SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

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

For the fiscal year ended April 30, 2005
 
Commission file number 0-10146

ABRAMS INDUSTRIES, INC.

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

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Common Stock, $1.00 Par Value Per Share
(Title of Class)

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

YES ü    NO    

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ü

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

YES        NO ü

The aggregate market value of Common Stock held by nonaffiliates of the registrant as of October 31, 2004 was $6,788,591. See Part III for a definition of nonaffiliates. The number of shares of Common Stock of the registrant outstanding as of April 30, 2005, was 3,209,113.

DOCUMENTS INCORPORATED BY REFERENCE

The information called for by Part III (Items 10, 11, 13, and 14) is incorporated herein by reference to the registrant’s definitive proxy statement for the 2005 Annual Meeting of Shareholders which is to be filed pursuant to Regulation 14A.

Table of Contents

PART I

ITEM 1. BUSINESS

Abrams Industries, Inc. (i) provides energy engineering and analytical consulting services and develops, implements and supports facility management software applications; (ii) implements energy saving lighting programs and provides other energy services, including facility-related improvements that reduce energy and operating costs; and (iii) engages in real estate investment and development.

     As used herein, the term “Company” refers to Abrams Industries, Inc. and its subsidiaries and predecessors, unless the context indicates otherwise, and the term “Parent” or “Parent Company” refers solely to Abrams Industries, Inc.

     The Company was organized under Delaware law in 1960 to succeed to the business of A. R. Abrams, Inc., which was founded in 1925 by Alfred R. Abrams as a sole proprietorship. In 1984, the Company changed its state of incorporation from Delaware to Georgia.

     Further information on the businesses of the Company’s operating segments is discussed below. Financial information for the segments is set forth in Note 14 to the consolidated financial statements of the Company.

     ENERGY AND FACILITIES SOLUTIONS SEGMENT

Servidyne Systems, LLC (“Servidyne”), a wholly-owned subsidiary of the Company, provides energy engineering services and facility management software applications to assist customers in optimizing facility performance and reducing building operating costs by lowering energy consumption, increasing work efficiency, extending equipment life and improving occupant satisfaction. Servidyne’s engineering and analytical consulting services include LEED® building certification; energy surveys and audits; design and specification services; MEP due diligence; energy savings programs; utility monitoring and analysis; ENERGY STAR® labeling and benchmarking; building commissioning; and energy simulations and modeling. Servidyne’s proprietary technology offerings include iTendant; WinSCORE®; SCORE®; Servidyne EnergyCheck®; Servidyne Checkmate®; and Servidyne Guest Services®. Servidyne provides turnkey implementation and ongoing support services to customers with its maintenance and service request software. Servidyne also offers maintenance training for building engineers and maintenance technicians.

     Servidyne’s customers are primarily building owners and operators and energy services companies in the hospitality, commercial office, gaming, retail, education, government, healthcare, industrial and multi-family sectors. The primary focus for the business is the continental United States, although the Company does business internationally as well. Contracts for energy engineering and analytical consulting services and facility management software applications are primarily obtained through negotiations, but may also be obtained through competitive bids on larger proposals.

     ENERGY SERVICES SEGMENT

The Wheatstone Energy Group, LLC (“Wheatstone”), a wholly-owned subsidiary of the Company, provides turnkey implementation of energy saving lighting programs and other energy-related services that reduce energy consumption and operating costs to commercial, industrial, retail, government, education and institutional facilities. As a vendor-neutral company, Wheatstone takes an unbiased approach to evaluating and implementing energy saving lighting programs and developing recommendations of cost-saving strategies.

     Wheatstone focuses its marketing and sales activities on national accounts, energy services companies, facility owners and owners’ agents throughout the United States. Services are mainly obtained through negotiations, but may also be obtained through competitive bids for large contracts.

     REAL ESTATE SEGMENT

Abrams Properties, Inc. (“Abrams Properties”), a wholly-owned subsidiary of the Company, has engaged in real estate activities since 1960. These activities primarily involve the acquisition, development, redevelopment, leasing, asset management, ownership, and sale of shopping centers and office buildings in the Southeast and Midwest. Abrams Properties uses third-party property managers and leasing agents for all of its multi-tenant properties and most of its leaseback properties.

