##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION     
 Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 For the quarter ended July 31, 2004 Commission file number 0-10146 ABRAMS INDUSTRIES, INC. 
 Georgia
    
    58-0522129(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer identification No.)
 1945 The Exchange, Suite 300, Atlanta, GA 30339-2029   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   Noo Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act). Yeso
  Noþ The number of shares of $1.00 par value Common Stock of the
Registrant outstanding as of August 31, 2004, was 3,205,713.




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TABLE OF CONTENTS  PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF OPERATIONSCONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITYCONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONSOLIDATED FINANCIAL STATEMENTSITEM 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 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSITEM 6. EXHIBITSSIGNATURESSECTION 302 CERTIFICATION OF THE CEOSECTION 302 CERTIFICATION OF THE CFOSECTION 906 CERTIFICATION OF THE CEOSECTION 906 CERTIFICATION OF THE CFO    Table of Contents  
 PART I. FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS 
 ABRAMS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED) July 31, 2004
    
    April 30, 2004ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    2,618,573
    
    
    $
    6,379,679Short-term investment
    
    
    200,000
    
    
    
    200,000Receivables (Note 4)
    
    
    3,200,177
    
    
    
    5,923,696Less: Allowance for doubtful accounts
    
    
    (488,795
    )
    
    
    (471,479
    )Assets of discontinued operations
    
    
    32,871
    
    
    
    56,947Costs and earnings in excess of billings
    
    
    457,370
    
    
    
    860,940Deferred income taxes
    
    
    1,561,263
    
    
    
    623,001Other
    
    
    1,058,996
    
    
    
    779,617Total current assets
    
    
    8,640,455
    
    
    
    14,352,401INCOME-PRODUCING PROPERTIES, net
    
    
    29,446,795
    
    
    
    29,628,177PROPERTY AND EQUIPMENT, net
    
    
    907,902
    
    
    
    605,967OTHER ASSETS:Real estate held for future development or sale
    
    
    3,970,498
    
    
    
    3,970,498Intangible assets, net (Note 8)
    
    
    3,482,039
    
    
    
    3,527,722Goodwill (Note 8)
    
    
    5,372,455
    
    
    
    4,998,242Investment held to maturity
    
    
    2,000,000
    
    
    
    2,000,000Other
    
    
    2,920,875
    
    
    
    2,793,012$
    56,741,019
    
    
    $
    61,876,019LIABILITIES
AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    1,653,873
    
    
    $
    2,924,611Accrued expenses
    
    
    2,332,505
    
    
    
    2,710,978Liabilities of discontinued operations
    
    
    12,786
    
    
    
    8,328Billings in excess of costs and earnings
    
    
    20,665
    
    
    
    208,482Current maturities of long-term debt
    
    
    1,212,855
    
    
    
    1,292,669Total current liabilities
    
    
    5,232,684
    
    
    
    7,145,068DEFERRED INCOME TAXES
    
    
    2,951,671
    
    
    
    2,677,141OTHER LIABILITIES
    
    
    1,618,011
    
    
    
    4,644,630MORTGAGE NOTES PAYABLE, less current maturities (Note 9)
    
    
    26,616,644
    
    
    
    25,509,868OTHER LONG-TERM DEBT, less current maturities
    
    
    1,964,372
    
    
    
    1,901,785Total liabilities
    
    
    38,383,382
    
    
    
    41,878,492COMMITMENTS AND CONTINGENCIES (Note 10)SHAREHOLDERS EQUITY:Common stock, $1 par value; 5,000,000 shares authorized;
3,353,954 issued and 3,206,466 outstanding in July 2004,
3,327,628 issued and 3,180,340 outstanding in April 2004
    
    
    3,353,954
    
    
    
    3,327,628Additional paid-in capital
    
    
    3,055,750
    
    
    
    2,963,874Deferred stock compensation
    
    
    (37,431
    )
    
    
    (26,855
    )Retained earnings
    
    
    12,665,981
    
    
    
    14,412,663Treasury stock, common shares, 147,488 in July 2004 and 147,288
in April 2004
    
    
    (680,617
    )
    
    
    (679,783
    )Total shareholders equity
    
    
    18,357,637
    
    
    
    19,997,527$
    56,741,019
    
    
    $
    61,876,019
 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 ENDEDJULY 31,2004
    
    2003REVENUES:Energy and facilities solutions
    
    $
    890,211
    
    
    $
    658,804Energy services
    
    
    1,962,868
    
    
    
    Rental income
    
    
    2,028,380
    
    
    
    2,019,616Construction
    
    
    145,383
    
    
    
    11,033,0455,026,842
    
    
    
    13,711,465Interest
    
    
    29,269
    
    
    
    5,313Other
    
    
    6,007
    
    
    
    14,0075,062,118
    
    
    
    13,730,785COSTS AND EXPENSES:Energy and facilities solutions
    
    
    480,889
    
    
    
    403,975Energy services
    
    
    1,481,237
    
    
    
    Rental property operating expenses, excluding interest
    
    
    1,414,016
    
    
    
    1,208,702Construction
    
    
    114,734
    
    
    
    10,619,6833,490,876
    
    
    
    12,232,360Selling, general and administrativeEnergy and facilities solutions
    
    
    638,932
    
    
    
    563,727Energy services
    
    
    640,033
    
    
    
    Real estate
    
    
    405,430
    
    
    
    224,192Construction
    
    
    105,306
    
    
    
    1,045,646Parent
    
    
    696,428
    
    
    
    630,1172,486,129
    
    
    
    2,463,682Extinguishment of debt (Note 9)
    
    
    218,071
    
    
    
    Interest costs incurred
    
    
    635,496
    
    
    
    612,2116,830,572
    
    
    
    15,308,253LOSS BEFORE INCOME TAXES FROM
CONTINUING OPERATIONS
    
    
    (1,768,454
    )
    
    
    (1,577,468
    )INCOME TAX BENEFIT
    
    
    (663,000
    )
    
    
    (529,000
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (1,105,454
    )
    
    
    (1,048,468
    )DISCONTINUED OPERATIONS (Note 5):Earnings from discontinued operations, adjusted
for applicable income tax expense of $0 and
$64,000, respectively
    
    
    
    
    
    
    100,062EARNINGS FROM DISCONTINUED OPERATIONS
    
    
    
    
    
    
    100,062NET LOSS
    
    $
    (1,105,454
    )
    
