##### 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, 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 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 1945 The Exchange, Suite 300, Atlanta, GA 30339-2029
    þ o
  o 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




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TABLE OF CONTENTS  ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II. OTHER INFORMATIONITEM 1A. RISK FACTORSITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM 6. EXHIBITSSIGNATURESEX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  SERVIDYNE, INC.
 October 31, 2009
    
    
    April 30, 2009ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    2,903,421
    
    
    $
    4,821,126Receivables (Note 5):Trade accounts and notes, net of allowance for doubtful accounts of
$85,103 and $145,236, respectively
    
    
    1,692,245
    
    
    
    1,368,577Contracts, net of allowance for doubtful accounts of $4,294 and
$4,294, respectively, including retained amounts of $359,856 and
$219,385, respectively
    
    
    2,027,131
    
    
    
    1,764,327Costs and earnings in excess of billings
    
    
    34,149
    
    
    
    408,950Deferred income taxes
    
    
    455,421
    
    
    
    579,423Other current assets
    
    
    1,766,010
    
    
    
    1,659,721Total current assets
    
    
    8,878,377
    
    
    
    10,602,124INCOME-PRODUCING PROPERTIES, net (Note 10)
    
    
    19,258,068
    
    
    
    19,391,375PROPERTY AND EQUIPMENT, net
    
    
    738,345
    
    
    
    797,556OTHER ASSETS:Real estate held for future development or sale
    
    
    853,109
    
    
    
    853,109Intangible assets, net (Note 8)
    
    
    3,031,655
    
    
    
    2,910,596Goodwill (Note 8)
    
    
    6,354,002
    
    
    
    6,354,002Other assets
    
    
    2,954,036
    
    
    
    2,735,894Total assets
    
    $
    42,067,592
    
    
    $
    43,644,656LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    585,083
    
    
    $
    851,633Accrued expenses
    
    
    2,010,347
    
    
    
    1,416,145Deferred revenue
    
    
    460,654
    
    
    
    708,401Billings in excess of costs and earnings
    
    
    962,204
    
    
    
    28,215Current maturities of mortgage notes and other long-term debt (Note 10)
    
    
    3,597,634
    
    
    
    566,858Total current liabilities
    
    
    7,615,922
    
    
    
    3,571,252DEFERRED INCOME TAXES
    
    
    1,446,361
    
    
    
    2,489,357OTHER LIABILITIES
    
    
    991,815
    
    
    
    824,877MORTGAGE NOTES PAYABLE, less current maturities
    
    
    14,911,846
    
    
    
    18,220,640OTHER LONG-TERM DEBT, less current maturities
    
    
    1,000,000
    
    
    
    1,000,000Total liabilities
    
    
    25,965,944
    
    
    
    26,106,126COMMITMENTS AND CONTINGENCIES (Note 12)SHAREHOLDERS EQUITY:Common stock, $1 par value; 10,000,000 shares authorized;
3,917,673 issued and 3,689,075 outstanding at October 31, 2009;
3,917,778 issued and 3,691,369 outstanding at April 30, 2009
    
    
    3,922,051
    
    
    
    3,917,778Additional paid-in capital
    
    
    6,114,456
    
    
    
    6,026,101Retained earnings
    
    
    7,044,566
    
    
    
    8,569,451Treasury stock (common shares) of 228,598 at October 31, 2009 and
226,409 at April 30, 2009
    
    
    (979,425
    )
    
    
    (974,800
    )Total shareholders equity
    
    
    16,101,648
    
    
    
    17,538,530Total liabilities and shareholders equity
    
    $
    42,067,592
    
    
    $
    43,644,656
 See accompanying notes to condensed consolidated financial statements.
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SERVIDYNE, INC.
 SECOND QUARTER ENDED
    
    
    SIX MONTHS ENDEDOCTOBER 31,
    
    
    OCTOBER 31,2009
    
    
    2008
    
    
    2009
    
    
    2008REVENUES:Building Performance Efficiency (BPE)
    
    $
    3,922,541
    
    
    $
    3,434,110
    
    
    $
    7,795,649
    
    
    $
    6,154,183Real Estate
    
    
    685,362
    
    
    
    784,357
    
    
    
    1,441,457
    
    
    
    1,588,8214,607,903
    
    
    
    4,218,467
    
    
    
    9,237,106
    
    
    
    7,743,004COST OF REVENUES:BPE
    
    
    2,670,904
    
    
    
    2,167,704
    
    
    
    5,295,513
    
    
    
    3,920,488Real Estate
    
    
    485,770
    
    
    
    560,618
    
    
    
    993,775
    
    
    
    1,034,6653,156,674
    
    
    
    2,728,322
    
    
    
    6,289,288
    
    
    
    4,955,153SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
    
    
    2,304,435
    
    
    
    2,695,481
    
    
    
    4,693,896
    
    
    