     Abrams Properties currently owns three shopping centers, two that it developed and one that it acquired. The centers are held as long-term investments or will be marketed for sale, as management determines is appropriate. See “ITEM 2. PROPERTIES—Owned Shopping Centers.” In February 2005, Abrams Properties sold its shopping center located in Cincinnati, Ohio. In April 2005, Abrams Properties sold its Company-developed shopping center located in Jackson, Michigan. Abrams Properties is also currently lessee and sublessor of five Company-developed shopping centers that were sold by and leased back to Abrams Properties, and then subleased to Kmart Corporation. See “ITEM 2. PROPERTIES—Leaseback Shopping Centers.” During fiscal 2005, Abrams Properties sold its leasehold interest in one such property located in Minneapolis, Minnesota. The Company owns three office properties. See “ITEM 2. PROPERTIES—

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Office Buildings.” The Company also owns, through its wholly-owned subsidiary, AFC Real Estate, Inc., a vacant former manufacturing and warehouse facility located in Atlanta, Georgia, and several parcels of vacant land. See “ITEM 2. REAL ESTATE HELD FOR FUTURE DEVELOPMENT, LEASE OR SALE.”

     EMPLOYEES AND EMPLOYEE RELATIONS

At April 30, 2005, the Company employed 70 salaried employees and 13 hourly employees. The Company believes that its relations with its employees are good.

     SEASONAL NATURE OF BUSINESS

The businesses of the Energy and Facilities Solutions, Energy Services, and Real Estate Segments generally are not seasonal. However, certain retail customers of the Energy Services Segment choose to delay lighting installation during the winter holiday season.

     COMPETITION

The industries in which the Company operates are highly competitive. The Energy and Facilities Solutions Segment’s competition is widespread and ranges from multi-national firms to local small businesses. Competition in the Energy Services Segment consists primarily of local and regional companies. The Real Estate Segment also operates in a competitive environment, with numerous parties competing for available financing, properties, tenants and investors.

     PRINCIPAL CUSTOMERS

In fiscal 2005, the Company derived approximately 21% ($4,782,852) of its consolidated revenues from continuing operations from direct transactions with Kmart Corporation. These revenues resulted from the Real Estate Segment. The Company does not have any other customers that accounted for more than 10% of the Company’s consolidated revenues and that the loss of which would have a material adverse effect on the Company. See Note 14 to the consolidated financial statements of the Company for segment information.

     BACKLOG

The following table indicates the backlog of contracts and expected rentals for the next twelve months by industry segment:

The Company estimates that most of the backlog at April 30, 2005, will be completed prior to April 30, 2006. No assurance can be given as to future backlog levels or whether the Company will realize earnings from revenues resulting from the backlog at April 30, 2005.

     REGULATION

The Company is subject to the authority of various federal, state and local regulatory agencies including, among others, the Occupational Safety and Health Administration and the Environmental Protection Agency. The Company is also subject to local zoning regulations and building codes. Management believes that it is in substantial compliance with all governmental regulations. Management believes that compliance with federal, state and local provisions, which have been enacted or adopted for regulating the discharge of materials into the environment, does not have a material adverse effect upon the capital expenditures, earnings, or competitive position of the Company.

     EXECUTIVE OFFICERS OF THE REGISTRANT

The Executive Officers of the Company as of April 30, 2005, were as follows:

Co-Chairman of the Board since 1998 and a Director of the Company since 1992, Mr. Abrams has been Chief Executive Officer since 1999 and President since 2000. He also served as President and Chief Executive Officer of Servidyne Systems, LLC from May 2002 to July 2003.

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PART I (continued)

Mr. Thomas has served as Chief Financial Officer since 2003. Prior to joining the Company, he was employed by Paragon Trade Brands (a manufacturing company), serving as Vice President of Finance & Corporate Controller from October 2000 to October 2002. He was employed by Mead Corporation (a paper packaging company), serving as Director of Finance from April 1997 to October 2000.