    $
    (948,406
    )NET
(LOSS) EARNINGS PER SHARE - BASIC AND DILUTED (Note 7):From continuing operations
    
    $
    (.35
    )
    
    $
    (.36
    )From discontinued operations
    
    
    
    
    
    $
    .03NET
(LOSS) EARNINGS PER SHARE - BASIC AND DILUTED
    
    $
    (.35
    )
    
    $
    (.33
    )DIVIDENDS PER SHARE
    
    $
    0.20
    
    
    $
    0.04WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED
    
    
    3,197,598
    
    
    
    2,914,271
 See accompanying notes to
consolidated financial statements. 2




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##### Table of Contents



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY Common Stock
    
    AdditionalPaid-In
    
    DeferredStock
    
    Retained
    
    TreasuryShares
    
    Amount
    
    Capital
    
    Compensation
    
    Earnings
    
    Stock
    
    TotalBALANCES at April 30, 2002
    
    
    3,054,439
    
    
    $
    3,054,439
    
    
    $
    2,135,005
    
    
    $
    (12,744
    )
    
    $
    18,273,853
    
    
    $
    (671,677
    )
    
    $
    22,778,876Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,073,524
    )
    
    
    
    
    
    
    (1,073,524
    )Common stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,270
    )
    
    
    (2,270
    )Common stock issued
    
    
    5,800
    
    
    
    5,800
    
    
    
    18,500
    
    
    
    (24,300
    )
    
    
    
    
    
    
    
    
    
    
    Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,446
    
    
    
    
    
    
    
    
    
    
    
    20,446Cash dividends declared -
$.16 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (465,576
    )
    
    
    
    
    
    
    (465,576
    )BALANCES at April 30, 2003
    
    
    3,060,239
    
    
    
    3,060,239
    
    
    
    2,153,505
    
    
    
    (16,598
    )
    
    
    16,734,753
    
    
    
    (673,947
    )
    
    
    21,257,952Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,850,126
    )
    
    
    
    
    
    
    (1,850,126
    )Common stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,836
    )
    
    
    (5,836
    )Common stock issued
    
    
    267,389
    
    
    
    267,389
    
    
    
    810,369
    
    
    
    (41,700
    )
    
    
    
    
    
    
    
    
    
    
    1,036,058Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,443
    
    
    
    
    
    
    
    
    
    
    
    31,443Cash
dividends declared - $.16 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (471,964
    )
    
    
    
    
    
    
    (471,964
    )BALANCES at April 30, 2004
    
    
    3,327,628
    
    
    
    3,327,628
    
    
    
    2,963,874
    
    
    
    (26,855
    )
    
    
    14,412,663
    
    
    
    (679,783
    )
    
    
    19,997,527Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,105,454
    )
    
    
    
    
    
    
    (1,105,454
    )Common stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (834
    )
    
    
    (834
    )Common stock issued
    
    
    26,326
    
    
    
    26,326
    
    
    
    91,876
    
    
    
    (23,296
    )
    
    
    
    
    
    
    
    
    
    
    94,906Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,720
    
    
    
    
    
    
    
    
    
    
    
    12,720Cash
dividends declared - $.20 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (641,228
    )
    
    
    
    
    
    
    (641,228
    )BALANCES at July 31, 2004
    
    
    3,353,954
    
    
    $
    3,353,954
    
    
    $
    3,055,750
    
    
    $
    (37,431
    )
    
    $
    12,665,981
    
    
    $
    (680,617
    )
    
    $
    18,357,637
 See accompanying notes
to consolidated financial statements. 3




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS FIRST QUARTER ENDED JULY 31,2004
    
    2003Cash flows from operating activities:Net loss
    
    $
    (1,105,454
    )
    
    $
    (948,406
    )Adjustments to reconcile net loss to net
cash used in operating activities:Income from discontinued operations, net of tax
    
    
    
    
    
    
    (100,062
    )Depreciation and amortization
    
    
    541,344
    
    
    
    446,609Deferred tax benefit
    
    
    (663,732
    )
    
    
    (484,881
    )Provision for (recovery of) doubtful accounts, net
    
    
    17,316
    
    
    
    (670
    )Extinguishment of debt
    
    
    218,071
    
    
    
    Changes in assets and liabilities, net of effect of acquisition:Receivables, net
    
    
    2,723,519
    
    
    
    877,408Costs and earnings in excess of billings
    
    
    403,570
    
    
    
    (680,780
    )Other current assets
    
    
    (279,379
    )
    
    
    (244,212
    )Other assets
    
    
    (127,863
    )
    
    
    138,926Trade and subcontractors payable
    
    
    (1,270,738
    )
    
    
    (129,865
    )Accrued expenses
    
    
    (378,473
    )
    
    
    380,407Billings in excess of costs and earnings
    
    
    (187,817
    )
    
    
    25,862Other liabilities
    
    
    59,228
    
    
    
    (53,042
    )Net cash used in operating activities
    
    
    (50,408
    )
    
    
    (772,706
    )Cash flows from investing activities:Additions to income-producing properties, net
    
    
    (106,261
    )
    
    
    (18,773
    )Additions to property and equipment, net
    
    
    (351,072
    )
    
    
    (12,540
    )Additions to intangible assets, net
    
    
    (175,399
    )
    
    
    (22,308
    )Additions to goodwill, net
    
    
    (29,256
    )
    
    
    Acquisition, net of cash acquired
    
    
    (125,000
    )
    
    
    Repayments received on notes receivable
    
    
    
    
    
    
    66,147Net cash (used in) provided by investing activities
    
    
    (786,988
    )
    
    
    12,526Cash flows from financing activities:Debt repayments
    
    
    (286,140
    )
    
    
    (336,729
    )Debt restructuring
    
    
    (1,974,042
    )
    
    
    Deferred loan costs paid
    
    
    (50,000
    )
    
    
    Repurchase of common stock
    
    
    (834
    )
    
    
    Cash dividends
    
    
    (641,228
    )
    
    
    (116,574
    )Net cash used in financing activities
    
    
    (2,952,244
    )
    
    
    (453,303
    )Cash flows from discontinued operations:Operating activities
    
    
    28,534
    
    
    
    354,442Debt repayments
    
    
    
    
    
    
    (179,949
    )Net cash provided by discontinued operations
    
    
    28,534
    
    
    
    174,493Net decrease in cash and cash equivalents
    
    
    (3,761,106
    )
    
    
    (1,038,990
    )Cash and cash equivalents at beginning of period
    
    
    6,379,679
    
    
    
    5,157,639Cash and cash equivalents at end of period
    
    $
    2,618,573
    
    
    $
    4,118,649Supplemental disclosure of noncash financing activities:Issuance of common stock under Stock Award Plan
    
    $
    5,200
    
    
    $
    
 See accompanying notes to
consolidated financial statements. 4




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##### Table of Contents



ABRAMS INDUSTRIES, INC. 
 
