##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 QUARTERLY
REPORT
 
 Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
 For
the quarter ended July 31, 2009
 Commission file number 0-10146
 SERVIDYNE, INC.
 (Exact name of registrant as specified in its charter)
 Georgia
    
    58-0522129(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 1945 The Exchange, Suite 300, Atlanta, GA 30339-2029
    þ o
  o o
  Large accelerated filer o
    

Accelerated Filer o
    

Non-accelerated filer o
    

Smaller Reporting Company þ(Do not check if a smaller reporting company)
  o þ




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TABLE OF CONTENTS  ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II. OTHER INFORMATIONITEM 1A. RISK FACTORSITEM 6. EXHIBITSSIGNATURESEX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  SERVIDYNE, INC.
 July 31, 2009
    
    
    April 30, 2009ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    3,324,303
    
    
    $
    4,821,126Receivables (Note 5):Trade accounts and notes, net of allowance for doubtful accounts of
$112,684 and $145,236, respectively
    
    
    1,239,199
    
    
    
    1,368,577Contracts, net of allowance for doubtful accounts of $4,294 and
$4,294, respectively, including retained amounts of $332,678 and
$219,385, respectively
    
    
    2,066,771
    
    
    
    1,764,327Costs and earnings in excess of billings
    
    
    697,844
    
    
    
    408,950Deferred income taxes
    
    
    457,577
    
    
    
    579,423Other current assets
    
    
    1,934,738
    
    
    
    1,659,721Total current assets
    
    
    9,720,432
    
    
    
    10,602,124INCOME-PRODUCING PROPERTIES, net (Note 10)
    
    
    19,389,439
    
    
    
    19,391,375PROPERTY AND EQUIPMENT, net
    
    
    755,627
    
    
    
    797,556OTHER ASSETS:Real estate held for future development or sale
    
    
    853,109
    
    
    
    853,109Intangible assets, net (Note 8)
    
    
    2,818,948
    
    
    
    2,910,596Goodwill (Note 8)
    
    
    6,354,002
    
    
    
    6,354,002Other assets
    
    
    2,813,432
    
    
    
    2,735,894Total assets
    
    $
    42,704,989
    
    
    $
    43,644,656LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    910,411
    
    
    $
    851,633Accrued expenses
    
    
    1,159,956
    
    
    
    1,416,145Deferred revenue
    
    
    687,297
    
    
    
    708,401Billings in excess of costs and earnings
    
    
    744,183
    
    
    
    28,215Current maturities of mortgage notes and other long-term debt
    
    
    474,010
    
    
    
    566,858Total current liabilities
    
    
    3,975,857
    
    
    
    3,571,252DEFERRED INCOME TAXES
    
    
    1,878,374
    
    
    
    2,489,357OTHER LIABILITIES
    
    
    922,278
    
    
    
    824,877MORTGAGE NOTES PAYABLE, less current maturities
    
    
    18,120,026
    
    
    
    18,220,640OTHER LONG-TERM DEBT, less current maturities
    
    
    1,000,000
    
    
    
    1,000,000Total liabilities
    
    
    25,896,535
    
    
    
    26,106,126COMMITMENTS AND CONTINGENCIES (Note 12)SHAREHOLDERS EQUITY:Common stock, $1 par value; 10,000,000 shares authorized;
3,917,673 issued and 3,691,264 outstanding at July 31, 2009;
3,917,778 issued and 3,691,369 outstanding at April 30, 2009
    
    
    3,917,673
    
    
    
    3,917,778Additional paid-in capital
    
    
    6,076,095
    
    
    
    6,026,101Retained earnings
    
    
    7,789,486
    
    
    
    8,569,451Treasury stock (common shares) of 226,409
    
    
    (974,800
    )
    
    
    (974,800
    )Total shareholders equity
    
    
    16,808,454
    
    
    
    17,538,530Total liabilities and shareholders equity
    
    $
    42,704,989
    
    
    $
    43,644,656
 See accompanying notes to condensed consolidated financial statements.
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SERVIDYNE, INC.
 FIRST QUARTER ENDEDJULY 31,2009
    
