##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 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, 2011
 Commission file number 0-10146
 SERVIDYNE, INC.
  Georgia
    
    58-0522129(State or other 
jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
identification No.)1945 The Exchange, Suite 300, Atlanta, GA
    
    30339-2029(Address of principal executive offices)
    
    (Zip Code)
 (770) 953-0304
  Title of each class:
    
    Name of each exchange on which registered:Common Stock, $1.00 Par Value Per Share
    
    NASDAQ Global Market
 
  o NO þ
  o NO þ
  YES þ o
 o o
 þ
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    
    
    Smaller Reporting Company þNon-Accelerated Filer o(Do not check if a smaller reporting company)
  o NO þ




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TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 1A. RISK FACTORSITEM 1B. UNRESOLVED STAFF COMMENTSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSPART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESPART IIITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A. CONTROLS AND PROCEDURESITEM 9B. OTHER INFORMATIONPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEITEM 11. EXECUTIVE COMPENSATIONITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED            STOCKHOLDER MATTERSITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESEX-10.18EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  
 PART I
 
 ITEM 1. BUSINESS
      BUILDING PERFORMANCE EFFICIENCY OFFERINGS
  
    
    The BPE Energy Solutionis designed to help building owners and operators substantially
reduce energy consumption and cut utility and operating costs of their existing facilities.
Major elements include: energy modeling; energy audits; building retro-commissioning;
LEED® and ENERGY STAR® certifications; comprehensive preventive
maintenance of energy-consuming equipment; turn-key design and implementation of
energy-saving lighting systems; and retrofits of mechanical and electrical systems.
    
    The BPE Environmental Sustainability Solutionis designed to help building owners and
operators identify and transform wasteful and inefficient facilities into cost-effective,
energy efficient and environmentally sustainable facilities. Major elements include:
energy and sustainability audits; building performance benchmarking and utility monitoring;
retro-commissioning of existing systems;
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efficiency improvements of existing energy conversion and water consuming building assets;
and other efficiency improvements that extend the lives of building infrastructures and
equipment.
    
    The BPE Occupant Satisfaction Solutionis designed to help building owners and operators
measurably improve the comfort level and satisfaction of their tenants, guests and
employees. Major elements include: proprietary web/wireless systems to manage guest and
tenant service requests; identification of low-cost and no-cost operating efficiency
improvements; lighting quality upgrades; technical staff training; more consistent control
of building temperature and humidity conditions; and improved reliability of building
systems and controls.
    
    The BPE Utility Solutionis designed to be a cost effective and reliable way for
utilities and their customers to modify peak usage of electricity by implementing demand
response programs that utilize smart gridtechnologies, in order to reduce excess demand on
the electric grid, lessen the need for utilities to build expensive new energy generating
plants, and provide substantial ongoing cost savings for building owners and operators. The
Company launched this product line, marketed under the name Fifth Fuel
Management®, during fiscal 2010, by expanding the Companys web-based
iTendant® platform to create the energy optimization and demand response system.
Major elements include: comprehensive demand response facility audits; technology-enabled
demand response programs (automatic, semi-automatic and manual); reliable two-way, fast and
secure communication and tracking; retro-commissioning of existing systems; customized site
training; and step-by-step processes for optimized demand response participation.
  EMPLOYEES AND EMPLOYEE RELATIONS
  SEASONAL NATURE OF BUSINESS
  COMPETITION
  BACKLOG
  IncreaseApril 30,
    
    
    (Decrease)2010
    
    
    2009
    
    
    Amount
    
    
    PercentageBPE (1)
    
    $
    13,893,000
    
    
    $
    15,369,000
    
    
    $
    (1,476,000
    )
    
    
    (10
    )Other (2)
    
    
    402,000
    
    
    
    402,000
    
    
    
    
    
    
    
    0Total Backlog
    
    $
    14,295,000
    
    
    $
    15,771,000
    
    
    $
    (1,476,000
    )
    
    
    (9
    )
 (1)
    
    BPE backlog at April 30, 2011, decreased by approximately $1,476,000, or 10%, compared to the
year-earlier period, primarily due to:
 (a)
    
    a decrease of approximately $2,361,000 in energy savings (lighting and
mechanical) projects; and(b)
    
    a decrease of approximately $270,000 in lighting products from the Companys
lighting distribution business;
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partially offset by:
 (c)
    
    an increase of approximately $813,000 in energy management consulting services;
and(d)
    
    an increase of approximately $358,000 in Fifth Fuel Management®
services.
 BPE backlog includes some contracts that can be cancelled by customers with less than one
years notice, and assumes such cancellation provisions will not be invoked. The value of
such contracts included in the prior years backlog that were subsequently cancelled was
approximately $234,000 or 1.5%.(2)
    
    Other backlog represents rental income under lease agreements at the Companys corporate
headquarters building and other leasehold interests.
  REGULATION
  
 ITEM 1A. RISK FACTORS
  RISKS RELATED TO THE PROPOSED SCI MERGER
 The SCI merger may not be completed, which could adversely affect our business and stock price.
  
    
    the attention of our management may have been diverted to the merger rather than to our
operations and the pursuit of other opportunities that could have been beneficial to us;
    
    the potential loss of key personnel during the pendency of the merger as employees may
experience uncertainty about their future roles with the combined company;
    
    we will have been subject to certain restrictions on the conduct of our business, which
may prevent us from pursuing certain business opportunities while the merger is pending;
    
    the trading price of our common stock may decline to the extent that the current market
price reflects a market assumption that the merger will be completed; and
    
    we would have incurred significant transaction-related expenses that did not result in a
consummated transaction.
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We are subject to contractual restrictions in the merger agreement that may hinder operations
pending the merger.
  We will be subject to various uncertainties while the merger is pending that may cause disruption
and may make it more difficult to maintain relationships with employees, suppliers, or customers.
   Pending shareholder lawsuits could delay or prevent the closing of the merger. In addition, we
could spend significant sums defending or settling the lawsuits.
   RISKS RELATED TO OUR BUSINESS
 We have experienced consolidated net losses in each of the last three fiscal years. There is no
guarantee that we will be able to generate net earnings in the near future, or at all.
  5




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We have used a significant amount of cash for operations in recent years. We may deplete our
capital resources before we achieve sufficient positive cash flow to fully fund our operations, and
may not be able to secure additional capital on favorable terms and on a timely basis, or at all, which could
materially adversely affect our ability to grow or continue to operate our business.
    
    
    refinance existing debt, or obtain new funds through bank loans or equity or debt
security issuances;
    
    sell real estate or other assets;
    
    limit growth or curtail operations to levels consistent with the constraints imposed
by the available cash and cash flow; or
    
    pursue any combination of these options.
   The future of our business depends on the success of our BPE offerings. If we fail to continue to
grow revenues and profitability from these offerings, our prospects will be adversely affected.
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
    
    our ability to add new product and service offerings on a timely basis, and to keep
our current products and services competitive;
    
    the successful hiring, training and retention of qualified personnel;
    
    the establishment of new relationships and the expansion of existing relationships
with customers and suppliers;
    
    the availability of adequate capital; and
    
    our ability to make profitable business acquisitions and to integrate such acquired
businesses into existing operations.
  Our earnings could be adversely affected by non-cash adjustments to goodwill and other assets.
    The markets for our products, services and technology are very competitive and are becoming more
so; if we cannot successfully compete in those markets, our business could be materially and
adversely affected.
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Failure to adequately expand our sales force may impede our growth.
  As more of our sales efforts are targeted at larger enterprise customers, sales cycles may become
longer and more expensive, and we may encounter pricing pressures and implementation challenges,
all of which could harm our business.
   A limited number of customers comprise a significant portion of our revenues and backlog. The loss
of, or any significant decrease in, business from these customers could have an adverse effect on
our results.
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A portion of our revenues is derived from fixed price contracts, which could result in losses on
contracts.
  We often utilize subcontractors in performing services or completing projects, whose potential
unavailability or unsatisfactory performance could have a material adverse effect on our business
and financial position.
    If our security measures for our proprietary technology solutions were breached, and as a result
unauthorized access to a customers data were obtained, our BPE offerings could be perceived as not
being sufficiently secure, customers might curtail or stop using our products and services, and we
could incur significant losses and liabilities.
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We depend on the assistance of our customers to complete energy savings projects on a timely basis.
If a customer were unable or unwilling to offer us assistance on a timely basis, or at all, it
could affect project timelines and reduce or slow the recognition of energy savings project
revenues.
  Our recently introduced Fifth Fuel Management ® offering is largely untested. If we fail
to fully develop this offering, its prospects could be adversely affected. Moreover, developing
Fifth Fuel Management ® will require additional capital, which we may not be able to
obtain.
 ® ®
 
    
    our ability to develop, acquire and/or license any additional technologies and
processes necessary to fully develop and implement the Fifth Fuel
Management® system;
    
    our ability to market and sell this new offering to significant customers, such as
public and investor-owned utilities and building owners and operators; and
    
    the availability of adequate capital to fund the full development, marketing and
working capital requirements of Fifth Fuel Management®.
 ®
 ®
 ®
 The value to customers of our energy savings products and services is substantially impacted by the
prevailing conditions of energy markets; if energy prices and utility costs were to decline, our
sales might not grow, or could even decline.
   We depend upon key personnel, and the loss of any such key personnel could adversely impair our
ability to conduct business. In addition, implementing our growth strategy will require the
addition of more suitable personnel.
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Prevailing capital market and economic conditions could impact demand for our services and
products.
  If we cannot find suitable candidates for business acquisition or cannot integrate completed
business acquisitions successfully, our prospects could be adversely affected.
    We could be exposed to environmental liability related to the disposal of hazardous materials.
  We are subject to changing regulations regarding corporate governance and required public
disclosure that have increased both the costs of compliance and the risks of noncompliance. As a
small public company, these costs of compliance may affect us disproportionately as compared with
larger competitors.
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We might not be able to refinance the mortgage debt on our corporate headquarters building on a
timely basis or on acceptable terms.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
   
 ITEM 3. LEGAL PROCEEDINGS
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Manzoor Hussain v. Servidyne Inc. et al Brian Jacobs v. Servidyne, Inc. et al
   
 PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
 MARKET FOR REGISTRANTS COMMON EQUITY
  Cash Dividends PaidMarket Prices
    
    
    Per ShareFiscal 2011
    
    
    Fiscal 2010
    
    
    2011
    
    
    2010High
    
    
    Low
    
    
    High
    
    
    LowTrade
    
    
    Trade
    
    
    Trade
    
    
    TradeFirst Quarter
    
    $
    3.98
    
    
    $
    1.67
    
    
    $
    2.90
    
    
    $
    1.51
    
    
    $
    0.010
    
    
    $
    0.020Second Quarter
    
    
    3.60
    
    
    
    2.02
    
    
    
    2.93
    
    
    
    1.75
    
    
    
    0.010
    
    
    
    0.010Third Quarter
    
    
    3.15
    
    
    
    2.18
    
    
    
    2.30
    
    
    
    1.53
    
    
    
    0.010
    
    
    
    0.010Fourth Quarter
    
    
    3.05
    
    
    
    2.21
    
    
    
    7.24
    
    
    
    1.60
    
    
    
    0.010
    
    
    
    0.010
  ISSUER PURCHASES OF EQUITY SECURITIES
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PART II
 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 INTRODUCTION
    OVERVIEW
  14




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1
    
 1
    
    The Company believes earnings before interest,
taxes, depreciation and amortization (EBITDA) is a useful non-GAAP
measurement of the BPE Segments performance because it assists investors
in comparing the Companys performance across reporting periods on a
consistent basis by excluding items that the Company does not believe are
indicative of its core operating performance. One should not consider
EBITDA as an alternative to, or a more meaningful indicator of the
segments operating performance than, earnings before taxes as determined
in accordance with GAAP. EBITDA has limitations as an analytical tool.
Some of these limitations are: 
    