    5,101,137OTHER (INCOME) AND EXPENSES:Other income
    
    
    (57,078
    )
    
    
    (23,804
    )
    
    
    (67,882
    )
    
    
    (36,943
    )Interest income
    
    
    (3,696
    )
    
    
    (47,971
    )
    
    
    (10,436
    )
    
    
    (103,058
    )Interest expense
    
    
    319,368
    
    
    
    330,368
    
    
    
    638,763
    
    
    
    662,764258,594
    
    
    
    258,593
    
    
    
    560,445
    
    
    
    522,763LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    (1,111,800
    )
    
    
    (1,463,929
    )
    
    
    (2,306,523
    )
    
    
    (2,836,049
    )INCOME TAX BENEFIT
    
    
    (403,778
    )
    
    
    (558,217
    )
    
    
    (892,915
    )
    
    
    (1,082,926
    )NET LOSS
    
    $
    (708,022
    )
    
    $
    (905,712
    )
    
    $
    (1,413,608
    )
    
    $
    (1,753,123
    )NET LOSS PER SHARE (Note 7):Net loss per share  basic and diluted
    
    $
    (0.19
    )
    
    $
    (0.24
    )
    
    $
    (0.38
    )
    
    $
    (0.47
    )WEIGHTED AVERAGE SHARES OUTSTANDING  BASIC
    
    
    3,690,288
    
    
    
    3,736,346
    
    
    
    3,690,791
    
    
    
    3,733,320WEIGHTED AVERAGE SHARES OUTSTANDING  DILUTED
    
    
    3,690,288
    
    
    
    3,736,346
    
    
    
    3,690,791
    
    
    
    3,733,320
 See accompanying notes to condensed consolidated financial statements.
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##### Table of Contents



SERVIDYNE, INC.
 SIX MONTHS ENDEDOCTOBER 31,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (1,413,608
    )
    
    $
    (1,753,123
    )Adjustments
to reconcile net loss to net cash used in operating activities:Loss on disposal of assets
    
    
    1,378
    
    
    
    9,683Depreciation and amortization
    
    
    711,363
    
    
    
    813,179Amortization of mortgage discount
    
    
    
    
    
    
    (15,000
    )Deferred tax benefit
    
    
    (918,994
    )
    
    
    (1,098,825
    )Stock compensation expense
    
    
    93,034
    
    
    
    98,447Adjustment to cash surrender value of life insurance
    
    
    (69,217
    )
    
    
    (93,852
    )Straight-line rent
    
    
    45,052
    
    
    
    (36,672
    )Provision for doubtful accounts, net
    
    
    (60,133
    )
    
    
    (37,865
    )Changes in assets and liabilities:Receivables
    
    
    (526,339
    )
    
    
    288,049Costs and earnings in excess of billings
    
    
    374,801
    
    
    
    (88,803
    )Other current and long-term assets
    
    
    (295,765
    )
    
    
    (146,471
    )Trade and subcontractors payable
    
    
    (266,550
    )
    
    
    (515,625
    )Accrued expenses and deferred revenue
    
    
    346,455
    
    
    
    (361,115
    )Accrued incentive compensation
    
    
    
    
    
    
    (318,571
    )Billings in excess of costs and earnings
    
    
    933,989
    
    
    
    35,824Other liabilities
    
    
    
    
    
    
    (14,219
    )Net cash used in operating activities
    
    
    (1,044,534
    )
    
    
    (3,234,959
    )Cash flows from investing activities:Acquisition, net of cash acquired
    
    
    
    
    
    
    (891,665
    )Premiums paid on officers life insurance policies
    
    
    (27,464
    )
    
    
    Release of restricted cash held in escrow
    
    
    57,170
    
    
    
    3,470,700Purchase of held to maturity investments
    
    
    
    
    
    
    (150,000
    )Additions to income-producing properties
    
    
    (128,925
    )
    
    
    (173,576
    )Additions to property and equipment
    
    
    (60,028
    )
    
    
    (129,876
    )Additions to intangible assets
    
    
    (321,598
    )
    
    
    (188,934
    )Proceeds from sale of property and equipment
    
    
    2,000
    
    
    
    Net cash (used in) provided by investing activities
    
    
    (478,845
    )
    
    
    1,936,649Cash flows from financing activities:Mortgage repayments
    
    
    (178,018
    )
    
    
    (169,396
    )Debt repayments
    
    
    (100,000
    )
    
    
    (240,875
    )Repurchase of common stock
    
    
    (4,625
    )
    
    
    (57,726
    )Cash dividends paid to shareholders
    
    
    (111,683
    )
    
    
    (284,370
    )Net cash used in financing activities
    
    
    (394,326
    )
    
    
    (752,367
    )Net decrease in cash and cash equivalents
    
    
    (1,917,705
    )
    
    
    (2,050,677
    )Cash at beginning of period
    
    
    4,821,126
    
    
    
