##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q/A
 QUARTERLY REPORT Amendment No. 1
 
 Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
 For the quarter ended October 31, 2010
 Commission file number 0-10146
 SERVIDYNE, INC.
  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 4. CONTROLS AND PROCEDURESPART II. OTHER INFORMATIONITEM 6. EXHIBITSSIGNATURESEX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  Explanatory Note
  Accounting for
Income Taxes
      
    
    Part I  Item 1  Financial Statements
    
    Part I  Item 2  Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    Part I  Item 4  Controls and Procedures
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##### Table of Contents



SERVIDYNE, INC.
 October 31, 2010
    
    
    April 30, 2010(Restated)
    
    
    (Restated)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    2,408,230
    
    
    $
    1,923,641Receivables (Note 5):Trade accounts and notes, net of allowance for doubtful accounts of
$85,397 and $58,989, respectively
    
    
    821,323
    
    
    
    953,075Contracts, net of allowance for doubtful accounts of $52,847 and
$22,530, respectively, including retained amounts of $521,623 and
$675,281, respectively (Note 12)
    
    
    3,132,729
    
    
    
    3,337,177Costs and earnings in excess of billings (Note 12)
    
    
    1,253,030
    
    
    
    715,129Assets of discontinued operations (Note 10)
    
    
    166,206
    
    
    
    188,827Deferred income taxes (Note 15)
    
    
    308,579
    
    
    
    360,097Other current assets
    
    
    1,705,867
    
    
    
    1,247,844Total current assets
    
    
    9,795,964
    
    
    
    8,725,790PROPERTY AND EQUIPMENT, net (Note 2)
    
    
    4,657,460
    
    
    
    4,805,542ASSETS OF DISCONTINUED OPERATIONS (Note 10)
    
    
    4,231,122
    
    
    
    13,767,227DEFERRED INCOME TAXES (Note 15)
    
    
    543,608
    
    
    
    1,160,371OTHER ASSETS:Real estate
held for future development or sale
    
    
    853,109
    
    
    
    853,109Intangible assets, net (Note 8)
    
    
    2,257,503
    
    
    
    2,395,874Goodwill (Note 8)
    
    
    6,354,002
    
    
    
    6,354,002Other assets (Note 9)
    
    
    2,789,325
    
    
    
    2,890,357Total assets
    
    $
    31,482,093
    
    
    $
    40,952,272LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    3,135,961
    
    
    $
    2,465,112Accrued expenses
    
    
    1,398,274
    
    
    
    1,378,538Deferred revenue
    
    
    357,937
    
    
    
    507,383Billings in excess of costs and earnings
    
    
    89,402
    
    
    
    53,100Liabilities of discontinued operations (Note 10)
    
    
    144,651
    
    
    
    520,308Short-term debt and current maturities of long-term debt
    
    
    275,343
    
    
    
    270,592Total current liabilities
    
    
    5,401,568
    
    
    
    5,195,033LIABILITIES OF DISCONTINUED OPERATIONS (Note 10)
    
    
    5,436,826
    
    
    
    13,587,832OTHER LIABILITIES
    
    
    1,061,264
    
    
    
    1,039,633MORTGAGE NOTES PAYABLE, less current maturities
    
    
    4,044,083
    
    
    
    4,107,996OTHER LONG-TERM DEBT, less current maturities (Note 12)
    
    
    1,938,069
    
    
    
    1,832,000Total liabilities
    
    
    17,881,810
    
    
    
    25,762,494COMMITMENTS AND CONTINGENCIES (Note 14)SHAREHOLDERS EQUITY:Common stock, $1 par value; 10,000,000 shares authorized;
3,919,373 issued and 3,675,982 outstanding at October 31, 2010;
3,919,773 issued and 3,676,383 outstanding at April 30, 2010
    
    
    3,919,373
    
    
    
    3,919,773Additional paid-in capital
    
    
    6,292,295
    
    
    
    6,206,521Retained earnings
    
    
    4,394,763
    
    
    
    6,069,629Treasury stock (common shares) of 243,391 and 243,390, respectively
    
    
    (1,006,148
    )
    
    
    (1,006,145
    )Total shareholders equity
    
    
    13,600,283
    
    
    
    15,189,778Total liabilities and shareholders equity
    
    $
    31,482,093
    
    
    $
    40,952,272
 See accompanying notes to condensed consolidated financial statements.
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##### Table of Contents



SERVIDYNE, INC.
 SECOND QUARTER ENDED
    
    
    SIX MONTHS ENDEDOCTOBER 31,
    
    
    OCTOBER 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(Restated)
    
    
    (Restated)
    
    
    (Restated)
    
    
    (Restated)REVENUES:Building Performance Efficiency (BPE) (Note 12)
    
    $
    7,519,147
    
    
    $
    3,922,541
    
    
    $
    12,360,874
    
    
    $
    7,795,649Other
    
    
    110,807
    
    
    
    106,017
    
    
    
    214,675
    
    
    
    207,0527,629,954
    
    
    
    4,028,558
    
    
    
    12,575,549
    
    
    
    8,002,701COST OF REVENUES:BPE
    
    
    5,403,096
    
    
    
    2,670,904
    
    
    
    8,968,113
    
    
    
    5,295,513Other
    
    
    161,346
    
    
    
    167,771
    
    
    
    335,652
    
    
    
    352,2755,564,442
    
    
    
    2,838,675
    
    
    
    9,303,765
    
    
    
    5,647,788SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    2,550,217
    
    
    
    2,292,123
    
    
    
    5,044,765
    
    
    
    4,676,032OTHER (INCOME) AND EXPENSES:Other income
    
    
    (67,366
    )
    
    
    (52,400
    )
    
    
    (44,375
    )
    
    
    (65,302
    )Interest income
    
    
    (22
    )
    
    
    (2,326
    )
    
    
    (39
    )
    
    
    (7,610
    )Interest expense
    
    
    111,800
    
    
    
    99,284
    
    
    
    220,790
    
    
    
    199,34144,412
    
    
    
    44,558
    
    
    
    176,376
    
    
    
    126,429LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    (529,117
    )
    
    
    (1,146,798
    )
    
    
    (1,949,357
    )
    
    
    (2,447,548
    )INCOME TAX BENEFIT (Note 15)
    
    
    (173,560
    )
    
    
    (330,107
    )
    
    
    (605,764
    )
    
    
    (775,093
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (355,557
    )
    
    
    (816,691
    )
    
    
    (1,343,593
    )
    
    
    (1,672,455
    )DISCONTINUED OPERATIONS (Note 10):(Loss) earnings from discontinued operations, adjusted for applicable income
tax (benefit) expense of ($210,821), $22,048, ($219,436) and $49,201 respectively
    
    
    (382,397
    )
    
    
    12,952
    
    
    
    (358,028
    )
    
    
    91,825Gain on disposition of income-producing properties, adjusted for applicable
income tax expense of $27,146, $0, $91,144 and $0, respectively
    
    
    49,633
    
    
    
    
    
    
    
    100,573
    
    
    
    (LOSS) EARNINGS FROM DISCONTINUED OPERATIONS
    
    
    (332,764
    )
    
    
    12,952
    
    
    
    (257,455
    )
    
    
    91,825NET LOSS
    
    $
    (688,321
    )
    
    $
    (803,739
    )
    
    $
    (1,601,048
    )
    
    $
    (1,580,630
    )NET (LOSS) EARNINGS PER SHARE (Note 7):From continuing operations  basic and diluted
    
    $
    (0.10
    )
    
    $
    (0.22
    )
    
    $
    (0.37
    )
    
    $
    (0.45
    )From discontinued operations  basic and diluted
    
    
    (.09
    )
    
    
    
    
    
    
    (.07
    )
    
    
    .02NET LOSS PER SHARE  BASIC AND DILUTED
    
    $
    (0.19
    )
    
    $
    (0.22
    )
    
    $
    (0.44
    )
    
    $
    (0.43
    )WEIGHTED AVERAGE SHARES OUTSTANDING  BASIC AND DILUTED
    
    
    3,676,010
    
    
    
    3,690,288
    
    
    
    3,676,188
    
    
    
    3,690,791
 See accompanying notes to condensed consolidated financial statements.
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##### Table of Contents



SERVIDYNE, INC.
 SIX MONTHS ENDEDOCTOBER 31,2010
    
    
    2009(Restated)
    
    
    (Restated)Cash flows from operating activities:Net loss
    
    $
    (1,601,048
    )
    
    $
    (1,580,630
    )Adjustments to reconcile net loss to net cash used in operating activities:Loss
(earnings) from discontinued operations, net of tax
    
    
    257,455
    
    
    
    (91,825
    )(Gain) loss on disposal of assets
    
    
    (1,385
    )
    
    
    1,378Depreciation and amortization
    
    
    509,652
    
    
    
    481,692Deferred tax benefit (Note 15)
    
    
    (598,368
    )
    
    
    (801,172
    )Stock compensation expense
    
    
    85,374
    
    
    
    93,034Adjustment to cash surrender value of life insurance
    
    
    (34,771
    )
    
    
    (69,217
    )Straight-line rent
    
    
    1,068
    
    
    
    (6,933
    )Provision for doubtful accounts, net
    
    
    56,725
    
    
    
    (59,413
    )Changes in assets and liabilities:Receivables
    
    
    279,475
    
    
    
    (498,452
    )Costs and earnings in excess of billings
    
    
    (537,901
    )
    
    
    374,801Other current and long-term assets
    
    
    (402,794
    )
    
    
    (204,038
    )Trade and subcontractors payable
    
    
    670,849
    
    
    
    (267,137
    )Accrued expenses and deferred revenue
    
    
    (111,644
    )
    
