 10
to the consolidated financial statements.(3)
    
    On a dollar and percentage basis, selling, general and administrative
expenses were higher for the for the first nine months of fiscal 2004 and
on a percentage basis, selling, general and administrative expenses were
higher for the third quarter of fiscal 2004 when compared to the same
periods in 2003 primarily due to: (a) an increase in legal and
professional fees in the third quarter and the first nine months of fiscal
2004 of approximately $178,000 and $1,080,000, respectively, primarily due
to the Companys internal investigation and ongoing cooperation with the
U.S. 16




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Department of Justice, as discussed in Note 9 to the consolidated
financial statements; (b) the one-time reduction of $450,000 in the first
nine months of fiscal 2003, resulting from the decrease in an allowance
for doubtful accounts reserve for a receivable from Montgomery Ward &
Company; offset by (c) a reduction in selling, general and administrative
salary costs of approximately $99,000 and $188,000, offset by hiring and
severance costs of $28,000 and $127,000 in the third quarter and first
nine months of fiscal 2004, respectively; and (d) lower revenues
during the 2004 periods.(4)
    
    On a dollar basis, selling, general and administrative expenses were
lower for the third quarter and the first nine months of fiscal 2004
compared to the same periods in 2003 primarily due to: (a) the decrease in
legal and professional fees of approximately $38,000 and $103,000 in the
third quarter and first nine months of fiscal 2004, respectively; and (b)
the decrease in asset management fees paid to a third party of
approximately $45,000 and $132,000 in the third quarter and the first nine
months of fiscal 2004, respectively; and (c) the decrease in residual land
expense of approximately $50,000 and $31,000 in the third quarter and
first nine months of fiscal 2004, respectively; offset by (d) the increase
in salaries, temporary staffing and consulting fees of approximately
$77,000 and $155,000 in the third quarter and first nine months of fiscal
2004, respectively.(5)
    
    Although, selling, general and administrative expenses were lower on a
dollar basis, on a percentage basis, selling, general and administrative
expenses were higher for the third quarter and the first nine months of
fiscal 2004 compared to the same periods in 2003 primarily due to the
reduction of consolidated revenues. Liquidity and capital
resources Between April 30, 2003, and January 31, 2004, working capital decreased by
$6,281,651, primarily due to: (1) losses from continuing operations; (2) cash
utilized in the acquisition of assets and the assumption of certain liabilities
of The Wheatstone Energy Group, Inc.; and (3) the cash investment required to
further develop the Companys shopping center in Jackson, Michigan. Operating
activities used cash of $64,932, primarily due to losses incurred during the
first nine months of fiscal 2004, a decrease in trade and
subcontractors payable,
offset by a decrease in accounts receivable. Investing activities used cash of
$2,204,780 primarily due to the acquisition of assets and the assumption of
certain liabilities of The Wheatstone Energy Group, Inc. (see Note 10 to the
consolidated financial statements) and additions to income-producing properties
for the completion of approximately 21,000 square feet of leasable space in the
Companys shopping center in Jackson, Michigan. Financing activities provided
cash of $1,065,290, primarily due to drawing on the Companys available lines
of credit offset by scheduled principal payments of mortgage notes and other
long-term debt. Discontinued operations provided cash of $94,955 due to the
collection of receivables. In October 2003, the maturity date of the loan related to the Companys
shopping center in North Fort Myers, Florida, was extended to February 2005.
On March 12, 2004, the Company closed on the sale of that
shopping center for a sales price of $21.8 million,
resulting
in a pre-tax gain of approximately $4.1 million. After repayment of the loan
secured by the shopping center and other expenses, the sale generated net cash
proceeds of approximately $10.6 million. The sale did not include any of the
Companys real estate held for future development or sale. In
addition to repaying its lines of credit, the Company intends
to use the proceeds from this sale as a source of cash for strategic
acquisitions and for additional investments in income-producing
properties, and is considering a number of other alternative uses,
including possibly distributing a portion as a special dividend,
funding working capital needs, or other corporate purposes. See Note 11 to the consolidated financial statements. In conjunction with the origination of the mortgage loan on the shopping
center in Jackson, Michigan, the Company obtained an irrevocable, standby
letter of credit in the amount of $500,000. The 17




