SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q
QUARTERLY REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

For the quarter ended January 31, 2005

Commission file number 0-10146

ABRAMS INDUSTRIES, INC.

1945 The Exchange, Suite 300, Atlanta, GA 30339-2029

Registrant’s telephone number, including area code: (770) 953-0304

Former name, former address, former fiscal year, if changed since last report: N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ            No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨            No þ

The number of shares of $1.00 par value Common Stock of the Registrant outstanding as of February 28, 2005, was 3,207,613.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ABRAMS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

See accompanying notes to consolidated financial statements.

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ABRAMS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

See accompanying notes to consolidated financial statements.

2

ABRAMS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)

See accompanying notes to consolidated financial statements.

3

ABRAMS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

See accompanying notes to consolidated financial statements.

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ABRAMS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2005, AND APRIL 30, 2004
(UNAUDITED)

NOTE 1. ORGANIZATION AND BUSINESS

     Abrams Industries, Inc. (together with its subsidiaries, the “Company”) was organized under Delaware law in 1960. In 1984, the Company changed its state of incorporation from Delaware to Georgia. The Company (i) provides energy engineering services and develops, implements and supports maintenance and service request solutions for facilities; (ii) implements energy saving lighting programs and provides other energy services, including facility-related improvements that reduce energy and operating costs; and (iii) engages in real estate investment and development. The Company also formerly provided commercial construction services as a general contractor.

NOTE 2. UNAUDITED STATEMENTS

     The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations, although management believes that the accompanying disclosures are adequate. In the opinion of management, the accompanying financial statements contain all adjustments, consisting of normal recurring accruals, that are necessary for a fair statement of the results for the interim periods presented. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2004. Results of operations for interim periods are not necessarily indicative of annual results.

     Certain reclassifications have been made to the fiscal 2004 consolidated financial statements to conform to classification adopted in the fiscal 2005.

NOTE 3. SIGNIFICANT ACCOUNTING POLICIES

     As of October 31, 2004, the Company elected to early adopt EITF 03-13 issued by Emerging Issues Task Force, Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations. During its fiscal year ended April 30, 2004, the Company made the decision to discontinue its operations as a general contractor, and pursuant to this decision, all general contracting operating activities have ceased. The Construction Segment has been classified as a discontinued operation, and the historical assets, liabilities, operating results and cash flows of the Segment have been reclassified to discontinued operations pursuant to SFAS No. 144.

     In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (“SFAS”) No. 123(R) which replaces SFAS No. 123, Accounting for Stock-Based Compensation, and supercedes Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) applies to all transactions involving the issuance, by the Company, of its own equity securities (stock, stock options, or other equity instruments) in exchange for goods or services, including employee services. It requires that all stock option awards to employees be

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expensed by the Company over any related vesting period. The Company will apply this standard on a modified prospective method. Under this method, the Company records compensation expense for all awards it grants after the date it adopts the standard. In addition, the Company is required to record compensation expense for the unvested portion of the previously granted awards that remain outstanding at the date of adoption. SFAS No. 123(R) is effective for the Company as of the beginning of the first interim period that begins after June 15, 2005. The adoption of this statement is not expected to have a material effect on the Company’s financial position or results of operations.

     As of January 31, 2003, the Company adopted the fair value disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure.” Under SFAS No. 148, the Company is required to disclose the effects on reported net earnings (loss) with respect to stock-based compensation.

     For purposes of the required pro forma disclosures, the Company has computed the value of all stock option awards granted for the third quarter and for the nine months ended January 31, 2005, and January 31, 2004, using the Black-Scholes option pricing model.

     Options to purchase 720,492 shares were outstanding at January 31, 2005, of which 560,028 options were vested. No stock options or shares of restricted stock were granted in the third quarter ended January 31, 2005, and 84,900 stock options and 7,500 shares of restricted stock were granted in the nine months ended January 31, 2005. The Company granted 186,000 stock options and 10,000 shares of restricted stock in the third quarter and in the nine months ended January 31, 2004. The number of options forfeited in the third quarter and nine months ended January 31, 2005, was 2,000 and 62,000, respectively, and 26,294 and 237,294 for the third quarter and nine months ended January 31, 2004, respectively. There were 6,592 stock options outstanding that were “in-the-money” as of January 31, 2005.