    EBITDA does not reflect the Companys cash expenditures, or future
requirements for capital expenditures, or contractual commitments;
    
    EBITDA does not reflect changes in, or cash requirements for, working
capital needs;
    
    EBITDA does not reflect the significant interest expense or the cash
requirements necessary to service interest or principal payments on
indebtedness;
    
    although depreciation and amortization are non-cash charges, the assets
being depreciated and amortized will often have to be replaced in the
future, and EBITDA does not reflect any cash requirements for such
replacements; and
    
    other companies in the Companys industry may calculate EBITDA
differently, potentially limiting its usefulness as a comparative measure.
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® ® ®
  DISCONTINUED OPERATIONS
   LIQUIDITY
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RESULTS OF OPERATIONS
  REVENUES
  CHART A
 Years EndedApril 30,
    
    Amount
    
    Percentage2011
    
    2010
    
    Change
    
    ChangeBPE (1)
    
    $
    25,735
    
    
    $
    18,172
    
    
    $
    7,563
    
    
    
    42Other
    
    
    423
    
    
    
    390
    
    
    
    33
    
    
    
    8$
    26,158
    
    
    $
    18,562
    
    
    $
    7,596
    
    
    
    41
 NOTES TO CHART A
 
 (1)
    
    The following table indicates the BPE Segment revenues by service and product type: 
 Years EndedApril 30
    
    Amount
    
    Percentage2011
    
    2010
    
    Change
    
    ChangeEnergy Savings Projects
    
    $
    18,791
    
    
    $
    11,051
    
    
    $
    7,740
    
    
    
    70Lighting Products
    
    
    2,227
    
    
    
    1,933
    
    
    
    294
    
    
    
    15Energy Management Services
    
    
    1,515
    
    
    
    1,801
    
    
    
    (286
    )
    
    
    (16
    )Fifth Fuel Management® Services
    
    
    241
    
    
    
    28
    
    
    
    213
    
    
    
    761Productivity Software
    
    
    2,961
    
    
    
    3,359
    
    
    
    (398
    )
    
    
    (12
    )$
    25,735
    
    
    $
    18,172
    
    
    $
    7,563
    
    
    
    42
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BPE Segment revenues increased by approximately $7,563,000, or 42%, in fiscal 2011 compared
to fiscal 2010, primarily due to:
 (a)
    
    an increase in energy savings project revenues of approximately
$7,740,000, primarily due to the substantial increase in revenues from customers in
both the private sector and the government sector, including revenues of
approximately $3,300,000 from several new energy savings project customers,
representing the completion of the initial phases of new energy savings program
initiatives for those customers;(b)
    
    an increase in lighting product revenues of approximately $294,000 due to
improved business conditions; and(c)
    
    an increase in Fifth Fuel Management® revenues of approximately $213,000,
which was introduced as a new offering by the Company in the prior fiscal year and
initially generated revenues in the fourth quarter of fiscal 2010, due to increased
customer orders as demand response emerges as a critical tactic to help address the
growing imbalance in the supply and demand of generated electric power in the United
States;
  (d)
    
    a decrease in energy management services of approximately $286,000,
primarily due to the completion of multi-year consulting services projects in the
prior fiscal year, which contributed approximately $506,000 in revenues in fiscal
2010, partially offset by an increase of approximately $220,000 in other energy
management services revenues; and
 (e)
    
    a decrease in productivity software revenues of approximately $398,000,
primarily due to fewer new implementations with existing large-portfolio customers.
 COST OF REVENUES
  CHART B
 Percentage ofRevenues for theYears Ended
    
    Years EndedApril 30,
    
    April 30,2011
    
    2010
    
    2011
    
    2010BPE (1)
    
    $
    18,246
    
    
    $
    12,301
    
    
    
    71
    
    
    
    68Other
    
    
    685
    
    
    
    747
    
    
    
    162
    
    
    
    192$
    18,931
    
    
    $
    13,048
    
    
    
    72
    
    
    
    70
 NOTES TO CHART B
 
 (1)
    
    BPE Segment cost of revenues increased by approximately $5,945,000, or 48%, in fiscal
2011 compared to fiscal 2010, primarily due to the corresponding increase in revenues (see
Chart A).On a percentage-of-revenues basis, BPE Segment cost of revenues increased from 68% of
revenues in fiscal 2010 to 71% of revenues in fiscal 2011, primarily due to a change in the
mix of services and products and an increasingly competitive market pricing environment for
energy savings projects. 18




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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
  CHART C
  Percentage ofRevenues for theYears Ended
    
    Years EndedApril 30,
    
    April 30,2011
    
    2010
    
    2011
    
    2010BPE (1)
    
    $
    5,739
    
    
    $
    5,830
    
    
    
    22
    
    
    
    32Corporate (2)
    
    
    4,201
    
    
    
    3,953
    
    
    
    16
    
    
    
    21$
    9,940
    
    
    $
    9,783
    
    
    
    38
    
    
    
    53
 NOTES TO CHART C
 
 (1)
    
    BPE Segment SG&A expenses decreased by approximately $91,000, or 2%, in fiscal 2011
compared to fiscal 2010, primarily due to lower personnel-related costs and project
development expenses.On a percentage-of-revenues basis, BPE Segment SG&A expenses decreased from 32% of revenues
in fiscal 2010 to 22% of revenues in fiscal 2011, primarily due to the increase in revenues
(see Chart A) without a corresponding proportional increase in expenses.(2)
    
    Corporate SG&A expenses increased by approximately $248,000, or 6%, in fiscal 2011
compared to fiscal 2010, primarily due to increases in consulting, legal, and non-employee
directors fees and investor relations expenses, partially offset by lower
personnel-related costs.On a percentage-of-revenue basis, Corporate SG&A expenses decreased from 21% of revenues in
fiscal 2010 to 16% of revenues in fiscal 2011, primarily due to the increase in revenues
(see Chart A) without a corresponding proportional increase in expenses. EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
   19




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CHART D
 Years Ended
    
    IncreaseApril 30,
    
    (Decrease)2011
    
    2010
    
    AmountBPE (1)
    
    $
    1,753
    
    
    $
    64
    
    
    $
    1,689Corporate (2)
    
    
    (4,720
    )
    
    
    (4,415
    )
    
    
    (305
    )Total
    
    $
    (2,967
    )
    
    $
    (4,351
    )
    
    $
    1,384
 NOTES TO CHART D
 
 (1)
    
    BPE Segment earnings before income taxes increased by approximately $1,689,000 in
fiscal 2011 compared to fiscal 2010, primarily due to the increase in revenues of
approximately $7,563,000 (see Chart A), an increase in gross margin of approximately
$1,618,000, and a decrease in SG&A expenses of approximately $91,000 (see Chart C). The
financial performance improvement of the BPE Segment is the result of improving business
conditions combined with the containment of overhead costs.(2)
    
    Corporate loss before income taxes increased by approximately $305,000, or 7%, in
fiscal 2011 compared to fiscal 2010, primarily due to increases in SG&A expenses of
approximately $248,000 (see Chart C), partially offset by an improvement in gross
margin of rental activities at the corporate headquarters building of approximately
$94,000. INCOME TAX BENEFIT
  INTEREST COSTS
  ACQUISITIONS
  DISCONTINUED OPERATIONS
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LIQUIDITY AND CAPITAL RESOURCES
    (a)
    
    current year losses from continuing operations before depreciation, amortization and
income taxes of approximately $2,019,000;(b)
    
    an increase in cost and earnings in excess of billings of approximately $797,000; and(c)
    
    an increase in other current and long-term assets of approximately $129,000;
  (d)
    
    a net increase in trade accounts payable, accrued expenses, and other liabilities of
approximately $1,275,000, primarily due to an increase in costs in line with the BPE
Segments revenue growth, as well as the timing and submission of payments; and
 (e)
    
    a decrease in net accounts receivable of approximately $347,000, primarily due to the
timing of billings and receipt of payments.
  (a)
    
    $500,000 used for the purchase of a held-to-maturity investment;
 (b)
    
    approximately $366,000 used for additions to intangible assets, primarily related to
enhancements to the BPE Segments proprietary technology solutions; and
 (c)
    
    approximately $54,000 used for additions to property and equipment, primarily related
to the purchase of computer hardware;
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(d)
    
    proceeds of approximately $195,000 from the termination of a split-dollar life
insurance agreement.
  (a)
    
    proceeds from other long-term debt of approximately $500,000;
  (b)
    
    scheduled principal payments on other debt of $163,000;(c)
    
    scheduled principal payments on the mortgage note on the corporate headquarters
building of approximately $121,000; and(d)
    
    payment of the regular quarterly cash dividends to shareholders of approximately
$148,000.
    Mortgage Notes and Other Long-Term Debt
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Sales of Promissory Notes
to Related Parties Termination of Split Dollar Life
Insurance Agreement
 ®
  Sales of Promissory Notes to Related Parties
  Termination of Split Dollar Life Insurance Agreement
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Capital Expenditures
  Significant Uses of Cash
  Mortgage Notes and Other Long-Term Debt
    
    
    The maturity date of the note, originally December 18, 2011, and principal payment
structure were amended such that principal payments commenced on February 19, 2011, based
on a 60-month amortization. In addition, a $150,000 principal payment is due on October
19, 2011, with a balloon payment of the remaining principal balance of approximately
$408,000 due on January 19, 2016; and
    
    The interest rate was changed from the prime rate plus 1.5% to a fixed rate of 6% per
annum.
    Secured Letter of Credit
  24




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Repurchases of Common Stock
   EFFECTS OF INFLATION ON REVENUES AND OPERATING PROFITS
   CRITICAL ACCOUNTING POLICIES
  Revenue Recognition
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Long-Lived Assets: Property & Equipment and Capitalized Software
    
    
    A significant decrease in the market price of a long-lived asset;
    
    A current-period operating or cash flow loss combined with a history of operating or
cash flow losses or a projection or forecast that demonstrates continuing losses associated
with the use of a long-lived asset;
    
    The Company has received purchase offers at prices below carrying value;
    
    A real estate asset that has a significant vacancy rate or significant rollover exposure
from one or more tenants;
    
    A major tenant experiencing financial difficulties that may jeopardize the tenants
ability to meet its lease obligations; and
    
    Depressed market conditions.
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
    
    A change in the estimated remaining useful life of the asset;
    
    A change in the manner in which the asset is used in the income-generating business of
the Company; or
    
    A current-period operating or cash flow loss combined with a history of operating or
cash flow losses, or a projection or forecast that demonstrates continuing losses
associated with the use of a long-lived asset.
  Valuation of Goodwill and Other Indefinite-Lived Intangible Assets
   Goodwill
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Other Indefinite-Lived Intangible Assets
  Income Taxes
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Discontinued Operations
  Recent Accounting Pronouncements
 Revenue Recognition (Topic
605)Multiple-Deliverable Revenue Arrangements Software (Topic 985)Certain
Revenue Arrangements That Include Software Elements
 Fair Value Measurements and Disclosures (Topic
820) Improving Disclosures about Fair Value Measurements
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
 ®
   30




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
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SERVIDYNE, INC.
 April 30,2011
    
    
    2010ASSETSCURRENT ASSETS:Cash and cash equivalents (Note 2)
    
    $
    2,125,305
    
    
    $
    1,923,641Receivables:Trade accounts and notes, net of allowance for doubtful accounts of
$141,225 and $58,989, respectively
    
    
    962,614
    
    
    