 NOTE 1. ORGANIZATION AND
BUSINESS Abrams Industries, Inc. (together with its subsidiaries, the Company)
was organized under Delaware law in 1960. In 1984, the Company changed its
state of incorporation from Delaware to Georgia. The Company (i) provides
energy engineering services and develops, implements and supports maintenance
and service request solutions for facilities; (ii) implements energy saving
lighting programs and provides other energy services, including
facility-related improvements that reduce energy and operating costs; and (iii)
engages in real estate investment and development. The Company also
historically provided commercial construction services as a general contractor. NOTE 2. UNAUDITED
STATEMENTS The accompanying unaudited consolidated financial statements have been
prepared by the Company in accordance with accounting principles generally
accepted in the United States of America, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements have been condensed or
omitted pursuant to such rules and regulations, although management believes
that the accompanying disclosures are adequate 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, 2004. Results of operations for interim periods are not necessarily
indicative of annual results. NOTE 3. SIGNIFICANT
ACCOUNTING POLICIES As of January 31, 2003, the Company adopted the fair value disclosure
provisions of Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation, as amended by SFAS No. 148,
Accounting for Stock-Based Compensation  Transition and
Disclosure. Under
SFAS No. 148, the Company is required to disclose the effects on reported net
(loss) earnings with respect to stock-based compensation. For purposes of the required pro forma disclosures, the Company has
computed the value of all stock option awards granted for the first quarter
ended July 31, 2004, and July 31, 2003, using the Black-Scholes option pricing
model. Options to purchase 725,992 shares were outstanding at July 31, 2004, of
which 521,528 options were vested. The Company granted 54,900 stock options
and 5,200 shares of stock in the first quarter ended July 31, 2004. No options
or shares of stock were granted in the first quarter ended July 31, 2003. The
number of options forfeited in the first quarter of fiscal 2005 and fiscal 2004
was 26,500 and 123,000, respectively. If the Company had accounted for its
stock-based compensation awards in accordance with SFAS No. 123, pro forma
results would have been as follows: 5




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##### Table of Contents



QuarterEnded July 31,2004
    
    2003Net loss, as reported
    
    $
    (1,105,454
    )
    
    $
    (948,406
    )Deduct: Total stock-based compensation
expense as determined under fair value
based method for all awards, net of
related tax effects
    
    
    (55,587
    )
    
    
    (39,082
    )Add: Forfeitures, net of related tax effects
    
    
    14,211
    
    
    
    59,346Pro forma net loss
    
    $
    (1,146,830
    )
    
    $
    (928,142
    )Net loss per share:Basic and
diluted - as reported
    
    $
    (0.35
    )
    
    $
    (0.33
    )Basic and
diluted - pro forma
    
    $
    (0.36
    )
    
    $
    (0.32
    )
 NOTE 4. RECEIVABLES All net contract and trade receivables are expected to be collected within
one year. NOTE 5. DISCONTINUED
OPERATIONS The Company is in the business of creating long-term value by periodically
realizing gains through the sale of existing real estate assets, and then
redeploying its capital by reinvesting the proceeds from such sales. Effective
May 1, 2002, the Company adopted SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which requires, among other things, that the
operating results of certain income-producing assets, sold subsequent to April
30, 2002, be included in discontinued operations in the statements of
operations for all periods presented. The Company classifies an asset as held
for sale when the asset is under a binding sales contract with minimal
contingencies, and the buyer is materially at risk if the buyer fails to
complete the transaction. However, each potential transaction is evaluated
based on its separate facts and circumstances. Pursuant to this standard, as
of July 31, 2004, the Company had no assets that were classified as held for
disposition or sale. During fiscal 2004, the Company made the decision to curtail its
operations as a general contractor, and pursuant to this decision, all
operating activities have substantially ceased and when all warranty periods have expired, the
Construction Segment will be classified as a discontinued operation, and the
historical operating results of the Segment will be reclassified to
discontinued operations pursuant to SFAS No. 144. On March 12, 2004, the Company sold its shopping center located in North
Fort Myers, Florida, and recognized a pretax gain of approximately $4.0
million. As a result this transaction, the Companys financial statements have
been prepared with the results of operations and cash flows related to the
North Fort Myers shopping center shown as discontinued operations. Summarized
financial information for discontinued operations for the first quarter ended
July 31 is as follows: 6




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##### Table of Contents



Quarter endedJuly 31,2004
    
    2003Rental income revenues
    
    $
    
    
    
    $
    706,624Operating expenses:Rental property operating expenses
    
    
    
    
    
    
    245,704Depreciation
    
    
    
    
    
    
    166,451Interest expense
    
    
    
    
    
    
    130,407Total rental property expenses
    
    
    
    
    
    
    542,562Earnings from discontinued operations
    
    
    
    
    
    
    164,062Income tax expense
    
    
    
    
    
    
    64,000Earnings from discontinued operations, net of tax
    
    $
    
    
    
    $
    100,062
 NOTE 6. OPERATING
SEGMENTS The Company has four operating segments: Energy and Facilities Solutions,
Energy Services, Real Estate, and Construction. The table below exhibits
selected financial data on a segment basis. Earnings (loss) from continuing
operations before income taxes are total revenues of continuing operations less
operating expenses of continuing operations, including depreciation and
interest. Parent company expenses have not been allocated to the subsidiaries. Energy andFor the Quarter Ended
    
    Facilities
    
    EnergyJuly 31, 2004
    
    Solutions
    
    Services (1)
    
    Real Estate
    
    Construction (2)
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated
customers
    
    $
    890,211
    
    
    $
    1,962,868
    
    
    $
    2,028,380
    
    
    $
    145,383
    
    
    $
    
    
    
    $
    
    
    
    $
    5,026,842Interest and other income
    
    
    
    
    
    
    
    
    
    
    28,072
    
    
    
    119
    
    
    
    7,085
    
    
    
    
    
    
    
