SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT

For the quarter ended January 31, 2010

Commission file number 0-10146

SERVIDYNE, INC.

(Exact name of registrant as specified in its charter)

Georgia		58-0522129
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1945 The Exchange, Suite 300, Atlanta, GA 30339-2029
(Address of principal executive offices) (Zip Code)

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       Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o       No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated Filer o		Non-accelerated filer o		Smaller Reporting Company þ
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o       No þ

The number of shares of $1.00 par value Common Stock of the Registrant outstanding as of February 28, 2010, was 3,676,083.

 

 

SERVIDYNE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

		January 31, 2010				April 30, 2009
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	2,299,200			$	4,821,126
Receivables (Note 5):
Trade accounts and notes, net of allowance for doubtful accounts of $88,718 and $121,463, respectively			1,209,192				1,277,508
Contracts, net of allowance for doubtful accounts of $4,294 and $4,294, respectively, including retained amounts of $487,706 and $219,385, respectively			1,820,248				1,764,327
Costs and earnings in excess of billings			486,201				408,950
Assets of discontinued operations (Note 10)			—				314,906
Deferred income taxes			463,745				529,708
Other current assets			1,254,446				1,485,599
Total current assets			7,533,032				10,602,124
INCOME-PRODUCING PROPERTIES, net			17,407,778				17,630,790
PROPERTY AND EQUIPMENT, net			702,544				797,556
ASSETS OF DISCONTINUED OPERATIONS (Note 10)			—				1,909,434
OTHER ASSETS:
Real estate held for future development or sale			853,109				853,109
Intangible assets, net (Note 8)			2,900,141				2,832,286
Goodwill (Note 8)			6,354,002				6,354,002
Other assets			2,979,113				2,665,355
Total assets		$	38,729,719			$	43,644,656
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade and subcontractors payables		$	1,137,791			$	851,633
Accrued expenses			1,229,569				1,388,229
Deferred revenue			460,654				601,347
Billings in excess of costs and earnings			925,894				28,215
Liabilities of discontinued operations (Note 10)			—				175,541
Short-term debt and current maturities of long-term debt			608,452				526,287
Total current liabilities			4,362,360				3,571,252
DEFERRED INCOME TAXES			1,484,602				2,246,919
LIABILITIES OF DISCONTINUED OPERATIONS (Note 10)			—				3,370,826
OTHER LIABILITIES			1,009,366				824,877
MORTGAGE NOTES PAYABLE, less current maturities			14,820,699				15,092,252
OTHER LONG-TERM DEBT, less current maturities			850,000				1,000,000
Total liabilities			22,527,027				26,106,126
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDERS’ EQUITY:
Common stock, $1 par value; 10,000,000 shares authorized; 3,919,473 issued and 3,676,083 outstanding at January 31, 2010; 3,917,778 issued and 3,691,369 outstanding at April 30, 2009			3,919,473				3,917,778
Additional paid-in capital			6,161,710				6,026,101
Retained earnings			7,127,654				8,569,451
Treasury stock (common shares) of 243,390 and 226,409, respectively			(1,006,145	)			(974,800	)
Total shareholders’ equity			16,202,692				17,538,530
Total liabilities and shareholders’ equity		$	38,729,719			$	43,644,656

See accompanying notes to condensed consolidated financial statements.

SERVIDYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

		THIRD QUARTER ENDED								NINE MONTHS ENDED
		JANUARY 31,								JANUARY 31,
		2010				2009				2010				2009
REVENUES:
Building Performance Efficiency (“BPE”)		$	4,119,890			$	3,338,921			$	11,915,539			$	9,493,104
Real Estate			717,899				716,102				2,080,802				2,099,033
			4,837,789				4,055,023				13,996,341				11,592,137
COST OF REVENUES:
BPE			2,651,957				2,098,300				7,947,470				6,018,788
Real Estate			458,561				444,588				1,388,890				1,334,150
			3,110,518				2,542,888				9,336,360				7,352,938
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:			2,454,058				2,469,754				7,144,254				7,567,681
OTHER (INCOME) AND EXPENSES:
Other income			(5,752	)			(281,323	)			(73,634	)			(316,907	)
Interest income			(25	)			(7,622	)			(7,650	)			(108,024	)
Interest expense			269,958				269,956				812,402				835,860
			264,181				(18,989	)			731,118				410,929
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES			(990,968	)			(938,630	)			(3,215,391	)			(3,739,411	)
INCOME TAX BENEFIT			(452,064	)			(465,830	)			(1,313,781	)			(1,535,354	)
LOSS FROM CONTINUING OPERATIONS			(538,904	)			(472,800	)			(1,901,610	)			(2,204,057	)
DISCONTINUED OPERATIONS (Note 10):
Loss from discontinued operations, adjusted for applicable income tax benefit of $19,451, $11,377, $50,649 and $24,778, respectively			(31,736	)			(18,562	)			(82,638	)			(40,428	)
Gain on disposition of income-producing properties, adjusted for applicable income tax expense of $498,017, $0, $498,017 and $0, respectively			690,622				—				690,622				—
EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS			658,886				(18,562	)			607,984				(40,428	)
NET EARNINGS (LOSS)		$	119,982			$	(491,362	)		$	(1,293,626	)		$	(2,244,485	)
NET EARNINGS (LOSS) PER SHARE (Note 7):
From continuing operations — basic and diluted		$	(0.15	)		$	(0.12	)		$	(0.52	)		$	(0.59	)
From discontinued operations — basic and diluted			.18				(.01	)			.16				(.01	)
NET EARNINGS (LOSS) PER SHARE — BASIC AND DILUTED		$	0.03			$	(0.13	)		$	(0.36	)		$	(0.60	)
WEIGHTED AVERAGE SHARES OUTSTANDING — BASIC AND DILUTED			3,685,268				3,711,559				3,688,952				3,726,066

See accompanying notes to condensed consolidated financial statements.

SERVIDYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

		NINE MONTHS ENDED
		JANUARY 31,
		2010				2009
Cash flows from operating activities:
Net loss		$	(1,293,626	)		$	(2,244,485	)
Adjustments to reconcile net loss to net cash used in operating activities:
Earnings from discontinued operations, net of tax			(607,984	)			40,428
Loss on disposal of assets			1,378				9,683
Depreciation and amortization			1,022,030				1,081,000
Amortization of mortgage discount			—				(20,000	)
Deferred tax benefit			(1,336,445	)			(1,560,134	)
Stock compensation expense			137,711				151,927
Adjustment to cash surrender value of life insurance			(75,122	)			(76,150	)
Straight-line rent			(23,108	)			(27,160	)
Provision for doubtful accounts, net			(32,745	)			(16,162	)
Changes in assets and liabilities:
Receivables			45,140				313,161
Costs and earnings in excess of billings			(77,251	)			(110,752	)
Other current and long-term assets			98,847				(111,825	)
Trade and subcontractors payable			286,158				(120,163	)
Accrued expenses and deferred revenue			(299,353	)			(201,097	)
Accrued incentive compensation			—				(494,000	)
Billings in excess of costs and earnings			897,679				108,178
Other liabilities			(4,000	)			(14,222	)
Net cash used in operating activities			(1,260,691	)			(3,291,773	)
Cash flows from investing activities:
Acquisition, net of cash acquired			—				(902,657	)
Premiums paid on officers’ life insurance policies			(27,464	)			(27,464	)
Release of restricted cash held in escrow			—				3,470,700
Deposit of restricted cash			—				(139,833	)
Purchase of held to maturity investments			—				(150,000	)
Additions to income-producing properties			(135,523	)			(163,462	)
Additions to property and equipment			(74,617	)			(147,631	)
Additions to intangible assets			(432,368	)			(263,005	)
Proceeds from sale of property and equipment			2,000				—
Net cash (used in) provided by investing activities			(667,972	)			1,676,648
Cash flows from financing activities:
Short-term loan proceeds			100,000				—
Mortgage repayments			(254,389	)			(237,926	)
Debt repayments			(185,000	)			(280,875	)
Repurchase of common stock			(31,345	)			(135,507	)
Cash dividends paid to shareholders			(148,578	)			(426,467	)
Net cash used in financing activities			(519,312	)			(1,080,775	)
DISCONTINUED OPERATIONS:
Operating activities			(13,319	)			71,344
Investing activities			(1,021	)			(6,776	)
Financing activities			(59,611	)			(21,054	)
Net cash (used in) provided by discontinued operations			(73,951	)			43,514
Net decrease in cash and cash equivalents			(2,521,926	)			(2,652,386	)
Cash at beginning of period			4,821,126				8,382,947
Cash at end of period		$	2,299,200			$	5,730,561

See accompanying notes to condensed consolidated financial statements.

Supplementary Disclosures of Noncash Investing and Financing Activities:

On June 6, 2008, the Company purchased substantially all of the assets and certain liabilities of Atlantic Lighting & Supply Co., Inc. for $902,657 in cash (net of cash received and including acquisition costs) and 17,381 shares of Servidyne common stock. The related assets and liabilities at the date of acquisition were as follows:

Total assets acquired, net of cash		$	1,577,844
Total liabilities assumed			(583,937	)
Net assets acquired, net of cash			993,907
Less value of shares issued for acquisition			(91,250	)
Total cash paid (including acquisition costs)		$	902,657

On January 29, 2010, the Company transferred its interest in an income-producing property and related assets to the note holder, which satisfied in full the Company’s liability for the related mortgage note payable.

Elimination of mortgage note payable		$	(3,159,348	)
Disposition of income-producing property, net			1,727,165
Disposition of other related assets and liabilities, net			193,545

See accompanying notes to condensed consolidated financial statements.

SERVIDYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1. ORGANIZATION AND BUSINESS

Servidyne, 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’s Building Performance Efficiency (“BPE”) Segment provides comprehensive energy efficiency and demand response solutions, sustainability programs, and other building performance-enhancing products and services to owners and operators of existing buildings, energy services companies, and public and private utilities. The Company’s Real Estate Segment engages in the asset management of its portfolio of commercial real estate income-producing properties and undeveloped land.

NOTE 2. UNAUDITED STATEMENTS

The accompanying unaudited condensed 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 to make the information presented not misleading. In the opinion of management, the accompanying financial statements contain all adjustments, consisting of normal recurring accruals, which 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, 2009. Results of operations for interim periods are not necessarily indicative of annual results.

The Company has made reclassifications related to certain income-producing properties that have been sold in accordance with the guidance now codified as Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-35, Property, Plant and Equipment (“ASC 360-35”). In addition, the Company has made certain reclassifications in the prior year to conform with the current year presentation.

NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS

In June 2009, the FASB issued guidance now codified as FASB ASC topic 105-10, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (“ASC 105-10” or the “Codification”), which became effective for interim and annual periods ending after September 15, 2009. Other than resolving certain minor inconsistencies in current U.S. generally accepted accounting principles (“GAAP”), the Codification does not change GAAP, but rather is intended to make it easier to find and research GAAP applicable to particular transactions or specific accounting issues. The Codification organizes previous accounting pronouncements into approximately 90 accounting topics and is now considered to be the single source of authoritative U.S. GAAP. The Company adopted ASC 105-10 in the second quarter of fiscal 2010. Adoption had no impact on the determination or reporting of the Company’s financial results. All references to specific authoritative guidance have been updated within this report to reflect the new Accounting Standards Codification structure.

In May 2009, the FASB issued guidance now codified as FASB ASC topic 855, Subsequent Events (“ASC 855”). ASC 855 modifies the names of the two types of subsequent events and, for public entities, modifies the definition of subsequent events to refer to events or transactions that occur after the balance sheet date but before the financial statements are issued. Also, ASC 855 requires that entities disclose the date through which subsequent events have been evaluated and the basis for that date. ASC 855 was effective for all interim and annual periods ending after June 15, 2009. The Company adopted ASC 855 in the first quarter of fiscal 2010.

In February 2010, the FASB issued new guidance codified as FASB Accounting Standards Update (“ASU”) 2010-09, Subsequent Events (“ASU 2010-09”). ASU 2010-09 updates FASB ASC 855. ASU 2010-09 removes the requirement to disclose the date through which an entity has evaluated subsequent events. The Company adopted the previously issued guidance included in ASC 855 in the first quarter of fiscal 2010. The Company adopted ASU 2010-09 in the third quarter of fiscal 2010. The Company has determined that adoption did not have a significant impact on the determination or reporting of the Company’s financial results.

In April 2009, the FASB issued new guidance now codified within FASB ASC topic 825, Financial Instruments (“ASC 825”). Following this new guidance, ASC 825 requires disclosure about the fair value of financial instruments for publicly traded companies in interim reporting periods, as well as in annual reporting periods. The Company adopted the new provisions of ASC 825 in the first quarter of fiscal 2010. See Note 11 for fair value disclosure of the Company’s financial instruments.

In April 2008, the FASB issued guidance now codified as FASB ASC Subtopic 350-30, Intangibles — Goodwill and Other; General Intangibles Other than Goodwill (“ASC 350-30”) and ASC topic 275, Risks and Uncertainties (“ASC 275”). This new guidance was designed to improve the consistency between the useful life of a recognized intangible asset under ASC 350, Intangibles — Goodwill and Other, and the period of expected cash flows used to measure the fair value of the asset under ASC 805, Business Combinations, and other guidance under GAAP. The Company adopted ASC 350-30 and ASC 275 in the first quarter of fiscal 2010. The Company has determined that adoption did not have a significant impact on the determination or reporting of the Company’s financial results.

NOTE 4. EQUITY-BASED COMPENSATION

The Company has three (3) outstanding types of equity-based incentive compensation instruments in effect with employees, non-employee directors and certain outside service providers: stock options, stock appreciation rights, and restricted stock. Most of these equity-based instruments have been granted under the terms of the Company’s 2000 Stock Award Plan (the “2000 Award Plan”). The total number of shares that can be granted under the 2000 Award Plan is 1,155,000 shares. The Company typically uses authorized, unissued shares to provide shares for these equity-based instruments.