    
    2008REVENUES:Building Performance Efficiency (BPE)
    
    $
    3,873,108
    
    
    $
    2,720,073Real Estate
    
    
    756,095
    
    
    
    804,4644,629,203
    
    
    
    3,524,537COST OF REVENUES:BPE
    
    
    2,624,609
    
    
    
    1,752,784Real Estate
    
    
    508,005
    
    
    
    474,0473,132,614
    
    
    
    2,226,831SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
    
    
    2,389,461
    
    
    
    2,405,656OTHER (INCOME) AND EXPENSES:Other income
    
    
    (10,804
    )
    
    
    (13,139
    )Interest income
    
    
    (6,740
    )
    
    
    (55,087
    )Interest expense
    
    
    319,395
    
    
    
    332,396301,851
    
    
    
    264,170LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    (1,194,723
    )
    
    
    (1,372,120
    )INCOME TAX BENEFIT
    
    
    (489,137
    )
    
    
    (524,709
    )NET LOSS
    
    $
    (705,586
    )
    
    $
    (847,411
    )NET LOSS PER SHARE (Note 7):Net loss per
share - basic and diluted
    
    $
    (0.19
    )
    
    $
    (0.23
    )
 See accompanying notes to condensed consolidated financial statements.
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SERVIDYNE, INC.
 FIRST QUARTER ENDEDJULY 31,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (705,586
    )
    
    $
    (847,411
    )Adjustments
to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    344,574
    
    
    
    397,045Amortization of mortgage discount
    
    
    
    
    
    
    (7,500
    )Deferred tax benefit
    
    
    (489,137
    )
    
    
    (538,198
    )Stock compensation expense
    
    
    50,297
    
    
    
    48,843Adjustment to cash surrender value of life insurance
    
    
    (29,310
    )
    
    
    (20,608
    )Straight-line rent
    
    
    52,812
    
    
    
    (19,576
    )Provision for doubtful accounts, net
    
    
    (32,552
    )
    
    
    (89,202
    )Changes in assets and liabilities:Receivables
    
    
    (140,514
    )
    
    
    248,332Costs and earnings in excess of billings
    
    
    (288,894
    )
    
    
    107,566Other current and long-term assets
    
    
    (331,762
    )
    
    
    (326,925
    )Trade and subcontractors payable
    
    
    58,778
    
    
    
    (271,161
    )Accrued expenses and deferred revenue
    
    
    (277,293
    )
    
    
    (183,178
    )Accrued incentive compensation
    
    
    
    
    
    
    (299,744
    )Billings in excess of costs and earnings
    
    
    715,968
    
    
    
    (19,967
    )Other liabilities
    
    
    1,401
    
    
    
    (7,048
    )Net cash used in operating activities
    
    
    (1,071,218
    )
    
    
    (1,828,732
    )Cash flows from investing activities:Premiums paid on officers life insurance policies
    
    
    (5,464
    )
    
    
    Release of restricted cash held in escrow
    
    
    57,170
    
    
    
    3,470,700Purchase of held to maturity investments
    
    
    
    
    
    
    (150,000
    )Additions to income-producing properties
    
    
    (128,724
    )
    
    
    (129,176
    )Additions to property and equipment
    
    
    (14,440
    )
    
    
    (28,758
    )Additions to intangible assets
    
    
    (65,897
    )
    
    
    (94,838
    )Acquisition, net of cash acquired
    
    
    
    
    
    
    (891,665
    )Net cash (used in) provided by investing activities
    
    
    (157,355
    )
    
    
    2,176,263Cash flows from financing activities:Mortgage repayments
    
    
    (93,462
    )
    
    
    (81,673
    )Debt repayments
    
    
    (100,000
    )
    
    
    (240,875
    )Cash dividends paid to shareholders
    
    
    (74,788
    )
    
    
    (142,297
    )Net cash used in financing activities
    
    
    (268,250
    )
    