    35,276Intersegment revenue
    
    
    11,535
    
    
    
    
    
    
    
    124,354
    
    
    
    3,293
    
    
    
    
    
    
    
    (139,182
    )
    
    
    Total revenues from
continuing operations
    
    $
    901,746
    
    
    $
    1,962,868
    
    
    $
    2,180,806
    
    
    $
    148,795
    
    
    $
    7,085
    
    
    $
    (139,182
    )
    
    $
    5,062,118Earnings (loss) before
income taxes from
continuing operations
    
    $
    (236,420
    )
    
    $
    (270,378
    )
    
    $
    (434,279
    )
    
    $
    (162,057
    )
    
    $
    (784,412
    )
    
    $
    119,092
    
    
    $
    (1,768,454
    )Energy andFor the Quarter Ended
    
    Facilities
    
    EnergyJuly 31, 2003
    
    Solutions
    
    Services (1)
    
    Real Estate
    
    Construction (2)
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues
from unaffiliated customers
    
    $
    658,804
    
    
    $
    
    
    
    $
    2,019,616
    
    
    $
    11,033,045
    
    
    $
    
    
    
    $
    
    
    
    $
    13,711,465Interest and other income
    
    
    
    
    
    
    
    
    
    
    17,292
    
    
    
    722
    
    
    
    1,306
    
    
    
    
    
    
    
    19,320Intersegment revenue
    
    
    
    
    
    
    
    
    
    
    113,493
    
    
    
    
    
    
    
    
    
    
    
    (113,493
    )
    
    
    Total revenues from
continuing operations
    
    $
    658,804
    
    
    $
    
    
    
    $
    2,150,401
    
    
    $
    11,033,767
    
    
    $
    1,306
    
    
    $
    (113,493
    )
    
    $
    13,730,785Earnings (loss) before
income taxes from
continuing operations
    
    $
    (309,154
    )
    
    $
    
    
    
    $
    104,787
    
    
    $
    (698,598
    )
    
    $
    (678,406
    )
    
    $
    3,903
    
    
    $
    (1,577,468
    )
 7




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##### Table of Contents



(1)
    
    The Energy Services Segment was formed in December 2003.(2)
    
    Although the operations of the Construction Segment were
substantially discontinued, the results, nevertheless, are included in
continuing operations pursuant to SFAS No. 144. NOTE 7. EARNINGS
(LOSS) PER SHARE Basic earnings per share are computed by dividing net earnings (loss) by
the weighted average shares outstanding during the reporting period. Diluted
earnings per share are computed giving effect to dilutive stock equivalents
resulting from outstanding stock options. The dilutive effect on the number of
common shares for the first quarter of fiscal 2005 and 2004 was 407 and 0,
respectively. Since the Company had losses from continuing operations
for both periods presented, all stock equivalents were antidilutive during these
periods, and therefore are excluded when determining the diluted weighted
average shares outstanding. NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS The gross carrying amounts and accumulated amortization for all of the
Companys intangible assets as of July 31, 2004, are as follows: Amount
    
    AmortizationAmortized intangible assets:Proprietary customers
software solutions
    
    $
    1,400,285
    
    
    $
    367,667Computer software
    
    
    414,850
    
    
    
    321,765Real estate lease costs
    
    
    1,741,259
    
    
    
    652,216Customer relationships
    
    
    218,000
    
    
    
    25,433Deferred loan costs
    
    
    823,175
    
    
    
    501,608Other
    
    
    55,608
    
    
    
    11,156$
    4,653,177
    
    
    $
    1,879,845Unamortized intangible assets:Trademark
    
    $
    708,707
    
    
    $
    Goodwill
    
    $
    5,372,455
    
    
    $
    
 Goodwill
increased $374,213 from April 30, 2004, due to: (1) the
acquisition of Building Performance Engineers, Inc. (see Note 11
Acquisitions)
of $344,957; and (2) purchase price adjustments of $29,256 from prior
acquisitions. Aggregate amortization expense for all amortized intangible assetsFor the three months ended July 31, 2004
    
    $
    165,644For the three months ended July 31, 2003
    
    
    121,772
 NOTE 9. MORTGAGE NOTES PAYABLE On July 8, 2004, the Company restructured the loan on the Companys owned
shopping center in Jacksonville, Florida. The Company paid the lender $1.5
million as payment in full of the Additional Interest Agreement, which was then
terminated, and the principal loan balance was reduced by $474,042.
The restructured principal loan balance is for $7.8 million, bears interest at 6.125%, and is amortized
until it matures on July 1, 2029, but
may be 8




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##### Table of Contents



called after July 1, 2011, with thirteen months notice. The following table updates Footnote 7 Mortgage Notes Payable and Leases
in the Companys Annual Report on Form 10-K as of April 30, 2004, to reflect
the restructuring of the loan mentioned above that occurred in the first
quarter ended July 31, 2004. The expected future minimum principal and
interest payments on mortgage notes payable on the owned rental properties are
as follows: Owned Rental PropertiesMortgage PaymentsPeriod ending April 30,
    
    Principal
    
    Interest2005 (1)
    
    $
    774,364
    
    
    $
    1,457,9612006
    
    
    1,114,040
    
    
    
    1,968,4102007
    
    
    1,171,418
    
    
    
    1,877,9272008
    
    
    6,833,107
    
    
    
    1,647,1292009
    
    
    767,885
    
    
    
    1,282,956Thereafter
    
    
    17,007,471
    
    
    
    9,667,560$
    27,668,285
    
    
    $
    17,901,943
  (1)
    
    The amount for the period ending April 30, 2005 is for the
remaining nine-month period from August 1, 2004, to April 30, 2005. The mortgage notes payable are due at various dates between January 1,
2008, and July 1, 2029, and bear interest at rates ranging from 6.125% to
9.25%. Management has determined that the changes to the loan mentioned above
were a material modification of the old loan, and as a result, the Company
recognized an expense relating to the extinguishment of debt in the amount of
$218,071, as shown on the accompanying statement of operations. In
conjunction with the new restructured loan, the Company recorded $50,000 in
deferred loan costs to be amortized over the life of the loan. NOTE 10. COMMITMENTS AND CONTINGENCIES The Company is subject to various other legal proceedings and claims that
arise in the ordinary course of business. While the resolution of these
matters cannot be predicted with certainty, the Company believes that the final
outcome of these matters will not have a material adverse effect on the
Companys financial position or results of operations. NOTE 11. ACQUISITIONS On May 26, 2004, Servidyne Systems, LLC (Servidyne), an indirect
wholly-owned subsidiary of the Company, acquired the operating business and
assets of Building Performance Engineers, Inc. (BPE) for a purchase price of
$369,906, in order to expand the Companys capabilities in energy engineering and
design. The consideration consisted of 21,126 newly-issued shares of the
Companys common stock, with a fair value of $94,906 at the date of grant, a
note payable in the amount of $150,000, and cash of $125,000
(including direct acquisition expenses). The amount and type of consideration was determined by negotiation
among the parties. The following table summarizes the estimated fair values of
the assets acquired on the date of acquisition: 9