    
    249,506Billings in excess of costs and earnings
    
    
    36,302
    
    
    
    933,989Net cash used in operating activities
    
    
    (1,391,011
    )
    
    
    (1,444,417
    )Cash flows from investing activities:Premiums paid on officers life insurance policies
    
    
    (5,464
    )
    
    
    (27,464
    )Purchase of money market account investment
    
    
    (500,000
    )
    
    
    Proceeds from termination of split-dollar life insurance agreement
    
    
    194,601
    
    
    
    Additions to property and equipment
    
    
    (38,510
    )
    
    
    (189,162
    )Additions to intangible assets
    
    
    (188,757
    )
    
    
    (312,674
    )Proceeds from sale of property and equipment
    
    
    5,454
    
    
    
    2,000Net cash used in investing activities
    
    
    (532,676
    )
    
    
    (527,300
    )Cash flows from financing activities:Mortgage repayments
    
    
    (59,162
    )
    
    
    (54,764
    )Debt repayments
    
    
    
    
    
    
    (100,000
    )Repurchase of common stock
    
    
    
    
    
    
    (4,625
    )Proceeds from other long-term debt
    
    
    500,000
    
    
    
    Cash dividends paid to shareholders
    
    
    (73,818
    )
    
    
    (111,683
    )Net cash provided by (used in) financing activities
    
    
    367,020
    
    
    
    (271,072
    )DISCONTINUED OPERATIONS:Operating activities
    
    
    100,906
    
    
    
    400,092Investing activities
    
    
    1,981,275
    
    
    
    48,246Financing activities
    
    
    (40,925
    )
    
    
    (123,254
    )Net cash provided by discontinued operations
    
    
    2,041,256
    
    
    
    325,084Net increase (decrease) in cash and cash equivalents
    
    
    484,589
    
    
    
    (1,917,705
    )Cash at beginning of period
    
    
    1,923,641
    
    
    
    4,821,126Cash at end of period
    
    $
    2,408,230
    
    
    $
    2,903,421Supplemental disclosure of non-cash investing and financing activities:Reduction in cash surrender value of life insurance policies
    
    $
    412,000
    
    
    $
    Reduction in loans against interest in cash surrender value
of life insurance policies
    
    $
    (412,000
    )
    
    $
    Change in fair market value of deferred executive compensation
plan assets and liabilities
    
    $
    13,242
    
    
    $
    
 See accompanying notes to condensed consolidated financial statements.
 4




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##### Table of Contents



SERVIDYNE, INC.
 NOTE 1. ORGANIZATION AND BUSINESS
   NOTE 2. UNAUDITED STATEMENTS
  Property, Plant and Equipment
 5




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##### Table of Contents



NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS
 Revenue Recognition (Topic 605)Multiple-Deliverable Revenue
Arrangements Software (Topic 985)Certain Revenue Arrangements That Include
Software Elements
 Fair Value Measurements and Disclosures (Topic
820) Improving Disclosures about Fair Value Measurements
 NOTE 4. EQUITY-BASED COMPENSATION
  6




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##### Table of Contents



Stock Options
  WeightedOptions to
    
    
    AveragePurchase
    
    
    ExerciseShares
    
    
    PriceOutstanding at April 30, 2010
    
    
    482,486
    
    
    $
    4.46Granted
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Outstanding at October 31, 2010
    
    
    482,486
    
    
    $
    4.46Vested at October 31, 2010
    
    
    482,486
    
    
    $
    4.46Non-vested at October 31, 2010, that are expected to vest
    
    
    
    
    
    $
    
   Weighted AverageExercise
    
    Number of
    
    
    Remaining ContractualPrice
    
    Outstanding Options
    
    
    Term (Years)$4.42
    
    
    415,629
    
    
    
    2.03$4.59
    
    
    55,440
    
    
    
    4.40$5.19
    
    
    917
    
    
    
    3.63$5.24
    
    
    10,500
    
    
    
    2.62
  7




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##### Table of Contents



Stock Appreciation Rights (SARs)
  WeightedAverageExerciseSARs
    
    
    PriceOutstanding at April 30, 2010
    
    
    927,425
    
    
    $
    3.85Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (52,500
    )
    
    
    4.76Outstanding at October 31, 2010
    
    
    874,925
    
    
    $
    3.79Vested at October 31, 2010
    
    
    155,579
    
    
    $
    4.06Non-vested at October 31, 2010, that are expected to vest
    
    
    521,687
    
    
    $
    3.80
 rd th th
 8




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##### Table of Contents



Weighted AverageExercise
    
    Outstanding
    
    
    Vested
    
    
    Remaining ContractualPrice
    
    SARs
    
    
    SARs
    
    
    Term (Years)$3.94
    
    
    180,495
    
    
    
    108,959
    
    
    
    5.66$3.79
    
    
    109,830
    
    
    
    33,390
    
    
    
    6.10$4.19
    
    
    10,500
    
    
    
    3,150
    
    
    
    6.62$6.19
    
    
    33,600
    
    
    
    10,080
    
    
    
    6.92$5.00
    
    
    52,500
    
    
    
    0
    
    
    
    7.48$4.76
    
    
    84,000
    
    
    
    0
    
    
    
    7.62$4.00
    
    
    22,500
    
    
    
    0
    
    
    
    7.88$2.30
    
    
    30,000
    
    
    
    0
    
    
    
    8.61$4.00
    
    
    200,000
    
    
    
    0
    
    
    
    9.04$2.12
    
    
    20,000
    
    
    
    0
    
    
    
    9.11$2.09
    
    
    131,500
    
    
    
    0
    
    
    
    9.40
   Shares of Restricted Stock
   9




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Number of
    
    
    Weighted AverageShares of
    
    
    Fair ValueRestricted
    
    
    per ShareStock
    
    
    on Grant DateNon-vested restricted stock at April 30, 2010
    
    
    3,150
    
    
    $
    2.99Granted
    
    
    
    
    
    
    Forfeited
    
    
    (400
    )
    
    
    2.11Vested
    
    
    (1,050
    )
    
    
    4.76Non-vested restricted stock at October 31, 2010
    
    
    1,700
    
    
    $
    2.11
 NOTE 5. RECEIVABLES
  NOTE 6. SEGMENT REPORTING
 Segment Reporting
  10




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##### Table of Contents



For the Second QuarterEnded October 31, 2010
    
    BPE
    
    
    Corporate (1)
    
    
    Eliminations
    
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    5,803,363
    
    
    
    
    
    
    
    
    
    
    $
    5,803,363Lighting products
    
    
    531,177
    
    
    
    
    
    
    
    
    
    
    
    531,177Energy management services
    
    
    426,496
    
    
    
    
    
    
    
    
    
    
    
    426,496Fifth fuel management services
    
    
    33,967
    
    
    
    
    
    
    
    
    
    
    
    33,967Productivity software
    
    
    724,144
    
    
    
    
    
    
    
    
    
    
    
    724,144Total revenues from unaffiliated customers
    
    $
    7,519,147
    
    
    $
    110,807
    
    
    $
    
    
    
    $
    7,629,954Intersegment revenue
    
    
    
    
    
    
    4,507
    
    
    
    (4,507
    )
    
    
    Total revenues from continuing
operations
    
    $
    7,519,147
    
    
    $
    115,314
    
    
    $
    (4,507
    )
    
    $
    7,629,954Earnings (loss) from continuing
operations before income taxes
    
    $
    383,153
    
    
    $
    (976,560
    )
    
    $
    64,290
    
    
    $
    (529,117
    )
 For the Six MonthsEnded October 31, 2010
    
    BPE
    
    
    Corporate (1)
    
    
    Eliminations
    
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    8,821,955
    
    
    
    
    
    
    
    
    
    
    $
    8,821,955Lighting products
    
    
    1,215,912
    
    
    
    
    
    
    
    
    
    
    
    1,215,912Energy management services
    
    
    766,586
    
    
    
    
    
    
    
    
    
    
    
    766,586Fifth fuel management services
    
    
    91,026
    
    
    
    
    
    
    
    
    
    
    
    91,026Productivity software
    
    
    1,465,395
    
    
    
    
    
    
    
    
    
    
    
    1,465,395Total revenues from unaffiliated customers
    
    $
    12,360,874
    
    
    $
    214,675
    
    
    $
    
    
    
    $
    12,575,549Intersegment revenue
    
    
    
    
    
    
    72,811
    
    
    
    (72,811
    )
    
    
    Total revenues from continuing
operations
    
    $
    12,360,874
    
    
    $
    287,486
    
    
    $
    (72,811
    )
    
    $
    12,575,549(Loss) earnings from continuing
operations before income taxes
    
    $
    (218,223
    )
    
    $
    (1,794,778
    )
    
    $
    63,644
    
    
    $
    (1,949,357
    )
 For the Second QuarterEnded October 31, 2009
    
    BPE
    
    
    Corporate (1)
    
    
    Eliminations
    
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    2,048,382
    
    
    
    
    
    
    
    
    
    
    $
    2,048,382Lighting products
    
    
    484,287
    
    
    
    
    
    
    
    
    
    
    
    484,287Energy management services
    
    
    457,714
    
    
    
    
    
    
    
    
    
    
    
    457,714Fifth fuel management services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Productivity software
    
    
    932,158
    
    
    
    
    
    
    
    
    
    
    
    932,158Total revenues from unaffiliated customers
    
    $
    3,922,541
    
    
    $
    106,017
    
    
    $
    
    
    
    $
    4,028,558Intersegment revenue
    
    
    
    
    
    
    63,494
    
    
    
    (63,494
    )
    
    
    Total revenues from continuing
operations
    
    $
    3,922,541
    
    
    $
    169,511
    
    
    $
    (63,494
    )
    
