##### 



SECURITIES AND EXCHANGE COMMISSION      
 Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 For the quarter ended October 31, 2004 Commission file number 0-10146 ABRAMS INDUSTRIES, INC. 
 Georgia
    
    58-0522129(State or other jurisdiction of
identification No.)
    
    (I.R.S. Employer
incorporation or organization)
 1945 The Exchange, Suite 300, Atlanta, GA 30339-2029 
 Registrants telephone number, including area code: (770) 953-0304 Former name, former address, former fiscal year, if changed since last report: N/A Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes þ     No o Indicate by check mark whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act). Yes o     No þ The number of shares of $1.00 par value Common Stock of the Registrant outstanding as
of November 30, 2004, was 3,355,901.




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##### 



PART I. FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS 
 ABRAMS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED) October 31, 2004
    
    April 30, 2004ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    4,364,265
    
    
    $
    6,379,679Short-term investment
    
    
    200,000
    
    
    
    200,000Receivables (Note 4)
    
    
    2,454,189
    
    
    
    1,860,723Less: Allowance for doubtful accounts
    
    
    (69,834
    )
    
    
    (60,644
    )Assets of discontinued operations
    
    
    351,998
    
    
    
    4,233,462Costs and earnings in excess of billings
    
    
    249,174
    
    
    
    481,480Deferred income taxes
    
    
    1,256,479
    
    
    
    623,001Other
    
    
    919,056
    
    
    
    634,700Total current assets
    
    
    9,725,327
    
    
    
    14,352,401INCOME-PRODUCING PROPERTIES, net
    
    
    29,290,725
    
    
    
    29,628,177PROPERTY AND EQUIPMENT, net
    
    
    900,734
    
    
    
    605,967OTHER ASSETS:Real estate held for future development or sale
    
    
    3,970,498
    
    
    
    3,970,498Intangible assets, net (Note 8)
    
    
    3,405,021
    
    
    
    3,527,722Goodwill (Note 8)
    
    
    5,383,014
    
    
    
    4,998,242Investment held to maturity
    
    
    2,000,000
    
    
    
    2,000,000Other
    
    
    3,082,708
    
    
    
    2,793,012$
    57,758,027
    
    
    $
    61,876,019LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    1,406,396
    
    
    $
    694,533Accrued expenses
    
    
    2,090,716
    
    
    
    2,278,280Liabilities of discontinued operations
    
    
    558,487
    
    
    
    2,781,147Billings in excess of costs and earnings
    
    
    809,563
    
    
    
    98,439Current maturities of long-term debt
    
    
    1,222,855
    
    
    
    1,292,669Total current liabilities
    
    
    6,088,017
    
    
    
    7,145,068DEFERRED INCOME TAXES
    
    
    2,895,489
    
    
    
    2,677,141OTHER LIABILITIES
    
    
    1,788,868
    
    
    
    4,644,630MORTGAGE NOTES PAYABLE, less current maturities (Note 9)
    
    
    26,340,488
    
    
    
    25,509,868OTHER LONG-TERM DEBT, less current maturities
    
    
    1,880,228
    
    
    
    1,901,785Total liabilities
    
    
    38,992,730
    
    
    
    41,878,492COMMITMENTS AND CONTINGENCIES (Note 10)SHAREHOLDERS EQUITY:Common stock, $1 par value; 5,000,000 shares authorized;
3,355,901 issued and 3,207,913 outstanding
in October 2004, 3,327,628 issued and
3,180,340 outstanding in April 2004
    
    
    3,355,901
    
    
    
    3,327,628Additional paid-in capital
    
    
    3,061,080
    
    
    
    2,963,874Deferred stock compensation
    
    
    (28,435
    )
    
    
    (26,855
    )Retained earnings
    
    
    13,059,093
    
    
    
    14,412,663Treasury stock, common shares, 147,988 in
October 2004 and 147,288 in April 2004
    
    
    (682,702
    )
    
    
    (679,783
    )Total shareholders equity
    
    
    18,764,937
    
    
    
    19,997,527$
    57,758,027
    
    
    $
    61,876,019
 See accompanying notes to consolidated financial statements. 1




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##### 



ABRAMS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) SECOND QUARTER ENDED
    
    FIRST SIX MONTHS ENDEDOCTOBER 31,
    
    OCTOBER 31,2004
    
    2003
    
    2004
    
    2003REVENUES:Energy and facilities solutions
    
    $
    940,084
    
    
    $
    716,480
    
    
    $
    1,830,295
    
    
    $
    1,375,284Energy services
    
    
    1,993,530
    
    
    
    
    
    
    
    3,956,398
    
    
    
    Real estate
    
    
    4,295,227
    
    
    
    1,924,403
    
    
    
    6,323,607
    
    
    
    3,944,0197,228,841
    
    
    
    2,640,883
    
    
    
    12,110,300
    
    
    
    5,319,303Interest
    
    
    10,074
    
    
    
    3,022
    
    
    
    39,224
    
    
    
    7,613Other
    
    
    30,057
    
    
    
    47,863
    
    
    
    36,064
    
    
    
    61,8707,268,972
    
    
    
    2,691,768
    
    
    
    12,185,588
    
    
    
    5,388,786COSTS AND EXPENSES:Energy and facilities solutions
    
    
    552,869
    
    
    
    418,632
    
    
    
    1,033,758
    
    
    
    822,607Energy services
    
    
    1,378,490
    
    
    
    
    
    
    
    2,859,727
    
    
    
    Rental property operating expenses, excluding interest
    
    
    1,443,489
    
    
    
    1,261,189
    
    
    
    2,857,505
    
    
    
    2,469,8913,374,848
    
    
    
    1,679,821
    
    
    
    6,750,990
    
    
    
    3,292,498Selling, general and administrativeEnergy and facilities solutions
    
    
    460,031
    
    
    
    638,029
    
    
    
    1,098,963
    
    
    
    1,201,756Energy services
    
    
    481,658
    
    
    
    
    
    
    
    1,121,691
    
    
    
    Real estate
    
    
    586,476
    
    
    
    143,446
    
    
    
    991,906
    
    
    
    367,638Parent
    
    
    904,294
    
    
    
    525,987
    
    
    
    1,600,722
    
    
    
    1,156,1042,432,459
    
    
    
    1,307,462
    
    
    
    4,813,282
    
    
    
    2,725,498Extinguishment of debt (Note 9)
    
    
    
    
    
    
    
    
    
    
    218,071
    
    
    
    Interest costs incurred
    
    
    551,012
    
    
    
    601,964
    
    
    
    1,186,508
    
    
    
    1,214,1756,358,319
    
    
    
    3,589,247
    
    
    
    12,968,851
    
    
    
    7,232,171EARNINGS (LOSS) BEFORE INCOME TAXES FROM
CONTINUING OPERATIONS
    
    
    910,653
    
    
    
    (897,479
    )
    
    
    (783,263
    )
    
    
    (1,843,385
    )INCOME TAX EXPENSE (BENEFIT)
    
    
    360,830
    
    
    
    (301,000
    )
    
    
    (277,170
    )
    
    
    (615,000
    )EARNINGS (LOSS) FROM CONTINUING OPERATIONS
    
    
    549,823
    
    
    
    (596,479
    )
    
    
    (506,093
    )
    
    
    (1,228,385
    )DISCONTINUED OPERATIONS (Note 5):Loss from discontinued operations, adjusted
for applicable income tax benefit of $15,193, $229,000,
$40,193 and $380,000, respectively
    
    
    (28,483
    )
    
    
    (460,217
    )
    
    
    (78,021
    )
    
    
    (776,717
    )LOSS FROM DISCONTINUED OPERATIONS
    
    
    (28,483
    )
    
    
    (460,217
    )
    
    
    (78,021
    )
    
    
    (776,717
    )NET EARNINGS (LOSS)
    
    $
    521,340
    
    
    $
    (1,056,696
    )
    