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##### Table of Contents



OperationsAcquired fromBPE
    
    Estimated LifeProperty, furniture and equipment, net
    
    $
    8,727
    
    
    3 yearsNon-competes
    
    
    16,222
    
    
    2 yearsAssembled
workforce
    
    
    71,300
    
    
    IndefiniteGoodwill
    
    
    273,657
    
    
    IndefiniteTotal assets acquired
    
    $
    369,906
 The goodwill has been assigned to the Energy and Facilities Solutions
Segment. The acquired assets and the results of operations have been included
in the Companys financial statements since the date of acquisition. The
Company will test goodwill for impairment related to its Energy and Facilities
Solutions Segment at April 30, 2005, pursuant to SFAS No. 142, Goodwill and
Other Intangible Assets. On April 16, 2004, Servidyne acquired substantially all of the assets and
assumed certain liabilities of iTendant, Inc. (iTendant) for a purchase price
of approximately $1.3 million. The consideration consisted of 123,547
newly-issued shares of the Companys common stock, with a fair value of
$525,075 at the date of grant, the payment of $500,000 cash, and the assumption of approximately
$170,000 of iTendants liabilities. Additional contingent consideration is
provided for based on future operating goals and performance. Consideration
was determined by negotiation among the parties. The following table summarizes the results of the Company on a pro forma
basis for the three months ended July 31, 2003, as if the
acquisitions of BPE and iTendant, Inc., as well as the acquisitions of The
Wheatstone Energy Group, Inc., in December 2003, and a professional medical office
building located in Douglasville, Georgia, in April 2004, had occurred at the
beginning of the period. These results do not purport to represent what the
results of operations for the Company would have actually been or to be
indicative of the future results of operations of the Company (in thousands,
except per share amounts): Three Months EndedJuly 31,2003
    
    2003(As Reported)
    
    (Pro Forma)Revenues
    
    $
    13,731
    
    
    $
    15,307Net loss
    
    
    (948
    )
    
    
    (1,572
    )Net loss per share - basic and diluted
    
    $
    (0.33
    )
    
    $
    (0.54
    )
 10




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS The following discussion should be read in conjunction with the
consolidated financial statements, including the notes to those statements,
which are presented elsewhere in this report. The Company also recommends that
this discussion and analysis be read in conjunction with managements
discussion and analysis and consolidated financial statements included in the
Companys Annual Report on Form 10-K for the year ended April 30, 2004. The Companys fiscal year 2005 ends April 30, 2005. Changes in CONSOLIDATED BALANCE SHEETS between April 30, 2004, and July 31,
2004 Net accounts receivable decreased by $2,740,835, primarily due to the
collection of Construction Segment receivables related to work performed in
prior periods. Deferred income taxes increased by $938,262, due to net operating loss
carryforwards that the Company expects to utilize this fiscal year. Goodwill
increased by $374,213, primarily due to the acquisition of the
operating business and assets of Building Performance Engineers, Inc. Trade and subcontractor accounts payable decreased by $1,270,738,
primarily due to the payment of invoices to subcontractors for work performed
at the Construction Segment in prior periods. Other liabilities decreased by $3,026,619 and mortgage notes payable
increased by $1,106,776, primarily due to the restructuring of the loan on the
Companys owned shopping center located in Jacksonville, Florida (See
Liquidity and Capital Resources). Results of operations of the first quarter of fiscal 2005 compared to the first
quarter of fiscal 2004 REVENUES From Continuing Operations For the first quarter of fiscal 2005, consolidated revenues from
continuing operations, including interest income and other income, and net of
intersegment eliminations, were $5,062,118, compared to $13,730,785 for the
first quarter of fiscal 2004, a decrease of 63%. The figures in Chart A are segment revenues from continuing operations,
net of intersegment eliminations, and do not include interest income or other
income. 11




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##### Table of Contents



CHART A
REVENUES FROM CONTINUING OPERATIONS SUMMARY BY SEGMENT
(Dollars in Thousands) First Quarter EndedJuly 31,
    
    AmountIncrease
    
    PercentIncrease2004
    
    2003
    
    (Decrease)
    
    (Decrease)Energy and Facilities Solutions (1)
    
    $
    890
    
    
    $
    659
    
    
    $
    231
    
    
    
    35Energy Services (2)
    
    
    1,963
    
    
    
    
    
    
    
    1,963
    
    
    
    Real Estate (3)
    
    
    2,028
    
    
    
    2,020
    
    
    
    8
    
    
    
    Construction (4)
    
    
    145
    
    
    
    11,033
    
    
    
    (10,888
    )
    
    
    (99
    )$
    5,026
    
    
    $
    13,712
    
    
    $
    (8,686
    )
    
    
    (63
    )
 NOTES TO CHART A  (1)
    
    Revenues increased for the first quarter of fiscal 2005 from that in
fiscal 2004 primarily due to: (1) an increase of approximately $132,000
in revenues from iTendant, Inc. and Building Performance Engineers, Inc.,
acquired in April 2004 and May 2004, respectively; and (2) an increase of
approximately $99,000 in revenues due to growth from a broadening customer base.(2)
    
    The Energy Services Segment was formed in December 2003.(3)
    
    Represents rental revenues.
The increase in rental revenues for the first quarter of fiscal 2005
compared to the same period in 2004 is primarily due to: (a)
approximately $154,000 in rental revenues related to a professional
medical office building located in Douglasville, Georgia, that was
acquired by the Company in April 2004; offset by: (b) a decrease in
rental revenues of approximately $46,000, which are contingent on tenant sales exceeding specified
amounts; (c) a decrease in common area
maintenance cost recoveries of approximately $28,000; and (d) a decrease
in leaseback income of approximately $64,000 related to a Kmart leaseback
that was assigned to the fee owner by the Company in October 2003.
Rental revenues for all periods presented do not include rental revenues
generated by income-producing properties which were subsequently sold.
Such revenues have been reclassified to discontinued operations.(4)
    
