##### 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 October 31, 2008
 Commission file number 0-10146
 SERVIDYNE, INC.
  Georgia
    
    58-0522129(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 1945 The Exchange, Suite 300, Atlanta, GA 30339-2029
 (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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM 6. EXHIBITSSIGNATURESEX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  
  
 ITEM 1. FINANCIAL STATEMENTS
 SERVIDYNE, INC.
 (UNAUDITED)October 31, 2008
    
    
    April 30, 2008ASSETSCURRENT ASSETS:Cash
    
    $
    6,332,270
    
    
    $
    8,382,947Restricted cash
    
    
    
    
    
    
    3,470,700Receivables (Note 4)
    
    
    3,566,403
    
    
    
    3,735,930Less: Allowance for doubtful accounts
    
    
    (89,142
    )
    
    
    (127,007
    )Costs and earnings in excess of billings
    
    
    364,557
    
    
    
    275,754Deferred income taxes
    
    
    499,318
    
    
    
    750,488Other current assets
    
    
    1,351,859
    
    
    
    1,011,304Total current assets
    
    
    12,025,265
    
    
    
    17,500,116INCOME-PRODUCING PROPERTIES, net
    
    
    21,660,378
    
    
    
    21,773,409PROPERTY AND EQUIPMENT, net
    
    
    875,623
    
    
    
    811,900OTHER ASSETS:Real estate held for future development or sale
    
    
    853,109
    
    
    
    853,109Intangible assets, net (Note 8)
    
    
    3,310,910
    
    
    
    3,222,125Goodwill (Note 8)
    
    
    6,343,012
    
    
    
    5,458,717Other assets
    
    
    2,716,970
    
    
    
    2,696,174Total assets
    
    $
    47,785,267
    
    
    $
    52,315,550LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    474,271
    
    
    $
    550,360Accrued expenses
    
    
    1,035,189
    
    
    
    1,143,794Deferred revenue
    
    
    640,089
    
    
    
    848,197Accrued incentive compensation
    
    
    175,429
    
    
    
    494,000Billings in excess of costs and earnings
    
    
    98,383
    
    
    
    62,559Current maturities of mortgage notes and other long-term debt
    
    
    507,430
    
    
    
    631,736Total current liabilities
    
    
    2,930,791
    
    
    
    3,730,646DEFERRED INCOME TAXES
    
    
    3,921,446
    
    
    
    5,271,441OTHER LIABILITIES
    
    
    864,370
    
    
    
    1,138,316MORTGAGE NOTES PAYABLE, less current maturities
    
    
    18,417,803
    
    
    
    18,603,769OTHER LONG-TERM DEBT, less current maturities
    
    
    1,090,000
    
    
    
    1,105,000Total liabilities
    
    
    27,224,410
    
    
    
    29,849,172COMMITMENTS AND CONTINGENCIES (Note 11)SHAREHOLDERS EQUITY:Common stock, $1 par value; 10,000,000 shares authorized;
3,918,078 issued and 3,725,144 outstanding at October 31, 2008,
3,708,836 issued and 3,539,770 outstanding at April 30, 2008
    
    
    3,918,078
    
    
    
    3,708,836Additional paid-in capital
    
    
    5,919,130
    
    
    
    5,045,100Retained earnings
    
    
    11,620,668
    
    
    
    14,511,159Treasury stock (common shares)
192,934 at October 31, 2008, and 169,066 at April 30, 2008
    
    
    (897,019
    )
    
    
    (798,717
    )Total shareholders equity
    
    
    20,560,857
    
    
    
    22,466,378Total liabilities and shareholders equity
    
    $
    47,785,267
    
    
    $
    52,315,550
 See accompanying notes to condensed consolidated financial statements.
 1




---



##### Table of Contents



SERVIDYNE, INC.
 SECOND QUARTER ENDED
    
    
    FIRST SIX MONTHS ENDEDOCTOBER 31,
    
    
    OCTOBER 31,2008
    
    
    2007
    
    
    2008
    
    
    2007REVENUES:Building Performance Efficiency (BPE)
    
    $
    3,434,110
    
    
    $
    3,987,123
    
    
    $
    6,154,183
    
    
    $
    8,753,515Real Estate
    
    
    778,480
    
    
    
    881,463
    
    
    
    1,574,683
    
    
    
    3,403,8544,212,590
    
    
    
    4,868,586
    
    
    
    7,728,866
    
    
    
    12,157,369Interest
    
    
    47,971
    
    
    
    77,143
    
    
    
    103,058
    
    
    
    96,623Other
    
    
    29,681
    
    
    
    33,446
    
    
    
    51,081
    
    
    
    103,4744,290,242
    
    
    
    4,979,175
    
    
    
    7,883,005
    
    
    
    12,357,466COSTS AND EXPENSES:BPE
    
    
    2,167,704
    
    
    
    2,760,396
    
    
    
    3,920,488
    
    
    
    5,945,980Real Estate
    
    
    560,618
    
    
    
    505,554
    
    
    
    1,034,665
    
    
    
    1,156,0782,728,322
    
    
    
    3,265,950
    
    
    
    4,955,153
    
    
    
    7,102,058Selling, general and administrativeBPE Segment
    
    
    1,612,875
    
    
    
    1,336,181
    
    
    
    3,021,855
    
    
    
    2,660,206Real Estate Segment
    
    
    164,739
    
    
    
    175,262
    
    
    
    333,646
    
    
    
    358,280Parent
    
    
    917,867
    
    
    
    352,164
    
    
    
    1,745,636
    
    
    
    1,640,7772,695,481
    
    
    
    1,863,607
    
    
    
    5,101,137
    
    
    
    4,659,263Interest costs incurred
    
    
    330,368
    
    
    