    $
    4,028,558(Loss) earnings from continuing
operations before income taxes
    
    $
    (352,474
    )
    
    $
    (800,308
    )
    
    $
    5,984
    
    
    $
    (1,146,798
    )
 For the Six MonthsEnded October 31, 2009
    
    BPE
    
    
    Corporate (1)
    
    
    Eliminations
    
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    4,061,226
    
    
    
    
    
    
    
    
    
    
    $
    4,061,226Lighting products
    
    
    940,738
    
    
    
    
    
    
    
    
    
    
    
    940,738Energy management services
    
    
    1,021,514
    
    
    
    
    
    
    
    
    
    
    
    1,021,514Fifth fuel management services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Productivity software
    
    
    1,772,171
    
    
    
    
    
    
    
    
    
    
    
    1,772,171Total revenues from unaffiliated customers
    
    $
    7,795,649
    
    
    $
    207,052
    
    
    $
    
    
    
    $
    8,002,701Intersegment revenue
    
    
    141,545
    
    
    
    133,362
    
    
    
    (274,907
    )
    
    
    Total revenues from continuing
operations
    
    $
    7,937,194
    
    
    $
    340,414
    
    
    $
    (274,907
    )
    
    $
    8,002,701Loss from continuing
operations before income taxes
    
    $
    (742,959
    )
    
    $
    (1,695,133
    )
    
    $
    (9,456
    )
    
    $
    (2,447,548
    )
 11




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##### Table of Contents



(1)
    
    The Corporate net loss in each period was derived from corporate headquarters
activities, which consist primarily of the following: rental revenues from tenants in
the Companys corporate headquarters building and related rental and operating costs,
salaries and benefits of Corporate Headquarters executive officers and staff,
equity-based compensation expenses, depreciation and amortization expenses, and costs
related to the Companys status as a publicly-held company, which include, among other
items, legal fees, non-employee directors fees, consulting expenses, investor relations
expenses, corporate audit and tax fees, Nasdaq listing fees, and other Securities &
Exchange Commission (SEC) and Sarbanes-Oxley compliance and financial reporting costs.
All relevant costs related to the business operations of the Companys BPE Segment are
either paid directly by BPE or are allocated to BPE by the Corporate Headquarters. 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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##### Table of Contents



NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
  October 31, 2010Gross Carrying
    
    
    AccumulatedAmount
    
    
    AmortizationIntangible assets, subject to amortization:Proprietary BPE technology solutions
    
    $
    4,261,926
    
    
    $
    3,095,503Acquired computer software
    
    
    706,032
    
    
    
    519,376Real estate lease costs
    
    
    49,170
    
    
    
    24,206Customer relationships
    
    
    404,632
    
    
    
    308,207Deferred loan costs
    
    
    122,686
    
    
    
    101,216Non-compete agreements
    
    
    63,323
    
    
    
    63,323Tradename
    
    
    61,299
    
    
    
    9,874Other
    
    
    44,882
    
    
    
    43,449$
    5,713,950
    
    
    $
    4,165,154Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707Goodwill
    
    $
    6,354,002
 April 30, 2010Gross Carrying
    
    
    AccumulatedAmount
    
    
    AmortizationIntangible assets, subject to amortization:Proprietary BPE technology solutions
    
    $
    4,096,802
    
    
    $
    2,827,071Acquired computer software
    
    
    676,837
    
    
    
    493,885Real estate lease costs
    
    
    49,170
    
    
    
    19,459Customer relationships
    
    
    404,632
    
    
    
    286,433Deferred loan costs
    
    
    122,686
    
    
    
    95,082Non-compete agreements
    
    
    63,323
    
    
    
    60,684Tradename
    
    
    61,299
    
    
    
    7,834Other
    
    
    44,882
    
    
    
    42,016$
    5,519,631
    
    
    $
    3,832,464Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707Goodwill
    
    $
    6,354,002
 Aggregate amortization expense for all amortizable intangible assets:For the six months ended October 31, 2010
    
    $
    351,120For the six months ended October 31, 2009
    
    
    295,835For the quarter ended October 31, 2010
    
    
    177,059For the quarter ended October 31, 2009
    
    
    151,193Estimated future amortization expenses for all amortized intangible assets for the fiscal years ended:Remainder of 2011
    
    $
    268,5942012
    
    
    496,1152013
    
    
    348,0472014
    
    
    247,2642015
    
    
    126,1502016
    
    
    33,680Thereafter
    
    
    28,946$
    1,548,796
 13




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##### Table of Contents



NOTE 9. OTHER ASSETS
 Money Market Account Investment
  Termination of Split Dollar Life Insurance Agreement
   14




---



##### Table of Contents



NOTE 10. DISCONTINUED OPERATIONS
    15




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##### Table of Contents



Second Quarter Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Rental revenues
    
    $
    131,907
    
    
    $
    579,345
    
    
    $
    428,066
    
    
    $
    1,234,405Rental property operating expenses, including depreciation
    
    
    135,566
    
    
    
    544,345
    
    
    
    415,971
    
    
    
    1,093,379Loss on impairment of income-producing property
    
    
    589,559
    
    
    
    
    
    
    
    589,559
    
    
    
    Operating (loss) earnings from discontinued operations
    
    
    (593,218
    )
    
    
    35,000
    
    
    
    (577,464
    )
    
    
    141,026Income tax benefit (expense)
    
    
    210,821
    
    
    
    (22,048
    )
    
    
    219,436
    
    
    
    (49,201
    )Operating (loss) earnings from discontinued operations, net of tax
    
    
    (382,397
    )
    
    
    12,952
    
    
    
    (358,028
    )
    
    
    91,825Gain on disposition of income-producing properties
    
    
    76,779
    
    
    
    
    
    
    
    191,717
    
    
    
    Income tax expense
    
    
    (27,146
    )
    
    
    
    
    
    
    (91,144
    )
    
    
    Gain on disposition of income-producing properties, net of tax
    
    
    49,633
    
    
    
    
    
    
    
    100,573
    
    
    
    (Loss) earnings from discontinued operations, net of tax
    
    $
    (332,764
    )
    
    $
    12,952
    
    
    $
    (257,455
    )
    
    $
    91,825
  16




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##### Table of Contents



As of October 31, 2010ReclassificationRelated to
    
    As Recast forDiscontinuance
    
    DiscontinuedAdjustments for
    
    of Real Estate
    
    Operations andAs Originally
    
    Discontinued
    
    Segment
    
    Segment ChangeReported
    
    Operations
    
    Reporting
    
    (Note 15)Consolidated balance sheetASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    2,408,230
    
    
    $
    
    
    
    $
    
    
    
    $
    2,408,230Receivables:Trade accounts and notes, net of allowance for doubtful accounts
    
    
    875,164
    
    
    
    (53,841
    )
    
    
    
    
    
    
    821,323Contracts, net of allowance for doubtful accounts
    
    
    3,132,729
    
    
    
    
    
    
    
    
    
    
    
    3,132,729Costs and earnings in excess of billings
    
    
    1,253,030
    
    
    
    
    
    
    
    
    
    
    
    1,253,030Assets of discontinued operations
    
    
    68,684
    
    
    
    97,522
    
    
    
    
    
    
    
    166,206Deferred income taxes
    
    
    359,878
    
    
    
    (15,333
    )
    
    
    
    
    
    
    344,545Other current assets
    
    
    1,734,215
    
    
    
    (28,348
    )
    
    
    
    
    
    
    1,705,867Total current assets
    
    
    9,831,930
    
    
    
    
    
    
    
    
    
    
    
    9,831,930INCOME-PRODUCING PROPERTIES, net
    
    
    7,992,605
    
    
    
    (3,942,904
    )
    
    
    (4,049,701
    )
    
    
    PROPERTY AND EQUIPMENT, net
    
    
    607,759
    
    
    
    
    
    
    
    4,049,701
    
    
    
    4,657,460ASSETS OF DISCONTINUED OPERATIONS
    
    
    
    
    
    
    4,231,122
    
    
    
    
    
    
    
    4,231,122DEFERRED INCOME TAXES
    
    
    
    
    
    
    1,306,820
    
    
    
    
    
    
    
    1,306,820OTHER ASSETS:Real estate
held for future development or sale
    
    
    853,109
    
    
    
    
    
    
    
    
    
    
    
    853,109Intangible assets, net
    
    
    2,527,974
    
    
    
    (270,471
    )
    
    
    
    
    
    
    2,257,503Goodwill
    
    
    6,354,002
    
    
    
    
    
    
    
    
    
    
    
    6,354,002Other assets
    
    
    2,807,072
    
    
    
    (17,747
    )
    
    
    
    
    
    
    2,789,325Total assets
    
    $
    30,974,451
    
    
    $
    1,306,820
    
    
    $
    
    
    
    $
    32,281,271LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    3,135,961
    
    
    $
    
    
    
    $
    
    
    
    $
    3,135,961Accrued expenses
    
    
    1,469,691
    
    
    
    (71,417
    )
    
    
    
    
    
    
    1,398,274Deferred revenue
    
    
    357,937
    
    
    
    
    
    
    
    
    
    
    
    357,937Billings in excess of costs and earnings
    
    
    89,402
    
    
    
    
    
    
    
    
    
    
    
    89,402Liabilities of discontinued operations
    
    
    21,390
    
    
    
    123,261
    
    
    
    
    
    
    
    144,651Short-term debt and current maturities of long-term debt
    
    
    327,187
    
    
    
    (51,844
    )
    
    
    
    
    
    
    275,343Total current liabilities
    
    
    5,401,568
    
    
    
    
    
    
    
    
    
    
    