    8,382,947Cash at end of period
    
    $
    2,903,421
    
    
    $
    6,332,270
 See accompanying notes to condensed consolidated financial statements.
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Total assets acquired, net of cash
    
    $
    1,577,844Total liabilities assumed
    
    
    (583,937
    )Net assets acquired, net of cash
    
    
    993,907Less value of shares issued for acquisition
    
    
    (91,250
    )Total cash paid (including acquisition costs)
    
    $
    902,657
 See accompanying notes to condensed consolidated financial statements.
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SERVIDYNE, INC.
 NOTE 1. ORGANIZATION AND BUSINESS
  NOTE 2. UNAUDITED STATEMENTS
  Subsequent Events
  Restatement of Previously Issued Condensed Consolidated Financial Statements
  5




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Reclassification of Previously Issued Condensed Consolidated Financial Statements
  NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS
 The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles
 Subsequent Events
 Financial
Instruments
 Business
Combinations
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Intangibles 
Goodwill and Other; General Intangibles Other than Goodwill Risks
and Uncertainties Intangibles  Goodwill and Other Business Combinations
 NOTE 4. EQUITY-BASED COMPENSATION
   7




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Stock Options
  WeightedOptions to
    
    
    AveragePurchase
    
    
    ExerciseShares
    
    
    PriceOutstanding at April 30, 2009
    
    
    482,486
    
    
    $
    4.46Granted
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Outstanding at October 31, 2009
    
    
    482,486
    
    
    $
    4.46Vested at October 31, 2009
    
    
    471,986
    
    
    $
    4.44Non-vested at October 31, 2009, that are expected to vest
    
    
    10,500
    
    
    $
    5.24
   Weighted AverageExercise
    
    Number of
    
    Remaining ContractualPrice
    
    Outstanding Options
    
    Term (Years)$4.42
    
    
    415,629
    
    
    
    3.03$4.59
    
    
    55,440
    
    
    
    5.40$5.19
    
    
    917
    
    
    
    4.63$5.24
    
    
    10,500
    
    
    
    3.62
   8




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Stock Appreciation Rights (SARs)
  WeightedAverageExerciseSARs
    
    
    PriceOutstanding at April 30, 2009
    
    
    565,350
    
    
    $
    4.37Granted
    
    
    30,000
    
    
    
    2.30Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (10,500
    )
    
    
    4.09Outstanding at October 31, 2009
    
    
    584,850
    
    
    $
    4.27Vested at October 31, 2009
    
    
    54,810
    
    
    $
    3.94Non-vested at October 31, 2009, that are expected to vest
    
    
    360,818
    
    
    $
    4.30
 rd th th
  Weighted AverageRemainingExercise
    
    Outstanding
    
    Vested
    
    ContractualPrice
    
    SARs
    
    SARs
    
    Term (Years)$3.94
    
    
    182,700
    
    
    
    54,810
    
    
    
    6.66$3.79
    
    
    111,300
    
    
    
    0
    
    
    
    7.10$4.19
    
    
    10,500
    
    
    
    0
    
    
    
    7.62$6.19
    
    
    38,850
    
    
    
    0
    
    
    
    7.92$5.00
    
    
    52,500
    
    
    
    0
    
    
    
    8.48$4.76
    
    
    136,500
    
    
    
    0
    
    
    
    8.62$4.00
    
    
    22,500
    
    
    
    0
    
    
    
    8.88$2.30
    
    
    30,000
    
    
    
    0
    
    
    
    9.61
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Expected life (years)
    
    
    5Dividend yield
    
    
    3.24
    %Expected stock price volatility
    
    
    49.19
    %Risk-free interest rate
    
    
    2.95
    %Fair value of SARs granted
    
    
    $0.51
  Shares of Restricted Stock
    Weighted AverageNumber of
    
    
    Fair ValueShares of
    
    
    per ShareRestricted Stock
    
    
    on Grant DateNon-vested restricted stock at April 30, 2009
    
    
    5,295
    
    
    $
    4.61Granted
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Vested
    
    
    (4,245
    )
    
    
    4.55Non-vested restricted stock at October 31, 2009
    
    
    1,050
    
    
    $
    4.76
 NOTE 5. RECEIVABLES
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NOTE 6. OPERATING SEGMENTS
  For the Second QuarterEnded October 31, 2009
    
    BPE
    
    Real Estate
    
    Parent Company (1)
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    2,048,382
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,048,382Lighting products
    
    
    484,287
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    484,287Energy management
services
    
    
    457,714
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    457,714Productivity software
    
    
    932,157
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    932,157Total revenues from unaffiliated customers
    
    $
    3,922,541
    
    
    $
    685,362
    
    
    $
    
    
    
    $
    
    
    
    $
    4,607,903Intersegment revenue
    
    
    
    
    
    
    136,043
    
    
    
    
    
    
    
    (136,043
    )
    
    
    Total revenues from continuing
operations
    
    $
    3,922,541
    
    
    $
    821,405
    
    
    $
    
    
    
    $
    (136,043
    )
    
    $
    4,607,903(Loss) earnings from continuing
operations before
income taxes
    
    $
    (352,474
    )
    
    $
    76,330
    
    
    $
    (841,640
    )
    
    $
    5,984
    
    
    $
    (1,111,800
    )For the Six Months EndedOctober 31, 2009
    
    BPE
    
    Real Estate
    
    Parent Company (1)
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    4,061,226
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    4,061,226Lighting products
    
    
    940,738
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    940,738Energy management
services
    
    
    1,021,514
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,021,514Productivity software
    
    
    1,772,171
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,772,171Total revenues from unaffiliated customers
    
    $
    7,795,649
    
    
    $
    1,441,457
    
    
    $
    
    
    
    $
    
    
    
    $
    9,237,106Intersegment revenue
    
    
    141,545
    
    
    
    272,085
    
    
    
    
    
    
    
    (413,630
    )
    
    
    Total revenues from continuing
operations
    
    $
    7,937,194
    
    
    $
    1,713,542
    
    
    $
    
    
    
    $
    (413,630
    )
    
    $
    9,237,106(Loss) earnings from continuing
operations before
income taxes
    
    $
    (742,959
    )
    
    $
    182,272
    
    
    $
    (1,736,380
    )
    
    $
    (9,456
    )
    
    $
    (2,306,523
    )For the Second QuarterEnded October 31, 2008
    
    BPE
    
    Real Estate
    
    Parent Company (1)
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customersInterest and other incomeBPE Segment services and products:Energy savings projects
    
    $
    1,224,618
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,224,618Lighting products
    
    
    658,913
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    658,913Energy management
services
    
    
    641,817
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    641,817Productivity software
    
    
    908,761
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    908,761Total revenues from unaffiliated customers
    
    $
    3,434,110
    
    
    $
    784,357
    
    
    $
    
    
    
    $
    
    
    
    $
    4,218,467Intersegment revenue
    
    
    
    
    
    
    140,455
    
    
    
    
    
    
    
    (140,455
    )
    
    
    Total revenues from continuing
operations
    
    $
    3,434,110
    
    
    $
    924,812
    
    
    $
    
    
    
    $
    (140,455
    )
    
    $
    4,218,467(Loss) earnings from continuing
operations before
income taxes
    
    $
    (641,228
    )
    
    $
    162,204
    
    
    $
    (981,580
    )
    
    $
    (3,325
    )
    
    $
    (1,463,929
    )For the Six Months EndedOctober 31, 2008
    
    BPE
    
    Real Estate
    
    Parent Company (1)
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated customersInterest and other incomeBPE Segment services and products:Energy savings projects
    
    $
    2,172,088
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,172,088Lighting products
    
    
    916,631
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    916,631Energy management
services
    
    
    1,241,463
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,241,463Productivity software
    
    
    1,824,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,824,000Total revenues from unaffiliated customers
    
    $
    6,154,183
    
    
    $
    1,588,821
    
    
    $
    
    
    
    $
    
    
    
    $
    7,743,004Intersegment revenue
    
    
    20,362
    
    
    
    283,032
    
    
    
    
    
    
    
    (303,394
    )
    
    
    Total revenues from continuing
operations
    
    $
    6,174,545
    
    
    $
    1,871,853
    
    
    $
    
    
    
    $
    (303,394
    )
    
    $
    7,743,004(Loss) earnings from continuing
operations before
income taxes
    
    $
    (1,379,962
    )
    
    $
    410,720
    
    
    $
    (1,856,291
    )
    
    $
    (10,516
    )
    
    $
    (2,836,049
    )
 11




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##### Table of Contents



(1)
    
    The Parent Companys net loss in each period was derived from corporate headquarters
activities and consisted primarily of the following: Parent Company executive officers
compensation expenses and costs related to the Companys status as a publicly-held company, which
include, among other items, legal fees, compliance costs, non-employee directors fees,
and other reporting costs. The corporate headquarters activities do not earn revenue.
All relevant costs related to the business operations of the Companys operating segments
are either paid directly by the respective operating segments or are allocated to the
segments by the Parent Company. The allocation method is dependent on the nature of each
expense item. Allocated expenses include, among other items, accounting services,
information technology services, insurance costs, and audit and tax preparation fees. NOTE 7. EARNINGS (LOSS) PER SHARE
  12




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##### Table of Contents



NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
  October 31, 2009Gross Carrying
    
    
    AccumulatedAmount
    
    
    AmortizationIntangible assets, subject to amortization:Proprietary BPE software solutions
    
    $
    3,957,809
    
    
    $
    2,569,828Acquired computer software
    
    
    650,880
    
    
    
    470,026Real estate lease costs
    
    
    701,776
    
    
    
    347,362Customer relationships
    
    
    404,632
    
    
    
    270,880Deferred loan costs
    
    
    331,488
    
    
    
    143,819Non-compete agreements
    
    
    63,323
    
    
    
    44,854Tradename
    
    
    61,299
    
    
    
    5,789Other
    
    
    44,882
    
    
    
    40,583$
    6,216,089
    
    
    $
    3,893,141Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707Goodwill
    
    $
    6,354,002
 April 30, 2009Gross Carrying
    
    
    AccumulatedAmount
    
    
    AmortizationIntangible assets, subject to amortization:Proprietary BPE software solutions
    
    $
    3,689,695
    
    
    $
    2,340,980Acquired computer software
    
    
    466,589
    
    
    
    458,883Real estate lease costs
    
    
    699,852
    
    
    
    308,010Customer relationships
    
    
    404,632
    
    
    
    252,216Deferred loan costs
    
    
    331,488
    
    
    
    128,826Non-compete agreements
    
    
    63,323
    
    
    
    29,023Tradename
    
    
    61,299
    
    
    
    3,746Other
    
    
    45,844
    
    
    
    39,149$
    5,762,722
    
    
    $
    3,560,833Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707Goodwill
    
    $
    6,354,002
 Aggregate amortization expense for all amortizable intangible assets:For the six months ended October 31, 2009
    
    $
    334,946For the six months ended October 31, 2008
    
    $
    406,728For the quarter ended October 31, 2009
    
    $
    177,404For the quarter ended October 31, 2008
    
    $
    208,271
 Estimated future amortization expenses
for all amortized intangible assets for the fiscal years ended:Remainder of fiscal year 2010
    
    
    380,3472011
    
    
    628,4382012
    
    
    482,8632013
    
    
    327,2822014
    
    
    229,0972015
    
    
    91,380Thereafter
    
    
    183,541$
    2,322,948
 13




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NOTE 9. ACQUISITIONS
 Fiscal 2010
  Fiscal 2009
   14




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Assets andLiabilitiesAcquired 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
    
    
    895,285
    
    
    IndefiniteTotal assets acquired
    
    $
    1,587,752Current liabilities
    
    
    (483,937
    )Long term liabilities
    
    
    (100,000
    )Net assets acquired
    
    $
    1,003,815
   Six Months EndedOctober 31, 2008Revenues
    
    $
    8,012Net loss
    
    $
    (1,767
    )Net loss per share  basic
    
    $
    (0.47
    )Net loss per share  diluted
    
    $
    (0.47
    )
 15




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NOTE 10.   INCOME-PRODUCING PROPERTIES
      16




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NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
     NOTE 12. COMMITMENTS AND CONTINGENCIES
  17




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
     ®
 18




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Results of operations of the second quarter and first six (6) months of fiscal 2010, compared
to the second quarter and first six (6) months of fiscal 2009.
  19




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CHART A
 Second Quarter Ended October 31,
    
    Amount
    
    Percentage
    
    Six Months Ended October 31,
    
    Amount
    
    Percentage2009
    
    2008
    
    Change
    
    Change
    
    2009
    
    2008
    
    Change
    
    ChangeBPE (1)
    
    $
    3,923
    
    
    $
    3,434
    
    
    $
    489
    
    
    
    14
    
    
    $
    7,796
    
    
    $
    6,154
    
    
    $
    1,642
    
    
    
    27Real Estate (2)
    
    
    685
    
    
    
    784
    
    
    
    (99
    )
    
    
    (13
    )
    
    
    1,441
    
    
    
    1,589
    
    
    
    (148
    )
    
    
    (9
    )$
    4,608
    
    
    $
    4,218
    
    
    $
    390
    
    
    
    9
    
    
    $
    9,237
    
    
    $
    7,743
    
    
    $
    1,494
    
    
    
    19
 NOTES TO CHART A
 (1)
    
    The following table indicates the BPE Segment revenues by service and product type:
 
 Second Quarter Ended October 31,
    
    Amount
    
    Percentage
    
    Six Months Ended October 31,
    
    Amount
    
    Percentage2009
    
    2008
    
    Change
    
    Change
    
    2009
    
    2008
    
    Change
    
    ChangeEnergy Savings Projects
    
    $
    2,048
    
    
    $
    1,225
    
    
    $
    823
    
    
    
    67
    
    
    $
    4,061
    
    
    $
    2,172
    
    
    $
    1,889
    
    
    
    87Lighting Products
    
    
    485
    
    
    
    659
    
    
    
    (174
    )
    
    
    (26
    )
    
    
    941
    
    
    
    917
    
    
    
    24
    
    
    
    3Energy Management Services
    
    
    458
    
    
    
    641
    
    
    
    (183
    )
    
    
    (29
    )
    
    
    1,022
    
    
    
    1,241
    
    
    
    (219
    )
    
    
    (18
    )Productivity Software
    
    
    932
    
    
    
    909
    
    
    
    23
    
    
    
    3
    
    
    
    1,772
    
    
    
    1,824
    
    
    
    (52
    )
    
    
    (3
    )$
    3,923
    
    
    $
    3,434
    
    
    $
    489
    
    
    
    14
    
    
    $
    7,796
    
    
    $
    6,154
    
    
    $
    1,642
    
    
    
    27
 BPE Segment revenues increased by approximately $489,000, or 14%, in the second quarter
of fiscal 2010 compared to the same period in fiscal 2009, primarily due to:
 (a)
    
    an increase in energy savings (lighting and mechanical) project revenues
of approximately $823,000;
 partially offset by:
 (b)
    
    a decrease in lighting product revenues of approximately $174,000
generated by the Companys lighting distribution business; and(c)
    
    a decrease in energy management services revenues of approximately
$183,000.
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BPE Segment revenues increased by approximately $1,642,000, or 27%, in the first six (6)
months of fiscal 2010 compared to the same period in fiscal 2009, primarily due to:
 (a)
    
    an increase in energy savings (lighting and mechanical) project revenues
of approximately $1,889,000;
 partially offset by:
 (b)
    
    a decrease in energy management services revenues of approximately
$219,000.
 (2)
    
    Real Estate Segment revenues decreased by $99,000, or 13%, in the second quarter of fiscal
2010 compared to the same period in fiscal 2009, primarily due to a decrease in rental
revenues at the segments owned office building located in Newnan, Georgia, due to the anchor
tenants default in the fourth quarter of fiscal 2009 (see Note 10 Income-Producing
Properties to the condensed consolidated financial statements) and the expiration of other
leases at that location.Real Estate Segment revenues decreased by $148,000, or 9%, in the first six (6) months of
fiscal 2010 compared to the same period in fiscal 2009, primarily due to:
 (a)
    
    the absence in the current year of the one-time early lease termination
payment received in the first quarter of fiscal 2009 at the Companys owned shopping
center located in Jacksonville, Florida; and(b)
    
    the anchor tenants default at the Real Estate Segments owned office building in
Newnan, Georgia, as discussed above, and the expiration of other leases at that
location;partially offset by:(c)
    
    revenues generated by new tenant leases at the Companys owned shopping
center located in Jacksonville, Florida.
  IncreaseOctober 31,
    
    (Decrease)2009
    
    2008
    
    Amount
    
    PercentageBPE (1)
    
    $
    7,027,000
    
    
    $
    6,963,000
    
    
    $
    64,000
    
    
    
    1Real Estate (2)
    
    
    2,746,000
    
    
    
    3,089,000
    
    
    
    (343,000
    )
    
    
    (11
    )Less: Intersegment eliminations (3)
    
    
    (587,000
    )
    
    
    (539,000
    )
    
    
    (48,000
    )
    
    
    (9
    )Total Backlog
    
    $
    9,186,000
    
    
    $
    9,513,000
    
    
    $
    (327,000
    )
    
    
    (3
    )
 (1)
    
    BPE backlog at October 31, 2009, increased by approximately $64,000, or 1%, compared to the
year-earlier period, primarily due to:
 (a)
    
    an increase of approximately $1,182,000 in energy savings (lighting and
mechanical) projects;partially offset by:(b)
    
    a decrease of approximately $286,000 in productivity software products
and services; and
 (c)
    
    a decrease of approximately $831,000 in energy management consulting
services, primarily as a result of the successful completion of approximately
$700,000 of multi-year consulting services projects.
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The Company estimates that the BPE backlog at October 31, 2009, will be recognized prior to
October 31, 2010.BPE backlog includes some contracts that can be cancelled by customers with less than one (1)
years notice, and assumes that such cancellation provisions will not be invoked. The value
of such contracts included in the prior years backlog that were subsequently cancelled was
approximately $107,000, or 1.5%.(2)
    
    Real Estate backlog at October 31, 2009, decreased by approximately $343,000, or 11%,
compared to the year-earlier period, primarily due to a decrease in rental revenues at the
Real Estate Segments owned office building located in Newnan, Georgia, due to the anchor tenants
default (see Note 10 Income-Producing Properties to the condensed consolidated financial
statements).(3)
    
    Represents rental revenues at the Companys corporate 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 theSecond Quarter Ended
    
    Second Quarter Ended
    
    Six Months Ended
    
    Six Months EndedOctober 31,
    
    October 31,
    
    October 31,
    
    October 31,2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008BPE (1)
    
    $
    2,671
    
    
    $
    2,168
    
    
    
    68
    
    
    
    63
    
    
    $
    5,296
    
    
    $
    3,920
    
    
    
    68
    
    
    
    64Real Estate (2)
    
    
    486
    
    
    
    561
    
    
    
    71
    
    
    
    72
    
    
    
    994
    
    
    
    1,035
    
    
    
    69
    
    
    
    65$
    3,157
    
    
    $
    2,729
    
    
    
    69
    
    
    
    65
    
    
    $
    6,290
    
    
    $
    4,955
    
    
    
    68
    
    
    
    64
 NOTES TO CHART B
 (1)
    
    BPE Segment cost of revenues increased by approximately $503,000, or 23%, in the second
quarter of fiscal 2010, and increased by approximately $1,376,000, or 35%, in the first six
(6) months of fiscal 2010, compared to the same respective periods in fiscal 2009, primarily
due to corresponding increases in revenues (see Chart A).
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On a percentage-of-revenues basis, BPE Segment cost of revenues increased by approximately 5%
and 4% in the second quarter and first six (6) months of fiscal 2010, respectively, compared
to the same periods in fiscal 2009, primarily due to a change in the mix of services and
products.(2)
    
    Real Estate Segment cost of revenues decreased by approximately $75,000, or 13%, in the
second quarter of fiscal 2010 compared to the same period in fiscal 2009, primarily due to a
decrease in depreciation and amortization expense of approximately
$47,000 at the Real Estate Segments
owned office building in Newnan, Georgia, for which the Company recognized an impairment loss
in the fourth quarter of fiscal 2009, as well as due to a decrease in legal fees of
approximately $19,000.
 
   CHART C
 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 31,2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008
    
    2009
    
    2008BPE (1)
    
    $
    1,362
    
    
    $
    1,613
    
    
    
    35
    
    
    
    47
    
    
    $
    2,722
    
    
    $
    3,022
    
    
    
    35
    
    
    
    49Real Estate
    
    
    142
    
    
    
    165
    
    
    
    21
    
    
    
    21
    
    
    
    302
    
    
    
    334
    
    
    
    21
    
    
    
    21Parent Company (2)
    
    
    800
    
    
    
    918
    
    
    
    17
    
    
    
    22
    
    
    
    1,670
    
    
    
    1,745
    
    
    
    18
    
    
    
    23$
    2,304
    
    
    $
    2,696
    
    
    
    50
    
    
    
    64
    
    
    $
    4,694
    
    
    $
    5,101
    
    
    
    51
    
    
    
    66
 NOTES TO CHART C
 (1)
    
    BPE Segment SG&A expenses decreased by approximately $251,000, or 16%, in the second
quarter of fiscal 2010, and decreased by approximately $300,000, or 10%, in the first six (6)
months of fiscal 2010, compared to the same respective periods in fiscal 2009, primarily due
to a decrease in general and administrative costs and product and project development
expenses.
 23




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##### Table of Contents



On a percentage-of-revenues basis, BPE Segment SG&A expenses decreased by 12% and 14% in the
second quarter and first six (6) months of fiscal 2010, respectively, compared to the same
periods in fiscal 2009, primarily due to the increase in revenues (see Chart A) and cost
savings as described in the previous paragraph.(2)
    
    Parent Company SG&A expenses decreased by approximately $118,000, or 13%, in the second
quarter of fiscal 2010 compared to the same period in fiscal 2009, primarily due to a
decrease in legal fees of approximately $92,000 primarily related to costs incurred in the
prior year to settle an insurance claim.On a percentage-of-revenues basis, Parent Company SG&A expenses decreased by 5% in the second
quarter of fiscal 2010 compared to the same period in fiscal 2009, primarily due to the
increase in revenues (see Chart A) without a corresponding proportional increase in expenses.
    CHART D
 Second Quarter Ended
    
    (Increase)
    
    Six Months Ended
    
    (Increase)October 31,
    
    Decrease
    
    October 31,
    
    Decrease2009
    
    2008
    
    Amount
    
    2009
    
    2008
    
    AmountBPE (1)
    
    $
    (75
    )
    
    $
    (353
    )
    
    $
    278
    
    
    $
    (199
    )
    
    $
    (806
    )
    
    $
    607Real Estate (2)
    
    
    (238
    )
    
    
    (209
    )
    
    
    (29
    )
    
    
    (442
    )
    
    
    (309
    )
    
    
    (133
    )Parent Company (3)
    
    
    (799
    )
    
    
    (902
    )
    
    
    103
    
    
    
    (1,666
    )
    
    
    (1,721
    )
    
    
    55Total
    
    $
    (1,112
    )
    
    $
    (1,464
    )
    
    $
    352
    
    
    $
    (2,307
    )
    
    $
    (2,836
    )
    
    $
    529
 NOTES TO CHART D
 (1)
    
    BPE Segment loss before income taxes decreased by approximately $278,000, or 79%, in the
second quarter of fiscal 2010 compared to the same period in fiscal 2009, primarily due to a
decrease in SG&A expenses of approximately $251,000 (see Chart C).
 24




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##### Table of Contents



BPE Segment loss before income taxes decreased by approximately $607,000, or 75%, in the
first six (6) months of fiscal 2010 compared to the same period in fiscal 2009, primarily due
to an increase in revenues of approximately $1,642,000 (see Chart A), an increase in gross
margin of approximately $266,000, a decrease in SG&A expenses of approximately $300,000 (see
Chart C), and an increase in interest and other income of approximately $34,000.(2)
    
    Real Estate Segment loss before income taxes increased by approximately $133,000, or 43%,
in the first six (6) months of fiscal 2010 compared to the same period in fiscal 2009,
primarily due to a decrease in revenues of approximately $148,000 (see Chart A), a decrease
in gross margin of approximately $106,000, and a decrease in interest and other income of
approximately $75,000, partially offset by a decrease in SG&A expenses of approximately
$32,000 (see Chart C) and a decrease in interest expense of approximately $17,000.(3)
    
    Parent Company loss before income taxes decreased by approximately $103,000, or 11%, in the
second quarter of fiscal 2010 compared to the same period in fiscal 2009, primarily due to a
decrease in SG&A expenses of approximately $118,000 (see Chart C).
   LIQUIDITY AND CAPITAL RESOURCES
   25




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##### Table of Contents



(a)
    
    current year losses from continuing operations before depreciation,
amortization and income taxes of approximately $1,596,000; and(b)
    
    an increase in other current and long-term assets of approximately
$296,000;
 partially offset by:
 (c)
    
    an increase in billings in excess of costs and earnings of approximately
$934,000 and a corresponding decrease in costs and earnings in excess of billings of
approximately $375,000; partially offset by an increase in accounts receivable (net
of changes in the provision for doubtful accounts) of approximately $586,000. These
changes were primarily as a result of the timing of billings and receipt of
payments; and(d)
    
    a net increase in trade accounts payable, accrued expenses, and other
liabilities of approximately $80,000, due to the timing and submission of payments.
  (a)
    
    approximately $322,000 used for additions to intangible assets, primarily
related to enhancements to the BPE Segments proprietary building productivity
software solutions, and to purchased accounting software;(b)
    
    approximately $129,000 used for additions to income-producing properties
related to building improvements; and
 (c)
    
    approximately $60,000 used for additions to property and equipment,
primarily related to vehicle and computer hardware purchases;
 partially offset by:
 (d)
    
    approximately $57,000 provided by the release of restricted cash
previously held in escrow.
 26




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##### Table of Contents



(a)
    
    scheduled principal payments on real estate mortgage notes of
approximately $178,000;(b)
    
    payment of the regular quarterly cash dividends to shareholders of
approximately $112,000; and(c)
    
    a scheduled principal payment on other debt of approximately $100,000.
    ä
 ä
 27




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##### Table of Contents



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 ä
 28




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES
  Revenue Recognition
    29




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##### Table of Contents



Long-Lived Assets: Income-Producing Properties, Capitalized Software, and Property and
Equipment
  30




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##### Table of Contents



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




    
    A change in the estimated remaining useful life of the asset;
    
    A change in the manner in which the asset is used in the income generating
business of the Company; or
    
    A current-period operating or cash flow loss combined with a history of operating
or cash flow losses, or a projection or forecast that demonstrates continuing losses
associated with the use of a long-lived asset.
  Valuation of Goodwill and Other Indefinite-Lived Intangible Assets
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Income Taxes
        33




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



ITEM 1A. RISK FACTORS
 The Companys new Fifth Fuel Management product line is largely untested. If the Company fails to
fully develop this product line, its prospects could be adversely affected. Moreover, the
development of Fifth Fuel Management will require additional capital, which the Company may
not be able to obtain.
  
    
    The Companys ability to develop, acquire and/or license any additional
technologies and processes necessary to fully develop the Fifth Fuel Management
system;
 
    
    The Companys ability to market and sell this new offering to significant
customers, such as public and private utilities; and
 
    
    The availability of adequate capital to fund the full development and marketing
of Fifth Fuel Management.
     
 ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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Election of Directors
 Director
    
    Votes for
    
    Votes WithheldAlan R. Abrams
    
    3,347,919
    
    62,956J. Andrew Abrams
    
    3,347,919
    
    62,956Samuel E. Allen
    
    3,357,020
    
    53,855Gilbert L. Danielson
    
    3,355,129
    
    55,746Herschel Kahn
    
    3,356,749
    
    54,126Robert T. McWhinney, Jr.
    
    3,356,749
    
    54,126
 
 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 2002
 32.2

    
    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
 36




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##### Table of Contents



SERVIDYNE, INC.
(Registrant)Date: December 15, 2009
    /s/ Alan R. AbramsAlan R. AbramsChief Executive OfficerDate: December 15, 2009
    /s/ Rick A. PaternostroRick A. PaternostroChief Financial Officer 37