    348,571
    
    
    
    662,764
    
    
    
    687,3585,754,171
    
    
    
    5,478,128
    
    
    
    10,719,054
    
    
    
    12,448,679LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
    
    
    (1,463,929
    )
    
    
    (498,953
    )
    
    
    (2,836,049
    )
    
    
    (91,213
    )INCOME TAX BENEFIT
    
    
    (558,217
    )
    
    
    (182,988
    )
    
    
    (1,082,926
    )
    
    
    (86,735
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (905,712
    )
    
    
    (315,965
    )
    
    
    (1,753,123
    )
    
    
    (4,478
    )DISCONTINUED OPERATIONS:(Loss) earnings from discontinued operations, adjusted for
applicable income tax (benefit) expense of $0, ($17,717), $0
and $17,568, respectively
    
    
    
    
    
    
    (28,907
    )
    
    
    
    
    
    
    28,663Gain on sale of income-producing real estate, adjusted for
applicable
income tax expense of $0, $0, $0, and $728,954, respectively
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,189,347(LOSS) EARNINGS FROM DISCONTINUED OPERATIONS
    
    
    
    
    
    
    (28,907
    )
    
    
    
    
    
    
    1,218,010NET (LOSS) EARNINGS
    
    $
    (905,712
    )
    
    $
    (344,872
    )
    
    $
    (1,753,123
    )
    
    $
    1,213,532NET (LOSS) EARNINGS PER SHARE  BASICFrom continuing operations
    
    $
    (0.24
    )
    
    $
    (0.09
    )
    
    $
    (0.47
    )
    
    $
    (0.00
    )From discontinued operations
    
    
    
    
    
    
    (0.01
    )
    
    
    
    
    
    
    0.32NET (LOSS) EARNINGS PER SHARE  BASIC
    
    $
    (0.24
    )
    
    $
    (0.10
    )
    
    $
    (0.47
    )
    
    $
    0.32NET (LOSS) EARNINGS PER SHARE  DILUTEDFrom continuing operations
    
    $
    (0.24
    )
    
    $
    (0.09
    )
    
    $
    (0.47
    )
    
    $
    (0.00
    )From discontinued operations
    
    
    
    
    
    
    (0.01
    )
    
    
    
    
    
    
    0.32NET (LOSS) EARNINGS PER SHARE  DILUTED
    
    $
    (0.24
    )
    
    $
    (0.10
    )
    
    $
    (0.47
    )
    
    $
    0.32DIVIDENDS PER SHARE
    
    $
    0.038
    
    
    $
    0.036
    
    
    $
    0.076
    
    
    $
    0.072WEIGHTED AVERAGE SHARES OUTSTANDING  BASIC
    
    
    3,736,346
    
    
    
    3,705,916
    
    
    
    3,733,320
    
    
    
    3,705,759WEIGHTED AVERAGE SHARES OUTSTANDING  DILUTED
    
    
    3,736,346
    
    
    
    3,705,916
    
    
    
    3,733,320
    
    
    
    3,705,759
 See accompanying notes to condensed consolidated financial statements.
 2




---



##### Table of Contents



SERVIDYNE, INC.
 Additional
    
    DeferredCommon Stock
    
    Paid-In
    
    Stock
    
    Retained
    
    TreasuryShares
    
    Amount
    
    Capital
    
    Compensation
    
    Earnings
    
    Stock
    
    TotalBALANCES at April 30, 2005
    
    
    3,357,601
    
    
    $
    3,357,601
    
    
    $
    3,067,982
    
    
    $
    (14,162
    )
    
    $
    15,186,932
    
    
    $
    (684,942
    )
    
    $
    20,913,411Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    525,766
    
    
    
    
    
    
    
    525,766Common stock issued
    
    
    1,800
    
    
    
    1,800
    
    
    
    6,660
    
    
    
    (8,460
    )
    
    
    
    
    
    
    
    
    
    
    Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,202
    
    
    
    
    
    
    
    (1,871
    )
    
    
    16,331Stock option exercise
    
    
    732
    
    
    
    732
    
    
    
    2,196
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,928Cash dividends declared 
$0.14 per share (adjusted for
subsequent stock dividend)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (511,688
    )
    
    
    
    
    
    
    (511,688
    )Stock dividend declared 
10% at market value
on date declared
    
    
    335,203
    
    
    
    335,203
    
    
    
    1,726,295
    
    
    
    
    
    
    
    (1,973,934
    )
    
    
    (87,564
    )
    
    
    BALANCES at April 30, 2006
    
    
    3,695,336
    
    
    $
    3,695,336
    
    
    $
    4,803,133
    
    
    $
    (4,420
    )
    
    $
    13,227,076
    
    
    $
    (774,377
    )
    
    $
    20,946,748Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    966,626
    
    
    
    
    
    
    
    966,626Common stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,747
    )
    
    
    (19,747
    )Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    72,027
    
    
    
    4,420
    
    
    
    
    
    
    
    (940
    )
    
    
    75,507Cash dividends declared 
$0.144 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (508,923
    )
    
    
    
    
    
    
    (508,923
    )BALANCES at April 30, 2007
    
    
    3,695,336
    
    
    $
    3,695,336
    
    
    $
    4,875,160
    
    
    $
    
    
    
    $
    13,684,779
    
    
    $
    (795,064
    )
    
    $
    21,460,211Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,335,562
    
    
    
    
    
    
    
    1,335,562Common stock issued
    
    
    2,500
    
    
    
    2,500
    
    
    
    (2,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    132,440
    
    
    
    
    
    
    
    
    
    
    
    (3,653
    )
    
    
    128,787Stock option exercise
    
    
    11,000
    
    
    
    11,000
    
    
    