    5,401,568DEFERRED INCOME TAXES
    
    
    222,803
    
    
    
    (222,803
    )
    
    
    
    
    
    
    LIABILITIES OF DISCONTINUED OPERATIONS
    
    
    
    
    
    
    5,436,826
    
    
    
    
    
    
    
    5,436,826OTHER LIABILITIES
    
    
    1,061,264
    
    
    
    
    
    
    
    
    
    
    
    1,061,264MORTGAGE NOTES PAYABLE, less current maturities
    
    
    7,951,286
    
    
    
    (3,907,203
    )
    
    
    
    
    
    
    4,044,083OTHER LONG-TERM DEBT, less current maturities
    
    
    1,938,069
    
    
    
    
    
    
    
    
    
    
    
    1,938,069Total liabilities
    
    
    16,574,990
    
    
    
    1,306,820
    
    
    
    
    
    
    
    17,881,810COMMITMENTS
AND CONTINGENCIES SHAREHOLDERS EQUITY:Common stock
    
    
    3,919,373
    
    
    
    
    
    
    
    
    
    
    
    3,919,373Additional
paid-in capital
    
    
    6,292,295
    
    
    
    
    
    
    
    
    
    
    
    6,292,295Retained
earnings
    
    
    5,193,941
    
    
    
    
    
    
    
    
    
    
    
    5,193,941Treasury
stock (common shares)
    
    
    (1,006,148
    )
    
    
    
    
    
    
    
    
    
    
    (1,006,148
    )Total shareholders equity
    
    
    14,399,461
    
    
    
    
    
    
    
    
    
    
    
    14,399,461Total liabilities and
shareholders equity
    
    $
    30,974,451
    
    
    $
    1,306,820
    
    
    $
    
    
    
    $
    32,281,271
 17




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##### Table of Contents



As of April 30, 2010ReclassificationRelated to
    
    As Recast forDiscontinuance
    
    DiscontinuedAdjustments for
    
    of Real Estate
    
    Operations andAs Originally
    
    Discontinued
    
    Segment
    
    Segment ChangeReported
    
    Operations
    
    Reporting
    
    (Note 15)Consolidated balance sheetASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    1,923,641
    
    
    $
    
    
    
    $
    
    
    
    $
    1,923,641Receivables:Trade accounts and notes, net of allowance for doubtful accounts
    
    
    973,442
    
    
    
    (20,367
    )
    
    
    
    
    
    
    953,075Contracts, net of allowance for doubtful accounts
    
    
    3,337,177
    
    
    
    
    
    
    
    
    
    
    
    3,337,177Costs and earnings in excess of billings
    
    
    715,129
    
    
    
    
    
    
    
    
    
    
    
    715,129Assets of discontinued operations
    
    
    150,970
    
    
    
    37,857
    
    
    
    
    
    
    
    188,827Deferred income taxes
    
    
    401,223
    
    
    
    (8
    )
    
    
    
    
    
    
    401,215Other current assets
    
    
    1,265,326
    
    
    
    (17,482
    )
    
    
    
    
    
    
    1,247,844Total current assets
    
    
    8,766,908
    
    
    
    
    
    
    
    
    
    
    
    8,766,908INCOME-PRODUCING PROPERTIES, net
    
    
    8,701,893
    
    
    
    (4,578,796
    )
    
    
    (4,123,097
    )
    
    
    PROPERTY AND EQUIPMENT, net
    
    
    682,445
    
    
    
    
    
    
    
    4,123,097
    
    
    
    4,805,542ASSETS OF DISCONTINUED OPERATIONS
    
    
    8,881,447
    
    
    
    4,885,780
    
    
    
    
    
    
    
    13,767,227DEFERRED INCOME TAXES
    
    
    6,666
    
    
    
    1,712,288
    
    
    
    
    
    
    
    1,718,954OTHER ASSETS:Real estate held for future development or sale
    
    
    853,109
    
    
    
    
    
    
    
    
    
    
    
    853,109Intangible assets, net
    
    
    2,684,057
    
    
    
    (288,183
    )
    
    
    
    
    
    
    2,395,874Goodwill
    
    
    6,354,002
    
    
    
    
    
    
    
    
    
    
    
    6,354,002Other assets
    
    
    2,909,158
    
    
    
    (18,801
    )
    
    
    
    
    
    
    2,890,357Total assets
    
    $
    39,839,685
    
    
    $
    1,718,288
    
    
    $
    
    
    
    $
    41,551,973LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    2,465,112
    
    
    $
    
    
    
    $
    
    
    
    $
    2,465,112Accrued expenses
    
    
    1,429,321
    
    
    
    (50,783
    )
    
    
    
    
    
    
    1,378,538Deferred revenue
    
    
    507,383
    
    
    
    
    
    
    
    
    
    
    
    507,383Billings in excess of costs and earnings
    
    
    53,100
    
    
    
    
    
    
    
    
    
    
    
    53,100Liabilities of discontinued operations
    
    
    417,681
    
    
    
    102,627
    
    
    
    
    
    
    
    520,308Short-term debt and current maturities of long-term debt
    
    
    322,436
    
    
    
    (51,844
    )
    
    
    
    
    
    
    270,592Total current liabilities
    
    
    5,195,033
    
    
    
    
    
    
    
    
    
    
    
    5,195,033LIABILITIES OF DISCONTINUED OPERATIONS
    
    
    7,943,165
    
    
    
    5,644,667
    
    
    
    
    
    
    
    13,587,832OTHER LIABILITIES
    
    
    1,039,633
    
    
    
    
    
    
    
    
    
    
    
    1,039,633MORTGAGE NOTES PAYABLE, less current maturities
    
    
    8,040,375
    
    
    
    (3,932,379
    )
    
    
    
    
    
    
    4,107,996OTHER LONG-TERM DEBT, less current maturities
    
    
    1,832,000
    
    
    
    
    
    
    
    
    
    
    
    1,832,000Total liabilities
    
    
    24,050,206
    
    
    
    1,712,288
    
    
    
    
    
    
    
    25,762,494COMMITMENTS AND CONTINGENCIES SHAREHOLDERS EQUITY:Common stock
    
    
    3,919,773
    
    
    
    
    
    
    
    
    
    
    
    3,919,773Additional paid-in capital
    
    
    6,206,521
    
    
    
    
    
    
    
    
    
    
    
    6,206,521Retained earnings
    
    
    6,669,330
    
    
    
    
    
    
    
    
    
    
    
    6,669,330Treasury stock (common shares)
    
    
    (1,006,145
    )
    
    
    
    
    
    
    
    
    
    
    1,006,145Total shareholders equity
    
    
    15,789,479
    
    
    
    
    
    
    
    
    
    
    
    15,789,479Total liabilities
and shareholders equity
    
    $
    39,839,685
    
    
    $
    1,712,288
    
    
    $
    
    
    
    $
    41,551,973
 18




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##### Table of Contents



For the Second Quarter Ended October 31, 2010As Recast forAdjustments for
    
    DiscontinuedAs Originally
    
    Discontinued
    
    OperationsReported
    
    Operations
    
    (Note 15)Consolidated statement of operationsREVENUES:Building Performance Efficiency (BPE)
    
    $
    7,519,147
    
    
    $
    
    
    
    $
    7,519,147Other (formerly Real Estate)
    
    
    252,587
    
    
    
    (141,780
    )
    
    
    110,8077,771,734
    
    
    
    (141,780
    )
    
    
    7,629,954COST OF REVENUES:BPE
    
    
    5,403,096
    
    
    
    
    
    
    
    5,403,096Other (formerly Real Estate)
    
    
    241,475
    
    
    
    (80,129
    )
    
    
    161,3455,644,571
    
    
    
    (80,129
    )
    
    
    5,564,442SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    2,552,113
    
    
    
    (1,896
    )
    
    
    2,550,217OTHER (INCOME) AND EXPENSES:Other income
    
    
    (72,457
    )
    
    
    (5,091
    )
    
    
    (67,366
    )Interest income
    
    
    (22
    )
    
    
    
    
    
    
    (22
    )Interest expense
    
    
    175,273
    
    
    
    (63,473
    )
    
    
    111,800Loss on impairment of income-producing property
    
    
    589,559
    
    
    
    (589,559
    )
    
    
    692,353
    
    
    
    (647,941
    )
    
    
    44,412LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    (1,117,303
    )
    
    
    588,186
    
    
    
    (529,117
    )INCOME TAX BENEFIT
    
    
    (418,962
    )
    
    
    208,909
    
    
    
    (210,053
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (698,341
    )
    
    
    379,277
    
    
    
    (319,064
    )DISCONTINUED OPERATIONS:Loss from discontinued operations, adjusted for applicable income
tax benefit
    
    
    (3,120
    )
    
    
    (379,277
    )
    
    
    (382,397
    )Gain on disposition of income-producing properties, adjusted for
applicable income tax expense
    
    
    49,633
    
    
    
    
    
    
    
    49,633EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS
    
    
    46,513
    
    
    
    (379,277
    )
    
    
    (332,764
    )NET LOSS
    
    $
    (651,828
    )
    
    $
    
    
    
    $
    (651,828
    )NET (LOSS) EARNINGS PER SHARE:From continuing operations  basic and diluted
    
    $
    (0.19
    )
    
    $
    0.10
    
    
    $
    (0.09
    )From discontinuing operations  basic and diluted
    
    
    0.01
    
    
    
    (0.10
    )
    
    
    (0.09
    )NET LOSS PER SHARE  BASIC AND DILUTED
    
    $
    (0.18
    )
    
    $
    
    
    
    $
    (0.18
    )
 19




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For the Six Months Ended October 31, 2010As Recast forAdjustments for
    
