##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
 For the quarter ended January 31, 2009
 Commission file number 0-10146
 SERVIDYNE, INC.
 (Exact name of registrant as specified in its charter)
 Georgia
    
    58-0522129(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 1945 The Exchange, Suite 300, Atlanta, GA 30339-2029
 (770) 953-0304
 N/A
  þ o
  Large accelerated filer o
    
    Accelerated Filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company þ
  o þ




---



TABLE OF CONTENTS  PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4 (T). CONTROLS AND PROCEDURESPART II. OTHER INFORMATIONITEM 1A. RISK FACTORSITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSITEM 6. EXHIBITSSIGNATURESEX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  
  
 ITEM 1. FINANCIAL STATEMENTS
 SERVIDYNE, INC.
   January 31, 2009
    
    
    April 30, 2008ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    5,730,561
    
    
    $
    8,382,947Restricted cash
    
    
    
    
    
    
    3,470,700Receivables (Note 5)
    
    
    3,528,902
    
    
    
    3,735,930Less: Allowance for doubtful accounts
    
    
    (110,845
    )
    
    
    (127,007
    )Costs and earnings in excess of billings
    
    
    386,506
    
    
    
    275,754Deferred income taxes
    
    
    521,036
    
    
    
    750,488Other current assets
    
    
    1,608,824
    
    
    
    1,011,304Total current assets
    
    
    11,664,984
    
    
    
    17,500,116INCOME-PRODUCING PROPERTIES, net
    
    
    21,519,183
    
    
    
    21,773,409PROPERTY AND EQUIPMENT, net
    
    
    845,978
    
    
    
    811,900OTHER ASSETS:Real estate held for future development or sale
    
    
    853,109
    
    
    
    853,109Intangible assets, net (Note 9)
    
    
    3,173,252
    
    
    
    3,222,125Goodwill (Note 9)
    
    
    6,354,003
    
    
    
    5,458,717Other assets
    
    
    2,697,137
    
    
    
    2,696,174Total assets
    
    $
    47,107,646
    
    
    $
    52,315,550LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    869,247
    
    
    $
    550,360Accrued expenses
    
    
    1,363,768
    
    
    
    1,143,794Deferred revenue
    
    
    640,089
    
    
    
    848,197Accrued incentive compensation
    
    
    
    
    
    
    494,000Billings in excess of costs and earnings
    
    
    170,737
    
    
    
    62,559Current maturities of mortgage notes and other long-term debt
    
    
    556,461
    
    
    
    631,736Total current liabilities
    
    
    3,600,302
    
    
    
    3,730,646DEFERRED INCOME TAXES
    
    
    3,465,955
    
    
    
    5,271,441OTHER LIABILITIES
    
    
    814,103
    
    
    
    1,138,316MORTGAGE NOTES PAYABLE, less current maturities
    
    
    18,324,190
    
    
    
    18,603,769OTHER LONG-TERM DEBT, less current maturities
    
    
    1,000,000
    
    
    
    1,105,000Total liabilities
    
    
    27,204,550
    
    
    
    29,849,172COMMITMENTS AND CONTINGENCIES (Note 13)SHAREHOLDERS EQUITY:Common stock, $1 par value; 10,000,000 shares authorized;
3,918,078 issued and 3,691,569 outstanding at January 31, 2009,
3,708,836 issued and 3,539,770 outstanding at April 30, 2008
    
    
    3,918,078
    
    
    
    3,708,836Additional paid-in capital
    
    
    5,972,610
    
    
    
    5,045,100Retained earnings
    
    
    10,987,208
    
    
    
    14,511,159Treasury stock (common shares)
226,509 at January 31, 2009, and 169,066 at April 30, 2008
    
    
    (974,800
    )
    
    
    (798,717
    )Total shareholders equity
    
    
    19,903,096
    
    
    
    22,466,378Total liabilities and shareholders equity
    
    $
    47,107,646
    
    
    $
    52,315,550
 See accompanying notes to condensed consolidated financial statements.
 1




---



##### Table of Contents



SERVIDYNE, INC.
   THIRD QUARTER ENDED
    
    
    NINE MONTHS ENDEDJANUARY 31,
    
    
    JANUARY 31,2009
    
    
    2008
    
    
    2009
    
    
    2008REVENUES:Building Performance Efficiency (BPE)
    
    $
    3,338,921
    
    
    $
    3,220,444
    
    
    $
    9,493,104
    
    
    $
    11,973,959Real Estate
    
    
    818,893
    
    
    
    895,264
    
    
    
    2,407,713
    
    
    
    4,335,4464,157,814
    
    
    
    4,115,708
    
    
    
    11,900,817
    
    
    
    16,309,405COST OF REVENUES:BPE
    
    
    2,098,300
    
    
    
    2,158,725
    
    
    
    6,018,788
    
    
    
    8,104,705Real Estate
    
    
    527,710
    
    
    
    515,624
    
    
    
    1,562,375
    
    
    
    1,671,7022,626,010
    
    
    
    2,674,349
    
    
    
    7,581,163
    
    
    
    9,776,407SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
    
    
    2,471,359
    
    
    
    2,319,813
    
    
    
    7,572,496
    
    
    
    6,982,322OTHER (INCOME) AND EXPENSES:Other income (Note 12)
    
    
    (280,510
    )
    
    
    (9,899
    )
    
    
    (317,454
    )
    
    
    (77,045
    )Interest income
    
    
    (8,560
    )
    
    
    (83,289
    )
    
    
    (111,618
    )
    
    
    (195,046
    )Interest expense
    
    
    318,083
    
    
    
    345,516
    
    
    
    980,847
    
    
    
    1,032,87529,013
    
    
    
    252,328
    
    
    
    551,775
    
    
    
    760,784LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
    
    
    (968,568
    )
    
    
    (1,130,782
    )
    
    
    (3,804,617
    )
    
    
    (1,210,108
    )INCOME TAX BENEFIT
    
    
    (477,206
    )
    
    
    (423,501
    )
    
    
    (1,560,132
    )
    
    
    (505,719
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (491,362
    )
    
    
    (707,281
    )
    
    
    (2,244,485
    )
    