    $
    (584,114
    )
    
    $
    (2,005,102
    )NET EARNINGS
(LOSS) PER SHARE  BASIC AND DILUTED (Note 7):From continuing operations
    
    $
    .17
    
    
    $
    (.20
    )
    
    $
    (.16
    )
    
    $
    (.42
    )From discontinued operations
    
    $
    (.01
    )
    
    $
    (.16
    )
    
    $
    (.02
    )
    
    $
    (.27
    )NET EARNINGS
(LOSS) PER SHARE  BASIC AND DILUTED
    
    $
    .16
    
    
    $
    (.36
    )
    
    $
    (.18
    )
    
    $
    (.69
    )DIVIDENDS PER SHARE
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    0.24
    
    
    $
    0.08WEIGHTED
AVERAGE SHARES OUTSTANDING  BASIC AND DILUTED
    
    
    3,206,710
    
    
    
    2,914,167
    
    
    
    3,202,153
    
    
    
    2,914,219
 See accompanying notes to consolidated financial statements. 2




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##### 



ABRAMS INDUSTRIES,
INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(UNAUDITED)  Common Stock
    
    Additional
    
    DeferredPaid-In
    
    Stock
    
    Retained
    
    TreasuryShares
    
    Amount
    
    Capital
    
    Compensation
    
    Earnings
    
    Stock
    
    TotalBALANCES at April 30, 2002
    
    
    3,054,439
    
    
    $
    3,054,439
    
    
    $
    2,135,005
    
    
    $
    (12,744
    )
    
    $
    18,273,853
    
    
    $
    (671,677
    )
    
    $
    22,778,876Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,073,524
    )
    
    
    
    
    
    
    (1,073,524
    )Common stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,270
    )
    
    
    (2,270
    )Common stock issued
    
    
    5,800
    
    
    
    5,800
    
    
    
    18,500
    
    
    
    (24,300
    )
    
    
    
    
    
    
    
    
    
    
    Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,446
    
    
    
    
    
    
    
    
    
    
    
    20,446Cash
dividends declared - $.16 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (465,576
    )
    
    
    
    
    
    
    (465,576
    )BALANCES at April 30, 2003
    
    
    3,060,239
    
    
    
    3,060,239
    
    
    
    2,153,505
    
    
    
    (16,598
    )
    
    
    16,734,753
    
    
    
    (673,947
    )
    
    
    21,257,952Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,850,126
    )
    
    
    
    
    
    
    (1,850,126
    )Common stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,836
    )
    
    
    (5,836
    )Common stock issued
    
    
    267,389
    
    
    
    267,389
    
    
    
    810,369
    
    
    
    (41,700
    )
    
    
    
    
    
    
    
    
    
    
    1,036,058Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,443
    
    
    
    
    
    
    
    
    
    
    
    31,443Cash
dividends declared - $.16 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (471,964
    )
    
    
    
    
    
    
    (471,964
    )BALANCES at April 30, 2004
    
    
    3,327,628
    
    
    
    3,327,628
    
    
    
    2,963,874
    
    
    
    (26,855
    )
    
    
    14,412,663
    
    
    
    (679,783
    )
    
    
    19,997,527Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (584,114
    )
    
    
    
    
    
    
    (584,114
    )Common stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,919
    )
    
    
    (2,919
    )Common stock issued
    
    
    28,273
    
    
    
    28,273
    
    
    
    97,206
    
    
    
    (30,573
    )
    
    
    
    
    
    
    
    
    
    
    94,906Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,993
    
    
    
    
    
    
    
    
    
    
    
    28,993Cash
dividends declared - $.24 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (769,456
    )
    
    
    
    
    
    
    (769,456
    )BALANCES at October 31, 2004
    
    
    3,355,901
    
    
    $
    3,355,901
    
    
    $
    3,061,080
    
    
    $
    (28,435
    )
    
    $
    13,059,093
    
    
    $
    (682,702
    )
    
    $
    18,764,937
 See accompanying notes to consolidated financial statements. 3




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##### 



ABRAMS INDUSTRIES,
INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)  SIX MONTHS ENDED OCTOBER 31,2004
    
    2003Cash flows from operating activities:Net loss
    
    $
    (584,114
    )
    
    $
    (2,005,102
    )Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:Loss from discontinued operations, net of tax
    
    
    78,021
    
    
    
    776,717Depreciation and amortization
    
    
    1,077,261
    
    
    
    780,063Deferred tax benefit
    
    
    (333,325
    )
    
    
    (1,030,922
    )Provision for (recovery of) doubtful accounts, net
    
    
    9,190
    
    
    
    (9,955
    )Extinguishment of debt
    
    
    218,071
    
    
    
    Changes in assets and liabilities, net of effect of acquisition:Receivables, net
    
    
    (593,466
    )
    
    
    402,882Costs and earnings in excess of billings
    
    
    232,306
    
    
    
    Other current assets
    
    
    (284,356
    )
    
    
    (202,382
    )Other assets
    
    
    (303,504
    )
    
    
    (121,346
    )Trade and subcontractors payable
    
    
    630,058
    
    
    
    (324,050
    )Accrued expenses
    
    
    (187,204
    )
    
    
    132,399Billings in excess of costs and earnings
    
    
    711,124
    
    
    
    Other liabilities
    
    
    180,736
    
    
    
    48,865Net cash provided by (used in) operating activities
    
    
    850,798
    
    
    
    (1,552,831
    )Cash flows from investing activities:Additions to income-producing properties, net
    
    
    (240,850
    )
    
    
    (154,296
    )Additions to property and equipment, net
    
    
    (400,581
    )
    
    
    (22,658
    )Additions to intangible assets, net
    
    
    (266,024
    )
    
    
    (57,975
    )Acquisition, net of cash acquired
    
    
    (178,315
    )
    
    
    Repayments received on notes receivable
    
    
    
    
    
    
    66,147Net cash used in investing activities
    
    
    (1,085,770
    )
    
    
    (168,782
    )Cash flows from financing activities:Debt repayments
    
    
    (567,368
    )
    
    
    (520,230
    )Mortgage restructuring
    
    
    (1,974,042
    )
    
    
    Deferred loan costs paid
    
    
    (50,000
    )
    
    
    Cash dividends
    
    
    (769,456
    )
    
    
    (233,144
    )Net cash used in financing activities
    
    
    (3,360,866
    )
    
    
    (753,374
    )Cash flows from discontinued operations:Operating activities
    
    
    1,580,424
    
    
    
    1,629,204Mortgage repayments
    
    
    
    
    
    
    (525,663
    )Net cash provided by discontinued operations
    
    
    1,580,424
    
    
    
    1,103,541Net decrease in cash and cash equivalents
    
    
    (2,015,414
    )
    
    
    (1,371,446
    )Cash and cash equivalents at beginning of period
    
    
    6,379,679
    
    
    
    5,157,639Cash and cash equivalents at end of period
    
    $
    4,364,265
    
    
    $
    3,786,193Supplemental
disclosure of non-cash financing activities:Issuance of common stock under Stock Award Plan
    