    DiscontinuedAs Originally
    
    Discontinued
    
    OperationsReported
    
    Operations
    
    (Note 15)Consolidated statement of operationsREVENUES:Building Performance Efficiency (BPE)
    
    $
    12,360,874
    
    
    $
    
    
    
    $
    12,360,874Other (formerly Real Estate)
    
    
    502,054
    
    
    
    (287,379
    )
    
    
    214,67512,862,928
    
    
    
    (287,379
    )
    
    
    12,575,549COST OF REVENUES:BPE
    
    
    8,968,113
    
    
    
    
    
    
    
    8,968,113Other (formerly Real Estate)
    
    
    492,471
    
    
    
    (156,819
    )
    
    
    335,6529,460,584
    
    
    
    (156,819
    )
    
    
    9,303,765SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    5,048,557
    
    
    
    (3,792
    )
    
    
    5,044,765OTHER (INCOME) AND EXPENSES:Other income
    
    
    (45,825
    )
    
    
    1,450
    
    
    
    (44,375
    )Interest income
    
    
    (39
    )
    
    
    
    
    
    
    (39
    )Interest expense
    
    
    347,241
    
    
    
    (126,451
    )
    
    
    220,790Loss on impairment of income-producing property
    
    
    589,559
    
    
    
    (589,559
    )
    
    
    890,936
    
    
    
    (714,560
    )
    
    
    176,376LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    (2,537,149
    )
    
    
    587,792
    
    
    
    (1,949,357
    )INCOME TAX BENEFIT
    
    
    (1,028,602
    )
    
    
    223,361
    
    
    
    (805,241
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (1,508,547
    )
    
    
    364,431
    
    
    
    (1,144,116
    )DISCONTINUED OPERATIONS:Earnings (Loss) from discontinued operations, adjusted for applicable
income tax (expense) benefit
    
    
    6,403
    
    
    
    (364,431
    )
    
    
    (358,028
    )Gain on disposition of income-producing properties, adjusted for
applicable income tax expense
    
    
    100,573
    
    
    
    
    
    
    
    100,573EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS
    
    
    106,976
    
    
    
    (364,431
    )
    
    
    (257,455
    )NET LOSS
    
    $
    (1,401,571
    )
    
    $
    
    
    
    $
    (1,401,571
    )NET (LOSS) EARNINGS PER SHARE:From continuing operations  basic and diluted
    
    $
    (0.41
    )
    
    $
    0.10
    
    
    $
    (0.31
    )From discontinuing operations  basic and diluted
    
    
    0.03
    
    
    
    (0.10
    )
    
    
    (0.07
    )NET LOSS PER SHARE  BASIC AND DILUTED
    
    $
    (0.38
    )
    
    $
    
    
    
    $
    (0.38
    )
 20




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##### Table of Contents



For the Second Quarter Ended October 31, 2009As Recast forAdjustments for
    
    DiscontinuedAs Originally
    
    Discontinued
    
    OperationsReported
    
    Operations
    
    (Note 15)Consolidated statement of operationsREVENUES:BPE
    
    $
    3,922,541
    
    
    $
    
    
    
    $
    3,922,541Other (formerly Real Estate)
    
    
    240,875
    
    
    
    (134,858
    )
    
    
    106,0174,163,416
    
    
    
    (134,858
    )
    
    
    4,028,558COST OF REVENUES:BPE
    
    
    2,670,904
    
    
    
    
    
    
    
    2,670,904Other (formerly Real Estate)
    
    
    253,909
    
    
    
    (86,138
    )
    
    
    167,7712,924,813
    
    
    
    (86,138
    )
    
    
    2,838,675SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    2,293,974
    
    
    
    (1,851
    )
    
    
    2,292,123OTHER (INCOME) AND EXPENSES:Other income
    
    
    (56,988
    )
    
    
    4,588
    
    
    
    (52,400
    )Interest income
    
    
    (2,326
    )
    
    
    
    
    
    
    (2,326
    )Interest expense
    
    
    163,551
    
    
    
    (64,267
    )
    
    
    99,284104,237
    
    
    
    (59,679
    )
    
    
    44,558LOSS FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES
    
    
    (1,159,608
    )
    
    
    12,810
    
    
    
    (1,146,798
    )INCOME TAX BENEFIT
    
    
    (418,583
    )
    
    
    (7,241
    )
    
    
    (425,824
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (741,025
    )
    
    
    20,051
    
    
    
    (720,974
    )DISCONTINUED OPERATIONS:Earnings from discontinued operations, adjusted for applicable
income tax (expense) benefit
    
    
    33,003
    
    
    
    (20,051
    )
    
    
    12,952EARNINGS FROM DISCONTINUED
OPERATIONS
    
    
    33,003
    
    
    
    (20,051
    )
    
    
    12,952NET LOSS
    
    $
    (708,022
    )
    
    $
    
    
    
    $
    (708,022
    )NET LOSS PER SHARE:From continuing operations  basic and diluted
    
    $
    (0.19
    )
    
    $
    
    
    
    $
    (0.19
    )From discontinuing operations  basic and diluted
    
    
    
    
    
    
    
    
    
    
    NET LOSS PER SHARE  BASIC AND DILUTED
    
    $
    (0.19
    )
    
    $
    
    
    
    $
    (0.19
    )
 21




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##### Table of Contents



For the Six Months Ended October 31, 2009As Recast forAdjustments for
    
    DiscontinuedAs Originally
    
    Discontinued
    
    OperationsReported
    
    Operations
    
    (Note 15)Consolidated statement of operationsREVENUES:BPE
    
    $
    7,795,649
    
    
    $
    
    
    
    $
    7,795,649Other (formerly Real Estate)
    
    
    483,182
    
    
    
    (276,130
    )
    
    
    207,0528,278,831
    
    
    
    (276,130
    )
    
    
    8,002,701COST OF REVENUES:BPE
    
    
    5,295,513
    
    
    
    
    
    
    
    5,295,513Other (formerly Real Estate)
    
    
    524,394
    
    
    
    (172,119
    )
    
    
    352,2755,819,907
    
    
    
    (172,119
    )
    
    
    5,647,788SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    4,679,734
    
    
    
    (3,702
    )
    
    
    4,676,032OTHER (INCOME) AND EXPENSES:Other income
    
    
    (67,252
    )
    
    
    1,950
    
    
    
    (65,302
    )Interest income
    
    
    (7,610
    )
    
    
    
    
    
    
    (7,610
    )Interest expense
    
    
    327,361
    
    
    
    (128,020
    )
    
    
    199,341252,499
    
    
    
    (126,070
    )
    
    
    126,429LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    (2,473,309
    )
    
    
    25,761
    
    
    
    (2,447,548
    )INCOME TAX BENEFIT
    
    
    (951,904
    )
    
    
    9,789
    
    
    
    (942,115
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (1,521,405
    )
    
    
    15,972
    
    
    
    (1,505,433
    )DISCONTINUED OPERATIONS:Earnings from discontinued operations, adjusted for applicable
income tax expense
    
    
    107,797
    
    
    
    (15,972
    )
    
    
    91,825EARNINGS FROM DISCONTINUED OPERATIONS
    
    
    107,797
    
    
    
    (15,972
    )
    
    
    91,825NET LOSS
    
    $
    (1,413,608
    )
    
    $
    
    
    
    $
    (1,413,608
    )NET (LOSS) EARNINGS PER SHARE:From continuing operations  basic and diluted
    
    $
    (0.41
    )
    
    $
    
    
    
    $
    (0.41
    )From discontinuing operations  basic and diluted
    
    
    0.03
    
    
    
    (0.01
    )
    
    
    0.02NET LOSS PER SHARE  BASIC AND DILUTED
    
    $
    (0.38
    )
    
    $
    (0.01
    )
    
    $
    (0.39
    )
 22




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##### Table of Contents



For the Six Months Ended October 31, 2010ReclassificationRelated to
    
    As Recast forDiscontinuance
    
    DiscontinuedAdjustments for
    
    of Real Estate
    
    Operations andAs Originally
    
    Discontinued
    
    Segment
    
    Segment ChangeReported
    
    Operations
    
    Reporting
    
    (Note 15)Consolidated statement of cash flowsCash flows from operating activities:Net loss
    
    $
    (1,401,571
    )
    
    $
    
    
    
    $
    
    
    
    $
    (1,401,571
    )Adjustments to reconcile net loss to net
cash used in operating activities:(Earnings) loss from discontinued operations, net of tax
    
    
    (106,976
    )
    
    
    364,431
    
    
    
    
    
    
    
    257,455Loss on impairment of income-producing property
    
    
    589,559
    
    
    
    (589,559
    )
    
    
    
    
    
    
    Gain on disposal of assets
    
    
    (1,385
    )
    
    
    
    
    
    
    
    
    
    
    (1,385
    )Depreciation and amortization
    
    
    586,257
    
    
    
    (76,605
    )
    
    
    
    
    
    
    509,652Deferred tax benefit
    
    
    (1,021,206
    )
    
    
    223,361
    
    
    
    
    
    
    
    (797,845
    )Stock compensation expense
    
    
    85,374
    
    
    
    
    
    
    
    
    
    
    
    85,374Adjustment to cash surrender value of life insurance
    
    
    (34,771
    )
    
    
    
    
    
    
    
    
    
    
    (34,771
    )Straight-line rent
    
    
    2,122
    
    
    
    (1,054
    )
    
    
    
    
    
    
    1,068Provision for doubtful accounts, net
    
    
    56,725
    
    
    
    
    
    
    
    
    
    
    
    56,725Changes in assets and liabilities:
    
    
    
    
    
    
    
    
    