For the third quarter and the nine (9) months ended January 31, 2010, total equity-based compensation expenses were $45,012 and $137,711, respectively, and the related income tax benefits were $17,105 and $52,330, respectively. Comparatively, for the third quarter and the nine (9) months ended January 31, 2009, total equity-based compensation expenses were $53,992 and $151,927, respectively, and the related income tax benefits were $20,517 and $57,925, respectively. All of these expenses are included in selling, general and administrative expenses in the condensed consolidated statements of operations. At January 31, 2010, there were total unrecognized equity-based compensation expenses of $314,682 that are expected to be recognized over a weighted average period of approximately 1.7 years.

Stock Options

A summary of stock options activity for the nine (9) months ended January 31, 2010, is as follows:

						Weighted
		Options to				Average
		Purchase				Exercise
		Shares				Price
Outstanding at April 30, 2009			482,486			$	4.46
Granted			—				—
Forfeited			—				—
Expired			—				—
Exercised			—				—
Outstanding at January 31, 2010			482,486			$	4.46
Vested at January 31, 2010			471,986			$	4.44
Non-vested at January 31, 2010, that are expected to vest			10,500			$	5.24

Stock options typically vest over a period of two (2) years. The maximum contractual term of the stock options is ten (10) years. As of January 31, 2010, none of the outstanding stock options, vested or non-vested, were “in the money.”

A summary of information about all stock options outstanding as of January 31, 2010, is as follows:

						Weighted Average
Exercise		Number of				Remaining Contractual
Price		Outstanding Options				Term (Years)
$4.42			415,629				2.77
$4.59			55,440				5.15
$5.19			917				4.38
$5.24			10,500				3.37

The Company estimates the fair value of each stock option award on the date of grant using the Black-Scholes option-pricing model. The risk-free interest rate utilized in the Black-Scholes calculation is the interest rate of the U.S. Treasury Bill having the same maturity period as the expected life of the stock option awards. The expected life of the stock options granted is based on the estimated holding period of the awarded stock options. The expected volatility of the stock options granted is based on the historical volatility of the Company’s stock over the preceding five-year period using the month-end closing stock price.

Compensation expenses related to the vesting of options for the third quarter and the nine (9) months ended January 31, 2010, were $725 and $3,142, respectively, and the related income tax benefits were $276 and $1,194, respectively. Comparatively, related compensation expenses for the third quarter and the nine (9) months ended January 31, 2009, were $8,039 and $15,195, respectively, and the related income tax benefits were $3,055 and $5,968, respectively.

Stock Appreciation Rights (“SARs”)

A summary of SARs activity for the nine (9) months ended January 31, 2010, is as follows:

						Weighted
						Average
						Exercise
		SARs				Price
Outstanding at April 30, 2009			565,350			$	4.37
Granted			250,000				3.65
Exercised			—				—
Forfeited			(10,500	)			4.09
Outstanding at January 31, 2010			804,850			$	4.15
Vested at January 31, 2010			88,200			$	3.88
Non-vested at January 31, 2010, that are expected to vest			468,618			$	4.20

All SARs have a five-year vesting period. Typically, thirty percent (30%) of the SARs will vest on the third (3^rd) year anniversary of the date of grant, thirty percent (30%) will vest on the fourth (4^th) year anniversary of the date of grant, and forty percent (40%) will vest on the fifth (5^th) year 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 (10) 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 for SARs issued under the 2000 Award Plan is $20.00 per share, and the triggering price for early vesting for SARs not issued under the 2000 Award Plan is $19.05 per share. The maximum contractual term of all SARs is ten (10) years. As of January 31, 2010, none of the outstanding SARs, vested or non-vested, were “in the money.”

A summary of information about all SARs outstanding as of January 31, 2010, is as follows:

										Weighted Average
Exercise		Outstanding				Vested				Remaining Contractual
Price		SARs				SARs				Term (Years)
$3.94			182,700				88,200				6.41
$3.79			111,300				0				6.85
$4.19			10,500				0				7.36
$6.19			38,850				0				7.66
$5.00			52,500				0				8.23
$4.76			136,500				0				8.37
$4.00			22,500				0				8.63
$2.30			30,000				0				9.36
$4.00			200,000				0				9.79
$2.12			20,000				0				9.85

The Company estimates the fair value of each award of SARs on the date of grant using the Black-Scholes option-pricing model. The risk-free interest rate utilized in the Black-Scholes calculation is the interest rate on the U.S. Treasury Bill having the same maturity as the expected life of the Company’s SARs awards. The expected life of the SARs granted is based on the estimated holding period of the awards. The expected volatility of the SARs granted is based on the historical volatility of the Company’s stock over the preceding five-year period using the month-end closing stock price.

The fair value of the SARs granted in the nine (9) months ended January 31, 2010, was estimated on the respective grant dates using the following weighted average assumptions in the Black-Scholes option-pricing model:

Expected life (years)			5
Dividend yield			4.25	%
Expected stock price volatility			55.59	%
Risk-free interest rate			2.35	%
Fair value of SARs granted		$	0.33

Compensation expenses related to the vesting of SARs for the third quarter and the nine (9) months ended January 31, 2010, were $42,402 and $127,785, respectively, and the related income tax benefits were $16,113 and $48,558, respectively. Comparatively, related compensation expenses for the third quarter and the nine (9) months ended January 31, 2009, were $40,537 and $123,778, respectively, and the related income tax benefits were $15,405 and $47,035, respectively.

Shares of Restricted Stock

Periodically, the Company has awarded shares of restricted stock to employees, non-employee directors and certain outside service providers. The awards are recorded at fair market value on the date of grant and typically vest over a period of one (1) year. As of January 31, 2010, there were unrecognized compensation expenses totaling $5,263 related to grants of shares of restricted stock, which the Company expects to be recognized over the ensuing year.

Compensation expenses related to the vesting of shares of restricted stock for the third quarter and the nine (9) months ended January 31, 2010, were $1,886 and $6,784, respectively, and the related income tax benefits were $716 and $2,578, respectively. Comparatively, the related compensation expenses for the third quarter and the nine (9) months ended January 31, 2009, were $5,416 and $12,954, respectively, and the related income tax benefits were $2,058 and $4,922, respectively.

The following table summarizes restricted stock activity for the nine (9) months ended January 31, 2010:

						Weighted Average
		Number of				Fair Value
		Shares of				per Share
		Restricted Stock				on Grant Date
Non-vested restricted stock at April 30, 2009			5,295			$	4.61
Granted			2,000				2.12
Forfeited			(200	)			2.12
Vested			(4,245	)			4.55
Non-vested restricted stock at January 31, 2010			2,850			$	3.09

NOTE 5. RECEIVABLES

All net contract and trade receivables are expected to be collected within one (1) year.

NOTE 6. OPERATING SEGMENTS

The table below shows selected financial data on a segment basis before intersegment eliminations. In this presentation, management fee expenses charged by the Parent Company are not included in the segments’ results.

For the Third Quarter										Parent
Ended January 31, 2010		BPE				Real Estate				Company (1)				Eliminations				Consolidated
Revenues from unaffiliated customers
BPE Segment services and products:
Energy savings projects		$	2,533,469															$	2,533,469
Lighting products			379,244																379,244
Energy management services			417,386																417,386
Productivity software			789,791																789,791
Total revenues from unaffiliated customers		$	4,119,890			$	717,899			$	—			$	—			$	4,837,789
Intersegment revenue			—				136,041				—				(136,041	)			—
Total revenues from continuing operations		$	4,119,890			$	853,940			$	—			$	(136,041	)		$	4,837,789
(Loss) earnings from continuing operations before income taxes		$	(353,718	)		$	204,522			$	(851,719	)		$	9,947			$	(990,968	)

For the Nine Months										Parent
Ended January 31, 2010		BPE				Real Estate				Company (1)				Eliminations				Consolidated
Revenues from unaffiliated customers
BPE Segment services and products:
Energy savings projects		$	6,594,695															$	6,594,695
Lighting products			1,319,982																1,319,982
Energy management services			1,438,900																1,438,900
Productivity software			2,561,962																2,561,962
Total revenues from unaffiliated customers		$	11,915,539			$	2,080,802			$	—			$	—			$	13,996,341
Intersegment revenue			141,545				408,126				—				(549,671	)			—
Total revenues from continuing operations		$	12,057,084			$	2,488,928			$	—			$	(549,671	)		$	13,996,341
(Loss) earnings from continuing operations before income taxes		$	(1,096,677	)		$	468,894			$	(2,588,099	)		$	491			$	(3,215,391	)

For the Third Quarter										Parent
Ended January 31, 2009		BPE				Real Estate				Company (1)				Eliminations				Consolidated
Revenues from unaffiliated customers
Interest and other income
BPE Segment services and products:
Energy savings projects		$	1,373,724															$	1,373,724
Lighting products			461,245																461,245
Energy management services			520,761																520,761
Productivity software			983,191																983,191
Total revenues from unaffiliated customers		$	3,338,921			$	716,102			$	—			$	—			$	4,055,023
Intersegment revenue			—				126,356				—				(126,356	)			—
Total revenues from continuing operations		$	3,338,921			$	842,458			$	—			$	(126,356	)		$	4,055,023
(Loss) earnings from continuing operations before income taxes		$	(481,401	)		$	160,719			$	(615,926	)		$	(2,022	)		$	(938,630	)

For the Nine Months										Parent
Ended January 31, 2009		BPE				Real Estate				Company (1)				Eliminations				Consolidated
Revenues from unaffiliated customers
Interest and other income
BPE Segment services and products:
Energy savings projects		$	3,545,614															$	3,545,614
Lighting products			1,378,075																1,378,075
Energy management services			1,762,224																1,762,224
Productivity software			2,807,191																2,807,191
Total revenues from unaffiliated customers		$	9,493,104			$	2,099,033			$	—			$	—			$	11,592,137
Intersegment revenue			—				409,388				—				(409,388	)			—
Total revenues from continuing operations		$	9,493,104			$	2,508,421			$	—			$	(409,388	)		$	11,592,137
(Loss) earnings from continuing operations before income taxes		$	(1,861,363	)		$	606,707			$	(2,472,217	)		$	(12,538	)		$	(3,739,411	)

NOTE 7. EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing net earnings (loss) by the weighted average shares outstanding during the reporting period. Diluted earnings (loss) per share is computed giving effect to dilutive stock equivalents resulting from outstanding stock options, restricted stock and stock appreciation rights. The potential dilutive effect on the number of common shares for the first nine (9) months of fiscal 2010 and fiscal 2009 was 0 shares and 474 shares, respectively. Because the Company had a loss from continuing operations for the quarter and the nine (9) months ended January 31, 2010, as well as for the quarter and the nine (9) months ended January 31, 2009, all stock equivalents were anti-dilutive during these periods, and therefore are excluded when determining the diluted weighted average number of shares outstanding.

NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS

The gross carrying amounts and accumulated amortization for the Company’s intangible assets as of January 31, 2010, and April 30, 2009, are as follows:

		January 31, 2010
		Gross Carrying				Accumulated
Intangible assets, subject to amortization:		Amount				Amortization
Proprietary BPE software solutions		$	4,032,898			$	2,691,738
Acquired computer software			662,488				481,316
Real estate lease costs			591,594				239,573
Customer relationships			404,632				280,212
Deferred loan costs			254,949				130,912
Non-compete agreements			63,323				52,769
Tradename			61,299				6,811
Other			44,882				41,300
		$	6,116,065			$	3,924,631
Intangible assets and goodwill, not subject to amortization:
Trademark		$	708,707
Goodwill		$	6,354,002

		April 30, 2009
		Gross Carrying				Accumulated
Intangible assets, subject to amortization:		Amount				Amortization
Proprietary BPE software solutions		$	3,689,695			$	2,340,980
Acquired computer software			466,589				458,883
Real estate lease costs			565,597				190,189
Customer relationships			404,632				252,216
Deferred loan costs			254,949				114,163
Non-compete agreements			63,323				29,023
Tradename			61,299				3,746
Other			45,844				39,149
		$	5,551,928			$	3,428,349
Intangible assets and goodwill, not subject to amortization:
Trademark		$	708,707
Goodwill		$	6,354,002

Aggregate amortization expense for all amortizable intangible assets:
For the nine months ended January 31, 2010		$	498,919
For the nine months ended January 31, 2009			571,339
For the quarter ended January 31, 2010			174,130
For the quarter ended January 31, 2009			194,709

Estimated future amortization expenses for all amortized intangible assets for the fiscal years ended:
Remainder of fiscal year 2010		$	190,598
2011			636,905
2012			497,867
2013			341,746
2014			242,806
2015			113,921
Thereafter			167,591
		$	2,191,434

The Company completed the annual impairment analysis of goodwill and indefinite-lived intangible assets in the fiscal quarter ended January 31, 2010. The annual analysis resulted in a determination of no impairment. All of the Company’s goodwill and indefinite-lived intangible assets are assigned to the BPE Segment, which has also been determined to be the reporting unit.

The valuation methodologies used to calculate the fair value of the BPE Segment were the discounted cash flow method of the income approach and the guideline company method of the market approach.

With the income approach, the cash flows anticipated over several periods, plus a terminal value at the end of that time horizon, are discounted to their present value using an appropriate rate of return. Projected cash flows are discounted to present value using an estimated weighted average cost of capital, reflecting returns to both equity and debt investors. The Company believes that this is a relevant and beneficial method to use in determining fair value, because it explicitly considers the future cash flow generating potential of the reporting unit.