     If the Company had accounted for its stock-based compensation awards in accordance with SFAS No. 123, pro forma results would have been as follows:

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NOTE 4. RECEIVABLES

     All net contract and trade receivables are expected to be collected within one year.

NOTE 5. DISCONTINUED OPERATIONS

     The Company is in the business of creating long-term value by periodically realizing gains through the sale of existing real estate assets, and then redeploying its capital by reinvesting the proceeds from such sales. Effective May 1, 2002, the Company adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which requires, among other things, that the operating results of certain income-producing assets, sold subsequent to April 30, 2002, be included in discontinued operations in the statements of operations for all periods presented. The Company classifies an asset as held for sale when the asset is under a binding sales contract with minimal contingencies, and the prospective buyer is materially at risk if the buyer fails to complete the transaction. However, each potential transaction is evaluated based on its separate facts and circumstances. Pursuant to this criteria, as of January 31, 2005, the Company classified its shopping center located in Cincinnati, Ohio, as held for sale. As such, the financial statements have been prepared with the results of operations and cash flows related to the shopping center now shown as discontinued operations. This sale of the shopping center subsequently closed in February 2005. See Note 12 to the consolidated financial statements. There were no other assets classified as held for sale as of January 31, 2005.

     During its fiscal year ended April 30, 2004, the Company made the decision to discontinue its operations as a general contractor, and pursuant to this decision, all general contracting operating activities have ceased. The Construction Segment has been classified as a discontinued operation, and the historical assets, liabilities, operating results and cash flows of the Segment have been reclassified to discontinued operations pursuant to SFAS No. 144.

     On March 12, 2004, the Company sold its shopping center located in North Fort Myers, Florida, and recognized a pretax gain of approximately $4.0 million. As a result of this transaction, the Company’s financial statements have been prepared with the results of operations and cash flows related to the North Fort Myers shopping center shown as discontinued operations.

     Summarized financial information for discontinued operations is as follows:

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NOTE 6. OPERATING SEGMENTS

     The Company has three operating segments: Energy and Facilities Solutions, Energy Services, and Real Estate. The Company also formerly provided commercial construction services as a general contractor through its Construction Segment. The Construction Segment has been classified as a discontinued operation, and the historical operating results of the Segment have been reclassified to discontinued operations pursuant to SFAS No. 144. The table below exhibits selected financial data on a segment basis. Earnings (loss) from continuing operations before income taxes are total revenues of continuing operations less operating expenses of continuing operations, including depreciation and interest. Parent company expenses have not been allocated to the subsidiaries.

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(1) The Energy Services Segment was formed in December 2003.

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NOTE 7. EARNINGS (LOSS) PER SHARE

     Basic earnings (loss) per share are computed by dividing net earnings (loss) by the weighted average shares outstanding during the reporting period. Diluted earnings per share are computed by giving effect to dilutive stock equivalents resulting from outstanding stock options. The dilutive effect on the number of common shares for the third quarter and nine months ended January 31, 2005, was 711 and 287 shares, respectively, and was 264 and 0 shares for the third quarter and the first nine months ended January 31, 2004, respectively. Since the Company had losses from continuing operations for all periods presented, all stock equivalents were antidilutive during these periods, and therefore, are excluded when determining the diluted weighted average shares outstanding.

NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS

     The gross carrying amounts and accumulated amortization for all of the Company’s intangible assets as of January 31, 2005, are as follows:

     Goodwill increased $460,475 from April 30, 2004, due to: (1) $313,035 from the acquisition of Building Performance Engineers, Inc. (see Note 11. “Acquisitions”); and (2) $147,440 in purchase price adjustments from prior acquisitions.

     The Company tested goodwill and intangible assets, related to its Energy Services Segment, with indefinite useful lives as of December 19, 2004, for impairment, as required by SFAS 142, utilizing the expected present value of future cash flows. The analysis did not result in an impairment.

NOTE 9. MORTGAGE NOTES PAYABLE

     On July 8, 2004, the Company restructured the loan on the Company’s owned shopping center in Jacksonville, Florida. The Company paid the lender $1.5 million as payment in full of the Additional Interest Agreement, which was then terminated. The loan principal amount was reduced by $474,042. The restructured loan principal amount was $7.8 million; the loan bears interest at 6.125% and will be

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amortized until it matures on July 1, 2029, although the loan may be called by the lender for early repayment any time after July 1, 2011, upon thirteen months’ notice. As a result of the loan restructuring, the Company’s annual debt service payment for the shopping center was reduced by $299,448.

     The following table updates Footnote 7 “Mortgage Notes Payable and Leases” in the Company’s Annual Report on Form 10-K as of April 30, 2004, to reflect the restructuring of the loan mentioned above. The expected future minimum principal and interest payments on mortgage notes payable on the owned rental properties are as follows:

     The mortgage notes payable are due at various dates between January 1, 2008, and July 1, 2029, and bear interest at rates ranging from 6.125% to 9.25%.

     Management has determined that the restructuring of the loan mentioned above was a material modification of the original loan, and as a result, the Company recognized an expense relating to the extinguishment of debt in the amount of $218,071, as shown on the accompanying statement of operations. In conjunction with the restructured loan, the Company recorded $50,000 in deferred loan costs to be amortized over the life of the loan.

NOTE 10. COMMITMENTS AND CONTINGENCIES

     On September 20, 2002, the Company’s subsidiary, Abrams Properties, Inc. (“API”), filed a claim in the Superior Court of Cobb County, Georgia, against API’s former real estate asset manager, who subsequently made a demand against API for arbitration and filed a counterclaim. On December 1, 2004, the arbitrator made separate awards in favor of the claim and counterclaim, and as a result, API incurred a net liability in the amount of approximately $247,000, of which $97,000 was accrued and expensed in a prior period. The remaining $150,000 was expensed in the second quarter and nine months ending January 31, 2005, as selling, general and administrative costs in the accompanying statements of operations.

     The Company is subject to various other legal proceedings and claims that arise in the ordinary course of business. While the resolution of these matters cannot be predicted with certainty, the Company believes that the final outcome of these matters will not have a material adverse effect on the Company’s financial position or results of operations.

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NOTE 11. ACQUISITIONS AND DISPOSITIONS

     On September 29, 2004, the Company closed on the sale of its Kmart leaseback interest in a shopping center in Minneapolis, Minnesota, for a price of $2.25 million, resulting in a pre-tax gain of approximately $2.2 million and net cash proceeds of approximately $2.2 million.

     On May 26, 2004, Servidyne Systems, LLC (“Servidyne”), an indirect wholly-owned subsidiary of the Company, acquired the operating business and assets of Building Performance Engineers, Inc. (“BPE”) for a purchase price of $337,984, in order to expand the Company’s capabilities in energy engineering and design. The consideration consisted of 21,126 newly-issued shares of the Company’s common stock, with a fair value of $94,906 at the date of acquisition, a note payable in the amount of $136,500, and cash of $106,578 (including direct acquisition expenses). The amount and type of consideration was determined by negotiation among the parties. The following table summarizes the estimated fair values of the assets acquired as of the date of acquisition:

     The goodwill has been assigned to the Energy and Facilities Solutions Segment. The acquired assets and the results of operations have been included in the Company’s financial statements since the date of acquisition. The Company will test goodwill for impairment related to its Energy and Facilities Solutions Segment at April 30, 2005, pursuant to SFAS No. 142, Goodwill and Other Intangible Assets.

     The following table summarizes the results of the Company on a pro forma basis for the third quarter and nine months ended January 31, 2004, as if the acquisition of the assets and operating business of BPE in May 2004, the acquisition of the assets and operating business of The Wheatstone Energy Group, Inc., in December 2003, the acquisition of the assets and operating business of iTendant, Inc. in April 2004, and the acquisition of a professional medical office building in Douglasville, Georgia, in April 2004, had all occurred at the beginning of the third quarter and nine months ended January 31, 2004. These results do not purport to represent what the results of operations for the Company would have actually been or to be indicative of the future results of operations of the Company (in thousands, except per share amounts):

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NOTE 12. SUBSEQUENT EVENT

     On February 9, 2005, the Company closed on the sale of its shopping center located in Cincinnati, Ohio, for a sales price of $3.6 million, resulting in a pre-tax gain of approximately $850,000. After selling expenses, the sale generated net cash proceeds of approximately $3.45 million. The Company intends to use the net proceeds from this sale to acquire an additional income-producing property, in order to qualify the sale under the Internal Revenue Code Section 1031 for federal income tax deferral, and has placed the net proceeds with a third party intermediary in connection therewith. There can be no assurance that the acquisition will take place.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with the consolidated financial statements, including the notes to those statements, which are presented elsewhere in this report. The Company also recommends that this discussion and analysis be read in conjunction with management’s discussion and analysis and consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2004.

     The Company’s fiscal year 2005 will end April 30, 2005.

Changes in CONSOLIDATED BALANCE SHEETS between April 30, 2004, and January 31, 2005

     Assets of discontinued operations decreased by $4,134,807 primarily as a result of the cessation of operations of the Construction Segment, and the collection of receivables related to construction work performed in prior periods.

     Real estate held for sale increased by $2,595,493, as a result of the classification of the shopping center located Cincinnati, Ohio, as held for sale as of January 31, 2005. The shopping center was sold in February 2005, at a gain.

     Real estate held for future development or sale decreased by $2,900,586, as a result of classifying the shopping center located in Cincinnati, Ohio, as a current asset as discussed above and the sale of an outparcel in North Fort Myers, Florida, in January 2005.

     Goodwill increased by $460,475, primarily due to the acquisition of the operating business and assets of Building Performance Engineers, Inc.

     Liabilities of discontinued operations decreased by $2,645,843, primarily as a result of the cessation of operations of the Construction Segment, and the payment of invoices to subcontractors for construction work performed in prior periods.

     Other long-term liabilities decreased by $3,072,511, and mortgage notes payable increased by $550,819, primarily due to the restructuring of the loan on the Company’s owned shopping center located in Jacksonville, Florida (See “Liquidity and Capital Resources”).

Results of operations of the third quarter and first nine months of fiscal 2005, compared to the third quarter and first nine months of fiscal 2004

REVENUES From Continuing Operations

     For the third quarter of fiscal 2005, consolidated revenues from continuing operations, including interest income and other income, and net of intersegment eliminations, were $5,644,619, compared to $3,023,768 for the third quarter of fiscal 2004, an increase of 87%. For the first nine months of fiscal 2005, consolidated revenues from continuing operations were $17,503,003, compared to $8,091,049 for the first nine months of fiscal 2004, an increase of 116%.

     The figures in Chart A are segment revenues from continuing operations, net of intersegment eliminations, and do not include interest income or other income.

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CHART A
REVENUES FROM CONTINUING OPERATIONS BY SEGMENT
(Dollars in Thousands)

NOTES TO CHART A

     The following table indicates the backlog of contracts and rental income for the next twelve months, by industry segment.

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COSTS AND EXPENSES APPLICABLE TO REVENUES
From Continuing Operations

     As a percentage of total segment revenues from continuing operations (See Chart A), the total applicable costs and expenses (See Chart B) were 66% and 62% for the third quarters of fiscal 2005 and 2004, respectively, and 59% and 62% for the first nine months of fiscal 2005 and 2004, respectively. In reviewing Chart B, the reader should recognize that the volume of revenues generally will affect the amounts and percentages.

     The figures in Chart B are net of intersegment eliminations.

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CHART B
COSTS AND EXPENSES APPLICABLE TO REVENUES
FROM CONTINUING OPERATIONS BY SEGMENT
(Dollars in Thousands)

NOTES TO CHART B

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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
From Continuing Operations

     For the third quarters of fiscal 2005 and 2004, total selling, general and administrative expenses (“SG&A”) from continuing operations, net of intersegment eliminations, were $1,931,624 and $1,343,111, respectively. As a percentage of consolidated revenues from continuing operations, these expenses were 34% and 45% for the third quarters of fiscal 2005 and 2004, respectively. For the first nine months of fiscal 2005 and 2004, total SG&A expenses from continuing operations, net of intersegment eliminations, were $6,742,407 and $4,065,475, respectively. As a percentage of consolidated revenues from continuing operations, these expenses were 39% and 51% for the first nine months of fiscal 2005 and 2004, respectively. In reviewing Chart C, the reader should recognize that the level of revenues generally will affect the amounts and percentages. The percentages in Chart C are based upon expenses as they relate to segment revenues from continuing operations (Chart A), except that parent and total expenses relate to consolidated revenues from continuing operations.

CHART C

SELLING, GENERAL AND ADMINSTRATIVE EXPENSES
FROM CONTINUING OPERATIONS BY SEGMENT
(Dollars in Thousands)

NOTES TO CHART C