    
    (464,845
    )Net decrease in cash and cash equivalents
    
    
    (1,496,823
    )
    
    
    (117,314
    )Cash at beginning of period
    
    
    4,821,126
    
    
    
    8,382,947Cash at end of period
    
    $
    3,324,303
    
    
    $
    8,265,633
 See accompanying notes to condensed consolidated financial statements.
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Total assets acquired, net of cash
    
    $
    1,577,844Total liabilities assumed
    
    
    (583,937
    )Net assets acquired, net of cash
    
    
    993,907Less value of shares issued for acquisition
    
    
    (91,250
    )Total cash paid (including acquisition costs)
    
    $
    902,657
 See accompanying notes to condensed consolidated financial statements.
 4




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SERVIDYNE, INC.
 NOTE 1. ORGANIZATION AND BUSINESS
  NOTE 2. UNAUDITED STATEMENTS
  Subsequent Events
  Restatement of Previously Issued Condensed Consolidated Financial Statements
  5




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Reclassification of Previously Issued Condensed Consolidated Financial Statements
  NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS
  The FASB Accounting Standards Codification
(Codification) and the Hierarchy of Generally Accepted Accounting Principles The Hierarchy of Generally Accepted Accounting Principles
 Subsequent Events
 Recognition and
Presentation of Other-Than-Temporary Impairments
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Interim Disclosures about Fair
Value of Financial Instruments
 Business Combinations Business Combinations
 Determining the Useful Life of Intangible Assets Goodwill and Other Intangible Assets Business Combinations
 Fair Value Measurements
 7




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NOTE 4. EQUITY-BASED COMPENSATION
   Stock Options
  WeightedOptions to
    
    
    AveragePurchase
    
    
    ExerciseShares
    
    
    PriceOutstanding at April 30, 2009
    
    
    482,486
    
    
    $
    4.46Granted
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Outstanding at July 31, 2009
    
    
    482,486
    
    
    $
    4.46Vested at July 31, 2009
    
    
    471,986
    
    
    $
    4.44Non-vested expected to vest at July 31, 2009
    
    
    10,500
    
    
    $
    5.24
  8




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Weighted AverageExercise
    
    Number of
    
    Remaining ContractualPrice
    
    Outstanding Options
    
    Term (Years)$4.42
    
    
    415,629
    
    
    
    3.28$4.59
    
    
    55,440
    
    
    
    5.65$5.19
    
    
    917
    
    
    
    4.88$5.24
    
    
    10,500
    
    
    
    3.87
   Stock Appreciation Rights (SARs)
  WeightedAverageExerciseSARs
    
    
    PriceOutstanding at April 30, 2009
    
    
    565,350
    
    
    $
    4.37Granted
    
    
    30,000
    
    
    
    2.30Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding at July 31, 2009
    
    
    595,350
    
    
    $
    4.27Vested at July 31, 2009
    
    
    54,810
    
    
    $
    3.94Non-vested expected to vest at July 31, 2009
    
    
    368,063
    
    
    $
    4.30
 rd th th
 9




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Weighted AverageExercise
    
    Outstanding
    
    Exercisable
    
    Remaining ContractualPrice
    
    SARs
    
    SARs
    
    Term (Years)$3.94
    
    
    182,700
    
    
    
    54,810
    
    
    
    6.91$3.79
    
    
    111,300
    
    
    
    0
    
    
    
    7.36$4.09
    
    
    10,500
    
    
    
    0
    
    
    
    7.77$4.19
    
    
    10,500
    
    
    
    0
    
    
    
    7.87$6.19
    
    
    38,850
    
    
    
    0
    
    
    
    8.17$5.00
    
    
    52,500
    
    
    
    0
    
    
    
    8.73$4.76
    
    
    136,500
    
    
    
    0
    
    
    
    8.87$4.00
    
    
    22,500
    
    
    
    0
    
    
    
    9.13$2.30
    
    
    30,000
    
    
    
    0
    
    
    