    953,075Contracts, net of allowance for doubtful accounts of $130,833 and
$22,530, respectively, including retained amounts of $472,034 and
$675,281, respectively (Note 16)
    
    
    2,980,430
    
    
    
    3,337,177Costs and earnings in excess of billings (Notes 5 and 16)
    
    
    1,511,706
    
    
    
    715,129Assets of discontinued operations (Note 4)
    
    
    30,174
    
    
    
    188,827Deferred income taxes (Note 10)
    
    
    471,231
    
    
    
    360,097Other current assets (Note 2)
    
    
    1,432,011
    
    
    
    1,247,844Total current assets
    
    
    9,513,471
    
    
    
    8,725,790PROPERTY AND EQUIPMENT, net (Note 6)
    
    
    4,518,675
    
    
    
    4,805,542ASSETS OF DISCONTINUED OPERATIONS (Note 4)
    
    
    
    
    
    
    13,767,227DEFERRED INCOME TAXES (Note 10)
    
    
    
    
    
    
    1,160,371OTHER ASSETS:Real estate held for future development or sale
    
    
    853,109
    
    
    
    853,109Intangible assets, net (Note 15)
    
    
    2,150,040
    
    
    
    2,395,874Goodwill (Note 15)
    
    
    6,354,002
    
    
    
    6,354,002Other assets (Note 2)
    
    
    2,838,271
    
    
    
    2,890,357Total assets
    
    $
    26,227,568
    
    
    $
    40,952,272LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    3,455,683
    
    
    $
    2,465,112Accrued expenses
    
    
    1,683,701
    
    
    
    1,378,538Deferred revenue
    
    
    469,449
    
    
    
    507,383Billings in excess of costs and earnings (Note 5)
    
    
    7,408
    
    
    
    53,100Liabilities of discontinued operations (Note 4)
    
    
    
    
    
    
    520,308Short-term debt and current maturities of long-term debt
    
    
    333,830
    
    
    
    270,592Total current liabilities
    
    
    5,950,071
    
    
    
    5,195,033DEFERRED INCOME TAXES (Note 10)
    
    
    590,564
    
    
    
    LIABILITIES OF DISCONTINUED OPERATIONS (Note 4)
    
    
    
    
    
    
    13,587,832OTHER LIABILITIES
    
    
    1,106,272
    
    
    
    1,039,633MORTGAGE NOTES PAYABLE, less current maturities (Note 7)
    
    
    3,977,589
    
    
    
    4,107,996OTHER LONG-TERM DEBT, less current maturities (Note 8)
    
    
    1,721,706
    
    
    
    1,832,000Total liabilities
    
    
    13,346,202
    
    
    
    25,762,494COMMITMENTS AND CONTINGENCIES (Note 17)SHAREHOLDERS EQUITY:Common stock, $1 par value; 10,000,000 shares authorized;
3,919,173 issued and 3,675,782 outstanding at April 30, 2011;
3,919,773 issued and 3,676,383 outstanding at April 30, 2010;
    
    
    3,919,173
    
    
    
    3,919,773Additional paid-in capital
    
    
    6,364,899
    
    
    
    6,206,521Retained earnings
    
    
    3,603,442
    
    
    
    6,069,629Treasury stock (common shares) of 243,391 and 243,390, respectively
    
    
    (1,006,148
    )
    
    
    (1,006,145
    )Total shareholders equity
    
    
    12,881,366
    
    
    
    15,189,778Total liabilities and shareholders equity
    
    $
    26,227,568
    
    
    $
    40,952,272
 See accompanying notes to consolidated financial statements.
 32




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##### Table of Contents



SERVIDYNE, INC.
 Year Ended April 30,2011
    
    
    2010REVENUES:Building Performance Efficiency (BPE) (Note 16)
    
    $
    25,734,826
    
    
    $
    18,171,536Other
    
    
    423,102
    
    
    
    389,99426,157,928
    
    
    
    18,561,530COST OF REVENUES:BPE
    
    
    18,245,824
    
    
    
    12,300,803Other
    
    
    685,544
    
    
    
    746,91918,931,368
    
    
    
    13,047,722SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    9,939,583
    
    
    
    9,783,066OTHER (INCOME) AND EXPENSES:Other income (Note 2)
    
    
    (194,646
    )
    
    
    (308,279
    )Interest income
    
    
    (62
    )
    
    
    (12,482
    )Interest expense
    
    
    448,484
    
    
    
    402,104253,776
    
    
    
    81,343LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
    
    (2,966,799
    )
    
    
    (4,350,601
    )INCOME TAX EXPENSE (BENEFIT) (Note 10):Current
    
    
    45,940
    
    
    
    13,309Deferred
    
    
    (983,104
    )
    
    
    (1,595,357
    )(937,164
    )
    
    
    (1,582,048
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (2,029,635
    )
    
    
    (2,768,553
    )DISCONTINUED OPERATIONS (Note 4):(Loss) earnings from discontinued operations, adjusted for applicable income
tax (benefit) expense of ($308,898) and $235,423, respectively
    
    
    (294,404
    )
    
    
    142,443Gain on disposition of income-producing properties, adjusted for applicable
income tax expense of $178,555 and $447,808, respectively
    
    
    5,479
    
    
    
    740,831(LOSS) EARNINGS FROM DISCONTINUED OPERATIONS
    
    
    (288,925
    )
    
    
    883,274NET LOSS
    
    $
    (2,318,560
    )
    
    $
    (1,885,279
    )NET (LOSS) EARNINGS PER SHARE (Note 13):From continuing operations  basic and diluted
    
    $
    (0.55
    )
    
    $
    (0.75
    )From discontinued operations  basic and diluted
    
    
    (.08
    )
    
    
    .24NET LOSS PER SHARE  BASIC AND DILUTED
    
    $
    (0.63
    )
    
    $
    (0.51
    )
 See accompanying notes to consolidated financial statements.
 33




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##### Table of Contents



SERVIDYNE, INC.
 AdditionalCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    TreasuryShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Stock
    
    
    TotalBALANCES at April 30, 2009
    
    
    3,917,778
    
    
    $
    3,917,778
    
    
    $
    6,026,101
    
    
    $
    8,139,988
    
    
    $
    (974,800
    )
    
    $
    17,109,067Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,885,279
    )
    
    
    
    
    
    
    (1,885,279
    )Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    182,415
    
    
    
    
    
    
    
    
    
    
    
    182,415Common stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,345
    )
    
    
    (31,345
    )Common stock issued
    
    
    1,995
    
    
    
    1,995
    
    
    
    (1,995
    )
    
    
    
    
    
    
    
    
    
    
    Cash dividends declared -
$0.047 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (185,080
    )
    
    
    
    
    
    
    (185,080
    )BALANCES at April 30, 2010
    
    
    3,919,773
    
    
    $
    3,919,773
    
    
    $
    6,206,521
    
    
    $
    6,069,629
    
    
    $
    (1,006,145
    )
    
    $
    15,189,778Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,318,560
    )
    
    
    
    
    
    
    (2,318,560
    )Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    157,778
    
    
    
    
    
    
    
    
    
    
    
    157,778Common stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )Cash dividends declared -
$0.04 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (147,627
    )
    
    
    
    
    
    
    (147,627
    )Stock forfeitures
    
    
    (600
    )
    
    
    (600
    )
    
    
    600
    
    
    
    
    
    
    
    
    
    
    
    BALANCES at April 30, 2011
    
    
    3,919,173
    
    
    $
    3,919,173
    
    
    $
    6,364,899
    
    
    $
    3,603,442
    
    
    $
    (1,006,148
    )
    
    $
    12,881,366
 See accompanying notes to consolidated financial statements.
 34




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##### Table of Contents



SERVIDYNE, INC.
 Fiscal Year Ended2011
    
    
    2010Cash flows from operating activities:Net loss
    
    $
    (2,318,560
    )
    
    $
    (1,885,279
    )Adjustments to reconcile net loss to net
cash used in operating activities:Loss (earnings) from discontinued operations, net of tax
    
    
    288,925
    
    
    
    (883,274
    )(Gain) loss on disposal of assets
    
    
    (1,385
    )
    
    
    1,378Depreciation and amortization
    
    
    948,236
    
    
    
    985,174Deferred tax benefit (Note 10)
    
    
    (983,104
    )
    
    
    (1,621,430
    )Stock compensation expense
    
    
    157,778
    
    
    
    182,415Adjustment to cash surrender value of life insurance
    
    
    (36,008
    )
    
    
    (62,442
    )Straight-line rent
    
    
    (1,162
    )
    
    
    22,357Provision for doubtful accounts, net
    
    
    190,539
    
    
    
    (38,197
    )Changes in assets and liabilities:Receivables
    
    
    156,669
    
    
    
    (1,357,368
    )Costs and earnings in excess of billings
    
    
    (796,577
    )
    
    
    (306,179
    )Other current and long-term assets
    
    
    (128,938
    )
    
    
    84,611Trade and subcontractors payable
    
    
    990,570
    
    
    
    1,623,729Accrued expenses and deferred revenue
    
    
    285,295
    
    
    
    27,437Billings in excess of costs and earnings
    
    
    (45,692
    )
    
    
    24,885Other liabilities
    
    
    (471
    )
    
    
    (2,900
    )Net cash used in operating activities
    
    
    (1,293,885
    )
    
    
    (3,205,083
    )Cash flows from investing activities:Premiums paid on officers life insurance policies
    
    
    (5,464
    )
    
    
    (61,464
    )Purchase of money market account investment
    
    
    (500,000
    )
    
    
    Proceeds from termination of split-dollar life insurance agreement
    
    
    194,601
    
    
    
    Additions to property and equipment
    
    
    (53,953
    )
    
    
    (257,195
    )Additions to intangible assets
    
    
    (365,650
    )
    
    
    (462,750
    )Proceeds from sale of property and equipment
    
    
    5,454
    
    
    
    2,000Net cash used in investing activities
    
    
    (725,012
    )
    
    
    (779,409
    )Cash flows from financing activities:Long-term loan proceeds
    
    
    
    
    
    
    982,000Mortgage repayments
    
    
    (120,653
    )
    
    
    (111,684
    )Debt repayments
    
    
    (162,879
    )
    
    
    (185,000
    )Repurchase of common stock
    
    
    
    
    
    
    (31,345
    )Proceeds from other long-term debt
    
    
    500,000
    
    
    
    Cash dividends paid to shareholders
    
    
    (147,627
    )
    
    
    (185,080
    )Net cash provided by financing activities
    
    
    68,841
    
    
    
    468,891DISCONTINUED OPERATIONS:Operating activities
    
    
    (4,616
    )
    
    
    1,051,139Investing activities
    
    
    2,205,829
    
    
    
    (141,881
    )Financing activities
    
    
    (49,493
    )
    
    
    (291,142
    )Net cash provided by discontinued operations
    
    
    2,151,720
    
    
    
    618,116Net increase (decrease) in cash and cash equivalents
    
    
    201,664
    
    
    
    (2,897,485
    )Cash at beginning of period
    
    
    1,923,641
    
    
    
    4,821,126Cash at end of period
    
    $
    2,125,305
    
    
    $
    1,923,641Supplemental disclosure of non-cash investing and financing activities:Issuance of Common Stock under 2000 Stock Award Plan
    
    $
    
    
    
    $
    4,434Reduction in cash surrender value of life insurance policies
    
    $
    412,000
    
    
    $
    Reduction in loans against interest in cash surrender value of life insurance
policies
    
    $
    (412,000
    )
    
    $
    Change in fair market value of deferred executive compensation plan assets and
liabilities
    
    $
    124,465
    
    
    $
    Supplemental schedule of cash flow information:Cash paid during the year for interest
    
    $
    462,007
    
    
    $
    1,094,304Cash paid during the year for income taxes, net
    
    $
    1,962
    
    
    $
    
 See accompanying notes to consolidated financial statements.
 35




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##### Table of Contents



Elimination of mortgage note payable
    
    $
    (3,159,348
    )Disposition of income-producing property, net
    
    
    1,727,165Disposition of other related assets and liabilities, net
    
    
    193,545
 See accompanying notes to consolidated financial statements.
 36




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##### Table of Contents



SERVIDYNE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended April 30, 2011, and April 30, 2010
 1. ORGANIZATION AND BUSINESS
   2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (A) Principles of consolidation and basis of presentation
  Property, Plant and Equipment
 (B) Use of estimates
  (C) Revenue recognition
  37




---



##### Table of Contents



(D) Cash and cash equivalents and short-term investments
  (E) Long-lived assets: property & equipment and capitalized software
    
    
    A significant decrease in the market price of a long-lived asset;
 
    
    A current-period operating or cash flow loss combined with a history of operating or
cash flow losses or a projection or forecast that demonstrates continuing losses associated
with the use of a long-lived asset;
 
    
    The Company has received purchase offers at prices below carrying value;
 38




---



##### Table of Contents




    
    A real estate asset that has a significant vacancy rate or significant rollover exposure
from one or more tenants;
 
    
    A major tenant experiencing financial difficulties that may jeopardize the tenants
ability to meet its lease obligations; and
 
    
    Depressed market conditions.
    