    
    (704,389
    )DISCONTINUED OPERATIONS:(Loss) earnings from discontinued operations, adjusted for applicable
income tax expense (benefit) of $0, ($1,832), $0 and $11,219, respectively
    
    
    
    
    
    
    (2,988
    )
    
    
    
    
    
    
    18,305Gain on sale of income-producing real estate, adjusted for applicable
income tax expense of $0, $792,218, $0, and $1,521,172, respectively
    
    
    
    
    
    
    1,292,567
    
    
    
    
    
    
    
    2,481,914EARNINGS FROM DISCONTINUED OPERATIONS
    
    
    
    
    
    
    1,289,579
    
    
    
    
    
    
    
    2,500,219NET (LOSS) EARNINGS
    
    $
    (491,362
    )
    
    $
    582,298
    
    
    $
    (2,244,485
    )
    
    $
    1,795,830NET (LOSS) EARNINGS PER SHARE  BASICFrom continuing operations
    
    $
    (0.13
    )
    
    $
    (0.19
    )
    
    $
    (0.60
    )
    
    $
    (0.19
    )From discontinued operations
    
    
    
    
    
    
    0.35
    
    
    
    
    
    
    
    0.67NET (LOSS) EARNINGS PER SHARE  BASIC
    
    $
    (0.13
    )
    
    $
    0.16
    
    
    $
    (0.60
    )
    
    $
    0.48NET (LOSS) EARNINGS PER SHARE  DILUTEDFrom continuing operations
    
    $
    (0.13
    )
    
    $
    (0.19
    )
    
    $
    (0.60
    )
    
    $
    (0.19
    )From discontinued operations
    
    
    
    
    
    
    0.35
    
    
    
    
    
    
    
    0.67NET (LOSS) EARNINGS PER SHARE  DILUTED
    
    $
    (0.13
    )
    
    $
    0.16
    
    
    $
    (0.60
    )
    
    $
    0.48DIVIDENDS PER SHARE
    
    $
    0.038
    
    
    $
    0.034
    
    
    $
    0.114
    
    
    $
    0.103WEIGHTED AVERAGE SHARES OUTSTANDING  BASIC
    
    
    3,711,559
    
    
    
    3,714,245
    
    
    
    3,726,066
    
    
    
    3,708,588WEIGHTED AVERAGE SHARES OUTSTANDING  DILUTED
    
    
    3,711,559
    
    
    
    3,714,245
    
    
    
    3,726,066
    
    
    
    3,708,588
 See accompanying notes to condensed consolidated financial statements.
 2




---



##### Table of Contents



SERVIDYNE, INC.
   NINE MONTHS ENDEDJANUARY 31,2009
    
    
    2008CONTINUING OPERATIONS:Cash flows from operating activities:Net (loss) earnings
    
    $
    (2,244,485
    )
    
    $
    1,795,830Earnings from discontinued operations, net of tax
    
    
    
    
    
    
    (2,500,219
    )Adjustments to reconcile net (loss) earnings to net
cash used in operating activities:Loss on sale of real estate
    
    
    
    
    
    
    89,179Loss on disposal of assets
    
    
    11,654
    
    
    
    14,330Depreciation and amortization
    
    
    1,208,196
    
    
    
    1,122,288Amortization of mortgage discount
    
    
    (20,000
    )
    
    
    (22,500
    )Deferred tax benefit
    
    
    (1,560,132
    )
    
    
    (505,719
    )Stock compensation expense
    
    
    151,927
    
    
    
    97,210Adjustment to cash surrender value of life insurance
    
    
    (103,614
    )
    
    
    (45,453
    )Straight-line rent
    
    
    (57,344
    )
    
    
    24,640Provision for doubtful accounts, net
    
    
    (16,162
    )
    
    
    100,812Changes in assets and liabilities:Receivables
    
    
    325,550
    
    
    
    (1,301,180
    )Costs and earnings in excess of billings
    
    
    (110,752
    )
    
    
    (736,081
    )Other current assets
    
    
    (263,603
    )
    
    
    283,178Trade and subcontractors payable
    
    
    (120,649
    )
    
    
    205,069Accrued expenses and deferred revenue
    
    
    (32,535
    )
    
    
    181,324Accrued incentive compensation
    
    
    (494,000
    )
    
    
    (196,516
    )Billings in excess of costs and earnings
    
    
    108,178
    
    
    
    (113,110
    )Other liabilities
    
    
    (14,224
    )
    
    
    175,537Net cash used in operating activities
    
    
    (3,247,895
    )
    
    
    (1,331,381
    )Cash flows from investing activities:Purchase of available-for-sale security
    
    
    
    
    
    
    (2,900,000
    )Deposit of cash proceeds from sale of real estate held in escrow
    
    
    
    
    
    
    (3,436,200
    )Release of restricted cash held in escrow
    
    
    3,470,700
    
    
    
    Deposit of restricted cash
    
    
    (139,833
    )
    
    
    Purchase of held to maturity investment
    
    
    (150,000
    )
    
    
    Additions to income-producing properties
    
    
    (170,238
    )
    
    
    (644,898
    )Additions to property and equipment
    
    
    (147,631
    )
    
    
    (164,426
    )Additions to intangible assets
    
    
    (263,005
    )
    
    
    (212,513
    )Acquisition, net of cash acquired
    
    
    (902,657
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    1,697,336
    
    
    
    (7,358,037
    )Cash flows from financing activities:Real estate loan proceeds
    
    
    
    
    
    
    3,200,000Mortgage repayments
    
    
    (258,978
    )
    
    
    (2,500,000
    )Debt repayments
    
    
    (280,875
    )
    
    
    (479,714
    )Repurchase of common stock
    
    
    (135,507
    )
    
    
    Deferred loan costs paid
    
    
    
    
    
    
    (57,346
    )Exercise of stock options
    
    
    
    
    
    
    51,000Cash dividends paid to shareholders
    
    
    (426,467
    )
    
    
    (381,746
    )Net cash used in financing activities
    
    
    (1,101,827
    )
    
    
    (167,806
    )DISCONTINUED OPERATIONS:Operating activities
    
    
    
    
    
    
    319,230Investing activities
    
    
    
    
    
    
    14,616,120Financing activities
    
    
    