    $
    7,500
    
    
    $
    
 See accompanying notes to consolidated financial statements. 4




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##### 



ABRAMS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2004, AND APRIL 30, 2004
(UNAUDITED) NOTE 1. ORGANIZATION AND BUSINESS Abrams Industries, Inc. (together with its subsidiaries, the Company) was organized under
Delaware law in 1960. In 1984, the Company changed its state of incorporation from Delaware to
Georgia. The Company (i) provides energy engineering services and develops, implements and supports
maintenance and service request solutions for facilities; (ii) implements energy saving lighting
programs and provides other energy services, including facility-related improvements that reduce
energy and operating costs; and (iii) engages in real estate investment and development. The
Company also formerly provided commercial construction services as a general contractor. NOTE 2. UNAUDITED STATEMENTS The accompanying unaudited consolidated financial statements have been prepared by the Company
in accordance with accounting principles generally accepted in the United States of America,
pursuant to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements have been condensed
or omitted pursuant to such rules and regulations, although management believes that the
accompanying disclosures are adequate. In the
opinion of management, the accompanying financial statements contain all adjustments, consisting of
normal recurring accruals, that are necessary for a fair statement of the results for the interim
periods presented. These financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Companys Annual Report on Form 10-K for
the year ended April 30, 2004. Results of operations for interim periods are not necessarily
indicative of annual results. NOTE 3. SIGNIFICANT ACCOUNTING POLICIES As of October 31, 2004, the Company elected to early adopt EITF 03-13 issued by the Financial
Accounting Standards Board, Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in
Determining Whether to Report Discontinued Operations. During fiscal 2004, the Company made the
decision to discontinue its operations as a general contractor, and pursuant to this decision, all
general contracting operating activities have ceased. The Construction Segment has
been classified as a discontinued operation, and the historical assets, liabilities, operating
results and cash flows of the Segment have been reclassified to discontinued operations pursuant to
SFAS No. 144. As of January 31, 2003, the Company adopted the fair value disclosure provisions of Statement
of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, as
amended by SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure.
Under SFAS No. 148, the Company is required to disclose the effects on reported net earnings
(loss) with respect to stock-based compensation. For purposes of the required pro forma disclosures, the Company has computed the value of all
stock option awards granted for the second quarter and for the six months ended October 31, 2004,
and October 31, 2003, using the Black-Scholes option pricing model. 5




---



##### 



Options to purchase 722,492 shares were outstanding at October 31, 2004, of which 490,028
options were vested. The Company granted 30,000 stock options and 2,300 shares of restricted stock
in the second quarter ended October 31, 2004, and 84,900 stock options and 7,500 shares of
restricted stock in the six months ended October 31, 2004. No options or shares of restricted
stock were granted in the second quarter or six months ended October 31, 2003. The number of
options forfeited in the second quarter and six months ended October 31, 2004, was 33,500 and
60,000, respectively, and 88,000 and 211,000 for the second quarter and six months ended October
31, 2003, respectively. None of the stock options outstanding were in-the-money as of October
31, 2004. If the Company had accounted for its stock-based compensation awards in accordance with SFAS
No. 123, pro forma results would have been as follows: Quarter
    
    Six MonthsEnded October 31,
    
    Ended October 31,2004
    
    2003
    
    2004
    
    2003Net earnings (loss), as reported
    
    $
    521,340
    
    
    $
    (1,056,696
    )
    
    $
    (584,114
    )
    
    $
    (2,005,102
    )Deduct: Total stock-based compensation
expense as determined under fair value
based method for all awards, net of
related tax effects
    
    
    (17,401
    )
    
    
    (34,040
    )
    
    
    (72,988
    )
    
    
    (73,122
    )Add: Forfeitures, net of related tax effects
    
    
    18,219
    
    
    
    51,471
    
    
    
    32,429
    
    
    
    110,816Pro forma net earnings (loss)
    
    $
    522,158
    
    
    $
    (1,039,265
    )
    
    $
    (624,673
    )
    
    $
    (1,967,408
    )Net earnings (loss) per share:Basic and
diluted  as reported
    
    $
    0.16
    
    
    $
    (0.36
    )
    
    $
    (0.18
    )
    
    $
    (0.69
    )Basic and
diluted  pro forma
    
    $
    0.16
    
    
    $
    (0.36
    )
    
    $
    (0.20
    )
    
    $
    (0.68
    )
 NOTE 4. RECEIVABLES All net contract and trade receivables are expected to be collected within one year. NOTE 5. DISCONTINUED OPERATIONS During
fiscal 2004, the Company made the decision to discontinue its operations as a general
contractor, and pursuant to this decision, all general contracting operating activities have
ceased. The Construction Segment has been classified as a discontinued operation,
and the historical assets, liabilities, operating results and cash flows of the
Segment have been reclassified to discontinued operations pursuant to SFAS No. 144. The Company is in the business of creating long-term value by periodically realizing gains
through the sale of existing real estate assets, and then redeploying its capital by reinvesting
the proceeds from such sales. Effective May 1, 2002, the Company adopted SFAS No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets, which requires, among other things, that the
operating results of certain income-producing assets, sold subsequent to April 30, 2002, be
included in discontinued operations in the statements of operations for all periods presented. The
Company classifies an asset
as held for sale when the asset is under a binding sales contract with minimal contingencies,
and the prospective buyer 6




---



##### 



is materially at risk if the buyer fails to complete the transaction. However, each
potential transaction is evaluated based on its separate facts and
circumstances. Pursuant to this criteria, as of October 31,
2004, the Company had no income-producing assets that were classified
as held for disposition or sale. Although in December 2004, the
Company entered into a contract to sell its shopping center located
in Jackson, Michigan. See Note 12 to the consolidated financial
statements. On March 12, 2004, the Company sold its shopping center located in North Fort Myers, Florida,
and recognized a pretax gain of approximately $4.0 million. As a result of this transaction, the
Companys financial statements have been prepared with the results of operations and cash flows
related to the North Fort Myers shopping center shown as discontinued operations. Summarized financial information for discontinued operations for the second quarter and six
months ended October 31, 2004, and 2003, respectively is as follows: Second Quarter Ended
    
    Six Months EndedOctober 31,
    
    October 31,2004
    
    2003
    
    2004
    
    2003REVENUES:Construction
    
    $
    11
    
    
    $
    10,376,148
    
    
    $
    145,513
    
    
    $
    21,409,915Real estate
    
    
    
    
    
    
    725,683
    
    
    
    
    
    
    
    1,432,307Total revenues
    
    
    11
    
    
    
    11,101,831
    
    
    
    145,513
    
    
    
    22,842,222COSTS AND EXPENSES:Construction costs
    
    
    
    
    
    
    9,997,762
    
    
    
    114,734
    
    
    
    20,617,445Rental
property operating expenses, including depreciation and interest
    
    
    
    
    
    
    541,441
    
    
    
    
    
    
    
    1,084,003Construction selling, general & administrative
    
    
    43,687
    
    
    
    1,251,845
    
    
    
    148,993
    
    
    
    2,297,491Total costs and expenses
    
    
    43,687
    
    
    
    11,791,048
    
    
    
    263,727
    
    
    
    23,998,939Loss from discontinued operations
    
    
    (43,676
    )
    
    
    (689,217
    )
    
    
    (118,214
    )
    
    
    (1,156,717
    )Income tax
benefit
    
    
    (15,193
    )
    
    
    (229,000
    )
    
    
    (40,193
    )
    
    
    (380,000
    )Loss from discontinued operations, net of tax
    
    $
    (28,483
    )
    
    $
    (460,217
    )
    
    $
    (78,021
    )
    
    $
    (776,717
    )
 NOTE 6. OPERATING SEGMENTS The Company has three operating segments: Energy and Facilities Solutions, Energy Services,
and Real Estate. The Company also formerly provided commercial construction services as a general
contractor through its Construction Segment. The Construction Segment has been classified as a
discontinued operation, and the historical operating results of the Segment have been reclassified
to discontinued operations pursuant to SFAS No. 144. The table below exhibits selected financial
data on a segment basis. Earnings (loss) from continuing operations before income taxes are total
revenues of continuing operations less operating expenses of continuing operations, including
depreciation and interest. Parent company expenses have not been allocated to the subsidiaries. 7




---



##### 



Energy andFor the Quarter Ended
    
    Facilities
    
    EnergyOctober 31, 2004
    
    Solutions
    
    Services (1)
    
    Real Estate
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated
customers
    
    $
    940,084
    
    
    $
    1,993,530
    
    
    $
    4,295,227
    
    
    $
    
    
    
    $
    
    
    
    $
    7,228,841Interest and other income
    
    
    
    
    
    
    11,125
    
    
    
    73,542
    
    
    
    8,121
    
    
    
