##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549




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FORM 10-Q

QUARTERLY REPORT




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Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

For the quarter ended July 31, 2003

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 August 31, 2003 was 2,914,251.





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TABLE OF CONTENTS



|                                                |                                                                                               |  |  |  |  |  |  | 
|----------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                  
|                                                | ITEM 1. 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 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                                     
|EX-31.1(A) SECTION 302 CERTIFICATION OF THE CEO
|EX-31.2(B) SECTION 302 CERTIFICATION OF THE CFO
|EX-32.1(A) SECTION 906 CERTIFICATION OF THE CEO
|EX-32.2(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)


|                                                |                                                                               |                                                                                                                   |                            |  |  |          |            |            |               |            |                |            |           |            | 
|----------------------------------------------- | ----------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | -------------------------- |  |  | -------- | ---------- | ---------- | ------------- | ---------- | -------------- | ---------- | --------- | ---------- | 
|                                                |                                                                               |                                                                                                                   |                            |  |  |          |            |            | July 31, 2003 |            | April 30, 2003
|                                                |                                                                               |                                                                                                                   |                            |  |  |          |            |            |               |            |               
|ASSETS                                          |                                                                               |                                                                                                                   |                            |  |  |          |            |            |               |            |                |           
|CURRENT ASSETS:                                 |                                                                               |                                                                                                                   |                            |  |  |          |            |            |               |            |                |           
|                                                | Cash and cash equivalents                                                     |                                                                                                                   |                            |  |  |          | $          | 4,118,649  |               |            | $              | 5,157,639  |          
|                                                | Receivables (Note 4)                                                          |                                                                                                                   |                            |  |  |          |            | 11,960,066 |               |            |                | 12,902,281 |          
|                                                |                                                                               | Less: Allowance for doubtful accounts                                                                             |                            |  |  |          |            |            | (492,715      | )          |                |            | (492,045  | )         
|                                                | Assets of discontinued operations (Note 5)                                    |                                                                                                                   |                            |  |  |          |            |           |               |            |                | 102,146    |          
|                                                | Costs and earnings in excess of billings                                      |                                                                                                                   |                            |  |  |          |            | 1,183,893  |               |            |                | 503,113    |          
|                                                | Income tax receivable                                                         |                                                                                                                   |                            |  |  |          |            | 171,907    |               |            |                | 171,907    |          
|                                                | Deferred income taxes                                                         |                                                                                                                   |                            |  |  |          |            | 607,845    |               |            |                | 610,980    |          
|                                                | Other                                                                         |                                                                                                                   |                            |  |  |          |            | 798,608    |               |            |                | 554,396    |          
|                                                |                                                                               |                                                                                                                   |                            |  |  |          |            |            |               |            |                |           
|                                                |                                                                               |                                                                                                                   | Total current assets       |  |  |          |            |            |               | 18,348,253 |                |            |           | 19,510,417 | 
|                                               
|INCOME-PRODUCING PROPERTIES, net                |                                                                               |                                                                                                                   |                            |  |  |          | 42,801,169 |            |               |            | 43,179,037     |           
|PROPERTY AND EQUIPMENT, net                     |                                                                               |                                                                                                                   |                            |  |  |          | 424,532    |            |               |            | 471,813        |           
|OTHER ASSETS:                                   |                                                                               |                                                                                                                   |                            |  |  |          |            |            |               |            |                |           
|                                                | Real
estate held for future development or sale (Note  10)                    |                                                                                                                   |                            |  |  |          |            | 3,952,812  |               |            |                | 3,952,812  |          
|                                                | Intangible assets, net (Note 8)                                               |                                                                                                                   |                            |  |  |          |            | 2,242,710  |               |            |                | 2,335,827  |          
|                                                | Goodwill (Note 8)                                                             |                                                                                                                   |                            |  |  |          |            | 1,741,831  |               |            |                | 1,741,831  |          
|                                                | Other                                                                         |                                                                                                                   |                            |  |  |          |            | 2,466,435  |               |            |                | 2,605,361  |          
|                                                |                                                                               |                                                                                                                   |                            |  |  |          |            |            |               |            |                |           
|                                                |                                                                               |                                                                                                                   |                            |  |  | $        | 71,977,742 |            |               | $          | 73,797,098     |           
|                                                |                                                                               |                                                                                                                   |                            |  |  |          |            |            |               |            |                |           
|LIABILITIES
AND SHAREHOLDERS EQUITY            |                                                                               |                                                                                                                   |                            |  |  |          |            |            |               |            |                |           
|CURRENT LIABILITIES:                            |                                                                               |                                                                                                                   |                            |  |  |          |            |            |               |            |                |           
|                                                | Trade and subcontractors payables                                             |                                                                                                                   |                            |  |  |          | $          | 5,943,931  |               |            | $              | 6,163,796  |          
|                                                | Accrued expenses                                                              |                                                                                                                   |                            |  |  |          |            | 2,212,397  |               |            |                | 1,831,990  |          
|                                                | Liabilities of discontinued operations (Note 5)                               |                                                                                                                   |                            |  |  |          |            |           |               |            |                | 563,584    |          
|                                                | Billings in excess of costs and earnings                                      |                                                                                                                   |                            |  |  |          |            | 708,536    |               |            |                | 682,674    |          
|                                                | Bank loans payable                                                            |                                                                                                                   |                            |  |  |          |            | 90,000     |               |            |                |           |          
|                                                | Current maturities of long-term debt                                          |                                                                                                                   |                            |  |  |          |            | 2,383,389  |               |            |                | 2,630,282  |          
|                                                |                                                                               |                                                                                                                   |                            |  |  |          |            |            |               |            |                |           
|                                                |                                                                               |                                                                                                                   | Total current liabilities  |  |  |          |            |            |               | 11,338,253 |                |            |           | 11,872,326 | 
|DEFERRED INCOME TAXES                           |                                                                               |                                                                                                                   |                            |  |  |          | 2,840,509  |            |               |            | 2,772,132      |           
|OTHER LIABILITIES                               |                                                                               |                                                                                                                   |                            |  |  |          | 4,318,332  |            |               |            | 4,371,374      |           
|MORTGAGE NOTES PAYABLE, less current maturities |                                                                               |                                                                                                                   |                            |  |  |          | 23,234,752 |            |               |            | 23,216,407     |           
|OTHER LONG-TERM DEBT, less current maturities   |                                                                               |                                                                                                                   |                            |  |  |          | 10,047,787 |            |               |            | 10,306,907     |           
|                                                |                                                                               |                                                                                                                   |                            |  |  |          |            |            |               |            |                |           
|                                                |                                                                               |                                                                                                                   | Total liabilities          |  |  |          |            |            |               | 51,779,633 |                |            |           | 52,539,146 | 
|                                                |                                                                               |                                                                                                                   |                            |  |  |          |            |            |               |            |                |           
|COMMITMENTS AND CONTINGENCIES (Note 9)          |                                                                               |                                                                                                                   |                            |  |  |          |            |            |               |            |                |           
|SHAREHOLDERS EQUITY:                           |                                                                               |                                                                                                                   |                            |  |  |          |            |            |               |            |                |           
|                                                | Common stock, $1 par value; 5,000,000 shares authorized;                      |                                                                                                                   |                            |  |  |          |            |            |               |            |                |            |          
|                                                |                                                                               | 3,060,239 issued and 2,914,251 outstanding in July 2003,
3,060,239 issued and 2,914,351 outstanding in April 2003 |                            |  |  |          |            |            | 3,060,239     |            |                |            | 3,060,239 |           
|                                                | Additional paid-in capital                                                    |                                                                                                                   |                            |  |  |          |            | 2,153,505  |               |            |                | 2,153,505  |          
|                                                | Deferred stock compensation                                                   |                                                                                                                   |                            |  |  |          |            | (10,971    | )             |            |                | (16,598    | )        
|                                                | Retained earnings                                                             |                                                                                                                   |                            |  |  |          |            | 15,669,783 |               |            |                | 16,734,753 |          
|                                                | Treasury stock, common shares, 145,988 in July 2003 and 145,888 in April 2003 |                                                                                                                   |                            |  |  | (674,447 | )          |            |               | (673,947   | )             
|                                                |                                                                               |                                                                                                                   |                            |  |  |          |            |            |               |            |                |           
|                                                |                                                                               |                                                                                                                   | Total shareholders equity |  |  |          |            |            |               | 20,198,109 |                |            |           | 21,257,952 | 
|                                                |                                                                               |                                                                                                                   |                            |  |  |          |            |            |               |            |                |           
|                                                |                                                                               |                                                                                                                   |                            |  |  | $        | 71,977,742 |            |               | $          | 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)


|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |            |         |          |  
|----------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | ----------------- | --------------------------------------------------- | ---------- | ------------------- | ---------- | ---------- | ---------- | ------- | -------- | -
|                                                            |                                                                                                                                |                   |                                                     |            | FIRST QUARTER ENDED
|                                                            |                                                                                                                                |                   |                                                     |            | JULY 31,           
|                                                            |                                                                                                                                |                   |                                                     |            |                    
|                                                            |                                                                                                                                |                   |                                                     |            | 2003                |            | 2002      
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |           
|REVENUES:                                                   |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|                                                            | Construction                                                                                                                   |                   | $                                                   | 11,033,045 |                     |            | $          | 14,428,033 |        
|                                                            | Rental income                                                                                                                  |                   |                                                     | 2,725,717  |                     |            |            | 2,571,162  |        
|                                                            | Energy management                                                                                                              |                   |                                                     | 658,804    |                     |            |            | 665,587    |        
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|                                                            |                                                                                                                                |                   | 14,417,566                                          |            |                     |            | 17,664,782 |           
|                                                            | Interest                                                                                                                       |                   |                                                     | 5,836      |                     |            |            | 16,007     |        
|                                                            | Other                                                                                                                          |                   |                                                     | 14,007     |                     |            |            | 41,528     |        
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|                                                            |                                                                                                                                |                   | 14,437,409                                          |            |                     |            | 17,722,317 |           
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|COSTS AND EXPENSES:                                         |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|                                                            | Construction                                                                                                                   |                   |                                                     | 10,619,683 |                     |            |            | 14,245,415 |        
|                                                            | Rental property operating expenses, excluding interest                                                                         |                   |                                                     | 1,619,323  |                     |            |            | 1,661,228  |        
|                                                            | Energy management                                                                                                              |                   |                                                     | 403,975    |                     |            |            | 412,020    |        
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|                                                            |                                                                                                                                |                   | 12,642,981                                          |            |                     |            | 16,318,663 |           
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|                                                            | Selling, general and administrative                                                                                            |                   |                                                     |            |                     |            |            |            |        
|                                                            |                                                                                                                                | Construction      |                                                     |            | 1,045,646           |            |            |            | 203,465 |         
|                                                            |                                                                                                                                | Real estate       |                                                     |            | 225,726             |            |            |            | 204,441 |         
|                                                            |                                                                                                                                | Energy management |                                                     |            | 563,727             |            |            |            | 389,074 |         
|                                                            |                                                                                                                                | Parent            |                                                     |            | 630,117             |            |            |            | 634,533 |         
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|                                                            |                                                                                                                                |                   | 2,465,216                                           |            |                     |            | 1,431,513  |           
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|Interest costs incurred                                     |                                                                                                                                |                   | 742,618                                             |            |                     |            | 735,302    |           
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|                                                            |                                                                                                                                |                   | 15,850,815                                          |            |                     |            | 18,485,478 |           
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|                                                            |                                                                                                                                |                   | LOSS BEFORE INCOME TAXES FROM
CONTINUING OPERATIONS |            |                     | (1,413,406 | )          |            |         | (763,161 | )
|                                                           
|INCOME TAX BENEFIT                                          |                                                                                                                                |                   | (465,000                                            | )          |                     |            | (298,213   | )         
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|                                                            |                                                                                                                                |                   | LOSS FROM CONTINUING OPERATIONS                     |            |                     | (948,406   | )          |            |         | (464,948 | )
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|DISCONTINUED OPERATIONS (Note 5):                           |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|                                                            | Earnings from discontinued operations, adjusted
for applicable income tax expense of $0 and
$6,608, respectively               |                   |                                                     |           |                     |            |            | 10,779     |        
|                                                            | Gain on sale of assets of discontinued operations,
adjusted for applicable income tax expense of
$0 and $372,228, respectively |                   |                                                     |           |                     |            |            | 617,987    |        
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|                                                            |                                                                                                                                |                   | EARNINGS FROM DISCONTINUED OPERATIONS               |            |                     |           |            |            |         | 628,766  |  
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|                                                            |                                                                                                                                |                   | NET (LOSS) EARNINGS                                 |            | $                   | (948,406   | )          |            | $       | 163,818  |  
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|NET (LOSS) EARNINGS PER SHARE  BASIC AND DILUTED (Note 7): |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|                                                            | From continuing operations                                                                                                     |                   | $                                                   | (.33       | )                   |            | $          | (.16       | )      
|                                                            | From discontinued operations                                                                                                   |                   |                                                     |           |                     |            |            | .22        |        
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|                                                            | NET (LOSS) EARNINGS PER SHARE  BASIC AND DILUTED                                                                              |                   | $                                                   | (.33       | )                   |            | $          | .06        |        
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|DIVIDENDS PER SHARE                                         |                                                                                                                                | $                 | 0.04                                                |            |                     | $          | 0.04       |           
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           
|WEIGHTED AVERAGE SHARES OUTSTANDING  BASIC AND DILUTED     |                                                                                                                                |                   | 2,914,271                                           |            |                     |            | 2,909,115  |           
|                                                            |                                                                                                                                |                   |                                                     |            |                     |            |            |           