A Director of the Company since 1999, Ms. Garrett has served as Secretary since 2000 and Vice President since May 2004. She was Chief Financial Officer from 1997 to 2003, and also has served Abrams Properties, Inc. as Chief Executive Officer since 2003, President since 2001, Chief Financial Officer from 1998 to 2000, and Vice President from 1993 to 2000.

Co-Chairman of the Board since 1998 and a Director of the Company since 1992, Mr. Abrams has been Vice President-Business Development since 2000. He served as President and Chief Operating Officer from 1999 to 2000.

Executive Officers of the Company are elected by the Board of Directors of the Company or the Board of the respective subsidiary to serve at the pleasure of the Board. Alan R. Abrams and J. Andrew Abrams are brothers. David L. Abrams, a member of the Board of Directors, is first cousin to Alan R. Abrams and J. Andrew Abrams. There are no other family relationships between any Executive Officers or Directors of the Company.

ITEM 2. PROPERTIES

The Company, through its Real Estate Segment, owns its corporate headquarters building, which contains approximately 65,880 square feet of leasable office space. The building is located in the North x Northwest Office Park, 1945 The Exchange, in suburban Atlanta, Georgia. The Parent Company and all the operating segments have their main offices located in this building. In addition to the 25,928 square feet of offices leased by Abrams entities, the remaining 39,952 square feet is leased to unrelated tenants. The Company through its Energy Services Segment leases 5,000 square feet of space for a warehouse through a lease that expires in March 2007.

     The Company also owns a vacant former manufacturing and warehouse facility located in Atlanta, Georgia. The Company owns, or has an interest in, the following properties:

     OWNED SHOPPING CENTERS

As of April 30, 2005, the Company’s Real Estate Segment owned three shopping centers, two that it developed and one that it acquired. The following chart provides relevant information relating to the owned shopping centers:

     The Company’s former shopping centers located in Cincinnati, Ohio, and Jackson, Michigan, were sold at gains in February 2005 and April 2005, respectively. These properties are not included above.

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     The two centers located in Morton, Illinois, and Columbus, Georgia, are leased exclusively to Kmart. The Kmart lease in Columbus, Georgia, expires in 2008 and Kmart has ten five-year renewal options. The Kmart lease in Morton, Illinois, expires in 2016 and Kmart has eight five-year renewal options. Anchor tenant lease terms for the center in Jacksonville, Florida, is shown in the following table:

     With the exception of the Kmart lease in Columbus, Georgia, and the Harbor Freight Tools lease in Jacksonville, Florida, all of the anchor tenant leases and many of the small shop leases provide for contingent rentals if sales generated by the respective tenant in the leased space exceed specified amounts. In some cases, contingent rentals are subject to certain rights of offset for the amounts that the ad valorem taxes exceed specified amounts. In fiscal 2005, the Company recognized $21,303 in contingent rent, net of offsets from owned shopping centers, which amounts are included in the aggregate rentals set forth above.

     Typically, tenants are responsible for their pro rata share of ad valorem taxes (subject to the rights of offset against contingent rents mentioned above), insurance and common area maintenance costs. Kmart has total responsibility for maintenance, insurance and taxes for the centers in Morton, Illinois, and Columbus, Georgia.

     OFFICE BUILDINGS

The Company, through its Real Estate Segment, owns three office properties in metropolitan Atlanta, Georgia: the corporate headquarters building located at 1945 The Exchange, in Atlanta; an office park in Marietta; and a professional medical office building in Douglasville. The following chart provides pertinent information relating to the office buildings:

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PART I (continued)

     LEASEBACK SHOPPING CENTERS

The Company, through its Real Estate Segment, has a leasehold interest in five shopping centers that it developed, sold, and leased back under leases expiring from years 2006 to 2014. Each of the centers is subleased by the Company entirely to Kmart Corporation. The Kmart subleases provide for contingent rentals if sales exceed specified amounts and contain nine five-year renewal options, except Jacksonville, Florida, which has eight five-year renewal options. The Company’s leases with the fee owners contain renewal options coextensive with Kmart’s renewal options.