    9.86
  Expected life (years)
    
    
    5Dividend yield
    
    
    3.24
    %Expected stock price volatility
    
    
    49.19
    %Risk-free interest rate
    
    
    2.95
    %Fair value of SARs granted
    
    $
    0.51
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Shares of Restricted Stock
   Weighted AverageNumber of
    
    
    Fair ValueShares of
    
    
    per ShareRestricted Stock
    
    
    on Grant DateNon-vested restricted stock at April 30, 2009
    
    
    5,295
    
    
    $
    4.61Granted
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Vested
    
    
    (3,045
    )
    
    
    4.76Non-vested restricted stock at July 31, 2009
    
    
    2,250
    
    
    $
    4.36
 NOTE 5. RECEIVABLES
  11




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NOTE 6. OPERATING SEGMENTS
  For the Quarter Ended July 31, 2009
    
    BPE
    
    
    Real Estate
    
    
    Parent (1)
    
    
    Eliminations
    
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    2,012,844
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,012,844Lighting products
    
    
    456,450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    456,450Energy management services
    
    
    563,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    563,800Productivity software
    
    
    840,014
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    840,014Total revenues from unaffiliated customers
    
    $
    3,873,108
    
    
    $
    756,095
    
    
    $
    
    
    
    $
    
    
    
    $
    4,629,203Intersegment revenue
    
    
    141,545
    
    
    
    136,042
    
    
    
    
    
    
    
    (277,587
    )
    
    
    Total
revenues from continuing operations
    
    $
    4,014,653
    
    
    $
    892,137
    
    
    $
    
    
    
    $
    (277,587
    )
    
    $
    4,629,203(Loss)
earnings from continuing operations before income taxes
    
    $
    (390,485
    )
    
    $
    105,942
    
    
    $
    (894,740
    )
    
    $
    (15,440
    )
    
    $
    (1,194,723
    )
 For the Quarter Ended July 31, 2008
    
    BPE
    
    
    Real Estate
    
    
    Parent (1)
    
    
    Eliminations
    
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    947,470
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    947,470Lighting products
    
    
    257,718
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    257,718Energy management services
    
    
    599,646
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    599,646Productivity software
    
    
    915,239
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    915,239Total revenues from unaffiliated customers
    
    $
    2,720,073
    
    
    $
    804,464
    
    
    $
    
    
    
    $
    
    
    
    $
    3,524,537Intersegment revenue
    
    
    20,362
    
    
    
    142,577
    
    
    
    
    
    
    
    (162,939
    )
    
    
    Total revenues from continuing operations
    
    $
    2,740,435
    
    
    $
    947,041
    
    
    $
    
    
    
    $
    (162,939
    )
    
    $
    3,524,537(Loss) earnings from continuing operations before income taxes
    
    $
    (738,734
    )
    
    $
    248,516
    
    
    $
    (874,711
    )
    
    $
    (7,191
    )
    
    $
    (1,372,120
    )
 
 (1)
    
    The Parent Companys net loss in each period was derived from corporate headquarters
activities and consisted primarily of the following: Parent Company executive officers
compensation and costs related to the Companys status as a publicly-held company, which
include, among other items, legal fees, compliance costs, non-employee directors fees,
and other reporting costs. The corporate headquarters activities do not earn revenue.
All relevant costs related to the business operations of the Companys operating segments
are either paid directly by the respective operating segments or are allocated to the
segments by the Parent. The allocation method is dependent on the nature of each expense
item. Allocated expenses include, among other items, accounting services, information
technology services, insurance costs, and audit and tax preparation fees. NOTE 7. EARNINGS (LOSS) PER SHARE
  12




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NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
  July 31, 2009Gross Carrying

    
    AccumulatedAmount

    

AmortizationIntangible assets, subject to amortization:Proprietary BPE software solutions
    
    $
    3,753,666
    
    $
    2,447,898Acquired computer software
    
    
    466,589
    
    
    462,706Real estate lease costs
    
    
    701,776
    
    
    328,328Customer relationships
    
    
    404,632
    
    
    261,548Deferred loan costs
    
    
    331,488
    
    
    136,323Non-compete agreements
    
    
    63,323
    
    
    36,938Tradename
    
    
    61,299
    
    
    4,768Other
    
    
    45,844
    
    
    39,867$
    5,828,617
    
    $
    3,718,376Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707Goodwill
    
    $
    6,354,002
 April 30, 2009Gross Carrying
    
    AccumulatedAmount
    
    AmortizationIntangible assets, subject to amortization:Proprietary BPE software solutions
    
    $
    3,689,695
    
    $
    2,340,980Acquired computer software
    
    
    466,589
    
    
    458,883Real estate lease costs
    
    
    699,852
    
    
    308,010Customer relationships
    
    
    404,632
    
    
    252,216Deferred loan costs
    
    
    331,488
    
    
    128,826Non-compete agreements
    
    
    63,323
    
    
    29,023Tradename
    
    
    61,299
    
    
    3,746Other
    
    
    45,844
    
    
    39,149$
    5,762,722
    
    $
    3,560,833Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707Goodwill
    
    $
    6,354,002
 Aggregate amortization expense for all amortizable intangible assets:For the three months ended July 31, 2009
    
    $
    157,543For the three months ended July 31, 2008
    
    $
    198,458
 Estimated future amortization expenses
for all amortized intangible assets for the fiscal years ended:Remainder of fiscal year 2010
    
    
    503,3662011
    
    
    530,8752012
    
    
    389,7222013
    
    
    262,6562014
    
    
    175,8562015
    
    
    64,223Thereafter
    
    
    183,543$
    2,110,241
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NOTE 9. ACQUISITIONS
 Fiscal 2010
  Fiscal 2009
   14




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Assets andLiabilitiesAcquiredfrom Seller
    
    
    Estimated LifeCurrent assets
    
    $
    322,514Property, furniture and equipment, net
    
    
    58,699
    
    
    Various (3-5)Trade name
    
    
    61,299
    
    
    15 yearsNon-compete agreements
    
    
    63,323
    
    
    2 yearsCustomer relationships
    
    
    186,632
    
    
    5 yearsGoodwill
    
    
    895,285
    
    
    IndefiniteTotal assets acquired
    
    $
    1,587,752Current liabilities
    
    
    (483,937
    )Long term liabilities
    
    
    (100,000
    )Net assets acquired
    
    $
    1,003,815
   Quarter EndedJuly 31, 2008Revenues
    
    $
    3,790Net loss
    
    $
    (847
    )Net
loss per share - basic
    
    $
    (0.23
    )Net
loss per share - diluted
    
    $
    (0.23
    )
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NOTE 10. INCOME-PRODUCING PROPERTIES
     NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
     NOTE 12. COMMITMENTS AND CONTINGENCIES
  16




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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Results of operations of the first quarter of fiscal 2010, compared to the first quarter of
fiscal 2009.
  
  CHART A
 First Quarter EndedJuly 31,
    
    
    Amount
    
    
    Percentage2009
    
    
    2008
    
    
    Change
    
    
    ChangeBPE (1)
    
    $
    3,873
    
    
    $
    2,720
    
    
    $
    1,153
    
    
    
    42Real Estate (2)
    
    
    756
    
    
    
    804
    
    
    
    (48
    )
    
    
    (6
    )$
    4,629
    
    
    $
    3,524
    
    
    $
    1,105
    
    
    
    31
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NOTES TO CHART A
 (1)
    
    The following table indicates the BPE Segment revenues by service and product type:
 
 First Quarter EndedJuly 31,
    
    
    Amount
    
    
    Percentage2009
    
    
    2008
    
    
    Change
    
    
    ChangeEnergy Savings Projects
    
    $
    2,013
    
    
    $
    947
    
    
    $
    1,066
    
    
    
    113Lighting Products
    
    
    456
    
    
    
    258
    
    
    
    198
    
    
    
    77Energy Management Services
    
    
    564
    
    
    
    600
    
    
    
    (36
    )
    
    
    (6
    )Productivity Software
    
    
    840
    
    
    
    915
    
    
    
    (75
    )
    
    
    (8
    )$
    3,873
    
    
    $
    2,720
    
    
    $
    1,153
    
    
    
    42
 BPE Segment revenues increased by approximately $1,153,000, or 42%, in the first quarter
of fiscal 2010 compared to the same period in fiscal 2009, primarily due to:
 (a)
    
    an increase in energy savings (lighting and mechanical) project revenues
of approximately $1,066,000; and(b)
    
    an increase in lighting product revenues of approximately $198,000
generated by the Companys lighting distribution business that was acquired in June
2009, as the lighting distribution business was operated by the Company for the
entire first quarter of fiscal 2010, whereas it was operated by the Company for only
a portion of the first quarter of fiscal 2009.
 (2)
    
    Real Estate Segment revenues decreased by $48,000, or 6%, in the first quarter of fiscal
2010 compared to the same period in fiscal 2009, primarily due to a one-time early lease
termination payment received in the first quarter of fiscal 2009.
  IncreaseJuly 31,
    
    
    (Decrease)2009
    
    
    2008
    
    
    Amount
    
    
    PercentageBPE (1)
    
    $
    8,234,000
    
    
    $
    6,536,000
    
    
    $
    1,698,000
    
    
    
    26Real Estate (2)
    
    
    2,768,000
    
    
    
    3,183,000
    
    
    
    (415,000
    )
    
    
    (13
    )Less: Intersegment eliminations (3)
    
    
    (551,000
    )
    
    
    (585,000
    )
    
    
    34,000
    
    
    
    6Total Backlog
    
    $
    10,451,000
    
    
    $
    9,134,000
    
    
    $
    1,317,000
    
    
    
    14
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(1)
    
    BPE backlog at July 31, 2009, increased by approximately $1,698,000, or 26%, compared to
the year-earlier period, primarily due to: (a)
    
    an increase of approximately $2,994,000 in energy savings (lighting and
mechanical) projects; partially offset by:
 (b)
    
    a decrease of approximately $178,000 in productivity software products
and services; and(c)
    
    a decrease of approximately $1,118,000 in energy management consulting
services, primarily as a result of the successful completion of approximately
$800,000 of multi-year consulting services projects.
 The Company estimates that a substantial majority of the BPE backlog at July 31, 2009, will
be recognized prior to July 31, 2010.BPE backlog includes some contracts that can be cancelled by customers with less than one (1)
years notice, and assumes that such cancellation provisions will not be invoked. The value
of such contracts included in the prior years backlog that were subsequently cancelled was
approximately $104,000, or 1.6%.
 (2)
    
    Real Estate backlog at July 31, 2009, decreased by approximately $415,000 compared to the
year-earlier period, primarily due to a decrease in rental revenues at the Companys owned
office building located in Newnan, Georgia, due to the anchor tenants default (see Note 10
to the condensed consolidated financial statements).(3)
    
    Represents rental revenues at the Companys owned headquarters building to be paid to the
Real Estate Segment by the Parent Company and the BPE Segment.
 
   CHART B
 Percentage of SegmentRevenues for theFirst Quarter Ended
    
    First Quarter EndedJuly 31,
    
    July 31,2009
    
    2008
    
    2009
    
    2008BPE (1)
    
    $
    2,625
    
    
    $
    1,753
    
    
    
    68
    
    
    
    64Real Estate (2)
    
    
    508
    
    
    
    474
    
    
    
    67
    
    
    
    59$
    3,133
    
    
    $
    2,227
    
    
    
    68
    
    
    
    63
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NOTES TO CHART B
 (1)
    
    BPE Segment cost of revenues increased by approximately $872,000, or 50%, in the first
quarter of fiscal 2010 compared to the same period in fiscal 2009, primarily due to a
corresponding increase in revenues (See Chart A).
 On a percentage-of-revenues basis, BPE Segment cost of revenues increased by approximately 4%
in the first quarter of fiscal 2010 compared to the same period in fiscal 2009, primarily due
to a change in the mix of services and products.
 (2)
    
    Real Estate Segment cost of revenues increased by approximately $34,000, or 7%, in the
first quarter of fiscal 2010 compared to the same period in fiscal 2009, primarily due to a
repair expense at the Companys owned shopping center in Smyrna, Tennessee.
 On a percentage-of-revenues basis, Real Estate Segment cost of revenues increased by
approximately 8% in the first quarter of fiscal 2010 compared to the same period in fiscal
2009, due to the decline in revenues discussed above (see Chart A) and the increases in cost
of revenues discussed in the previous paragraph.
 
   CHART C
 Percentage of SegmentRevenues for theFirst Quarter Ended
    
    
    First Quarter EndedJuly 31,
    
    
    July 31,2009
    
    
    2008
    
    
    2009
    
    
    2008BPE (1)
    
    $
    1,360
    
    
    $
    1,409
    
    
    
    35
    
    
    
    52Real Estate
    
    
    160
    
    
    $
    169
    
    
    
    21
    
    
    
    21Parent (2)
    
    
    869
    
    
    $
    828
    
    
    
    19
    
    
    
    23$
    2,389
    
    
    $
    2,406
    
    
    
    52
    
    
    
    68
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NOTES TO CHART C
 (1)
    
    BPE Segment SG&A expenses decreased by approximately
$49,000, or 3%, in the first quarter
of fiscal 2010 compared to the same period in fiscal 2009, primarily due to a decrease in
product development expenses and general administrative expenses, partially offset by higher
sales and marketing expenses.
  (2)
    
    Parent SG&A expenses increased by approximately $41,000, or 5%, in the first quarter of
fiscal 2010 compared to the same period of fiscal 2009, primarily due to:
 (a)
    
    an increase in accounting and other non-legal compliance costs of
approximately $66,000;
  (b)
    
    a decrease in legal fees of approximately $33,000 because of costs
incurred in the prior year primarily related to the settlement of an insurance
claim.
     CHART D
 First Quarter Ended
    
    
    IncreaseJuly 31,
    
    
    (Decrease)2009
    
    
    2008
    
    
    AmountBPE (1)
    
    $
    (124
    )
    
    $
    (453
    )
    
    $
    329Real Estate (2)
    
    
    (204
    )
    
    
    (100
    )
    
    
    (104
    )Parent (3)
    
    
    (867
    )
    
    
    (819
    )
    
    
    (48
    )Total
    
    $
    (1,195
    )
    
    $
    (1,372
    )
    
    $
    177
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NOTES TO CHART D
 (1)
    
    BPE Segment loss before income taxes decreased by approximately $329,000, or 73%, in the
first quarter of fiscal 2010 compared to the same period in fiscal 2009, primarily due to an
increase in revenues of approximately $1,153,000 (see Chart A), an increase in gross margin
of approximately $281,000, and a decrease in SG&A expenses of
approximately $49,000 (see
Chart C).(2)
    
    Real Estate Segment loss before income taxes increased by
approximately $104,000 in the
first quarter of fiscal 2010 compared to the same period in fiscal 2009, primarily due to a
decrease in revenues of approximately $48,000 (see Chart A), an increase in cost of revenues
of approximately $34,000 (see Chart B), a decrease in SG&A
expenses of approximately $9,000
(see Chart C), a decrease in interest expense of approximately $12,000, and a decrease in
interest and other income of approximately $42,000.(3)
    