See accompanying notes to consolidated financial statements.

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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                         |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |             |            |           |          |  
|-------------------------------------------------------- | ---------------------------------------------------- | ----------------------------------------------- | -------------------------------------------------------------------------------------- | ----------------------------------------------- | -------- | ---------------------------- | --------- | ----------- | ---------- | --------- | -------- | -
|                                                         |                                                      |                                                 |                                                                                        |                                                 |          | FIRST QUARTER ENDED JULY 31,
|                                                         |                                                      |                                                 |                                                                                        |                                                 |          |                             
|                                                         |                                                      |                                                 |                                                                                        |                                                 |          | 2003                         |           | 2002       
|                                                         |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |            
|Cash flows from operating activities:                    |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |            
|                                                         |                                                      |                                                 | Net (loss) earnings                                                                    |                                                 | $        | (948,406                     | )         |             | $          | 163,818   |         
|                                                         |                                                      |                                                 | Adjustments to reconcile net (loss) earnings to net
cash used in operating activities: |                                                 |          |                              |           |             |            |           |         
|                                                         |                                                      |                                                 |                                                                                        | Income from discontinued operations, net of tax |          |                              |          |             |            |           | (628,766 | )
|                                                         |                                                      |                                                 |                                                                                        | Depreciation and amortization                   |          |                              | 606,034   |             |            |           | 658,120  |  
|                                                         |                                                      |                                                 |                                                                                        | Deferred tax benefit                            |          |                              | (484,881  | )           |            |           |         |  
|                                                         |                                                      |                                                 |                                                                                        | Recovery of doubtful accounts, net              |          |                              | (670      | )           |            |           | (442,358 | )
|                                                         |                                                      |                                                 |                                                                                        | Changes in assets and liabilities:              |          |                              |           |             |            |           |          |  
|                                                         |                                                      |                                                 |                                                                                        | Receivables, net                                |          |                              | 877,408   |             |            |           | 406,130  |  
|                                                         |                                                      |                                                 |                                                                                        | Costs and earnings in excess of billings        |          |                              | (680,780  | )           |            |           | (171,316 | )
|                                                         |                                                      |                                                 |                                                                                        | Other current assets                            |          |                              | (244,212  | )           |            |           | (78,723  | )
|                                                         |                                                      |                                                 |                                                                                        | Other assets                                    |          |                              | 138,926   |             |            |           | (31,247  | )
|                                                         |                                                      |                                                 |                                                                                        | Trade and subcontractors payable                |          |                              | (129,865  | )           |            |           | (429,121 | )
|                                                         |                                                      |                                                 |                                                                                        | Accrued expenses                                |          |                              | 380,407   |             |            |           | (257,610 | )
|                                                         |                                                      |                                                 |                                                                                        | Billings in excess of costs and earnings        |          |                              | 25,862    |             |            |           | 85,614   |  
|                                                         |                                                      |                                                 |                                                                                        | Other liabilities                               |          |                              | (53,042   | )           |            |           | 61,600   |  
|                                                         |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |            
|                                                         |                                                      |                                                 | Net cash used in operating activities                                                  |                                                 |          | (513,219                     | )         |             |            | (663,859  | )       
|                                                         |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |            
|Cash flows from investing activities:                    |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |            
|                                                         |                                                      | Additions to income-producing properties, net   |                                                                                        |                                                 | (18,773  | )                            |           |             | (18,899    | )        
|                                                         |                                                      | Additions to property and equipment, net        |                                                                                        |                                                 | (12,540  | )                            |           |             | (17,423    | )        
|                                                         |                                                      | Additions to intangible assets                  |                                                                                        |                                                 | (22,308  | )                            |           |             | (73,071    | )        
|                                                         |                                                      | Repayments received on notes receivable         |                                                                                        |                                                 | 66,147   |                              |           |             | 2,453      |          
|                                                         |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |            
|                                                         |                                                      |                                                 | Net cash provided by (used in) investing activities                                    |                                                 |          | 12,526                       |           |             |            | (106,940  | )       
|                                                         |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |            
|Cash flows from financing activities:                    |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |            
|                                                         |                                                      | Debt proceeds                                   |                                                                                        |                                                 |         |                              |           |             | 4,900,000  |          
|                                                         |                                                      | Debt repayments                                 |                                                                                        |                                                 | (516,678 | )                            |           |             | (5,048,128 | )        
|                                                         |                                                      | Deferred loan costs paid                        |                                                                                        |                                                 |         |                              |           |             | (107,788   | )        
|                                                         |                                                      | Cash dividends                                  |                                                                                        |                                                 | (116,574 | )                            |           |             | (116,363   | )        
|                                                         |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |            
|                                                         |                                                      |                                                 | Net cash used in financing activities                                                  |                                                 |          | (633,252                     | )         |             |            | (372,279  | )       
|                                                         |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |            
|Cash flows from discontinued operations:                 |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |            
|                                                         | Operating activities                                 |                                                 |                                                                                        | 94,955                                          |          |                              |           | (188,159    | )         
|                                                         | Mortgage payoff                                      |                                                 |                                                                                        |                                                |          |                              |           | (12,206,700 | )         
|                                                         | Proceeds from sale of property, net of costs of sale |                                                 |                                                                                        |                                                |          |                              |           | 13,489,901  |           
|                                                         |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |            
|                                                         |                                                      |                                                 | Net cash provided by discontinued operations                                           |                                                 |          | 94,955                       |           |             |            | 1,095,042 |         
|                                                         |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |            
|Net decrease in cash and cash equivalents                |                                                      |                                                 | (1,038,990                                                                             | )                                               |          |                              | (48,036   | )          
|Cash and cash equivalents at beginning of period         |                                                      |                                                 | 5,157,639                                                                              |                                                 |          |                              | 7,911,205 |            
|                                                         |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |            
|Cash and cash equivalents at end of period               |                                                      | $                                               | 4,118,649                                                                              |                                                 |          | $                            | 7,863,169 |            
|                                                         |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |            
|Supplemental disclosure of noncash financing activities: |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |            
|                                                         |                                                      | Issuance of common stock under Stock Award Plan |                                                                                        | $                                               |         |                              |           | $           | 5,500      |          
|                                                         |                                                      |                                                 |                                                                                        |                                                 |          |                              |           |            

See accompanying notes to consolidated financial statements.

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##### Table of Contents



ABRAMS INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


JULY 31, 2003, AND APRIL 30, 2003
(UNAUDITED)


NOTE 1. ORGANIZATION AND BUSINESS

Abrams Industries, Inc. and 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 engages in: (i) commercial
construction; (ii) real estate investment and development; and (iii) energy
management.

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.

Certain reclassifications have been made to the 2003 consolidated
financial statements to conform to classifications adopted in 2004.

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 first quarter
ended July 31, 2003, and 2002, using the Black-Scholes option pricing model.

Options to purchase 689,252 shares were outstanding at July 31, 2003, of
which 425,252 options were vested. No stock options or stock awards were
granted in the quarter ended July 31, 2003, and 609,000 options were granted in
the quarter ended July 31, 2002. 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:

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##### Table of Contents



|                                                                                                                                      |                                 |   |                |       |      |   |         |      | 
|------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | - | -------------- | ----- | ---- | - | ------- | ---- | 
|                                                                                                                                      |                                 |   | Three Months  
|                                                                                                                                      |                                 |   | Ended July 31,
|                                                                                                                                      |                                 |   |               
|                                                                                                                                      |                                 |   | 2003           |       | 2002
|                                                                                                                                      |                                 |   |                |       |     
|Net (loss) earnings, as reported                                                                                                      |                                 | $ | (948,406       | )     |      | $ | 163,818 |     
|Deduct: Total stock-based compensation
expense as determined under fair value
based method for all awards, net of
related tax effects |                                 |   | (45,753        | )     |      |   | (12,256 | )   
|                                                                                                                                      |                                 |   |                |       |      |   |         |     
|Pro forma net (loss) earnings                                                                                                         |                                 | $ | (994,159       | )     |      | $ | 151,562 |     
|                                                                                                                                      |                                 |   |                |       |      |   |         |     
|Net (loss) earnings per share:                                                                                                        |                                 |   |                |       |      |   |         |     
|                                                                                                                                      | Basic and diluted  as reported |   | $              | (0.33 | )    |   | $       | 0.06 | 
|                                                                                                                                      |                                 |   |                |       |      |   |         |     
|                                                                                                                                      | Basic and diluted  pro forma   |   | $              | (0.34 | )    |   | $       | 0.05 | 
|                                                                                                                                      |                                 |   |                |       |      |   |         |     

NOTE 4. RECEIVABLES

All net contract and trade receivables are expected to be collected within
one year.

NOTE 5. DISCONTINUED OPERATIONS

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. 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. As of
July 31, 2003, the Company had no assets that qualified as held for disposition
or sale as defined by SFAS No. 144. Summarized financial information for
discontinued operations for the three months ended July 31 is as follows:
5Table of Contents

|                                                        |  |                            |   |      |  |   |         | 
|------------------------------------------------------- |  | -------------------------- | - | ---- |  | - | ------- | 
|                                                        |  | Three months endedJuly 31,
|                                                        |  |                           
|                                                        |  | 2003                       |   | 2002
|                                                        |  |                            |   |     
|Results
of operations                                   |  |                            |   |      |  |   |         | 
|Revenues                                                |  | $                          |  |      |  | $ | 289,173 | 
|Operating expenses, including amortization and interest |  |                            |  |      |  |   | 271,786 | 
|                                                        |  |                            |   |      |  |   |         | 
|                                                        |  | $                          |  |      |  | $ | 17,387  | 
|                                                        |  |                            |   |      |  |   |         | 

|                                  |  |               |   |                |  |   |         | 
|--------------------------------- |  | ------------- | - | -------------- |  | - | ------- | 
|                                  |  | Balances at  
|                                  |  |              
|                                  |  | July 31, 2003 |   | April 30, 2003
|                                  |  |               |   |               
|Assets
of discontinued operations |  |               |   |                |  |   |         | 
|Receivables                       |  | $             |  |                |  | $ | 57,020  | 
|Other                             |  |               |  |                |  |   | 45,126  | 
|                                  |  |               |   |                |  |   |         | 
|                                  |  | $             |  |                |  | $ | 102,146 | 
|                                  |  |               |   |                |  |   |         | 

|                                       |  |               |   |                |  |   |         | 
|-------------------------------------- |  | ------------- | - | -------------- |  | - | ------- | 
|                                       |  | Balances at  
|                                       |  |              
|                                       |  | July 31, 2003 |   | April 30, 2003
|                                       |  |               |   |               
|Liabilities
of discontinued operations |  |               |   |                |  |   |         | 
|Income taxes                           |  | $             |  |                |  | $ | 476,635 | 
|Accrued 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 less operating expenses of continuing operations, including
depreciation and interest. Parent expenses have not been allocated to the
subsidiaries.

|                                                               |                                           |              |            |             |  |            |           |           |  |              |          |              |  |   |          |       |  |   |          |          |   |   |            |            | 
|-------------------------------------------------------------- | ----------------------------------------- | ------------ | ---------- | ----------- |  | ---------- | --------- | --------- |  | ------------ | -------- | ------------ |  | - | -------- | ----- |  | - | -------- | -------- | - | - | ---------- | ---------- | 
|                                                               |                                           |              |            |             |  |            |           |           |  |              | Energy   |              |  |   |          |       |  |   |          |          |   |   |           
|For the Quarter Ended July 31, 2003                            |                                           | Construction |            | Real Estate |  | Management |           | Parent    |  | Eliminations |          | Consolidated
|                                                               |                                           |              |            |             |  |            |           |           |  |              |          |             
|Revenues from unaffiliated customers                           |                                           | $            | 11,033,045 |             |  | $          | 2,725,717 |           |  | $            | 658,045  |              |  | $ |         |       |  | $ |         |          |   | $ | 14,417,566 |           
|Interest and other income                                      |                                           |              | 722        |             |  |            | 17,815    |           |  |              |         |              |  |   | 1,306    |       |  |   |         |          |   |   | 19,843     |           
|Intersegment revenue                                           |                                           |              |           |             |  |            | 113,493   |           |  |              |         |              |  |   |         |       |  |   | (113,493 | )        |   |   |           |           
|                                                               |                                           |              |            |             |  |            |           |           |  |              |          |              |  |   |          |       |  |   |          |          |   |   |            |           
|                                                               | Total revenues from
continuing operations |              | $          | 11,033,767  |  |            | $         | 2,857,025 |  |              | $        | 658,804      |  |   | $        | 1,306 |  |   | $        | (113,493 | ) |   | $          | 14,437,409 | 
|                                                               |                                           |              |            |             |  |            |           |           |  |              |          |              |  |   |          |       |  |   |          |          |   |   |            |           
|Earnings (loss) before income taxes
from continuing operations |                                           | $            | (698,598   | )           |  | $          | 265,591   |           |  | $            | (309,154 | )            |  | $ | (678,406 | )     |  | $ | 7,161    |          |   | $ | (1,413,406 | )         
|                                                               |                                           |              |            |             |  |            |           |           |  |              |          |              |  |   |          |       |  |   |          |          |   |   |            |           

|                                                               |                                           |              |            |             |  |            |           |           |  |              |          |              |  |   |          |        |  |   |          |          |   |   |            |            | 
|-------------------------------------------------------------- | ----------------------------------------- | ------------ | ---------- | ----------- |  | ---------- | --------- | --------- |  | ------------ | -------- | ------------ |  | - | -------- | ------ |  | - | -------- | -------- | - | - | ---------- | ---------- | 
|                                                               |                                           |              |            |             |  |            |           |           |  |              | Energy   |              |  |   |          |        |  |   |          |          |   |   |           
|For the Quarter Ended July 31, 2002                            |                                           | Construction |            | Real Estate |  | Management |           | Parent    |  | Eliminations |          | Consolidated
|                                                               |                                           |              |            |             |  |            |           |           |  |              |          |             
|Revenues from unaffiliated customers                           |                                           | $            | 14,428,033 |             |  | $          | 2,571,162 |           |  | $            | 665,587  |              |  | $ |         |        |  | $ |         |          |   | $ | 17,664,782 |           
|Interest and other income                                      |                                           |              | 4,959      |             |  |            | 44,368    |           |  |              |         |              |  |   | 14,542   |        |  |   | (6,334   | )        |   |   | 57,535     |           
|Intersegment revenue                                           |                                           |              |           |             |  |            | 110,175   |           |  |              |         |              |  |   |         |        |  |   | (110,175 | )        |   |   |           |           
|                                                               |                                           |              |            |             |  |            |           |           |  |              |          |              |  |   |          |        |  |   |          |          |   |   |            |           
|                                                               | Total revenues from
continuing operations |              | $          | 14,432,992  |  |            | $         | 2,725,705 |  |              | $        | 665,587      |  |   | $        | 14,542 |  |   |          | (116,509 | ) |   | $          | 17,722,317 | 
|                                                               |                                           |              |            |             |  |            |           |           |  |              |          |              |  |   |          |        |  |   |          |          |   |   |            |           
|Earnings (loss) before income taxes
from continuing operations |                                           | $            | (81,445    | )           |  | $          | 123,545   |           |  | $            | (142,254 | )            |  | $ | (670,173 | )      |  | $ | 7,166    |          |   | $ | (763,161   | )         
|                                                               |                                           |              |            |             |  |            |           |           |  |              |          |              |  |   |          |        |  |   |          |          |   |   |            |           

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NOTE 7. EARNINGS PER SHARE

Basic earnings per share are computed by dividing net earnings 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 number of common shares
for the first quarter of fiscal 2004 and 2003, were 2,914,271 and 2,937,609,
respectively. Since the Company had losses from continuing operations for all
periods presented, all stock equivalents were antidilutive during these
periods, and are therefore 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 July 31, 2003, are as follows:

|                                        |  |                |           |              |  |   |           | 
|--------------------------------------- |  | -------------- | --------- | ------------ |  | - | --------- | 
|                                        |  | Gross Carrying |           | Accumulated 
|Amortized intangible assets             |  | Amount         |           | Amortization
|                                        |  |                |           |             
|Proprietary customer
software solutions |  | $              | 963,423   |              |  | $ | 435,845   | 
|Computer software                       |  |                | 352,339   |              |  |   | 291,366   | 
|Real estate lease costs                 |  |                | 1,608,688 |              |  |   | 740,091   | 
|Deferred loan costs                     |  |                | 944,454   |              |  |   | 496,363   | 
|Other                                   |  |                | 28,660    |              |  |   | 6,450     | 
|                                        |  |                |           |              |  |   |           | 
|                                        |  | $              | 3,897,564 |              |  | $ | 1,970,115 | 
|                                        |  |                |           |              |  |   |           | 

|                              |  |   |           | 
|----------------------------- |  | - | --------- | 
|Unamortized intangible assets |  |   |           | 
|                             
|Goodwill                      |  | $ | 1,741,831 | 
|Trademark                     |  |   | 315,261   | 
|                              |  |   |           | 
|                              |  | $ | 2,057,092 | 
|                              |  |   |           | 

|                                                                   |  |   |         | 
|------------------------------------------------------------------ |  | - | ------- | 
|Aggregate amortization expense for all amortized intangible assets
|                                                                  
|For the three months ended July 31, 2003                           |  | $ | 121,772 | 

|                                                                           |  |   |         | 
|-------------------------------------------------------------------------- |  | - | ------- | 
|Estimated amortization expense for all amortized intangible assets for the
|fiscal year ended April 30,                                               
|                                                                          
|2005                                                                       |  | $ | 439,221 | 
|2006                                                                       |  |   | 322,661 | 
|2007                                                                       |  |   | 189,126 | 
|2008                                                                       |  |   | 157,216 | 
|2009                                                                       |  |   | 121,085 | 

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, had revealed information suggesting that behavior in violation of
Federal antitrust laws may have taken place in a certain job bidding process
for one customer of the

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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 has also voluntarily communicated the results of its
investigation to the United States Department of Justice (DOJ) and is fully
cooperating in the subsequent inquiry that has 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. The Company has also communicated its concerns about the job bidding
process to Home Depot. The Company has conducted extensive additional training
of all employees and is implementing additional procedures to prevent a
recurrence of this behavior. The Company estimates the costs associated with
this matter, including the Companys internal investigation and its ongoing
cooperation with the DOJ, are expected to approximate $750,000 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.

There have been no material changes to commitments and contingencies as
disclosed on Form 10-K for the year ended April 30, 2003.

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.

NOTE 10. REAL ESTATE HELD FOR
FUTURE DEVELOPMENT OR SALE

Real estate held for future
development or sale includes the Companys remaining undeveloped
land in Oakwood, Georgia, for which a contract has been executed to
sell at a gain, by April 30, 2004. The contract may be cancelled
on or before March 1, 2004.

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##### Table of Contents






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

The following discussion should be read in conjunction with the
consolidated financial statements, including the notes to those statements,
included elsewhere in this report. The Company also recommends that this
managements discussion and analysis be read in conjunction with the
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 July 31, 2003.

Accounts receivable decreased by $942,215, primarily due to the timing of
the submission and payment of invoices for construction work performed and a
decrease in construction revenues.

Costs and earnings in excess of billings increased by $680,780 primarily
due to the timing of the submission of invoices for construction work
performed.

Accrued
expenses increased by $380,407, primarily due to legal costs that had
been incurred, but that had not been billed as of July 31, 2003, related
to the legal proceedings discussed in Note 9 to the consolidated financial
statements.

Results of operations of first
quarter of fiscal 2004 compared to first quarter of fiscal 2003.

REVENUES From Continuing Operations

For the first quarter of fiscal 2004, consolidated revenues from
continuing operations, including interest income and other income, and net of
intersegment eliminations, were $14,437,409, compared to $17,722,317 for the
first quarter of fiscal 2003, a decrease of 19%.

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

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

|                  |  |                     |        |          |  |            |        |            |  |   |        |   |  |  |     |  
|----------------- |  | ------------------- | ------ | -------- |  | ---------- | ------ | ---------- |  | - | ------ | - |  |  | --- | -
|                  |  | First Quarter Ended |        |          |  |            |        |            |  |  
|                  |  | July 31,            |        | Amount   |  | Percent   
|                  |  |                     |        | Increase |  | Increase  
|                  |  | 2003                |        | 2002     |  | (Decrease) |        | (Decrease)
|                  |  |                     |        |          |  |            |        |           
|Construction (1)  |  | $                   | 11,033 |          |  | $          | 14,428 |            |  | $ | (3,395 | ) |  |  | (24 | )
|Real Estate (2)   |  |                     | 2,726  |          |  |            | 2,571  |            |  |   | 155    |   |  |  | 6   |  
|Energy Management |  |                     | 659    |          |  |            | 666    |            |  |   | (7     | ) |  |  | (1  | )
|                  |  |                     |        |          |  |            |        |            |  |   |        |   |  |  |     |  
|                  |  | $                   | 14,418 |          |  | $          | 17,665 |            |  | $ | (3,247 | ) |  |  | (18 | )
|                  |  |                     |        |          |  |            |        |            |  |   |        |   |  |  |     |  

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NOTES TO CHART A



| | (1) |  | Revenues decreased for the first quarter of fiscal 2004 from that in
2003 primarily due to the Companys ongoing election to reduce revenue
volume rather than contract at prices that offered the Company
unacceptable levels of potential profitability on a number of jobs for
the Companys largest customer (revenues from this customer were
approximately $6.5 million in the first quarter of 2004 compared to $9.7
million in 2003, a 33% decrease). A majority of fiscal year
ended 2003 and the first quarter of 2004 revenues were from jobs that the
Company would not bid on today, because they would not meet the Companys
current profitability and risk criteria. The Company expects the
trend of decreasing revenues from its largest customer to continue. The Company has continued to
see a reduction in the number of construction jobs available in a very
competitive marketplace, which is a result of a continuing weakness in
capital spending by many retail companies. Although the Company has
seen little indication that the possible construction job bidding
improprieties described in Note 9 to the consolidated financial
statements will negatively impact the Companys ability to
achieve future revenues, there can be no assurance that these
possible improprieties will not have such effect. In fiscal 2003, the Company
increased its new business development capabilities and efforts in order
to identify customers and contracts that place more value on the
Companys high quality and high service approach, and is currently
exploring different commercial market sectors for potential opportunities
to broaden and increase Construction Segment revenues.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Revenues for the first quarter of fiscal 2004 increased from that in
2003 primarily due to an increase in common area maintenance income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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

|                             |               |   |            |            |      |   |            |            | 
|---------------------------- | ------------- | - | ---------- | ---------- | ---- | - | ---------- | ---------- | 
|                             |               |   | July 31,  
|                             |               |   |           
|                             |               |   | 2003       |            | 2002
|                             |               |   |            |            |     
|Construction(1)              |               | $ | 10,608,000 |            |      | $ | 26,830,000 |           
|Real Estate-rental income(2) |               |   | 8,932,000  |            |      |   | 9,016,000  |           
|Energy Management(3)         |               |   | 661,000    |            |      |   | 445,000    |           
|                             |               |   |            |            |      |   |            |           
|                             | Total Backlog |   | $          | 20,201,000 |      |   | $          | 36,291,000 | 
|                             |               |   |            |            |      |   |            |           



| | (1) |  | See Note 1 to Chart A above.                                                                                                                                                                                                                                                                                              
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Real estate backlog at
July 31, 2003, does not include a contract, which
has been executed, to sell the Companys remaining undeveloped land in
Oakwood, Georgia, for $1,503,000, by April 30, 2004. The contract may be
cancelled on or before March 1, 2004.                                                            
|
| | (3) |  | All energy management contracts that can be cancelled with less than one
years notice are not included in backlog. As of July 31, 2003, and 2002,
such contracts totaled $1.2 million and $1.4 million, respectively, in
potential revenue over the next twelve months, assuming cancellation
provisions are not invoked.

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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) for the first quarter of fiscal 2004 and 2003, the total applicable
costs and expenses (See Chart B) were 88% and 92%, 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 Revenues
|                  |  | First Quarter Ended |        | For First Quarter Ended
|                  |  | July 31,            |        | July 31,               
|                  |  |                     |        |                        
|                  |  | 2003                |        | 2002                    |  | 2003 |        | 2002
|                  |  |                     |        |                         |  |      |        |     
|Construction(1)   |  | $                   | 10,620 |                         |  | $    | 14,246 |      |  |                             | 96 |  |  |  | 99 | 
|Real Estate(2)    |  |                     | 1,619  |                         |  |      | 1,661  |      |  |                             | 59 |  |  |  | 65 | 
|Energy Management |  |                     | 404    |                         |  |      | 412    |      |  |                             | 61 |  |  |  | 62 | 
|                  |  |                     |        |                         |  |      |        |      |  |                             |    |  |  |  |    | 
|                  |  | $                   | 12,643 |                         |  | $    | 16,319 |      |  |                             | 88 |  |  |  | 92 | 
|                  |  |                     |        |                         |  |      |        |      |  |                             |    |  |  |  |    | 

NOTES TO CHART B



| | (1) |  | The decrease in the percentage of costs and expenses applicable to
revenues for the first quarter of fiscal 2004 compared to the same period
in 2003 is primarily attributable to losses in the amount of approximately
$577,000 taken on jobs in the first quarter 2003. If not for the losses
taken in the first quarter of 2003, the percent of segment revenues for
first quarter of 2004 and 2003 would have been the same.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | The decrease in the dollar amount and percentage of costs and expenses
applicable to revenues from continuing operations for the first quarter of
fiscal 2004 compared to the same period in 2003 is primarily attributable
to the Companys decision to no longer outsource asset management
responsibilities resulting in a decrease in management fees of
approximately $74,000 in fiscal 2004.                              

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
From Continuing Operations

For the first quarter of fiscal 2004 and 2003, selling, general and
administrative expenses from continuing operations, net of intersegment
eliminations, were $2,465,216 and $1,431,513, respectively.
As a percentage of consolidated revenues from continuing operations, these
expenses were 17% and 8%, 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

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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 Revenues
|                     |  | First Quarter Ended |       | For First Quarter Ended
|                     |  | July 31,            |       | July 31,               
|                     |  |                     |       |                        
|                     |  | 2003                |       | 2002                    |  | 2003 |       | 2002
|                     |  |                     |       |                         |  |      |       |     
|Construction(1)      |  | $                   | 1,045 |                         |  | $    | 204   |      |  |                             | 9  |  |  |  | 1  | 
|Real Estate          |  |                     | 226   |                         |  |      | 204   |      |  |                             | 8  |  |  |  | 8  | 
|Energy Management(2) |  |                     | 564   |                         |  |      | 389   |      |  |                             | 86 |  |  |  | 58 | 
|Parent               |  |                     | 630   |                         |  |      | 635   |      |  |                             | 4  |  |  |  | 4  | 
|                     |  |                     |       |                         |  |      |       |      |  |                             |    |  |  |  |    | 
|                     |  | $                   | 2,465 |                         |  | $    | 1,432 |      |  |                             | 17 |  |  |  | 8  | 
|                     |  |                     |       |                         |  |      |       |      |  |                             |    |  |  |  |    | 

NOTES TO CHART C



| | (1) |  | On a dollar and percentage basis, selling, general and administrative
expenses were higher for the first quarter of fiscal 2004 compared to the
same period in 2003 primarily due to: (a) the one-time reduction in
fiscal 2003 expenses of $450,000, resulting from the decrease in an
allowance for doubtful accounts reserve for a receivable from Montgomery
Ward & Company; and (b) an increase in legal and professional fees in
fiscal 2004 of approximately $367,000 primarily due to the Companys
internal investigation and ongoing cooperation with the U.S. Department of
Justice as discussed in Note 9 to the consolidated financial statements.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | On a dollar and percentage basis, selling, general and administrative
expenses were higher for the first quarter of fiscal 2004 compared to the
same period of 2003 primarily due to an increase in the number of
personnel and other personnel costs.                                                                                                                                                                                                                                                                                                                                                                                                         

Liquidity and capital resources.

Between April 30, 2003, and July 31, 2003, working capital decreased by
$628,091 primarily due to losses incurred during the first quarter of 2004.
Operating activities used cash of $513,219, primarily because of losses
incurred during the first quarter of 2004, an increase in costs and earnings in
excess of billings offset by a decrease in receivables. Investing activities
provided cash of $12,526. Financing activities used cash of $633,252,
primarily for scheduled principal payments of mortgage notes and other
long-term debt. Discontinued operations provided cash of $94,955 due to the
collection of receivables.

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 the sale of income producing properties,
the Company has available bank lines of credit. The bank lines of credit
expire on October 30, 2003. The Company expects to renew the bank lines of
credit, however, there can be no assurance that such renewal will take place.

The Company anticipates that its equity, 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

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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 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; continuing competitive pressures on the
availability and pricing of construction projects; 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 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:

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Revenue recognition

Construction 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.

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 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.


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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.

There have been no other material changes since April 30, 2003.




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.




PART II. OTHER INFORMATION




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 2002
|32(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 July 31, 2003                                                                                                                           
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | On July 8, 2003, the Company furnished on Form 8-K, pursuant to Item 9
thereof, a press release disclosing the Companys cooperation with a U.S.
Department of Justice investigation.

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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: |  | September 12, 2003 |  | /s/ Alan R. Abrams                        
|      |  |                    |  |                                           
|      |  |                    |  | Alan R. Abrams
Chief Executive Officer    
|      |  |                    |  |                                           
|Date: |  | September 12, 2003 |  | /s/ Melinda S. Garrett                    
|      |  |                    |  |                                           
|      |  |                    |  | Melinda S. Garrett
Chief Financial Officer

16