    (52,657
    )
    
    
    40,131Intersegment revenue
    
    
    
    
    
    
    
    
    
    
    121,864
    
    
    
    
    
    
    
    (121,864
    )
    
    
    Total revenues from
continuing operations
    
    $
    940,084
    
    
    $
    2,004,655
    
    
    $
    4,490,633
    
    
    $
    8,121
    
    
    $
    (174,521
    )
    
    $
    7,268,972Earnings (loss) before
income taxes from
continuing operations
    
    $
    (116,129
    )
    
    $
    12,329
    
    
    $
    1,929,120
    
    
    $
    (999,917
    )
    
    $
    85,250
    
    
    $
    910,653
 Energy andFor the Quarter Ended
    
    Facilities
    
    EnergyOctober 31, 2003
    
    Solutions
    
    Services (1)
    
    Real Estate
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues
from unaffiliated
customers
    
    $
    716,480
    
    
    $
    
    
    
    $
    1,924,403
    
    
    $
    
    
    
    $
    
    
    
    $
    2,640,883Interest and other income
    
    
    
    
    
    
    
    
    
    
    50,826
    
    
    
    59
    
    
    
    
    
    
    
    50,885Intersegment revenue
    
    
    
    
    
    
    
    
    
    
    114,439
    
    
    
    
    
    
    
    (114,439
    )
    
    
    Total revenues from
continuing operations
    
    $
    716,480
    
    
    $
    
    
    
    $
    2,089,668
    
    
    $
    59
    
    
    $
    (114,439
    )
    
    $
    2,691,768Earnings (loss) before
income taxes from
continuing operations
    
    $
    (340,700
    )
    
    $
    
    
    
    $
    83,184
    
    
    $
    (576,489
    )
    
    $
    (63,474
    )
    
    $
    (897,479
    )
 Energy andFor the Six Months Ended
    
    Facilities
    
    EnergyOctober 31, 2004
    
    Solutions
    
    Services (1)
    
    Real Estate
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues
from unaffiliated
customers
    
    $
    1,830,295
    
    
    $
    3,956,398
    
    
    $
    6,323,607
    
    
    $
    
    
    
    $
    
    
    
    $
    12,110,300Interest and other income
    
    
    
    
    
    
    11,125
    
    
    
    149,071
    
    
    
    15,206
    
    
    
    (100,114
    )
    
    
    75,288Intersegment revenue
    
    
    11,535
    
    
    
    
    
    
    
    246,218
    
    
    
    
    
    
    
    (257,753
    )
    
    
    Total revenues from
continuing operations
    
    $
    1,841,830
    
    
    $
    3,967,523
    
    
    $
    6,718,896
    
    
    $
    15,206
    
    
    $
    (357,867
    )
    
    $
    12,185,588Earnings (loss) before
income taxes from
continuing operations
    
    $
    (352,549
    )
    
    $
    (258,049
    )
    
    $
    1,494,841
    
    
    $
    (1,784,329
    )
    
    $
    116,823
    
    
    $
    (783,263
    )
 Energy andFor the Six Months Ended
    
    Facilities
    
    EnergyOctober 31, 2003
    
    Solutions
    
    Services (1)
    
    Real Estate
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated
customers
    
    $
    1,375,284
    
    
    $
    
    
    
    $
    3,944,019
    
    
    $
    
    
    
    $
    
    
    
    $
    5,319,303Interest and other income
    
    
    
    
    
    
    
    
    
    
    68,118
    
    
    
    1,365
    
    
    
    
    
    
    
    69,483Intersegment revenue
    
    
    
    
    
    
    
    
    
    
    227,932
    
    
    
    
    
    
    
    (227,932
    )
    
    
    Total revenues from
continuing operations
    
    $
    1,375,284
    
    
    $
    
    
    
    $
    4,240,069
    
    
    $
    1,365
    
    
    $
    (227,932
    )
    
    $
    5,388,786Earnings (loss) before
income taxes from
continuing operations
    
    $
    (649,854
    )
    
    $
    
    
    
    $
    187,971
    
    
    $
    (1,254,895
    )
    
    $
    (126,607
    )
    
    $
    (1,843,385
    )
 8




---



##### 



(1)
    
    The Energy Services Segment was formed in December 2003. NOTE 7. EARNINGS (LOSS) PER SHARE Basic
earnings (loss) per share are computed by dividing net earnings (loss) by the weighted average
shares outstanding during the reporting period. Diluted earnings per
share are computed by giving
effect to dilutive stock equivalents resulting from outstanding stock options. The dilutive effect
on the number of common shares for the second quarter and six months of fiscal 2005 was 0 and 52
shares, respectively, and was 0 shares for both the second quarter and the first six months of
fiscal 2004, respectively. Since the Company had a loss from continuing operations for the period
in which there was a dilutive effect, all stock equivalents were antidilutive during that period, and therefore, are excluded when determining the diluted weighted average shares outstanding. NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS The gross carrying amounts and accumulated amortization for all of the Companys intangible
assets as of October 31, 2004, are as follows: October 31, 2004Gross Carrying
    
    AccumulatedAmount
    
    AmortizationAmortized
intangible assets:Proprietary software solutions
    
    $
    1,463,067
    
    
    $
    438,694Applications software
    
    
    409,572
    
    
    
    330,587Real estate lease costs
    
    
    1,771,537
    
    
    
    715,629Customer relationships
    
    
    218,000
    
    
    
    36,333Deferred loan costs
    
    
    826,015
    
    
    
    513,029Other
    
    
    55,608
    
    
    
    13,213$
    4,743,799
    
    
    $
    2,047,485Unamortized intangible assets:Trademark
    
    $
    708,707
    
    
    $
    Goodwill
    
    $
    5,383,014
    
    
    $
    
 Goodwill increased $384,772 from April 30, 2004, due to: (1) $331,457 from the acquisition of
Building Performance Engineers, Inc. (see Note 11. Acquisitions); and (2) $53,315 in purchase
price adjustments from prior acquisitions. 9




---



##### 



NOTE 9. MORTGAGE NOTES PAYABLE On July 8, 2004, the Company restructured the loan on the Companys owned shopping center in
Jacksonville, Florida. The Company paid the lender $1.5 million as payment in full of the
Additional Interest Agreement, which was then terminated. The loan principal amount was reduced
by $474,042. The restructured loan principal amount was $7.8 million; the loan bears interest at
6.125% and will be amortized until it matures on July 1, 2029,
although the loan may be called by the lender for
early repayment any time after July 1, 2011, upon thirteen months notice. As a result of the loan
restructuring, the Companys annual debt service payment was
reduced by $299,448. The following table updates Footnote 7 Mortgage Notes Payable and Leases in the Companys
Annual Report on Form 10-K as of April 30, 2004, to reflect the restructuring of the loan mentioned
above. The expected future minimum principal and interest payments on mortgage notes payable on
the owned rental properties are as follows: Owned Rental PropertiesMortgage PaymentsPeriod ending April 30,
    
    Principal
    
    Interest2005 (1)
    
    $
    774,364
    
    
    $
    1,457,9612006
    
    
    1,114,040
    
    
    
    1,968,4102007
    
    
    1,171,418
    
    
    
    1,877,9272008
    
    
    6,833,107
    
    
    
    1,647,1292009
    
    
    767,885
    
    
    
    1,282,956Thereafter
    
    
    17,007,471
    
    
    
    9,667,560$
    27,668,285
    
    
    $
    17,901,943
  (1)
    
    The amounts represent payments expected for the nine-month period from August 1,
2004, to April 30, 2005. The mortgage notes payable are due at various dates between January 1, 2008, and July 1, 2029,
and bear interest at rates ranging from 6.125% to 9.25%. Management
has determined that the restructuring of the loan
mentioned above was a material
modification of the original loan, and as a result, the Company recognized an expense relating to
the extinguishment of debt in the amount of $218,071, as shown on the accompanying statement of
operations. In conjunction with the restructured loan, the Company recorded $50,000 in deferred
loan costs to be amortized over the life of the loan. NOTE 10. COMMITMENTS AND CONTINGENCIES On September 20, 2002, the Companys subsidiary, Abrams Properties, Inc. (API), filed a
claim in the Superior Court of Cobb County, Georgia, against APIs former real estate asset
manager, who subsequently made a demand against API for arbitration and filed a counterclaim. On
December 1, 2004, the arbitrator made separate awards in favor of the claim and counterclaim, and
as a result, API incurred a net liability in the amount of approximately $247,000, which is
recorded in accrued expenses in the accompanying balance sheet, and
of that amount, approximately
$150,000 was expensed in the second quarter and first six months of
fiscal 2005, as selling, general and administrative costs in the
accompanying statements of operations. The Company is subject to various other legal proceedings and claims that arise in the
ordinary course of business. While the resolution of these matters cannot be predicted with
certainty, the 10




---



##### 



Company believes that the final outcome of these matters will not have a material
adverse effect on the Companys financial position or results of operations. NOTE 11. ACQUISITIONS AND DISPOSITIONS On September 29, 2004, the Company closed on the sale of its Kmart leaseback interest in a
shopping center in Minneapolis, Minnesota, for a price of $2.25 million, resulting in a
pre-tax gain of approximately $2.2 million and net cash proceeds of approximately $2.2 million.
The Company intends to use the proceeds from this sale as a source of funds for strategic
acquisitions, for additional investments in income-producing properties and/or for other corporate
purposes. On May 26, 2004, Servidyne Systems, LLC (Servidyne), an indirect wholly-owned subsidiary of
the Company, acquired the operating business and assets of Building Performance Engineers, Inc.
(BPE) for a purchase price of $356,406, in order to expand the Companys capabilities in energy
engineering and design. The consideration consisted of 21,126 newly-issued shares of the Companys
common stock, with a fair value of $94,906 at the date of acquisition, a note payable in the amount
of $136,500, and cash of $125,000 (including direct acquisition expenses). The amount and type of
consideration was determined by negotiation among the parties. The following table summarizes the
estimated fair values of the assets acquired as of the date of acquisition: AssetsAcquired fromBPE
    
    Estimated LifeProperty, furniture and equipment, net
    
    $
    8,727
    
    
    3 yearsNon-competes
    
    
    16,222
    
    
    2 yearsGoodwill
    
    
    331,457
    
    
    IndefiniteTotal assets acquired
    
    $
    356,406
 The
goodwill has been assigned to the Energy and Facilities Solutions
Segment. The acquired assets and the results of operations have been included in the Companys
financial statements since the date of acquisition. The Company will test
goodwill for impairment related to its Energy and Facilities
Solutions Segment at April
30, 2005, pursuant to SFAS No. 142, Goodwill and Other Intangible Assets. The
following table summarizes the results of the Company on a pro forma basis
for the quarter
and six months ended October 31, 2003, as if the acquisition of
the assets and operating business of BPE in
May 2004, the acquisition of
the assets and operating business of The Wheatstone Energy Group, Inc., in
December 2003, the acquisition of the assets and operating
business of iTendant, Inc. in
April 2004, and the acquisition of the professional medical office
building in Douglasville, Georgia, in
April 2004, had all occurred
at the beginning of the second quarter and six months ended
October 31, 2003. These results do not purport to represent
what the results of
operations for the Company would have actually been or to be indicative of
the future results of
operations of the Company (in thousands, except per share amounts): 11




---



##### 



Three Months Ended
    
    Six Months EndedOctober 31,
    
    October 31,2003
    
    2003
    
    2003
    
    2003(As Reported)
    
    (Pro Forma)
    
    (As Reported)
    
    (Pro Forma)Revenues
    
    $
    2,692
    
    
    $
    4,483
    
    
    $
    5,389
    
    
    $
    8,812Net loss
    
    
    (1,057
    )
    
    
    (1,401
    )
    
    
    (2,005
    )
    
    
    (2,829
    )Net loss per share  basic
and diluted
    
    $
    (0.36
    )
    
    $
    (0.44
    )
    
    $
    (0.69
    )
    
    $
    (0.97
    )
 NOTE 12. SUBSEQUENT
EVENT The
Company has entered into a contract to sell its shopping center
located in Jackson, Michigan, at a gain. The contract specifies a
closing date in December 2004. The contract is subject to customary
conditions, and there can be no assurance that the contract will
close. 12




---



##### 



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial
statements, including the notes to those statements, which are presented elsewhere in this report.
The Company also recommends that this discussion and analysis be read in conjunction with
managements discussion and analysis and consolidated financial statements included in the
Companys Annual Report on Form 10-K for the year ended April 30, 2004. The
Companys fiscal year 2005 will end April 30, 2005. Changes in CONSOLIDATED BALANCE SHEETS between April 30, 2004, and October 31, 2004 Net accounts receivable increased by $584,276, primarily as a result of timing of the
submission and payment of invoices for work performed. Assets of discontinued operations decreased by $3,881,464, primarily as a result of the
cessation of operations of the Construction Segment, and the collection of receivables related to
construction work performed in prior periods. Current deferred income tax assets increased by $633,478, reflecting the net operating loss
carryforwards that the Company expects to utilize this fiscal year. Goodwill increased by $384,772, primarily due to the acquisition of the operating business and
assets of Building Performance Engineers, Inc. Trade
and subcontractor accounts payable increased by $711,863, primarily
due to the timing and submission of invoices for work performed. Liabilities of discontinued operations decreased by $2,223,020, primarily as a result of the
cessation of operations of the Construction Segment, and the payment of invoices to subcontractors
for construction work performed in prior periods. Other long-term liabilities decreased by $2,855,762 and mortgage notes payable increased by
$830,620, primarily due to the restructuring of the loan on the Companys owned shopping center
located in Jacksonville, Florida (See Liquidity and Capital Resources). Results of operations of the second quarter and first six months of fiscal 2005, compared to
the second quarter and first six months of fiscal 2004 REVENUES From Continuing Operations For the second quarter of fiscal 2005, consolidated revenues from continuing operations,
including interest income and other income, and net of intersegment eliminations, were $7,268,972,
compared to $2,691,768 for the second quarter of fiscal 2004, an increase of 170%. For the first
six months of fiscal 2005, consolidated revenues from continuing operations were $12,185,588,
compared to $5,388,786 for the first six months of fiscal 2004, an increase of 126%. The figures in Chart A are segment revenues from continuing operations, net of intersegment
eliminations, and do not include interest income or other income. 13




---



##### 



CHART A
REVENUES FROM CONTINUING OPERATIONS BY SEGMENT
(Dollars in Thousands) Second Quarter Ended
    
    
    
    
    
    
    
    
    
    Six Months EndedOctober 31,
    
    
    
    
    
    October 31,Amount
    
    Percent
    
    
    
    Amount
    
    Percent2004
    
    2003
    
    Increase
    
    Increase
    
    2004
    
    2003
    
    Increase
    
    IncreaseEnergy and Facilities
Solutions (1)
    
    $
    940
    
    
    $
    716
    
    
    $
    224
    
    
    
    31
    
    
    $
    1,830
    
    
    $
    1,375
    
    
    $
    455
    
    
    
    33Energy Services (2)
    
    
    1,994
    
    
    
    
    
    
    
    1,994
    
    
    
    
    
    
    
    3,956
    
    
    
    
    
    
    
    3,956
    
    
    
    Real Estate (3)
    
    
    4,295
    
    
    
    1,924
    
    
    
    2,371
    
    
    
    123
    
    
    
    6,324
    
    
    
    3,944
    
    
    
    2,380
    
    
    
    60$
    7,229
    
    
    $
    2,640
    
    
    $
    4,589
    
    
    
    174
    
    
    $
    12,110
    
    
    $
    5,319
    
    
    $
    6,791
    
    
    