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letter of credit was
originally issued in July 1997, and has been extended to mature on June 30,
2004. The mortgage lender is allowed to draw on the letter in order to reduce
the related mortgage loan if certain leasing requirements are not met by March
31, 2004. The lender has indicated that they will allow an extension of the
leasing requirements, however, there can be no assurance that the extension
will be granted. The letter of credit is secured by a bank line of credit, as discussed
below. 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 sale of real estate,
the Company has available bank lines of credit. In October 2003, the lines of
credit were renewed and currently provide commitments from a bank for unsecured
lines of credit totaling $7 million, of which a total of $650,000 is restricted
as it secures letters of credit. These lines of credit bear interest at the
prime rate or LIBOR plus 2%, and have a commitment fee of 0.375% on any unused
portion. The bank lines of credit expire on October 30, 2004. At January 31,
2004, $3,000,000 was outstanding under these lines of credit. In March 2004,
these lines were paid off in full. See Note 11 to the consolidated financial
statements. The
Company is under a binding contract to purchase a professional office
building located in Douglasville, Georgia, as its Section 1033 qualified
replacement property previously discussed in the Companys Annual Report on
Form 10-K for the year ended April 30, 2003. The Company intends to acquire
such property primarily through the use of debt financing and approximately
$1.4 million from the Companys available cash on hand. The Company currently estimates the costs associated with the U.S.
Department of Justice investigation described under ITEM 3. LEGAL
PROCEEDINGS, including the Companys internal investigation and its ongoing
cooperation with the Justice Department, will approximate $1.45 million in the
current fiscal year ending April 30, 2004. Such cost estimates, however, are
particularly difficult to make with any precision, and as a result the actual
costs may be lower or higher than this amount. In
December 2003, the Company purchased a one year certificate of
deposit in the amount of $200,000 that is used as collateral for an
irrevocable letter of credit. The Company anticipates that its equity, lines of credit, potential
proceeds from sales of real estate, potential cash flow provided by financing
or refinancing of debt, 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. 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 security,
employment levels, wage and salary levels, consumer confidence, availability of
credit, taxation policies, interest rates, capital spending, deflation, and
inflation could negatively impact the Company and its customers, suppliers, and
sources of capital. Any significant 18




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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 revenues due to
the possible construction job bidding improprieties described in Note 9 to the
consolidated financial statements; the ultimate disposition of legal
proceedings in which the Company is involved, including the U.S. Department of
Justices inquiry into the aforementioned construction job bidding matter; 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
Companys ability to acquire a qualified replacement property for tax deferral
purposes; 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 ultimate collectibility of the Companys receivable from
the Montgomery Ward & Company bankruptcy; the level and volatility of interest
rates; 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
a 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. Management believes that the
Companys most critical accounting policies include: Revenue recognition
     Construction and facility 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
based on property operating expenses. 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. 19




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Revenue from the sale of real estate is 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. Energy management revenues primarily consist of services and product
sales. Revenues are recognized as services are rendered, and depending upon the
product type and customer agreement, product sales are recognized when products
are shipped or delivered. Income-producing
properties and property and equipment
     Income-producing properties are stated at cost, and are depreciated for
financial reporting purposes using the straight-line method over the estimated
useful lives of the assets. 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
construction are capitalized. Costs of development and construction of real
estate assets are also capitalized. Capitalization of interest and other
carrying costs are discontinued when a development project is substantially
completed or if active development ceases. Impairment of long-lived
assets and assets to be disposed of     Long-lived assets and certain intangible assets, are required to be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount
of the asset to estimated future net cash flows expected to be generated by the
asset. If an asset is considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the asset
exceeds the assets fair value. Assets to be disposed of are reported at the
lower of their carrying amount or fair value less cost to sell. Income taxes     Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the 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. 
 ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK See ITEM 2. Liquidity and capital resources for discussion regarding the
debt on the Companys shopping centers in Jackson, Michigan, and North Ft.
Myers, Florida, and the renewal of the Companys lines of credit. There have
been no other material changes since April 30, 2003. Refer to the Companys
Annual Report on Form 10-K for the fiscal year ended April 30, 2003, for
detailed disclosures about quantitative and qualitative disclosures about
market risk. 20




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ITEM 4. CONTROLS AND
PROCEDURES Management has evaluated the Companys disclosure and 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. Based on this
evaluation, these officers have concluded that the Companys disclosure
controls and procedures were effective as of such date. There was no change in the Companys internal control over financial
reporting that occurred during the period covered by this quarterly report on
Form 10-Q that has materially affected, or is reasonably likely to materially
affect, the Companys internal control over financial reporting. 
 PART II. OTHER
INFORMATION 
 ITEM 1. LEGAL
PROCEEDINGS As previously disclosed on Form 10-K for the year ended April 30, 2003,
the Company announced on July 7, 2003, that an internal investigation, which
was conducted by the Companys legal counsel at the request of senior
management, revealed information suggesting that activities in violation of
Federal antitrust laws may have taken place in a certain job bidding process
for one customer of the Companys subsidiary, Abrams Construction, Inc. The
results of this investigation were reported to the Board of Directors of the
Company on June 9, 2003. The Company also voluntarily communicated the results
of its investigation to the United States Department of Justice
(DOJ) and continues to fully
cooperate in the inquiry that resulted. The DOJ, on July 1, 2003,
issued a conditional letter of amnesty to the Company and its subsidiaries for
their cooperation in recognizing and then immediately reporting the
irregularities. The Company believes, based on its internal investigation, that
the specific improprieties were confined to a bidding process for The Home
Depot, Inc. (Home Depot), its largest customer. At this time, the Company has
no reason to believe that any other customers were affected by such
inappropriate activity. The Company also communicated its concerns about the
job bidding process to Home Depot. The Company has conducted extensive
additional training of all employees and has implemented additional procedures
to prevent a recurrence of this behavior. Costs associated with this matter,
including the Companys internal investigation and its ongoing cooperation with
the DOJ, are currently estimated to approximate $1.45 million in the current
fiscal year ending April 30, 2004. Such cost estimates, however, are
particularly difficult to make with any precision, and as a result the actual
costs may be lower or higher than this amount. To date, no third party has
made, or threatened to make, any claim in connection with this matter. It is
possible, however, that claims could be made as a result of this situation. 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. The defendant subsequently made a
demand against API for arbitration and filed a counterclaim. In January
2003, the Cobb County Superior Court denied the defendants demand for
arbitration, but in July 2003 this decision was reversed by the Georgia Court
of Appeals. The Company sought certiorari from the state of Georgia Supreme
Court, which was denied during the second quarter of fiscal 2004. The case
will now be arbitrated. The dispute arises out of the defendants former
provision of real estate asset management services to API. The Company
believes APIs claims against its former asset manager and its defenses to the
managers claims are meritorious and intends to continue to vigorously pursue
its claims and assert its defenses. 21




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Other than the costs of the Companys internal investigation and ongoing
cooperation associated with the DOJ, the Company believes the ultimate
disposition of the above noted legal proceedings and claims or potential
claims, and those previously disclosed on Form 10-K for the year ended April
30, 2003, will not have a material adverse affect on the financial condition,
cash flows, or results of operations of the Company; however, the Company
cannot predict the ultimate disposition of the above noted claims, potential
claims and proceedings, and therefore, the Company cannot be certain that the
above noted legal proceedings and claims or potential claims will not have a
material adverse affect on the financial condition, cash flows, or results of
operations of the Company. The Company is subject to other various 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. 
 ITEM 2. CHANGES IN
SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES On December 19, 2003, an indirect wholly-owned subsidiary of the Company
acquired substantially all of the assets and assumed certain liabilities of The
Wheatstone Energy Group, Inc. The consideration included 23,842 newly-issued
shares of the Companys common stock, par value $1.00 per share. Also in
connection with the transaction, the Company issued 110,000 shares of the
Companys common stock and a warrant to purchase an additional 40,000 shares of
the Companys common stock at an exercise price of $5.10 per share to a lender
of the acquired company. See Note 10, Acquisition, to the consolidated
financial statements for more information. The issuance of the stock and
warrant were exempt from registration as private placements pursuant to the
Securities Act of 1933 and the rules promulgated there under. 
 ITEM 6. EXHIBITS AND
REPORTS ON FORM 8-K  (a)
    
    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  (b)
    
    Reports on Form 8-K during the quarter ended January 31, 2004See Current Report on Form 8-K, pursuant to Item 2 thereof, filed January
5, 2004, reporting an acquisition of assets. 22




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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 16, 2004
    
    /s/ Alan R. AbramsAlan R. AbramsChief Executive OfficerDate:
March 16, 2004
    
    /s/ Mark J. ThomasMark J. ThomasChief Financial Officer
 23