    40,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,000Cash dividends declared 
$0.144 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (509,182
    )
    
    
    
    
    
    
    (509,182
    )BALANCES at April 30, 2008
    
    
    3,708,836
    
    
    $
    3,708,836
    
    
    $
    5,045,100
    
    
    $
    
    
    
    $
    14,511,159
    
    
    $
    (798,717
    )
    
    $
    22,466,378Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,753,123
    )
    
    
    
    
    
    
    (1,753,123
    )Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    98,447
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98,447Common stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57,726
    )
    
    
    (57,726
    )Common stock issued
    
    
    23,081
    
    
    
    23,081
    
    
    
    68,169
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91,250Cash dividends declared 
$0.076 per share (adjusted for subsequent stock dividend)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (284,370
    )
    
    
    
    
    
    
    (284,370
    )Stock dividend declared 
5% at market value
on date declared
    
    
    186,161
    
    
    
    186,161
    
    
    
    707,414
    
    
    
    
    
    
    
    (852,999
    )
    
    
    (40,576
    )
    
    
    BALANCES at October 31, 2008
    
    
    3,918,078
    
    
    $
    3,918,078
    
    
    $
    5,919,130
    
    
    $
    
    
    
    $
    11,620,667
    
    
    $
    (897,019
    )
    
    $
    20,560,856
 See accompanying notes to condensed consolidated financial statements.
 3




---



##### Table of Contents



SERVIDYNE, INC.
 FIRST SIX MONTHS ENDEDOCTOBER 31,2008
    
    
    2007CONTINUING OPERATIONS:Cash flows from operating activities:Net (loss) earnings
    
    $
    (1,753,123
    )
    
    $
    1,213,532Earnings from discontinued operations, net of tax
    
    
    
    
    
    
    (1,218,010
    )Adjustments to reconcile net (loss) earnings to net
cash (used in) provided by operating activities:Loss on sale of real estate
    
    
    
    
    
    
    83,194Loss on disposal of assets
    
    
    9,683
    
    
    
    11,630Depreciation and amortization
    
    
    813,179
    
    
    
    730,821Mortgage discount
    
    
    (15,000
    )
    
    
    Deferred tax benefit
    
    
    (1,098,825
    )
    
    
    (123,922
    )Stock compensation expense
    
    
    98,447
    
    
    
    61,461Adjustment to cash surrender value of life insurance
    
    
    (93,852
    )
    
    
    (39,533
    )Straight-line rent
    
    
    (36,672
    )
    
    
    29,133Provision for doubtful accounts, net
    
    
    (37,865
    )
    
    
    13,926Changes in assets and liabilities:Receivables
    
    
    288,049
    
    
    
    (1,173,783
    )Costs and earnings in excess of billings
    
    
    (88,803
    )
    
    
    (323,683
    )Other current assets
    
    
    (146,471
    )
    
    
    584,441Trade and subcontractors payable
    
    
    (515,625
    )
    
    
    161,242Accrued expenses
    
    
    (361,115
    )
    
    
    16,036Accrued incentive compensation
    
    
    (318,571
    )
    
    
    (118,855
    )Billings in excess of costs and earnings
    
    
    35,824
    
    
    
    27,318Other liabilities
    
    
    (14,219
    )
    
    
    312,019Net cash (used in) provided by operating activities
    
    
    (3,234,959
    )
    
    
    246,966Cash flows from investing activities:Deposit of cash proceeds from sale of real estate held in escrow
    
    
    
    
    
    
    (6,464,276
    )Release of restricted cash held in escrow
    
    
    3,470,700
    
    
    
    Deposit of interest on cash proceeds held in escrow
    
    
    
    
    
    
    (70,617
    )Purchase of held to maturity investment
    
    
    (150,000
    )
    
    
    Additions to income-producing properties, net
    
    
    (173,577
    )
    
    
    (515,664
    )Additions to property and equipment, net
    
    
    (129,876
    )
    
    
    (54,456
    )Additions to intangible assets, net
    
    
    (188,934
    )
    
    
    (40,728
    )Acquisition, net of cash acquired
    
    
    (891,665
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    1,936,649
    
    
    
    (7,145,742
    )Cash flows from financing activities:Real estate loan proceeds
    
    
    
    
    
    
    9,850,000Mortgage repayments
    
    
    (169,396
    )
    
    
    (8,255,594
    )Debt repayments
    
    
    (240,875
    )
    
    
    (150,102
    )Repurchase of common stock
    
    
    (57,726
    )
    
    
    Deferred loan costs paid
    
    
    
    
    
    
    (123,311
    )Cash dividends paid to shareholders
    
    
    (284,370
    )
    
    
    (254,286
    )Net cash (used in) provided by financing activities
    
    
    (752,367
    )
    
    
    1,066,707DISCONTINUED OPERATIONS:Operating activities
    
    
    
    
    
    
    321,089Investing activities
    
    
    
    
    
    
    4,611,733Financing activities
    
    
    
    
    
    
    (431,910
    )Net cash used in discontinued operations
    
    
    
    
    
    
    4,500,912Net decrease in cash and cash equivalents
    
    
    (2,050,677
    )
    
    
    (1,331,156
    )Cash at beginning of period
    
    
    8,382,947
    
    
    
    5,662,894Cash at end of period
    
    $
    6,332,270
    
    
    $
    4,331,738
 See accompanying notes to condensed consolidated financial statements.
 4




---



##### Table of Contents



Total assets acquired, net of cash
    
    $
    1,566,852Total liabilities assumed
    
    
    (583,937
    )Net assets acquired, net of cash
    
    $
    982,915Less value of shares issued for acquisition
    
    
    (91,250
    )Total cash paid (including acquisition expenses)
    