    As previously discussed in the Companys 2004 Annual Report on Form
10-K for the fiscal year ended April 30, 2004, the Company has elected to
discontinue its role as a multi-purpose general contractor. Although the
operations of the Construction Segment have been substantially discontinued,
the results, will nevertheless, continue to be included in continuing operations pursuant
to SFAS No. 144 until all operating activities cease and all warranty
periods expire. The following table indicates the backlog of contracts and rental income
for the next twelve months, by industry segment. 12




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##### Table of Contents



July 31,2004
    
    2003Energy and Facilities Solutions (a)
    
    $
    956,000
    
    
    $
    661,000Energy Services (b)
    
    
    1,264,000
    
    
    
    Real Estate (c)
    
    
    7,750,000
    
    
    
    7,322,000Construction (d)
    
    
    
    
    
    
    10,608,000Less: Intersegment eliminations (e)
    
    
    (521,000
    )
    
    
    (492,000
    )Total Backlog
    
    $
    9,449,000
    
    
    $
    18,099,000
  (a)
    
    The increase in backlog for the first quarter of fiscal 2005 compared to
the same period in fiscal 2004 is primarily the result of the acquisitions
of iTendant, Inc. and Building Performance Engineers, Inc. in April 2004
and May 2004, respectively. Contracts that can be cancelled with less than
one years notice are not included in backlog. As of July 31, 2004, and
July 31, 2003, such contracts not included in backlog totaled $1.36
million and $1.2 million, respectively, in potential revenue over the
ensuing twelve months, assuming cancellations provisions are not invoked.  (b)
    
    The Energy Services Segment was formed in December 2003.  (c)
    
    Included in Real Estate backlog at July 31, 2004, is approximately
$458,000 related to a professional medical office building located in
Douglasville, Georgia, acquired by the Company in April 2004. This
increase from prior year is offset by approximately $255,000 related to a Kmart leaseback
that was assigned to the fee owner by the Company in October 2003.  (d)
    
    The absence in backlog in fiscal 2005 compared to 2004
results from the Companys
election to discontinue its operations as a multi-purpose general
contractor. Although the operations of the Construction Segment have
been
substantially discontinued, the results, will nevertheless, continue
to be included in
continuing operations pursuant to SFAS No. 144 until all
operating activities cease and warranty periods expire.  (e)
    
    The intersegment eliminations reported include only intercompany rent of
approximately $521,000 and $492,000, as of July 31, 2004, and July 31,
2003, respectively. COSTS AND EXPENSES APPLICABLE TO REVENUES
From Continuing Operations As a percentage of total segment revenues from continuing operations (See
Chart A), the total applicable costs and expenses (See Chart B) were 70% and
89% for the first quarter of fiscal 2005 and 2004, respectively. In reviewing
Chart B, the reader should recognize that the volume of revenues generally will
affect the amounts and percentages. The figures in Chart B are net of intersegment eliminations. 13




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##### Table of Contents



CHART B
COSTS AND EXPENSES APPLICABLE TO REVENUES
FROM CONTINUING OPERATIONS SUMMARY BY SEGMENT
(Dollars in Thousands) Percent of SegmentRevenues forFirst Quarter Ended
    
    First Quarter EndedJuly 31,
    
    July 31,2004
    
    2003
    
    2004
    
    2003Energy and Facilities Solutions (1)
    
    $
    481
    
    
    $
    404
    
    
    
    54
    
    
    
    61Energy Services (2)
    
    
    1,481
    
    
    
    
    
    
    
    75
    
    
    
    Real Estate (3)
    
    
    1,414
    
    
    
    1,209
    
    
    
    70
    
    
    
    60Construction (4)
    
    
    115
    
    
    
    10,620
    
    
    
    79
    
    
    
    96$
    3,491
    
    
    $
    12,233
    
    
    
    70
    
    
    
    89
 NOTES TO CHART B  (1)
    
    The change in the dollar amount and percentage of costs and expenses
applicable to revenues from continuing operations for the first quarter of
fiscal 2005, compared to the same period in 2004, is primarily a result of
the change in the mix of services and products.(2)
    
    The Energy Services Segment was formed in December 2003.(3)
    
    The increase in the dollar amount and percentage of costs and expenses
applicable to revenues is primarily due to: (a) rental operating costs
and expenses of approximately $147,000 related to a professional medical
office building located in Douglasville, Georgia, acquired in April 2004;
(b) an increase in leasing expenses of approximately $23,000; and (c) an
increase in common area maintenance expenses of approximately
$32,000. Costs and expenses for all periods presented do not include the
costs and expenses of income producing properties that were subsequently
sold, and do not include the costs of sale of these properties. Those
costs and expenses have been reclassified to discontinued operations.(4)
    
    As previously mentioned elsewhere, the Company has elected to discontinue
its role as a multi-purpose general contractor. Although the operations
of the Construction Segment have been substantially discontinued, the
results, will
nevertheless, continue to be included in continuing operations pursuant to SFAS No.
144 until all operating activities cease and all warranty periods
expire. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
From Continuing Operations For the first quarters of fiscal 2005 and 2004, selling, general and
administrative expenses (SG&A) from continuing operations, net of
intersegment eliminations, were $2,486,129 and $2,463,682, respectively. As a
percentage of consolidated revenues from continuing operations, these expenses
were 49% and 18%, respectively. In reviewing Chart C, the reader should
recognize that the volume of revenues generally will affect the amounts and
percentages. The percentages in Chart C are based upon expenses as they relate
to segment revenues from continuing operations (Chart A), except that parent
and total expenses relate to consolidated revenues from continuing operations. 14




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##### Table of Contents



CHART C
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
FROM CONTINUING OPERATIONS BY SEGMENT
(Dollars in Thousands) Percent of SegmentRevenues forFirst Quarter Ended
    
    First Quarter EndedJuly 31,
    
    July 31,2004
    
    2003
    
    2004
    
    2003Energy and Facilities Solutions (1)
    
    $
    639
    
    
    $
    564
    
    
    
    72
    
    
    
    86Energy Services (2)
    
    
    640
    
    
    
    
    
    
    
    32
    
    
    
    Real Estate (3)
    