    
    
    
    (6,187,504
    )Net cash provided by discontinued operations
    
    
    
    
    
    
    8,747,846Net decrease in cash and cash equivalents
    
    
    (2,652,386
    )
    
    
    (109,378
    )Cash at beginning of period
    
    
    8,382,947
    
    
    
    5,662,894Cash at end of period
    
    $
    5,730,561
    
    
    $
    5,553,516
 See accompanying notes to condensed consolidated financial statements.
 3




---



##### Table of Contents



Total assets acquired, net of cash
    
    $
    1,577,844Total liabilities assumed
    
    
    (583,937
    )Net assets acquired, net of cash
    
    
    993,907Less value of shares issued for acquisition
    
    
    (91,250
    )Total cash paid (including acquisition costs)
    
    $
    902,657
 See accompanying notes to condensed consolidated financial statements.
 4




---



##### Table of Contents



SERVIDYNE, INC.
 NOTE 1. ORGANIZATION AND BUSINESS
  NOTE 2. UNAUDITED STATEMENTS
  Restatement
of Previously Issued Condensed Consolidated Financial Statements
  Reclassification
of Previously Issued Condensed Consolidated Financial Statements
  NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS
  5




---



##### Table of Contents



6




---



##### Table of Contents



NOTE 4. EQUITY-BASED COMPENSATION
   Stock Options
  WeightedOptions to
    
    
    AveragePurchase
    
    
    ExerciseShares
    
    
    PriceOutstanding at April 30, 2008
    
    
    483,536
    
    
    $
    4.45Granted
    
    
    10,500
    
    
    
    5.24Exercised
    
    
    
    
    
    
    Forfeited / Expired
    
    
    (11,550
    )
    
    
    4.59Outstanding at January 31, 2009
    
    
    482,486
    
    
    $
    4.46Vested at January 31, 2009
    
    
    471,986
    
    
    $
    4.44
   Weighted AverageExercise
    
    Number of
    
    Remaining ContractualPrice
    
    Outstanding Options
    
    Life (Years)$4.42
    
    
    415,629
    
    
    
    3.77$4.59
    
    
    55,440
    
    
    
    6.15$5.19
    
    
    917
    
    
    
    5.38$5.24
    
    
    10,500
    
    
    
    4.37
  7




---



##### Table of Contents



Expected life (years)
    
    
    5Dividend yield
    
    
    2.55
    %Expected stock price volatility
    
    
    37.11
    %Risk-free interest rate
    
    
    3.73
    %Fair value of options granted
    
    $
    1.16
  Stock Appreciation Rights (SARs)
  WeightedAverageSAR
    
    
    ExerciseUnits
    
    
    PriceOutstanding at April 30, 2008
    
    
    411,600
    
    
    $
    4.26Granted
    
    
    184,000
    
    
    
    4.57Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (5,250
    )
    
    
    3.88Outstanding at January 31, 2009
    
    
    590,350
    
    
    $
    4.36Vested at January 31, 2009
    
    
    
    
    
    $
    
  Expected life (years)
    
    
    5Dividend yield
    
    
    2.59
    %Expected stock price volatility
    
    
    37.25
    %Risk-free interest rate
    
    
    3.45
    %Fair value of SARs granted
    
    $
    0.91
 8




---



##### Table of Contents



Shares of Restricted Stock
    Weighted AverageNumber of
    
    
    Fair ValueShares of
    
    
    per ShareRestricted Stock
    
    
    on Grant DateNon-vested restricted stock at April 30, 2008
    
    
    1,785
    
    
    $
    4.27Granted
    
    
    5,800
    
    
    
    4.72Vested
    
    
    (1,785
    )
    
    
    Forfeited
    
    
    (205
    )
    
    
    Non-vested restricted stock at January 31, 2009
    
    
    5,595
    
    
    $
    4.61
 NOTE 5. RECEIVABLES
  NOTE 6. DISCONTINUED OPERATIONS
 9




---



##### Table of Contents



Sales of Income-Producing Properties
   Third Quarter Ended
    
    Nine Months EndedJanuary 31,
    
    January 31,2009
    
    2008
    
    2009
    
    2008REAL ESTATE SEGMENTRental revenues
    
    $
    
    
    
    $
    195,980
    
    
    $
    
    
    
    $
    1,172,304Rental property operating expenses, including depreciation
    
    
    
    
    
    
    200,800
    
    
    
    
    
    
    
    1,142,780Operating (loss) earnings from discontinued operations
    
    
    
    
    
    
    (4,820
    )
    
    
    
    
    
    
    29,524Income tax benefit (expense)
    
    
    
    
    
    
    1,832
    
    
    
    
    
    
    
    (11,219
    )Operating (loss) earnings from discontinued operations, net of tax
    
    
    
    
    
    
    (2,988
    )
    
    
    
    
    
    
    18,305Gain on sale of income-producing properties
    
    
    
    
    
    
    2,084,785
    
    
    
    
    
    
    
    4,003,086Income tax expense
    
    
    
    
    
    
    (792,218
    )
    
    
    
    
    
    
    (1,521,172
    )Gain on sale of income-producing properties, net of tax
    
    
    
    
    
    
    1,292,567
    
    
    
    
    
    
    
    2,481,914Earnings from discontinued operations, net of tax
    
    $
    
    
    
    $
    1,289,579
    
    
    $
    
    
    
    $
    2,500,219
 10




---



##### Table of Contents



NOTE 7. OPERATING SEGMENTS
   For the Nine MonthsEnded January 31, 2009
    
    BPE
    
    Real Estate
    
    Parent (1)
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    1,373,724
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,373,724Lighting products
    
    
    461,245
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    461,245Energy management services
    
    
    520,761
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    520,761Productivity software
    
    
    983,191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    983,191Total revenues from unaffiliated customers
    
    $
    3,338,921
    
    
    $
    818,893
    
    
    $
    
    
    
    $
    
    
    
    $
    4,157,814Intersegment revenue
    
    
    
    
    
    
    126,356
    
    
    
    
    
    
    
    (126,356
    )
    
    
    Total revenues from continuing
operations
    
    $
    3,338,921
    
    
    $
    945,249
    
    
    $
    
    
    