    $
    891,665
 See accompanying notes to condensed consolidated financial statements.
 5




---



##### Table of Contents



SERVIDYNE, INC.
 NOTE 1. ORGANIZATION AND BUSINESS
  NOTE 2. UNAUDITED STATEMENTS
  NOTE 3. SIGNIFICANT ACCOUNTING POLICIES
   6




---



##### Table of Contents



Equity-Based Compensation
   7




---



##### Table of Contents



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 October 31, 2008
    
    
    482,486
    
    
    $
    4.46Vested at October 31, 2008
    
    
    471,986
    
    
    $
    4.44
   Number of
    
    Weighted AverageExercise
    
    Outstanding and
    
    Remaining ContractualPrice
    
    Exercisable Options
    
    Life (Years)$4.42
    
    
    415,629
    
    
    
    4.00$4.59
    
    
    55,440
    
    
    
    6.40$5.19
    
    
    917
    
    
    
    5.63$5.24
    
    
    10,500
    
    
    
    4.62
  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
  8




---



##### Table of Contents



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 October 31, 2008
    
    
    590,350
    
    
    $
    4.36Vested at October 31, 2008
    
    
    
    
    
    $
    
  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
  Shares of Restricted Stock
  9




---



##### Table of Contents



Weighted AverageNumber of
    
    
    Grant DateRestricted
    
    
    Fair ValueShares of Stock
    
    
    per ShareNon-vested restricted stock at April 30, 2008
    
    
    1,785
    
    
    $
    4.27Granted
    
    
    5,800
    
    
    
    4.72Vested
    
    
    (1,785
    )
    
    
    Forfeited
    
    
    (205
    )

    
    
    Non-vested restricted stock at October 31, 2008
    
    
    5,595
    
    
    $
    4.61
 NOTE 4. RECEIVABLES
  NOTE 5. DISCONTINUED OPERATIONS
 Sales of Income-Producing Properties
   10




---



##### Table of Contents



Second Quarter Ended
    
    Six months endedOctober 31,
    
    October 31,2008
    
    2007
    
    2008
    
    2007REAL ESTATE SEGMENTRental revenues
    
    $
    
    
    
    $
    397,082
    
    
    $
    
    
    
    $
    948,664Rental property operating expenses, including depreciation
    
    
    
    
    
    
    443,706
    
    
    
    
    
    
    
    902,433Operating (loss) earnings from discontinued operations
    
    
    
    
    
    
    (46,625
    )
    
    
    
    
    
    
    46,231Income tax benefit (expense)
    
    
    
    
    
    
    17,717
    
    
    
    
    
    
    
    (17,568
    )Operating (loss) earnings from discontinued operations, net of tax
    
    
    
    
    
    
    (28,907
    )
    
    
    
    
    
    
    28,663Gain on sale of income-producing properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,918,301Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (728,954
    )Gain on sale of income-producing properties, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,189,347(Loss) earnings from discontinued operations, net of tax
    
    $
    
    
    
    $
    (28,907
    )
    
    $
    
    
    
    $
    1,218,010
 NOTE 6. OPERATING SEGMENTS
  11




---



##### Table of Contents



For the Second QuarterEnded October 31, 2008
    
    BPE
    
    Real Estate
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customers
    
    $
    3,434,110
    
    
    $
    778,480
    
    
    $
    
    
    
    $
    
    
    
    $
    4,212,590Interest and other income
    
    
    14,155
    
    
    
    310,157
    
    
    
    9,895
    
    
    
    (256,555
    )
    
    
    77,652Intersegment revenue
    
    
    
    
    
    
    140,455
    
    
    
    
    
    
    
    (140,455
    )
    
    
    Total revenues from continuing
operations
    
    $
    3,448,265
    
    
    $
    1,229,092
    
    
    $
    9,895
    
    
    $
    (397,010
    )
    
    $
    4,290,242Net (loss) earnings
    
    $
    (399,298
    )
    
    $
    100,565
    
    
    $
    (551,597
    )
    
    $
    (55,382
    )
    
    $
    (905,712
    )
 For the Six Months EndedOctober 31, 2008
    
    BPE
    
    Real Estate
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customers
    
    $
    6,154,183
    
    
    $
    1,574,683
    
    
    $
    
    
    
    $
    
    
    
    $
    7,728,866Interest and other income
    
    
    21,632
    
    
    
    610,290
    
    
    
    18,211
    
    
    
    (495,994
    )
    
    
    154,139Intersegment revenue
    
    
    
    
    
    
    283,032
    
    
    
    
    
    
    
    (283,032
    )
    
    
    Total revenues from continuing
operations
    
    $
    6,175,815
    
    
    $
    2,468,005
    
    
    $
    18,211
    
    
    $
    (779,026
    )
    
    $
    7,883,005Net (loss) earnings
    
    $
    (858,907
    )
    
    $
    254,646
    
    
    $
    (1,213,021
    )
    
    $
    64,159
    
    
    $
    (1,753,123
    )
 For the Second QuarterEnded October 31, 2007
    
    BPE
    
    Real Estate
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customers
    
    $
    3,987,123
    
    
    $
    881,463
    
    
    $
    
    
    
    $
    
    
    
    $
    4,868,586Interest and other income
    
    
    
    
    
    
    401,035
    
    
    
    15,181
    
    
    
    (305,627
    )
    
    
    110,589Intersegment revenue
    
    
    
    
    
    
    147,564
    
    
    
    
    
    
    
    (147,564
    )
    
    
    Total revenues from continuing
operations
    
    $
    3,987,123
    
    
    $
    1,430,062
    
    
    $
    15,181
    
    
    $
    (453,191
    )
    
    $
    4,979,175Net (loss) earnings
    
    $
    (234,141
    )
    
    $
    200,346
    
    
    $
    (251,732
    )
    
    $
    (59,345
    )
    
    $
    (344,872
    )
 For the Six Months EndedOctober 31, 2007
    
    BPE
    
    Real Estate
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customers
    
    $
    8,753,515
    
    
    $
    3,403,854
    
    
    $
    
    
    
    $
    
    
    
    $
    12,157,369Interest and other income
    
    
    55,094
    
    
    
    700,288
    
    
    
    27,951
    
    
    
    (583,236
    )
    
    
    200,097Intersegment revenue
    
    
    
    
    
    
    295,105
    
    
    
    
    
    
    
    (295,105
    )
    
    
    Total revenues from continuing
operations
    
    $
    8,808,609
    
    
    $
    4,399,247
    
    
    $
    27,951
    
    
    $
    (878,341
    )
    
    $
    12,357,466Net (loss) earnings
    
    $
    (199,546
    )
    
    $
    2,540,505
    
    
    $
    (1,062,058
    )
    
    $
    (65,369
    )
    
    $
    1,213,532
 
 (1)
    
    The Company is in the business of creating long-term value by periodically
realizing gains through the sale of income-producing properties and real estate held for
future development or sale; therefore, in this presentation the Real Estate Segments net
earnings include earnings from discontinued operations, pursuant to SFAS 144, that
resulted from the sales of certain income-producing properties, and earnings from
continuing operations that resulted from the gains on sale of certain other real estate
assets. NOTE 7. EARNINGS (LOSS) PER SHARE
  12




---



##### Table of Contents



NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
  13




---



##### Table of Contents



October 31, 2008Gross Carrying
    
    
    AccumulatedAmount
    
    
    AmortizationIntangible assets, subject to amortization:Proprietary BPE software solutions
    
    $
    3,547,345
    
    
    $
    2,064,566Acquired computer software
    
    
    462,555
    
    
    
    461,068Real estate lease costs
    
    
    859,801
    
    
    
    254,674Customer relationships
    
    
    404,632
    
    
    
    217,011Deferred loan costs
    
    
    331,487
    
    
    
    113,865Non-compete agreements
    
    
    63,323
    
    
    
    10,179Tradename
    
    
    61,299
    
    
    
    14,040Other
    
    
    28,660
    
    
    
    21,496$
    5,759,102
    
    
    $
    3,156,899Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707
    
    
    $
    Goodwill
    
    $
    6,343,012
    
    
    $
    
 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
    
    $
    708,707
    
    
    $
    Goodwill
    
    $
    5,458,717
    
    
    $
    
 Aggregate amortization expense for all amortizable intangible assets:For the six months ended October 31, 2008
    
    $
    406,728For the six months ended October 31, 2007
    
    $
    374,474For the quarter ended October 31, 2008
    
    $
    208,271For the quarter ended October 31, 2007
    
    $
    185,470
 NOTE 9. DISPOSITIONS
 Fiscal 2009
 14




---



##### Table of Contents



Fiscal 2008
    NOTE 10. ACQUISITIONS
  15




---



##### Table of Contents



OperationsAcquired fromSeller
    
    
    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
    
    
    884,293
    
    
    IndefiniteTotal assets acquired
    
    $
    1,576,760Current liabilities
    
    
    (483,937
    )Long term liabilities
    
    
    (100,000
    )Net assets acquired
    
    $
    992,823
   16




---



##### Table of Contents



Quarter Ended
    
    Six Months EndedOctober 31,
    
    October 31,2008
    
    2007
    
    2008
    
    2007Revenues
    
    $
    4,362
    
    
    $
    5,725
    
    
    $
    8,152
    
    
    $
    13,933Net (loss) earnings
    
    $
    (920
    )
    
    $
    (336
    )
    
    $
    (1,767
    )
    
    $
    1,246Net (loss) earnings per share  basic
    
    $
    (0.24
    )
    
    $
    (0.08
    )
    
    $
    (0.47
    )
    
    $
    0.35Net (loss) earnings per share 
diluted
    
    $
    (0.24
    )
    
    $
    (0.08
    )
    
    $
    (0.47
    )
    
    $
    0.35
 NOTE 11. COMMITMENTS AND CONTINGENCIES
  17




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
     Results of operations of the second quarter and first six months of fiscal 2009, compared to
the second quarter and first six months of fiscal 2008.
 
  CHART A
 Second Quarter Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedOctober 31,
    
    
    Amount
    
    
    Percentage
    
    
    October 31,
    
    
    Amount
    
    
    Percentage2008
    
    
    2007
    
    
    Decrease
    
    
    Decrease
    
    
    2008
    
    
    2007
    
    
    Decrease
    
    
    DecreaseBPE (1)
    
    $
    3,434
    
    
    $
    3,987
    
    
    $
    (553
    )
    
    
    (14
    )
    
    $
    6,154
    
    
    $
    8,754
    
    
    $
    (2,600
    )
    
    
    (30
    )Real Estate (2)
    
    
    778
    
    
    
    881
    
    
    
    (103
    )
    
    
    (12
    )
    
    
    1,575
    
    
    
    3,404
    
    
    
    (1,829
    )
    
    
    (54
    )$
    4,212
    
    
    $
    4,868
    
    
    $
    (656
    )
    
    
    (13
    )
    
    $
    7,729
    
    
    $
    12,158
    
    
    $
    (4,429
    )
    
    
    (36
    )
 18




---



##### Table of Contents



NOTES TO CHART A
 (1)
    
    BPE Segment revenues decreased by approximately $553,000, or 14%, in the second quarter of
fiscal 2009, compared to the same period in fiscal 2008, primarily due to:
 (a)
    
    energy savings (lighting and mechanical) project revenues which were
approximately $1,358,000 lower than in the year-earlier period (although 26% higher
than in the immediately preceding first quarter of fiscal 2009 and 57% higher than
in the fourth quarter of fiscal 2008), primarily due to:
 i.
    
    continuing delays in the receipt of certain orders;
however, the Company received $3,163,000 in energy savings project orders during October and
November 2008, of which $1,535,000 were included in backlog at October 31, 2008, only
a portion of which relates to the previously described delayed orders.
Revenues from these projects are expected to commence during the third and
fourth quarters of fiscal 2009 and continue into fiscal 2010;
 partially offset by:
 ii.
    
    revenues of approximately $348,000 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 was partially offset by:
 (b)
    
    lighting product revenues of approximately $660,000, as a result of the
Companys acquisition during the first quarter of fiscal 2009 of its lighting
distribution business; and(c)
    
    an increase in energy management consulting services revenues of
approximately $121,000.
 BPE Segment revenues decreased by approximately $2,600,000, or 30%, in the first six months
of fiscal 2009, compared to the same period in fiscal 2008, primarily due to:
 (a)
    
    energy savings (lighting and mechanical) project revenues that were
approximately $3,738,000 lower than in the year-earlier period, primarily because
of:
 i.
    
    continuing 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 during the
year-earlier period;
 partially offset by:
 19




---



##### Table of Contents



iii.
    
    revenues of approximately $528,000 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 was partially offset by:
 (b)
    
    lighting product revenues of approximately $916,000, 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 $222,000.
 While management believes that the decrease in energy savings project revenues is due in part
to the general deterioration of the overall economy and its effect on certain of the
Companys customers, order activity has strengthened significantly in recent months, and
management believes that the Company is well positioned to continue to grow energy savings
project revenues.
 (2)
    
    Real Estate Segment revenues decreased by $103,000, or 12%, in the second quarter of fiscal
2009, compared to the same period in fiscal 2008, primarily as a result of a decrease in
rental income of approximately $187,000 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 $36,000 from new tenant leases at the same property,
as well as increased rental income at various other properties.Real Estate Segment revenues decreased by $1,829,000, or 54%, in the first six months of
fiscal 2009, compared to the same period in fiscal 2008, primarily due to:
 (a)
    
    the absence of one-time 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(b)
    
    a decrease in rental income of approximately $374,000 due to the
expiration of the anchor tenant lease in January 2008 at the Companys owned
headquarters building in Atlanta, Georgia;
 partially offset by:
 (c)
    
    approximately $53,000 as the result of an early lease termination payment
in the first quarter of fiscal 2009;and
 (d)
    
    an increase in rental income of approximately $57,000 from new tenant
leases at the Companys owned headquarters building.
  20




---



##### Table of Contents



IncreaseOctober 31,
    
    (Decrease)2008
    
    2007
    
    Amount
    
    PercentageBPE (1)
    
    $
    6,963,000
    
    
    $
    6,724,000
    
    
    
    239,000
    
    
    
    4Real Estate (2)
    
    
    3,089,000
    
    
    
    3,143,000
    
    
    
    (66,000
    )
    
    
    (2
    )Less: Intersegment eliminations (3)
    
    
    (539,000
    )
    
    
    (525,000
    )
    
    
    (2,000
    )
    
    
    0Total Backlog
    
    $
    9,513,000
    
    
    $
    9,342,000
    
    
    $
    171,000
    
    
    
    2
 
 (1)
    
    BPE backlog at October 31, 2008, increased by approximately $239,000 compared to the
year-earlier period, primarily due to:
 (a)
    
    an increase of approximately $627,000 in energy savings projects; and(b)
    
    an increase of approximately $171,000 in productivity software products
and services;
 partially offset by:
 (c)
    
    a decrease of approximately $559,000 in energy management consulting
services, as a result of the successful completion of approximately $750,000 of
multi-year consulting services projects, partially offset by approximately $191,000
in new consulting services contracts.
 The Company estimates that the BPE backlog at October 31, 2008, will be recognized prior to
October 31, 2009, with the exception of approximately $245,000 in energy management consulting
services from multi-year contracts with terms that extend longer than one year.
 BPE backlog includes some contracts that can be cancelled by customers with less than one
years notice, and assumes such cancellation provisions will not be invoked. The amount of
such cancelled contracts included in the prior years backlog was approximately $138,000, or
2.0%.
 (2)
    
    Real Estate backlog at October 31, 2008, decreased by
approximately $54,000 compared to the
year-earlier period, primarily due to a decrease of approximately
$47,000 as a result of the reduction in leased office
space at the Companys owned headquarters building in Atlanta, Georgia.
 (3)
    
    Represents rental income at the Companys headquarters building to be paid to the Real
Estate Segment by the Parent Company and the BPE Segment.
 
  21




---



##### Table of Contents



CHART B
 Percentage of Segment
    
    
    
    
    
    
    
    
    
    
    Percentage of SegmentRevenues for the
    
    
    
    
    
    
    
    
    
    
    Revenues for theSecond Quarter Ended
    
    
    Second Quarter Ended
    
    
    Six Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,
    
    
    October 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007BPE (1)
    
    $
    2,168
    
    
    $
    2,760
    
    
    
    63
    
    
    
    69
    
    
    $
    3,920
    
    
    $
    5,946
    
    
    
    64
    
    
    
    68Real Estate (2)
    
    
    561
    
    
    
    506
    
    
    
    72
    
    
    
    57
    
    
    
    1,035
    
    
    
    1,156
    
    
    
    66
    
    
    
    34$
    2,729
    
    
    $
    3,266
    
    
    
    65
    
    
    
    67
    
    
    $
    4,955
    
    
    $
    7,102
    
    
    
    64
    
    
    
    58
 NOTES TO CHART B
 
 (1)
    
    BPE Segment costs and expenses decreased by approximately $592,000 , or 21%, in the second
quarter of fiscal 2009, and by approximately $2,026,000, or 34%, in the first six months of
fiscal 2009, compared to the same periods in fiscal 2008, primarily due to:
 (a)
    
    the corresponding decrease in revenues (See Chart A);
 partially offset by:
 (b)
    
    an increase in costs of approximately $479,000 and $627,000 in the
second quarter and the first six months of fiscal 2009, respectively, as a result
of the Companys acquisition of its lighting distribution business during the first
quarter of fiscal 2009.
 On a percentage-of-revenues basis, BPE Segment costs and expenses decreased by 6% and 4%,
respectively, in the second quarter and first six months of fiscal 2009, compared to the same
periods in fiscal 2008, primarily due to a change in the mix of services and products.
 (2)
    
    Real Estate Segment costs and expenses increased by approximately $55,000, or 11%, in the
second quarter of fiscal 2009, compared to the same period in fiscal 2008, primarily due to:
 (a)
    
    an increase in rental operating costs of approximately $100,000, primarily as the result
of higher real estate taxes and property maintenance and repair
expenses, a portion of which are reimbursable by the tenants, and
legal fees;
 partially offset by:
 (b)
    
    a decrease in rental operating costs of approximately $45,000
primarily due to lower tenant occupancy at the Companys owned headquarters
building in Atlanta, Georgia.
 Real Estate Segment costs and expenses decreased by approximately $121,000, or 10%, for the
first six months of fiscal 2009, compared to the same period in fiscal 2008, primarily due
to:
 22




---



##### Table of Contents



(a)
    
    the absence of one-time leaseback and sales costs 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 $79,000
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 $105,000, primarily as the result
of higher real estate taxes and property maintenance and
repair expenses, a portion of which are reimbursable by the tenants,
and legal fees;
 On a percentage-of-revenues basis, Real Estate Segment costs and expenses increased by 15%
and 32% in the second quarter and first six months of fiscal 2009, respectively. The
increase in the second quarter compared to the prior year period was primarily due to higher
legal fees, maintenance and landscaping costs, and additional depreciation, as mentioned
above. The
increase in the first six months compared to the prior year period
was primarily due to the inclusion of one-time 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 were approximately $95,000.
 
  CHART C
 Percent of Segment
    
    
    
    
    
    
    
    
    
    
    Percent of SegmentRevenues for
    
    
    
    
    
    
    
    
    
    
    Revenues forSecond Quarter Ended
    
    
    Second Quarter Ended
    
    
    Six Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,
    
    
    October 31,
    
    
    October 31,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007BPE (1)
    
    $
    1,613
    
    
    $
    1,336
    
    
    
    47
    
    
    
    34
    
    
    $
    3,022
    
    
    $
    2,660
    
    
    
    49
    
    
    
    30Real Estate (2)
    
    
    165
    
    
    
    175
    
    
    
    21
    
    
    
    20
    
    
    
    334
    
    
    
    358
    
    
    
    21
    
    
    
    11Parent (3)
    
    
    918
    
    
    
    352
    
    
    
    22
    
    
    
    7
    
    
    
    1,745
    
    
    
    1,641
    
    
    
    23
    
    
    
    13$
    2,696
    
    
    $
    1,863
    
    
    
    64
    
    
    
    38
    
    
    $
    5,101
    
    
    $
    4,659
    
    
    
    66
    
    
    
    38
 23




---



##### Table of Contents



NOTES TO CHART C
 
 (1)
    
    BPE SG&A expenses increased by approximately $277,000, or 21%, in the second quarter of
fiscal 2009, compared to the same period in fiscal 2008, primarily due to the Companys
acquisition of its lighting distribution business during the first quarter of fiscal 2009.BPE SG&A expenses increased by approximately $362,000, or 14%, in the first six months of
fiscal 2009, compared to the same period in fiscal 2008, primarily due to the Companys
acquisition of its lighting distribution business during the first quarter of fiscal 2009.On a percentage-of-revenues basis, BPE SG&A expenses increased by 13% and 19% in the second
quarter and first six months of fiscal 2009, respectively, compared to the same periods of
fiscal 2008, primarily due to the decrease in revenues without a corresponding decrease in
expenses (See Chart A).(2)
    
    Real Estate SG&A expenses decreased by approximately $10,000 and $24,000 in the second
quarter and the first six months of fiscal 2009, respectively, compared to the same periods
in fiscal 2008, primarily due to a decrease in personnel and consulting costs.On a percentage-of-revenues basis, Real Estate SG&A expenses increased by approximately 11%
in the first six months of fiscal 2009, compared to the same period in fiscal 2008, primarily
due to the inclusion of one-time 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.(3)
    
    Parent SG&A expenses increased by approximately
$566,000, or 161%, in the second quarter of
fiscal 2009, compared to the same period of fiscal 2008, primarily due to:
 (a)
    
    a reduction in the prior year period of approximately $336,000 in accrued incentive compensation expenses.
The Company partially reduced the
incentive compensation expenses accrued in the first quarter of
fiscal 2008 pursuant to the terms of the Companys cash incentive compensation
plan. There were no incentive compensation expenses in the second quarter of fiscal
2009.(b)
    
    an increase in legal fees of approximately $99,000 as a result of ongoing
efforts to perfect an insurance claim as well as increased Securities and Exchange
Commission (SEC) compliance costs; and(c)
    
    an increase in accounting and other non-legal compliance costs of
approximately $94,000.
 Parent SG&A expenses increased by approximately $104,000 , or 6%, in the first six months of
fiscal 2009, compared to the same period of fiscal 2008, primarily due to:
 (a)
    
    an increase in legal fees of approximately $137,000 as a result of
ongoing efforts to perfect an insurance claim as well as increased SEC
compliance costs;(b)
    
    an increase in accounting and other non-legal compliance costs of
approximately $161,000;
 24