    128
 NOTES TO CHART A  (1)
    
    Revenues for the Energy and Facilities Solutions Segment increased 31% for the second
quarter and 33% for the first six months of fiscal 2005 compared to the same periods in
fiscal 2004, primarily due to: (1) an increase in revenues of approximately $238,000 in the
second quarter and $370,000 for the first six months of fiscal 2005 derived from
contributions from the business and assets of iTendant, Inc. and Building Performance
Engineers, Inc., which were acquired in April 2004 and May 2004, respectively; and (2) an
increase in revenues from existing customers of approximately $85,000 for the first six months of fiscal 2005.(2)
    
    The Energy Services Segment was formed in December 2003.(3)
    
    Real Estate Segment revenues increased 123% for the second quarter of fiscal 2005 compared
to the same period in fiscal 2004, primarily due to: (a) the sale the Companys Kmart
leaseback interest in a shopping center in Minneapolis, Minnesota, for $2,250,000; (b) an
increase in rental revenues of approximately $154,000 related to the
acquisition of the
professional medical office building in Douglasville, Georgia, in April 2004; and (c)
a net increase in rental revenues of approximately $69,000 from new tenants; offset by (d) a
decrease in leaseback income of approximately $64,000 related to another Kmart leaseback that
was assigned by the Company in October 2003 to the fee owner; and (e) a decrease in leaseback
income of approximately $30,000 related to the sale in September 2004 mentioned in (a) above.The increase in Real Estate Segment revenues for the first six months of fiscal 2005 compared
to the same period in fiscal 2004 is primarily due to: (f) the sale of the Companys Kmart
leaseback mentioned in (a) above; (g) an increase in rental revenues of approximately
$308,000 related to the Companys acquisition mentioned in (b) above; (h) a net increase in
rental revenues of approximately $61,000 from new tenants; offset by (i) a decrease in
leaseback income of approximately $128,000 related to the Kmart leaseback that was assigned
by the Company in October 2003 to the fee owner; (j) a decrease in leaseback income of
approximately $30,000 related to the sale in September 2004 mentioned in (a) above; and (k) a
decrease in contingent rental revenues of approximately $51,000,
which are payable only if actual tenant sales exceed
targeted amounts. Pursuant to SFAS No. 144, Real Estate Segment
revenues for all 14




---



##### 



periods presented do not include rental revenues generated by
certain owned income-producing
properties which have been sold; such revenues have been reclassified to discontinued
operations. The following table indicates the backlog of contracts and rental income for the next twelve
months, by industry segment. October 31,2004
    
    2003Energy and Facilities Solutions (i)
    
    $
    740,000
    
    
    $
    664,000Energy Services (ii)
    
    
    4,396,000
    
    
    
    Real Estate (iii)
    
    
    7,606,000
    
    
    
    6,954,000Less: Intersegment eliminations (iv)
    
    
    (524,000
    )
    
    
    (442,000
    )Total Backlog
    
    $
    12,218,000
    
    
    $
    7,176,000
  (i)
    
    The increase in backlog is primarily the result of the acquisitions of the operating business
and assets of iTendant, Inc. and Building Performance Engineers, Inc.
in April 2004 and May 2004, respectively. Revenues from
contracts that can be cancelled with
less than one years notice are not included in backlog. As of October 31, 2004, and October
31, 2003, such contracts not included in backlog totaled $1.35 million and $1.09 million,
respectively, in potential revenue over the ensuing twelve months, assuming cancellation
provisions were not invoked.(ii)
    
    The Energy Services Segment was formed in December 2003.(iii)
    
    Included in Real Estate backlog at October 31, 2004, is approximately $493,000 related to
rental income from the Companys acquisition of the professional
medical office building in Douglasville, Georgia, in April 2004.
Revenues from any contract in which the prospective buyer is not
materially at risk are not included in backlog. As of October 31, 2004, backlog does not
include the Company's contract to sell its shopping center located in
Jackson, Michigan. See Note 12 to the consolidated financial
statements. Backlog also does not include a contract, which has been executed, to sell an outparcel at a gain in North Fort
Myers, Florida.(iv)
    
    The intersegment eliminations reported include intercompany rent of approximately $524,000
and $442,000, as of October 31, 2004, and October 31, 2003, respectively. COSTS AND EXPENSES APPLICABLE TO REVENUES
From Continuing Operations As a percentage of total segment revenues from continuing operations (See Chart A), the total
applicable costs and expenses (See Chart B) were 47% and 64% for the second quarters of fiscal 2005
and 2004, respectively, and 56% and 62% for the first six months of fiscal 2005 and 2004,
respectively. In reviewing Chart B, the reader should recognize that the volume of revenues
generally will affect the amounts and percentages. The figures in Chart B are net of intersegment eliminations. 15




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CHART B
COSTS AND EXPENSES APPLICABLE TO REVENUES
FROM CONTINUING OPERATIONS BY SEGMENT
(Dollars in Thousands) 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 31,2004
    
    2003
    
    2004
    
    2003
    
    2004
    
    2003
    
    2004
    
    2003Energy and Facilities
Solutions (1)
    
    $
    553
    
    
    $
    419
    
    
    
    59
    
    
    
    59
    
    
    $
    1,034
    
    
    $
    823
    
    
    
    57
    
    
    
    60Energy Services (2)
    
    
    1,378
    
    
    
    
    
    
    
    69
    
    
    
    
    
    
    
    2,860
    
    
    
    
    
    
    
    72
    
    
    
    Real Estate (3)
    
    
    1,444
    
    
    
    1,261
    
    
    
    34
    
    
    
    66
    
    
    
    2,857
    
    
    
    2,470
    
    
    
    45
    
    
    
    63$
    3,375
    
    
    $
    1,680
    
    
    
    47
    
    
    
    64
    
    
    $
    6,751
    
    
    $
    3,293
    
    
    
    56
    
    
    
    62
 NOTES TO CHART B  (1)
    
    The increase in the dollar amount for the second quarter and for the
first six months of fiscal 2005, compared
to the same periods in fiscal 2004, is directly related to the
increase in revenues. The decrease in the percentage
of costs and expenses applicable to revenues from continuing operations of the Energy and
Facilities Solutions Segment for the first six months of fiscal 2005, compared to the same
period in fiscal 2004, is primarily a result of the change in the mix of services and
products.(2)
    
    The Energy Services Segment was formed in December 2003.(3)
    
    The decrease in the percentage of costs and expenses applicable to the Real Estate Segments
revenues for the second quarter and for the first six months of
fiscal 2005, compared to the same periods in
fiscal 2004, is primarily due to the increased revenues that resulted from the sale of the
Companys Kmart leaseback interest in the shopping center in Minneapolis, Minnesota. The cost
of the sale of the leaseback interest was $42,115. The increase in the dollar amount for the
second quarter and for the first six months of fiscal 2005, compared to the same periods in
fiscal 2004, is primarily due to: (a) rental operating costs and expenses of approximately
$145,000 in the second quarter and $284,000 in the first six months of fiscal 2005 generated
by the Companys professional medical office building located in Douglasville, Georgia, which
was acquired in April 2004; (b) an increase in common area
maintenance and other operating expenses
of approximately $96,000 in the second quarter and $127,000 in the first six months of fiscal
2005; offset by (c) a decrease in lease costs of approximately $61,000 in the second quarter
and $119,000 in the first six months of fiscal 2005, as the result of the Companys
assignment of another Kmart leaseback interest to the fee owner in October 2003. Pursuant to SFAS No. 144,
costs and expenses for all periods presented do not include the costs and
expenses of certain owned
income-producing properties that have been sold, and do not include the costs of sale of these
properties; those costs and expenses have been reclassified to discontinued operations. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
From Continuing Operations For
the second quarters of fiscal 2005 and 2004, total selling, general and administrative expenses
(SG&A) from continuing operations, net of intersegment eliminations, were $2,432,459 and
$1,307,462, respectively. As a percentage of consolidated revenues from continuing operations,
these expenses were 34% and 50% for the second quarters of fiscal 2005 and 2004, respectively. For
the first six
months of fiscal 2005 and 2004, total SG&A expenses from continuing operations, net of intersegment
eliminations, 16




