##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION  FORM 10-K ANNUAL REPORT
 Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 For the fiscal year ended April 30, 2004 Commission file number 0-10146 ABRAMS INDUSTRIES, INC.  Georgia
(State or other jurisdiction of
incorporation or organization)
    
    58-0522129
(I.R.S. Employer
Identification No.)
 1945 The Exchange, Suite 300, Atlanta, GA
(Address of principal executive offices)
    
    30339-2029

(Zip Code)
 Registrants telephone number, including area code: (770) 953-0304 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Title of each class:None
    
    Name of each exchange on
which registered:None
 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, $1.00 Par Value Per Share
(Title of Class) 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 ü    NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the
best of the Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ü Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act 12b-2). YES     NO ü The aggregate market value of Common Stock held by nonaffiliates of the
registrant as of October 31, 2003 was $5,575,967. See Part III for a definition
of nonaffiliates. The number of shares of Common Stock of the registrant
outstanding as of April 30, 2004, was 3,180,340. DOCUMENTS INCORPORATED BY REFERENCE The information called for by Part III (Items 10, 11, 13 and 14) is
incorporated herein by reference to the registrants definitive proxy statement
for the 2004 Annual Meeting of Shareholders which is to be filed pursuant to
Regulation 14A.




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TABLE OF CONTENTS  PART IITEM 1 BUSINESSITEM 2 PROPERTIESITEM 3 LEGAL PROCEEDINGSITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5 MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERSITEM 6 SELECTED FINANCIAL DATAITEM 7 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMCONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF OPERATIONSCONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITYCONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONSOLIDATED FINANCIAL STATEMENTSITEM 9 CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A CONTROLS AND PROCEDURESPART IIIITEMS 10-14PART IVITEM 16 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-KSIGNATURESEX-21 LIST OF THE COMPANIES SUBSIDIARIESEX-23.(A) CONSENT OF DELOITTE AND TOUCHE LLPEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEOEX-32.2 SECTION 906 CERTIFICATION OF THE CFO    Table of Contents  
 PART I 
 ITEM 1 BUSINESS Abrams Industries, Inc. (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. As used herein, the term Company refers to
Abrams Industries, Inc. and its subsidiaries and
predecessors, unless the context indicates
otherwise, and the term Parent or Parent Company
refers solely to Abrams Industries, Inc. The Company historically provided commercial
construction and general contracting services.
Construction revenues in fiscal 2004 continued to
decrease significantly from prior years due to the
Companys decision to reduce revenue volume rather
than contract at prices that offered the Company
unacceptable levels of potential profit relative to
the inherent risks. During fiscal 2004, the Company
continued to see an ongoing lack of attractive
project opportunities, in a competitive marketplace,
that would meet its risk/reward requirements.
Accordingly, the Company has elected to discontinue
its operations as a multi-purpose general
contractor. The Companys strategy is to continue to add
new service offerings that are expected to generate
lower gross revenues, but at higher profit margins,
than general contracting. The Company is pursuing
this strategy partially through selective
acquisitions. In December 2003, the Company acquired
the business and assets of The Wheatstone Energy
Group, Inc., a provider of energy efficient lighting
system installation services and other
energy-related services. In April 2004, the Company
expanded its capabilities through the purchase of
the business and assets of iTendant, Inc.,
(iTendant). The iTendant software platform is a
comprehensive Web and wireless maintenance and
service request solution that connects property owners,
managers, engineers, building occupants and service
providers in order to improve communication and
increase visibility into building operations. In May
2004, the Company further expanded its energy
engineering and design capabilities through the
purchase of the business and assets of Building
Performance Engineers, Inc. (BPE). BPE
specializes in the optimization of building
performance through energy analyses, simulation and
modeling, on-site investigative engineering,
building and engineering systems design, and
qualification of buildings for LEED (Leadership in
Energy and Environmental Design) certification.
These transactions have expanded the Companys
portfolio of offerings designed to improve facility
operating performance and lower building operating
costs, while improving the level of service and
comfort for building occupants. The Company was organized under Delaware law in
1960 to succeed to the business of A. R. Abrams,
Inc., which was founded in 1925 by Alfred R. Abrams
as a sole proprietorship. In 1984, the Company
changed its state of incorporation from Delaware to
Georgia. Further information on the businesses of the
Companys operating segments is discussed below.
Financial information for the segments is set forth
in Note 13 to the consolidated financial statements
of the Company. ENERGY AND FACILITIES SOLUTIONS SEGMENT In May 2001, the Company acquired the business and assets of Servidyne
Systems, Inc., establishing the Companys Energy and Facilities Solutions
Segment. Servidyne Systems, LLC (Servidyne), a
wholly-owned subsidiary of the Company, provides energy engineering services
and maintenance and service request solutions that assist its customers in
optimizing facility performance and reducing the costs of owning and operating
buildings, by lowering energy consumption, increasing work efficiency, and
improving occupant satisfaction. Servidyne acquired the business and assets of
iTendant and BPE in April 2004 and May 2004, respectively. These acquisitions
have expanded Servidynes capabilities in engineering and in developing,
implementing, and supporting maintenance and service request solutions.
Servidynes engineering services include
energy audits; engineering design services; energy monitoring and analyses;
LEED certification; building commissioning; energy modeling; mechanical,
electrical and plumbing surveys; and Energy Star® qualification. Servidyne
also assists customers in managing facility equipment maintenance for the
highest efficiency and useful equipment life, and in managing service requests
to improve building occupant satisfaction while maximizing labor productivity,
by implementing and supporting its proprietary computerized maintenance and
service request systems, and by providing consulting services. Servidynes customers are building owners and
operators and energy services companies in the
commercial office, hospitality, retail,
institutional, government, healthcare, residential
and industrial sectors. The primary focus for the
business is the continental United States, although
the Company does business internationally as well.
Contracts for energy engineering services and
maintenance and service request solutions are
primarily obtained through negotiations, but may
also be obtained through competitive bids on larger
proposals. ENERGY SERVICES SEGMENT In December 2003, the Company acquired the business
and assets of The Wheatstone Energy Group, Inc.,
establishing the Companys Energy Services Segment.
The Wheatstone Energy Group, LLC (Wheatstone), a
wholly owned subsidiary of the Company, provides
turnkey implementation of energy saving lighting programs and
other energy-related services that reduce energy
consumption and operating costs to commercial,
industrial and institutional facilities. As a
vendor-neutral company, Wheatstone takes an unbiased
approach to evaluating and implementing energy
saving systems and developing recommendations of
cost-saving strategies. Wheatstone focuses its marketing and sales
activities on national accounts, energy services
companies, facility owners and owners agents
throughout the United States. Services are mainly
obtained through negotiations, but may also be
obtained through competitive bids for large
contracts. REAL ESTATE SEGMENT Abrams Properties, Inc. (Abrams Properties), a
wholly owned subsidiary of the Company, has engaged
in real estate activities since 1960. These
activities primarily involve the acquisition,
development, redevelopment, leasing, asset
management, ownership, and sale of shopping centers
and office buildings in the Southeast and Midwest.
Abrams Properties uses third-party property managers
and leasing agents for all of its multi-tenant
properties. Abrams Properties currently owns five shopping
centers, three that it developed and two that it
acquired. The centers are held as long-term
investments or will be marketed for sale, as
management determines is appropriate. See ITEM 2.
PROPERTIES  Owned Shopping Centers. n
 ABRAMS 2004 4




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In March 2004, Abrams Properties sold its
Company-developed shopping center located in North
Fort Myers, Florida. See Note 3 to the consolidated
financial statements of the Company. Abrams
Properties is also currently lessee and sublessor of
six Company-developed shopping centers that were
sold by and leased back to Abrams Properties, and
then subleased to Kmart Corporation. See ITEM 2.
PROPERTIES  Leaseback Shopping Centers. During
fiscal 2004, Abrams Properties terminated its
leasehold interest in one such property. The Company
owns three office properties, including a
professional medical office building located in
Douglasville, Georgia, which the Company acquired in
April 2004. See ITEM 2. PROPERTIES  Office
Buildings. The Company also owns, through its
wholly owned subsidiary, AFC Real Estate, Inc., a
vacant former manufacturing facility located in
Atlanta, Georgia. CONSTRUCTION SEGMENT The Company has elected to discontinue the
operations of Abrams Construction, Inc. (Abrams
Construction), a wholly owned subsidiary, as a
multi-purpose general contractor, as is discussed
elsewhere. Abrams Constructions activities included
building, expanding, remodeling and renovating
retail stores, shopping centers, banks, office
buildings, and distribution and manufacturing
facilities. Although Abrams Construction
historically worked throughout much of the United
States, it concentrated its activities principally
in the southern and mid-western states. EMPLOYEES AND EMPLOYEE RELATIONS At April 30, 2004, the Company employed 83 salaried
employees and 8 hourly employees. The Company
believes that its relations with its employees are
good. SEASONAL NATURE OF BUSINESS The businesses of the Energy and Facilities
Solutions, Energy Services, and Real Estate Segments
generally are not seasonal. However, certain retail
customers of the Energy Services Segment choose to
delay lighting installation during the winter
holiday season. The business of the Construction
Segment historically was somewhat seasonal, affected
by weather conditions and its retail customers
store opening schedules. COMPETITION The industries in which the Company operates are
highly competitive. The Energy and Facilities
Solutions Segments competition is widespread and
ranges from multi-national firms to local small
businesses. Competition in the Energy Services
Segment consists primarily of local and regional
companies. The Real Estate Segment also operates in
a competitive environment, with numerous parties
competing for available financing, properties,
tenants and investors. In the Construction Segment,
the Company competed with a large number of national
and local construction companies, many of which had
proprietary customer relationships or greater
financial resources than the Company. PRINCIPAL CUSTOMERS In fiscal 2004, the Company derived approximately
38% ($14,706,748) of its consolidated revenues from
continuing operations from direct transactions with
The Home Depot, Inc. These revenues resulted
principally from construction activities, which are
being discontinued as
is discussed elsewhere. See Note 13 to the
consolidated financial statements of the Company. No
other single customer accounted for 10% or more of
the Companys consolidated revenues during the year. BACKLOG The following table indicates the backlog of
contracts and expected rentals for the next twelve
months by industry segment: April 30,
    
    April 30,2004
    
    2003Energy and Facilities
Solutions(1)
    
    $
    875,000
    
    
    $
    768,000Energy Services (2)
    
    
    2,234,000
    
    
    
    Real Estate (3)
    
    
    7,407,000
    
    
    
    9,302,000Construction(4)
    
    
    124,000
    
    
    
    15,262,000Less: Intersegment
eliminations
    
    
    (517,000
    )
    
    
    (442,000
    )Total Backlog
    
    $
    10,123,000
    
    
    $
    24,890,000
  (1)
    
    Contracts that can be cancelled with less than one years notice are not
included in backlog. As of April 30, 2004, and April 30, 2003, such contracts
not included in backlog totaled $1.43 million and $1.14 million, respectively,
in potential revenue over the ensuing twelve months, assuming cancellation
provisions are not invoked.(2)
    
    The Energy Services Segment was formed in
December 2003. See Note 14 to the consolidated financial statements.(3)
    
    Included in Real Estate income at April 30, 2003, is approximately
$255,000 related to a Kmart leaseback that was
assigned to the fee owner by the Company in
October 2003, and approximately $2.14 million
related to the Companys shopping center located
in North Fort Myers, Florida, which was sold at a
gain in March 2004. See Note 3 to the consolidated
financial statements. The intersegment
eliminations reported include only intercompany rent of
approximately $517,000 and $442,000, in the fiscal
years ended April 30, 2004, and April 30, 2003,
respectively.(4)
    
    The difference between 2004 and 2003 is primarily due to the
Companys election to discontinue its operations as a multi-purpose
general contractor. The Company estimates that most of the backlog at
April 30, 2004, will be completed prior to April 30,
2005. No assurance can be given as to future backlog
levels or whether the Company will realize earnings
from revenues resulting from the backlog at April
30, 2004. REGULATION The Company is subject to the authority of various
federal, state and local regulatory agencies
including, among others, the Occupational Health and
Safety Administration and the Environmental
Protection Agency. The Company is also subject to
local zoning regulations and building codes.
Management believes that it is in substantial
compliance with all such governmental regulations,
except for the Construction Segment to the extent
set forth under ITEM 3. LEGAL PROCEEDINGS
regarding past conduct that may have contravened
antitrust laws. Management believes that compliance
with federal, state and local provisions, which have
been enacted or adopted for regulating the discharge
of materials into the environment, does not have a
material adverse effect upon the capital expenditures,
earnings, or competitive position of the Company. n  ABRAMS 2004 5




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EXECUTIVE OFFICERS OF THE REGISTRANT The Executive Officers of the Company as of June 30, 2004, were as follows: Alan R. Abrams(49)
    
    Officer since 1988
 Co-Chairman of the Board since 1998 and a Director of the Company since 1992,
he has been Chief Executive Officer since 1999 and President since 2000. From
1998 to 1999, he was President and Chief Operating Officer. He also served as
President and Chief Executive Officer of Servidyne Systems, LLC from May 2002
to July 2003. Mark J. Thomas(48)
    
    Officer since 2003
 Chief Financial Officer since 2003. Prior to joining the Company, he was
employed by Paragon Trade Brands (a manufacturing company), serving as Vice
President of Finance & Corporate Controller from October 2000 to October 2002.
He also was employed by Mead Corporation (a paper packaging company), serving
as Director of Finance from April 1997 to October 2000. Melinda S. Garrett(48)
    
    Officer since 1990
 A Director of the Company since 1999, she has been Secretary since 2000 and
Vice President since May 2004, and was Chief Financial Officer from 1997 to
2003. She also has served Abrams Properties, Inc. as Chief Executive Officer
since 2003, President since 2001, Chief Financial Officer from 1998 to 2000,
and Vice President from 1993 to 2000. J. Andrew Abrams(44)
    
    Officer since 1988
 Co-Chairman of the Board since 1998 and a Director of the Company since 1992,
he has been Vice President-Business Development since 2000. He served as
President and Chief Operating Officer from 1999 to 2000. From 1997 to 1999, he
was Executive Vice President. Claire J. Wiggill(38)
    
    Officer since 2003
 Vice President since 2001, she also has served as Interim President of
Servidyne Systems, LLC since July 2003. Prior to joining the Company, she was
employed by iXL, Inc. (an interactive design company), serving as Senior
Manager from May 2000 to September 2001. She also was employed by Wachovia
Securities (an investment bank) from 1992 to May 2000, most recently serving as
Senior Vice-President. Executive Officers of the Company are elected by the Board of Directors of the
Company or the Board of the respective subsidiary to serve at the pleasure of
the Board. Alan R. Abrams and J. Andrew Abrams are brothers, and are the sons
of Edward M. Abrams, the Companys Chairman Emeritus, who retired as a member
of the Board of Directors in 2003. David L. Abrams, a member of the Board of
Directors, is first cousin to Alan R. Abrams and J. Andrew Abrams, and nephew
to Edward M. Abrams. There are no other family relationships between any
Executive Officers or Directors of the Company. n ABRAMS 2004 6




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ITEM 2 PROPERTIES The Company, through its Real Estate Segment, owns its corporate headquarters
building, which contains approximately 65,880 square feet of office space. The
building is located in the North x Northwest Office Park, 1945 The Exchange, in
suburban Atlanta, Georgia. The Parent Company and all the operating segments
have their main offices located in this building. In addition to the 25,928
square feet of offices leased by Abrams entities, another 33,500 square feet is
leased to unrelated tenants, and 6,452 square feet is currently available for
lease. The Company also owns a vacant former metal manufacturing facility located in
Atlanta, Georgia. In December 2003, as part of the Energy Services Segments acquisition of
the business and assets of The Wheatstone Energy Group, Inc., the Company
assumed two leases for a total of 10,000 square feet of office and warehouse
space located at 1231 Collier Road in Atlanta, Georgia, which leases expired in
June 2004. The Energy Services Segment relocated its main offices to the
corporate headquarters building in June 2004 upon expiration of one of the
leases, but retained the other 5,000 square feet of space under an amended
lease for use as a warehouse, extending the lease to March 2007. The Company owns, or has an interest in, the following properties: OWNED SHOPPING CENTERS As of April 30, 2004, the Companys Real Estate Segment owned three shopping
centers that it developed and two that it acquired. The following chart
provides relevant information relating to the owned shopping centers: Percentage
    
    
    
    
    
    
    
    
    
    Rental
    
    
    
    
    
    
    
    
    
    Principalof Square
    
    Calendar
    
    
    
    
    
    Income
    
    
    
    
    
    
    
    
    
    Amount ofLeasable
    
    Footage
    
    Year(s)
    
    
    
    
    
    Per Leased
    
    
    
    
    
    Debt
    
    DebtSquare
    
    Leased as of
    
    Placed in
    
    Rental
    
    Square
    
    
    
    
    
    Service
    
    OutstandingFeet in
    
    April 30,
    
    Service by
    
    Income
    
    Foot
    
    EBITDA
    
    Payments
    
    as of April 30,Location
    
    Acres
    
    Building(s)
    
    2004
    
    Company
    
    2004
    
    2004 (1)
    
    2004 (2)
    
    2004 (3)
    
    2004 (4)1100 W. Argyle Street
    
    
    10.5
    
    
    
    110,070
    
    
    
    97
    %
    
    
    1972, 1996
    
    
    $
    565,753
    
    
    $
    5.30
    
    
    $
    395,059
    
    
    $
    396,933
    
    
    $
    2,584,318Jackson, MI(5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20041075 W. Jackson Street
    
    
    7.3
    
    
    
    92,120
    
    
    
    100
    
    
    
    1980, 1992
    
    
    
    515,259
    
    
    
    5.59
    
    
    
    439,723
    
    
    
    405,249
    
    
    
    2,340,652Morton, IL (6)2500 Airport Thruway
    
    
    8.0
    
    
    
    87,543
    
    
    
    100
    
    
    
    1980, 1988
    
    
    
    441,286
    
    
    
    5.04
    
    
    
    396,296
    
    
    
    391,356
    
    
    
    1,385,623Columbus, GA (6) (7)5700 Harrison Avenue
    
    
    10.8
    
    
    
    86,396
    
    
    
    97
    
    
    
    1998
    
    
    
    628,749
    
    
    
    7.50
    
    
    
    382,069
    
    
    
    
    
    
    
    Cincinnati, OH (8)8106 Blanding Blvd.
    