     Kmart is responsible for insurance and ad valorem taxes, but has the right to offset against contingent rentals for any ad valorem taxes paid in excess of specified amounts. In fiscal 2005, the Company recognized $33,059 in contingent rentals, net of offsets, from leaseback shopping centers, which amounts are included in the aggregate annual rentals set forth below. The Company has responsibility for structural and roof maintenance of the buildings. The Company also has responsibility for underground utilities, parking lots and driveways, except for routine upkeep, which is the responsibility of the subtenant, Kmart. The Company’s leases contain exculpatory provisions, which limit the Company’s liability for payments to its interest in the respective leases.

     The following chart provides certain information relating to the leaseback shopping centers:

     The Company’s interest in the leaseback shopping center in Minneapolis, Minnesota, was sold at a gain in September 2004. This leaseback shopping center is not included above.

     REAL ESTATE HELD FOR FUTURE DEVELOPMENT, LEASE OR SALE

The Company, through its Real Estate Segment, owns the following real estate, which is held for future development, lease or sale:

     There is no debt on any of the above properties. The Company will either develop the properties described above or will continue to hold them for sale or lease to others.

     For further information on the Company’s properties, see Notes 4, 6, 8 and 9 to the consolidated financial statements, and “SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION.”

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ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The Common Stock of Abrams Industries, Inc. is traded on the NASDAQ National Market System (Symbol: ABRI). The approximate number of holders of Common Stock was 475 (including shareholders of record and shares held in street name) as June 30, 2005. The Company did not repurchase any of the shares of its Common Stock during its fiscal year ended April 30, 2005.

     The information contained under the heading “Equity Compensation Plan” in the Company’s definitive proxy materials for its 2005 Annual Meeting of Shareholders will be filed with the Securities and Exchange Commission under a separate filing, and is hereby incorporated by reference.

     On May 26, 2004, an indirect wholly-owned subsidiary of the Company acquired substantially all of the assets of Building Performance Engineers, Inc. The consideration included 21,126 newly-issued shares of the Company’s Common Stock, par value $1.00 per share. The issuance of these shares was exempt from registration as a private placement pursuant to the Securities Act of 1933 and the rules promulgated thereunder.

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PART II (continued)

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected financial data for the Company and should be read in conjunction with the consolidated financial statements and the notes thereto:

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     INTRODUCTION

The Company is organized into three operating segments: Energy and Facilities Solutions, Energy Services, and Real Estate. The Company continues to seek to add new service offerings. The Company is pursuing this strategy partially through selective acquisitions.

     The Company also formerly provided commercial construction services as a general contractor and reported a fourth operating segment, Construction. The Company made the decision to discontinue its operations as a general contractor in the fourth quarter of fiscal 2004. In accordance with SFAS 144, the Construction Segment has been classified as a discontinued operation and is no longer reported as a separate operating segment, but is reported as discontinued operations. All amounts in this Annual Report on Form 10-K have been restated so they are consistent with the current presentation.

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     In “RESULTS OF OPERATIONS” below, changes in revenues, costs and expenses, and selling, general and administrative expenses from period to period are analyzed on a segment and consolidated basis. For net earnings and similar profit information on a consolidated basis, please see “ITEM 6. SELECTED FINANCIAL DATA” above or the Company’s consolidated financial statements. Pursuant to SFAS 144, the figures shown in the following charts for all periods presented do not include Real Estate Segment revenues, cost and expenses, and selling, general and administrative expenses generated by certain owned income-producing properties which have been sold; such amounts have been reclassified to discontinued operations.

     RESULTS OF OPERATIONS

REVENUES

Revenues from continuing operations for fiscal 2005 were $22,795,356, compared to $12,382,949 and $10,523,063, for fiscal 2004 and fiscal 2003, respectively. This represents an increase in revenues of 84% in 2005 and 18% in 2004. Revenues include interest income of $79,587, $8,264, and $36,274, for 2005, 2004, and 2003, respectively, and other income of $79,854, $122,423, and $65,172, for 2005, 2004, and 2003, respectively. The figures in Chart A below, however, do not include interest income, other income or intersegment revenues. When more than one segment is involved, revenues are reported by the segment that sells the product or service to an unaffiliated purchaser.