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were $4,813,282 and $2,725,498, respectively. As a percentage of consolidated
revenues from continuing operations, these expenses were 40% and 51% for the first six months of
fiscal 2005 and 2004, respectively. In reviewing Chart C, the reader should recognize that the
level of revenues generally will affect the amounts and percentages. The percentages in Chart C
are based upon expenses as they relate to segment revenues from continuing operations (Chart A),
except that parent and total expenses relate to consolidated revenues from continuing operations. CHART C
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
FROM CONTINUING OPERATIONS BY SEGMENT
(Dollars in Thousands) 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 31,2004
    
    2003
    
    2004
    
    2003
    
    2004
    
    2003
    
    2004
    
    2003Energy and Facilities
Solutions (1)
    
    $
    460
    
    
    $
    638
    
    
    
    49
    
    
    
    89
    
    
    $
    1,099
    
    
    $
    1,202
    
    
    
    60
    
    
    
    87Energy Services (2)
    
    
    482
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    1,122
    
    
    
    
    
    
    
    28
    
    
    
    Real Estate (3)
    
    
    586
    
    
    
    143
    
    
    
    14
    
    
    
    7
    
    
    
    992
    
    
    
    368
    
    
    
    16
    
    
    
    9Parent (4)
    
    
    904
    
    
    
    526
    
    
    
    13
    
    
    
    20
    
    
    
    1,601
    
    
    
    1,156
    
    
    
    13
    
    
    
    22$
    2,432
    
    
    $
    1,307
    
    
    
    34
    
    
    
    50
    
    
    $
    4,814
    
    
    $
    2,726
    
    
    
    40
    
    
    
    51
 NOTES TO CHART C  (1)
    
    SG&A expenses for the Energy and Facilities Solutions Segment were lower on a dollar basis
and percentage basis primarily due to: (1) a decrease in consulting fees of approximately
$20,000 and $97,000 in the second quarter and first six months of fiscal 2005, respectively;
(2) a decrease in rent expense of approximately $39,000 and $53,000 in the second quarter and
first six months of fiscal 2005, respectively; and (3) a decrease in personnel related costs
of approximately $57,000 in the second quarter of fiscal 2005.(2)
    
    The Energy Services Segment was formed in December 2003.(3)
    
    On a dollar and percentage basis, SG&A expenses for the Real
Estate Segment were higher for the second quarter and first six months of
fiscal 2005, compared
to the same periods in 2004, primarily due to: (a) an expense of
$150,011 for the December 2004 arbitration
settlement, which is discussed elsewhere; (b) an increase in personnel and personnel costs of
approximately $84,000 in the second quarter and $178,000 in the first six months of fiscal
2005; and (c) an increase in legal, professional, and consulting fees of approximately
$160,000 in the second quarter and $210,000 for the first six months of fiscal 2005. SG&A
expenses for all periods presented do not include SG&A expenses
of certain owned income-producing
properties that have been sold. These expenses have been reclassified as discontinued
operations.(4)
    
    On a percentage basis SG&A expenses were lower due to the increase in revenues. On a dollar
basis, SG&A expenses were higher for the second quarter and first six
months of fiscal 2005,
compared to the same periods in 2004, primarily due to an increase in personnel costs of
approximately $300,000 in the second quarter and $336,000 for the first six months of fiscal
2005. 17




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Liquidity and capital resources Between April 30, 2004, and October 31, 2004, working capital decreased by $3,570,023,
primarily due to: (1) cash of approximately $2.0 million utilized
in the restructuring of the loan
related to the Companys owned shopping center in Jacksonville,
Florida; (2) cash payments of the regular
and special dividends totaling approximately $770,000; and
(3) cash of approximately
$340,000 for leasehold improvements related to both the Energy and Facilities Solutions Segment and
Energy Services Segment relocating their main offices to the corporate headquarters building.
Operating activities provided cash of $850,798, primarily due to: (1) the sale of the Companys
Kmart leaseback interest in a shopping center in Minneapolis, Minnesota; (2) an increase in trade
and subcontractor accounts and billings in excess of costs and earnings from continuing operations;
offset by (3) a net increase in accounts receivable from continuing operations. Investing
activities used cash of $1,085,770, primarily due to: (1) additions to property and equipment,
related to the leasehold improvements to the corporate headquarters building mentioned above; (2)
additions to income-producing properties and intangible assets; and (3) the acquisition of the
operating business and assets of Building Performance Engineers, Inc. Financing activities used
cash of $3,360,866, primarily due to: (1) the payment related to the restructuring
of the loan on the Companys owned shopping center in Jacksonville, Florida; (2) scheduled
principal payments of mortgage notes and other debt obligations; and
(3) the payments of
the regular and special dividends. Discontinued operations provided cash of $1,580,424
primarily due to a liquidation of accounts receivable offset by
payoffs of trade and subcontractor
accounts in the Construction Segment. Except for certain real estate construction loans and occasional short-term operating loans,
the Company generally has been able to finance its working capital needs through funds generated
internally. If adequate funds are not generated through normal operations or
from the sales of real
estate, the Company has an available bank line of credit. In conjunction with the Companys
discontinuation of its role as a multi-purpose general contractor, the line of credit, which
previously provided for $7 million in commitments, was renewed in October 2004 in the amount of $4
million, of which $150,000 is restricted as it secures a letter of credit. The line of credit
bears interest at the prime rate or LIBOR plus 2%, and has a commitment fee of 0.375% on any unused
portion. The bank line of credit expires on January 31, 2005.
There can be no assurance that the bank line of credit will be renewed. In October 2004, the Company sold its Kmart leaseback interest in a shopping center in
Minneapolis, Minnesota, for a price of $2.25 million. The transaction
generated cash proceeds of approximately $2.2 million. The Company
intends to use the proceeds from this transaction as a
source of funds for strategic acquisitions, for additional investments in income-producing
properties and/or for other corporate purposes. The
Company has entered into a contract to sell its shopping center
located in Jackson, Michigan, at a gain. The contract specifies a
closing date in December 2004. The contract is subject to customary
conditions, and there can be no assurance that the contract will
close. The Company anticipates that its equity, line of credit, potential proceeds from sales of real
estate, potential cash flow provided by financing or refinancing of debt obligations, and cash flow
generated from operations will, for the foreseeable future, provide adequate liquidity and
financial flexibility to meet the Companys needs to fund working capital, capital expenditures,
and investment activities. Cautionary statement regarding forward-looking statements Certain statements contained or incorporated by reference in this Quarterly Report on Form
10-Q, including without limitation, statements containing the words believes, anticipates,
estimates, expects, plans, and words of similar import, are forward-looking statements within
the meaning of the 18




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federal securities laws. Such forward-looking statements involve known and
unknown risks, uncertainties and other matters which may cause the actual results, performance, or
achievements of the Company to be materially different from any future results, performance, or
uncertainties expressed or implied by such forward-looking statements. Factors relating to general global, national, regional, and local economic conditions,
including international political stability, national defense, homeland security, employment
levels, wage and salary levels, consumer confidence, availability of credit, taxation policies,
interest rates, capital spending, deflation, and inflation could negatively impact the Company and
its customers, suppliers, and sources of capital. Any significant negative impact from these
factors could result in material adverse effects on the Companys results of operations and
financial condition. The Company is at risk for many other matters beyond its control, including, but not limited
to: the possible impact, if any, on the ultimate disposition of legal proceedings in which the
Company is involved, including the matters described in previous SEC reports; the potential loss of
significant customers; co-tenancy provisions in anchor tenant leases; the Companys ability to sell
or refinance its real estate; the possibility of not achieving projected backlog revenues or not
realizing earnings from such revenues; the cost and availability of insurance; the ability of the
Company to attract and retain key personnel; weather conditions; changes in laws and regulations,
including changes in accounting standards, generally accepted accounting principles, and regulatory
requirements of the SEC and NASDAQ; overall vacancy rates in markets where the Company leases
retail and office space; overall capital spending trends in the economy; the timing and amount of
earnings recognition related to the possible sale of real estate properties held for sale; delays
in or cancellations of customers orders; the level and volatility of interest rates; the level and
volatility of energy prices; the failure of a subcontractor to perform; and the deterioration in
the financial stability of an anchor tenant, significant subcontractor or other significant
customer. Critical Accounting Policies A critical accounting policy is one that is both important to the portrayal of a Companys
financial position and results of operations, and requires the Company to make estimates and
assumptions in certain circumstances that affect the amounts reported in the accompanying
consolidated financial statements and related notes. In preparing these financial statements, the
Company has made its best estimates and used its best judgments regarding certain amounts included
in the financial statements, giving due consideration to materiality. The application of these
accounting policies involves the exercise of judgment and the use of assumptions regarding future
uncertainties, and as a result, actual results could differ from those estimates. Summaries of the
Companys accounting policies that management believes are the most critical are as follows: Revenue recognition  Energy
services revenues are reported on the
percentage-of-completion method, using costs incurred to-date in relation to estimated total costs
of the contracts to measure the stage of completion. Original contract prices are adjusted for
cumulative effects of changes in estimated total contract costs and revenues (change orders) in the
amounts that are reasonably estimated based on the Companys historical experience. The change
orders are recorded in the period 19




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##### 



in which the facts requiring such revisions become known, and are
accounted for using the percentage-of-completion method. At the time it is determined that a
contract is expected to result in a loss, the entire estimated loss is recorded. The Company leases space in its income-producing properties to tenants, and recognizes minimum
base rentals as revenue on a straight-line basis over the lease terms. Tenants may also be required
to pay additional rental amounts as partial reimbursements of property operating and common area
expenses which are recognized when earned. In addition, certain tenants are required to pay
incremental rental amounts, which are contingent on their store sales. These percentage rents are
recognized only as earned. Revenues from the sale of real estate are recognized when all of the following has occurred:
(a) the property is transferred to the buyer; (b) the buyers initial and continuing investment is
adequate to demonstrate a commitment to pay for the property; and (c) the buyer has assumed all
future ownership risks of the property. Costs of sales related to real estate are based on the
specific property sold. When a portion or unit of a development property is sold, a proportionate share of the total cost of the
development is charged to cost of sales. Income-producing properties and property and equipment  Property
and equipment are stated at cost, and are depreciated for financial reporting purposes
using the straight-line method over the estimated useful lives of the assets. Significant
additions that extend asset lives are capitalized. Normal maintenance and repair costs are
expensed as incurred. Interest
and other carrying costs related to real estate assets under
development are
capitalized. Costs of development and construction of real estate assets are also capitalized.
Capitalization of interest and other carrying costs is discontinued when a development project is
substantially completed or if active development ceases. Impairment of long-lived assets, including goodwill, and assets to be disposed of  Income taxes  20




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##### 



Discontinued operations Accounting for the Impairment or Disposal of Long- Lived Asset,
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK On July 8, 2004, the Company restructured the loan on the Companys owned shopping center in
Jacksonville, Florida. The Company paid the lender $1.5 million as payment in full of the
Additional Interest Agreement, which was then terminated. The restructured loan has a principal
amount of $7.8 million, bears interest at 6.125%, and matures on
July 1, 2029, but may be called
by the lender after July 1, 2011, with thirteen months notice. Refer to the Companys Quarterly Report on Form
10Q as of July 31, 2004, which updates the information related to the Companys market risk
sensitive debt instruments as of April 30, 2004. In conjunction with the Companys discontinuation of its role as a multi-purpose general
contractor, the line of credit, which previously provided for $7 million in commitments, was
renewed in October 2004 in the amount of $4 million, of which $150,000 is restricted as it secures
a letter of credit. The line of credit bears interest at the prime rate or LIBOR plus 2%, and has
a commitment fee of 0.375% on any unused portion. The bank line of credit expires on January 31,
2005. There can be no assurance that the bank line of credit will be
renewed. There have been no other material changes since April 30, 2004, except as discussed above.
Refer to the Companys Annual Report on Form 10-K for the fiscal year ended April 30, 2004, for
detailed disclosures about quantitative and qualitative disclosures about market risk. 21




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##### 



ITEM 4. CONTROLS AND PROCEDURES Management has evaluated the Companys disclosure controls and procedures as defined by Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the
period covered by this report. This evaluation was carried out with the participation of the
Companys Chief Executive Officer and Chief Financial Officer. No system of controls, no matter
how well designed and operated, can provide absolute assurance that the objectives of the system of
controls are met, and no evaluation of controls can provide absolute assurance that the system of
controls has operated effectively in all cases. The Companys disclosure controls and procedures,
however, are designed to provide reasonable assurance that the objectives of disclosure controls
and procedures are met. Based on managements evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures were effective, as of the end of
the period covered by this report, to provide reasonable assurance that the objectives of
disclosure controls and procedures were met. There was no change in the Companys internal controls over financial reporting that occurred
during the period covered by this quarterly report on Form 10-Q that materially affected, or is
reasonably likely to materially affect, the Companys internal control over financial reporting. The Company continues to integrate and standardize internal accounting systems across
subsidiaries in an effort to prepare for Sarbanes-Oxley Section 404, which becomes effective for
the Company April 30, 2006. 22




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##### 



PART II. OTHER INFORMATION 
 ITEM 3. LEGAL PROCEEDINGS On September 20, 2002, the Companys subsidiary, Abrams Properties, Inc. (API), filed a
claim in the Superior Court of Cobb County, Georgia, against APIs former real estate asset
manager, who subsequently made a demand against API for arbitration and filed a counterclaim. On
December 1, 2004, the arbitrator made separate awards in favor of the claim and counterclaim, and
as a result, API incurred a net liability in the amount of approximately $247,000, which is
recorded in accrued expenses in the accompanying balance sheet, and of that
amount, approximately
$150,000 was expensed in the second quarter and first six months of
fiscal 2005, as selling, general and administrative expenses in the
accompanying statements of operations. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Companys Annual Meeting of Shareholders, held on August 25, 2004, the shareholders
voted upon and approved the nominees for the Board of Directors. The voting was as follows: Directors
    
    Votes For
    
    Votes WithheldAlan R. Abrams
    
    
    2,887,899
    
    
    
    76,285David L. Abrams
    
    
    2,887,899
    
    
    
    76,285J. Andrew Abrams
    
    
    2,887,899
    
    
    
    76,285Samuel E. Allen
    
    
    2,911,079
    
    
    
    53,105Gilbert L. Danielson
    
    
    2,910,979
    
    
    
    53,205Melinda S. Garrett
    
    
    2,887,799
    
    
    
    76,385Robert T. McWhinney, Jr.
    
    
    2,910,979
    
    
    
    53,205Felker W. Ward, Jr.
    
    
    2,887,899
    
    
    
    76,285
 
 ITEM 6. EXHIBITS 31(a)
    
    Certification of Chief Executive Officer, pursuant Rules 13a-14(a)/15d-14(a)31(b)
    
    Certification of Chief Financial Officer, pursuant Rules 13a-14(a)/15d-14(a)32(a)
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes Oxley Act 200232(b)
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes Oxley Act 2002
 23




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##### 



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ABRAMS INDUSTRIES, INC.(Registrant)Date: December 15, 2004
    
    /s/ Alan R. AbramsAlan R. Abrams
Chief Executive OfficerDate: December 15, 2004
    
    /s/ Mark J. ThomasMark J. Thomas
Chief Financial Officer
 24