    
    18.8
    
    
    
    174,220
    
    
    
    90
    
    
    
    1999
    
    
    
    1,594,759
    
    
    
    10.17
    
    
    
    1,138,911
    
    
    
    887,187
    
    
    
    8,315,124Jacksonville, FL (9)
  (1)
    
    Calculated by dividing annual rental income by leased square feet in
building, as of April 30, 2004.(2)
    
    EBITDA is defined as earnings before the following: interest, income taxes,
depreciation, and amortization of loan and lease costs. See table following in
this ITEM 2. PROPERTIES - EBITDA, which reconciles earnings before income
taxes from continuing
operations to EBITDA.(3)
    
    Includes principal and interest.(4)
    
    The Companys liability for repayment is limited by exculpatory provisions
to its interest in the respective mortgaged properties.(5)
    
    2004 rental income and EBITDA for the shopping center in Jackson, Michigan,
included partial year revenues of $4,667 from a portion of the 21,000 square
feet of newly created shop space that first opened in April 2004. This center
is currently being marketed for sale.(6)
    
    Land is leased, not owned.(7)
    
    The center in Columbus, Georgia, is owned by Abrams-Columbus Limited
Partnership, in which Abrams Properties, Inc. serves as general partner and
owns an 80% interest.(8)
    
    Originally developed by third parties in 1982. This center is currently
in the process of being marketed for sale.(9)
    
    Originally developed by third parties in 1985. The Companys former shopping center located in North Fort Myers, Florida,
was sold at a gain in March 2004. This property is not included above. n ABRAMS 2004 7




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The two centers located in Morton, Illinois, and Columbus, Georgia, are
leased exclusively to Kmart. The Kmart lease in Columbus, Georgia, expires in
2008 and has ten five-year renewal options, and the Kmart lease in Morton,
Illinois, expires in 2016 and has eight five-year renewal options. Anchor
tenant lease terms for the other owned centers are shown in the following
table: Lease
    
    OptionsAnchor
    
    Square
    
    Expiration
    
    toLocation
    
    Tenant (1)
    
    Footage
    
    Date
    
    RenewJackson, MI
    
    Big Lots
    
    
    26,022
    
    
    
    2007
    
    
    2 for 5 years eachKroger
    
    
    63,024
    
    
    
    2021
    
    
    6 for 5 years eachCincinnati, OH
    
    Kroger (2)
    
    
    42,456
    
    
    
    2005
    
    
    3 for 5 years eachHarbor Freight Tools
    
    
    13,500
    
    
    
    2010
    
    
    2 for 5 years eachJacksonville, FL
    
    Publix (3)
    
    
    85,560
    
    
    
    2010
    
    
    6 for 5 years eachOffice Depot
    
    
    22,692
    
    
    
    2008
    
    
    2 for 5 years each
  (1)
    
    A tenant is considered to be an Anchor Tenant if it leases 12,000 square
feet or more for an initial lease term in excess of five years.(2)
    
    Tenant has
subleased the premises to Mattress Distribution Center, Inc., but remains
liable for the lease until the expiration date.(3)
    
    Tenant has subleased the
premises to Floor and Decor Outlets, but remains liable for the lease until the
expiration date. With the exception of the Kmart lease in Columbus, Georgia, and the Harbor
Freight Tools lease in Cincinnati, Ohio, all of the anchor tenant and many of
the small shop leases provide for contingent rentals if sales generated by the
respective tenant in the leased space exceed specified amounts. In some cases,
contingent rentals are subject to certain rights of offset for the amounts that
the ad valorem taxes exceed specified amounts. In fiscal 2004, the Company
recognized $56,656 in contingent rent, net of offsets, from owned shopping
centers, which amounts are included in the aggregate rentals set forth above. Typically, tenants are responsible for their pro rata share of ad valorem
taxes, insurance and common area maintenance costs (subject to the rights of
offset against contingent rents mentioned above). Kmart has total maintenance
responsibility for the centers in Morton, Illinois, and Columbus, Georgia. OWNED OFFICE BUILDINGS The Company, through its Real Estate Segment, owns three office properties: the
corporate headquarters building located at 1945 The Exchange, in suburban
Atlanta, Georgia; an office park in suburban Atlanta, Georgia; and a
professional medical office building in Douglasville, Georgia. The following
chart provides pertinent information relating to the office buildings: Percentage
    
    
    
    
    
    
    
    
    
    Rental
    
    
    
    
    
    
    
    
    
    Principalof Square
    
    Calendar
    
    
    
    
    
    Income
    
    
    
    
    
    
    
    
    
    Amount ofLeasable
    
    Footage
    
    Year(s)
    
    
    
    
    
    Per Leased
    
    
    
    
    
    Debt
    
    DebtSquare
    
    Leased as of
    
    Placed in
    
    Rental
    
    Square
    
    
    
    
    
    Service
    
    OutstandingFeet in
    
    April 30,
    
    Service by
    
    Income
    
    Foot
    
    EBITDA
    
    Payments
    
    as of April 30,Location
    
    Acres
    
    Building(s)
    
    2004
    
    Company
    
    2004
    
    2004 (1)
    
    2004 (2)
    
    2004 (3)
    
    20041945 The Exchange
    
    
    3.12
    
    
    
    65,880
    
    
    
    85
    %
    
    
    1997
    
    
    $
    1,107,319
    
    
    $
    19.77
    
    
    $
    654,872
    
    
    $
    443,690
    
    
    $
    4,785,829Atlanta, GA (4)1501-1523
    
    
    8.82
    
    
    
    121,476
    
    
    
    62
    
    
    
    1997
    
    
    
    1,621,901
    
    
    
    21.53
    
    
    
    955,505
    
    
    
    536,382
    
    
    
    6,059,460Johnson Ferry Rd.
Marietta, GA (5)4586 Timber Ridge Dr.
    
    
    2.534
    
    
    
    28,404
    
    
    
    81
    
    

    
    2004
    
    
    
    57,393
    
    
    
    N/A
    
    
    
    43,558
    
    
    
    17,526
    
    
    
    2,941,469Douglasville, GA (6)
  (1)
    
    Calculated by dividing annual rental income by leased square feet in
building, as of April 30, 2004.(2)
    
    EBITDA is defined as earnings before the following: interest, income taxes,
depreciation, and amortization of loan and lease costs. See table following in
this ITEM 2. PROPERTIES - EBITDA, which reconciles earnings before income
taxes from continuing operations to EBITDA(3)
    
    Includes principal and interest.(4)
    
    The Companys corporate headquarters building of which the Company leases
approximately 25,928 square feet. Rental income and EBITDA include $497,235 of
intercompany rent at a competitive rate paid by the Parent Company, Real Estate
Segment and the Construction Segment. The building was originally developed by
third parties in 1974 and acquired and re-developed by the Company 1997.(5)
    
    The Company, through a subsidiary of its Real Estate Segment, is the lessee
of 10,661 square feet of space under a master lease agreement to satisfy a
condition required by the lender, of which 5,445 square feet has been leased to
third parties as of April 30, 2004. Rental income and EBITDA include $138,681
of intercompany rent at a competitive rate paid by the Real Estate Segment. The
buildings were originally developed by third parties in 1980 and 1985.(6)
    
    The Company acquired this professional medical office building on April 5,
2004. The rental income is only for the short period following
the acquisition through April 30, 2004. n ABRAMS 2004 8




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##### Table of Contents



EBITDA Earnings before interest, taxes, depreciation and amortization of loan and
lease costs (EBITDA) is not a measure of performance defined in accordance
with accounting principles generally accepted in the United States of America
(GAAP). Management, however, believes that EBITDA is useful to investors and
management in evaluating performance, because it is a commonly used financial
analysis tool for measuring and comparing individual properties in the area of
operating performance. EBITDA should not be considered as a substitute for
earnings (loss) before income taxes as an indicator of the Companys
performance, or as an alternative to net cash provided by operating activities
as a measure of liquidity, and may not be comparable to similarly titled
measures used by other companies. The following table reconciles earnings
before income taxes from continuing operations under GAAP to EBITDA presented
in the Owned Shopping Center and Owned Office Buildings tables above: OWNED SHOPPING CENTERS
    
    OWNED OFFICE BUILDINGSJackson
    
    Morton
    
    Columbus
    
    Cincinnati
    
    Jacksonville
    
    Atlanta
    
    Marietta
    
    DouglasvilleMichigan
    
    Illinois
    
    Georgia
    
    Ohio
    
    Florida
    
    Georgia
    
    Georgia
    
    GeorgiaEarnings before
income taxes from
continuing operations
    
    $
    90,245
    
    
    $
    83,027
    
    
    $
    153,029
    
    
    $
    324,392
    
    
    $
    40,371
    
    
    $
    76,839
    
    
    $
    147,077
    
    
    $
    1,086Add:Depreciation
    
    
    52,648
    
    
    
    125,151
    
    
    
    104,299
    
    
    
    50,789
    
    
    
    147,141
    
    
    
    167,055
    
    
    
    286,289
    
    
    
    17,168Amortization
    
    
    22,452
    
    
    
    7,236
    
    
    
    29,037
    
    
    
    6,888
    
    
    
    22,546
    
    
    
    37,546
    
    
    
    62,321
    
    
    
    7,778Interest Expense
    
    
    229,714
    
    
    
    224,309
    
    
    
    109,931
    
    
    
    
    
    
    
    928,853
    
    
    
    373,432
    
    
    
    459,818
    
    
    
    17,526EBITDA
    
    $
    395,059
    
    
    $
    439,723
    
    
    $
    396,296
    
    
    $
    382,069
    
    
    $
    1,138,911
    
    
    $
    654,872
    
    
    $
    955,505
    
    
    $
    43,558
 LEASEBACK SHOPPING CENTERS The Company, through its Real Estate Segment, has a leasehold interest in six
shopping centers that it developed, sold, and leased back under leases expiring
from years 2006 to 2014. Each of the centers is entirely subleased by the
Company to Kmart Corporation. The Kmart subleases provide for contingent
rentals if sales exceed specified amounts, and contain nine five-year renewal
options, except Jacksonville, Florida, which has eight five-year renewal
options. The Companys leases with the fee owners contain renewal options
coextensive with Kmarts renewal options. Kmart is responsible for insurance and ad valorem taxes, but has the right
to offset against contingent rentals for any such taxes paid in excess of
specified amounts. In fiscal 2004, the Company recognized $83,773 in contingent
rentals, net of offsets, from leaseback shopping centers, which amounts are
included in the aggregate annual rentals set forth below. The Company has
responsibility for structural and roof maintenance of the buildings. The
Company also has responsibility for underground utilities, parking lots and
driveways, except for routine upkeep, which is the responsibility of the
subtenant, Kmart. The Companys leases contain exculpatory provisions, which
limit the Companys liability for payments to its interests in the respective
leases. The following chart provides certain information relating to the
leaseback shopping centers: Square
    
    Calendar Years
    
    Rental
    
    Rental Income
    
    RentFeet in
    
    Placed in Service
    
    Income
    
    Per Square Foot
    
    ExpenseLocation
    
    Acres
    
    Building(s)
    
    by Company
    
    2004
    
    2004 (1)
    
    2004Bayonet Point, FL
    
    
    10.8
    
    
    
    109,340
    
    
    1976, 1994
    
    $
    368,565
    
    
    $
    3.37
    
    
    $
    269,564Orange Park, FL
    
    
    9.4
    
    
    
    84,180
    
    
    1976
    
    
    264,000
    
    
    
    3.14
    
    
    
    226,796Davenport, IA
    
    
    10.0
    
    
    
    84,180
    
    
    1977
    
    
    255,308
    
    
    
    3.03
    
    
    
    204,645Minneapolis, MN
    
    
    7.1
    
    
    
    84,180
    
    
    1978
    
    
    368,127
    
    
    
    4.37
    
    
    
    230,570Jacksonville, FL
    
    
    11.6
    
    
    
    97,032
    
    
    1979
    
    
    303,419
    
    
    
    3.13
    
    
    
    258,858Richfield, MN
    
    
    5.7
    
    
    
    74,217
    
    
    1979
    
    
    300,274
    
    
    
    4.05
    
    
    
    241,904
  (1)
    
    Calculated by dividing rental income by square feet in building. REAL ESTATE LEASED OR HELD FOR FUTURE DEVELOPMENT OR SALE The Company, through its Real Estate Segment, owns or has an interest in the
following real estate held for future development or sale: Calendar YearDevelopment
    
    IntendedLocation
    
    Acres
    
    Completed
    
    Use (1)Dixie Highway
    
    
    4.7
    
    
    
    1979
    
    
    Food store and/or retail shopsLouisville, KYMundy Mill Road
    
    
    5.3
    
    
    
    1987
    
    
    Commercial development pad or up toOakwood, GA
    
    
    
    
    
    
    
    
    
    four outlotsNorth Cleveland Avenue
    
    
    11.6
    
    
    
    1993
    
    
    Five outlots, anchor pads and retail shopsNorth Fort Myers, FLMetropolitan Parkway
    
    
    3.6
    
    
    
    (3
    )
    
    Warehouse, industrial or commercialAtlanta, GA (2)
    
    
    
    
    
    
    
    
    
    building
 n ABRAMS 2004 9




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##### Table of Contents



(1)
    
    Outlot as used herein refers to a small parcel of land platted separately
from the shopping center parcel, which is generally sold for, leased for, or
developed as a fast-food restaurant, bank, small retail shops, or other
similar use.(2)
    
    Land and buildings, originally utilized by the Company as its metal
manufacturing facility; owned by AFC Real Estate, Inc., formerly known as
Abrams Fixture Corporation.(3)
    
    The Company assembled the property in a series of transactions. The
buildings were developed by third parties prior to 1960. There is no debt on any of the above properties. The Company will either
develop the properties described above or will continue to hold them for sale
or lease to others. For further information on the Companys properties, see Notes 3, 5, 7 and
8 to the consolidated financial statements, and SCHEDULE III - REAL ESTATE AND
ACCUMULATED DEPRECIATION. 
 ITEM 3 LEGAL PROCEEDINGS The Company announced on July 7, 2003, that an internal investigation, which
was conducted by the Companys legal counsel at the
request of senior management, revealed information suggesting that activities
in violation of Federal antitrust laws may have taken place in a certain job
bidding process for one customer of the Companys subsidiary, Abrams
Construction, Inc. The results of this investigation were reported to the Board
of Directors of the Company on June 9, 2003. The Company also voluntarily
communicated the results of its investigation to the United States Department
of Justice (DOJ). The DOJ, on July 1, 2003, issued a conditional letter of
amnesty to the Company and its subsidiaries for their cooperation in
recognizing and then immediately reporting the irregularities. The Company
believes, based on its internal investigation, that the specific improprieties
were confined to a bidding process for The Home Depot, Inc. (Home Depot), its
largest customer in fiscal 2004. At this time, the Company has no reason to
believe that any other customers were affected by such inappropriate activity.
The Company also communicated its concerns about the job bidding process to
Home Depot. The Company has conducted extensive additional training of all
employees and has implemented additional procedures to prevent a recurrence of
this behavior. Currently, the Company believes that it has satisfied all of the DOJs
requests for document production in conjunction with its on-going cooperation
with the DOJ investigation, and has otherwise complied with the conditions of
the letter of amnesty. The remaining estimated costs are not expected to be
material. Such cost estimates, however, are particularly difficult to make with
any precision. To date, no private party has made, or threatened to make, any
claim in connection with this matter. It is possible, however, that claims
could be made as a result of this situation, and such claims could be material. 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. The case is currently being
arbitrated. The dispute arises out of the former asset managements provision
of real estate services to API. The Company believes APIs claims against its
former asset manager and its defenses to the asset managers claims are
meritorious, and intends to continue to vigorously pursue its claims and assert
its defenses. The Company believes the ultimate disposition of the above noted legal
proceedings and claims or potential claims will not have a material adverse
effect on the financial condition, cash flows, or results of operations of the
Company; however, the Company cannot predict the ultimate disposition of the
above noted claims, potential claims and proceedings, and therefore, the
Company cannot be certain that the above noted legal proceedings and claims or
potential claims will not have a material adverse effect on the financial
condition, cash flows, or results of operations of the Company. 
 ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 
 PART II 
 ITEM 5 MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS. CLOSING MARKET PRICES
    
    DIVIDENDS PAIDPER SHAREFISCAL 2004
    
    FISCAL 2003
    
    FISCAL 2004
    
    FISCAL 2003HIGH
    
    LOW
    
    HIGH
    
    LOWTRADE
    
    TRADE
    
    TRADE
    
    TRADEFirst Quarter
    
    $
    4.05
    
    
    $
    3.60
    
    
    $
    5.31
    
    
    $
    4.60
    
    
    $
    0.04
    
    
    $
    0.04Second Quarter
    
    
    4.75
    
    
    
    3.57
    
    
    
    4.84
    
    
    
    3.37
    
    
    
    0.04
    
    
    
    0.04Third Quarter
    
    
    4.49
    
    
    
    3.76
    
    
    
    4.58
    
    
    
    3.47
    
    
    
    0.04
    
    
    
    0.04Fourth Quarter
    
    
    4.55
    
    
    
    3.80
    
    
    
    4.10
    
    
    
    3.75
    
    
    
    0.04
    
    
    
    0.04
 The common stock of Abrams Industries, Inc. is traded on the NASDAQ National
Market System (Symbol: ABRI). The approximate number of holders of common stock
was 485 (including shareholders of record and shares held in street name) at
June 30, 2004. n ABRAMS 2004 10




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##### Table of Contents



The information contained under the heading Equity Compensation Plan in
the Companys definitive proxy materials for its 2004 Annual Meeting of
Shareholders will be filed with the Securities and Exchange Commission under a
separate filing, and is hereby incorporated by reference. The Company did not repurchase any of the shares of its common stock during
its fiscal year ended April 30, 2004. On April 16, 2004, an indirect wholly-owned subsidiary of the Company
acquired the business and substantially all of the assets and assumed certain
liabilities of iTendant, Inc. The consideration included 123,547 newly-issued
shares of the Companys common stock, par value $1.00 per share. See Note 14,
Acquisitions, to the consolidated financial statements for more
information. The issuance of the stock is exempt from registration as private
placements pursuant to the Securities Act of 1933 and the rules promulgated
there under. 
 ITEM 6 SELECTED FINANCIAL DATA The following table sets forth selected financial data for the Company and
should be read in conjunction with the consolidated financial statements and
the notes thereto: Year Ended April 30,
    
    2004
    
    2003
    
    2002
    
    2001
    
    2000Net Earnings (Loss) (1)
    
    $
    (1,850,126
    )
    
    $
    (1,073,524
    )
    
    $
    811,774
    
    
    $
    676,172
    
    
    $
    (456,605
    )Net Earnings
(Loss) -
Continuing Operations (2)
    
    $
    (4,706,963
    )
    
    $
    (2,092,653
    )
    
    $
    (1,268,685
    )
    
    $
    211,906
    
    
    $
    2,069,756Net Earnings (Loss) -
Discontinued Operations
    
    $
    2,856,837
    
    
    $
    1,019,129
    
    
    $
    2,080,459
    
    
    $
    464,266
    
    
    $
    (2,526,361
    )Net Earnings (Loss)
Per Share (1)
    
    $
    (.62
    )
    
    $
    (.37
    )
    
    $
    .28
    
    
    $
    .23
    
    
    $
    (.16
    )Net Earnings (Loss) Per Share -
Continuing Operations (2)
    
    $
    (1.58
    )
    
    $
    (.72
    )
    
    $
    (.43
    )
    
    $
    .07
    
    
    $
    .70Net Earnings (Loss) Per Share -
Discontinued Operations
    
    $
    .96
    
    
    $
    .35
    
    
    $
    .71
    
    
    $
    .16
    
    
    $
    (.86
    )Consolidated Revenues -
Continuing Operations (2)
    
    $
    39,082,120
    
    
    $
    71,278,440
    
    
    $
    112,761,140
    
    
    $
    149,818,972
    
    
    $
    169,878,196Shares Outstanding at Year-End
    
    
    3,180,340
    
    
    
    2,914,351
    
    
    
    2,909,079
    
    
    
    2,943,303
    
    
    
    2,936,356Cash Dividends Paid Per Share
    
    $
    .16
    
    
    $
    .16
    
    
    $
    .16
    
    
    $
    .16
    
    
    $
    .16Shareholders Equity
    
    $
    19,997,527
    
    
    $
    21,257,952
    
    
    $
    22,778,876
    
    
    $
    22,505,543
    
    
    $
    22,346,138Shareholders Equity Per Share
    
    $
    6.29
    
    
    $
    7.29
    
    
    $
    7.83
    
    
    $
    7.65
    
    
    $
    7.61Working Capital
    
    $
    7,207,333
    
    
    $
    7,638,091
    
    
    $
    9,875,096
    
    
    $
    11,442,348
    
    
    $
    10,820,179Depreciation
and Amortization
- Continuing Operations (3)
    
    $
    1,685,809
    
    
    $
    1,638,322
    
    
    $
    2,280,284
    
    
    $
    1,934,870
    
    
    $
    1,986,362Total Assets
    
    $
    61,876,019
    
    
    $
    73,797,098
    
    
    $
    91,784,369
    
    
    $
    97,619,685
    
    
    $
    102,845,867Income-Producing Properties and

Property and Equipment, net
(4)
    
    $
    30,234,144
    
    
    $
    43,650,850
    
    
    $
    45,188,295
    
    
    $
    28,134,764
    
    
    $
    61,456,455Long-Term Debt
    
    $
    27,411,653
    
    
    $
    33,523,314
    
    
    $
    35,163,492
    
    
    $
    50,180,619
    
    
    $
    51,929,637Interest Rate Sensitive Debt (5)
    
    $
    1,000,000
    
    
    $
    11,351,353
    
    
    $
    16,916,652
    
    
    $
    17,941,479
    
    
    $
    18,302,855Return on
Average
Shareholders Equity (1)
    
    
    (9.0)%
    
    
    
    (4.9)%
    
    
    
    3.6%
    
    
    
    3.0%
    
    
    
    (2.0)%
  (1)
    
    Includes continuing operations, discontinued operations and extraordinary
items, if any.(2)
    
    Although, as of April 30, 2004, the operations of the Construction Segment
were substantially discontinued, the results, nevertheless, are included in
continuing operations pursuant to SFAS No. 144.(3)
    
    Depreciation and amortization for sold properties have been reclassified as
discontinued operations and are not included above.(4)
    
    Does not include property held for sale or real estate held for future development or sale.(5)
    
    Includes short-term and long-term debt. n ABRAMS 2004 11




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##### Table of Contents



ITEM 7 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION As discussed in ITEM 1. BUSINESS above, the amount and percentage of the
Companys revenues derived from its Construction Segment, historically the
Companys largest business, have declined dramatically in recent years, and the
Company has elected to discontinue its activities as a multi-purpose general
contractor, as is discussed elsewhere. The Company has added and is continuing
to add new service offerings that are expected to generate lower gross
revenues, but at higher profit margins, than did the Construction Segment. The
Company is pursuing this strategy partially through selective acquisitions.

This trend and strategy is expected to result in higher proportions of the
Companys revenues in the future being attributable to service and product
sales. Because service and product sales are generally recognized as the
service is performed and when the product is shipped or delivered, the Company
expects backlog to become less significant to the Company in the future. In RESULTS OF OPERATIONS below, changes in revenues, costs and expenses,
and selling, general and administrative expenses from period to period are
analyzed on a segment and consolidated basis. For net earnings and similar
profit information on a consolidated basis, please see ITEM 6. SELECTED
FINANCIAL DATA above or the Companys consolidated financial statements. RESULTS OF OPERATIONS REVENUES Revenues from continuing operations for 2004 were $39,082,120, compared to
$71,278,440 and $112,761,140, for 2003 and 2002, respectively. This represents
decreases in revenues of 45% in 2004 and 37% in 2003. Revenues included
interest income of $12,581, $50,127, and $158,207, for 2004, 2003, and 2002,
respectively, and other income of $122,423, $65,172, and $90,418, for 2004,
2003, and 2002, respectively. The figures in Chart A below, however, do not
include interest income, other income or intersegment revenues. When more than
one segment is involved, revenues are reported by the segment that sells the
product or service to an unaffiliated purchaser. REVENUES FROM CONTINUING OPERATIONS SUMMARY BY SEGMENT CHART A
(Dollars in Thousands) Years Ended
    
    Increase
    
    Years Ended
    
    IncreaseApril 30,
    
    (Decrease)
    
    April 30,
    
    (Decrease)2004
    
    2003
    
    Amount
    
    Percent
    
    2003
    
    2002
    
    Amount
    
    PercentEnergy and Facilities
Solutions
    
    $
    2,962
    
    
    $
    2,900
    
    
    $
    62
    
    
    
    2
    
    
    $
    2,900
    
    
    $
    2,995
    
    
    $
    (95
    )
    
    
    (3
    )Energy Services (1)
    
    
    2,602
    
    
    
    
    
    
    
    2,602
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real Estate (2)
    
    
    7,882
    
    
    
    8,735
    
    
    
    (853
    )
    
    
    (10
    )
    
    
    8,735
    
    
    
    8,830
    
    
    
    (95
    )
    
    
    (1
    )Construction (3)
    
    
    25,500
    
    
    
    59,528
    
    
    
    (34,028
    )
    
    
    (57
    )
    
    
    59,528
    
    
    
    100,688
    
    
    
    (41,160
    )
    
    
    (41
    )Total
    
    $
    38,946
    
    
    $
    71,163
    
    
    $
    (32,217
    )
    
    
    (45
    )
    
    $
    71,163
    
    
    $
    112,513
    
    
    $
    (41,350
    )
    
    
    (37
    )
 NOTES:  (1)
    
    The Energy Services Segment was formed in December 2003. See Note 14 to the
consolidated financial statements.(2)
    
    Represents rental revenues and revenues from sales of land, if any. Rental
revenues for all periods presented do not include rental revenues generated by
income-producing properties which were subsequently sold. Such revenues have
been reclassified to discontinued operations.
Rental revenues from continuing operations for 2004 were $7,882,431, compared
to $7,875,530 in 2003, and $8,364,764 in 2002. Rental revenues exclude
intercompany rents of $457,414 in 2004, $449,549 in 2003, and $461,818 in
2002. There were no sales of land in 2004. Revenues from sales of land were
$859,561 in 2003, resulting from the sale of an outparcel in Jackson,
Michigan, and an outparcel and an anchor store pad in Davenport, Iowa.
Revenues from sales of land were $465,000 in 2002, resulting from the sale of
an outlot in North Fort Myers, Florida.(3)
    
    Revenues decreased for fiscal 2004 from the comparable period in fiscal
2003, and for fiscal 2003 from the comparable period in fiscal 2002, primarily
due to the Companys election to reduce revenue volume rather than contract at
prices that offered the Company unacceptable levels of potential profitability
relative to the inherent risks. As discussed previously, the Company has
elected to discontinue its role as a multi-purpose general contractor.
Although, as of April 30, 2004, the operations of the Construction Segment were
substantially discontinued, the results, nevertheless, are included in
continuing operations pursuant to SFAS No. 144. n ABRAMS 2004 12




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##### Table of Contents



COST AND EXPENSES: APPLICABLE TO REVENUES As a percentage of total segment revenues (See Chart A), the applicable total
segment costs and expenses (See Chart B)of $33,443,421 for 2004, $64,260,964
for 2003, and $104,889,811 for 2002, were 86%, 90%, and 93%, respectively. COSTS AND EXPENSES:APPLICABLE TO REVENUES FROM CONTINUING OPERATIONS SUMMARY BY SEGMENT CHART B
(Dollars in Thousands) Percent ofSegment RevenuesYears Ended
    
    For Years EndedApril 30,
    
    April 30,2004
    
    2003
    
    2002
    
    2004
    
    2003
    
    2002Energy and Facilities Solutions (1)
    
    $
    1,630
    
    
    $
    1,573
    
    
    $
    1,760
    
    
    
    55
    
    
    
    54
    
    
    
    59Energy Services (2)
    
    
    1,822
    
    
    
    
    
    
    
    
    
    
    
    70
    
    
    
    
    
    
    
    Real Estate (3)
    
    
    4,899
    
    
    
    5,409
    
    
    
    5,980
    
    
    
    62
    
    
    
    62
    
    
    
    68Construction (4)
    
    
    25,093
    
    
    
    57,279
    
    
    
    97,150
    
    
    
    98
    
    
    
    96
    
    
    
    96Total
    
    $
    33,444
    
    
    $
    64,261
    
    
    $
    104,890
    
    
    
    86
    
    
    
    90
    
    
    
    93
 NOTES:  (1)
    
    The change in the dollar amount and percentage of costs and expenses
applicable to revenues from continuing operations for fiscal 2003, compared to
the same period in 2002, was primarily the result of a change in the mix of
services.(2)
    
    The Energy Services Segment was formed in December 2003. See Note 14 to the
consolidated financial statements.(3)
    
    Costs and expenses for all periods presented do not include the costs and
expenses of income-producing properties that were subsequently sold, and do not
include the costs of sale of these properties. These costs and expenses have
been reclassified to discontinued operations. Costs and expenses from
continuing operations for 2004 were $4,898,526, compared to $5,113,013 in 2003,
and $5,574,522 in 2002. There were no sales of land in 2004. Costs of the sale
of real estate were $295,813 in 2003, resulting from the sale of an outparcel
in Jackson, Michigan, and an outparcel and an anchor store pad in Davenport,
Iowa, and $405,647 in 2002, resulting from the sale of an outlot North Fort
Myers, Florida. The decrease in the dollar amount applicable to revenues from
continuing operations for 2004 compared to 2003 is primarily attributable to:
(a) a decrease in lease costs of approximately $141,000 due to the cancellation
of a Kmart sublease; and (b) the Company no longer outsourcing asset management
responsibilities, resulting in a decrease in fiscal 2004 asset management fees
of approximately $83,000. The decrease in the dollar amount and percentage of
costs and expenses applicable to revenues from continuing operations for 2003
compared to 2002 was primarily attributable to: (a) a decrease in lease costs
of approximately $380,000 due to the cancellation of two Kmart subleases; (b) a
decrease in depreciation expense of approximately $46,000; and (c) a decrease
in management fees of approximately $177,000 paid to an outside asset manager
that only served for a partial year in 2003; offset by (d) an increase in
common area operating expenses of approximately $127,000, primarily due to
parking lot repairs.(4)
    
    The increase in the percentage of costs and expenses applicable to revenues
from continuing operations for 2004 compared to 2003 is primarily attributable
to losses taken on two jobs and the decrease in revenues (see Note 3 to Chart
A). Although, as of April 30, 2004, the operations of the Construction Segment
were substantially discontinued, the results, nevertheless, are included in
continuing operations pursuant to SFAS No. 144. n ABRAMS 2004 13




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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES For the fiscal years 2004, 2003, and 2002, selling, general and administrative
(SG&A) expenses from continuing operations (see Chart C) were $10,203,916,
$8,043,576, and $7,536,971, respectively. As a percentage of consolidated
revenues from continuing operations, these expenses were 26%, 11%, and 7%, in
2004, 2003, and 2002, respectively. In reviewing Chart C, the reader should
recognize that the volume of revenues generally affects these amounts and
percentages. The percentages in Chart C are based on expenses as they relate to
segment revenues in Chart A, with the exception that parent expenses and total
expenses relate to consolidated revenues. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES FROM CONTINUING OPERATIONS SUMMARY BY SEGMENT CHART C
(Dollars in Thousands) Percent ofSegment RevenuesYears Ended
    
    For Years EndedApril 30,
    
    April 30,2004
    
    2003
    
    2002
    
    2004
    
    2003
    
    2002Energy and
Facilities
Solutions (1)
    
    $
    2,424
    
    
    $
    1,795
    
    
    $
    1,360
    
    
    
    82
    
    
    
    62
    
    
    
    45Energy Services (2)
    
    
    788
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    Real Estate (3)
    
    
    862
    
    
    
    841
    
    
    
    494
    
    
    
    11
    
    
    
    10
    
    
    
    6Construction (4)
    
    
    3,604
    
    
    
    2,426
    
    
    
    3,092
    
    
    
    14
    
    
    
    4
    
    
    
    3Parent (5)
    
    
    2,526
    
    
    
    2,982
    
    
    
    2,591
    
    
    
    6
    
    
    
    4
    
    
    
    2Total
    
    $
    10,204
    
    
    $
    8,044
    
    
    $
    7,537
    
    
    
    26
    
    
    
    11
    
    
    
    7
 NOTES:  (1)
    
    On a dollar and percentage basis, SG&A expenses
were higher for fiscal 2004 compared to the same
period in 2003 and 2002, primarily due to an
increase in the number of personnel and other
personnel costs, as well as a charge to earnings of
approximately $267,000 in 2004 related to a change
in estimated useful life of one of the Companys
proprietary software offerings. In fiscal 2004, the
increase in SG&A was also due to higher sales and
marketing expenditures, which did not generate the
growth in revenues that was intended. The Company
believes the recent acquisitions of the business
and assets of iTendant, Inc. and Building
Performance Engineers, Inc. will generate
additional incremental revenue, and management has
made operational adjustments, which it believes
will result in sales and marketing costs being
spent more effectively.(2)
    
    The Energy Services Segment was formed in
December 2003. See Note 14 to the consolidated financial statements.(3)
    
    SG&A expenses for all periods presented do not
include SG&A expenses of income-producing
properties that were subsequently sold. These
expenses have been reclassified as discontinued
operations. On a dollar and percentage basis, SG&A
expenses from continuing operations were higher for
fiscal 2004 compared to 2003, primarily due to: (a)
a decrease in legal and professional fees of
approximately $242,000; offset by (b) an increase
in personnel and staffing costs of approximately
$285,000. On a dollar and percentage basis, SG&A
expenses were higher for 2003 compared to 2002,
primarily due to: (a) increased legal and
professional fees of approximately $201,000,
largely attributable to Kmarts bankruptcy, a legal
dispute with the Companys former asset manager,
and the employment of an outside consultant to
assist in asset management; and (b) increased
personnel and staffing costs of approximately
$149,000 due to the Companys return to internal
asset management.(4)
    
    On a dollar and percentage basis, SG&A expenses were higher for
fiscal 2004 compared to 2003, primarily due to:
(a) an increase in legal and professional fees of
approximately $1,258,000, primarily due to the
Companys internal investigation and ongoing
cooperation with the U.S. Department of Justice,
as discussed in ITEM 3. LEGAL PROCEEDINGS; (b)
the one-time expense reduction of $450,000 in
fiscal 2003, resulting from the decrease in an
allowance for doubtful accounts reserve for a
receivable from Montgomery Ward & Company; offset
by (c) a reduction in SG&A salary costs of
approximately $895,000, which in turn was
partially offset by hiring and severance costs of
$222,000; and (d) lower revenues during 2004. On
a dollar basis, SG&A expenses were lower for 2003
compared to 2002, due to: (a) the one-time
expense reduction of $450,000 in 2003 discussed
in the previous sentence; and (b) a reduction in
personnel and incentive compensation costs of
approximately $278,000; offset by (c) an increase
in information technology costs of approximately
$122,000. Although, as of April 30, 2004, the
operations of the Construction Segment were
substantially discontinued, the results,
nevertheless, are included in continuing
operations pursuant to SFAS No. 144.(5)
    
    Although, SG&A expenses were lower on a dollar basis in fiscal 2004,
on a percentage basis SG&A expenses were higher for fiscal 2004 compared
to the same period in 2003 due to the reduction of consolidated
revenues. On a dollar basis, SG&A expenses were lower for 2004 compared
to 2003 primarily due to: (a) the accrual in 2003 of an expense of
$484,000 related to a retirement agreement, which replaced the previous
employment agreement of a former officer and director of the Company;
and (b) a decrease in personnel and personnel related costs of
approximately $117,000. On a dollar and percentage basis, SG&A expenses
were higher in 2003 compared to 2002 primarily due to the accrual of the
expense of $484,000 mentioned in (a) above. n ABRAMS 2004 14




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INTEREST COSTS Most of the interest costs expensed of $2,512,688,
$2,377,553, and $2,437,738, in 2004, 2003, and
2002, respectively, is related to debt on real
estate. There was no capitalized interest in any of
the years presented. FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION In 2004, accounts receivables and trade and
subcontractors payables decreased by $6,958,019 and
$3,239,185, respectively, primarily due to the
timing of the payment of invoices for construction
work performed and a decrease in construction
revenues. In 2004, income-producing properties decreased
by $13,550,860, primarily due to: (1) the sale of
the Companys shopping center located in North Fort
Myers, Florida, in March 2004 (See Note 3 to the
consolidated financial statements); and (2)
depreciation expense; offset by (3) the acquisition
of a professional medical office building located
in Douglasville, Georgia (see Note 14 to the
consolidated financial statements); and (4) the
additions to income-producing properties resulting
from the completion of approximately 21,000 square
feet of leasable space in the Companys shopping
center located in Jackson, Michigan. In 2004, goodwill increased by $3,256,411 and
intangibles increased by $1,191,895, primarily due
to the acquisition of assets and the assumption of
certain liabilities of The Wheatstone Energy Group,
Inc. and iTendant, Inc. (See Note 14 to the
consolidated financial statements.) In 2004,
investment held to maturity increased due to a
$2,000,000 investment in a long-term securities
bond that matures in April 2006, which management
intends to hold to maturity. In 2004, mortgage notes payable increased by
$2,293,461 primarily due to the assumption of the
mortgage debt related the professional medical
office building. (See Note 14 to the consolidated
financial statements.) In 2004, other long-term
debt decreased by $8,405,122, primarily due to the
repayment of the North Fort Myers, Florida,
construction loan upon the Companys sale of the
shopping center (see Note 3 to the consolidated
financial statements), offset by the assumption of
certain liabilities of The Wheatstone Energy Group,
Inc. (see Note 14 to the consolidated financial
statements). LIQUIDITY AND CAPITAL RESOURCES Except for certain real estate construction loans
and occasional short-term operating loans, the
Company is usually able to finance its working
capital needs through funds generated internally.
If adequate funds are not generated through normal
operations or the sale of real estate, the Company
has available bank lines of credit. See Note 8 to
the consolidated financial statements. Working
capital was $7,207,333 at April 30, 2004, compared
to $7,638,091 at April 30, 2003. Operating
activities used cash of $2,059,704, primarily due
to losses incurred during fiscal 2004 and a
decrease in trade and subcontractors payable,
offset by a decrease in accounts receivable.
Investing activities used cash of $6,262,513,
primarily due to: (1) the acquisition of the
business and assets and the assumption of certain
liabilities of The Wheatstone Energy Group, Inc.
and the acquisition of the business and assets and
the assumption of certain liabilities of iTendant,
Inc. (see Note 14 to the consolidated financial
statements); (2) additions to income-producing
properties due to the completion of approximately
21,000 square feet of leasable space in the
Companys shopping center in Jackson, Michigan; (3)
the investment of $2,000,000 in a securities bond
for cash management purposes; and (4) the
acquisition of a professional medical office
building located in Douglasville, Georgia.
Financing activities used cash of $1,541,684,
primarily for scheduled principal payments of
mortgage notes and other long-term debt.
Discontinued operations provided cash of
$11,085,941, from the sale of the Companys former
shopping center located in North Fort Myers,
Florida. In 1999, in connection with the financing of
the purchase of the Companys owned shopping center
in Jacksonville, Florida, the Company obtained a
permanent mortgage loan in the amount of
$9,500,000, which is secured by the center. Prior
to being restructured, as is discussed below, the
loan bore interest at 7.375% and was scheduled to
be fully amortized over twenty years. The loan was
to mature in 2019, but the lender had the right to
call the loan at any time after September 1, 2002,
upon thirteen months notice. If the loan had been called, the
Company would have had up to thirteen months to
repay the principal amount of the loan without
penalty, by selling or refinancing the loan on the
shopping center. However, the Companys liability
for repayment was limited to its interest in the
center. In conjunction with the loan, an Additional
Interest Agreement was executed, which had entitled
the lender to be paid additional interest equal to
fifty percent of the quarterly net cash flow and
fifty percent of the appreciation in the property
upon sale or refinance. The liability related to
the lenders fifty percent share of the
appreciation in the property was $3,048,264 at
April 30, 2004. The mortgage debt and related
unamortized loan discount was $1,699,731 and
$8,315,124, respectively, at April 30, 2004. 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 is for $7.8 million, bears
interest at 6.125%, and matures on July 1, 2029,
but may be called after July 1, 2011, with thirteen
months notice. However, the Companys liability
for repayment is limited to its interest in the
center. In March 2004, the Companys Board authorized
the repurchase of up to 200,000 shares of the
Company Stock in the twelve-month period beginning
March 4, 2004, and ending on March 3, 2005. Any
such purchases, if made, could be in the open
market at prevailing prices or in privately
negotiated transactions. The Company did not
repurchase any shares in the period between May 1,
2003, and June 30, 2004. In conjunction with the refinancing of a
mortgage on an income-producing property in July
2002, the Company is required to provide for
potential future tenant improvement expenses and
lease commissions through additional collateral, in
the form of a letter of credit, in the amount of
$150,000 for each of the first three loan years,
$300,000 during the fourth, fifth, and sixth loan
years, and $450,000 during the seventh, eighth,
ninth, and tenth loan years. The letter of credit,
currently $150,000, is secured by a bank line of
credit. Effective April 30, 2003, the Company
terminated an employment agreement and entered into
a new retirement agreement with a former officer
and director of the Company. Beginning May 1, 2003,
the new agreement required the Company to pay a
retirement benefit of approximately $87,000 through
August 19, 2003, and requires payments of
approximately $100,000 per year thereafter for a
term of four years, ending on August 19, 2007. In
addition, the n ABRAMS 2004 15




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Company will also continue to provide certain
medical insurance benefits through the term of the
retirement agreement. The new agreement provides
that the retirees stock options expire no later
than August 19, 2004. The retirement agreement
would terminate early in the event of the death of
the retiree. In December 2003, the Company acquired the
business and substantially all of the assets and
assumed certain liabilities of The Wheatstone
Energy Group, Inc. for a purchase price of
approximately $4.8 million. The consideration
consisted of 23,842 newly-issued shares of the
Companys common stock with a fair value of
$89,645, the payment of approximately $1.3 million
to certain trade creditors, and assumed
approximately $2.9 million of liabilities. Also in
connection with the transaction, the Company issued
110,000 shares of Common Stock with a fair value of
$424,380, and a warrant to purchase an additional
40,000 shares at an exercise price of $5.10 per
share with a fair value of approximately $36,800
determined using the Black-Scholes option pricing
model. In December 2003, the Company purchased a one
year certificate of deposit in the amount of
$200,000 that is used as collateral for an
irrevocable letter of credit. In 1992, the Company secured a construction
loan for the development of the shopping center in
North Fort Myers, Florida, from SunTrust Bank. The
original term of the construction financing was
five years, and the loan was most recently extended
to February 2005. In March 2004, the Company closed
on the sale of the shopping center in North Fort
Myers, Florida, for a sales price of $21.8 million,
resulting in a pre-tax
gain of approximately $4.0 million. After
repayment of the remaining balance on the loan
secured by the shopping center (approximately $10.5
million) and other expenses, the sale generated net
cash proceeds of approximately $10.6 million. The
sale did not include any of the Companys adjacent
real estate held for future development or sale.
The Company used a portion of the proceeds to
acquire the business and assets of iTendant, Inc.,
Building Performance Engineers, Inc., and a
professional medical office building in
Douglasville, Georgia. Each of these acquisitions
is discussed below. The Company also used a portion
of the proceeds from this sale to pay a special
dividend approved by the Board in May 2004. The
Company also intends to use a portion of the
proceeds as a source of cash for other strategic
acquisitions, and for additional investments in
income-producing properties. Also, for cash
management purposes, the Company used $2,000,000 of
the proceeds to purchase a long-term investment in
a securities bond. In October 1999, the Georgia World Congress
Center Authority acquired the Companys former wood
manufacturing facility located in Atlanta, Georgia,
for approximately $4.5 million. For income tax
purposes, the Company treats this transaction as an
involuntary conversion under Section 1033 of the
Internal Revenue Code, which allows for the tax
deferral on the gain if the Company acquires a
qualified replacement property. In April 2004, the
Company purchased a professional medical office
building located in Douglasville, Georgia, as its
Section 1033 qualified replacement property. The
Company paid cash and assumed a mortgage note
payable to purchase the asset for approximately
$4.4 million, including the costs associated with
completing the transaction. In April 2004, the Company acquired
substantially all of the assets and assumed certain
liabilities of iTendant, Inc for a purchase price
of approximately $1.2 million. The consideration
consisted of 123,547 newly-issued shares of the
Companys Common Stock, with a fair value of
$525,075, $500,000 cash, and the assumption of
approximately $170,000 of liabilities. Additional
contingent consideration is provided for based on future
operating goals and performance. In the fourth quarter of fiscal 2004, the
Company made the decision to discontinue its
Construction Segment activities. During fiscal
2005, any remaining open contracts will be
completed and the associated warranty periods will
be serviced. The Company anticipates that the
settlement of final liabilities, collection of
outstanding receivables, and the liquidation of
other assets associated with this segment will
provide additional cash and liquidity. In May 2004, the Company acquired the
operating business and assets of Atlanta-based
Building Performance Engineers, Inc. for a purchase
price of approximately $350,000. The consideration
consisted of 21,126 newly-issued shares of the
Companys Common Stock, with a fair value of
$94,906, and issued a note for $150,000, and paid
$100,000 cash. The Companys other commitments primarily
include operating leases for its leaseback shopping
centers and ground leases, as described in ITEM 2.
PROPERTIES. The Company has no long-term
commitments to purchase building materials or other
supplies. The Company anticipates that its equity,
potential proceeds from sales of real estate,
potential cash flow provided by financing or
refinancing of debt, 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. EFFECTS OF INFLATION ON REVENUES AND OPERATING PROFITS The effects of inflation upon the Companys
operating results are varied. Inflation in recent
years has been modest and has had minimal effect on
the Company. The Energy and Facilities Solutions Segment
generally has contracts that are renewed on an
annual basis. At the time of renewal, contract fees
may be adjusted, subject to customer approval. As
inflation impacts the Companys costs, primarily
labor, the Company could seek a price increase for
its contracts in order to protect its profit
margin. The Energy Services Segment typically engages
in contracts of short duration with fixed prices,
which normally will minimize any erosion of its
profit margin due to inflation. As inflation
impacts the Companys costs, primarily labor and
materials, the Company could seek a price increase
for subsequent contracts to protect its profit
margin. In the Real Estate Segment, many of the anchor
tenant leases are long-term (original terms over 20
years) with fixed rents, except for some leases
with contingent rent provisions by which the
Company may earn additional rent as a result of
increases in tenants sales over specified targets.
In many cases, however, the contingent rent
provisions permit the anchor tenant to offset
against contingent rents any increases in ad
valorem taxes over a specified amount. If inflation
were to rise, ad valorem taxes would probably
increase as well, which, in turn, could cause a
decrease in the contingent rents. Furthermore, the
Company has certain repair obligations, and the
costs of repairs generally increase with inflation. Inflation causes interest rates to rise, which
has a positive effect on investment income, but
could have a negative effect on profit margins,
because of the increased costs of contracts and the
increase in interest expense on variable rate
loans. Overall, inflation could tend to limit the
Companys markets, and in turn, could reduce
revenues as well as operating profits and earnings. n ABRAMS 2004 16




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CONTRACTUAL OBLIGATIONS A summary of contractual obligations at April 30, 2004, are as follows: Payment due by PeriodLess than
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    1 Year
    
    1 - 3 Years
    
    3 - 5 Years
    
    5 YearsMortgage notes payable
(1)
    
    $
    26,712,744
    
    
    $
    1,202,876
    
    
    $
    8,300,215
    
    
    $
    7,268,824
    
    
    $
    9,940,829Operating leases (2)
    
    
    4,147,000
    
    
    
    1,332,000
    
    
    
    1,661,000
    
    
    
    430,000
    
    
    
    724,000Other long-term debt
    
    
    1,938,083
    
    
    
    46,855
    
    
    
    338,228
    
    
    
    318,000
    
    
    
    1,235,000Long-term obligations
    
    
    322,000
    
    
    
    100,000
    
    
    
    222,000
    
    
    
    
    
    
    
    Capital lease obligations
    
    
    53,495
    
    
    
    42,938
    
    
    
    10,557
    
    
    
    
    
    
    
    Total
    
    $
    33,173,322
    
    
    $
    2,724,669
    
    
    $
    10,532,000
    
    
    $
    8,016,824
    
    
    $
    11,899,829
  (1)
    
    Regularly scheduled principal amortization payments.(2)
    
    Future minimum rental payments on leaseback shopping centers and ground
leases. CRITICAL ACCOUNTING POLICIES A critical accounting policy is one which is
important both 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
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. Management believes that the
Companys most critical accounting policies are
discussed and described in Note 2 to the
consolidated financial statements, and include: Revenue recognition Energy and facilities solutions revenues primarily
consist of services and product sales. Revenues are
recognized as services are rendered, and depending
upon the product type and customer agreement,
product sales are recognized when products are
shipped or delivered. Energy services and construction 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 change orders in the amounts that
are reasonably estimated based on the Companys
historical experience. The cumulative effects of
changes in estimated total contract costs and
revenues (change orders) are recorded in the period
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 based on property operating expenses. In
addition, certain tenants are required to pay
incremental rental amounts, which are contingent on
their store sales. These percentage rents are
recognized only if and when earned. Revenue from the sale of real estate is
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 of
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 Income-producing properties are stated at cost, and
are depreciated for financial reporting purposes
using the straight-line method over the estimated
useful lives of the assets. Property and equipment are recorded 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 construction are
capitalized. Other costs of development and
construction of real estate assets are also
capitalized. Capitalization of interest and other
carrying costs are discontinued when a project is
substantially completed or if active development
ceases. Impairment of long-lived assets, including goodwill, and assets to be disposed of Long-lived assets and certain intangible assets,
including goodwill, are required to be reviewed for
impairment on an annual basis or whenever events or
changes in circumstances indicate that the carrying
amount of an asset may not be recoverable.
Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of
the asset to future net cash flows expected to be
generated by the asset. If an asset is determined
to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount
of the asset exceeds the assets estimated fair
value. Assets to be disposed of are reported at the
lower of their carrying amount or estimated fair
value less costs to sell. n ABRAMS 2004 17




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Income taxes Income taxes are accounted for under the asset and
liability method. Deferred tax assets and
liabilities are recognized for the future tax
consequences attributable to differences between
the financial statement carrying amounts of
existing assets and liabilities and their
respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates
expected to apply to taxable income in the years
in which those temporary differences are expected
to be recovered or settled. The effect of a change
in tax rates on deferred tax assets and
liabilities is recognized in income in the period
that includes the enactment date. Discontinued Operations The Company adopted SFAS 144, Accounting for the
Impairment or Disposal of Long- Lived Asset,
effective May 1, 2002, which requires among other
things, that the gains and losses from the
disposition of certain income-producing real
estate assets, and the related historical
operating results, be reflected as discontinued
operations in the statements of operations for all
periods presented. Although net earnings is not
affected, the Company has reclassified results
previously included in continuing operations to
discontinued operations for qualifying
dispositions under SFAS 144. DISCONTINUED OPERATIONS On March 12, 2004, the Company sold its shopping
center located in North Fort Myers, Florida, and
recognized a pre-tax gain of approximately $4.0
million. On June 28, 2002, the Company sold its
shopping center located in Englewood, Florida, and
recognized a pre-tax gain of approximately $1.0
million. As a result of these sales, the Companys
financial statements have been prepared with
results of operations, cash flows, and the gains
from the sales shown as discontinued operations
for all periods presented. During fiscal 2004, the Company made the
decision to curtail its operations as a general
contractor. Pursuant to this decision, when all
operating activities have ceased and all warranty
periods have expired, the Construction Segment
will be classified as a discontinued operation and
the historical operating results of the segment
will be reclassified to discontinued operations
pursuant to SFAS 144. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND RISKS Certain statements contained or incorporated by
reference in this Annual Report on Form 10-K,
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 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, 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 revenues due to
the ultimate disposition of legal proceedings in
which the Company is involved, including the
Justice Departments inquiry into the construction
job bidding matter described in ITEM 3. LEGAL PROCEEDINGS; 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 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; declines in
energy prices which could negatively impact the
value of the Companys energy conservation
services; the level and volatility of interest
rates; the failure of a subcontractor to perform;
and the deterioration in the financial stability
of an anchor tenant, significant subcontractor or
other significant customer. n ABRAMS 2004 18




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##### Table of Contents



ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Companys major market risk exposure arises from changes in interest rates
and the resulting impact on variable rate debt instruments. In addition, the
Company has interest rate risk associated with fixed rate debt. The Companys
objectives in interest rate risk management are to limit the negative impact of
interest rates on earnings and cash flows and to lower overall borrowing costs.
To achieve its objectives, the Company borrows at fixed rates when it believes
it is in its best interests to do so, and may enter into derivative financial
instruments, such as interest rate swaps and caps, in order to limit its
exposure to interest rate fluctuations. The Company does not enter into
derivative or interest rate transactions for speculative purposes. There were
no derivative contracts in effect at April 30, 2004, or April 30, 2003. The following table summarizes information related to the Companys market
risk sensitive debt instruments as of April 30, 2004: Expected Maturity DateFiscal year ending April 30(Dollars in Thousands)
    
    
    
    
    
    EstimatedThere-
    
    
    
    
    
    Fair2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    after
    
    Total
    
    ValueFixed rate debt (1)
    
    $
    1,293
    
    
    
    7,467
    
    
    
    1,182
    
    
    
    6,950
    
    
    
    637
    
    
    
    10,175
    
    
    
    27,704
    
    
    
    29,033Average interest rate
    
    
    7.6
    %
    
    
    7.4
    %
    
    
    7.8
    %
    
    
    7.4
    %
    
    
    8.5
    %
    
    
    8.2
    %
    
    
    
    
    
    
    Variable rate debt
(2)
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    1,000
    
    
    
    1,000
  (1)
    
    Amount for 2006 includes approximately $8.3 million, net of loan discount
of approximately $1.7 million, of debt on the shopping center in Jacksonville,
Florida, which loan was not scheduled to mature until 2019, but could have been
called at any time after September 2002, for repayment thirteen months after
such call date. This loan was restructured on July 8, 2004, with a fixed rate
of 6.125% to be amortized over twenty-five years, and may be called by the
lender in seven years, upon thirteen months notice. See ITEM 7. LIQUIDITY AND
CAPITAL RESOURCES.(2)
    
    Interest on variable rate debt is based on prime rate plus 1.5%. 
 ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTSReport of Independent Registered Public Accounting Firm
    
    page 20Consolidated
Balance Sheets - April 30, 2004, and 2003
    
    page 21Consolidated
Statements of Operations - For the years ended April 30, 2004, 2003, and 2002
    
    page 22Consolidated
Statements of Shareholders Equity - For the years ended April 30, 2004, 2003,
and 2002
    
    page 23Consolidated
Statements of Cash Flows - For the years ended April 30, 2004, 2003, and 2002
    
    page 24Notes to
Consolidated Financial Statements - For the years ended April 30, 2004, 2003, and 2002
    
    page 25Schedules:Schedule NumberII Valuation and Qualifying Accounts
    
    page 39III Real Estate and Accumulated Depreciation
    
    page 40
 n ABRAMS 2004 19




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and
Shareholders Abrams Industries, Inc.: We have audited the accompanying consolidated balance sheets of Abrams
Industries, Inc. and subsidiaries (the Company) as of
April 30, 2004, and 2003, and the related consolidated statements of
operations, shareholders equity, and cash flows for each of the three years in
the period ended April 30, 2004. Our audits also included the financial
statement schedules listed in the Index at Item 8. These financial statements
and financial statement schedules are the responsibility of the Companys
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Abrams Industries,
Inc. and subsidiaries as of April 30, 2004, and 2003, and the results of their
operations and their cash flows for each of the three years in the period ended
April 30, 2004, in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, such financial statement
schedules for 2004, 2003, and 2002 when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth herein. As discussed in Note 3 to the consolidated financial statements, effective May
1, 2002, the Company changed its method of accounting for discontinued
operations to conform to the Statement of Financial Accounting Standards No.
144 and retroactively restated the 2003 and 2002 financial statements for the
change. -s-DELOITTE & TOUCHE LLP Atlanta, Georgia
July 8, 2004 n ABRAMS 2004 20




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##### Table of Contents



CONSOLIDATED BALANCE SHEETS April 30,2004
    
    2003ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    6,379,679
    
    
    $
    5,157,639Short-term investment
    
    
    200,000
    
    
    
    Receivables:Trade accounts and notes, net of allowance for doubtful accounts of
$60,644 in 2004, and $44,751 in 2003
    
    
    852,405
    
    
    
    1,178,382Contracts, net of allowance for doubtful accounts of $410,835
in 2004, and $447,294 in 2003, including retained amounts of $192,340
and $3,096,192, in 2004 and 2003, respectively(Note 4)
    
    
    4,599,812
    
    
    
    11,231,854Assets of discontinued operations (Note 3)
    
    
    56,947
    
    
    
    102,146Costs and earnings in excess of billings (Note 4)
    
    
    860,940
    
    
    
    503,113Income tax receivable
    
    
    
    
    
    
    171,907Deferred income taxes (Note 9)
    
    
    623,001
    
    
    
    610,980Other
    
    
    779,617
    
    
    
    554,396Total current assets
    
    
    14,352,401
    
    
    
    19,510,417INCOME-PRODUCING PROPERTIES, net (Notes 5 and 7)
    
    
    29,628,177
    
    
    
    43,179,037PROPERTY AND EQUIPMENT, NET (Note 6)
    
    
    605,967
    
    
    
    471,813OTHER ASSETS:Real estate held for future development or sale
    
    
    3,970,498
    
    
    
    3,952,812Intangible assets, net (Note 15)
    
    
    3,527,722
    
    
    
    2,335,827Goodwill (Note 15)
    
    
    4,998,242
    
    
    
    1,741,831Investment held to maturity
    
    
    2,000,000
    
    
    
    Other
    
    
    2,793,012
    
    
    
    2,605,361$
    61,876,019
    
    
    $
    73,797,098LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables, including retained amounts
of $300,546 and $1,064,989, in 2004 and 2003, respectively
    
    $
    2,924,611
    
    
    $
    6,163,796Accrued expenses
    
    
    2,710,978
    
    
    
    1,831,990Billings in excess of costs and earnings (Note 4)
    
    
    208,482
    
    
    
    682,674Liabilities of discontinued operations (Note 3)
    
    
    8,328
    
    
    
    563,584Current maturities of long-term debt
    
    
    1,292,669
    
    
    
    2,630,282Total current liabilities
    
    
    7,145,068
    
    
    
    11,872,326DEFERRED INCOME TAXES (Note 9)
    
    
    2,677,141
    
    
    
    2,772,132OTHER LIABILITIES
    
    
    4,644,630
    
    
    
    4,371,374MORTGAGE NOTES PAYABLE, less current maturities (Note 7)
    
    
    25,509,868
    
    
    
    23,216,407OTHER LONG-TERM DEBT, less current maturities (Note 8)
    
    
    1,901,785
    
    
    
    10,306,907Total liabilities
    
    
    41,878,492
    
    
    
    52,539,146COMMITMENTS AND CONTINGENCIES (Notes 7, 8 and 16)SHAREHOLDERS EQUITY (Note 11):Common stock, $1 par value; 5,000,000 shares authorized;
3,327,628 issued and 3,180,340 outstanding in 2004,
3,060,239 issued and 2,914,351 outstanding in 2003,
    
    
    3,327,628
    
    
    
    3,060,239Additional paid-in capital
    
    
    2,963,874
    
    
    
    2,153,505Deferred stock compensation
    
    
    (26,855
    )
    
    
    (16,598
    )Retained earnings
    
    
    14,412,663
    
    
    
    16,734,753Treasury stock (common shares) of 147,288 in 2004, and 145,888 in 2003
    
    
    (679,783
    )
    
    
    (673,947
    )Total shareholders equity
    
    
    19,997,527
    
    
    
    21,257,952$
    61,876,019
    
    
    $
    73,797,098
 See accompanying notes to consolidated financial statements. n ABRAMS 2004 21




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##### Table of Contents



CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended April 30,2004
    
    2003
    
    2002REVENUES:Energy and facility solutions
    
    $
    2,962,308
    
    
    $
    2,900,191
    
    
    $
    2,994,879Energy services
    
    
    2,602,025
    
    
    
    
    
    
    
    Rental income
    
    
    7,882,431
    
    
    
    7,875,530
    
    
    
    8,364,764Real estate sales
    
    
    
    
    
    
    859,561
    
    
    
    465,000Construction
    
    
    25,500,352
    
    
    
    59,527,859
    
    
    
    100,687,872Interest
    
    
    12,581
    
    
    
    50,127
    
    
    
    158,207Other
    
    
    122,423
    
    
    
    65,172
    
    
    
    90,41839,082,120
    
    
    
    71,278,440
    
    
    
    112,761,140COSTS AND EXPENSES:Energy and facility solutions
    
    
    1,629,687
    
    
    
    1,573,426
    
    
    
    1,760,007Energy services
    
    
    1,821,869
    
    
    
    
    
    
    
    Rental property operating expenses,excluding interest
    
    
    4,898,526
    
    
    
    5,113,013
    
    
    
    5,574,522Cost of real estate sold
    
    
    
    
    
    
    295,813
    
    
    
    405,647Construction
    
    
    25,093,339
    
    
    
    57,278,712
    
    
    
    97,149,63533,443,421
    
    
    
    64,260,964
    
    
    
    104,889,811Selling, general and administrative
    
    
    10,203,916
    
    
    
    8,043,576
    
    
    
    7,536,971Interest costs incurred
    
    
    2,512,688
    
    
    
    2,377,553
    
    
    
    2,437,73846,160,025
    
    
    
    74,682,093
    
    
    
    114,864,520LOSS BEFORE INCOME TAXES
    
    
    (7,077,905
    )
    
    
    (3,403,653
    )
    
    
    (2,103,380
    )INCOME TAX BENEFIT (Note 9):Current
    
    
    
    
    
    
    (171,907
    )
    
    
    (766,682
    )Deferred
    
    
    (2,370,942
    )
    
    

    (1,139,093
    )
    
    
    (68,013
    )(2,370,942
    )
    
    
    (1,311,000
    )
    
    
    (834,695
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (4,706,963
    )
    
    
    (2,092,653
    )
    
    
    (1,268,685
    )DISCONTINUED OPERATIONS (Note 3):Earnings from discontinued operations,adjusted
for applicable income tax expense of $241,876 in 2004,
$249,413 in 2003, and $218,452 in 2002
    
    
    394,914
    
    
    
    401,142
    
    
    
    359,710Gain on sale of assets of discontinued operations,
adjusted for applicable income tax expense of $1,510,307
in 2004, $372,228 in 2003, and $1,056,000 in 2002
    
    
    2,461,923
    
    
    
    617,987
    
    
    
    1,720,749EARNINGS FROM DISCONTINUED OPERATIONS
    
    
    2,856,837
    
    
    
    1,019,129
    
    
    
    2,080,459NET (LOSS) EARNINGS
    
    $
    (1,850,126
    )
    
    $
    (1,073,524
    )
    
    $
    811,774NET (LOSS) EARNINGS PER SHARE (Note 12):From
continuing operations - basic and diluted
    
    $
    (1.58
    )
    
    $
    (.72
    )
    
    $
    (.43
    )From
discontinued operations - basic and diluted
    
    
    .96
    
    
    
    .35
    
    
    
    .71Net
(loss) earnings per share - basic and diluted
    
    $
    (.62
    )
    
    $
    (.37
    )
    
    $
    .28
 See accompanying notes to consolidated financial statements. n ABRAMS 2004 22




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##### Table of Contents



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY Common Stock
    
    AdditionalPaid-in
    
    DeferredStock
    
    Retained
    
    TreasuryShares
    
    Amount
    
    Capital
    
    Compensation
    
    Earnings
    
    Stock
    
    TotalBALANCES at
April 30, 2001
    
    
    3,041,039
    
    
    $
    3,041,039
    
    
    $
    2,097,315
    
    
    $
    (75,094
    )
    
    $
    17,930,914
    
    
    $
    (488,631
    )
    
    $
    22,505,543Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    
    
    
    811,774
    
    
    
    
    
    
    
    811,774Common stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (183,046
    )
    
    
    (183,046
    )Common stock issued
    
    
    13,400
    
    
    
    13,400
    
    
    
    37,690
    
    
    
    (51,090
    )
    
    
    
    
    
    
    
    
    
    
    Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113,440
    
    
    
    
    
    
    
    
    
    
    
    113,440Cash dividends declared - $.16 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (468,835
    )
    
    
    
    
    
    
    (468,835
    )BALANCES 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
    )
    
    $
    19,997,527
 See accompanying notes to consolidated financial statements. n ABRAMS 2004 23




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended April 30,2004
    
    2003
    
    2002Cash flows from operating activities:Net (loss) earnings
    
    $
    (1,850,126
    )
    
    $
    (1,073,524
    )
    
    $
    811,774Adjustments to reconcile net (loss) earnings to net
cash used in operating activities:Income from discontinued operations, net of tax
    
    
    (2,856,837
    )
    
    
    (1,019,129
    )
    
    
    (2,080,459
    )Depreciation and amortization
    
    
    1,685,809
    
    
    
    1,638,322
    
    
    
    2,280,284Deferred tax benefit
    
    
    (2,370,942
    )
    
    
    (1,610,654
    )
    
    
    (1,062,587
    )(Recovery of) provision for doubtful accounts
    
    
    (20,566
    )
    
    
    (514,513
    )
    
    
    69,999Gain on sale of real estate
    
    
    
    
    
    
    (563,748
    )
    
    
    (59,353
    )Changes in assets and liabilities, net of effect of acquisitions:Receivables, net
    
    
    7,662,639
    
    
    
    882,693
    
    
    
    2,431,245Costs and earnings in excess of billings
    
    
    (261,587
    )
    
    
    179,049
    
    
    
    801,033Other current assets
    
    
    (151,553
    )
    
    
    166,289
    
    
    
    108,244Other assets
    
    
    (306,145
    )
    
    
    147,431
    
    
    
    421,256Trade and subcontractors payable
    
    
    (3,778,853
    )
    
    
    (1,848,896
    )
    
    
    (764,797
    )Accrued expenses
    
    
    700,760
    
    
    
    283,033
    
    
    
    (1,357,839
    )Accrued profit-sharing
    
    
    
    
    
    
    
    
    
    
    (1,277,917
    )Billings in excess of costs and earnings
    
    
    (729,912
    )
    
    
    4,687
    
    
    
    (828,779
    )Other liabilities
    
    
    217,609
    
    
    
    474,758
    
    
    
    (73,271
    )Net cash used in operating activities
    
    
    (2,059,704
    )
    
    
    (2,854,202
    )
    
    
    (581,167
    )Cash flows from investing activities:Purchase of held to maturity investments
    
    
    (2,200,000
    )
    
    
    
    
    
    
    Proceeds from sales of real estate and property and equipment
    
    
    
    
    
    
    847,203
    
    
    
    407,837Additions to real estate held for sale or future development
    
    
    (17,686
    )
    
    
    
    
    
    
    Additions to intangible assets, net
    
    
    168,388
    
    
    
    (282,479
    )
    
    
    Additions to income-producing properties, net
    
    
    (1,075,371
    )
    
    
    (260,522
    )
    
    
    (339,207
    )Additions to property, equipment, and other, net
    
    
    5,871
    
    
    
    (113,075
    )
    
    
    (512,056
    )Acquisitions, net of cash acquired
    
    
    (3,209,862
    )
    
    
    
    
    
    
    (2,971,663
    )Repayments received on notes receivable
    
    
    66,147
    
    
    
    10,183
    
    
    
    94,096Net cash (used in) provided by investing activities
    
    
    (6,262,513
    )
    
    
    201,310
    
    
    
    (3,320,993
    )Cash flows from financing activities:Debt proceeds
    
    
    
    
    
    
    4,900,000
    
    
    
    Debt repayments
    
    
    (1,063,884
    )
    
    
    (5,560,674
    )
    
    
    (1,105,664
    )Deferred loan costs paid
    
    
    
    
    
    
    (107,788
    )
    
    
    (5,000
    )Repurchase of common stock
    
    
    (5,836
    )
    
    
    (2,270
    )
    
    
    (183,046
    )Cash dividends
    
    
    (471,964
    )
    
    
    (465,576
    )
    
    
    (468,835
    )Net cash used in financing activities
    
    
    (1,541,684
    )
    
    
    (1,236,308
    )
    
    
    (1,762,545
    )Cash flows from discontinued operations:Operating activities
    
    
    1,210,681
    
    
    
    817,330
    
    
    
    2,127,160Debt repayments
    
    
    (11,351,353
    )
    
    
    (13,171,597
    )
    
    
    Proceeds from sale of property, net of costs of sale
    
    
    21,226,613
    
    
    
    13,489,901
    
    
    
    Net cash provided by discontinued operations
    
    
    11,085,941
    
    
    
    1,135,634
    
    
    
    2,127,160Net increase (decrease) in cash and cash equivalents
    
    
    1,222,040
    
    
    
    (2,753,566
    )
    
    
    (3,537,545
    )Cash and cash equivalents at beginning of year
    
    
    5,157,639
    
    
    
    7,911,205
    
    
    
    11,448,750Cash and cash equivalents at end of year
    
    $
    6,379,679
    
    
    $
    5,157,639
    
    
    $
    7,911,205Supplemental disclosure of noncash investing activities:Transfer of real estate held for future development or sale to
property held for sale
    
    $
    
    
    
    $
    
    
    
    $
    12,522,944Transfer of property to real estate held for future development
or sale
    
    $
    
    
    
    $
    
    
    
    $
    321,710Transfer of property held for sale to income-producing property
    
    $
    
    
    
    $
    
    
    
    $
    19,362,643Supplemental disclosure of noncash financing activities:Issuance of common stock under Stock Award Plan
    
    $
    41,700
    
    
    $
    24,300
    
    
    $
    51,090Supplemental schedule of cash flow information:Cash paid during the year for interest
    
    $
    2,457,694
    
    
    $
    2,967,042
    
    
    $
    4,092,065Cash (refunded) paid during the year for income taxes, net
    
    $
    (186,094
    )
    
    $
    (351,871
    )
    
    $
    202,716
 See accompanying notes to consolidated financial statements. n  ABRAMS 2004 24




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS APRIL 30, 2004, 2003, AND 2002  1
    
    ORGANIZATION AND BUSINESS Abrams Industries, Inc. and 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 savings 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
historically provided commercial construction
services as a general contractor. The Companys
wholly owned subsidiaries include Servidyne
Systems, LLC, (the Energy and Facilities Solutions
Segment); The Wheatstone Energy Group, LLC (the
Energy Services Segment); Abrams Properties, Inc.
and subsidiaries, and AFC Real Estate, Inc. and its
subsidiary (the Real Estate Segment); and Abrams
Construction, Inc. (the Construction Segment).  2
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Principles of consolidation and basis of presentation The consolidated financial statements include the
accounts of Abrams Industries, Inc., its wholly
owned subsidiaries, and its 80% investment in
Abrams-Columbus Limited Partnership. All
significant intercompany balances and transactions
have been eliminated in consolidation. (b) Use of estimates The preparation of financial statements in
conformity with accounting principles generally
accepted in the United States of America requires
the Company to make estimates and assumptions that
affect the reported amounts of assets and
liabilities, disclosure of contingent assets and
liabilities at the date of the financial
statements, and the reported amounts of revenues
and expenses during the period. Actual results
could differ from those estimates. (c) Revenue recognition Energy and facilities solutions revenues primarily
consist of services and product sales. Revenues are
recognized as services are rendered, and depending
upon the product type and customer agreement,
product sales are recognized when products are
shipped or delivered. Energy services and construction 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 change orders in the amounts that
are reasonably estimated based on the Companys
historical experience. The cumulative effects of
changes in estimated total contract costs and
revenues (change orders) are recorded in the period
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 based on property
operating expenses. In addition, certain tenants
are required to pay incremental rental amounts,
which are contingent on their store sales. These
percentage rents are recognized only if and when
earned. Revenue from the sale of real estate is 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. (d) Cash and cash equivalents and short-term
investments Cash and cash equivalents include money market
funds and other financial instruments. The Company
considers all highly liquid financial instruments
with original maturities of three months or less to
be cash equivalents. The Company considers
financial instruments with original maturities of three
months to one year to be a short-term investment. (e) Property held for sale Property held for sale is expected to be sold in
the near term and is carried at the lower of cost
or fair value less costs to sell. (f) Income-producing properties and property and
equipment Income-producing properties are stated at cost, and
are depreciated for financial reporting purposes
using the straight-line method over the estimated
useful lives of the properties and related assets.
Property and equipment are recorded at cost, and
are depreciated for financial reporting purposes
using the straight-line method over the estimated
useful lives of the assets. Significant additions,
which 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 construction are
capitalized. Other costs of development and
construction of real estate assets are also
capitalized. Capitalization of interest and other
carrying costs are discontinued when a project is
substantially completed or if active development
ceases. (g) Real estate held for future development or sale Real estate held for future development or sale is
carried at the lower of cost or fair value less
costs to sell. (h) Deferred loan costs Costs incurred to obtain loans have been deferred
and are being amortized over the terms of the
related loans. n ABRAMS
2004  25




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##### Table of Contents



(i) Impairment of long-lived assets and assets to
be disposed of The Company reviews its long-lived assets and
certain intangible assets for impairment whenever
events or changes in circumstances indicate that
the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held
and used is measured by a comparison of the
carrying amount of the asset to future net cash
flows expected to be generated by the asset. If an
asset is determined to be impaired, the impairment
to be recognized is measured by the amount by which
the carrying amount of the asset exceeds the
assets fair value. Assets to be disposed of are
reported at the lower of their carrying amount or
fair value less costs to sell. (j) Income taxes Income taxes are accounted for under the asset and
liability method. Deferred tax assets and
liabilities are recognized for the future tax
consequences attributable to differences between
the financial statement carrying amounts of
existing assets and liabilities and their
respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in
which those temporary differences are expected to
be recovered or settled. The effect of a change in
tax rates on deferred tax assets and liabilities is
recognized in income in the period that includes
the enactment date. (k) Fair value of financial instruments Management believes that the carrying amounts of
cash and cash equivalents, short-term investments,
receivables, other assets, accounts payable,
accrued expenses, and the current portion of debt
instruments are reasonable approximations of their
fair value, because of the short-term nature of
these instruments. Management believes that the carrying amount of
long-term investments in debt securities
approximates fair value due to managements intent
to hold the investments
to maturity. The fair value of the Companys debt instruments is
estimated by discounting the future cash flows of
each instrument at rates currently offered to the
Company by the Companys bankers for similar debt
instruments of comparable maturities. Based on this
valuation methodology, the carrying amount and
estimated fair value of the debt instruments as of April 30,
2004, are
$28,704,332 and $30,032,704, respectively. (l) Intangible assets Intangible assets primarily consist of a
trademarks, computer software, customer
relationships, proprietary customer software
solutions, lease costs, and deferred loan costs.
The trademarks are unamortized intangible assets as
they have indefinite lives. However, the computer
software, proprietary computer software solutions,
lease costs, and deferred loan costs are amortized
using the straight-line method over the following
estimated useful lives: Computer software
    
    3 yearsProprietary customer software solutions
    
    5 yearsCustomer relationships
    
    5 yearsLease costs
    
    Over the term of the leaseLoan costs
    
    Over the term of the loan
 The Company tested goodwill and intangibles assets,
related to its Energy and Facilities Solutions
Segment, with indefinite useful lives as of April
30, 2004, for impairment, as required by SFAS 142,
utilizing the expected present value of future cash
flows. The analysis did not result in an impairment
for fiscal 2004. As of April 30, 2004, the Company
does not believe any of its goodwill or long-lived
assets are impaired. The Company will test goodwill
and intangibles assets with indefinite useful
lives, related to its Energy Services Segment, that
were acquired in December 2003 at the earlier of
one year from the acquisition date or the
occurrence of an event or circumstance that would
indicate impairment. (m) Derivative instruments and hedging activities The Company accounts for derivative and hedging
activities in accordance with Statement of
Financial Accounting Standards (SFAS) 133,
Accounting for Derivative Instruments and Hedging
Activities, as amended. Under SFAS 133, derivative
instruments are recognized in the balance sheet at
fair value, and changes in the fair value of such
instruments are recognized currently in earnings
unless specific hedge accounting criteria are met.
At April 30, 2004, and 2003, the Company had no
derivative instruments. (n) Discontinued Operations The Company adopted SFAS 144, Accounting for the
Impairment or Disposal of Long- Lived Asset,
effective May 1, 2002, which requires among other
things, that the gains and losses from the
disposition of certain income-producing real estate
assets, and the related historical operating
results, be reflected as discontinued operations in
the statements of operations for all periods
presented. Although net earnings are not affected,
the Company has reclassified results previously
included in continuing operations to discontinued
operations for qualifying dispositions under SFAS
144. (o) Stock Compensation In December 2002, SFAS 148, Accounting for
Stock-Based Compensation  Transition and
Disclosure,was issued. This statement amends SFAS
123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition for an
entity that voluntarily changes to the fair value
based method of accounting for stock-based employee
compensation. It also amends the disclosure
provisions of that statement to require prominent
disclosure about the effects on reported net income
of an entitys accounting policy decisions with
respect to stock-based employee compensation. The
Company elected to adopt this standard as of
January 31, 2003, resulting in additional
disclosures related to its stock-based compensation
plan. For purposes of the pro forma disclosures
required by SFAS 123, the Company has computed the
value of all stock and stock option awards granted
during fiscal 2004, 2003, and 2002, using the
Black-Scholes option pricing model. n ABRAMS 2004  26




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##### Table of Contents



If the Company had accounted for its stock-based compensation awards in
accordance with SFAS 123, pro forma results would have been as follows for the
years ended April 30: 2004
    
    2003
    
    2002Net (loss) earnings, as reported
    
    $
    (1,850,126
    )
    
    $
    (1,073,524
    )
    
    $
    811,774Deduct: Total stock-based compensation
expense as determined under fair
value
based method for all awards, net of
related tax effects
    
    
    (191,890
    )
    
    
    (165,411
    )
    
    
    (46,963
    )Add: Forfeitures, net of related tax effects
    
    
    124,997
    
    
    
    2,064
    
    
    
    94Pro forma net (loss) earnings
    
    $
    (1,917,019
    )
    
    $
    (1,236,871
    )
    
    $
    764,905Net (loss) earnings per share:Basic and
diluted - as reported
    
    $
    (.62
    )
    
    $
    (.37
    )
    
    $
    .28Basic and
diluted - pro forma
    
    $
    (.65
    )
    
    $
    (.42
    )
    
    $
    .26
 A summary of the options activity for the fiscal years ended April 30, 2004,
2003, and 2002, is as follows: 2004
    
    2003
    
    2002Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Exercise
    
    
    
    
    
    ExerciseShares
    
    Price
    
    Shares
    
    Price
    
    Shares
    
    PriceOutstanding at beginning
of year
    
    
    671,884
    
    
    $
    4.97
    
    
    
    150,250
    
    
    $
    4.00
    
    
    
    150,616
    
    
    $
    4.00Granted
    
    
    206,000
    
    
    
    5.10
    
    
    
    609,000
    
    
    
    5.10
    
    
    
    
    
    
    
    Forfeited
    
    
    (179,294
    )
    
    
    4.65
    
    
    
    (87,366
    )
    
    
    4.21
    
    
    
    (366
    )
    
    
    4.00Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at end of year
    
    
    698,590
    
    
    
    5.09
    
    
    
    671,884
    
    
    
    4.97
    
    
    
    150,250
    
    
    
    4.00Exercisable at end of year
    
    
    296,592
    
    
    $
    5.08
    
    
    
    74,759
    
    
    $
    4.00
    
    
    
    75,125
    
    
    $
    4.00
 The fair value for each option grant was estimated on the grant date using the
Black-Scholes option-pricing model with the following weighted average
assumptions: 2004
    
    2003
    
    2002Expected life (years)
    
    
    10
    
    
    5 and 10
    
    
    5Dividend yield
    
    
    4.01
    %
    
    
    3.68
    %
    
    
    4.16
    %Expected stock price volatility
    
    
    32
    %
    
    
    33
    %
    
    
    42
    %Risk-free interest rate
    
    
    4.52
    %
    
    3.22% and 4.65%
    
    
    4.93
    %
 Using these assumptions, the weighted average fair value per share of options
granted is $0.92, $1.18, and $1.05, for 2004, 2003, and 2002, respectively.  3
    
    DISCONTINUED OPERATIONS 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 Statement of Financial Accounting Standards
(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 buyer 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 standard, as of April 30, 2004, the Company had
no current assets that were classified as held for disposition or sale. n ABRAMS 2004  27




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##### Table of Contents



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. On
June 28, 2002, the Company sold its shopping center located in Englewood,
Florida, and recognized a pretax gain of approximately $1.0 million. In June
1999, the Company received notice from the Georgia State Properties Commission
that the Georgia World Congress Center Authority had made the determination to
acquire the Companys former manufacturing segments wood manufacturing
facility in Atlanta, Georgia. In October 1999, a Special Master appointed by
the court awarded the Company $4.5 million for the property, which was paid to the manufacturing
segment. Both the State and the Company appealed the award amount. During the
year ended April 30, 2002, the Company reached a settlement with the State and
recognized an after-tax gain of $1,720,749 on the transaction. As a result of these transactions, the Companys financial statements have been
prepared with these properties results of operations, cash flows, and the
gains from the sales shown as discontinued operations. All historical
statements have been restated in accordance with SFAS 144. Summarized financial
information for discontinued operations for the fiscal years ended April 30 is
as follows: 2004
    
    2003
    
    2002Rental income revenues
    
    $
    2,565,036
    
    
    $
    3,146,080
    
    
    $
    4,836,547Rental property operating expenses
    
    
    932,055
    
    
    
    1,031,688
    
    
    
    1,465,522Depreciation
    
    
    571,581
    
    
    
    797,605
    
    
    
    833,872Interest Expense
    
    
    424,610
    
    
    
    666,232
    
    
    
    1,958,991Total rental property expenses
    
    
    1,928,246
    
    
    
    2,495,525
    
    
    
    4,258,385Earnings from discontinued operations
    
    
    636,790
    
    
    
    650,555
    
    
    
    578,162Income tax expense
    
    
    (241,876
    )
    
    
    (249,413
    )
    
    
    (218,452
    )Earnings from discontinued operations, net of tax
    
    
    394,914
    
    
    
    401,142
    
    
    
    359,710Gain on disposition of discontinued operations
    
    
    3,972,230
    
    
    
    990,215
    
    
    
    2,776,749Income tax expense
    
    
    (1,510,307
    )
    
    
    (372,228
    )
    
    
    (1,056,000
    )Gain on sale of assets of discontinued
operations, net of tax
    
    
    2,461,923
    
    
    
    617,987
    
    
    
    1,720,749Earnings from discontinued operations, net of tax
    
    $
    2,856,837
    
    
    $
    1,019,129
    
    
    $
    2,080,459
 Balances atAssets of discontinued operations:
    
    April 30, 2004
    
    April 30, 2003Receivables
    
    $
    42,577
    
    
    $
    57,020Other
    
    
    14,370
    
    
    
    45,126$
    56,947
    
    
    $
    102,146
 Balances atLiabilities of discontinued operations:
    
    April 30, 2004
    
    April 30, 2003Income taxes
    
    $
    
    
    
    $
    476,635Accrued expenses
    
    
    8,328
    
    
    
    86,949$
    8,328
    
    
    $
    563,584
  4
    
    CONTRACTS IN PROGRESS Assets and liabilities related to contracts in progress, including contracts
receivable, are included in current assets and current liabilities as they will
be liquidated in the normal course of contract completion, which is expected to
occur within one year. Amounts billed and costs and earnings recognized on
contracts in progress at April 30 were: Costs and earnings in excess of billings:
    
    2004
    
    2003Accumulated costs and earnings
    
    $
    2,702,357
    
    
    $
    16,324,508Amounts billed
    
    
    1,841,417
    
    
    
    15,821,395$
    860,940
    
    
    $
    503,113Billings in excess of costs and earnings:Amounts billed
    
    $
    3,495,268
    
    
    $
    17,349,809Accumulated costs and earnings
    
    
    3,286,786
    
    
    
    16,667,135$
    208,482
    
    
    $
    682,674
 n ABRAMS 2004  28




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##### Table of Contents



5
    
    INCOME-PRODUCING PROPERTIES Income-producing properties and their estimated useful lives at April 30 were as follows: Estimateduseful lives
    
    2004
    
    2003Land
    
    
    N/A
    
    
    $
    9,109,422
    
    
    $
    13,777,053Buildings and improvements
    
    7-39 years
    
    
    31,937,313
    
    
    
    46,294,09641,046,735
    
    
    
    60,071,149Less - accumulated depreciation and amortization
    
    
    
    
    
    
    11,418,558
    
    
    
    16,892,112$
    29,628,177
    
    
    $
    43,179,037
 Depreciation expense from continuing operations for the years ended April 30,
2004, 2003, and 2002, was $936,138, $952,884, and $983,211, respectively.  6
    
    PROPERTY AND EQUIPMENT The major components of property and equipment and their estimated useful lives
at April 30 were as follows: Estimateduseful lives
    
    2004
    
    2003Building and improvements
    
    3-39 years
    
    $
    254,796
    
    
    $
    434,024Equipment
    
    3-10 years
    
    
    974,173
    
    
    
    845,553Vehicles
    
    
    
    
    
    
    399,442
    
    
    
    672,5341,628,411
    
    
    
    1,952,111Less - accumulated depreciation
    
    
    
    
    
    
    1,022,444
    
    
    
    1,480,298$
    605,967
    
    
    $
    471,813
 Depreciation expense from continuing operations for the years ended April 30,
2004, 2003, and 2002, was $218,773, $269,026, and $366,739, respectively.  7
    
    MORTGAGE NOTES PAYABLE AND LEASES As of April 30, 2004, the Company owned five shopping centers, two office
buildings, an office park, and a former manufacturing facility. Of the owned
properties, four of the five shopping centers and the office properties were
pledged as collateral on related
mortgage notes payable. Exculpatory provisions of the mortgage notes limit the
Companys liability for repayment to its interests in the respective mortgaged
properties. As of April 30, 2004, Kmart was a tenant in two of the five
Company-owned shopping centers. The owned shopping centers are leased to
tenants for terms expiring on various dates from fiscal years 2005 to 2021,
while leases on the office properties expire from fiscal years 2005 to 2012. The Company also leases six shopping centers under leaseback arrangements
expiring on various dates between fiscal years 2005 to 2015. The Companys
leases contain exculpatory provisions that limit the Companys liability for
payment to its interests in the respective leases. All of the leaseback centers
are subleased to the Kmart Corporation. The subleases on the leaseback shopping
centers either are the same as, or may be extended to correspond to, the
leaseback periods. All leases are operating leases. The owned shopping center
leases typically require that the tenants make fixed rental payments over a
five to twenty-five year period, and may provide for renewal options and for
contingent rentals, if the tenants sales volume in the leased space exceeds a
predetermined amount. In most cases, the shopping center leases provide that
the tenant bear its share of the cost of insurance, repairs, maintenance, and
taxes. Base rental revenues recognized from owned shopping centers and office
properties in 2004, 2003, and 2002, were approximately $5,209,000, $5,049,000,
and $5,044,000, respectively. Base rental revenues recognized from leaseback
shopping centers in 2004, 2003, and 2002, were approximately $1,904,000,
$2,031,000, and $2,497,000, respectively. Contingent rental revenues on all
shopping centers in 2004, 2003, and 2002, were approximately $138,000,
$181,000, and $174,000, respectively. Approximate future minimum annual rental receipts from all rental properties
are as follows: Year ending April 30,
    
    Owned
    
    Leaseback2005
    
    $
    5,001,000
    
    
    $
    1,651,0002006
    
    
    4,608,000
    
    
    
    1,476,0002007
    
    
    3,871,000
    
    
    
    888,0002008
    
    
    3,448,000
    
    
    
    618,0002009
    
    
    2,243,000
    
    
    
    303,000Thereafter
    
    
    8,611,000
    
    
    
    1,543,000$
    27,782,000
    
    
    $
    6,479,000
 n ABRAMS 2004  29




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##### Table of Contents



The expected future minimum principal and interest payments on mortgage notes
payable on the owned rental properties, and the approximate future minimum
rentals expected to be paid on the leaseback centers, are as follows: Owned Rental
PropertiesMortgage Payments
    

    LeasebackCenters RentalYear ending April
30,
    
    Principal
    
    
    
    Interest
    
    
    
    Payments2005
    
    $
    1,202,876
    
    
    $
    1,625,388
    
    
    $
    1,332,0002006
    
    
    7,280,267
    
    
    
    1,500,664
    
    
    
    1,146,0002007
    
    
    1,019,948
    
    
    
    1,419,158
    
    
    
    515,0002008
    
    
    6,672,095
    
    
    
    1,197,903
    
    
    
    287,0002009
    
    
    596,729
    
    
    
    843,873
    
    
    
    143,000Thereafter
    
    
    9,940,829
    
    
    
    4,415,986
    
    
    
    724,000$
    26,712,744
    
    
    $
    11,002,972
    
    
    $
    4,147,000
 The mortgage notes payable are due at various dates between January 1, 2008,
and January 1, 2026, and bear interest at rates ranging from 7.25% to 9.25%. At
April 30, 2004, the weighted average rate for all outstanding debt was 7.7%,
including other long-term debt and credit facilities (see Note 8). In
conjunction with the origination of a mortgage on an income-producing property,
an Additional Interest Agreement was executed, which prior to the loan being
restructured on July 8, 2004, entitled the lender to participate in fifty
percent of the quarterly net cash flow and fifty percent of the appreciation in
the property upon sale or refinance, as defined in the Agreement. The
appreciation participation liability, which is included in other liabilities,
was $3,048,264 and $2,721,448, at April 30, 2004, and 2003, respectively. The
related unamortized loan discount was $1,699,731 and $1,732,647, at April 30,
2004, and 2003, respectively. The principal amount of approximately $6.3
million associated with this loan is included in the year 2006 in the table
above (See Note17 regarding the loan restructuring).  8
    
    OTHER LONG-TERM DEBT AND CREDIT FACILITIES Other long-term debt at April 30 was as follows: 2004
    
    2003Real estate
construction loan bearing interest at the prime rate plus .375%; paid off
in March 2004
    
    $
    
    
    
    $
    7,249,849Amendment to
the construction loan shown above, permitting borrowings of up to
$4,942,419; bearing interest at the prime rate plus .375%; paid off in March 2004
    
    
    
    
    
    
    4,101,504Note payable bearing interest at the prime rate plus 1.5% (5.5% at April 30,2004);
interest only payments due monthly; matures December 18,2011; secured by all
general assets of The Wheatstone Energy Group, LLC
    
    
    1,000,000
    
    
    
    Note payable
bearing interest at 6.0%; interest due annually on January 31, and
principal payments due in installments as defined in the agreement commencing
on January 31,2006; matures on January 31,2008
    
    
    516,000
    
    
    
    Note payable
bearing interest at 6.8%; interest due annually on December 31,
beginning December 31, 2004, and principal payments due annually in
installments as defined in the agreement commencing on December 19,2008;
matures on December 19,2011
    
    
    295,000
    
    
    
    Note payable
with an imputed interest rate of 6.0%; principal payments due
annually in installments as defined in the agreement commencing on
December 26, 2004; matures on December 26,2006
    
    
    79,000
    
    
    
    Capital
lease obligation; monthly payments of $3,578 ending in July 2005
    
    
    53,495
    
    
    
    Various notes payable with interest rates ranging from 8.3% to 10.75%;
maturity dates ranging from September 2005 to November 2005
    
    
    48,083
    
    
    
    Total other long-term debt
    
    
    1,991,578
    
    
    
    11,351,353Less current maturities
    
    
    89,793
    
    
    
    1,044,446Total other
long-term debt, less current maturities
    
    $
    1,901,785
    
    
    $
    10,306,907
 n ABRAMS 2004  30




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##### Table of Contents



The future minimum principal payments due on other long-term debt are as
follows: Year Ending April 30,2005
    
    $
    89,7932006
    
    
    186,7852007
    
    
    162,0002008
    
    
    278,0002009
    
    
    40,000Thereafter
    
    
    1,235,000Total
    
    $
    1,991,578
 At April 30, 2004, the Company had commitments from a bank for unsecured lines
of credit totaling $7.5 million, of which a total of $150,000 is restricted as
it secures a letter of credit described below. These lines of credit bear
interest at the prime rate or LIBOR plus 2%, and have a commitment fee of
0.375% on any unused portion. The lines of credit expire on October 30, 2004.
At April 30, 2004, no amounts were outstanding under these lines of credit. In conjunction with terms of a real estate loan, the Company is required to
provide for potential future tenant improvement costs and lease commissions at
that property through additional collateral, in the form of a letter of credit
in the amount of $150,000 for each of the first three loan years, $300,000
during the fourth, fifth, and sixth loan years, and $450,000 during the
seventh, eighth, ninth and tenth loan years. The $150,000 letter of credit is
secured by one of the bank lines of credit, as discussed above.  9
    
    INCOME TAXES The benefit for income taxes from
continuing operations consists of the
following: Current
    
    Deferred
    
    TotalYear ended April 30, 2004Federal
    
    $
    
    
    
    $
    (1,996,583
    )
    
    $
    (1,996,583
    )State and local
    
    
    
    
    
    
    (374,359
    )
    
    
    (374,359
    )$
    
    
    
    $
    (2,370,942
    )
    
    $
    (2,370,942
    )Year ended April 30, 2003Federal
    
    $
    (171,907
    )
    
    $
    (965,506
    )
    
    $
    (1,137,413
    )State and local
    
    
    
    
    
    
    (173,587
    )
    
    
    (173,587
    )$
    (171,907
    )
    
    $
    (1,139,093
    )
    
    $
    (1,311,000
    )Year ended April 30, 2002Federal
    
    $
    (700,847
    )
    
    $
    (65,462
    )
    
    $
    (766,309
    )State and local
    
    
    (65,835
    )
    
    
    (2,551
    )
    
    
    (68,386
    )$
    (766,682
    )
    
    $
    (68,013
    )
    
    $
    (834,695
    )
 n  ABRAMS 2004 31




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##### Table of Contents



Total income tax benefit from continuing operations recognized in the
consolidated statements of operations differs from the amounts computed by
applying the federal income tax rate of 34% to pretax loss, as a result of the
following: Year ended April 302004
    
    2003
    
    2002Computed expected tax benefit
    
    $
    (2,406,488
    )
    
    $
    (1,157,242
    )
    
    $
    (715,149
    )Decrease in income taxes resulting
from:State and local income taxes, net
of federal income tax benefit
    
    
    (247,219
    )
    
    
    (153,758
    )
    
    
    (119,546
    )Valuation allowance
    
    
    282,765
    
    
    
    
    
    
    
    $
    (2,370,942
    )
    
    $
    (1,311,000
    )
    
    $
    (834,695
    )
 The tax effect of the temporary differences that give rise to significant
portions of the deferred income tax assets and deferred income tax liabilities,
at April 30, are presented below: 2004
    
    2003Deferred income tax assets:Items not currently deductible for tax purposes:Provisions for impairment on income-producing property
    
    $
    
    
    
    $
    1,026,816Net operating loss carryforwards, federal and state
    
    
    2,296,430
    
    
    
    1,579,861Valuation allowance
    
    
    (282,765
    )
    
    
    Income producing properties and property and equipment,
principally
because of differences in depreciation and capitalized interest
    
    
    799,357
    
    
    
    Capitalized costs
    
    
    96,261
    
    
    
    407,450Accrued directors fees
    
    
    115,110
    
    
    
    170,283Bad debt reserve
    
    
    212,769
    
    
    
    191,364Deferred compensation plan
    
    
    473,846
    
    
    
    461,468Compensated absences
    
    
    52,009
    
    
    
    86,471Other accrued expenses
    
    
    363,892
    
    
    
    441,805Other
    
    
    309,920
    
    
    
    184,000Gross deferred income tax assets
    
    
    4,436,829
    
    
    
    4,549,518Deferred income tax liabilities:Income-producing properties and property and equipment, principally
because of differences in depreciation and capitalized interest
    
    
    1,202,766
    
    
    
    1,707,847Gain on real estate sales structured as tax-deferred like-kind
exchanges
    
    
    5,179,395
    
    
    
    5,002,823Other
    
    
    108,808
    
    
    
    Gross deferred income tax liability
    
    
    6,490,969
    
    
    
    6,710,670Net deferred income tax liability
    
    $
    2,054,140
    
    
    $
    2,161,152
 Valuation allowance against deferred tax assets at April 30, 2004, and 2003,
was $282,765 and $0, respectively. The valuation allowance reduces tax deferred
tax assets to an amount that represents managements best estimate of the
amount of such deferred tax assets that more likely than not will be realized.  10
    
    401(K) PLAN The Company has a 401(k) plan (the Plan) which covers the majority of its
employees. Pursuant to the provisions of the Plan, eligible employees may make
salary deferral (before tax) contributions of up to 100% of their total
compensation per plan year, not to exceed a specified maximum contribution as
determined by the Internal Revenue Service. The Plan also includes provisions
that authorize the Company to make discretionary contributions. Such
contributions, if made, are allocated among all eligible employees as
determined under the Plan. The trustee under the Plan invests the assets of
each participants account, as directed by the participant. The Plan assets do
not include any stock of the Company. Funded employer contributions to the Plan
for 2004, 2003, and 2002, were approximately $54,000, $18,000, and $60,000,
respectively. The net assets in the Plan, which is administered by an
independent trustee, were approximately $5,060,000, $8,204,000, and $9,290,000,
at April 30, 2004, 2003, and 2002, respectively. In conjunction with the
acquisition of the assets of Servidyne Systems, Inc. in fiscal 2002, the
Company assumed a 401(k) plan (the Servidyne Plan), which covered
substantially all employees of the Energy and Facilities Solutions Segment at
that time. Under the provisions of the Servidyne Plan, participants could
contribute up to 100% of their compensation per plan year, not to exceed a
specified maximum contribution, as determined by the Internal Revenue Service.
The Company could also make discretionary contributions, and did make
contributions of approximately $19,500 and $15,000, in fiscal 2003 and 2002,
respectively. The Servidyne Plan was frozen as of January 1, 2003, and no more
employee or employer contributions were funded after that date. All employees
of the Energy and Facilities Solutions Segment are eligible to participate in
the Plan, as described above. n ABRAMS 2004 32




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##### Table of Contents



11
    
    SHAREHOLDERS EQUITY In August 2000, the shareholders approved the 2000 Stock Award Plan (the Award
Plan). The Award Plan permits the grant of incentive and non-qualified stock
options, non-restricted, restricted and performance stock awards, and stock
appreciation rights to directors, employees, independent contractors, advisors,
or consultants to the Company, as determined by the Compensation Committee of
the Board of Directors. The term and vesting requirements for each award are
determined by the Compensation Committee, but in no event may the term exceed
ten years. Incentive Stock Options under the Award Plan provide for the
purchase of the Companys common stock at not less than fair market value on
the date the option is issued. The total number of shares originally available
for grant under the Award Plan was 1,000,000 shares. Through April 30, 2004,
the Company has made the following grants of restricted shares: RestrictedSharesDate
    
    Granted
    
    General Vesting Period for Restricted SharesJanuary 19, 2001
    
    
    28,100
    
    

    One installment, on January 19, 2002May 18, 2001
    
    
    7,600
    
    
    One installment, on May 18, 2002November 28, 2001
    
    
    5,000
    
    
    One installment, on November 28, 2002July 29, 2002
    
    
    1,100
    
    
    One installment, on July 29, 2003March 11, 2003
    
    
    4,700
    
    
    One installment, on March 11, 2004January 6, 2004
    
    
    10,000
    
    
    One installment, on January 6, 2005
 During fiscal years 2004, 2003, and 2002, forfeitures of restricted shares,
which were not vested, totaled 1,400 shares, 400 shares, and 2,300 shares,
respectively. The Company recognizes compensation expense ratably over the vesting period.
Stock award compensation expense for the years ended April 30, 2004, 2003, and
2002, was $31,443, $20,446, and $113,440, respectively. As of April 30, 2004,
after forfeitures during the year, there were 9,200 shares outstanding under
restricted stock award grants that were not yet vested. In fiscal 2000, the Companys Board of Directors authorized the repurchase of
up to 200,000 shares of Common Stock during the twelvemonth period beginning
February 25, 2000, and ending February 24, 2001. In February 2002, February
2003, and most recently March 2004, the Companys Board reauthorized additional
repurchases of up to 200,000 shares of Common Stock in each of the subsequent
twelve-month periods, the most recent to end on March 3, 2005. During fiscal
2002 and 2003, the Company repurchased 44,524 shares and 128 shares,
respectively, of Common Stock. There were no shares repurchased during fiscal
2004.  12
    
    NET EARNINGS (LOSS) PER SHARE Earnings per share are calculated in accordance with SFAS 128, Earnings Per
Share, which requires dual presentation of basic and diluted earnings per share
on the face of the income statement for all entities with complex capital
structures. Basic and diluted weighted-average share differences result solely
from dilutive common stock options. Basic earnings per share are computed by
dividing net earnings by the weighted average shares outstanding during the
reporting period. Dilutive potential common shares are calculated in accordance
with the treasury stock method, which assumes that the proceeds from the
exercise of all options are used to repurchase common shares at the current
market value. The number of shares remaining after the exercise proceeds are
exhausted represents the potentially dilutive effect of the options. The
dilutive number of common shares for the fourth quarter 2004 and 2003, were
3,077,686 and 2,912,659, respectively; and for the fiscal year ended 2004 and
2003, were 2,971,172 and 2,919,203, respectively. Since the Company had losses
from continuing operations for all periods presented, all stock equivalents
were antidilutive during
these periods, and are therefore excluded from weighted average shares
outstanding. n ABRAMS 2004 33




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##### Table of Contents



The following tables set forth the computations of basic and diluted net
earnings (loss) per share: For the year ended April 30, 2004Earnings (loss)
    
    Shares
    
    Per share(numerator)
    
    (denominator)
    
    amountBasic EPS  loss per share from continuing operations
    
    $
    (4,706,963
    )
    
    
    2,971,172
    
    
    $
    (1.58
    )Basic EPS  earnings per share from discontinued
operations
    
    
    2,856,837
    
    
    
    2,971,172
    
    
    
    .96Effect of dilutive securities
    
    
    
    
    
    
    
    
    
    
    Diluted EPS  loss per share
    
    $
    (1,850,126
    )
    
    
    2,971,172
    
    
    $
    (.62
    )
 For the year ended April 30, 2003Earnings (loss)
    
    Shares
    
    Per share(numerator)
    
    (denominator)
    
    amountBasic EPS  loss per share from continuing operations
    
    $
    (2,092,653
    )
    
    
    2,910,475
    
    
    $
    (.72
    )Basic EPS  earnings per share from discontinued
operations
    
    
    1,019,129
    
    
    
    2,910,475
    
    
    
    .35Effect of dilutive securities
    
    
    
    
    
    
    
    
    
    
    Diluted EPS  loss per share
    
    $
    (1,073,524
    )
    
    
    2,910,475
    
    
    $
    (.37
    )
 For the year ended April 30, 2002Earnings (loss)
    
    Shares
    
    Per share(numerator)
    
    (denominator)
    
    amountBasic EPS  loss per share from continuing operations
    
    $
    (1,268,685
    )
    
    
    2,926,248
    
    
    $
    (.43
    )Basic EPS  earnings per share from discontinued
operations
    
    
    2,080,459
    
    
    
    2,926,248
    
    
    
    .71Effect of dilutive securities
    
    
    
    
    
    
    
    
    
    
    Diluted EPS  earnings per share
    
    $
    811,774
    
    
    
    2,926,248
    
    
    $
    .28
  13
    
    OPERATING SEGMENTS The Company had four operating segments at April 30, 2004: Energy and
Facilities Solutions, Energy Services, Real Estate, and Construction. The
Energy and Facilities Solutions Segment, which began in fiscal 2002, assists
its customers in improving facility operating performance, reducing energy
consumption, and lowering ownership and operating costs, while improving the
level of service and comfort for building occupants, through its: (1)
engineering and consulting services, including energy analyses, facility
studies, energy monitoring services, building qualification for the EPAs
Energy Star® and LEED certifications, and HVAC retrofit design; and (2)
maintenance and service request solutions, including its iTendant platform
using Web and wireless technologies. The primary focus for the Energy and
Facilities Solutions Segment is the continental United States, although it does
business internationally as well. The Energy Services Segment provides turnkey
implementation of energy saving lighting programs and energy related-services
that reduce energy consumption and operating costs to commercial, industrial,
and institutional facilities. The primary focus for the Energy Services Segment
is the continental United States. The Real Estate Segment is involved in the
investment and development of shopping centers and office properties in the
Southeast and Midwest. The Construction Segments activities historically
consisted of general contracting construction services, including expansion,
remodeling and renovation of retail store buildings, banks, shopping centers,
warehouses and distribution centers, and other types of commercial
construction. Although the Construction Segment performed work throughout much
of the United States, it concentrated its activities principally in the
southern and midwestern states. The operating segments are managed separately and maintain separate personnel,
due to the differing services offered by each segment. Management of each of
the segments evaluates and monitors the performance of the respective segment
primarily based on the earnings or losses prior to income taxes, cash flows,
and activities consistent with the Companys long-term strategic objectives.
The significant accounting policies utilized by the operating segments are the
same as those summarized in Note 2 to the accompanying financial statements of
the Company. Total revenue by operating segment includes both revenues from unaffiliated
customers, as reported in the Companys consolidated statements of operations,
and intersegment revenues, which are generally at prices negotiated between
segments. The Company had revenues from The Home Depot, Inc., primarily representing
revenues in the Construction Segment, aggregating approximately 37%, 59%, and
56% of consolidated revenues from continuing operations in 2004, 2003, and
2002, respectively. Revenues from Academy Sports & Outdoor, generated entirely
in the Construction Segment, totaled 18% of consolidated revenues in 2002, but
were less than 10% of consolidated revenues in 2004 and 2003. Earnings (loss) before income taxes from continuing operations represent total
revenues less operating expenses, including depreciation and interest. Selling,
general and administrative, and interest costs, deducted in the computation of
earnings (loss) before income taxes from continuing operations of each segment,
represent the actual costs incurred by that segment. They exclude any
extraordinary items. Parent expenses have not been allocated to the
subsidiaries in the following table. Segment assets are those that are used in the Companys operations in each
segment, including receivables due from other segments and assets from
discontinued operations. The Parent Companys assets are primarily cash and
cash equivalents, the cash surrender value of life insurance, receivables, and
assets related to deferred compensation plans. Liquid assets attributable to
the Companys former manufacturing segments discontinued operations are also
included in the Parent Companys assets in 2004, 2003, and 2002. n ABRAMS 2004 34




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##### Table of Contents



13
    
    OPERATING SEGMENTS continued Energy
    
    Energyand Facilities
    
    Services
    
    RealSolutions
    
    (Note 14)
    
    Estate
    
    Construction
    
    Parent
    
    Eliminations
    
    Consolidated2004Revenues from unaffiliated
customers
    
    $
    2,962,308
    
    
    $
    2,602,025
    
    
    $
    7,882,431
    
    
    $
    25,500,352
    
    
    $
    
    
    
    $
    
    
    
    $
    38,947,116Interest and other income
    
    
    
    
    
    
    13,445
    
    
    
    92,046
    
    
    
    1,728
    
    
    
    27,785
    
    
    
    
    
    
    
    135,004Intersegment revenue
    
    
    13,600
    
    
    
    32,044
    
    
    
    470,008
    
    
    
    889,188
    
    
    
    3,076
    
    
    
    (1,407,916
    )
    
    
    Total revenues from
continuing
operations
    
    $
    2,975,908
    
    
    $
    2,647,514
    
    
    $
    8,444,485
    
    
    $
    26,391,268
    
    
    $
    30,861
    
    
    $
    (1,407,916
    )
    
    $
    39,082,120Operating earnings (loss)
from
continuing
operations
    
    $
    (1,092,673
    )
    
    $
    (64,621
    )
    
    $
    521,279
    
    
    $
    (3,536,780
    )
    
    $
    (2,725,528
    )
    
    $
    (179,582
    )
    
    $
    (7,077,905
    )Segment assets
    
    $
    4,842,959
    
    
    $
    5,746,891
    
    
    $
    45,935,012
    
    
    $
    7,674,876
    
    
    $
    19,726,643
    
    
    $
    (22,050,362
    )
    
    $
    61,876,019Goodwill
    
    $
    1,963,248
    
    
    $
    3,034,994
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,998,242Interest expense
    
    $
    1,491
    
    
    $
    44,750
    
    
    $
    2,445,570
    
    
    $
    2,319
    
    
    $
    18,558
    
    
    $
    
    
    
    $
    2,512,688Depreciation and amortization
    
    $
    229,772
    
    
    $
    45,374
    
    
    $
    1,227,866
    
    
    $
    132,719
    
    
    $
    64,514
    
    
    $
    (14,436
    )
    
    $
    1,685,809Capital expenditures
    
    $
    18,233
    
    
    $
    9,282
    
    
    $
    1,075,371
    
    
    $
    13,921
    
    
    $
    110,107
    
    
    $
    
    
    
    $
    1,226,914
 Energy
    
    Energyand Facilities
    
    Services
    
    RealSolutions
    
    (Note 14)
    
    Estate
    
    Construction
    
    Parent
    
    Eliminations
    
    Consolidated2003Revenues from unaffiliated
customers
    
    $
    2,900,191
    
    
    $
    
    
    
    $
    8,735,091
    
    
    $
    59,527,859
    
    
    $
    
    
    
    $
    
    
    
    $
    71,163,141Interest and other income
    
    
    
    
    
    
    
    
    
    
    89,360
    
    
    
    9,903
    
    
    
    22,342
    
    
    
    (6,306
    )
    
    
    115,299Intersegment revenue
    
    
    
    
    
    
    
    
    
    
    449,549
    
    
    
    
    
    
    
    
    
    
    
    (449,549
    )
    
    
    Total revenues from
continuing
operations
    
    $
    2,900,191
    
    
    $
    
    
    
    $
    9,274,000
    
    
    $
    59,537,762
    
    
    $
    22,342
    
    
    $
    (455,855
    )
    
    $
    71,278,440Operating earnings (loss)
from
continuing
operations
    
    $
    (476,283
    )
    
    $
    
    
    
    $
    652,159
    
    
    $
    (432,894
    )
    
    $
    (3,162,250
    )
    
    $
    15,615
    
    
    $
    (3,403,653
    )Segment assets
    
    $
    3,624,372
    
    
    $
    
    
    
    $
    54,413,919
    
    
    $
    15,073,267
    
    
    $
    13,043,446
    
    
    $
    (12,357,906
    )
    
    $
    73,797,098Goodwill
    
    $
    1,741,831
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,741,831Interest expense
    
    $
    7,912
    
    
    $
    
    
    
    $
    2,357,412
    
    
    $
    942
    
    
    $
    11,287
    
    
    $
    
    
    
    $
    2,377,553Depreciation and amortization
    
    $
    222,155
    
    
    $
    
    
    
    $
    1,133,322
    
    
    $
    246,783
    
    
    $
    50,498
    
    
    $
    (14,436
    )
    
    $
    1,638,322Capital expenditures
    
    $
    31,810
    
    
    $
    
    
    
    $
    264,986
    
    
    $
    67,050
    
    
    $
    18,404
    
    
    $
    
    
    
    $
    382,250
 Energy
    
    Energyand Facilities
    
    Services
    
    RealSolutions
    
    (Note 14)
    
    Estate
    
    Construction
    
    Parent
    
    Eliminations
    
    Consolidated2002Revenues from unaffiliated
customers
    
    $
    2,994,879
    
    
    $
    
    
    
    $
    8,829,764
    
    
    $
    100,687,872
    
    
    $
    
    
    
    $
    
    
    
    $
    112,512,515Interest and other income
    
    
    
    
    
    
    
    
    
    
    143,138
    
    
    
    60,537
    
    
    
    55,188
    
    
    
    (10,238
    )
    
    
    248,625Intersegment revenue
    
    
    
    
    
    
    
    
    
    
    461,818
    
    
    
    
    
    
    
    
    
    
    
    (461,818
    )
    
    
    Total revenues from
continuing
operations
    
    $
    2,994,879
    
    
    $
    
    
    
    $
    9,434,720
    
    
    $
    100,748,409
    
    
    $
    55,188
    
    
    $
    (472,056
    )
    
    $
    112,761,140Operating earnings (loss)
from
continuing
operations
    
    $
    (135,945
    )
    
    $
    
    
    
    $
    531,842
    
    
    $
    243,344
    
    
    $
    (2,785,300
    )
    
    $
    42,679
    
    
    $
    (2,103,380
    )Segment assets
    
    $
    3,452,921
    
    
    $
    
    
    
    $
    67,143,652
    
    
    $
    18,011,119
    
    
    $
    12,843,051
    
    
    $
    (9,666,373
    )
    
    $
    91,784,370Goodwill
    
    $
    1,741,831
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,741,831Interest expense
    
    $
    10,431
    
    
    $
    
    
    
    $
    2,414,127
    
    
    $
    5,255
    
    
    $
    7,925
    
    
    $
    
    
    
    $
    2,437,738Depreciation and amortization
    
    $
    201,399
    
    
    $
    
    
    
    $
    1,618,143
    
    
    $
    348,137
    
    
    $
    127,041
    
    
    $
    (14,436
    )
    
    $
    2,280,284Capital expenditures
    
    $
    39,154
    
    
    $
    
    
    
    $
    624,801
    
    
    $
    14,655
    
    
    $
    13,769
    
    
    $
    
    
    
    $
    692,379
 n  ABRAMS 2004 35




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14
    
    ACQUISITIONS Acquisition of The Wheatstone Energy Group, Inc. On December 19, 2003, The Wheatstone Energy Group,
LLC, an indirect wholly-owned subsidiary of the
Company, acquired substantially all of the assets
and assumed certain liabilities of The Wheatstone
Energy Group, Inc. (TWEG) for a purchase price of
approximately $4.8 million. TWEG was engaged in the
business of providing energy efficient lighting
system installation services and other related
energy conservation services, and the Company
intends to continue to offer these services. The
consideration consisted of 23,842 newly-issued
shares of the Companys common stock, with a fair
value of $89,645, the payment of approximately $1.3
million to certain trade creditors of TWEG from
available cash, and the assumption of approximately
$2.9 million of TWEGs liabilities. Also in
connection with the transaction, the Company issued
110,000 newly-issued shares of the Companys common
stock, with a fair value of $424,380, and a warrant
to purchase an additional 40,000 shares of the
Companys common stock at an exercise price of
$5.10 per share, with a fair value of approximately
$36,800 determined using the Black-Scholes option
pricing model, to a lender of TWEG. The amount and
type of consideration was determined by negotiation
among the parties. The Companys subsidiary acquired substantially all
of the assets of TWEG, including cash, accounts
receivable, inventory, personal property and
equipment, proprietary information, intellectual
property, and TWEGs right, title and interest to
assigned contracts. Only specified liabilities of
TWEG were assumed, including executory obligations
under disclosed assigned contracts, current balance
sheet liabilities, and certain debt for borrowed
funds from two lenders of TWEG. The following table summarizes the estimated fair
values of the assets acquired and liabilities
assumed at the date of acquisition. OperationsAcquired from
    
    EstimatedTWEG
    
    LifeCurrent assets
    
    $
    933,982Property, furniture and
equipment, net
    
    
    336,117
    
    
    Various (3-5)Customer relationships
    
    
    218,000
    
    
    5 yearsTrademark
    
    
    280,000
    
    
    IndefiniteNon-competes
    
    
    3,000
    
    
    2 yearsWebsite/Software
    
    
    42,438
    
    
    3 yearsGoodwill
    
    
    3,034,994
    
    
    IndefiniteTotal assets acquired
    
    
    4,848,531Current liabilities
    
    
    1,032,404Long term liabilities
    
    
    1,890,0002,922,404Net assets acquired
    
    $
    1,926,127
 The trademarks and goodwill are not subject to
amortization and the amount assigned to goodwill is
not deductible for tax purposes. The goodwill
amount has been assigned to the Energy
Services Segment. The acquired assets, the assumed
liabilities, and the results of operations have
been included in the Companys financial statements
since the date of acquisition. Acquisition of Prestley Mill Forest Medical Office Building On April 5, 2004, Prestley Mill, LLC, a
wholly-owned subsidiary of the Company acquired a
professional medical office building located in
Douglasville, Georgia. The Company used available
cash and assumed a mortgage note payable to
purchase the asset for approximately $4.4 million, including the
costs associated with completing the transaction. The following table summarizes the estimated fair
values of the assets and liabilities acquired at
the date of acquisition: OperationsAcquired from
    
    EstimatedPrestley Mill
    
    LifeLand
    
    $
    609,000Building
    
    
    2,569,575
    
    
    39 yearsTenant improvements
    
    
    725,592
    
    
    Over life of lease termLease costs
    
    
    470,833
    
    
    Over life of lease termTotal assets acquired
    
    
    4,375,000Mortgage note payable
    
    
    2,941,469Net assets acquired
    
    $
    1,433,531
 The assets, mortgage note payable, and results of
operations of Prestley Mill have been included in
the Companys financial statements since the date
of acquisition. Acquisition of iTendant, Inc. On April 16, 2004, Servidyne Systems, LLC, a
wholly-owned subsidiary of the Company, acquired
substantially all of the assets and assumed certain
liabilities of iTendant, Inc. (iTEN) for a
purchase price of approximately $1.3 million. iTEN
was engaged in the provision of property services
and maintenance solutions that automate service
requests and maintenance management using the
internet and wireless hand held devices, and the
Company intends to continue this business. The
consideration consisted of 123,547 newly-issued
shares of the Companys common stock, with a fair
value of $252,075, the payment of $500,000 cash,
and the assumption of approximately $170,000 of
iTENs liabilities. Additional contingent
consideration is provided for based on future
operating goals and performance. Consideration was
determined by negotiation among the parties. The Companys subsidiary acquired substantially all
of the assets of iTEN, including cash, accounts
receivable, personal property and equipment,
proprietary information, intellectual property,
software, and iTENs right, title, and interest to
assigned contracts. Only specified liabilities of
iTEN were assumed, including executory obligations
under disclosed assigned contracts and current
balance sheet liabilities. n ABRAMS
2004  36




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The following table summarizes the estimated fair
values of the assets acquired and liabilities
assumed at the date of acquisition: OperationsAcquired from
    
    EstimatediTEN
    
    LifeCurrent assets
    
    $
    64,599Property, furniture and equipment, net
    
    
    22,560
    
    
    Various (2-5 years)Software
    
    
    854,879
    
    
    5 yearsNon-competes
    
    
    7,247
    
    
    2 yearsAssembled workforce
    
    
    217,622
    
    
    IndefiniteTrademark
    
    
    106,399
    
    
    IndefiniteTotal assets acquired
    
    
    1,273,306Current liabilities
    
    
    174,136Net assets acquired
    
    $
    1,099,170
 The acquired assets, assumed liabilities and
results of operations have been included in the
Companys financial statements since the date of
acquisition as part of the Energy Services Segment. Proformas The following table summarizes the results of the
Company on a pro forma basis, as if the acquisition
of TWEG, Prestley Mill, and iTEN had occurred at
the beginning of each period. These results do not
purport to represent what the results of operations
for the Company actually would have been or to be
indicative of the future results of operations of
the Company (in thousands, except per share
amounts). (Unaudited)For the year ended April 30,2004
    
    2003Revenues
    
    $
    43,087
    
    
    $
    79,161Net loss
    
    
    (3,255
    )
    
    
    (3,544
    )Net loss per share -
basic and diluted
    
    $
    (1.10
    )
    
    $
    (1.22
    )
  15
    
    GOODWILL AND OTHER INTANGIBLE ASSETS The gross carrying amounts and accumulated
amortization for all of the Companys intangible
assets are as follows: April 30, 2004Gross Carrying
    
    AccumulatedAmount
    
    AmortizationAmortized intangible assetsProprietary customer
software solutions
    
    $
    1,284,586
    
    
    $
    296,638Computer software
    
    
    384,276
    
    
    
    311,821Real estate lease costs
    
    
    1,821,682
    
    
    
    699,212Customer relationships
    
    
    218,000
    
    
    
    14,533Deferred loan costs
    
    
    946,954
    
    
    
    539,022Other
    
    
    39,033
    
    
    
    9,099$
    4,694,531
    
    
    $
    1,870,325Unamortized intangible assetsTrademark
    
    $
    703,516
    
    
    $
    
 April 30, 2003Gross Carrying
    
    AccumulatedAmount
    
    AmortizationAmortized intangible assetsProprietary customer
software solutions
    
    $
    960,419
    
    
    $
    386,440Computer software
    
    
    349,016
    
    
    
    282,995Real estate lease costs
    
    
    1,850,252
    
    
    
    957,674Deferred loan costs
    
    
    947,979
    
    
    
    482,918Other
    
    
    28,660
    
    
    
    5,733$
    4,136,326
    
    
    $
    2,115,760Unamortized intangible assetsTrademark
    
    $
    315,261
    
    
    $
    
 Aggregate amortization
expense for all amortized intangible assets  For the year ended April 30, 2004
    
    $
    465,299For the year
ended April 30, 2003
    
    
    499,268
 Estimated amortization expense for all amortized intangible
assets for the fiscal year ended April 30,  2005
    
    $
    581,9892006
    
    
    462,5472007
    
    
    434,8552008
    
    
    405,7122009
    
    
    348,635
 The changes in the carrying
amount of goodwill are as follows: Balance as of April 30, 2002
    
    $
    1,741,831Goodwill acquired during the year
    
    
    Balance as of April 30, 2003
    
    
    1,741,831Goodwill acquired during the year
    
    
    3,256,411Balance as of April 30, 2004
    
    $
    4,998,242
 In fiscal 2004, the Company changed the estimated
useful life of one of the proprietary customer
software offerings resulting in a charge to
earnings of approximately $267,000. This expense
is recorded in selling, general and administrative
expenses in the accompanying statement of
operations for the Energy and Facilities Solutions
Segment.  16
    
    COMMITMENTS AND CONTINGENCIES Effective April 30, 2003, the Company terminated an
employment agreement and entered into a new
retirement agreement with a former officer and
director of the Company. Beginning May 1, 2003, the
new agreement required the Company to pay a
retirement benefit of approximately $87,000 through
August 19, 2003, and approximately $100,000 per
year thereafter for a term of four years ending on
August 19, 2007. In addition, the Company will also
continue to provide certain medical insurance
benefits through the term of the retirement
agreement. The new agreement requires that the
retirees stock options expire no later than August
19, 2004. The retirement agreement would terminate
early in the event of the death of the retiree. The Company announced on July 7, 2003, that an
internal investigation, which was conducted by the
Companys legal counsel at the request of senior
management, revealed information n ABRAMS 2004 37




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##### Table of Contents



suggesting that activities in violation of Federal
antitrust laws may have taken place in a certain
job bidding process for one customer of the
Companys subsidiary, Abrams Construction, Inc. The
results of this investigation were reported to the
Board of Directors of the Company on June 9, 2003.
The Company voluntarily communicated the results of
its investigation to the United States Department
of Justice (DOJ). On July 1, 2003, the DOJ issued
a conditional letter of amnesty to the Company and
its subsidiaries for their cooperation in
recognizing and then immediately reporting the
irregularities. The Company believes, based on its
internal investigation, that the specific
improprieties were confined to a bidding process
for The Home Depot, Inc. (Home Depot). At this
time, the Company has no reason to believe that any
other customers were affected by such inappropriate
behavior. The Company also communicated its
concerns about the job bidding process to Home
Depot. The Company believes that it has satisfied all of
the DOJs requests for document production, in
conjunction with its on-going cooperation with the
DOJ investigation, and has otherwise complied with
the conditions of the letter of amnesty. The
remaining estimated costs associated with this
matter are not expected to be material. Such cost
estimates, however, are particularly difficult to
make with any precision. To date, no private party
has made, or threatened to make, any claim in
connection with this matter. It is possible,
however, that claims could be made as a result of
this situation, and such claims could be material. 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. The case is
currently being arbitrated. The dispute arises out
of the former asset managers provision of real
estate services to API. The Company believes