    
    Receivables
    
    
    246,001
    
    
    
    33,474
    
    
    
    
    
    
    
    279,475Costs and earnings in excess of billings
    
    
    (537,901
    )
    
    
    
    
    
    
    
    
    
    
    (537,901
    )Other current and long-term assets
    
    
    (413,660
    )
    
    
    10,866
    
    
    
    
    
    
    
    (402,794
    )Trade and subcontractors payable
    
    
    670,849
    
    
    
    
    
    
    
    
    
    
    
    670,849Accrued expenses and deferred revenue
    
    
    (91,010
    )
    
    
    (20,634
    )
    
    
    
    
    
    
    (111,644
    )Billings in excess of costs and earnings
    
    
    36,302
    
    
    
    
    
    
    
    
    
    
    
    36,302Net cash used in operating activities
    
    
    (1,335,291
    )
    
    
    (55,720
    )
    
    
    
    
    
    
    (1,391,011
    )Cash flows from investing activities:Premiums paid on officers life insurance policies
    
    
    (5,464
    )
    
    
    
    
    
    
    
    
    
    
    (5,464
    )Purchase of money market account investment
    
    
    (500,000
    )
    
    
    
    
    
    
    
    
    
    
    (500,000
    )Proceeds from termination of split-dollar life insurance agreement
    
    
    194,601
    
    
    
    
    
    
    
    
    
    
    
    194,601Additions to income-producing properties
    
    
    (6,280
    )
    
    
    6,280
    
    
    
    
    
    
    
    Additions to property and equipment
    
    
    (38,510
    )
    
    
    
    
    
    
    
    
    
    
    (38,510
    )Additions to intangible assets
    
    
    (195,039
    )
    
    
    6,282
    
    
    
    
    
    
    
    (188,757
    )Proceeds from sale of property and equipment
    
    
    5,454
    
    
    
    
    
    
    
    
    
    
    
    5,454Net cash used in investing activities
    
    
    (545,238
    )
    
    
    12,562
    
    
    
    
    
    
    
    (532,676
    )Cash flows from financing activities:Mortgage repayments
    
    
    (84,338
    )
    
    
    25,176
    
    
    
    
    
    
    
    (59,162
    )Proceeds from other long-term debt
    
    
    500,000
    
    
    
    
    
    
    
    
    
    
    
    500,000Cash dividends paid to shareholders
    
    
    (73,818
    )
    
    
    
    
    
    
    
    
    
    
    (73,818
    )Net cash provided by financing activities
    
    
    341,844
    
    
    
    25,176
    
    
    
    
    
    
    
    367,020DISCONTINUED OPERATIONS:Operating activities
    
    
    51,467
    
    
    
    49,439
    
    
    
    
    
    
    
    100,906Investing activities
    
    
    1,987,556
    
    
    
    (6,281
    )
    
    
    
    
    
    
    1,981,275Financing activities
    
    
    (15,749
    )
    
    
    (25,176
    )
    
    
    
    
    
    
    (40,925
    )Net cash provided by discontinued operations
    
    
    2,023,274
    
    
    
    17,982
    
    
    
    
    
    
    
    2,041,256Net increase in cash and cash equivalents
    
    
    484,589
    
    
    
    
    
    
    
    
    
    
    
    484,589Cash at beginning of period
    
    
    1,923,641
    
    
    
    
    
    
    
    
    
    
    
    1,923,641Cash at end of period
    
    $
    2,408,230
    
    
    $
    
    
    
    $
    
    
    
    $
    2,408,230
 23




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##### Table of Contents



For the Six Months Ended October 31, 2009ReclassificationRelated to
    
    As Recast forDiscontinuance
    
    DiscontinuedAdjustments for
    
    of Real Estate
    
    Operations andAs Originally
    
    Discontinued
    
    Segment
    
    Segment ChangeReported
    
    Operations
    
    Reporting
    
    (Note 15)Consolidated statement of cash flowsCash flows from operating activities:Net loss
    
    $
    (1,413,608
    )
    
    $
    
    
    
    $
    
    
    
    $
    (1,413,608
    )Adjustments to reconcile net loss to net
cash used in operating activities:Earnings from discontinued operations, net of tax
    
    
    (107,797
    )
    
    
    (15,972
    )
    
    
    
    
    
    
    (91,825
    )Loss on disposal of assets
    
    
    1,378
    
    
    
    
    
    
    
    
    
    
    
    1,378Depreciation and amortization
    
    
    553,045
    
    
    
    (71,353
    )
    
    
    
    
    
    
    481,692Deferred tax benefit
    
    
    (977,983
    )
    
    
    9,789
    
    
    
    
    
    
    
    (968,194
    )Stock compensation expense
    
    
    93,034
    
    
    
    
    
    
    
    
    
    
    
    93,034Adjustment to cash surrender value of life insurance
    
    
    (69,217
    )
    
    
    
    
    
    
    
    
    
    
    (69,217
    )Straight-line rent
    
    
    (8,917
    )
    
    
    1,984
    
    
    
    
    
    
    
    (6,933
    )Provision for doubtful accounts, net
    
    
    (59,413
    )
    
    
    
    
    
    
    
    
    
    
    (59,413
    )Changes in assets and liabilities:Receivables
    
    
    (513,873
    )
    
    
    15,421
    
    
    
    
    
    
    
    (498,452
    )Costs and earnings in excess of billings
    
    
    374,801
    
    
    
    
    
    
    
    
    
    
    
    374,801Other current and long-term assets
    
    
    (211,680
    )
    
    
    7,642
    
    
    
    
    
    
    
    (204,038
    )Trade and subcontractors payable
    
    
    (267,870
    )
    
    
    733
    
    
    
    
    
    
    
    (267,137
    )Accrued expenses and deferred revenue
    
    
    271,255
    
    
    
    (21,748
    )
    
    
    
    
    
    
    249,507Billings in excess of costs and earnings
    
    
    933,988
    
    
    
    
    
    
    
    
    
    
    
    933,988Net cash used in operating activities
    
    
    (1,402,857
    )
    
    
    (41,560
    )
    
    
    
    
    
    
    (1,444,417
    )Cash flows from investing activities:Premiums paid on officers life insurance policies
    
    
    (27,464
    )
    
    
    
    
    
    
    
    
    
    
    (27,464
    )Additions to income-producing properties
    
    
    (128,925
    )
    
    
    (205
    )
    
    
    129,130
    
    
    
    Additions to property and equipment
    
    
    (60,028
    )
    
    
    (4
    )
    
    
    (129,130
    )
    
    
    (189,162
    )Additions to intangible assets
    
    
    (314,192
    )
    
    
    1,518
    
    
    
    
    
    
    
    (312,674
    )Proceeds from sale of property and equipment
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    2,000Net cash used in investing activities
    
    
    (528,609
    )
    
    
    1,309
    
    
    
    
    
    
    
    (527,300
    )Cash flows from financing activities:Mortgage repayments
    
    
    (78,370
    )
    
    
    23,606
    
    
    
    
    
    
    
    (54,764
    )Debt repayments
    
    
    (100,000
    )
    
    
    
    
    
    
    
    
    
    
    (100,000
    )Repurchase of common stock
    
    
    (4,625
    )
    
    
    
    
    
    
    
    
    
    
    (4,625
    )Cash dividends paid to shareholders
    
    
    (111,683
    )
    
    
    
    
    
    
    
    
    
    
    (111,683
    )Net cash used in financing activities
    
    
    (294,678
    )
    
    
    23,606
    
    
    
    
    
    
    
    (271,072
    )DISCONTINUED OPERATIONS:Operating activities
    
    
    358,323
    
    
    
    41,769
    
    
    
    
    
    
    
    400,092Investing activities
    
    
    49,764
    
    
    
    (1,518
    )
    
    
    
    
    
    
    48,246Financing activities
    
    
    (99,648
    )
    
    
    (23,606
    )
    
    
    
    
    
    
    (123,254
    )Net cash provided by discontinued operations
    
    
    308,439
    
    
    
    16,645
    
    
    
    
    
    
    
    325,084Net decrease in cash and cash equivalents
    
    
    (1,917,705
    )
    
    
    
    
    
    
    
    
    
    
    (1,917,705
    )Cash at beginning of period
    
    
    4,821,126
    
    
    
    
    
    
    
    
    
    
    
    4,821,126Cash at end of period
    
    $
    2,903,421
    
    
    $
    
    
    
    $
    
    
    
    $
    2,903,421
 24




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##### Table of Contents



NOTE 11. FAIR VALUE MEASUREMENTS
  
    
    Level 1 Quoted prices in active markets for identical assets or liabilities.
    
    Level 2 Inputs other than quoted prices which are observable for an asset or
liability, either directly or indirectly.
    