In the guideline method of the market approach, the value of a reporting unit is estimated by comparing the subject to similar businesses or “guideline” companies whose securities are actively traded in public markets. The comparison is generally based on data regarding each of the companies’ stock prices and earnings, which is expressed as a fraction known as a “multiple.” The premise of this method is that if the guideline public companies are sufficiently similar to each other, then their multiples should be similar. The multiples for the guideline companies are analyzed, adjusted for differences as compared to the subject company, and then applied to the applicable business characteristics of the subject company to arrive at an indication of the fair value. The Company believes that the inclusion of a market approach analysis in the fair value calculation is beneficial, because it provides an indication of value based on external, market-based measures.

In the application of the income approach, financial projections were developed for use in the discounted cash flow calculations. Significant assumptions included revenue growth rates; margin rates; selling, general and administrative (“SG&A”) costs; and working capital and capital expenditure requirements over a period of ten (10) years. Revenue growth rate and margin rate assumptions were developed using historical Company data, current backlog, specific customer commitments, status of outstanding customer proposals, and future economic and market conditions expected. Consideration was then given to the SG&A costs, working capital, and capital expenditures required to deliver the revenue and margin determined. The other significant assumption used with the income approach was the assumed rate at which to discount the cash flows. The rate was determined by utilizing the weighted average cost of capital method.

In the income approach model, three (3) separate financial projection scenarios were prepared using the above assumptions: the first used the expected revenue growth rates, the second used higher revenue growth rates, and the third used lower revenue growth rates. The discount rates used in the scenarios ranged from 19% for the lower growth scenario to 21% for the higher growth scenario. For the assessment of fair value of the BPE Segment based on the income approach, the results of the three (3) scenarios were weighted equally (33% for the expected case and 33% each for the other scenarios) to produce the applicable fair value indication using the income approach. The weightings reflect the Company’s view of the relative likelihood of each scenario.

In the application of the market approach, the Company considered valuation multiples derived from five (5) public comparable companies that were identified as belonging to a group of industry peers. The applicable financial multiples of the comparable companies were adjusted for profitability and size and then applied to the BPE Segment.

The comparable companies selected for the market approach were similar to the BPE Segment in terms of business description and markets served. As such, the Company believes a market participant is likely to consider the market approach in determining the fair value of the BPE Segment. In addition, the Company believes a market participant will consider the cash flow generating capacity of the BPE Segment using an income approach. Both the market and income approaches provide meaningful indications of the fair value of the BPE Segment. The outcomes of the income approach and market approach were weighted 70% and 30%, respectively, with the resulting fair value compared to the carrying value of the BPE Segment. This test of fair value indicated that no impairment existed at January 31, 2010.

NOTE 9. ACQUISITIONS

Fiscal 2010

There were no acquisitions in the first nine (9) months of fiscal 2010.

Fiscal 2009

On June 6, 2008, Atlantic Lighting & Supply Co., LLC (“AL&S LLC”), an indirect wholly-owned subsidiary of the Company, acquired substantially all of the assets and assumed certain operating liabilities of Atlantic Lighting & Supply Co., Inc. (the “Seller”), for a total consideration, including the assumption of certain operating liabilities, of approximately $1.5 million (excluding acquisition costs). The Seller was engaged in the business of distributing energy efficient lighting products to building owners and operators, and the Company is continuing to conduct this business. The acquisition was made pursuant to an asset purchase agreement dated June 6, 2008, between the Company, AL&S LLC, the Seller, and the shareholders of the Seller (the “Agreement”). The consideration consisted of 17,381 newly-issued shares of the Company’s common stock, with a fair value of $91,250, the payment of approximately $618,000 in cash to the Seller, the payment of approximately $165,000 in cash to satisfy outstanding debt to two (2) lenders of the Seller, and the assumption of certain operating liabilities of the Seller that totaled approximately $584,000. The amounts and types of the consideration were determined through negotiations among the parties.

Pursuant to the Agreement, AL&S LLC acquired substantially all of the assets of the Seller, including cash, accounts receivable, inventory, personal property and equipment, proprietary information, intellectual property, and the Seller’s right, title, and interest to assigned contracts. Only certain specified operating liabilities of the Seller were assumed, including executory obligations under assigned contracts and certain current balance sheet operating liabilities.

During the quarter ended January 31, 2009, the Company finalized its allocation of the purchase price. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

		Assets and
		Liabilities
		Acquired
		from Seller				Estimated Life
Current assets		$	322,514
Property, furniture and equipment, net			58,699			Various (3-5)
Trade name			61,299			15 years
Non-compete agreements			63,323			2 years
Customer relationships			186,632			5 years
Goodwill			895,285			Indefinite
Total assets acquired		$	1,587,752
Current liabilities			(483,937	)
Long term liabilities			(100,000	)
Net assets acquired		$	1,003,815

The goodwill amount is not subject to amortization. The amounts assigned to all intangible assets are deductible for tax purposes over a period of fifteen (15) years. The goodwill amount has been assigned to the BPE Segment.

The following table summarizes what the results of operations of the Company would have been on a pro forma basis for the first nine (9) months of fiscal 2009 if the acquisition had occurred prior to the beginning of the period. These results do not purport to represent what the results of operations for the Company actually would have been or to be indicative of the future results of operations of the Company (in thousands, except for per share amounts):

		Nine Months Ended
		January 31, 2009
Revenues		$	11,790
Loss from continuing operations		$	(2,205	)
Loss from discontinued operations		$	(41	)
Net loss		$	(2,246	)
Loss per share from continuing operations — basic and diluted		$	(0.59	)
Loss per share from discontinued operations — basic and diluted		$	(0.01	)
Net loss per share — basic and diluted		$	(0.60	)

NOTE 10. DISCONTINUED OPERATIONS

During the fourth quarter of fiscal 2009, the anchor tenant of the Real Estate Segment’s owned office building in Newnan, Georgia, defaulted on its lease obligations, and subsequently vacated its leased space during the first quarter of fiscal 2010. Accordingly, management did not anticipate that this tenant would make any additional lease payments. Given this event, management determined that the building’s fair market value was less than its book value at that time, and therefore the Real Estate Segment recorded an impairment loss of approximately $2,007,000 in the fourth quarter of fiscal 2009. Additionally, given this event, the segment also recorded an impairment loss of approximately $151,000 in the fourth quarter of fiscal 2009 to write off the remaining net book value of the anchor tenant’s capitalized lease cost, which was initially recorded as an intangible asset when the office building was acquired by the segment in fiscal 2007.

On January 29, 2010, the Real Estate Segment’s interest in the property was transferred to the note holder. In this transaction, the Real Estate Segment transferred its approximately $2.0 million interest in the property and related assets to the note holder, which satisfied in full the Company’s liability for the approximately $3.2 million remaining balance on the property’s non-recourse mortgage loan. Correspondingly, the Company recognized a pre-tax gain of approximately $1.2 million in the third quarter of fiscal 2010 as a result of the elimination of the balance of the indebtedness on the property.

As a result of this transaction, the Company’s financial statements have been prepared with the results of operations and cash flows of this disposed property shown as discontinued operations. All historical statements have been restated in accordance with GAAP. Summarized financial information for discontinued operations for the third quarter and the nine (9) months ended January 31, 2010, and January 31, 2009, is as follows:

		Third Quarter Ended								Nine Months Ended
		January 31,								January 31,
		2010				2009				2010				2009
REAL ESTATE SEGMENT
Rental revenues		$	9,677			$	44,373			$	50,572			$	158,297
Rental property operating expenses, including depreciation			60,864				74,312				183,859				223,503
Operating loss from discontinued operations			(51,187	)			(29,939	)			(133,287	)			(65,206	)
Income tax benefit			19,451				11,377				50,649				24,778
Operating loss from discontinued operations, net of tax			(31,736	)			(18,562	)			(82,638	)			(40,428	)
Gain on disposition of income-producing properties			1,188,639				—				1,188,639				—
Income tax expense			(498,017	)			—				(498,017	)			—
Gain on disposition of income-producing properties, net of tax			690,622				—				690,622				—
Earnings (loss) from discontinued operations, net of tax		$	658,886			$	(18,562	)		$	607,984			$	(40,428	)

NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of the Company’s cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value due to their short-term maturities.

As of January 31, 2010, the Company had the following assets and liabilities that represent financial instruments: a certificate of deposit (“CD”), mortgage notes payable, and other debt.

The CD, which had a balance of $450,000 as of January 31, 2010, is included within “Other assets” in the Company’s condensed consolidated balance sheet. This CD secures a letter of credit, which is required by the terms of the mortgage on the Company’s owned corporate headquarters building. Based on the rates currently available on certificates of deposit with similar terms, the CD’s carrying amount approximates its fair value as of January 31, 2010.

Based on the borrowing rates currently available for mortgage notes with similar terms and average maturities, the fair value of mortgage notes payable was $14,279,733 as of January 31, 2010. Based on the borrowing rates currently available for bank loans with similar terms and average maturities, the fair value of other debt was $958,390 as of January 31, 2010.

NOTE 12. COMMITMENTS AND CONTINGENCIES

The Company is subject to legal proceedings and other claims that arise from time to time 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 any such matters would not have a material adverse effect on the Company’s financial position or results of operations.

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

The following discussion should be read in conjunction with the condensed 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 section and the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2009.

The following discussion has been updated to reflect the reclassifications discussed in Note 2 “Unaudited Statements” to the condensed consolidated financial statements.

The Company’s fiscal year 2010 will end on April 30, 2010.

The Company currently expects that the BPE Segment will be generating positive EBITDA (earnings before interest, taxes, depreciation and amortization) and net earnings within the next two (2) fiscal quarters, as revenues continue to grow. BPE backlog at January 31, 2010, of $8.6 million was 22% higher than the backlog at October 31, 2009, due to a strengthening in customer order activity. The BPE Segment entered the current fiscal year with a backlog of approximately $10 million, which was the primary factor that produced a year-over-year increase in BPE revenues during each of the first three (3) quarters of the current fiscal year, and an overall increase in BPE revenues of 26% for the first nine (9) months, compared to the same period last year. This growth included an 86% year-over-year increase in Energy Savings Projects revenues for the first nine (9) months of the current fiscal year. Nevertheless, BPE revenues outpaced new orders during the first six (6) months of the current fiscal year, leading to a decline in overall order backlog during that period.

Beginning in September 2009, however, new order activity began to strengthen, and new order bookings increased in each successive month thereafter. The BPE Segment was awarded approximately $5 million in new orders during the Company’s third fiscal quarter ended January 31, 2010, including order bookings from customers in both the private sector and the government sector. As a result, BPE backlog as of January 31, 2010, was approximately $8.6 million, which represents the highest quarterly backlog of the current fiscal year. This stronger order activity continued during February 2010, the first month of the fourth fiscal quarter.

The Company believes that the recent increase in BPE order activity is a direct result of three (3) distinct factors: the success of the Company’s new sales and marketing efforts, which were initiated in fiscal 2009; an overall improvement in the capital spending environment for many of BPE’s customers; and the beginning of the long-anticipated infusion of U.S. government expenditures for energy efficiency upgrades of government facilities. The Company currently expects that these factors will continue to be favorable for the BPE Segment during the fourth fiscal quarter, and will continue in fiscal year 2011.

In addition, the Company has enjoyed initial success in marketing the BPE Segment’s new product line, Fifth Fuel Management™. As a result, the Company currently anticipates that new order activity will be generated from electric utilities by this new offering over the next several quarters. The BPE Segment has recently expanded its sales force to offer this new technology-enabled demand response and energy efficiency system to a network of utilities and independent system operators in the U.S., as well as to owners and operators of large commercial office buildings, retail stores, hotels, light industrial facilities and institutional buildings. During February 2010, the Company received its initial multi-year orders for

this new offering, with Fifth Fuel Management™ order bookings totaling more than $400,000 for the month. The Company created Fifth Fuel Management™ by expanding its Web-based iTendant^® platform to become a real-time, energy optimization and demand response system. The new system was successfully tested at several large luxury hotels during the second quarter of fiscal 2010 in a pilot program for a major U.S. electric utility, implementing the demand response participation by controlling the hotels’ peak time energy usage. Demand response is emerging as a critical tactic to help address the growing imbalance in the supply and demand of generated electric power in the United States. The Company designed Fifth Fuel Management™ to be a cost effective and reliable way for utilities to optimize their customers’ demand response participation and to enable owners and operators of large buildings to maximize the value of their investments in energy efficiency. The Company expects Fifth Fuel Management™ to provide additional opportunities for sales of the BPE Segment’s existing services and products, and to allow the BPE Segment to leverage its established customer base of building owners and operators to help utilities gain better utilization of their existing energy generating facilities and infrastructures. The Company believes the BPE Segment is now much better positioned to participate in the growing utility market sector, and as a result, anticipates that it will begin generating additional recurring revenues over the next year through new multi-year contracts with utilities. However, the Company’s ability to develop the new Fifth Fuel Management™ offering to its full potential will require additional capital. To support revenue growth over a longer time horizon, in addition to the inherent potential of the utility market sector, the Company anticipates continued strong BPE order growth from the government sector and from customers in the private sector. The Company’s BPE Segment offers the government sector many of the same offerings provided to private sector customers, including energy savings projects and other energy efficiency-focused products and services, usually by acting as a subcontractor to large energy services company (“ESCO”) partners to provide services to end-user government facilities. Through this channel, the BPE Segment provides services to a wide range of government facilities, including U.S. military bases, federal and state prisons, and large public educational facilities, school districts, and a variety of other federal, state and municipal buildings and facilities. The Company believes that future growth in BPE’s government business should be underpinned by two (2) recent U.S. Government actions: in December 2008, the U.S. Department of Energy (“DOE”) announced a program to fund $80 billion of energy savings performance contracts through sixteen (16) large ESCOs to improve the energy efficiency of government buildings; and in February 2009, President Obama signed the American Recovery and Reinvestment Act of 2009, which will provide an additional approximately $75 billion for the performance of energy efficiency projects in government buildings. The Company has existing business relationships with half of these sixteen (16) selected ESCOs and a long history of providing these exact types of services to the government sector. The Company believes that it is well positioned to perform a significant amount of these funded projects.

While the potential market demand for the BPE Segment’s offerings appears to be quite promising, there can be no assurance that this will result in sustained revenue growth, particularly if recent macro-economic conditions were to continue, or worsen, for an extended period of time.

The Company’s Real Estate Segment is in the business of creating long-term value and has periodically realized gains through the sale of its real estate assets. The Company has historically generated substantial liquidity from such periodic sales, and the proceeds from such sales often have then been redeployed to other segments of the Company. However, the current real estate portfolio consists of a limited number of properties, and given recent declines in commercial real estate markets and asset valuations in the United States, the Company may be unable to sell any of its real estate assets at acceptable prices, or at all, in the near future. Nevertheless, the Company is currently marketing for sale its owned shopping center in Jacksonville, Florida, and has engaged a third party real estate broker to

assist it in those efforts. Based on the range of prices contained in the initial non-binding offers that the Company has already received from prospective purchasers, the Company currently expects to sell the shopping center in the near future at an acceptable price, and generate a gain on sale and substantial liquidity as a result of such sale.

The loss from operations during the first nine (9) months of fiscal 2010 resulted in significant usage of the Company’s cash, continuing the trend of substantial cash usage to fund operating losses in recent quarters, with the exception of the second quarter of fiscal 2010, when the Company generated approximately $27,000 in positive cash flow from operations. The Company believes that it has, or can obtain, sufficient capital resources to operate its business in the ordinary course until the BPE Segment begins to generate sufficient cash flow to fund the Company’s operations. Although as noted above, the BPE Segment is currently expected to begin to generate positive EBITDA and net earnings from operations within the next two (2) fiscal quarters, a longer period of time will be required before the BPE Segment generates sufficient cash flow to fund the Company’s operations.

Historically, operating performance has been indicative of the BPE Segment’s cash flows before taking into account the timing of receivables and payables. Given the continuing substantial revenue growth and earnings that the Company currently expects the BPE Segment to achieve in the next few fiscal quarters, the timing of when the segment will begin to generate consistent positive cash flows from operations will be dependent on the timing of collections on customer receivables and payments to vendors and suppliers. In addition there can be no guarantee that the expected substantial revenue growth, positive EBITDA and net earnings from operations at the BPE Segment will actually occur, particularly if recent macro-economic conditions continue, or worsen, for an extended period of time. See “Liquidity and capital resources” for more information.

Results of operations of the third quarter and first nine (9) months of fiscal 2010, compared to the third quarter and first nine (9) months of fiscal 2009.

In the following charts, changes in revenues, cost of revenues, selling, general and administrative expenses, and loss from continuing operations before income taxes from period to period are analyzed on a segment basis, net of intersegment eliminations. For net earnings and similar profit information on a consolidated basis, refer to the Company’s condensed consolidated financial statements. For net earnings presented by segment before intercompany eliminations, refer to Note 6 “Operating Segments” to the condensed consolidated financial statements.

REVENUES
From Continuing Operations

For the third quarter of fiscal 2010, consolidated revenues from continuing operations, net of inter-segment eliminations, were $4,837,789 compared to $4,055,023 for the third quarter of fiscal 2009, an increase of approximately 19%. For the first nine (9) months of fiscal 2010, consolidated revenues from continuing operations were $13,996,341, compared to $11,592,137 for the first nine (9) months of fiscal 2009, an increase of approximately 21%.

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

		Third Quarter Ended																Nine Months Ended
		January 31,								Amount				Percentage				January 31,								Amount				Percentage
		2010				2009				Change				Change				2010				2009				Change				Change
BPE (1)		$	4,120			$	3,339			$	781				23			$	11,915			$	9,493			$	2,422				26
Real Estate			718				716				2				0				2,081				2,099				(18	)			(1	)
		$	4,838			$	4,055			$	783				19			$	13,996			$	11,592			$	2,404				21

NOTES TO CHART A

BPE SEGMENT REVENUES — SUMMARY BY SERVICE & PRODUCT TYPE
(Dollars in Thousands)

		Third Quarter Ended																Nine Months Ended
		January 31,								Amount				Percentage				January 31,								Amount				Percentage
		2010				2009				Change				Change				2010				2009				Change				Change
Energy Savings Projects		$	2,534			$	1,374			$	1,160				84			$	6,594			$	3,546			$	3,048				86
Lighting Products			379				461				(82	)			(18	)			1,320				1,378				(58	)			(4	)
Energy Management Services			417				521				(104	)			(20	)			1,439				1,762				(323	)			(18	)
Productivity Software			790				983				(193	)			(20	)			2,562				2,807				(245	)			(9	)
		$	4,120			$	3,339			$	781				23			$	11,915			$	9,493			$	2,422				26

BPE Segment revenues increased by approximately $781,000, or 23%, in the third quarter of fiscal 2010 compared to the same period in fiscal 2009, due to:

(a)

an increase in energy savings (lighting and mechanical) project revenues of approximately $1,160,000;

partially offset by:

	(b)		a decrease in lighting product revenues of approximately $82,000 generated by the Company’s energy efficient lighting distribution business;
	(c)		a decrease in energy management services revenues of approximately $104,000; and
	(d)		a decrease in productivity software revenues of approximately $193,000.

BPE Segment revenues increased by approximately $2,422,000, or 26%, in the first nine (9) months of fiscal 2010 compared to the same period in fiscal 2009, due to:

	(a)		an increase in energy savings (lighting and mechanical) project revenues of approximately $3,048,000;
	partially offset by:
	(b)		a decrease in lighting product revenues of approximately $58,000 generated by the Company’s energy efficient lighting distribution business;

	(c)		a decrease in energy management services revenues of approximately $323,000; and
	(d)		a decrease in productivity software revenues of approximately $245,000.

The following table indicates the backlog of contracts and rental income, by segment.

										Increase
		January 31,									(Decrease)
		2010				2009				Amount				Percentage
BPE (1)		$	8,602,000			$	11,313,000			$	(2,711,000	)			(24	)
Real Estate			2,715,000				2,720,000				(5,000	)			(0	)
Less: Intersegment eliminations (2)			(591,000	)			(543,000	)			(48,000	)			(9	)
Total Backlog		$	10,726,000			$	13,490,000			$	(2,764,000	)			(20	)

(1)

BPE backlog at January 31, 2010, decreased by approximately $2,711,000, or 24%, compared to the year-earlier period, primarily due to:

	(a)		a decrease of approximately $1,662,000 in energy savings (lighting and mechanical) projects, due primarily to the near completion during the current fiscal year of an approximately $3.2 million project in the prior year’s backlog, partially offset by new projects added in the current fiscal year;
	(b)		a decrease of approximately $437,000 in productivity software products and services; and
	(c)		a decrease of approximately $612,000 in energy management consulting services, primarily as a result of the successful completion of approximately $700,000 of multi-year consulting services projects.

		Despite the decline in BPE backlog compared to the year-earlier period, BPE backlog at January 31, 2010, increased by approximately $1,575,000, or 22%, compared to the immediately prior quarter ended October 31, 2009.
		The Company estimates that the BPE backlog at January 31, 2010, will be recognized prior to January 31, 2011.
		BPE backlog includes some contracts that can be cancelled by customers with less than one (1) year’s notice, and assumes that such cancellation provisions will not be invoked. The value of such contracts included in the prior year’s backlog that were subsequently cancelled was approximately $126,000, or 1.1%

(2)

Represents rental revenues at the Company’s corporate headquarters building to be paid to the Real Estate Segment by the Parent Company and the BPE Segment.

COST OF REVENUES
From Continuing Operations

As a percentage of total segment revenues from continuing operations (see Chart A), the total applicable costs of revenues (see Chart B) were 64% and 63% for the third quarters of fiscal 2010 and 2009, respectively, and 67% and 63% for the first nine (9) months of fiscal 2010 and 2009, respectively. In reviewing Chart B, the reader should recognize that the volume of revenues generally will affect the amounts and percentages presented.

The figures in Chart B are net of intersegment eliminations.

CHART B
COST OF REVENUES
FROM CONTINUING OPERATIONS SUMMARY BY SEGMENT
(Dollars in Thousands)

										Percentage of Segment																Percentage of Segment
										Revenues for the																Revenues for the
		Third Quarter Ended								Third Quarter Ended								Nine Months Ended								Nine Months Ended
		January 31,								January 31,								January 31,								January 31,
		2010				2009				2010				2009				2010				2009				2010				2009
BPE (1)		$	2,652			$	2,098				64				63			$	7,947			$	6,019				67				63
Real Estate			459				445				64				62				1,389				1,334				67				64
		$	3,111			$	2,543				64				63			$	9,336			$	7,353				67				63

NOTES TO CHART B

(1)		BPE Segment cost of revenues increased by approximately $554,000, or 26%, in the third quarter of fiscal 2010, and increased by approximately $1,928,000, or 32%, in the first nine (9) months of fiscal 2010, compared to the same respective periods in fiscal 2009, primarily due to the corresponding increases in revenues (see Chart A).
		On a percentage-of-revenues basis, BPE Segment cost of revenues increased by approximately 1% and 4% in the third quarter and first nine (9) months of fiscal 2010, respectively, compared to the same periods in fiscal 2009, primarily due to a change in the mix of services and products.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
From Continuing Operations

As a percentage of total segment revenues from continuing operations (see Chart A), the total applicable selling, general and administrative expenses (“SG&A”) (see Chart C), net of intersegment eliminations, were 51% and 61% in the third quarters of fiscal 2010 and 2009, respectively, and 51% and 65% for the first nine (9) months of fiscal 2010 and 2009, respectively. In reviewing Chart C, the reader should recognize that the volume of revenues generally will affect the percentages presented. The percentages in Chart C are based upon expenses as they relate to the respective segment revenues from continuing operations (see Chart A), with the exception that Parent Company and total expenses relate to total consolidated revenues from continuing operations.

The figures in Chart C are net of intersegment eliminations.

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

										Percentage of Segment																Percentage of Segment
										Revenues for the																Revenues for the
		Third Quarter Ended								Third Quarter Ended								Nine Months Ended								Nine Months Ended
		January 31,								January 31,								January 31,								January 31,
		2010				2009				2010				2009				2010				2009				2010				2009
BPE (1)		$	1,530			$	1,418				37				42			$	4,252			$	4,440				36				47
Real Estate (2)			125				167				17				23				423				497				20				24
Parent Company (3)			799				885				17				22				2,469				2,630				18				23
		$	2,454			$	2,470				51				61			$	7,144			$	7,567				51				65

NOTES TO CHART C

(1)		BPE Segment SG&A expenses increased by approximately $112,000, or 8%, in the third quarter of fiscal 2010, compared to the same period in fiscal 2009, primarily due to approximately $71,000 of one-time, outside consulting costs.
		BPE Segment SG&A expenses decreased by approximately $188,000, or 4%, in the first nine (9) months of fiscal 2010, compared to the same period in fiscal 2009, primarily due to a decrease in general and administrative costs and product and project development expenses, offset by approximately $166,000 of one-time, outside consulting costs.
		On a percentage-of-revenues basis, BPE Segment SG&A expenses decreased by 5% and 11% in the third quarter and first nine (9) months of fiscal 2010, respectively, compared to the same periods in fiscal 2009, primarily due to the increase in revenues (see Chart A) without corresponding proportional increases in expenses.
(2)		Real Estate Segment SG&A expenses decreased by approximately $42,000, or 25%, in the third quarter of fiscal 2010, compared to the same period in fiscal 2009, primarily due to a decrease in personnel-related costs and legal fees.
		Real Estate Segment SG&A expenses decreased by approximately $74,000, or 15%, in the first nine (9) months of fiscal 2010, compared to the same period in fiscal 2009, primarily due to decreases in personnel-related costs, consulting fees and legal fees.
(3)		Parent Company SG&A expenses decreased by approximately $86,000, or 10%, in the third quarter of fiscal 2010, and decreased by approximately $161,000, or 6%, in the first nine (9) months of fiscal 2010, compared to the same periods in fiscal 2009, primarily due to a decrease in legal fees related to costs incurred in the prior year to settle an insurance claim.
		On a percentage-of-revenues basis, Parent Company SG&A expenses decreased by 5% in both the third quarter and first nine (9) months of fiscal 2010, compared to the same periods in fiscal 2009, due to the increase in revenues (see Chart A) and the decrease in expenses.

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

Consolidated loss before income taxes from continuing operations was $990,968 in the third quarter of fiscal year 2010, compared to $938,630 in the same period of fiscal year 2009, an increase of $52,338, or 6%. For the first nine (9) months of fiscal 2010, the consolidated loss before income taxes from continuing operations was $3,215,391, compared to $3,739,411 in the same period of fiscal year 2009, a reduction of $524,020, or 14%.

The figures in Chart D are net of intersegment eliminations.

CHART D
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
SUMMARY BY SEGMENT
(Dollars in Thousands)

		Third Quarter Ended								(Increase)				Nine Months Ended								(Increase)
		January 31,								Decrease				January 31,								Decrease
		2010				2009				Amount				2010				2009				Amount
BPE (1)		$	(76	)		$	(183	)		$	107			$	(275	)		$	(989	)		$	714
Real Estate (2)			(114	)			(148	)			34				(474	)			(421	)			(53	)
Parent Company (3)			(800	)			(608	)			(192	)			(2,466	)			(2,329	)			(137	)
Total		$	(990	)		$	(939	)		$	(51	)		$	(3,215	)		$	(3,739	)		$	524