REVENUES FROM CONTINUING OPERATIONS SUMMARY BY SEGMENT

CHART A

     Real estate revenues from continuing operations decreased $834,000 or 11% for fiscal 2004 compared to the same period in fiscal 2003 primarily due to revenues from sales of land of $860,000 in fiscal 2003, which resulted from the sale of an outparcel in Jackson, Michigan, and an outparcel and an anchor store pad in Davenport, Iowa. There were no sales of land in fiscal 2004.

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PART II (continued)

     COST AND EXPENSES: APPLICABLE TO REVENUES

As a percentage of total segment revenues (See Chart A), the applicable total segment costs and expenses applicable to revenues (See Chart B) of $13,624,384 for fiscal 2005, $7,759,903 for fiscal 2004, and $6,340,798 for fiscal 2003, were 60%, 63%, and 61%, respectively. In reviewing Chart B, the reader should recognize that the volume of revenues generally will affect the amounts and percentages.

COSTS AND EXPENSES: APPLICABLE TO REVENUES FROM CONTINUING OPERATIONS SUMMARY BY SEGMENT

CHART B

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

For fiscal years 2005, 2004, and 2003, selling, general and administrative (“SG&A”) expenses from continuing operations (see Chart C) were $9,337,313, $6,600,411, and $5,611,913, respectively. As a percentage of consolidated revenues from continuing operations, these expenses were 41%, 54%, and 54% in 2005, 2004, and 2003, respectively. In reviewing Chart C, the reader should recognize that the volume of revenues generally affects these amounts and percentages. The percentages in Chart C are based on expenses as they relate to segment revenues in Chart A, with the exception that parent expenses and total expenses relate to consolidated revenues.

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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES FROM CONTINUING OPERATIONS SUMMARY BY SEGMENT

CHART C

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PART II (continued)

     INTEREST COSTS

Interest costs expensed of $2,052,931, $2,279,642, and $2,133,131, in 2005, 2004, and 2003, respectively, are primarily related to debt on real estate. There was no capitalized interest in any of the years presented.

     DISCONTINUED OPERATIONS

On April 18, 2005, the Company sold its Company-developed shopping center located in Jackson, Michigan, and recognized a pre-tax gain on sale, net of associated costs, of approximately $4.1 million. On February 9, 2005, the Company sold its shopping center located in Cincinnati, Ohio, and recognized a pre-tax gain of approximately $850,000. As a result of these sales, the Company’s financial statements have been prepared with assets, liabilities, results of operations, cash flows, and the gains from the sales shown as discontinued operations for all periods presented.

     During fiscal 2004, the Company made the decision to discontinue its operations as a general contractor, and pursuant to this decision, all general contracting operating activities have ceased. The former Construction Segment, as a result, has been classified as a discontinued operation, and the assets, liabilities, results of operations and cash flows of the Segment have been reclassified to discontinued operations for all periods presented.

     LIQUIDITY AND CAPITAL RESOURCES

     Working capital increased 45% to $10,450,202 at April 30, 2005, compared to $7,207,333 at April 30, 2004. Operating activities provided cash of $1,194,912, primarily due to the sale of the Company’s Kmart leaseback interest in a shopping center in Minneapolis, Minnesota. The cash balance at April 30, 2005, did not include temporarily restricted cash of $8,272,399, of which $3.489 million was released to the Company and converted to cash in May 2005.

     Investing activities used cash of $9,383,000, primarily due to:

     Financing activities used cash of $4,019,000, primarily due to:

     Discontinued operations provided cash of $7,230,000, primarily from:

     The Company anticipates that its existing cash balances, equity, line of credit, potential proceeds from sales of real estate, potential cash flow provided by financing or refinancing of debt obligations, and cash flow generated from operations will, for the foreseeable future, provide adequate liquidity and financial flexibility to meet the Company’s needs to fund working capital, capital expenditures, and investment activities.

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Acquisitions

In May 2004, the Company acquired the operating business and assets of Building Performance Engineers, Inc. for a purchase price of $337,984, in order to expand the Company’s capabilities in energy efficiency 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 the acquisition; a non-interest bearing note payable in the amount of $150,000 (discounted to $136,500); and cash of $106,578 (including direct acquisition expenses).