APIs counter claims against its former asset
manager and its defenses to the asset managers
claims are meritorious and intends to continue to
vigorously pursue its claims and assert its defenses. The Company believes the ultimate disposition of
the above noted legal proceedings and claims or
potential claims will not have a material adverse
affect on the financial condition, cash flows, or
results of operations of the Company; however, the
Company cannot predict the ultimate disposition of
the above noted claims, potential claims, and
proceedings, and therefore, the Company cannot be
certain that the above noted legal proceedings and
claims or potential claims will not have a material
adverse effect on the financial condition, cash
flows, or results of operations of the Company. The
Company is subject to other various legal
proceedings and claims that arise in the ordinary
course of business. While the resolution of these
matters cannot be predicted with certainty, the
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.  17
    
    SUBSEQUENT EVENTS In May 2004, the Company acquired the operating
business and assets of Atlanta-based Building
Performance Engineers, Inc. for a purchase price of
approximately $350,000. The consideration consisted
of 21,126 newly-issued shares of the Companys
common stock, with a fair value of $94,906, issued
a note for $150,000, and paid $100,000 cash. In July 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 is for $7.8 million, bears
interest at 6.125%, and matures on July 1, 2029,
but may be called after July 1, 2011, with thirteen
months notice. However, the Companys liability
for repayment is limited to its interest in the
center. n ABRAMS
2004 38




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18
    
    QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Quarterly financial information for the fiscal years ended April 30, 2004, and
2003 (dollars in thousands, except per share amounts): Fiscal Year Ended April 30, 2004First Quarter
    
    Second Quarter
    
    Third Quarter
    
    Fourth QuarterTotal revenues
    
    $
    13,730
    
    
    $
    13,069
    
    
    $
    5,562
    
    
    $
    6,721Gross profit
    
    
    1,502
    
    
    
    1,397
    
    
    
    1,057
    
    
    
    1,683Net (loss) earnings
    
    
    (948
    )
    
    
    (1,057
    )
    
    
    (883
    )
    
    
    1,038Net (loss) earnings per share - basic and diluted
    
    
    (.33
    )
    
    
    (.36
    )
    
    
    (.30
    )
    
    
    .37
 Fiscal Year Ended April 30, 2003First Quarter
    
    Second Quarter
    
    Third Quarter
    
    Fourth QuarterTotal revenues
    
    $
    17,066
    
    
    $
    22,803
    
    
    $
    14,991
    
    
    $
    16,418Gross profit
    
    
    1,082
    
    
    
    1,544
    
    
    
    1,578
    
    
    
    2,813Net earnings (loss)
    
    
    164
    
    
    
    (543
    )
    
    
    (603
    )
    
    
    (92
    )Net earnings (loss) per share - basic and diluted
    
    
    .06
    
    
    
    (.18
    )
    
    
    (.21
    )
    
    
    (.04
    )
 SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS AdditionsBalance at
    
    Charged to
    
    Charged toBeginning
    
    Costs and
    
    Other
    
    
    
    
    
    Balance atof Year
    
    Expenses
    
    Accounts
    
    Deductions*
    
    End of YearDescriptionAllowance for doubtful
accountsYear ended April 30, 2004
    
    $
    492,045
    
    
    $
    40,084
    
    
    $
    
    
    
    $
    60,650
    
    
    $
    471,479Year ended April 30, 2003
    
    
    1,031,460
    
    
    
    84,727
    
    
    
    
    
    
    
    624,142
    
    
    
    492,045Year ended April 30, 2002
    
    
    961,461
    
    
    
    203,687
    
    
    
    
    
    
    
    133,688
    
    
    
    1,031,460
  *
    
    Allowance for doubtful accounts deductions resulted from the subsequent
write-off and/or recovery of the related receivable. n
ABRAMS 2004 39




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SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION, APRIL 30, 2004 CostsCapitalizedSubsequentInitial Cost to Company
    
    to AcquisitionBuilding andDescription
    
    Encumbrances
    
    Land
    
    Improvements
    
    ImprovementsINCOME-PRODUCING PROPERTIES:Shopping Center - Jackson, MI
    
    $
    2,584,318
    
    
    $
    401,195
    
    
    $
    1,788,183
    
    
    $
    2,112,307Kmart - Morton, IL
    
    
    2,340,652
    
    
    
    18,005
    
    
    
    2,767,764
    
    
    
    Kmart - Columbus, GA
    
    
    1,385,623
    
    
    
    11,710
    
    
    
    2,356,920
    
    
    
    10,078Leaseback Shopping Center - Davenport, IA
    
    
    
    
    
    
    
    
    
    
    2,150
    
    
    
    193,261Leaseback Shopping Center - Jacksonville, FL
    
    
    
    
    
    
    
    
    
    
    42,151
    
    
    
    Leaseback Shopping Center - Orange Park, FL
    
    
    
    
    
    
    
    
    
    
    127,487
    
    
    
    35,731Leaseback Shopping Center - Minneapolis, MN
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,778Office Building - Atlanta, GA
    
    
    4,785,829
    
    
    
    660,000
    
    
    
    4,338,102
    
    
    
    770,063Office
Building - Douglasville, GA (4)
    
    
    2,941,469
    
    
    
    609,000
    
    
    
    3,238,235
    
    
    
    Office Park - Marietta, GA
    
    
    6,059,460
    
    
    
    1,750,000
    
    
    
    6,417,275
    
    
    
    1,038,647Shopping Center - Cincinnati, OH
    
    
    
    
    
    
    1,699,410
    
    
    
    617,102
    
    
    
    435,559Shopping Center - Jacksonville, FL
    
    
    8,315,124
    
    
    
    3,908,004
    
    
    
    5,170,420
    
    
    
    158,36228,412,475
    
    
    
    9,057,324
    
    
    
    26,865,789
    
    
    
    4,794,786REAL ESTATE HELD FOR FUTURE
DEVELOPMENT OR SALE:Land - Louisville, KY
    
    
    
    
    
    
    80,011
    
    
    
    
    
    
    
    Land - Oakwood, GA
    
    
    
    
    
    
    234,089
    
    
    
    
    
    
    
    543,330Land - North Ft. Myers, FL
    
    
    
    
    
    
    2,411,703
    
    
    
    
    
    
    
    363,012Land and
Building - Atlanta, GA (5)
    
    
    
    
    
    
    92,226
    
    
    
    722,033
    
    
    
    
    
    
    
    2,818,029
    
    
    
    722,033
    
    
    
    906,342$
    28,412,475
    
    
    $
    11,875,353
    
    
    $
    27,587,822
    
    
    $
    5,701,128
 Reconciliations of total real estate carrying value and accumulated
depreciation for the three years ended April 30, are as follows: Real Estate
    
    Accumulated Depreciation2004
    
    2003
    
    2002
    
    2004
    
    2003
    
    2002BALANCE AT
BEGINNING OF YEAR
    
    $
    64,516,511
    
    
    $
    80,707,855
    
    
    $
    80,081,541
    
    
    $
    15,784,645
    
    
    $
    19,449,160
    
    
    $
    17,235,470ADDITIONS DURING YEARReal Estate
    
    
    4,940,289
    (7)
    
    
    260,929
    
    
    
    611,585
    
    
    
    
    
    
    
    
    
    
    
    Depreciation
continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    936,138
    
    
    
    952,884
    
    
    
    983,211Depreciation
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    666,232
    
    
    
    824,914Transfers
    
    
    
    
    
    
    
    
    
    
    814,259
    (5)
    
    
    
    
    
    
    
    
    
    
    492,548
    (5)4,940,289
    
    
    
    260,929
    
    
    
    1,425,844
    
    
    
    936,138
    
    
    
    1,619,116
    
    
    
    2,300,673DEDUCTIONS DURING YEARAccumulated depreciation on
properties sold or transferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,809,675
    (8)
    
    
    5,283,631
    (9)
    
    
    Carrying value of real estate
sold, transferred, or retired
    
    
    23,947,017
    (8)
    
    
    16,452,273
    (9)
    
    
    799,530
    
    
    
    
    
    
    
    
    
    
    
    86,98323,947,017
    
    
    
    16,452,273
    
    
    
    799,530
    
    
    
    4,809,675
    
    
    
    5,283,631
    
    
    
    86,983BALANCE AT CLOSE OF YEAR
    
    $
    45,509,783
    
    
    $
    64,516,511
    
    
    $
    80,707,855
    
    
    $
    11,911,108
    
    
    $
    15,784,645
    
    
    $
    19,449,160
 n
ABRAMS 2004 40




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##### Table of Contents



Gross Amounts at WhichCarried at Close of Year
    
    
    
    
    
    
    
    
    
    
    
    
    
    Life on WhichDepreciationin LatestEarningsBuilding and
    
    Capitalized
    
    
    
    
    
    Net Accumulated
    
    Date(s) of
    
    Date
    
    StatementLand
    
    Improvements
    
    Interest
    
    Total (1)
    
    Depreciation
    
    Construction
    
    Acquired
    
    is Computed$
    453,293
    
    
    $
    3,848,392
    
    
    $
    89,866
    
    
    $
    4,391,551
    
    
    $
    2,194,418
    
    
    
    1972, 1996, 2004
    
    
    
    
    
    
 
     39 years18,005
    
    
    
    2,767,764
    
    
    
    
    
    
    
    2,785,769
    
    
    
    2,657,125
    
    
    
    1980, 1992
    
    
    
    
    
    
 
     25 years11,710
    
    
    
    2,366,998
    
    
    
    238,970
    
    
    
    2,617,678
    
    
    
    2,454,360
    
    
    
    1980, 1988
    
    
    
    
    
    
 
     25 years
    
    
    
    195,411
    
    
    
    
    
    
    
    195,411
    
    
    
    185,872
    
    
    
    1995
    
    
    
    
    
    
 
     7 years
    
    
    
    42,151
    
    
    
    
    
    
    
    42,151
    
    
    
    19,389
    
    
    
    1994
    
    
    
    
    
    
 
     25 years
    
    
    
    163,218
    
    
    
    
    
    
    
    163,218
    
    
    
    163,218
    
    
    
    1995
    
    
    
    
    
    
 
     7 years
    
    
    
    40,778
    
    
    
    
    
    
    
    40,778
    
    
    
    14,692
    
    
    
    1997
    
    
    
    
    
    
 
     15 years660,000
    
    
    
    5,108,165
    
    
    
    
    
    
    
    5,768,165
    
    
    
    1,255,566
    
    
    
    1974, 1997
    (2)
    
    
    1997
    
    
 
     39 years609,000
    
    
    
    3,238,235
    
    
    
    
    
    
    
    3,847,235
    
    
    
    17,168
    
    
    
    2000
    (3)
    
    
    2004
    
    
 
     39 years1,750,000
    
    
    
    7,455,922
    
    
    
    
    
    
    
    9,205,922
    
    
    
    1,581,153
    
    
    
    1980, 1985
    (3)
    
    
    1997
    
    
 
     39 years1,699,410
    
    
    
    1,052,661
    
    
    
    
    
    
    
    2,752,071
    
    
    
    202,274
    
    
    
    1982
    (3)
    
    
    1998
    
    
 
     39 years3,908,004
    
    
    
    5,328,782
    
    
    
    
    
    
    
    9,236,786
    
    
    
    673,323
    
    
    
    1985
    (3)
    
    
    1999
    
    
 
     39 years9,109,422
    
    
    
    31,608,477
    
    
    
    328,836
    
    
    
    41,046,735
    
    
    
    11,418,55880,011
    
    
    
    
    
    
    
    
    
    
    
    80,011
    
    
    
    
    
    
    
    
    
    
    
    1979
    
    
    
    777,419
    
    
    
    
    
    
    
    16,644
    
    
    
    794,063
    
    
    
    
    
    
    
    
    
    
    
    1987
    
    
    
    2,774,715
    
    
    
    
    
    
    
    
    
    
    
    2,774,715
    
    
    
    
    
    
    
    
    
    
    
    1993
    
    
    
    92,226
    
    
    
    722,033
    
    
    
    
    
    
    
    814,259
    
    
    
    492,550
    
    
    
    (6)
    
    
    
    1960, 1968
    
    
    
    3,724,371
    
    
    
    722,033
    
    
    
    16,644
    
    
    
    4,463,048
    
    
    
    492,550$
    12,833,793
    
    
    $
    32,330,510
    
    
    $
    345,480
    
    
    $
    45,509,783
    
    
    $
    11,911,108
 NOTES:  (1)
    
    The aggregated cost for land, buildings and improvements for federal income
tax purposes at April 30, 2004, is $31,275,615.(2)
    
    Developed by others in 1974, redeveloped by the
Company in 1997.(3)
    
    Developed by others.(4)
    
    Acquired in 2004.(5)
    
    Vacant; former manufacturing facility.(6)
    
    Original building constructed by others prior to 1960.(7)
    
    Primarily represents the acquisition of the professional medical office
building in Douglasville, Georgia. (8) Primarily represents the sale of a
shopping center in North Fort Myers, Florida.(9)
    
    Primarily represents the sale of a shopping center in Englewood, Florida. n ABRAMS 2004 41




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##### Table of Contents



ITEM 9 CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING AND FINANCIAL DISCLOSURE The information required by this item has been previously reported on Current
Reports on Form 8-K filed October 30, 2001, and May 28, 2002. 
 ITEM 9A CONTROLS AND PROCEDURES Management has evaluated the Companys disclosure and 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 are met. There was no change in the Companys internal control over financial reporting
that occurred during the Companys fourth fiscal quarter for its fiscal year
ended April 30, 2004, which has materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial reporting. 
 PART III 
 ITEMS 10-14 The information required by Part III of this Form 10-K will be included in the
Companys definitive proxy materials for its 2004 Annual Meeting of
Shareholders, to be filed with Securities and Exchange Commission, under the
headings Election of Directors, Meetings and Committees of the Board of
Directors, Nomination of Directors, Principal Holders of the Companys
Securities and Holdings by Executive Officers and Directors, Section 16A
Beneficial Ownership Reporting Compliance, Compensation of Executive
Officers, Equity Compensation Plan, Compensation of Directors,
Information Concerning the Companys Independent Auditor and Corporate
Governance and Communicating with the Board, and is hereby incorporated herein
by reference. Information related to Executive Officers of the Company is
included in Item 1 of this report. For purposes of determining the aggregate market value of the Companys voting
stock held by nonaffiliates, shares beneficially owned directly or indirectly by
all Directors and Executive Officers of the Company have been excluded. The
exclusion of such shares is not intended to, and shall not, constitute a
determination as to which persons or entities may be affiliates of the
Company, as defined by the Securities and Exchange Commission. n ABRAMS 2004 42




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##### Table of Contents



PART IV 
 ITEM 16 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K  (A)
    
    The following documents are filed as part of this Annual
Report on Form 10-K: 1. Financial Statements: Report of
Independent Registered Public Accounting Firm Consolidated
Balance Sheets at April 30, 2004, and 2003 Consolidated Statement of Operations for the Years Ended April 30, 2004,
2003, and 2002 Consolidated Statements of Shareholders Equity for the Years Ended April
30, 2004, 2003, and 2002 Consolidated Statements of Cash Flows for the
Years Ended April 30, 2004, 2003, and 2002 Notes to Consolidated Financial
Statements 2. Financial Statement Schedules: Schedule II - Valuation and Qualifying Accounts Schedule III - Real Estate and Accumulated
Depreciation 3. Exhibits: Exhibit
No. 2a. Agreement and Plan of Reorganization Among Abrams Industries, Inc., WEGI
Acquisition, LLC, The Wheatstone Energy Group, Inc. and the Shareholders of
The Wheatstone Energy Group, Inc., dated as of December 19, 2003 (1) 2b.
Asset Purchase Agreement Among Abrams Industries, Inc., Servidyne Systems,
LLC and iTendant, Inc., dated as of April 16, 2004 (2) 3a. Articles of
Incorporation (3) 3b. Restated Bylaws (4), Amendments to Bylaws (7) 10a.
Directors Deferred Compensation Plan (5)# 10b. Edward M. Abrams Split Dollar
Life Insurance Agreements dated July 29, 1991 (6)# 10c. Edward M. Abrams
Employment Agreement dated November 18, 1998 (8)# 10d. 2000 Stock Award Plan
(9)# 10e. E. Milton Bevington Employment Agreement dated May 9, 2001 (10)# 10f. Alan R. Abrams Split Dollar Life Insurance Agreement dated May 31, 2001
(10)# 10g. J. Andrew Abrams Split Dollar Life Insurance Agreement dated May
31, 2001 (10)# 10h. Edward M. Abrams Retirement Agreement dated July 22, 2003
(11)# 21. List of the Companys Subsidiaries 23a. Consent
of Deloitte & Touche LLP 31.1 Certification of the CEO 31.2 Certification of the CFO 32.1 Section 906 Certification of the
CEO 32.2 Section 906 Certification of
the CFO Explanation of Exhibits  (1)
    
    This exhibit is incorporated by reference to the Companys Form
8-K filed January 5, 2004.(2)
    
    This exhibit is incorporated by
reference to the Companys Form 8-K filed May 3, 2004.(3)
    
    This exhibit is incorporated by reference to the Companys Form 10-K for
the year ended April 30, 1985.(4)
    
    This exhibit is incorporated by reference to the Companys Form 10-K for
the year ended April 30, 1997.(5)
    
    This exhibit is incorporated by reference to the Companys Form 10-K for
the year ended April 30, 1991.(6)
    
    This exhibit is incorporated by reference to the Companys Form 10-K for
the year ended April 30, 1993.(7)
    
    This exhibit is incorporated by reference
to the Companys Form 10-K for the year ended April 30, 1998.(8)
    
    This exhibit
is incorporated by reference to the Companys Form 10-K for the year ended
April 30, 1999.(9)
    
    This exhibit is incorporated by reference to the Companys
Form S-8 filed September 29, 2000.(10)
    
    This exhibit is incorporated by reference to the Companys Form 10-K for
the year ended April 30, 2001.(11)
    
    This exhibit is incorporated by reference
to the Companys Form 10-K for the year ended April 30, 2003.#
    
    Management
compensatory plan or arrangement.  (B)
    
    Reports on Form 8-K: See Current Reports on Form 8-K, filed March 29, 2004,
and on Form 8-K/A, filed March 3, 2004,reporting acquisitions pursuant to Items
2 and 7 thereof.(C)
    
    The Company hereby files as exhibits to this Annual Report on Form 10-K the
exhibits set forth in Item 15(A)3 hereof.(D)
    
    The Company hereby files as
financial statement schedules to this Annual Report on Form 10-K the financial
statement schedules set forth in Item 15(A)2 hereof. n ABRAMS 2004 43




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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.Dated: July 19, 2004
    By:
    /s/  Alan R. AbramsAlan R. AbramsChief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated. Dated: July 19, 2004
    
    /s/ Alan R. Abrams
Alan R. Abrams
Co-Chairman of the Board of Directors,
Chief Executive OfficerDated: July 19, 2004
    
    /s/ J. Andrew Abrams
J. Andrew Abrams
Co-Chairman of the Board of DirectorsDated: July 19, 2004
    
    /s/ David L. Abrams
David L. Abrams
DirectorDated: July 19, 2004
    
    /s/ Samuel E. Allen
Samuel E. Allen
DirectorDated: July 19, 2004
    
    /s/ Gilbert L. Danielson
Gilbert L. Danielson
DirectorDated: July 19, 2004
    
    /s/ Melinda S. Garrett
Melinda S. Garrett
DirectorDated: July 19, 2004
    
    /s/ Robert T. McWhinney, Jr.
Robert T. McWhinney, Jr.
DirectorDated: July 19, 2004
    
    /s/ Mark J. Thomas
Mark J. Thomas
Chief Financial OfficerDated: July 19, 2004
    
    /s/ Felker W. Ward, Jr.
Felker W. Ward, Jr.
Director
 n ABRAMS 2004 44