    
    A change in the estimated remaining useful life of the asset;
 
    
    A change in the manner in which the asset is used in the income-generating business of
the Company; or
 
    
    A current-period operating or cash flow loss combined with a history of operating or
cash flow losses, or a projection or forecast that demonstrates continuing losses
associated with the use of a long-lived asset.
  (F) Goodwill and other intangible assets
  Acquired computer software
    
    3 yearsProprietary technology solutions
    
    5 yearsCustomer relationships
    
    5 years
  39




---



##### Table of Contents



Goodwill
       40




---



##### Table of Contents



Other Indefinite-Lived Intangible Assets
  (G) Income taxes
    (H) Discontinued operations
  41




---



##### Table of Contents



(I) Other current assets
  2011
    
    
    2010Inventory
    
    $
    632,112
    
    
    $
    537,624Prepaid real estate taxes
    
    
    49,926
    
    
    
    48,928Deferred costs
    
    
    45,520
    
    
    
    31,248Prepaid insurance
    
    
    911
    
    
    
    47,468Prepaid rent
    
    
    8,766
    
    
    
    35,783Deposits
    
    
    28,140
    
    
    
    44,400Prepaid consulting fees
    
    
    55,500
    
    
    
    25,000Unbilled engineering revenue
    
    
    215,379
    
    
    
    170,520Other receivables
    
    
    62,169
    
    
    
    117,660Vendor credits
    
    
    175,800
    
    
    
    36,361Other
    
    
    157,788
    
    
    
    152,852$
    1,432,011
    
    
    $
    1,247,844
 (J) Other assets
  2011
    
    
    2010Cash surrender value of life insurance
    
    $
    826,866
    
    
    $
    1,447,224Deferred executive compensation
    
    
    1,014,248
    
    
    
    947,023Money market account investment
    
    
    500,000
    
    
    
    Certificate of deposit
    
    
    450,000
    
    
    
    450,000Straight-line rent receivable
    
    
    25,390
    
    
    
    24,228Notes receivable
    
    
    9,000
    
    
    
    9,000Other
    
    
    12,767
    
    
    
    12,882$
    2,838,271
    
    
    $
    2,890,357
 Money Market Account Investment
  Termination of Split Dollar Life Insurance Agreement
   42




---



##### Table of Contents



(K) Other income
  (L) Recent accounting pronouncements
 Revenue
Recognition (Topic 605)Multiple-Deliverable Revenue Arrangements Software
(Topic 985)Certain Revenue Arrangements That Include Software Elements
 Fair Value Measurements and Disclosures (Topic
820) Improving Disclosures about Fair Value Measurements
 3. EQUITY-BASED COMPENSATION
  43




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##### Table of Contents



Stock Options
  2011
    
    
    2010Weighted
    
    
    
    
    
    
    WeightedOptions to
    
    
    Average
    
    
    Options to
    
    
    AveragePurchase
    
    
    Exercise
    
    
    Purchase
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at beginning of year
    
    
    482,486
    
    
    $
    4.46
    
    
    
    482,486
    
    
    $
    4.46Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at end of year
    
    
    482,486
    
    
    $
    4.46
    
    
    
    482,486
    
    
    $
    4.46Vested at end of year
    
    
    482,486
    
    
    $
    4.46
    
    
    
    471,986
    
    
    $
    4.44Non-vested at end of year, that are expected to vest
    
    
    
    
    
    $
    
    
    
    
    10,500
    
    
    $
    5.24
   Weighted AverageExercise
    
    Number of
    
    
    Remaining ContractualPrice
    
    Outstanding Options
    
    
    Term (Years)$4.42
    
    
    415,629
    
    
    
    1.53$4.59
    
    
    55,440
    
    
    
    3.90$5.19
    
    
    917
    
    
    
    3.13$5.24
    
    
    10,500
    
    
    
    2.12
   44




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##### Table of Contents



Stock Appreciation Rights
  2011
    
    
    2010Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseSARs
    
    
    Price
    
    
    SARs
    
    
    PriceOutstanding at beginning of year
    
    
    927,425
    
    
    $
    3.85
    
    
    
    565,350
    
    
    $
    4.37Granted
    
    
    
    
    
    
    
    
    
    
    381,500
    
    
    
    3.11Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (97,125
    )
    
    
    4.46
    
    
    
    (19,425
    )
    
    
    4.62Outstanding at end of year
    
    
    830,300
    
    
    $
    3.78
    
    
    
    927,425
    
    
    $
    3.85Vested at end of year
    
    
    204,278
    
    
    $
    4.09
    
    
    
    88,200
    
    
    $
    3.88Non-vested at end of year, that are expected to vest
    
    
    464,712
    
    
    $
    3.75
    
    
    
    589,305
    
    
    $
    3.91
   Weighted AverageExercise
    
    Outstanding
    
    
    Vested
    
    
    Remaining ContractualPrice
    
    SARs
    
    
    SARs
    
    
    Term (Years)$3.94
    
    
    153,720
    
    
    
    108,959
    
    
    
    5.16$3.79
    
    
    102,480
    
    
    
    66,339
    
    
    
    5.61$4.19
    
    
    10,500
    
    
    
    3,150
    
    
    
    6.12$6.19
    
    
    33,600
    
    
    
    10,080
    
    
    
    6.42$5.00
    
    
    52,500
    
    
    
    15,750
    
    
    
    6.99$4.76
    
    
    73,500
    
    
    
    0
    
    
    
    7.13$4.00
    
    
    22,500
    
    
    
    0
    
    
    
    7.39$2.30
    
    
    30,000
    
    
    
    0
    
    
    
    8.11$4.00
    
    
    200,000
    
    
    
    0
    
    
    
    8.55$2.12
    
    
    20,000
    
    
    
    0
    
    
    
    8.61$2.09
    
    
    131,500
    
    
    
    0
    
    
    
    8.90
  45




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##### Table of Contents



Expected life (years)
    
    
    5Dividend yield
    
    
    3.82
    %Expected stock price volatility
    
    
    55.88
    %Risk-free interest rate
    
    
    2.38
    %Fair value of SARs granted
    
    $
    0.40
  Shares of restricted stock
    2011
    
    
    2010Number of
    
    
    Weighted Average
    
    
    
    
    
    
    WeightedShares of
    
    
    Fair Value
    
    
    Shares of
    
    
    Fair ValueRestricted
    
    
    per Share
    
    
    Restricted
    
    
    per ShareStock
    
    
    on Grant Date
    
    
    Stock
    
    
    on Grant DateNon-vested restricted stock at beginning of year
    
    
    3,150
    
    
    $
    2.99
    
    
    
    5,295
    
    
    $
    4.77Granted
    
    
    
    
    
    
    
    
    
    
    2,600
    
    
    
    2.11Forfeited
    
    
    (600
    )
    
    
    2.11
    
    
    
    (500
    )
    
    
    2.12Vested
    
    
    (2,550
    )
    
    
    3.20
    
    
    
    (4,245
    )
    
    
    4.55Non-vested restricted stock at end of year
    
    
    
    
    
    $
    
    
    
    
    3,150
    
    
    $
    2.99
 4. DISCONTINUED OPERATIONS
    46




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2011
    
    
    2010Rental revenues
    
    $
    509,411
    
    
    $
    2,388,143Rental property operating expenses, including depreciation
    
    
    523,154
    
    
    
    2,010,277Loss on impairment of income-producing property
    
    
    589,559
    
    
    
    Operating (loss) earnings from discontinued operations
    
    
    (603,302
    )
    
    
    377,866Income tax benefit (expense)
    
    
    308,898
    
    
    
    (235,423
    )Operating (loss) earnings from discontinued operations, net of tax
    
    
    (294,404
    )
    
    
    142,443Gain on disposition of income-producing properties
    
    
    184,034
    
    
    
    1,188,639Income tax expense
    
    
    (178,555
    )
    
    
    (447,808
    )Gain on disposition of income-producing properties, net of tax
    
    
    5,479
    
    
    
    740,831(Loss) earnings from discontinued operations, net of tax
    
    $
    (288,925
    )
    
    $
    883,274
 47




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##### Table of Contents



Balances atApril 30, 2011
    
    
    April 30, 2010Assets of discontinued operationsAccounts receivable
    
    $
    16,346
    
    
    $
    92,402Deferred income taxes
    
    
    13,828
    
    
    
    50,660Other current assets
    
    
    
    
    
    
    45,765Total current
    
    
    30,174
    
    
    
    188,827Property and equipment
    
    
    
    
    
    
    13,259,155Intangible assets
    
    
    
    
    
    
    414,543Other assets
    
    
    
    
    
    
    93,529Total non-current
    
    
    
    
    
    
    13,767,227Total assets of discontinued operations
    
    $
    30,174
    
    
    $
    13,956,054Liabilities of discontinued operationsAccounts payable and accrued expenses
    
    $
    
    
    
    $
    274,077Deferred revenue
    
    
    
    
    
    
    Current maturities of mortgage notes and long-term debt payable
    
    
    
    
    
    
    246,231Total current
    
    
    
    
    
    
    520,308Deferred income taxes
    
    
    
    
    
    
    2,972,327Mortgage notes payable
    
    
    
    
    
    
    10,615,505Total non-current
    
    
    
    
    
    
    13,587,832Total liabilities of discontinued operations
    
    $
    
    
    
    $
    14,108,140
 5. CONTRACTS IN PROGRESS
  2011
    
    
    2010Costs and earnings in excess of billings:Accumulated costs and earnings
    
    $
    13,259,293
    
    
    $
    4,030,255Amounts billed
    
    
    11,747,587
    
    
    
    3,315,126$
    1,511,706
    
    
    $
    715,129Billings in excess of costs and earnings:Amounts billed
    
    $
    552,945
    
    
    $
    5,149,164Accumulated costs and earnings
    
    
    545,537
    
    
    
    5,096,064$
    7,408
    
    
    $
    53,100
 48




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##### Table of Contents



6. PROPERTY AND EQUIPMENT
  Estimateduseful lives
    
    
    2011
    
    
    2010Land
    
    
    N/A
    
    
    $
    660,000
    
    
    $
    660,000Buildings and improvements
    
    3-39 years
    
    
    5,996,584
    
    
    
    5,991,900Equipment
    
    3-10 years
    
    
    1,345,463
    
    
    
    1,296,278Vehicles
    
    3-5 years
    
    
    322,042
    
    
    
    344,562$
    8,324,089
    
    
    $
    8,292,740Less  accumulated depreciation
    
    
    
    
    
    
    3,805,414
    
    
    
    3,487,198$
    4,518,675
    
    
    $
    4,805,542
  7. MORTGAGE NOTE PAYABLE AND LEASES
      Year ending April 30,
    
    Owned
    
    
    Leaseback2012
    
    $
    147,000
    
    
    $
    255,0002013
    
    
    141,000
    
    
    
    149,0002014
    
    
    95,000
    
    
    
    2015
    
    
    91,000
    
    
    
    2016
    
    
    91,000
    
    
    
    Thereafter
    
    
    15,000
    
    
    
    Total
    
    $
    580,000
    
    
    $
    404,000
 49




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##### Table of Contents



Owned Income-ProducingProperties
    
    
    LeasebackMortgage Payments
    
    
    Center RentalYear ending April 30,
    
    Principal
    
    
    Interest
    
    
    Payments2012
    
    $
    130,346
    
    
    $
    313,799
    
    
    $
    105,2032013
    
    
    3,977,589
    
    
    
    76,846
    
    
    
    61,3682014
    
    
    
    
    
    
    
    
    
    
    2015
    
    
    
    
    
    
    
    
    
    
    2016
    
    
    
    
    
    
    
    
    
    
    Thereafter
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    4,107,935
    
    
    $
    390,645
    
    
    $
    166,571
  Secured letter of credit
  50




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##### Table of Contents



8. OTHER LONG-TERM DEBT
  2011
    
    
    2010Note payable bearing interest at 5.0%;
principal and interest
payments due in full at maturity; no maturity
date; secured by
related life insurance policy
    
    $
    382,210
    
    
    $
    370,000Note payable bearing interest at 5.0%;
principal and interest
payments due in full at maturity; no maturity
date; secured by
related life insurance policy
    
    
    205,859
    
    
    
    200,000Note payable bearing interest at 6.0%;
principal and interest
payments due in full at maturity
    
    
    
    
    
    
    412,000Note payable bearing interest at 6.0%;
principal and interest
payments due monthly; $150,000 of principal due
on October 19,
2011, with remaining principal maturing on
January 19, 2016;
secured by all general assets of a Company subsidiary
    
    
    837,121
    
    
    
    850,000Note 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, 2010
    
    
    
    
    
    
    150,000Note payable to a Director of the Company
bearing interest at
12.0%; interest payments due monthly; matures
on May 14, 2012;
secured by security deed on real property
granted by a Company
subsidiary (1)
    
    
    400,000
    
    
    
    Note payable to the Chairman of the Board and
Chief Executive
Officer of the Company bearing interest at
12.0%; interest
payments due monthly; matures on May 14, 2012;
secured by
security deed on real property granted by a
Company subsidiary
(1)
    
    
    50,000
    
    
    
    Note payable to the Executive Vice President of
the Company
bearing interest at 12.0%; interest payments
due monthly;
matures on May 14, 2012; secured by security
deed on real
property granted by a Company subsidiary (1)
    
    
    25,000
    
    
    
    Note payable to a Director of the Company
bearing interest at
12.0%; interest payments due monthly; matures
on May 14, 2012;
secured by security deed on real property
granted by a Company
subsidiary (1)
    
    
    25,000
    
    
    
    Total other long-term debt
    
    
    1,925,190
    
    
    
    1,982,000Less current maturities
    
    
    203,484
    
    
    
    150,000Total other long-term debt, less current
maturities
    
    $
    1,721,706
    
    
    $
    1,832,000
 
 (1)
    
    See Note 16 Related Parties for more information. 51




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##### Table of Contents



Fiscal Year Ending April 30,2012
    
    $
    203,4842013
    
    
    556,7842014
    
    
    60,2862015
    
    
    64,0042016
    
    
    452,562Thereafter
    
    
    588,070Total
    
    $
    1,925,190
   
    
    The maturity date of the note, originally December 18, 2011, and principal payment
structure were amended such that principal payments commenced on February 19, 2011, based
on a 60-month amortization. In addition, a $150,000 principal payment is due on
October 19, 2011, with a balloon payment of the remaining principal balance of
approximately $408,000 due on January 19, 2016; and
 
    
    The interest rate was changed from the prime rate plus 1.5% to a fixed rate of 6% per
annum.
  9. FAIR VALUE MEASUREMENTS
  
    
    Level 1 Quoted prices in active markets for identical assets or liabilities.
 
    
    Level 2 Inputs other than quoted prices which are observable for an asset or
liability, either directly or indirectly.
 
    
    Level 3 Unobservable inputs for an asset or liability when little or no market data
is available.
    52




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##### Table of Contents



(J)
Other assets
  Non-Recurring Measurements
  53




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##### Table of Contents



10. INCOME TAXES
  Current
    
    
    Deferred
    
    
    TotalYear ended April 30, 2011Federal
    
    $
    
    
    
    $
    (993,497
    )
    
    $
    (993,497
    )State and local
    
    
    45,940
    
    
    
    10,393
    
    
    
    56,333$
    45,940
    
    
    $
    (983,104
    )
    
    $
    (937,164
    )Year ended April 30, 2010Federal
    
    $
    
    
    
    $
    (1,486,321
    )
    
    $
    (1,486,321
    )State and local
    
    
    13,309
    
    
    
    (109,036
    )
    
    
    (95,727
    )$
    13,309
    
    
    $
    (1,595,357
    )
    
    $
    (1,582,048
    )
  2011
    
    
    2010Computed expected benefit
    
    $
    (1,008,712
    )
    
    $
    (1,479,204
    )State and local income taxes
    
    
    (250,409
    )
    
    
    (265,038
    )Permanent items
    
    
    15,213
    
    
    
    (8,803
    )Valuation Allowance
    
    
    291,122
    
    
    
    170,238Other
    
    
    15,622
    
    
    
    759$
    (937,164
    )
    
    $
    (1,582,048
    )
 54




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##### Table of Contents



2011
    
    
    2010Deferred income tax assets:Items not currently deductible for tax purposes:Net operating loss carryforwards, federal and state, and credits (1)
    
    $
    2,030,231
    
    
    $
    3,898,970Valuation allowance
    
    
    (990,162
    )
    
    
    (750,214
    )Property and equipment, principally because of differences
in capitalized interest
    
    
    50,740
    
    
    
    54,118Capitalized costs
    
    
    32,163
    
    
    
    38,116Bad debt reserves
    
    
    79,398
    
    
    
    30,005Deferred compensation plan expenses
    
    
    395,711
    
    
    
    369,423Equity-based compensation expenses
    
    
    321,867
    
    
    
    223,107Compensated absences
    
    
    48,104
    
    
    
    52,354Other accrued expenses
    
    
    343,555
    
    
    
    318,266Other
    
    
    68,374
    
    
    
    54,197Gross deferred income tax assets
    
    
    2,379,981
    
    
    
    4,288,342Deferred income tax liabilities:Property and equipment, principally because of differences
in depreciation and capitalized interest
    
    
    (610,773
    )
    
    
    (441,552
    )Intangible assets, principally because of differences in amortization
    
    
    (786,534
    )
    
    
    (870,182
    )Gain on real estate sales structured as tax-deferred like-kind exchanges
    
    
    (1,075,125
    )
    
    
    (1,363,186
    )Other
    
    
    (26,882
    )
    
    
    (92,954
    )Gross deferred income tax liability
    
    
    (2,499,314
    )
    
    
    (2,767,874
    )Net deferred income tax asset of continuing operations
    
    $
    (119,333
    )
    
    $
    1,520,468Net deferred income tax asset (liability) of discontinued operations (Note 4)
    
    
    13,828
    
    
    
    (2,921,667
    )Total net deferred income tax liability
    
    $
    (105,505
    )
    
    $
    (1,401,199
    )
 
 (1)
    
    The federal NOL carryforwards and all significant state NOL carryforwards expire
between the fiscal years 2022 and 2031.    11. 401(K) PLAN
  55




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12. SHAREHOLDERS EQUITY
      56




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##### Table of Contents



13. NET (LOSS) EARNINGS PER SHARE
   For the year Ended April 30, 2011Loss
    
    
    Shares
    
    
    Per Share AmountBasic EPS  loss per share from continuing operations
    
    $
    (2,029,635
    )
    
    
    3,675,987
    
    
    $
    (0.55
    )Basic EPS  loss per share from discontinued operations
    
    
    (288,925
    )
    
    
    3,675,987
    
    
    
    (0.08
    )Effect of dilutive securities
    
    
    
    
    
    
    
    
    
    
    -Diluted EPS  loss per share
    
    $
    (2,318,560
    )
    
    
    3,675,987
    
    
    $
    (0.63
    )
 For the Year Ended April 30, 2010(Loss) Earnings
    
    
    Shares
    
    
    Per Share AmountBasic EPS  loss per share from continuing operations
    
    $
    (2,768,553
    )
    
    
    3,685,834
    
    
    $
    (0.75
    )Basic EPS  earnings per share from discontinued operations
    
    
    883,274
    
    
    
    3,685,834
    
    
    
    0.24Effect of dilutive securities
    
    
    
    
    
    
    
    
    
    
    Diluted EPS  loss per share
    
    $
    (1,885,279
    )
    
    
    3,685,834
    
    
    $
    (0.51
    )
 14. SEGMENT REPORTING
 Segment Reporting
 ® ® ®
 57




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##### Table of Contents



2011
    
    
    2010Customer 1
    
    
    25
    %
    
    
    27
    %
   58




---



##### Table of Contents



For the Year EndedApril 30, 2011
    
    BPE
    
    
    Corporate (1)
    
    
    Eliminations
    
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    18,790,872
    
    
    
    
    
    
    
    
    
    
    $
    18,790,872Lighting products
    
    
    2,226,827
    
    
    
    
    
    
    
    
    
    
    
    2,226,827Energy management services
    
    
    1,515,007
    
    
    
    
    
    
    
    
    
    
    
    1,515,007Fifth fuel management services
    
    
    240,986
    
    
    
    
    
    
    
    
    
    
    
    240,986Productivity software
    
    
    2,961,134
    
    
    
    
    
    
    
    
    
    
    
    2,961,134Total revenues from unaffiliated customers
    
    $
    25,734,826
    
    
    $
    423,102
    
    
    $
    
    
    
    $
    26,157,928Intersegment revenue
    
    
    
    
    
    
    203,700
    
    
    
    (203,700
    )
    
    
    Total revenues from continuing operations
    
    $
    25,734,826
    
    
    $
    626,802
    
    
    $
    (203,700
    )
    
    $
    26,157,928Earnings (loss) from continuing operations before income taxes
    
    $
    556,096
    
    
    $
    (3,538,798
    )
    
    $
    15,903
    
    
    $
    (2,966,799
    )Segment assets
    
    $
    15,829,280
    
    
    $
    27,439,154
    
    
    $
    (17,040,866
    )
    
    $
    26,227,568Goodwill
    
    $
    6,354,002
    
    
    $
    
    
    
    $
    
    
    
    $
    6,354,002Interest expenses
    
    $
    106,949
    
    
    $
    395,599
    
    
    $
    (54,064
    )
    
    $
    448,484Depreciation and amortization
    
    $
    660,695
    
    
    $
    287,541
    
    
    $
    
    
    
    $
    948,236Capital expenditures (2)
    
    $
    34,438
    
    
    $
    19,515
    
    
    $
    
    
    
    $
    53,953
 For the Year EndedApril 30, 2010
    
    BPE
    
    
    Corporate (1)
    
    
    Eliminations
    
    
    ConsolidatedRevenues from unaffiliated customersBPE Segment services and products:Energy savings projects
    
    $
    11,051,059
    
    
    
    
    
    
    
    
    
    
    $
    11,051,059Lighting products
    
    
    1,932,521
    
    
    
    
    
    
    
    
    
    
    
    1,932,521Energy management services
    
    
    1,801,271
    
    
    
    
    
    
    
    
    
    
    
    1,801,271Fifth fuel management services
    
    
    28,000
    
    
    
    
    
    
    
    
    
    
    
    28,000Productivity software
    
    
    3,358,685
    
    
    
    
    
    
    
    
    
    
    
    3,358,685Total revenues from unaffiliated customers
    
    $
    18,171,536
    
    
    $
    389,994
    
    
    $
    
    
    
    $
    18,561,530Intersegment revenue
    
    
    223,799
    
    
    
    301,702
    
    
    
    (525,501
    )
    
    
    Total revenues from continuing operations
    
    $
    18,395,335
    
    
    $
    691,696
    
    
    $
    (525,501
    )
    
    $
    18,561,530Loss from continuing operations before income taxes
    
    $
    (998,225
    )
    
    $
    (3,279,661
    )
    
    $
    (72,715
    )
    
    $
    (4,350,601
    )Segment assets
    
    $
    14,715,108
    
    
    $
    43,535,833
    
    
    $
    (17,298,669
    )
    
    $
    40,952,272Goodwill
    
    $
    6,354,002
    
    
    $
    
    
    
    $
    
    
    
    $
    6,354,002Interest expenses
    
    $
    82,044
    
    
    $
    339,393
    
    
    $
    (19,333
    )
    
    $
    402,104Depreciation and amortization
    
    $
    702,424
    
    
    $
    282,750
    
    
    $
    
    
    
    $
    985,174Capital expenditures (2)
    
    $
    93,270
    
    
    $
    163,925
    
    
    $
    
    
    
    $
    257,195
 
 (1)
    
    The Corporate net loss in each period is derived from corporate headquarters
activities, which consist primarily of the following: rental revenues from tenants in the
Companys corporate headquarters building and related rental and operating costs, salaries
and benefits of Corporate Headquarters executive officers and staff, equity-based
compensation expenses, depreciation and amortization expenses, and costs related to the
Companys status as a publicly-held company, which include, among other items, legal fees,
non-employee directors fees, consulting expenses, investor relations expenses, corporate
audit and tax fees, Nasdaq listing fees, and other Securities & Exchange Commission (SEC)
and Sarbanes-Oxley compliance and financial reporting costs. All relevant costs related to
the business operations of the Companys BPE Segment are either paid directly by BPE or are
allocated to BPE by the Corporate Headquarters. The allocation method is dependent on the
nature of each expense item. Allocated expenses include, among other items, accounting
services, information technology services, insurance costs, and audit and tax preparation
fees. (2)
    
    Includes property and equipment expenditures only. 59




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15. GOODWILL AND OTHER INTANGIBLE ASSETS
  April 30, 2011Gross Carrying
    
    
    AccumulatedAmount
    
    
    AmortizationIntangible assets, subject to amortization:BPE proprietary technology solutions
    
    $
    4,405,389
    
    
    $
    3,311,762Acquired computer software
    
    
    706,032
    
    
    
    548,205Real estate lease costs
    
    
    45,339
    
    
    
    15,192Customer relationships
    
    
    404,632
    
    
    
    326,873Deferred loan costs
    
    
    140,630
    
    
    
    108,037Non-compete agreements
    
    
    63,323
    
    
    
    63,323Tradename
    
    
    61,299
    
    
    
    11,919Other
    
    
    44,882
    
    
    
    44,882$
    5,871,526
    
    
    $
    4,430,193Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707Goodwill
    
    $
    6,354,002
 April 30, 2010Gross Carrying
    
    
    AccumulatedAmount
    
    
    AmortizationIntangible assets, subject to amortization:BPE proprietary technology solutions
    
    $
    4,096,802
    
    
    $
    2,827,071Acquired computer software
    
    
    676,837
    
    
    
    493,885Real estate lease costs
    
    
    49,170
    
    
    
    19,459Customer relationships
    
    
    404,632
    
    
    
    286,433Deferred loan costs
    
    
    122,686
    
    
    
    95,082Non-compete agreements
    
    
    63,323
    
    
    
    60,684Tradename
    
    
    61,299
    
    
    
    7,834Other
    
    
    44,882
    
    
    
    42,016$
    5,519,631
    
    
    $
    3,832,464Intangible assets and goodwill, not subject to amortization:Trademark
    
    $
    708,707Goodwill
    
    $
    6,354,002
 Aggregate amortization expense for all amortizable intangible assets:For the year ended April 30, 2011
    
    $
    611,484For the year ended April 30, 2010
    
    
    594,770
 Estimated future amortization expenses for all amortized intangible assets for the fiscal years ended:2012
    
    $
    530,3822013
    
    
    382,2282014
    
    
    282,0032015
    
    
    160,3912016
    
    
    86,329Thereafter
    
    
    $
    1,441,333
  60




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##### Table of Contents



16. RELATED PARTIES
  (J) Other assets
  17. COMMITMENTS AND CONTINGENCIES
  18. SUBSEQUENT EVENTS
    
    
    each share of the Companys $1.00 par value common stock that is issued and outstanding
immediately prior to the completion of the merger will be converted into the right to
receive $3.50 in cash;
    
    each share of restricted stock that is outstanding immediately prior to the effective
time of the merger will vest (if not previously vested), and the holder thereof will be
entitled to receive the per share consideration in exchange for each such restricted share,
less any applicable withholding taxes.
 61




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##### Table of Contents




    
    each unexercised outstanding stock option or SAR that is out-of the money (i.e., the
exercise price of such incentive is equal to or greater than $3.50), whether or not vested,
will expire and be cancelled as of the effective time of the merger for no consideration;
    
    each unexercised outstanding stock option that is in-the-money (i.e., the exercise
price of such stock option is less than $3.50) will vest (if not vested) and be cancelled
and settled, and the holder thereof will be entitled to receive an amount in cash, without
interest, equal to the product of (i) the excess, if any, of (x) $3.50 over (y) the
exercise price per share of Company common stock subject to such in-the-money stock option,
multiplied by (ii) the number of shares of Company common stock represented by such stock
option (other than shares for which such stock option had previously been exercised, if
any); and
    
    each SAR that is in-the-money will vest (if not previously vested) and the holder
thereof will be entitled to receive in exchange therefore an amount in cash equal to the
product of (i) the excess, if any, of (x) $3.50 over (y) the exercise price of such
in-the-money SAR, multiplied by (ii) the number of units represented by such SAR (other
than SARs for which such grant had previously been exercised, if any).
  
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  
 ITEM 9A.
    
    CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
   
    
    develop and implement additional procedures to increase the level of review,
evaluation and validation of the Companys valuation of deferred
tax assets;
    
    increase the level of knowledge among Company employees in the
area of accounting for income taxes; and
    
    hire a third-party accounting firm of tax professionals to assist in the preparation
and review of income tax information reported and disclosed in this Annual Report on Form
10-K.
  MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
   62




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##### Table of Contents



Internal Control-Integrated Framework.
 Accounting for Income Taxes
  
 ITEM 9B.
    
    OTHER INFORMATION
  
 PART III
 
 ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 DIRECTORS
  63




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##### Table of Contents



INFORMATION CONCERNINGNAME
    
    THE DIRECTORSAlan R. Abrams
    
    A Director of the Company since 1992, Mr. Abrams has been Chairman of the Board
since 2006 and Chief Executive Officer since 1999. He served as Co-Chairman of the Board from
1998 to 2006 and as President from 2000 to June 2010. Mr. Abrams is 56.The Board believes that, as the Companys Chief Executive Officer, Mr.
Abrams provides essential insights and guidance to the Board from an
insider perspective of the day-to-day operations and strategic
positioning of the Company.Samuel E. Allen
    
    A Director of the Company since 2003, Mr. Allen has served as Chairman of Globalt,
Inc., an investment management company, since 1990, and was Chief Executive Officer of that
company from 1990 to 2004. He was also a director of Chattem, Inc., a marketer and
manufacturer of over-the-counter healthcare products, toiletries and dietary supplements, from
2001 to 2010. Mr. Allen is 75.The Board believes that Mr. Allen brings strong leadership and
operational experience to the Board from his prior roles with Globalt,
as well as valuable financial expertise. Also, his current service as
the Chairman of Globalt and as a long-time director and audit committee
chairman of a public company adds strategic planning and financial
skills to the Board, and brings insights on public company governance
practices. Further, the Board believes his prior experience with other
boards of directors makes him an effective chairman of the Nominating
and Corporate Governance Committee.Gilbert L. Danielson
    
    A Director of the Company since 2000, Mr. Danielson has served as Chief
Financial Officer and director of Aarons, Inc. since 1990 and as its Executive Vice President
since 1998. Aarons, Inc. is a company engaged in the sales and lease ownership and specialty
retailing of residential furniture, consumer electronics, home appliances, and accessories.
Mr. Danielson is 65.The Board believes that Mr. Danielsons long experience as the
Executive Vice President and Chief Financial Officer of Aarons, Inc.
brings to the Board the operational and financial acumen and
substantial leadership of an experienced senior financial executive at
a significantly larger public company. His financial expertise makes
him an effective member of the Audit Committee, while his role as a
director of another public company adds strategic planning and public
company governance skills. The Board has determined he is an audit
committee financial expert within the meaning of the rules of the SEC.Herschel Kahn
    
    A Director of the Company since March 2008 and the Boards Lead Director since
December 2008, Mr. Kahn has served as owner and managing principal of HK Enterprises, a
company engaged in management and executive development, succession planning, labor relations, contract negotiations, executive compensation, and executive coaching and
counseling, since 1993. Mr. Kahn is 77.
 64




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##### Table of Contents



INFORMATION CONCERNINGNAME
    
    THE DIRECTORSThe Board believes that Mr. Kahn brings substantial leadership and
operational and entrepreneurial experience as the founder and principal
of his own business. Moreover, the Board believes his deep experience
in corporate human resources, management and executive development is
an important and valuable resource for the Board, and qualifies him to
chair the Compensation Committee.Robert T. McWhinney, Jr.
    
    A Director of the Company since 2000, Mr. McWhinney has been President and
Chief Executive Officer of Douglass, McCarthy & McWhinney, Inc., a management consulting
company, since 2003. Mr. McWhinney is 71.The Board believes that Mr. McWhinney brings significant leadership,
financial and operational experience and industry knowledge to the
Board from his executive officer roles. Importantly, his long
experience as a management consultant adds substantial strategic
planning and operational experience from various industries to the
Boards overall skill set. Further, the Board believes Mr. McWhinneys
significant experience with financial matters qualifies him to chair
the Audit Committee.
 EXECUTIVE OFFICERS
   Alan R. Abrams
 Officer since 1988
  Rick A. Paternostro
 Officer since 2000
  M. Todd Jarvis
 Officer since 2004
  J. Andrew Abrams
 Officer since 1988
  65




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##### Table of Contents



SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
  CORPORATE GOVERNANCE AND COMMUNICATING WITH THE BOARD OF DIRECTORS
 www.servidyne.com
    
 ITEM 11.
    
    EXECUTIVE COMPENSATION
 COMPENSATION OF DIRECTORS
  66




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FeesEarned orPaid in
    
    
    SARsCash
    
    
    Awards
    
    
    TotalName
    
    ($) (1)
    
    
    ($)(2)
    
    
    ($) (3)Samuel E. Allen
    
    
    35,146
    
    
    
    
    
    
    
    35,146Gilbert L. Danielson
    
    
    26,750
    
    
    
    
    
    
    
    26,750Herschel Kahn
    
    
    30,421
    
    
    
    
    
    
    
    30,421Robert T. McWhinney, Jr.
    
    
    44,518
    
    
    
    
    
    
    
    44,518
 
 (1)
    
    The Company maintains a deferred compensation plan (the Deferred Compensation Plan)
under which each member of the Board may elect to defer to a future date receipt of all or
any part of his or her compensation as a Director and/or as a member of the committees of
the Board. For purposes of the Deferred Compensation Plan, compensation means the
retainer fees and meeting fees payable to such Directors by the Company in their capacities
as Directors or as members of the committees of the Board, respectively, but excludes
awards of restricted stock, stock options, stock appreciation rights (SARs), or other
equity incentives. For the fiscal year ended April 30, 2011, two members of the Board
participated in the Deferred Compensation Plan.(2)
    
    Represents the grant date fair values of SARs awarded in the fiscal year ended April
30, 2011. See Note 3 Equity-Based Compensation to the consolidated financial statements
for the assumptions made in determining fair values. There can be no assurance that these
amounts will ever be realized.The number of outstanding stock options (adjusted for stock dividends) and SARs (adjusted
for stock dividends) held by each of the Companys Outside Directors as of April 30, 2011,
is summarized in the table below: Number of
    
    
    Number of
    
    
    Number ofSecurities
    
    
    Securities
    
    
    SecuritiesUnderlying
    
    
    Underlying
    
    
    UnderlyingUnexercised
    
    
    Unexercised
    
    
    UnexercisedOptions (#)
    
    
    SARs (#)
    
    
    SARs (#)Name
    
    Exercisable
    
    
    Unexercisable
    
    
    ExercisableSamuel E. Allen
    
    
    11,550
    
    
    
    8,400
    
    
    
    12,600Gilbert L. Danielson
    
    
    11,550
    
    
    
    8,400
    
    
    
    12,600Herschel Kahn
    
    
    
    
    
    
    21,000
    
    
    
    Robert T. McWhinney, Jr.
    
    
    11,550
    
    
    
    8,400
    
    
    
    12,600
 The stock options awarded have a two-year vesting period. All of the options have vested as
of April 30, 2011. The SARs awarded have a five-year vesting period, in which thirty
percent (30%) of the SARs will vest on the third annual anniversary of the date of grant,
thirty percent (30%) will vest on the fourth annual anniversary of the date of grant, and
forty percent (40%) will vest on the fifth annual anniversary of the date of grant, with an
early vesting provision by which one hundred percent (100%) of the SARs will vest
immediately at such time as the price of the common stock closes at or above $19.05 per
share (adjusted for stock dividends) for ten consecutive trading days or upon a change in
control of the Company.
 (3)
    
    Outside Directors do not receive any other perquisites or other compensation.
 COMPENSATION OF EXECUTIVE OFFICERS
  67




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AllEquity
    
    
    OtherFiscal
    
    
    Salary
    
    
    Awards
    
    
    Compensation
    
    
    TotalName and Principal Position
    
    Year
    
    
    ($)
    
    
    ($) (1)
    
    
    ($) (2)
    
    
    ($)Alan R. Abrams
    
    
    2011
    
    
    
    333,333
    
    
    
    
    
    
    
    4,840
    
    
    
    338,173Chairman of the Board
    
    
    2010
    
    
    
    324,635
    
    
    
    10,260
    
    
    
    3,621
    
    
    
    338,516and Chief Executive OfficerM. Todd Jarvis
    
    
    2011
    
    
    
    230,000
    
    
    
    
    
    
    
    19,525
    
    
    
    249,525President and Chief Operating Officer,
    
    
    2010
    
    
    
    209,500
    
    
    
    25,400
    
    
    
    18,508
    
    
    
    253,408Servidyne, Inc.
President and Chief Executive Officer,
Servidyne Systems, LLCJ. Andrew Abrams
    
    
    2011
    
    
    
    194,000
    
    
    
    
    
    
    
    3,517
    
    
    
    197,517Executive Vice President, Servidyne, Inc.
    
    
    2010
    
    
    
    188,000
    
    
    
    
    
    
    
    3,603
    
    
    
    191,603Vice President and Chief Technology Officer,
Servidyne Systems, LLC
Director and Vice President,
Abrams Properties, Inc.
President, Chief Executive Officer and
Director, Abrams Properties, Inc.Melinda S. Garrett
    
    
    2011
    
    
    
    315,063
    
    
    
    
    
    
    
    39,329
    
    
    
    354,392Former Executive Officer
    
    
    2010
    
    
    
    213,500
    
    
    
    
    
    
    
    2,981
    
    
    
    216,481
 
 (1)
    
    Represents the grant date fair values of SARs awarded in the fiscal years ended April 30,
2011 and 2010. See Note 3 Equity-Based Compensation to the consolidated financial
statements for the assumptions made in determining these fair values. There can be no
assurance that these amounts will ever be realized.(2)
    
    Consists of: (i) matching contributions to the Companys 401(k) Plan; (ii) the economic
benefit of premiums paid on behalf of the Named Executive Officers under individual life
insurance policies; (iii) club fees; (iv) auto allowance; and (v) severance paid to a former
Executive Officer. Such amounts in the fiscal year ended April 30, 2011, were as follows: Economic Benefit forMatching Contributions
    
    
    Life Insurance
    
    
    
    
    
    
    Auto
    
    
    SeveranceName
    
    to 401(k) Plan
    
    
    Premiums
    
    
    Club Fees
    
    
    Allowance
    
    
    Paid
    
    
    TotalAlan R. Abrams
    
    $
    3,670
    
    
    $
    1,170
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    4,840M. Todd Jarvis
    
    
    3,595
    
    
    
    0
    
    
    
    5,730
    
    
    
    10,200
    
    
    
    0
    
    
    
    19,525J. Andrew Abrams
    
    
    2,697
    
    
    
    820
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    3,517Melinda S. Garrett
    
    
    2,377
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    36,952
    
    
    
    39,329
   68




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##### Table of Contents



OUTSTANDING EQUITY AWARDS
  Number of
    
    
    Number of
    
    
    Number ofSecurities
    
    
    Securities
    
    
    SecuritiesUnderlying
    
    
    Underlying
    
    
    UnderlyingUnexercised
    
    
    Unexercised SARs
    
    
    UnexercisedOptions (#)
    
    
    (#) Unexercisable
    
    
    SARs (#)
    
    
    Exercise
    
    
    ExpirationName
    
    Grant Date
    
    
    Exercisable (1)
    
    
    (2)
    
    
    Exercisable (2)
    
    
    Price
    
    
    DateAlan R. Abrams
    
    July 17, 2002
    
    
    127,958
    
    
    
    
    
    
    
    
    
    
    $
    4.42
    
    
    
    7/17/2012March 22, 2010
    
    
    
    
    
    
    19,000
    
    
    
    
    
    
    
    2.09
    
    
    
    3/22/2020M. Todd Jarvis
    
    January 6, 2004
    
    
    54,285
    
    
    
    
    
    
    
    
    
    
    
    4.42
    
    
    
    1/6/2014June 26, 2006
    
    
    
    
    
    
    10,080
    
    
    
    15,120
    
    
    
    3.94
    
    
    
    6/26/2016December 6, 2006
    
    
    
    
    
    
    6,720
    
    
    
    10,080
    
    
    
    3.79
    
    
    
    12/6/2016June 8, 2009
    
    
    
    
    
    
    20,000
    
    
    
    
    
    
    
    2.30
    
    
    
    6/8/2019March 22, 2010
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    2.09
    
    
    
    3/22/2020J. Andrew Abrams
    
    July 17, 2002
    
    
    12,458
    
    
    
    
    
    
    
    
    
    
    
    4.42
    
    
    
    7/17/2012June 13, 2008
    
    
    10,500
    
    
    
    
    
    
    
    
    
    
    
    5.24
    
    
    
    6/13/2018June 13, 2008
    
    
    
    
    
    
    21,000
    
    
    
    
    
    
    
    4.76
    
    
    
    6/13/2018
 
 (1)
    
    The stock options awarded have a two-year vesting period. All of the options have vested
as of April 30, 2011.(2)
    
    The SARs awarded have a five-year vesting period, in which thirty percent (30%) of the SARs
will vest on the third annual anniversary of the date of grant, thirty percent (30%) will vest
on the fourth annual anniversary of the date of grant, and forty percent (40%) will vest on
the fifth annual anniversary of the date of grant. All SARs have early vesting provisions by
which one hundred percent (100%) of the SARs would vest immediately (1) on the date of a
change in control of the Company; or (2) if the Companys stock price were to close at or
above a certain price for ten consecutive trading days. For SARs granted prior to the stock
dividend that occurred in the first quarter of fiscal 2009, the triggering price for early
vesting is $19.05 per share. For SARs granted subsequent to the stock dividend that occurred
in the first quarter of fiscal 2009, the triggering price for early vesting is $20.00 per
share  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
 EQUITY COMPENSATION PLAN INFORMATION
  69




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(a)
    
    
    (b)
    
    
    (c)Number of
    
    
    
    
    
    
    Number ofsecurities to be
    
    
    Weighted-
    
    
    securitiesissued upon
    
    
    average exercise
    
    
    remaining availableexercise of
    
    
    price of
    
    
    for future issuanceoutstanding
    
    
    outstanding
    
    
    (excluding securitiesPlan Category
    
    options and SARs
    
    
    options and SARs
    
    
    reflected in column (a))2000 Award Plan
    
    
    1,040,286
    
    
    $
    4.02
    
    
    
    Equity compensation
awards not approved
by shareholders
    
    
    272,500
    
    
    
    4.05
    
    
    
    TOTAL
    
    
    1,312,786
    
    
    
    
    
    
    
    
  PRINCIPAL HOLDERS OF THE COMPANYS SECURITIES AND HOLDINGS BY EXECUTIVE OFFICERS AND DIRECTORS
  Shares ofCommon Stock
    
    
    PercentageName and Address
    
    Beneficially Owned
    
    
    of ClassDavid L. Abrams
    
    
    865,850
    (1)(2)
    
    
    23.56
    %Alan R. Abrams
    
    
    783,500
    (3)(4)(5)(6)
    
    
    20.60
    %Kandu
Partners L.P. 
Post Office Box 53407
Atlanta, Georgia 30355
    
    
    707,561
    (2)
    
    
    19.25
    %
 70




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##### Table of Contents



Shares ofCommon Stock
    
    
    PercentageName and Address
    
    Beneficially Owned
    
    
    of ClassJ. Andrew Abrams
    
    
    684,563
    (3)(4)(7)
    
    
    18.51
    %Abrams Partners, L.P.

7525 Princeton Trace

Atlanta, Georgia 30328
    
    
    577,500
    (3)(4)
    
    
    15.71
    %Ann U. Abrams

2828 Peachtree Road, Apt 2901

Atlanta, Georgia 30305
    
    
    305,567
    (4)
    
    
    8.31
    %Tamalpais Master Fund, Ltd

Clifton House, 75 Fort Street

PO Box 190 GT, Georgetown

Grand Cayman, 
Cayman Islands
    
    
    198,549
    (8)
    
    
    5.40
    %M. Todd Jarvis
    
    
    73,929
    (9)
    
    
    1.98
    %Samuel E. Allen
    
    
    23,121
    (10)(11)
    
    
    *Gilbert L. Danielson
    
    
    22,705
    (10)
    
    
    *Herschel Kahn
    
    
    3,300
    (12)
    
    
    *Robert T. McWhinney, Jr.
    
    
    16,149
    (8)(10)(13)
    
    
    *All Executive Officers
and Directors as a group (8 persons)
    
    
    1,060,204
    
    
    
    26.88
    %
 
 *
    
    Less than 1%(1)
    
    Includes 707,561 shares (19.25% of outstanding shares) owned by Kandu Partners, L.P.,
which David L. Abrams beneficially owns due to his management of the general partner of the
partnership.(2)
    
    This shareholder has entered into a support agreement with SCI to vote in favor of the merger as described
below, subject to termination if the Company's Board changes its recommendation to the shareholders to approve the merger.(3)
    
    Includes 577,500 shares (15.71% of the outstanding shares) owned by Abrams Partners, L.P.,
which Alan R. Abrams and J. Andrew Abrams each beneficially own due to their joint control of
the general partner of such partnership.(4)
    
    This shareholder has entered into a support agreement with SCI to vote in favor of the merger as described
below.(5)
    
    Includes 115 shares owned by Mr. Alan R. Abrams wife.(6)
    
    Includes currently exercisable options to purchase 127,958 shares of the common stock.(7)
    
    Includes currently exercisable options to purchase 22,958 shares of the common stock.(8)
    
    Based on Schedule 13D (adjusted for stock dividends) filed on May 19, 2008, by Tamalpais
Master Fund, Ltd. and its investment manager, Tamalpais Management Group LP, whose principal
executive office is located at 600 California Street, Suite 540, San Francisco, California
94108. 71




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##### Table of Contents



(9)
    
    Includes currently exercisable options to purchase 54,285 shares of the common stock.(10)
    
    Includes currently exercisable options to purchase 11,550 shares of the common stock.(11)
    
    Includes 1,719 shares owned by Mr. Allens children for the benefit of his grandchildren.(12)
    
    Includes 2,250 shares owned jointly with Mr. Kahns daughter.(13)
    
    Includes 1,155 shares owned jointly with Mr. McWhinneys wife. VOTING AND SUPPORT AGREEMENTS IN CONNECTION WITH SCI MERGER
   
 ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 RELATED PARTY TRANSACTIONS
 (J)
Other assets
   72




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##### Table of Contents



DIRECTOR INDEPENDENCE
   
    
    While Mr. Danielson is technically not independent under the NASDAQ definition of
independence, he has not received, nor will he receive, any pecuniary benefit from the
business relationship of his company with the Company, and the Board has determined that Mr.
Danielson can continue to exercise independent judgment with respect to matters coming before
the Board and its Audit Committee;
    
    Mr. Danielsons ten years of service as the Chairman of the Audit Committee has given him
substantial experience in the Companys industry and knowledge of the Companys operations.
That experience and knowledge, coupled with his expertise in financial reporting, make him a
valuable ongoing asset to the Board and its Audit Committee; andThe Board has determined that it may take significant time to identify and qualify suitable
candidates with the requisite financial expertise for election as independent directors, which
would interfere with the immediate need of the Company to have a fully functioning Audit
Committee.
 
 ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
 INFORMATION CONCERNING THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 FEES
  Years Ended April, 302011
    
    
    2010Audit fees
    
    $
    220,000
    
    
    $
    210,000Audit related fees (1)
    
    
    20,000
    
    
    
    4,950Tax fees (2)
    
    
    62,000
    
    
    
    62,000All other fees
    
    
    3,260
    
    
    
    2,760$
    305,260
    
    
    $
    279,710
 
 (1)
    
    In fiscal 2011, these fees were due to additional procedures related to the fiscal 2010
annual audit, and in fiscal 2010, these fees related to preliminary Sarbanes Oxley procedures.(2)
    
    In fiscal 2011 and 2010, these fees related to the preparation of the income tax returns for
the fiscal years ended April 30, 2010 and 2009, respectively. 73




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##### Table of Contents



PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES
  74




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PART IV
 
 ITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (A)
 
 
  Exhibit No.
    
    Exhibit Title2.1
    
    Agreement and Plan of Merger, dated as of June 26, 2011, by and among Scientific
Conservation, Inc., Scrabble Acquisition, Inc. and Servidyne, Inc. (included as
Exhibit 2.1 to the Companys Form 8-K filed with the SEC on June 28, 2011, and
incorporated herein by reference). (The Disclosure Schedule and similar attachments
are omitted pursuant to Item 601(b)(2) of Regulation S-K under the Securities
Exchange Act of 1934, as amended. The Company agrees to furnish a supplemental copy
of any omitted schedule to the Securities and Exchange Commission upon request).3.1
    
    Amended and Restated Articles of Incorporation of Servidyne, Inc., dated September
22, 2008 (included as Exhibit 3.1 to the Companys Form 8-K filed with the SEC on
September 25, 2008, and incorporated herein by reference).3.2
    
    Amended and Restated Bylaws of Servidyne, Inc., dated November 28, 2007 (included as
Exhibit 3(b) to the Companys Form 8-K filed with the SEC on November 30, 2007, and
incorporated herein by reference).10.1
    
    Directors Deferred Compensation Plan (included with the Companys Form 10-K for the
year ended April 30, 1991, File No. 0-10146, and incorporated herein by reference).
#10.2
    
    2000 Stock Award Plan (included as Exhibit 4 to the Companys Form S-8 filed with
the SEC on September 29, 2000, File No. 333-46920, and incorporated herein by
reference). #10.3
    
    Alan R. Abrams Split Dollar Life Insurance Agreement dated May 31, 2001 (included as
Exhibit 10(i) to the Companys Form 10-K for the year ended April 30, 2001 filed
with the SEC on July 18, 2001, File No. 0-10146, and incorporated herein by
reference). #10.4
    
    J. Andrew Abrams Split Dollar Life Insurance Agreement dated May 31, 2001 (included
as Exhibit 10(j) to the Companys Form 10-K for the year ended April 30, 2001 filed
with the SEC on July 18, 2001, File No. 0-10146, and incorporated herein by
reference). #10.5
    
    Summary Description of Annual Incentive Bonus Plan (included as Exhibit 10(i) to the
Companys Form 10-Q for the quarter ended October 31, 2005, filed with the SEC on
December 15, 2005, File No. 0-10146, and incorporated herein by reference). #10.6
    
    Form of Stock Appreciation Rights Agreement (included as Exhibit 10(j) to the
Companys Form 10-K for the year ended April 30, 2006, filed with the SEC on July
31, 2006, and incorporated herein by reference). #
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Exhibit No.
    
    Exhibit Title10.7
    
    Form of Related Party Promissory Note (included as Exhibit 10.1 to the Companys
Form 10-Q for the quarter ended October 31, 2010, filed with the SEC on December 15,
2010, and incorporated herein by reference).10.8
    
    Real Estate Note dated July 17, 2002, made by 1945 The Exchange LLC (an affiliate of
the Company) in favor The Ohio National Life Insurance Company (related to the
Companys corporate headquarters building) (included as Exhibit 10.1 to the
Companys Form 8-K filed with the SEC on June 2, 2011, and incorporated herein by
reference).10.9
    
    Deed to Secure Debt and Security Agreement made and entered into as of July 17,
2002, by and between 1945 The Exchange LLC and The Ohio National Life Insurance
Company (related to the Companys corporate headquarters building) (included as
Exhibit 10.2 to the Companys Form 8-K filed with the SEC on June 2, 2011, and
incorporated herein by reference).10.10
    
    Assignment of Leases and Rents made and entered into as of July 17, 2002, by and
between 1945 The Exchange LLC and The Ohio National Life Insurance Company (related
to the Companys corporate headquarters building) (included as Exhibit 10.3 to the
Companys Form 8-K filed with the SEC on June 2, 2011, and incorporated herein by
reference).10.11
    
    Unconditional Guaranty of Payment and Performance made as of July 17, 2002, by
Abrams Properties, Inc. (an affiliate of the Company) in favor of The Ohio National
Life Insurance Company (related to the Companys corporate headquarters building)
(included as Exhibit 10.4 to the Companys Form 8-K filed with the SEC on June 2,
2011, and incorporated herein by reference).10.12
    
    Consolidated Amended and Restated Renewal Note and Security Agreement dated as of
December 18, 2003, by and among National Loan Investors, L.P., DMD2, Inc. (f/k/a the
Wheatstone Energy Group, Inc.) and Servidyne Systems, LLC (f/k/a The Wheatstone
Energy Group, LLC, f/k/a WEGI Acquisition, LLC) (an affiliate of the Company)
(included as Exhibit 10.5 to the Companys Form 8-K filed with the SEC on June 2,
2011, and incorporated herein by reference).10.13
    
    Assumption Agreement dated as of December 18, 2003, by and among National Loan
Investors, L.P., DMD2, Inc., Servidyne Systems, LLC, M. Todd Jarvis and Paul M.
Williams (included as Exhibit 10.6 to the Companys Form 8-K filed with the SEC on
June 2, 2011, and incorporated herein by reference).10.14
    
    Loan Modification, Extension, Reaffirmation and Assumption Agreement dated as of
March 9, 2011, by and among National Loan Investors, L.P. and Servidyne Systems, LLC
(included as Exhibit 10.7 to the Companys Form 8-K filed with the SEC on June 2,
2011, and incorporated herein by reference).10.15
    
    Modification and Extension Promissory Note and Security Agreement No. 1 dated March
9, 2011, and effective January 19, 2011, between and among National Loan Investors,
L.P. and Servidyne Systems, LLC (included as Exhibit 10.8 to the Companys Form 8-K
filed with the SEC on June 2, 2011, and incorporated herein by reference).10.16
    
    Modification and Extension Promissory Note and Security Agreement No. 2 dated March
9, 2011, and effective January 19, 2011, between and among National Loan Investors,
L.P. and Servidyne Systems, LLC (included as Exhibit 10.9 to the Companys Form 8-K
filed with the SEC on June 2, 2011, and incorporated herein by reference).
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Exhibit No.
    
    Exhibit Title10.17
    
    Unconditional Guaranty of Payment
and Performance made and entered into March 9, 2011, by Abrams Power, Inc. (an affiliate of the Company) to and in favor of
National Loan Investors, L.P. (included as Exhibit 10.10 to the Companys Form 8-K
filed with the SEC on June 2, 2011, and incorporated herein by reference).10.18
    
    Salaried Employees Severance Plan, dated as of May 1, 1993. #21.1
    
    List of the Companys Subsidiaries.23.1
    
    Consent of Deloitte & Touche LLP.31.1
    
    Certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.1
    
    Form of Voting and Support Agreement With Respect to Approximately 28% of the Voting
Power of the Company (included as Exhibit 99.1 to the Companys Form 8-K filed with
the SEC on June 28, 2011, and incorporated herein by reference).99.2
    
    Form of Voting and Support Agreement With Respect to Approximately 27% of the Voting
Power of the Company (included as Exhibit 99.2 to the Companys Form 8-K filed with
the SEC on June 28, 2011, and incorporated herein by reference).
 
 #
    
    Management compensatory plan or arrangement. (B)
 (C)
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SERVIDYNE, INC.Dated: July 29, 2011
    By:
    /s/ Alan R. AbramsAlan R. AbramsChief Executive Officer  Dated: July 29, 2011
    
    /s/ Alan R. AbramsAlan R. Abrams
Chairman of the Board of Directors,
Chief Executive OfficerDated: July 29, 2011
    
    /s/ Samuel E. AllenSamuel E. AllenDirectorDated: July 29, 2011
    
    /s/ Gilbert L. DanielsonGilbert L. Danielson
DirectorDated: July 29, 2011
    
    /s/ Herschel KahnHerschel Kahn
DirectorDated: July 29, 2011
    
    /s/ Robert T. McWhinney, Jr.Robert T. McWhinney, Jr.
DirectorDated: July 29, 2011
    
    /s/ Rick A. PaternostroRick A. Paternostro
Chief Financial Officer
 78