Dispositions Of Real Estate Assets

On April 18, 2005, the Company closed on the sale of its shopping center located in Jackson, Michigan, for a sales price of $7.4 million, resulting in a pre-tax gain of approximately $4.1 million. After selling expenses, repayment of mortgage note payable and other associated costs, the sale generated net cash proceeds of approximately $4.78 million. The Company had intended to use proceeds from this sale to acquire an additional income-producing property and qualify the sale under the Internal Revenue Code Section 1031 for federal income tax deferral, by placing the proceeds with a third party intermediary. In July 2005, the Company elected not to acquire a replacement income-producing property. Proceeds of $4.78 million are included in temporarily restricted cash held in escrow at April 30, 2005, in the Company’s accompanying balance sheet and will be released to the Company the earlier of filing the Company’s federal tax return or at the end of the statutory holding period in October 2005.

     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 $3.45 million. The Company had intended to use the net proceeds from this sale to acquire an additional income-producing property and qualify for Section 1031 federal income tax deferral by placing the proceeds with a third party intermediary; however, the Company did not consummate an acquisition of an income-producing property, and the proceeds of approximately $3.49 million were subsequently released to the Company in May 2005.

     On January 31, 2004, the Company closed on the sale of one of its outparcels located in North Fort Myers, Florida, for a sales price of $515,000, resulting in a pre-tax gain of approximately $191,000. After selling expenses, the sale generated net cash proceeds of approximately $468,000.

     On September 29, 2004, the Company closed on the sale of its Kmart leaseback interest in a shopping center in Minneapolis, Minnesota, for a sales 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.

Debt Restructuring

The Company restructured the loan on the Company-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 newly restructured loan initial principal amount was $7.8 million; the loan bears interest at 6.125% and will be amortized until it matures on July 1, 2029, although the loan may be called by the lender for early repayment any time after July 1, 2011, upon thirteen months’ prior notice. As a result of the loan restructuring, the Company’s annual debt service payment for the shopping center was reduced by $299,448.

Secured Line Of Credit

The Company has a commitment from a bank for a secured line of credit in the amount of $1.5 million, of which a total of $300,000 is restricted to secure a letter of credit described in the next paragraph. The bank line of credit is secured by the Company’s investment in a short-term securities bond of $2.0 million that matures in April 2006. The Company can borrow an amount not to exceed 75% of the current market value of the bond. The line of credit bears interest at the prime rate or LIBOR plus 2%, and has a commitment fee of .375% on any unused portion. The bank line of credit expires January 31, 2006. As of April 30, 2005, there were no amounts outstanding on this line of credit.

     In conjunction with the refinancing of a mortgage on an income-producing property in July 2002, the Company is required to provide for potential future tenant improvement expenses and lease commissions through additional collateral, in the form of a letter of credit, in the amount of $150,000 from July 17, 2002 through July 16, 2005, $300,000 from July 17, 2005 through July 16, 2008, and $450,000 from July 17, 2008 through August 1, 2012. The letter of credit, currently $300,000, is secured by the bank line of credit, as discussed in the paragraph above.

Repurchases Of Common Stock

In March 2005, the Company’s Board of Directors authorized the repurchase of up to 50,000 shares of the Company’s stock in the twelve-month period beginning March 6, 2005, and ending on March 5, 2006. Any such purchases, if made, could be in the open market at prevailing prices or in privately negotiated transactions. The Company did not repurchase any shares in the period between May 1, 2004, and June 30, 2005.

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PART II (continued)

     OTHER COMMITMENTS AND CONTINGENCIES

The Company’s other commitments primarily include operating leases for its leaseback shopping centers, as described in “ITEM 2. PROPERTIES.” The Company has no long-term commitments to purchase building materials or other supplies.

     CONTRACTUAL OBLIGATIONS

A summary of the Company’s contractual obligations at April 30, 2005, are as follows:

     EFFECTS OF INFLATION ON REVENUES AND OPERATING PROFITS

The effects of inflation upon the Company’s operating results are varied. Inflation in recent years has been modest and has had minimal effect on the Company.

     The Energy and Facilities Solutions Segment generally has contracts that are renewed on an annual basis. At the time of renewal, contract fees may be increased, subject to customer approval. As inflation impacts the Company’s costs, primarily labor, the Company could seek a price increase for its contracts in order to protect its profit margin.