    
    406
    
    
    
    224
    
    
    
    20
    
    
    
    11Construction (4)
    
    
    105
    
    
    
    1,046
    
    
    
    72
    
    
    
    9Parent (5)
    
    
    696
    
    
    
    630
    
    
    
    14
    
    
    
    5$
    2,486
    
    
    $
    2,464
    
    
    
    49
    
    
    
    18
 NOTES TO CHART C  (1)
    
    Although SG&A expenses were lower on a percentage basis due to the
increase in revenues, on a dollar amount basis, SG&A expenses were higher
for the first quarter of 2005 compared to the same period of fiscal 2004
due to an increase in personnel and personnel costs resulting primarily
from the acquisitions of iTendant, Inc. and Building Performance
Engineers, Inc. in April 2004 and May 2004, respectively.(2)
    
    The Energy Services Segment was formed in December 2003.(3)
    
    On a dollar and percentage basis, SG&A expenses from continuing
operations were higher for the first quarter of fiscal 2005 compared to
2004, primarily due to: (a) an increase in personnel costs of
approximately $96,000; and (b) an increase in legal and professional fees
of approximately $47,000. SG&A expenses for all periods presented do not
include SG&A expenses of income-producing properties that were
subsequently sold. These expenses have been reclassified as discontinued
operations.(4)
    
    As previously mentioned elsewhere, the Company has elected to discontinue
its role as a multi-purpose general contractor. Although the operations
of the Construction Segment have been substantially discontinued, the results,
will nevertheless, continue to be included in continuing operations pursuant to SFAS No.
144 until all operating activities cease and all warranty periods
expire.(5)
    
    On a dollar and percentage basis, SG&A expenses were higher for the first
quarter of fiscal 2005 compared to the same period in 2004, primarily due
to: (a) an increase in personnel costs of approximately $161,000; offset
by (b) a decrease in legal and professional fees of approximately $76,000. Liquidity and capital
resources Between April 30, 2004, and July 31, 2004, working capital decreased by
$3,799,562, primarily due to: (1) cash utilized in the restructuring of the
loan related to the Companys owned shopping center located in Jacksonville,
Florida, of approximately $2.0 million; (2) payment of the regular and special
dividends of approximately $641,000; (3) the addition of approximately $340,000
in leasehold improvements at the corporate headquarters building; and (4) the
acquisition of the operating business 15




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##### Table of Contents



and assets of Building Performance
Engineers, Inc. Operating activities used cash of $50,408, primarily due to
losses incurred during the first three months of fiscal 2005, and a decrease in
accounts receivable, offset by a decrease in trade and subcontractor accounts
payable. Investing activities used cash of $786,988, primarily due: (1)
additions to property and equipment, related to leasehold improvements on the
corporate headquarters building; (2) additions to income-producing properties
and intangible assets; and (3) the acquisition of the operating business and
assets of Building Performance Engineers, Inc. Financing activities used cash
of $2,952,244, primarily due to: (1) the payment of $2.0 million related to
the restructuring of the loan on the Companys owned shopping center
located in Jacksonville, Florida; (2) scheduled principal payments of mortgage
notes; and (3) the payment of a regular and special dividend. Discontinued
operations provided cash of $28,534. Except for certain real estate construction loans and occasional
short-term operating loans, the Company generally has been able to finance its
working capital needs through funds generated internally. If adequate funds
are not generated through normal operations or from the sale of real estate,
the Company has available bank lines of credit. These lines of credit bear
interest at the prime rate or LIBOR plus 2%, and have a commitment fee of
0.375% on any unused portion. The bank lines of credit expire on October 30,
2004. The Company expects to renew the bank lines of credit in
appropriate amounts; however, there
can be no assurance that such renewal will take place. The Company anticipates that its equity, lines of credit, potential
proceeds from sales of real estate, potential cash flow provided by financing
or refinancing of debt, and cash flow generated from operations will, for the
foreseeable future, provide adequate liquidity and financial flexibility to
meet the Companys needs to fund working capital, capital expenditures, and
investment activities. Contractual Obligations The following table updates Item 7. Contractual Obligations in the
Companys Annual Report on Form 10-K as of April 30, 2004, to reflect the
restructuring of the loan mentioned elsewhere that occurred in the first
quarter ended July 31, 2004: Payment due by PeriodLess than
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    1 Year
    
    1 - 3 Years
    
    3 - 5 Years
    
    5 YearsMortgage notes payable (1)
    
    $
    28,412,475
    
    
    $
    1,518,542
    
    
    $
    2,285,458
    
    
    $
    7,600,992
    
    
    $
    17,007,483Operating leases (2)
    
    
    4,147,000
    
    
    
    1,332,000
    
    
    
    1,661,000
    
    
    
    430,000
    
    
    
    724,000Other long-term debt
    
    
    1,938,083
    
    
    
    46,855
    
    
    
    338,228
    
    
    
    318,000
    
    
    
    1,235,000Long-term obligations
    
    
    322,000
    
    
    
    100,000
    
    
    
    222,000
    
    
    
    
    
    
    
    Capital lease obligations
    
    
    53,495
    
    
    
    42,938
    
    
    
    10,557
    
    
    
    
    
    
    
    Total
    
    $
    34,873,053
    
    
    $
    3,040,335
    
    
    $
    4,517,243
    
    
    $
    8,348,992
    
    
    $
    18,966,483
  (1)
    
    Regularly scheduled loan principal amortization and maturity
payments.(2)
    
    Future minimum rental payments on leaseback shopping centers. 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 16




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be materially
different from any future results, performance, or uncertainties expressed or
implied by such forward-looking statements. Factors relating to general global, national, regional, and local economic
conditions, including international political stability, national defense,
homeland security, employment levels, wage and salary levels, consumer
confidence, availability of credit, taxation policies, interest rates, capital
spending, deflation, and inflation could negatively impact the Company and its
customers, suppliers, and sources of capital. Any significant negative impact
from these factors could result in material adverse effects on the Companys
results of operations and financial condition. The Company is at risk for many other matters beyond its control,
including, but not limited to: the possible impact, if any, on the ultimate
disposition of legal proceedings in which the Company is involved, including
the matters described in Item 3 of the Companys Annual Report on Form 10-K for
its fiscal year ended April 30, 2004; the potential loss of significant
customers; co-tenancy provisions in anchor tenant leases; the Companys ability
to sell or refinance its real estate; the possibility of not achieving
projected backlog revenues or not realizing earnings from such revenues; the
cost and availability of insurance; the ability of the Company to attract and
retain key personnel; weather conditions; changes in laws and regulations,
including changes in accounting standards, generally accepted accounting
principles, and regulatory requirements of the SEC and NASDAQ; overall vacancy
rates in markets where the Company leases retail and office space; overall
capital spending trends in the economy; the timing and amount of earnings
recognition related to the possible sale of real estate properties held for
sale; delays in or cancellations of customers orders; the level and volatility
of interest rates; the level and volatility of energy prices; the failure of a subcontractor to perform; and the
deterioration in the financial stability of an anchor tenant, significant
subcontractor or other significant customer. Critical Accounting
Policies A critical accounting policy is one that is both important to the portrayal of
a Companys financial position and results of operations, and requires the
Company to make estimates and assumptions in certain circumstances that affect
the amounts reported in the accompanying consolidated financial statements and
related notes. In preparing these financial statements, the Company has made
its best estimates and used its best judgments regarding certain amounts
included in the financial statements, giving due consideration to materiality.
The application of these accounting policies involves the exercise of judgment
and the use of assumptions regarding future uncertainties, and as a result,
actual results could differ from those estimates. Management believes that the
Companys most critical accounting policies include: Revenue recognition
     Energy and facilities solutions 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. Energy
services revenues and 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. 17




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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. Revenues
from the sale of real estate are recognized when all of the
following has occurred: (a) the property is transferred to the buyer; (b) the
buyers initial and continuing investment is adequate to demonstrate a
commitment to pay for the property; and (c) the buyer has assumed all future
ownership risks of the property. Costs of sales related to real estate are
based on the specific property sold. When a
portion or unit of a development property is sold, a proportionate share of the
total cost of the development is charged to cost of sales. Income-producing properties and property and equipment  Property and equipment are stated at cost, and are depreciated for
financial reporting purposes using the straight-line method over the estimated
useful lives of the assets. Significant additions that extend asset lives are
capitalized. Normal maintenance and repair costs are expensed as incurred. Interest and other carrying costs related to real estate assets under
construction are capitalized. Costs of development and construction of real
estate assets are also capitalized. Capitalization of interest and other
carrying costs is discontinued when a development project is substantially
completed or if active development ceases. Impairment of long-lived assets, including goodwill, and assets to be disposed
of  Income taxes  18




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##### Table of Contents



Discontinued Operations Accounting for the Impairment or Disposal of
Long- Lived Asset,
 
 ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK On July 8,
2004, the Company restructured the loan on the Companys owned
shopping center in Jacksonville, Florida. The Company paid the lender $1.5
million as payment in full of the Additional Interest Agreement, which was then
terminated. The restructured loan has a principal amount of $7.8 million, bears interest at
6.125%, and matures on July 1, 2029, but may be called after July 1, 2011, with
thirteen months notice. The following table updates Item 7A. Quantitative and Qualitative
Disclosures About Market Risk in the Companys Annual Report on Form 10-K as
of April 30, 2004, to reflect the restructuring of the loan mentioned above
that occurred in the first quarter ended July 31, 2004. The following table
summarizes information related to the Companys market risk sensitive debt
instruments as of April 30, 2004: Expected Maturity Date
Fiscal Year Ending April 30
(Dollars in Thousands)EstimatedThere-
    
    
    
    
    
    Fair2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    after
    
    Total
    
    ValueFixed rate debt
    
    $
    1,608
    
    
    
    1,301
    
    
    
    1,333
    
    
    
    7,111
    
    
    
    808
    
    
    
    17,243
    
    
    
    29,404
    
    
    
    30,670Average interest rate
    
    
    7.1
    %
    
    
    7.6
    %
    
    
    7.6
    %
    
    
    7.4
    %
    
    
    8.0
    %
    
    
    7.3
    %Variable rate debt (1)
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000
  (1)
    
    Interest on variable debt is based on the prime rate plus 1.5%. There have been no other material changes since April 30, 2004. Refer to
the Companys Annual Report on Form 10-K for the fiscal year ended April 30,
2004, for detailed disclosures of quantitative and qualitative disclosures
of market risk. 
 ITEM 4. CONTROLS AND
PROCEDURES Management
has evaluated the Companys disclosure controls and
procedures as defined by Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended, as of the end of the period covered by this
report. This evaluation was carried out with the participation of the
Companys Chief Executive Officer and Chief Financial Officer. No system of
controls, no matter how well designed and operated, can provide absolute
assurance that the objectives of the system of controls are met, and no
evaluation of controls can provide absolute assurance that the system of
controls has operated effectively in all cases. The Companys disclosure
controls and procedures, however, are designed to provide a reasonable assurance
that the objectives of disclosure controls and procedures are met. 19




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Based on managements evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Companys disclosure controls and
procedures were effective as of the end of the period covered by this
report, to
provide reasonable assurance that the objectives of disclosure controls and
procedures were met. There was
no change in the Companys internal controls over financial
reporting that occurred during the period covered by this quarterly report on
Form 10-Q that materially affected, or is reasonably likely to materially
affect, the Companys internal controls over financial reporting. 20




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PART II. OTHER INFORMATION 
 ITEM 2. UNREGISTERED SALES
OF EQUITY SECURITIES AND USE OF PROCEEDS On May 26, 2004, an indirect wholly-owned subsidiary of the Company
acquired substantially all of the assets of Building Performance Engineers,
Inc. The consideration included 21,126 newly-issued shares of the Companys
common stock, par value $1.00 per share. The issuance of these shares was exempt
from registration as a private placement pursuant to the Securities Act of 1933
and the rules promulgated thereunder. 
 ITEM 6. EXHIBITS 31(a)
    
    Certification of Chief Executive Officer, pursuant Rules 13a-14(a)/15d-14(a)31(b)
    
    Certification of Chief Financial Officer, pursuant Rules 13a-14(a)/15d-14(a)32(a)
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes
Oxley Act 200232(b)
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the
Sarbanes Oxley Act
2002
 21




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##### Table of Contents



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. ABRAMS INDUSTRIES, INC.(Registrant)Date:
September 14, 2004
    
    /s/ Alan R. AbramsAlan R. AbramsChief Executive OfficerDate:
September 14, 2004
    
    /s/ Mark J. ThomasMark J. ThomasChief Financial Officer
 22