---



##### Table of Contents



(c)
    
    an increase in general insurance expenses of approximately $22,000;
 partially offset by:
 (d)
    
    a decrease of approximately $246,000 in incentive compensation expenses.
 On a percentage-of-revenues basis, Parent SG&A expenses increased by 15% and 10% in the
second quarter and first six months of fiscal 2009, respectively, compared to the same
periods of fiscal 2008, primarily due to the decrease in revenues without a corresponding
decrease in expenses (See Chart A).
 Liquidity and capital resources
   (a)
    
    current year losses from continuing operations before depreciation,
amortization and income taxes of approximately $2,023,000;(b)
    
    cash payments of approximately $319,000 for incentive compensation
expensed in the prior fiscal year as a result of the successful achievement of certain
company earnings and performance goals in the prior fiscal year; and(c)
    
    a net decrease in trade accounts payable, accrued expenses, other
liabilities, and billings in excess of costs and earnings of
approximately $855,000,
due to the timing and submission of payments;
 partially offset by:
 (d)
    
    a decrease in net accounts receivable of $250,000, primarily as a result
of the timing of billing and receipt of payments.
  (a)
    
    the release to the Company of approximately $3,471,000 in cash previously
held in escrow, after the Company elected not to purchase a replacement property to
complete a proposed Internal Revenue Code Section 1031 federal tax deferred exchange
for the Companys owned office park located in Marietta, Georgia, which was sold by
the Company in fiscal 2008;
 partially offset by:
 (b)
    
    approximately $892,000 for the acquisition of the
Companys energy-efficient lighting
distribution business;(c)
    
    approximately $189,000 for additions to intangible assets, primarily
related to the development of enhancements to BPEs proprietary building
productivity software solutions;(d)
    
    approximately $174,000 for additions to income-producing properties,
primarily related to tenant and building improvements;
 25




---



##### Table of Contents



(e)
    
    $150,000 for the purchase of a held-to-maturity investment related to the
scheduled increase in restricted cash as required by a provision in a Real Estate
loan agreement; and(f)
    
    approximately $130,000 for additions to property and equipment.
  (a)
    
    payment of the regular quarterly cash dividends to shareholders of
approximately $284,000 ;(b)
    
    payment in full of a note at maturity of approximately $241,000;(c)
    
    scheduled principal payments on mortgage notes and other long-term debt
of approximately $169,000; and(d)
    
    repurchases of the 17,295 shares of the Companys common stock of approximately $58,000.
    Cautionary statement regarding forward-looking statements
  26




---



##### Table of Contents



Critical Accounting Policies
  Revenue Recognition
 Revenue Recognition
    27




---



##### Table of Contents



Income-Producing Properties and Property and Equipment
   Valuation of Goodwill and Other Intangible Assets
  28




---



##### Table of Contents



Income Taxes
  Discontinued Operations
 ,
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4 (T). CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   29




---



##### Table of Contents



Changes in Internal Control Over Financial Reporting
  30




---



##### 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
    
    Maximum Number ofShares Purchased as
    
    Shares that May YetPart of Publicly
    
    Be Purchased underTotal Number of
    
    Average Price
    
    Announced Plans or
    
    the Plans orPeriod
    
    Shares Purchased
    
    Paid per Share
    
    Programs
    
    ProgramsAugust 1-31, 2008
    
    
    0
    
    
    
    n/a
    
    
    
    0
    
    
    
    100,000September 1-30, 2008
    
    
    2,102
    
    
    
    3.68
    
    
    
    2,102
    
    
    
    97,898October 1-31, 2008
    
    
    15,193
    
    
    
    3.69
    
    
    
    15,193
    
    
    
    82,705Total
    
    
    17,295
    
    
    
    3.69
    
    
    
    17,295
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 31




---



##### Table of Contents



(1)
    
    elected six (6) directors to constitute the Board of Directors until the next Annual
Meeting of Shareholders and until their successors are qualified and elected; and(2)
    
    approved an amendment to the Companys Articles of Incorporation that increased the number
of authorized shares of the Companys common stock, par value $1.00 per share, from 5,000,000
shares to 10,000,000 shares.
  Election of Directors
 Director
    
    Votes For
    
    Votes WithheldAlan R. Abrams
    
    
    3,056,991
    
    
    
    141,039J. Andrew Abrams
    
    
    3,056,991
    
    
    
    141,039Samuel E. Allen
    
    
    3,056,508
    
    
    
    141,522Gilbert L. Danielson
    
    
    3,056,277
    
    
    
    141,753Herschel Kahn
    
    
    3,057,757
    
    
    
    140,273Robert T. McWhinney, Jr.
    
    
    3,057,757
    
    
    
    140,273
 Amendment to the Articles of Incorporation
 Votes For
    
    Votes Against
    
    Abstentions
    
    Broker Non-Votes1,998,830
    
    1,198,969
    
    231
    
    0
 
 ITEM 6. EXHIBITS
 3.1
    
    Amended and Restated Articles of Incorporation (incorporated by reference to
Exhibit 3.1 to the Companys Current Report on Form 8-K filed on September 25, 2008)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
 32




---



##### Table of Contents



SERVIDYNE,
INC.(Registrant)Date: December 15, 2008
    /s/ Alan R. AbramsAlan R. AbramsChief Executive OfficerDate: December 15, 2008
    /s/ Rick A. PaternostroRick A. PaternostroChief Financial Officer 33