    $
    (126,356
    )
    
    $
    4,157,814(Loss) earnings from continuing
operations before income taxes
    
    $
    (481,401
    )
    
    $
    130,781
    
    
    $
    (615,926
    )
    
    $
    (2,022
    )
    
    $
    (968,568
    )For the Nine MonthsEnded January 31, 2009
    
    BPE
    
    Real Estate
    
    Parent (1)
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    3,545,614
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,545,614Lighting products
    
    
    1,378,075
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,378,075Energy management services
    
    
    1,762,224
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,762,224Productivity software
    
    
    2,807,191
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,807,191Total revenues from unaffiliated customers
    
    $
    9,493,104
    
    
    $
    2,407,713
    
    
    $
    
    
    
    $
    
    
    
    $
    11,900,817Intersegment revenue
    
    
    
    
    
    
    409,388
    
    
    
    
    
    
    
    (409,388
    )
    
    
    Total revenues from continuing
operations
    
    $
    9,493,104
    
    
    $
    2,817,101
    
    
    $
    
    
    
    $
    (409,388
    )
    
    $
    11,900,817(Loss) earnings from continuing
operations before income taxes
    
    $
    (1,861,363
    )
    
    $
    541,501
    
    
    $
    (2,472,217
    )
    
    $
    (12,538
    )
    
    $
    (3,804,617
    )For the Third QuarterEnded January 31, 2008
    
    BPE
    
    Real Estate
    
    Parent (1)
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    1,840,590
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,840,590Lighting products
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Energy management services
    
    
    494,350
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    494,350Productivity software
    
    
    885,504
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    885,504Total revenues from unaffiliated customers
    
    $
    3,220,444
    
    
    $
    895,264
    
    
    $
    
    
    
    $
    
    
    
    $
    4,115,708Intersegment revenue
    
    
    
    
    
    
    149,268
    
    
    
    
    
    
    
    (149,268
    )
    
    
    Total revenues from continuing
operations
    
    $
    3,220,444
    
    
    $
    1,044,532
    
    
    $
    
    
    
    $
    (149,268
    )
    
    $
    4,115,708(Loss) earnings from continuing
operations before income taxes
    
    $
    (465,021
    )
    
    $
    319,259
    
    
    $
    (601,944
    )
    
    $
    (6,026
    )
    
    $
    (1,130,782
    )For the Nine MonthsEnded January 31, 2008
    
    BPE
    
    Real Estate
    
    Parent (1)
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    7,750,989
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    7,750,989Lighting products
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Energy management services
    
    
    1,725,249
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,725,249Productivity software
    
    
    2,497,721
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,497,721Total revenues from unaffiliated customers
    
    $
    11,973,959
    
    
    $
    4,335,446
    
    
    $
    
    
    
    $
    
    
    
    $
    16,309,405Intersegment revenue
    
    
    
    
    
    
    444,373
    
    
    
    
    
    
    
    (444,373
    )
    
    
    Total revenues from continuing
operations
    
    $
    11,973,959
    
    
    $
    4,779,819
    
    
    $
    
    
    
    $
    (444,373
    )
    
    $
    16,309,405(Loss) earnings from continuing
operations before income taxes
    
    $
    (774,725
    )
    
    $
    2,452,314
    
    
    $
    (2,858,546
    )
    
    $
    (29,151
    )
    
    $
    (1,210,108
    )
 11




---



##### Table of Contents



(1)
    
    The Parent Companys net loss in each period is derived from corporate headquarters
activities and consists primarily of the following: Parent Company executive officers
compensation and costs related to the Companys status as a publicly-held company which
include, among other items, legal fees, compliance costs, non-employee directors fees, and other reporting costs. The
corporate headquarters activities do not earn revenue. All relevant costs
related to the business operations of the Companys operating segments are either paid
directly by the operating segments or  are allocated down to the segments by the Parent. The
allocation method is dependent on the nature of each expense item. Allocated expenses
include, among other items, accounting services, information technology services,
insurance costs, and audit and tax preparation fees. NOTE 8. EARNINGS (LOSS) PER SHARE
   12




---



##### Table of Contents



NOTE 9. GOODWILL AND OTHER INTANGIBLE ASSETS
  January 31, 2009Gross Carrying
    
    
    AccumulatedAmount
    
    
    AmortizationIntangible assets, subject to amortization:Proprietary BPE software solutions
    
    $
    3,609,411
    
    
    $
    2,202,764Acquired computer software
    
    
    466,589
    
    
    
    464,892Real estate lease costs
    
    
    860,865
    
    
    
    283,809Customer relationships
    
    
    404,632
    
    
    
    242,884Deferred loan costs
    
    
    331,488
    
    
    
    121,330Non-compete agreements
    
    
    63,323
    
    
    
    21,108Tradename
    
    
    61,299
    
    
    
    2,724Other
    
    
    28,659
    
    
    
    22,210$
    5,826,266
    
    
    $
    3,361,721Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707Goodwill
    
    $
    6,354,003
 April 30, 2008Gross Carrying
    
    
    AccumulatedAmount
    
    
    AmortizationIntangible assets, subject to amortization:Proprietary BPE software solutions
    
    $
    3,403,208
    
    
    $
    1,788,415Acquired computer software
    
    
    462,555
    
    
    
    453,038Real estate lease costs
    
    
    823,091
    
    
    
    208,966Customer relationships
    
    
    218,000
    
    
    
    188,933Deferred loan costs
    
    
    331,488
    
    
    
    94,170Other
    
    
    28,660
    
    
    
    20,062$
    5,267,002
    
    
    $
    2,753,584Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707Goodwill
    
    $
    5,458,717
 Aggregate amortization expense for all amortizable intangible assets:For the nine months ended January 31, 2009
    
    $
    616,486For the nine months ended January 31, 2008
    
    $
    560,838For the quarter ended January 31, 2009
    
    $
    209,758For the quarter ended January 31, 2008
    
    $
    186,364
 13




---



##### Table of Contents



Remainder of fiscal year 2009
    
    $
    199,9892010
    
    
    675,7912011
    
    
    536,6362012
    
    
    383,4212013
    
    
    261,3152014
    
    
    174,594Thereafter
    
    
    232,799$
    2,464,545
      14




---



##### Table of Contents



NOTE 10. DISPOSITIONS
 Fiscal 2009
  Fiscal 2008
   15




---



##### Table of Contents



NOTE 11. ACQUISITIONS
    16




---



##### Table of Contents



Assets andLiabilities Acquiredfrom Seller
    
    
    Estimated LifeCurrent assets
    
    $
    322,514Property, furniture and equipment, net
    
    
    58,699
    
    
    Various (3-5)Trade name
    
    
    61,299
    
    
    15 yearsNon-compete agreements
    
    
    63,323
    
    
    2 yearsCustomer relationships
    
    
    186,632
    
    
    5 yearsGoodwill
    
    
    895,285
    
    
    IndefiniteTotal assets acquired
    
    $
    1,587,752Current liabilities
    
    
    (483,937
    )Long term liabilities
    
    
    (100,000
    )Net assets acquired
    
    $
    1,003,815
   Quarter Ended
    
    Nine Months EndedJanuary 31,
    
    January 31,2009
    
    2008
    
    2009
    
    2008Revenues
    
    $
    4,158
    
    
    $
    4,927
    
    
    $
    12,098
    
    
    $
    18,860Net (loss) earnings
    
    $
    (491
    )
    
    $
    482
    
    
    $
    (2,246
    )
    
    $
    1,728Net (loss) earnings per share  basic
    
    $
    (0.13
    )
    
    $
    0.13
    
    
    $
    (0.60
    )
    
    $
    0.47Net (loss) earnings per share  diluted
    
    $
    (0.13
    )
    
    $
    0.13
    
    
    $
    (0.60
    )
    
    $
    0.47
 NOTE 12. OTHER INCOME
  NOTE 13. COMMITMENTS AND CONTINGENCIES
  17




---



##### Table of Contents



NOTE 14. SUBSEQUENT EVENT
    18




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
       19




---



##### Table of Contents



Results of operations of the third quarter and first nine months of fiscal 2009, compared to
the third quarter and first nine months of fiscal 2008.
   
  20




---



##### Table of Contents



CHART A
 Third Quarter Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedJanuary 31,
    
    
    Amount
    
    
    Percentage
    
    
    January 31,
    
    
    Amount
    
    
    Percentage2009
    
    
    2008
    
    
    Change
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change
    
    
    ChangeBPE (1)
    
    $
    3,339
    
    
    $
    3,220
    
    
    $
    119
    
    
    
    4
    
    
    $
    9,493
    
    
    $
    11,974
    
    
    
    $(2,481
    )
    
    
    (21
    )Real Estate (2)
    
    
    819
    
    
    
    895
    
    
    
    (76
    )
    
    
    (8
    )
    
    
    2,408
    
    
    
    4,335
    
    
    
    (1,927
    )
    
    
    (44
    )$
    4,158
    
    
    $
    4,115
    
    
    $
    43
    
    
    
    1
    
    
    $
    11,901
    
    
    $
    16,309
    
    
    
    $(4,408
    )
    
    
    (27
    )
 NOTES TO CHART A
 (1)
    
    The following table indicates the BPE Segment revenues by service and product type.
 
 Third Quarter Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedJanuary 31,
    
    
    Amount
    
    
    Percentage
    
    
    January 31,
    
    
    Amount
    
    
    Percentage2009
    
    
    2008
    
    
    Change
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change
    
    
    ChangeEnergy Savings Projects
    
    $
    1,374
    
    
    $
    1,840
    
    
    $
    (466
    )
    
    
    (25
    )
    
    $
    3,546
    
    
    $
    7,751
    
    
    $
    (4,205
    )
    
    
    (54
    )Lighting Products
    
    
    461
    
    
    
    
    
    
    
    461
    
    
    
    
    
    
    $
    1,378
    
    
    $
    
    
    
    
    1,378
    
    
    
    Energy Management Services
    
    
    521
    
    
    
    494
    
    
    
    27
    
    
    
    5
    
    
    
    1,762
    
    
    
    1,725
    
    
    
    37
    
    
    
    2Productivity Software
    
    
    983
    
    
    
    886
    
    
    
    97
    
    
    
    11
    
    
    
    2,807
    
    
    
    2,498
    
    
    
    309
    
    
    
    12$
    3,339
    
    
    $
    3,220
    
    
    $
    119
    
    
    
    4
    
    
    $
    9,493
    
    
    $
    11,974
    
    
    $
    (2,481
    )
    
    
    (21
    )
  (a)
    
    lighting product revenues of approximately $461,000 as a result of the
Companys acquisition during the first quarter of fiscal 2009 of its new lighting
distribution business; and(b)
    
    an increase in productivity software products and services revenues of
approximately $97,000;
 partially offset by:
 (c)
    
    energy savings (lighting and mechanical) project revenues that were
approximately $466,000 lower than in the year-earlier period, primarily due to
delays in the receipt of certain orders. However, the Company received these
previously delayed orders in the third fiscal quarter. This
contributed to a BPE backlog at January 31, 2009, which was 62% higher than backlog levels at
October 31, 2008. See further discussion on the BPE Segment backlog below.
  21




---



##### Table of Contents



(a)
    
    energy savings (lighting and mechanical) project revenues that were
approximately $4,205,000 lower than in the year-earlier period, primarily because
of:
 i.
    
    delays in the receipt of certain orders, as described above;
 and
 ii.
    
    the absence of revenues of approximately $1 million that were generated by a one-time special project for a large retail customer in the year-earlier period;
 partially offset by:
 iii.
    
    revenues of approximately $1,152,000 from several new energy savings project customers, representing the initial phases of new energy savings program initiatives for those customers;
 The year-over-year decline in energy savings project revenues for the first nine months
was partially offset by:
 (b)
    
    lighting product revenues of approximately $1,378,000, as the result of
the Companys acquisition during the first quarter of fiscal 2009 of its lighting
distribution business; and
 (c)
    
    an increase in productivity software products and services revenues of
approximately $309,000.
 While management believes that the decrease in BPE Segment revenues in the first nine months
is due in part to the general deterioration of the overall economy and its effect on certain
of the Companys customers, revenues in the third quarter were higher than last year, and order activity continued to strengthen significantly in the third fiscal quarter. As
a result, management believes that the Company is well positioned to continue to grow BPE
Segment revenues.(2)
    