     The Energy Services Segment typically engages in contracts of short duration with fixed prices, which normally will minimize any erosion of its profit margin due to inflation. As inflation impacts the Company’s costs, primarily labor and materials, the Company could seek a price increase for subsequent contracts to protect its profit margin.

     In the Real Estate Segment, many of the anchor retail tenant leases are long-term (original terms over 20 years), with fixed rents, and most retail leases have contingent rent provisions by which the Company may earn additional rent as a result of increases in tenants’ sales over specified targets. In many cases, however, the contingent rent provisions permit the tenant to offset against contingent rents any increases in the tenant’s share of ad valorem taxes above a specified amount. If inflation were to rise, ad valorem taxes would probably increase as well, which, in turn, could cause a decrease in the contingent rents. Furthermore, the Company has certain repair obligations, and the costs of repairs generally increase with inflation.

     Inflation causes interest rates to rise, which has a positive effect on investment income, but could have a negative effect on profit margins, because of the increased costs of contracts and the increase in interest expense on variable rate loans.

     CRITICAL ACCOUNTING POLICIES

A critical accounting policy is one which is both important to the portrayal of a Company’s financial position and results of operations, and requires the Company to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. In preparing these financial statements, the Company has made its best estimates and used its best judgments regarding certain amounts included in the financial statements, giving due consideration to materiality. The application of these accounting policies involves the exercise of judgment and the use of assumptions regarding future uncertainties, and as a result, actual results could differ from those estimates. Management believes that the Company’s most critical accounting policies are discussed and described in Note 2 to the consolidated financial statements, and include:

Revenue Recognition

Energy and facilities solutions revenues primarily consist of services and product sales. Revenues are recognized as services are rendered, and depending upon the product type and customer agreement, product sales are recognized when products are installed or when products are delivered.

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     Energy services revenues are reported on the percentage-of-completion method, using costs incurred to date in relation to estimated total costs of the contracts, to measure the stage of completion. Original contract prices are adjusted for change orders in the amounts that are reasonably estimated based on the Company’s historical experience. The cumulative effects of changes in estimated total contract costs and revenues (change orders) are recorded in the period in which the facts requiring such revisions become known, and are accounted for using the percentage-of-completion method. At the time it is determined that a contract is expected to result in a loss, the entire estimated loss is recorded.

     The Company leases space in its income-producing properties to tenants, and recognizes minimum base rentals as revenue on a straight-line basis over the lease terms. Tenants may also be required to pay additional rental amounts based on property operating expenses. In addition, certain retail tenants are required to pay incremental rental amounts, which are contingent on their store sales. These percentage rents are recognized only if and when earned.

     Revenue from the sale of real estate is recognized when all of the following has occurred: (a) the property is transferred to the buyer; (b) the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property; and (c) the buyer has assumed all future ownership risks of the property. Costs of sales of real estate are based on the specific property sold. When a portion or unit of a development property is sold, a proportionate share of the total cost of the development is charged to cost of sales.

Income-producing Properties And Property And Equipment

Income-producing properties are stated at cost, and are depreciated for financial reporting purposes using the straight-line method over the estimated useful lives of the assets.

     Property and equipment are recorded at cost, and are depreciated for financial reporting purposes using the straight-line method over the estimated useful lives of the assets. Significant additions that extend asset lives are capitalized. Normal maintenance and repair costs are expensed as incurred. Interest and other carrying costs related to real estate assets under construction are capitalized. Other costs of development and construction of real estate assets are also capitalized. Capitalization of interest and other carrying costs are discontinued when a project is substantially completed or if active development ceases. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount or as asset may not be recoverable.

Valuation Of Goodwill And Other Intangible Assets

Goodwill and intangible assets with indefinite lives are required to be reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future net discounted cash flows expected to be generated by the asset. The most significant assumptions in the impairment analysis are revenue growth and discount rate. If an asset is determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the asset’s estimated fair value. Assets to be disposed of are reported at the lower of their carrying amount or estimated fair value less costs to sell.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

Discontinued Operations

The Company adopted SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, effective May 1, 2002, which requires among other things, that the gains and losses from the disposition of certain income-producing real estate assets, liabilities, operating results, and cash flows be reflected as discontinued operations in the financial statements for all periods presented. Although net earnings is not affected, the Company has reclassified results previously included in continuing operations to discontinued operations for qualifying dispositions under SFAS 144.