    Parent loss before income taxes increased by approximately $48,000 in the first quarter of
fiscal 2010 compared to the same period in fiscal 2009, due to an increase in SG&A expenses
of approximately $41,000 (see Chart C) and a decrease in interest and other income of
approximately $7,000.
   LIQUIDITY AND CAPITAL RESOURCES
    (a)
    
    current year losses from continuing operations before depreciation,
amortization and income taxes of approximately $850,000;(b)
    
    an increase in other current and long-term assets of approximately $332,000, due
primarily to an increase in accrued revenues on energy management projects; and.(c)
    
    a net decrease in trade accounts payable, accrued expenses, and other
liabilities of approximately $217,000, due to the timing and submission of payments;
  (d)
    
    an increase in billings in excess of costs and earnings of approximately
$716,000; partially offset by an increase in accounts receivable (net of changes in
the provision for doubtful accounts) of approximately $173,000 and an increase in
costs and earnings in excess of billings of approximately $289,000. These changes
are primarily as a result of the timing of billings and receipt of payments.
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(a)
    
    approximately $129,000 used for additions to income-producing properties
related to building improvements; and(b)
    
    approximately $66,000 used for additions to intangible assets, primarily
related to the development of enhancements to the BPE Segments proprietary building
productivity software solutions;
  (c)
    
    approximately $57,000 provided by the release of restricted cash
previously held in escrow.
  (a)
    
    payment of the regular quarterly cash dividends to shareholders of
approximately $75,000;(b)
    
    scheduled principal payments on real estate mortgage notes of
approximately $93,000; and(c)
    
    scheduled principal payments on other long-term debt of approximately
$100,000.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
  25




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CRITICAL ACCOUNTING POLICIES
  Revenue Recognition
 Revenue Recognition
  Accounting for Performance
of Construction-Type and Certain Production-Type Contracts
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Long-Lived Assets: Income-Producing Properties, Capitalized Software, and Property and
Equipment
  27




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##### Table of Contents




    
    A significant decrease in the market price of a long-lived asset;
    
    A significant adverse change in the extent or manner in which a long-lived asset
is being used or in its physical condition;
    
    A significant adverse change in legal factors or in the business climate that
could affect the value of a long-lived asset, including an adverse action or
assessment by a regulator;
    
    An accumulation of costs significantly in excess of the amount originally
expected for the acquisition or construction of a long-lived asset;
    
    A current-period operating or cash flow loss combined with a history of operating
or cash flow losses or a projection or forecast that demonstrates continuing losses
associated with the use of a long-lived asset;
    
    A current expectation that, more likely than not, a long-lived asset will be sold
or otherwise disposed of significantly before the end of its previously estimated
useful life;
    
    The Company has recently sold similar income-producing properties at losses;
    
    The Company has received purchase offers at prices below carrying value;
    
    Income-producing properties that have significant vacancy rates or significant
rollover exposure from one or more tenants;
    
    A major tenant experiencing financial difficulties that may jeopardize the
tenants ability to meet its lease obligations;
    
    Depressed market conditions;
    
    Presence of a new competitive property constructed in the assets market area;
and
    
    Evidence of significant corrective measures required to cure structural problems,
physical obsolescence, or deterioration of essential building components.
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Accounting for the Costs of Computer Software Developed or Obtained for Internal Use
  
    
    A change in the estimated remaining useful life of the asset;
    
    A change in the manner in which the asset is used in the income generating
business of the Company; or
    
    A current-period operating or cash flow loss combined with a history of operating
or cash flow losses, or a projection or forecast that demonstrates continuing losses
associated with the use of a long-lived asset.
  Valuation of Goodwill and Other Indefinite-Lived Intangible Assets
 Goodwill and Other Intangible Assets
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Income Taxes
       30




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
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ITEM 1A. RISK FACTORS
  
 ITEM 6. EXHIBITS
 31.1
    
       Certification of Chief Executive Officer, pursuant to Rules 13a-14(a)/15d-14(a)31.2
    

    Certification of Chief Financial Officer, pursuant to Rules 13a-14(a)/15d-14(a)32.1
    

    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes Oxley Act 200232.2
    

    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes Oxley Act 2002
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SERVIDYNE, INC.(Registrant)Date: September 14, 2009
    /s/ Alan R. AbramsAlan R. AbramsChief Executive OfficerDate: September 14, 2009
    /s/ Rick A. PaternostroRick A. PaternostroChief Financial Officer 33