    Level 3 Unobservable inputs for an asset or liability when little or no market data
is available.
       25




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##### Table of Contents



Non-Recurring Measurements
   NOTE 12. RELATED PARTY TRANSACTIONS
    NOTE 13. SUBSEQUENT EVENTS
  26




---



##### Table of Contents




    
    approximately $3.95 million for assumption of the mortgage note; and
    
    approximately $125,000 for closing costs and prorations.
  NOTE 14. COMMITMENTS AND CONTINGENCIES
  NOTE 15. RESTATEMENT OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Accounting for Income Taxes
   27




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##### Table of Contents



As of October 31, 2010As Recast forDiscontinuedOperations andSegmentChange(Note 10)
    
    Adjustments
    
    As RestatedConsolidated balance sheet accounts
impacted by restatement:Deferred income taxes (current)
    
    $
    344,545
    
    
    $
    (35,966
    )
    
    $
    308,579Total current assets
    
    
    9,831,930
    
    
    
    (35,966
    )
    
    
    9,795,964Deferred income taxes (non-current)
    
    
    1,306,820
    
    
    
    (763,212
    )
    
    
    543,608Total assets
    
    
    32,281,271
    
    
    
    (799,178
    )
    
    
    31,482,093Retained earnings
    
    
    5,193,941
    
    
    
    (799,178
    )
    
    
    4,394,763Total shareholders equity
    
    
    14,399,461
    
    
    
    (799,178
    )
    
    
    13,600,283Total liabilities and shareholders equity
    
    
    32,281,271
    
    
    
    (799,178
    )
    
    
    31,482,093
 As of April 30, 2010As Recast forDiscontinuedOperations andSegmentChange(Note 10)
    
    Adjustments
    
    As RestatedConsolidated balance sheet accounts
impacted by restatement:Deferred income taxes (current)
    
    $
    401,215
    
    
    $
    (41,118
    )
    
    $
    360,097Total current assets
    
    
    8,766,908
    
    
    
    (41,118
    )
    
    
    8,725,790Deferred income taxes (non-current)
    
    
    1,718,954
    
    
    
    (558,583
    )
    
    
    1,160,371Total assets
    
    
    41,551,973
    
    
    
    (599,701
    )
    
    
    40,952,272Retained earnings
    
    
    6,669,330
    
    
    
    (599,701
    )
    
    
    6,069,629Total shareholders equity
    
    
    15,789,479
    
    
    
    (599,701
    )
    
    
    15,189,778Total liabilities and shareholders equity
    
    
    41,551,973
    
    
    
    (599,701
    )
    
    
    40,952,272
 28




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For the Second Quarter Ended October 31, 2010As Recast forDiscontinuedOperations(Note 10)
    
    Adjustments
    
    As RestatedConsolidated statement of operations accounts
impacted by restatement:Income tax benefit
    
    $
    (210,053
    )
    
    $
    36,493
    
    
    $
    (173,560
    )Loss from continuing operations
    
    
    (319,064
    )
    
    
    (36,493
    )
    
    
    (355,557
    )Net loss
    
    
    (651,828
    )
    
    
    (36,493
    )
    
    
    (688,321
    )Net loss per share from continuing operations
    
    $
    (0.09
    )
    
    $
    (0.01
    )
    
    $
    (0.10
    )Net loss per share from discontinued operations
    
    
    (0.09
    )
    
    
    
    
    
    
    (0.09
    )Net loss per share  basic and diluted
    
    
    (0.18
    )
    
    
    (0.01
    )
    
    
    (0.19
    )For the Six Months Ended October 31, 2010As Recast forDiscontinuedOperations(Note 10)
    
    Adjustments
    
    As RestatedConsolidated statement of operations accounts
impacted by restatement:Income tax benefit
    
    $
    (805,241
    )
    
    $
    199,477
    
    
    $
    (605,764
    )Loss from continuing operations
    
    
    (1,144,116
    )
    
    
    (199,477
    )
    
    
    (1,343,593
    )Net loss
    
    
    (1,401,571
    )
    
    
    (199,477
    )
    
    
    (1,601,048
    )Net loss per share from continuing operations
    
    $
    (0.31
    )
    
    $
    (0.06
    )
    
    $
    (0.37
    )Net loss per share from discontinued operations
    
    
    (0.07
    )
    
    
    
    
    
    
    (0.07
    )Net loss per share  basic and diluted
    
    
    (0.38
    )
    
    
    (0.06
    )
    
    
    (0.44
    )Consolidated statement of cash flows accounts
impacted by restatement:Net loss
    
    $
    (1,401,571
    )
    
    $
    (199,477
    )
    
    $
    (1,601,048
    )Deferred tax benefit
    
    
    (797,845
    )
    
    
    199,477
    
    
    
    (598,368
    )
 29




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For the Second Quarter Ended October 31, 2009As Recast forDiscontinuedOperations(Note 10)
    
    Adjustments
    
    As RestatedConsolidated statement of operations accounts
impacted by restatement:Income tax benefit
    
    $
    (425,824
    )
    
    $
    95,717
    
    
    $
    (330,107
    )Loss from continuing operations
    
    
    (720,974
    )
    
    
    (95,717
    )
    
    
    (816,691
    )Net loss
    
    
    (708,022
    )
    
    
    (95,717
    )
    
    
    (803,739
    )Net loss per share from continuing operations
    
    $
    (0.19
    )
    
    $
    (0.03
    )
    
    $
    (0.22
    )Net earnings per share from discontinued operations
    
    
    
    
    
    
    
    
    
    
    Net loss per share  basic and diluted
    
    
    (0.19
    )
    
    
    (0.03
    )
    
    
    (0.22
    )For the Six Months Ended October 31, 2009As Recast forDiscontinuedOperations(Note 10)
    
    Adjustments
    
    As RestatedConsolidated statement of operations accounts
impacted by restatement:Income tax benefit
    
    $
    (942,115
    )
    
    $
    167,022
    
    
    $
    (775,093
    )Loss from continuing operations
    
    
    (1,505,433
    )
    
    
    (167,022
    )
    
    
    (1,672,455
    )Net loss
    
    
    (1,413,608
    )
    
    
    (167,022
    )
    
    
    (1,580,630
    )Net loss per share from continuing operations
    
    $
    (0.41
    )
    
    $
    (0.04
    )
    
    $
    (0.45
    )Net earnings per share from discontinued operations
    
    
    0.02
    
    
    
    
    
    
    
    0.02Net loss per share  basic and diluted
    
    
    (0.39
    )
    
    
    (0.04
    )
    
    
    (0.43
    )Consolidated statement of cash flows accounts
impacted by restatement:Net loss
    
    $
    (1,413,608
    )
    
    $
    (167,022
    )
    
    $
    (1,580,630
    )Deferred tax benefit
    
    
    (968,194
    )
    
    
    167,022
    
    
    
    (801,172
    )
  30




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
     OVERVIEW
   31




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1
    
 1
    
    The Company believes EBITDA is a useful non-GAAP
measurement of the BPE Segments performance, because it provides information
that can be used to further evaluate the operational effectiveness of the
business. One should not consider EBITDA an alternative to, or a more
meaningful indicator of the segments operating performance than, earnings
before taxes as determined in accordance with GAAP. 32




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Discontinued Operations
   Liquidity
   RESULTS OF OPERATIONS
  33




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CHART A
 Second Quarter Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedOctober 31,
    
    
    Amount
    
    
    Percentage
    
    
    October 31,
    
    
    Amount
    
    
    Percentage2010
    
    
    2009
    
    
    Change
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    Change
    
    
    ChangeBPE (1)
    
    $
    7,519
    
    
    $
    3,923
    
    
    $
    3,596
    
    
    
    92
    
    
    $
    12,361
    
    
    $
    7,796
    
    
    $
    4,565
    
    
    
    59Other
    
    
    111
    
    
    
    106
    
    
    
    5
    
    
    
    5
    
    
    
    215
    
    
    
    207
    
    
    
    8
    
    
    
    4$
    7,630
    
    
    $
    4,029
    
    
    $
    3,601
    
    
    
    89
    
    
    $
    12,576
    
    
    $
    8,003
    
    
    $
    4,573
    
    
    
    57
 NOTES TO CHART A
 (1)
    
    The following table indicates the BPE Segment revenues by service and product type:
 
 Second Quarter Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedOctober 31,
    
    
    Amount
    
    
    Percentage
    
    
    October 31,
    
    
    Amount
    
    
    Percentage2010
    
    
    2009
    
    
    Change
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    Change
    
    
    ChangeEnergy Savings Projects
    
    $
    5,803
    
    
    $
    2,048
    
    
    $
    3,755
    
    
    
    183
    
    
    $
    8,822
    
    
    $
    4,061
    
    
    $
    4,761
    
    
    
    117Lighting Products
    
    
    531
    
    
    
    485
    
    
    
    46
    
    
    
    9
    
    
    
    1,216
    
    
    
    941
    
    
    
    275
    
    
    
    29Energy Management Services
    
    
    427
    
    
    
    458
    
    
    
    (31
    )
    
    
    (7
    )
    
    
    767
    
    
    
    1,022
    
    
    
    (255
    )
    
    
    (25
    )Fifth Fuel Management Services
    
    
    34
    
    
    
    
    
    
    
    34
    
    
    
    
    
    
    
    91
    
    
    
    
    
    
    
    91
    
    
    
    Productivity Software
    
    
    724
    
    
    
    932
    
    
    
    (208
    )
    
    
    (22
    )
    
    
    1,465
    
    
    
    1,772
    
    
    
    (307
    )
    
    
    (17
    )$
    7,519
    
    
    $
    3,923
    
    
    $
    3,596
    
    
    
    92
    
    
    $
    12,361
    
    
    $
    7,796
    
    
    $
    4,565
    
    
    
    59
  (a)
    
    an increase in energy savings (lighting and mechanical) project revenues
of approximately $3,755,000;
  34




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(b)
    
    a decrease in productivity software revenues of approximately $208,000.
 BPE Segment revenues increased by approximately $4,565,000, or 59%, in the first six (6)
months of fiscal 2011 compared to the same period in fiscal 2010, primarily due to:
 (a)
    
    an increase in energy savings (lighting and mechanical) project revenues
of approximately $4,761,000;(b)
    
    an increase in lighting product revenues of approximately $275,000; and(c)
    
    approximately $91,000 in revenues from the Companys new Fifth Fuel
Management service offering;
 partially offset by:
 (d)
    
    a decrease in energy management service revenues of approximately
$255,000; and(e)
    
    a decrease in productivity software revenues of approximately $307,000.
  IncreaseOctober 31,
    
    
    (Decrease)2010
    
    
    2009
    
    
    Amount
    
    
    PercentageBPE (1)
    
    $
    16,299,000
    
    
    $
    7,027,000
    
    
    $
    9,272,000
    
    
    
    132Other (2)
    
    
    405,000
    
    
    
    395,000
    
    
    
    10,000
    
    
    
    3Total Backlog
    
    $
    16,704,000
    
    
    $
    7,422,000
    
    
    $
    9,282,000
    
    
    
    125
 
 (1)
    
    BPE backlog at October 31, 2010, increased by approximately $9,272,000, or 132%,
compared to the year-earlier period, primarily due to:
 (a)
    
    an increase of approximately $8,262,000 in energy savings (lighting and
mechanical) projects;(b)
    
    approximately $622,000 in backlog from BPEs new Fifth Fuel Management
TM service offering; and(c)
    
    an increase of approximately $349,000 in energy management consulting
services.
 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 $168,000, or 2.4%.(2)
    
    Other backlog represents rental income under lease agreements at the Companys corporate
headquarters building and other leasehold interests.
 35




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CHART B
 Percentage of
    
    
    
    
    
    
    
    
    
    
    Percentage ofRevenues for the
    
    
    
    
    
    
    
    
    
    
    Revenues for theSecond Quarter Ended
    
    
    Second Quarter Ended
    
    
    Six Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,
    
    
    October 31,
    
    
    October 31,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009BPE (1)
    
    $
    5,403
    
    
    $
    2,671
    
    
    
    72
    
    
    
    68
    
    
    $
    8,968
    
    
    $
    5,296
    
    
    
    73
    
    
    
    68Other
    
    
    161
    
    
    
    168
    
    
    
    146
    
    
    
    158
    
    
    
    336
    
    
    
    352
    
    
    
    156
    
    
    
    170$
    5,564
    
    
    $
    2,839
    
    
    
    73
    
    
    
    70
    
    
    $
    9,304
    
    
    $
    5,648
    
    
    
    74
    
    
    
    71
 NOTES TO CHART B
 (1)
    
    BPE Segment cost of revenues increased by approximately $2,732,000, or 102%, and by
approximately $3,672,000, or 69%, in the second quarter and the first six (6) months of
fiscal 2011, respectively, compared to the same periods in fiscal 2010, 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%
and by approximately 5% in the second quarter and the first six (6) months of fiscal 2011,
respectively, compared to the same periods in fiscal 2010, primarily due to changes in the
mix of services and products and an increasingly competitive market pricing environment for energy
savings projects.
 
  36




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CHART C
 Percentage of
    
    
    
    
    
    
    
    
    
    
    Percentage ofRevenues for the
    
    
    
    
    
    
    
    
    
    
    Revenues for theSecond Quarter Ended
    
    
    Second Quarter Ended
    
    
    Six Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,
    
    
    October 31,
    
    
    October 31,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009BPE (1)
    
    $
    1,428
    
    
    $
    1,362
    
    
    
    19
    
    
    
    35
    
    
    $
    3,005
    
    
    $
    2,722
    
    
    
    24
    
    
    
    35Corporate (2)
    
    
    1,122
    
    
    
    930
    
    
    
    15
    
    
    
    23
    
    
    
    2,040
    
    
    
    1,954
    
    
    
    16
    
    
    
    24$
    2,550
    
    
    $
    2,292
    
    
    
    33
    
    
    
    57
    
    
    $
    5,045
    
    
    $
    4,676
    
    
    
    40
    
    
    
    58
 NOTES TO CHART C
 (1)
    
    BPE Segment SG&A expenses increased by approximately $283,000, or 10%, in the first six (6)
months of fiscal 2011 compared to the same period in fiscal 2010, primarily due to higher
personnel-related costs, product development expenses, and sales and marketing expenses.On a percentage-of-revenue basis, BPE Segment SG&A expenses decreased by approximately 16%
and 11% in the second quarter and the first six (6) months of fiscal 2011, respectively,
compared to the same periods in fiscal 2010, primarily due to the increases in revenues (see
Chart A) without corresponding proportional increases in expenses.(2)
    
    Corporate SG&A expenses increased by approximately $192,000, or 21%, and by approximately
$86,000, or 4%, in the second quarter and the first six (6) months of fiscal 2011,
respectively, compared to the same periods in fiscal 2010, primarily due to increases in
consulting, legal, and non-employee directors fees and investor relations expenses, partially offset by reductions
in audit and tax fees.On a percentage-of-revenue basis, Corporate SG&A expenses decreased by 8% in both the second
quarter and first six (6) months of fiscal 2011, compared to the same respective periods in
fiscal 2010, primarily due to the increase in revenues (see Chart A) without corresponding
proportional increases in expenses.
   37




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CHART D
 Second Quarter Ended
    
    
    (Increase)
    
    
    Six Months Ended
    
    
    (Increase)October 31,
    
    
    Decrease
    
    
    October 31,
    
    
    Decrease2010
    
    
    2009
    
    
    Amount
    
    
    2010
    
    
    2009
    
    
    AmountBPE (1)
    
    $
    697
    
    
    $
    (75
    )
    
    $
    772
    
    
    $
    383
    
    
    $
    (199
    )
    
    $
    582Corporate (2)
    
    
    (1,226
    )
    
    
    (1,072
    )
    
    
    (154
    )
    
    
    (2,332
    )
    
    
    (2,249
    )
    
    
    (83
    )Total
    
    $
    (529
    )
    
    $
    (1,147
    )
    
    $
    618
    
    
    $
    (1,949
    )
    
    $
    (2,448
    )
    
    $
    499
 NOTES TO CHART D
 (1)
    
    BPE Segment earnings before income taxes of approximately $697,000 in the second quarter of
fiscal 2011 represents growth in earnings of approximately $772,000 compared to the same
period in fiscal 2010, primarily due to an increase in revenues of approximately $3,596,000
(see Chart A) and an increase in gross margin of approximately $864,000, partially offset by
an increase in SG&A expenses of approximately $66,000 (see Chart C).BPE Segment earnings before income taxes of approximately $383,000 in the first six (6)
months of fiscal 2011 represents growth in earnings of approximately $582,000 compared to the
same period in fiscal 2010, primarily due to an increase in revenues of approximately
$4,565,000 (see Chart A) and an increase in gross margin of approximately $893,000, partially
offset by an increase in SG&A expenses of approximately $283,000 (see Chart C).(2)
    
    Corporate loss before income taxes increased by approximately
$154,000, or 14%, and by
approximately $83,000, or 4%, in the second quarter and the first six (6) months of fiscal
2011, respectively, compared to the same periods in fiscal 2010, primarily due to increases
in SG&A expenses of approximately $192,000 and $86,000 respectively (see Chart C).
   38




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LIQUIDITY AND CAPITAL RESOURCES
   39




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##### Table of Contents



(a)
    
    current year losses from continuing operations before depreciation,
amortization, and income taxes of approximately $1,439,000;(b)
    
    an increase in costs and earnings in excess of billings of approximately
$538,000; and(c)
    
    an increase in other current and long-term assets of approximately
$403,000;
 partially offset by:
 (d)
    
    an increase in trade accounts payable, accrued expenses, and other
liabilities of approximately $559,000; and(e)
    
    a decrease in net accounts receivable of approximately $336,000.
  (a)
    
    $500,000 used for the purchase of a held-to-maturity investment; and(b)
    
    approximately $189,000 used for additions to intangible assets, primarily
related to enhancements to the BPE Segments proprietary building productivity
software solutions;
 partially offset by:
 (c)
    
    proceeds of approximately $195,000 from the termination of a split-dollar
life insurance agreement.
  (a)
    
    proceeds from other long-term debt of $500,000;
 partially offset by:
 (b)
    
    scheduled principal payments on the mortgage note on the corporate
headquarters building of approximately $59,000; and(c)
    
    payment of the regular quarterly cash dividends to shareholders of
approximately $74,000.
   40




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Sales of
Promissory Notes to Related Parties Termination of Split Dollar
Life Insurance Agreement
 ®
 41




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##### Table of Contents



®
 Sales of Promissory Notes to Related Parties
  Termination of Split Dollar Life Insurance Agreement
   42




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Capital Expenditures
  Significant Uses of Cash
  Mortgage Notes and Other Long-Term Debt
   43




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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
  CRITICAL ACCOUNTING POLICIES
  Revenue Recognition
   44




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Long-Lived Assets: Property & Equipment and Capitalized Software
    
    
    A significant decrease in the market price 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;
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
    
    The Company has received purchase offers at prices below carrying value;
    
    A real estate asset that has a significant vacancy rate 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; and
    
    Depressed market conditions.
    
    
    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.
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Valuation of Goodwill and Other Indefinite-Lived Intangible Assets
   Income Taxes
        47




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ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
  Accounting for Income Taxes,
 
    
    develop and implement additional procedures to increase the level of
review, evaluation and validation of the Companys valuation of deferred
tax assets; and
    
    increase the level of knowledge among Company employees in the area
of accounting for income taxes.
   48




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ITEM 6. EXHIBITS
 31.1
    
    Certification of Chief Executive Officer, pursuant to Rules 13a-14(a)/15d-14(a)31.2
    
    Certification of Chief Financial Officer, pursuant to Rules 13a-14(a)/15d-14(a)32.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes Oxley Act 200232.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes Oxley Act 2002
 49




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SERVIDYNE, INC.
      (Registrant)Date: June 2, 2011
    /s/ Alan R. AbramsAlan R. AbramsChief Executive Officer Date: June 2, 2011
    /s/ Rick A. PaternostroRick A. PaternostroChief Financial Officer 50