    Real Estate Segment revenues decreased by $76,000, or 8%, in the third quarter of fiscal
2009 compared to the same period in fiscal 2008, primarily as a result of a decrease in
rental income of approximately $146,000 due to the expiration of an anchor tenant lease in
January 2008 at the Companys owned headquarters building in Atlanta, Georgia, partially
offset by rental income of approximately $25,000 from new tenant leases at the same property,
as well as increased rental income and expense reimbursements at other properties.Real Estate Segment revenues decreased by $1,927,000, or 44%, in the first nine months of
fiscal 2009 compared to the same period in fiscal 2008, primarily due to:
 (a)
    
    the absence of revenues of approximately $1,553,000 generated in the
first quarter of fiscal 2008 by the sale of the Companys leasehold interest in its
shopping center in Jacksonville, Florida, and the absence of $75,000 in rental
revenues in the current year due to the sale of this property; and
 22




---



##### Table of Contents



(b)
    
    a decrease in rental revenues of approximately $519,000 due to the
expiration of an anchor tenant lease in January 2008 at the Companys owned
headquarters building in Atlanta, Georgia;
 partially offset by:
 (c)
    
    approximately $66,000 in rental revenues as the result of an early lease
termination in the first quarter of fiscal 2009;(d)
    
    approximately $85,000 in rental revenues from new tenant leases at the
Companys owned headquarters building; and(e)
    
    approximately $35,000 in expense reimbursements from tenants due to
higher real estate taxes and property repair and maintenance expenses.
  IncreaseJanuary 31,
    
    
    (Decrease)2009
    
    
    2008
    
    
    Amount
    
    
    PercentageBPE (1)
    
    $
    11,313,000
    
    
    $
    6,328,000
    
    
    
    4,985,000
    
    
    
    79Real Estate (2)
    
    
    2,914,000
    
    
    
    2,994,000
    
    
    
    (80,000
    )
    
    
    (3
    )Less: Intersegment eliminations (3)
    
    
    (543,000
    )
    
    
    (528,000
    )
    
    
    (15,000
    )
    
    
    3Total Backlog
    
    $
    13,684,000
    
    
    $
    8,794,000
    
    
    $
    4,890,000
    
    
    
    56
 
 (1)
    
    BPE backlog at January 31, 2009, increased by approximately $4,985,000 compared to
the year-earlier period, primarily due to:
 (a)
    
    an increase of approximately $5,683,000 in energy savings (lighting and
mechanical) projects; and(b)
    
    an increase of approximately $237,000 in productivity software products
and services;
 partially offset by:
 (c)
    
    a decrease of approximately $935,000 in energy management consulting
services, primarily as a result of the successful completion of approximately
$850,000 of multi-year consulting services projects.
   23




---



##### Table of Contents



(2)
    
    Real Estate backlog at January 31, 2009, decreased by approximately $80,000
compared to the year-earlier period, primarily due to a decrease in future rental revenues at
the Companys owned office building located in Newnan, Georgia, partially offset by an
increase in the amount of leased office space at the Companys owned headquarters building in
Atlanta, Georgia.
 (3)
    
    Represents rental revenues at the Companys owned headquarters building to be paid to the
Real Estate Segment by the Parent Company and the BPE Segment.
 
   CHART B
 Percentage of Segment
    
    
    
    
    
    
    
    
    
    
    Percentage of SegmentRevenues for the
    
    
    
    
    
    
    
    
    
    
    Revenues for theThird Quarter Ended
    
    
    Third Quarter Ended
    
    
    Nine Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,
    
    
    January 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008BPE (1)
    
    $
    2,098
    
    
    $
    2,159
    
    
    
    63
    
    
    
    67
    
    
    $
    6,019
    
    
    $
    8,105
    
    
    
    63
    
    
    
    68Real Estate (2)
    
    
    528
    
    
    
    516
    
    
    
    64
    
    
    
    58
    
    
    
    1,562
    
    
    
    1,672
    
    
    
    65
    
    
    
    39$
    2,626
    
    
    $
    2,675
    
    
    
    63
    
    
    
    65
    
    
    $
    7,581
    
    
    $
    9,777
    
    
    
    64
    
    
    
    60
 NOTES TO CHART B
 (1)
    
    BPE Segment cost of revenues decreased by approximately $2,086,000, or 26%, in the first
nine months of fiscal 2009 compared to the same period in fiscal 2008, primarily due to the
corresponding decrease in revenues (See Chart A).
 On a percentage-of-revenues basis, BPE Segment cost of revenues decreased by 4% and 5%,
respectively, in the third quarter and first nine months of fiscal 2009 compared to the same
periods in fiscal 2008, primarily due to a change in the mix of services and products.
 24




---



##### Table of Contents



(2)
    
    Real Estate Segment cost of revenues decreased by approximately $110,000, or 7%, for the
first nine months of fiscal 2009 compared to the same period in fiscal 2008, primarily due
to:
 (a)
    
    the absence of sales costs and leaseback expenses of approximately
$147,000 that were included in the prior year as a result of the sale of the
Companys leasehold interest in a shopping center located in Jacksonville, Florida,
in July 2007;(b)
    
    a decrease in rental operating costs of approximately $89,000 primarily
due to lower tenant occupancy at the Companys owned headquarters building in
Atlanta, Georgia;
 partially offset by:
 (c)
    
    an increase in rental operating costs of approximately $88,000, primarily
as the result of higher real estate taxes and property maintenance and repair
expenses, a portion of which is reimbursable by the tenants, and higher legal fees;
 On a percentage-of-revenues basis, Real Estate Segment cost of revenues increased
approximately 7% and 26% in the third quarter and first nine months of fiscal 2009,
respectively. The percentage increase in the third quarter compared to the prior year period
was primarily due to higher legal fees relative to the lower revenues for the quarter, as
mentioned directly above. The percentage increase in the first nine months compared to the
prior year period was primarily due to the inclusion of revenues of $1,553,000 in the prior
year that were generated by the sale of the Companys leasehold interest in a shopping center
located in Jacksonville, Florida, in July 2007; the costs of the sale included in the prior
year were approximately $95,000.
 
  25




---



##### Table of Contents



CHART C
 Percentage of Segment
    
    
    
    
    
    
    
    
    
    
    Percentage of SegmentRevenues for the
    
    
    
    
    
    
    
    
    
    
    Revenues for theThird Quarter Ended
    
    
    Third Quarter Ended
    
    
    Nine Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,
    
    
    January 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008BPE (1)
    
    $
    1,418
    
    
    $
    1,268
    
    
    
    42
    
    
    
    39
    
    
    $
    4,440
    
    
    $
    3,928
    
    
    
    47
    
    
    
    33Real Estate (2)
    
    
    168
    
    
    
    214
    
    
    
    21
    
    
    
    24
    
    
    
    502
    
    
    
    599
    
    
    
    21
    
    
    
    14Parent (3)
    
    
    885
    
    
    
    838
    
    
    
    21
    
    
    
    20
    
    
    
    2,630
    
    
    
    2,455
    
    
    
    22
    
    
    
    15$
    2,471
    
    
    $
    2,320
    
    
    
    59
    
    
    
    56
    
    
    $
    7,572
    
    
    $
    6,982
    
    
    
    64
    
    
    
    43
 NOTES TO CHART C
 (1)
    
    BPE Segment SG&A expenses increased by approximately $150,000, or 12%, in the third quarter
of fiscal 2009 compared to the same period in fiscal 2008, primarily due to the operating
costs associated with the Companys new lighting distribution business, which was acquired
during the first quarter of fiscal 2009.BPE Segment SG&A expenses increased by approximately $512,000, or 13%, in the first nine
months of fiscal 2009 compared to the same period in fiscal 2008, primarily due to the
operating costs associated with the Companys new lighting distribution business, which was
acquired during the first quarter of fiscal 2009.On a percentage-of-revenues basis, BPE Segment SG&A expenses increased by 3% in the third
quarter of fiscal 2009 compared to the same period of fiscal 2008, primarily due to the
operating costs associated with the Companys new lighting distribution business, which was
acquired during the first quarter of fiscal 2009, partially offset by the increase in
revenues (See Chart A).On a percentage-of-revenues basis, BPE Segment SG&A expenses increased by 14% in the first
nine months of fiscal 2009 compared to the same period of fiscal 2008, primarily due to the
decrease in revenues without a corresponding decrease in expenses (See Chart A).(2)
    
    Real Estate Segment SG&A expenses decreased by approximately $46,000 and $97,000 in the
third quarter and the first nine months of fiscal 2009, respectively, compared to the same
periods in fiscal 2008, primarily due to a decrease in insurance, legal, personnel and
consulting expenses.On a percentage-of-revenues basis, Real Estate Segment SG&A expenses decreased by 3% in the
third quarter of fiscal 2009 compared to the same period in fiscal 2008, primarily due to the
lower expenses noted above. Conversely, Real Estate Segment SG&A expenses on a
percentage-of-revenues basis increased by 7% in the first nine months of fiscal 2009,
compared to the same period in fiscal 2008, primarily due to the inclusion of revenues of
$1,553,000 in the prior year period that were generated by the sale of the Companys
leasehold interest in a shopping center located in Jacksonville, Florida, in July 2007.
 26




---



##### Table of Contents



(3)
    
    Parent SG&A expenses increased by approximately $175,000, or 7%, in the first nine months
of fiscal 2009 compared to the same period of fiscal 2008, primarily due to:
 (a)
    
    an increase in legal fees of approximately $199,000 that were incurred to
settle an insurance claim, as well as increased SEC compliance costs;
 (b)
    
    an increase in personnel-related expenses of approximately $186,000; and
 (c)
    
    an increase in accounting and other non-legal compliance costs of
approximately $99,000;
 partially offset by:
 (d)
    
    a decrease of approximately $358,000 in incentive compensation expenses,
as there were no incentive compensation expenses in the first nine months of fiscal
2009.
 On a percentage-of-revenues basis, Parent SG&A expenses increased by 7% in the first nine
months of fiscal 2009 compared to the same period of fiscal 2008, primarily due to the
decrease in revenues without a corresponding decrease in expenses (See Chart A).
    CHART D
 Third Quarter Ended
    
    
    Increase
    
    
    Nine Months Ended
    
    
    IncreaseJanuary 31,
    
    
    (Decrease)
    
    
    January 31,
    
    
    (Decrease)2009
    
    
    2008
    
    
    Amount
    
    
    2009
    
    
    2008
    
    
    AmountBPE (1)
    
    $
    (183
    )
    
    $
    (225
    )
    
    $
    42
    
    
    $
    (989
    )
    
    $
    (82
    )
    
    $
    (907
    )Real Estate (2)
    
    
    (178
    )
    
    
    (77
    )
    
    
    (101
    )
    
    
    (487
    )
    
    
    1,291
    
    
    
    (1,778
    )Parent (3)
    
    
    (608
    )
    
    
    (829
    )
    
    
    221
    
    
    
    (2,329
    )
    
    
    (2,419
    )
    
    
    90Total
    
    $
    (969
    )
    
    $
    (1,131
    )
    
    $
    162
    
    
    $
    (3,805
    )
    
    $
    (1,210
    )
    
    $
    (2,595
    )
 NOTES TO CHART D
 (1)
    
    BPE Segment loss before income taxes decreased by approximately $42,000 in the third
quarter of fiscal 2009 compared to the same period in fiscal 2008, primarily due to an
increase in revenue of approximately $119,000 (see Chart A), a decrease in cost of revenues
of approximately $61,000 (see Chart B), and an increase in SG&A expenses of approximately
$150,000 (see Chart C).BPE Segment loss before income taxes increased by approximately $907,000 in the first nine
 27




---



##### Table of Contents



months of fiscal 2009 compared to the same period in fiscal 2008, primarily due to:
 (a)
    
    a decrease in revenues of approximately $2,481,000, primarily due to
delays in the receipt of orders for certain energy savings projects. Such orders
have been received and have contributed to BPE backlog at January 31, 2009, that is
62% higher than the backlog balance at October 31, 2008;
 (b)
    
    a corresponding decrease in cost of revenues of approximately $2,086,000;
and
 (c)
    
    an increase in SG&A expenses of approximately $512,000, primarily due to
the costs associated with the Companys new lighting distribution business which was
acquired during the first quarter of the fiscal year.
 (2)
    
    Real Estate Segments loss before income taxes of approximately $487,000 for the first nine
months of fiscal year 2009 represents an earnings decline of approximately $1,778,000 as
compared to the same period of fiscal year 2008, primarily due to:
 (a)
    
    a decrease in revenues of approximately $1,927,000, primarily due to the
absence of revenues of approximately $1,553,000, generated in the first quarter of
fiscal year 2008 by the sale of a leasehold interest and a decrease in revenues of
approximately $519,000 due to the expiration of an anchor tenant lease; and
 (b)
    
    the absence of $147,000 in costs related to the revenues from the sale of
the leasehold interest above.
 (3)
    
    Parent loss before income taxes decreased by approximately $221,000 in the third quarter
ended January 31, 2009, compared to the same period of 2008, primarily due to the settlement
of an insurance claim in the amount of $285,000, partially offset by an increase in legal
fees related to settling the claim and an increase in compliance costs.
   LIQUIDITY AND CAPITAL RESOURCES
    (a)
    
    current year losses from continuing operations before depreciation,
amortization and income taxes of approximately $2,597,000;
 28




---



##### Table of Contents



(b)
    
    cash payments of approximately $494,000 for incentive compensation
expenses accrued in the prior fiscal year but paid in the current fiscal year as a
result of the successful achievement of certain Company earnings and performance
goals;(c)
    
    an increase in other current assets of approximately $264,000, due
primarily to a $285,000 receivable from the settlement of an insurance claim; and(d)
    
    a net decrease in trade accounts payable, accrued expenses, and other
liabilities of approximately $167,000, due to the timing and submission of payments;
 partially offset by:
 (e)
    
    a decrease in net accounts receivable of $309,000, primarily as a result
of the timing of billing and receipt of payments.
  (a)
    
    approximately $903,000 for the acquisition of the Companys lighting distribution
business in the first quarter;
 (b)
    
    approximately $263,000 for additions to intangible assets, primarily
related to the development of enhancements to BPEs proprietary building
productivity software solutions;
 (c)
    
    approximately $170,000 for additions to income-producing properties, primarily
related to tenant and building improvements;
 (d)
    
    $150,000 for the purchase of a held-to-maturity investment related to a scheduled
increase in restricted cash as required by a provision of a real estate loan
agreement;
 (e)
    
    approximately $148,000 for additions to property and equipment; and
 (f)
    
    approximately $140,000 received from a real estate tenant and temporarily
placed in escrow, related to the lease modification and assignment agreement
discussed above.
  (a)
    
    payment of the regular quarterly cash dividends to shareholders of
approximately $426,000;
 (b)
    
    scheduled principal payments on real estate mortgage notes of
approximately $259,000;
 (c)
    
    scheduled principal payments on other long-term debt of
approximately $281,000;
and
 (d)
    
    repurchases of the Companys common stock of approximately $136,000.
  29




---



##### Table of Contents



30




---



##### Table of Contents



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
  CRITICAL ACCOUNTING POLICIES
  Revenue Recognition
 Revenue Recognition
 31




---



##### Table of Contents



32




---



##### Table of Contents



Long-Lived Assets: Income-Producing Properties, Capitalized Software, and Property and Equipment
   
    
    A significant decrease in the market price of a long-lived
asset;
    
    A significant adverse change in the extent or manner in which a long-lived asset
is being used or in its physical condition;
    
    A significant adverse change in legal factors or in the business climate that
could affect the value of a long-lived asset, including an adverse action or
assessment by a regulator;
    
    An accumulation of costs significantly in excess of the amount originally
expected for the acquisition or construction of a long-lived asset;
    
    A current-period operating or cash flow loss combined with a history of operating
or cash flow losses or a projection or forecast that demonstrates continuing losses
associated with the use of a long-lived asset;
    
    A current expectation that, more likely than not, a long-lived asset will be sold
or otherwise disposed of significantly before the end of its previously estimated
useful life;
 33




---



##### Table of Contents




    
    The Company has recently sold similar income-producing
properties at losses;
    
    The Company has received a purchase offers at a prices below
carrying value;
    
    Income-producing properties which have significant vacancy rates or significant
rollover exposure by one or more tenants;
    
    Major tenant experiencing financial difficulties which may jeopardize the
tenants ability to meet lease obligations;
    
    Depressed market conditions;
    
    Presence of a new competitive property constructed in the
Companys market area; and
    
    Evidence of significant corrective measures required to cure structural problems,
physical obsolescence, or deterioration of essential building components.
   
    
    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.
 34




---



##### Table of Contents



Valuation of Goodwill and Other Intangible Assets
       35




---



##### Table of Contents



Income Taxes
    36




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
  37




---



##### Table of Contents



ITEM 1A. RISK FACTORS
   
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Issuer Purchases of Equity Securities
 Total Number of Shares
    
    Maximum Number ofPurchased as Part of
    
    Shares that May Yet BeTotal Number of
    
    Average Price
    
    Publicly Announced Plans
    
    Purchased under thePeriod
    
    Shares Purchased
    
    Paid per Share
    
    or Programs
    
    Plans or ProgramsAs of October 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,705November 1-30, 2008
    
    
    7,835
    
    
    
    2.50
    
    
    
    7,835
    
    
    
    24,870December 1-31, 2008
    
    
    15,741
    
    
    
    2.27
    
    
    
    15,741
    
    
    
    59,129January 1-31, 2009
    
    
    8,019
    
    
    
    1.66
    
    
    
    8,019
    
    
    
    51,110Total
    
    
    31,595
    
    
    
    2.17
    
    
    
    31,595
  38




---



##### Table of Contents



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
 39




---



##### Table of Contents



SERVIDYNE, INC.
     (Registrant)Date: March 17, 2009
    /s/ Alan R. AbramsAlan R. AbramsChief Executive OfficerDate: March 17, 2009
    /s/ Rick A. PaternostroRick A. PaternostroChief Financial Officer 40