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PART II (continued)

Recent Accounting Pronouncements

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 supersedes 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 expensed by the Company over any related vesting period. As of the effective date, the Company will apply this standard using the 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, as of the effective date, the Company will be 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 May 1, 2006. The adoption of this statement is not expected to have a material effect on the Company’s financial position or results of operations.

     CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND RISKS

Certain statements contained or incorporated by reference in this Annual Report on Form 10-K, including without limitation, statements containing the words “believes,” “anticipates,” “estimates,” “expects,” “plans,” and words of similar import, are forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements involve known and unknown risks, uncertainties and other matters which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or uncertainties expressed or implied by such forward-looking statements.

     Factors relating to general global, national, regional, and local economic conditions, including international political stability, national defense, homeland security, employment levels, wage and salary levels, consumer confidence, availability of credit, taxation policies, the Sarbanes-Oxley Act, SEC reporting requirements, fees paid to vendors in order to remain in compliance with Sarbanes-Oxley Act and SEC requirements, interest rates, capital spending, and inflation could negatively impact the Company and its customers, suppliers, and sources of capital. Any significant negative impact from these factors could result in material adverse effects on the Company’s results of operations and financial condition.

     The Company is at risk for many other matters beyond its control, including, but not limited to: the possible impact, if any, on revenues due to the ultimate disposition of legal proceedings in which the Company is involved, including matters described in previous SEC reports; the potential loss of significant customers; co-tenancy provisions in anchor tenant leases; the Company’s ability to sell or refinance its real estate; the possibility of not achieving projected backlog revenues or not realizing earnings from such revenues; the cost and availability of insurance; the ability of the Company to attract and retain key personnel; weather conditions; changes in laws and regulations, including changes in accounting standards, generally accepted accounting principles, and regulatory requirements of the SEC and NASDAQ; overall vacancy rates in the markets where the Company leases retail and office space; overall capital spending trends in the economy; the timing and amount of earnings recognition related to the possible sale of real estate properties held for sale; delays in or cancellations of customers’ orders; the level and volatility of energy prices; the level and volatility of interest rates; the failure of a subcontractor to perform; and the deterioration in the financial stability of an anchor tenant, significant subcontractor or other significant customer.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s major market risk exposure arises from changes in interest rates and the resulting impact on variable rate debt instruments. The Company has variable rate debt of $1 million. In addition, the Company has interest rate risk associated with fixed rate debt. The Company’s objectives in interest rate risk management are to limit the negative impact of interest rates on earnings and cash flows and to lower overall borrowing costs. To achieve its objectives, the Company borrows at fixed rates when it believes it is in its best interests to do so, and may enter into derivative financial instruments, such as interest rate swaps and caps, in order to limit its exposure to interest rate fluctuations. The Company does not enter into derivative or interest rate transactions for speculative purposes. There were no derivative contracts in effect at April 30, 2005, or April 30, 2004.

     The following table summarizes information related to the Company’s market risk sensitive debt instruments as of April 30, 2005:

     The estimated fair value of our debt as of April 30, 2005, is based on a discounted cash flow analysis using current borrowing rates for debt with similar terms and remaining maturities. Such fair value is subject to changes in interest rates. Generally, the fair value will increase as interest rates fall and decrease as interest rates rise.

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     REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Abrams Industries, Inc.:

We have audited the accompanying consolidated balance sheets of Abrams Industries, Inc. and subsidiaries (the “Company”) as of April 30, 2005, and 2004, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended April 30, 2005. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Abrams Industries, Inc. and subsidiaries as of April 30, 2005, and 2004, and the results of their operations and their cash flows for each of the three years in the period ended April 30, 2005, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule for 2005, 2004, and 2003 when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ Deloitte & Touche LLP

Atlanta, Georgia
July 25, 2005

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CONSOLIDATED BALANCE SHEETS

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS