ABRAMS INDUSTRIES, INC.
Table of Contents

 
 
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
QUARTERLY REPORT
 
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended October 31, 2005
Commission file number 0-10146
ABRAMS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
     
Georgia   58-0522129
(State or other jurisdiction of   (I.R.S. Employer identification No.)
incorporation or organization)    
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                    No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes o                    No þ
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 November 30, 2005, was 3,545,628.
 
 

 


TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
SIGNATURES
EX-10.(I) SUMMARY DESCRIPTION OF ANNUAL INCENTIVE BONUS PLAN
EX-31.(A) SECTION 302, CERTIFICATION OF THE CEO
EX-31.(B) SECTION 302, CERTIFICATION OF THE CFO
EX-32.(A) SECTION 906, CERTIFICATION OF THE CEO
EX-32.(B) SECTION 906, CERTIFICATION OF THE CFO


Table of Contents

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ABRAMS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
                 
    October 31, 2005   April 30, 2005
     
ASSETS
               
CURRENT ASSETS:
               
Cash and cash equivalents
  $ 6,634,651     $ 1,402,645  
Restricted cash
          8,272,399  
Short-term investment
    2,000,000       2,000,000  
Receivables (Note 4)
    2,010,550       2,721,831  
Less: Allowance for doubtful accounts
    (19,760 )     (69,801 )
Assets of discontinued operations (Note 5)
    3,155       103,632  
Costs and earnings in excess of billings
    266,359       312,781  
Deferred income taxes
    552,953       552,953  
Note receivables
    882,267       23,500  
Other
    1,047,490       867,022  
     
 
               
Total current assets
    13,377,665       16,186,962  
 
INCOME-PRODUCING PROPERTIES, net
    24,296,167       24,413,645  
PROPERTY AND EQUIPMENT, net
    893,399       836,227  
OTHER ASSETS:
               
Real estate held for future development or sale
    3,167,721       3,692,731  
Intangible assets, net (Note 8)
    3,371,747       3,164,272  
Goodwill (Note 8)
    5,458,717       5,458,717  
Other
    3,727,443       3,314,618  
     
 
  $ 54,292,859     $ 57,067,172  
     
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
CURRENT LIABILITIES:
               
Trade and subcontractors payables
  $ 961,853     $ 888,397  
Accrued expenses
    1,499,727       1,861,348  
Accrued incentive compensation
    456,402       1,089,369  
Liabilities of discontinued operations (Note 5)
    97,289       196,427  
Billings in excess of costs and earnings
    191,248       526,512  
Current maturities of long-term debt
    1,188,133       1,174,707  
     
 
               
Total current liabilities
    4,394,652       5,736,760  
 
DEFERRED INCOME TAXES
    3,177,700       3,460,151  
OTHER LIABILITIES
    1,663,373       1,602,243  
MORTGAGE NOTES PAYABLE, less current maturities
    23,083,209       23,567,189  
OTHER LONG-TERM DEBT, less current maturities
    1,663,250       1,787,418  
     
 
               
Total liabilities
    33,982,184       36,153,761  
     
 
COMMITMENTS AND CONTINGENCIES (Note 10)
               
 
               
SHAREHOLDERS’ EQUITY:
               
Common stock, $1 par value; 5,000,000 shares authorized; 3,694,436 issued and 3,545,738 outstanding at October 31, 2005 (including 335,203 shares issued on October 11, 2005, as a stock dividend), 3,357,601 issued and 3,209,113 outstanding at April 30, 2005
    3,694,436       3,357,601  
Additional paid-in capital
    4,800,028       3,067,982  
Deferred stock compensation
    (6,048 )     (14,162 )
Retained earnings
    12,508,071       15,186,932  
Treasury stock, common shares;
               
148,698 at October 31, 2005, and 148,488 at April 30, 2005
    (685,812 )     (684,942 )
     
 
               
Total shareholders’ equity
    20,310,675       20,913,411  
     
 
  $ 54,292,859     $ 57,067,172  
     
See accompanying notes to consolidated financial statements.

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ABRAMS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
                                 
    SECOND QUARTER ENDED     FIRST SIX MONTHS ENDED  
    OCTOBER 30,     OCTOBER 30,  
    2005     2004     2005     2004  
         
REVENUES:
                               
Energy and facilities solutions
  $ 969,604     $ 940,084     $ 1,893,952     $ 1,830,295  
Energy services
    1,874,731       1,993,530       3,969,641       3,956,398  
Rental income
    1,685,444       3,932,511       3,379,406       5,670,841  
Real estate sales
    1,154,254             1,154,254        
 
                       
 
    5,684,033       6,866,125       10,397,253       11,457,534  
 
                       
 
                               
Interest
    51,928       9,810       98,152       38,628  
Other
    240,960       30,057       254,021       36,064  
 
                       
 
    5,976,921       6,905,992       10,749,426       11,532,226  
 
                       
 
                               
COSTS AND EXPENSES:
                               
Energy and facilities solutions
    492,253       552,869       1,002,524       1,033,758  
Energy services
    1,278,681       1,378,490       2,267,285       2,859,727  
Rental property operating expenses, excluding interest
    1,135,412       1,275,168       2,228,264       2,549,948  
Cost of real estate sold
    612,124             612,124        
 
                       
 
    3,518,470       3,206,527       6,110,197       6,443,433  
 
                       
 
                               
Selling, general and administrative
                               
Energy and facilities solutions
    541,614       460,031       1,087,587       1,098,963  
Energy services
    530,741       481,658       1,085,636       1,121,691  
Real estate
    186,873       583,218       452,157       945,808  
Parent
    736,043       904,294       1,635,595       1,600,722  
 
                       
 
    1,995,271       2,429,201       4,260,975       4,767,184  
 
                       
 
                               
Extinguishment of debt
                      218,071  
 
                               
Interest costs incurred
    472,865       499,475       904,970       1,077,392  
 
                       
 
    5,986,606       6,135,203       11,276,142       12,506,080  
 
                       
 
                               
(LOSS) EARNINGS BEFORE INCOME TAXES FROM CONTINUING OPERATIONS
    (9,685 )     770,789       (526,716 )     (973,854 )
 
                               
INCOME TAX (BENEFIT) EXPENSE
    (3,680 )     310,757       (200,152 )     (349,595 )
 
                       
(LOSS) EARNINGS FROM CONTINUING OPERATIONS
    (6,005 )     460,032       (326,564 )     (624,259 )
 
                       
 
                               
DISCONTINUED OPERATIONS:
                               
(Loss) earnings from discontinued operations, adjusted for applicable income tax (benefit) expense of $(10,362), $34,881, $(20,456), and $32,232, respectively
    (16,909 )     61,308       (33,376 )     40,145  
 
                               
 
                       
NET (LOSS) EARNINGS
  $ (22,914 )   $ 521,340     $ (359,940 )   $ (584,114 )
 
                       
 
                               
NET (LOSS) EARNINGS PER SHARE — BASIC AND DILUTED:
                               
From continuing operations
  $ (.00 )   $ .13     $ (.09 )   $ (.18 )
From discontinued operations
    (.01 )     .02       (.01 )     .01  
 
                       
NET (LOSS) EARNINGS PER SHARE — BASIC AND DILUTED
  $ (.01 )   $ .15     $ (.10 )   $ (.17 )
 
                       
 
                               
DIVIDENDS PER SHARE
  $ .04     $ .04     $ .07     $ .22  
 
                       
 
                               
WEIGHTED AVERAGE SHARES OUTSTANDING — BASIC AND DILUTED
    3,545,418       3,541,913       3,545,049       3,537,356  
 
                       
See accompanying notes to consolidated financial statements.

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ABRAMS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
                                                         
                    Additional   Deferred            
    Common Stock   Paid-In   Stock   Retained   Treasury    
    Shares   Amount   Capital   Compensation   Earnings   Stock   Total
     
BALANCES at April 30, 2003
    3,060,239       3,060,239       2,153,505       (16,598 )     16,734,753       (673,947 )     21,257,952  
Net loss
                            (1,850,126 )           (1,850,126 )
Common stock acquired
                                         
Common stock issued
    267,389       267,389       810,369       (41,700 )                 1,036,058  
Stock compensation expense
                      31,443             (5,836 )     25,607  
Cash dividends declared — $.16 per share
                            (471,964 )           (471,964 )
     
BALANCES at April 30, 2004
    3,327,628       3,327,628       2,963,874       (26,855 )     14,412,663       (679,783 )     19,997,527  
     
Net earnings
                            1,800,358             1,800,358  
Common stock acquired
                                         
Common stock issued
    29,973       29,973       104,108       (39,175 )                   94,906  
Stock compensation expense
                      51,868             (5,159 )     46,709  
Cash dividends declared — $.32 per share
                            (1,026,089 )           (1,026,089 )
     
BALANCES at April 30, 2005
    3,357,601       3,357,601       3,067,982       (14,162 )     15,186,932       (684,942 )     20,913,411  
     
Net loss
                            (359,940 )           (359,940 )
Common stock issued
    900       900       3,555       (4,455 )                    
Stock compensation expense
                      12,569             (870 )     11,699  
Stock option exercise
    732       732       2,196                               2,928  
Cash dividends declared — $.0726 per share (adjusted for subsequent stock dividend)
                            (257,423 )           (257,423 )
Stock dividend declared — 10% at market value on date declared
    335,203       335,203       1,726,295             (2,061,498 )            
     
BALANCES at October 31, 2005
    3,694,436     $ 3,694,436     $ 4,800,028     $ (6,048 )   $ 12,508,071     $ (685,812 )   $ 20,310,675  
     
See accompanying notes to consolidated financial statements.

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ABRAMS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
                 
    SIX MONTHS ENDED  
    OCTOBER 30,  
    2005     2004  
     
CONTINUING OPERATIONS:
               
Cash flows from operating activities:
               
Net loss
  $ (359,940 )   $ (584,114 )
Loss (earnings) from discontinued operations, net of tax
    33,376       (40,145 )
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
               
Gain on sale of real estate
    (542,130 )      
Depreciation and amortization
    790,935       1,011,336  
Deferred tax benefit
    (282,451 )     (333,325 )
(Recovery of) provison for doubtful accounts, net
    (50,041 )     9,190  
Extinguishment of debt
          218,071  
Changes in assets and liabilities:
               
Receivables
    711,281       (593,466 )
Costs and earnings in excess of billings
    46,422       232,306  
Note receivables
    (623,031 )      
Other current assets
    (180,468 )     (284,356 )
Other assets
    (198,561 )     (303,504 )
Trade and subcontractors payable
    73,456       630,058  
Accrued expenses
    (361,621 )     (187,204 )
Accrued incentive compensation
    (632,967 )      
Billings in excess of costs and earnings
    (335,264 )     711,124  
Other liabilities
    61,130       180,736  
 
           
Net cash (used in) provided by operating activities
    (1,849,874 )     666,707  
 
           
 
               
Cash flows from investing activities:
               
Release of restricted cash held in escrow
    8,272,399        
Proceeds from sale of real estate
    617,140        
Additions to income-producing properties, net
    (355,897 )     (205,447 )
Additions to property and equipment, net
    (148,158 )     (400,581 )
Additions to intangible assets, net
    (474,143 )     (253,955 )
Acquisition, net of cash acquired
          (178,315 )
 
           
Net cash provided by (used in) investing activities
    7,911,341       (1,038,298 )
 
           
 
               
Cash flows from financing activities:
               
Debt restructuring
          (1,974,042 )
Debt repayments
    (542,929 )     (478,212 )
Deferred loan costs paid
          (50,000 )
Cash received on stock option exercise
    2,928        
Cash dividends
    (257,423 )     (769,456 )
 
           
Net cash used in financing activities
    (797,424 )     (3,271,710 )
 
           
 
               
DISCONTINUED OPERATIONS:
               
Operating activities
    (32,037 )     1,764,506  
Investing activities
          (47,472 )
Financing activities
          (89,156 )
 
           
Net cash (used in) provided by discontinued operations
    (32,037 )     1,627,878  
 
           
 
               
Net increase (decrease) in cash and cash equivalents
    5,232,006       (2,015,423 )
Cash and cash equivalents at beginning of period
    1,402,645       6,379,679  
 
           
Cash and cash equivalents at end of period
  $ 6,634,651     $ 4,364,256  
 
           
 
               
Supplemental disclosure of noncash financing activities:
               
Issuance of common stock under Stock Award Plan
  $ 4,455     $ 7,500  
See accompanying notes to consolidated financial statements.

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ABRAMS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2005, AND APRIL 30, 2005
(UNAUDITED)
NOTE 1. ORGANIZATION AND BUSINESS
Abrams Industries, Inc. (together with its subsidiaries, the “Company”) was organized under Delaware law in 1960. In 1984, the Company changed its state of incorporation from Delaware to Georgia. The Company (i) provides energy engineering 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.
NOTE 2. UNAUDITED STATEMENTS
The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations, although management believes that the accompanying disclosures are adequate to make the information presented not misleading. In the opinion of management, the accompanying financial statements contain all adjustments, consisting of normal recurring accruals that are necessary for a fair statement of the results for the interim periods presented. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2005. Results of operations for interim periods are not necessarily indicative of annual results.
Certain reclassifications have been made to the fiscal 2005 consolidated financial statements to conform to the classifications adopted in 2006.
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES
For purposes of the required pro forma disclosures required by Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, the Company has computed the value of all stock option awards granted for the quarter ended October 31, 2005, and October 31, 2004, using the Black-Scholes option pricing model.
If the Company had accounted for its stock-based compensation awards in accordance with SFAS 123, pro forma results would have been as follows:

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    Quarter   Six Months
    Ended October 31,   Ended October 31,
    2005   2004   2005   2004
         
Net (loss) earnings, as reported
  $ (22,914 )   $ 521,340     $ (359,940 )   $ (584,114 )
Add: Stock-based compensation
    6,654       16,273       16,057       34,680  
Deduct: Total stock-based compensation expense as determined under fair value based method for all awards, net of related tax effects
    (28,013 )     (33,674 )     (58,655 )     (107,668 )
Add: Forfeitures, net of related tax effects
    7,073       25,271       9,659       46,534  
         
Pro forma net (loss) earnings
  $ (37,200 )   $ 529,210     $ (392,879 )   $ (610,568 )
         
 
                               
Net (loss) earnings per share:
                               
Basic and diluted — as reported
  $ (0.01 )   $ 0.15     $ (0.10 )   $ (0.17 )
         
Basic and diluted — pro forma
  $ (0.01 )   $ 0.15     $ (0.11 )   $ (0.17 )
         
Options to purchase 703,536 shares were outstanding at October 31, 2005, of which 464,062 options were vested. The Company did not grant any stock options or shares of restricted stock for the quarter ended October 31, 2005. The Company did grant 30,000 stock options and 2,300 shares of restricted stock for the quarter ended October 31, 2004. The Company granted 4,000 stock options and 900 shares of restricted stock for the first six months ended October 31, 2005, and granted 84,900 stock options and 7,500 shares of restricted stock for the first six months ended October 31, 2004. The number of stock options forfeited in the quarters ended October 31, 2005, and October 31, 2004, was 12,198 and 33,500, respectively. The number of stock options forfeited in the first six months ended October 31, 2005, and October 31, 2004, was 16,248 and 60,000, respectively. There were 3,662 stock options that were “in-the-money” and exercisable as of October 31, 2005. The number of shares of unvested, restricted stock forfeited in the quarters ended October 31, 2005, and October 31, 2004, was 110 and 400, respectively. The number of shares of unvested, restricted stock forfeited in the first six months ended October 31, 2005, and October 31, 2004, was 210 and 700, respectively.
NOTE 4. RECEIVABLES
All net contract and trade receivables are expected to be collected within one year.
NOTE 5. DISCONTINUED OPERATIONS
Construction Segment
During fiscal 2004, the Company made the decision to curtail its operations as a general contractor, and pursuant to this decision, all operating activities were ceased. The former Construction Segment has been classified as a discontinued operation.
Real Estate Sales of Income-Producing Properties
The Company is in the business of creating long-term value by periodically realizing gains through the sale of existing real estate assets, and then redeploying its capital by reinvesting the proceeds from such sales. Effective May 1, 2002, the Company adopted SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which requires, among other things, that the operating results of certain income-producing assets, sold subsequent to April 30, 2002, be included in discontinued operations in the statements of operations for all periods presented. The Company classifies an asset as held for sale when the asset is under a binding sales contract with minimal contingencies, and the buyer is materially

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at risk if the buyer fails to complete the transaction. However, each potential transaction is evaluated based on its separate facts and circumstances. Pursuant to this standard, as of October 31, 2005, the Company had no assets that were classified as held for sale.
On April 18, 2005, the Company sold its shopping center located in Jackson, Michigan, and recognized a pre-tax gain of approximately $4.1 million. On February 9, 2005, the Company sold its shopping center in Cincinnati, Ohio, and recognized a pre-tax gain of approximately $850,000. As a result of these transactions, the Company’s financial statements have been prepared with the assets, liabilities, results of operations, cash flows, and the gains on the sales shown as discontinued operations. All historical statements have been restated in accordance with SFAS 144. Summarized financial information for discontinued operations for the quarters and six month periods ended October 31, 2005, and 2004, is as follows:
                                 
    Second Quarter Ended   Six Months Ended
    October 31,   October 31,
    2005   2004   2005   2004
         
REVENUES:
                               
Construction
  $     $ 11     $ 40     $ 145,513  
Rental properties
    19,796       362,980       19,796       653,362  
         
Total revenues
    19,796       362,991       19,836       798,875  
 
                               
COSTS AND EXPENSES:
                               
Construction cost and expenses
                      114,734  
Rental property operating expenses, including depreciation and interest
    6,741       225,706       6,640       462,771  
Construction selling, general & administrative
    40,326       41,096       67,028       148,993  
         
Total costs and expenses
    47,067       266,802       73,668       726,498  
 
                               
(Loss) earnings from discontinued operations
    (27,271 )     96,189       (53,832 )     72,377  
Income tax (benefit) expense
    (10,362 )     34,881       (20,456 )     32,232  
         
(Loss) earnings from discontinued operations, net of tax
  $ (16,909 )   $ 61,308     $ (33,376 )   $ 40,145  
         
                 
    Balances at
Assets of discontinued operations   October 31, 2005 April 30, 2005
     
Receivables, net
  $     $ 100,477  
Other current assets
    3,155       3,155  
     
 
  $ 3,155     $ 103,632  
     
                 
    Balances at
Liabilities of discontinued operations   October 31, 2005   April 30, 2005
     
Trade and subcontractors payables
  $ 28,747     $ 74,150  
Accrued expenses
    68,542       122,277  
     
 
  $ 97,289     $ 196,427  
     
NOTE 6. OPERATING SEGMENTS
The Company has three operating segments: Energy and Facilities Solutions, Energy Services, and Real Estate. The table below shows selected financial data on a segment basis. Net earnings (loss) are total revenues less operating expenses, including depreciation, interest, and income taxes. In this presentation, management fee expense charged by the Parent Company has not been allocated to the subsidiaries.

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For the Quarter Ended   Energy and           Real Estate            
October 31, 2005   Facilities Solutions   Energy Services   (1)   Parent   Eliminations   Consolidated
     
Revenues from unaffiliated customers
  $ 969,604     $ 1,874,731     $ 2,839,698     $     $     $ 5,684,033  
Interest and other income
    1,418       9,530       418,506       9,010       (145,576 )     292,888  
Intersegment revenue
                134,705             (134,705 )      
     
Total revenues from continuing operations
  $ 971,022     $ 1,884,261     $ 3,392,909     $ 9,010     $ (280,281 )   $ 5,976,921  
     
Net (loss) earnings (2)
  $ (126,613 )   $ (55,994 )   $ 661,738     $ (468,243 )   $ (8,799 )   $ 2,089  
     
                                                 
For the Quarter Ended   Energy and           Real Estate            
October 31, 2004   Facilities Solutions   Energy Services   (1)   Parent   Eliminations   Consolidated
     
Revenues from unaffiliated customers
  $ 940,084     $ 1,993,530     $ 3,932,511     $     $     $ 6,866,125  
Interest and other income
          11,125       73,278       8,121       (52,657 )     39,867  
Intersegment revenue
                121,864             (121,864 )      
     
Total revenues from continuing operations
  $ 940,084     $ 2,004,655     $ 4,127,653     $ 8,121     $ (174,521 )   $ 6,905,992  
     
Net (loss) earnings (2)
  $ (72,162 )   $ 7,388     $ 1,387,925     $ (832,987 )   $ 54,743     $ 544,907  
     
                                                 
For the Six Months Ended   Energy and           Real Estate            
October 31, 2005   Facilities Solutions   Energy Services   (1)   Parent   Eliminations   Consolidated
     
Revenues from unaffiliated customers
  $ 1,893,952     $ 3,969,641     $ 4,533,660     $     $     $ 10,397,253  
Interest and other income
    1,733       9,530       572,828       13,640       (245,558 )     352,173  
Intersegment revenue
                261,893             (261,893 )      
     
Total revenues from continuing operations
  $ 1,895,685     $ 3,979,171     $ 5,368,381     $ 13,640     $ (507,451 )   $ 10,749,426  
     
Net (loss) earnings (2)
  $ (257,440 )   $ 236,229     $ 794,335     $ (1,084,196 )   $ (7,335 )   $ (318,407 )
     
                                                 
For the Six Months Ended   Energy and           Real Estate            
October 31, 2004   Facilities Solutions   Energy Services   (1)   Parent   Eliminations   Consolidated
     
Revenues from unaffiliated customers
  $ 1,830,295     $ 3,956,398     $ 5,670,841     $     $     $ 11,457,534  
Interest and other income
          11,125       148,475       15,206       (100,114 )     74,692  
Intersegment revenue
    11,535             246,218             (257,753 )      
     
Total revenues from continuing operations
  $ 1,841,830     $ 3,967,523     $ 6,065,534     $ 15,206     $ (357,867 )   $ 11,532,226  
     
Net (loss) earnings (2)
  $ (218,582 )   $ (159,990 )   $ 1,024,749     $ (1,303,683 )   $ 151,412     $ (506,094 )
     

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(1)   The Company is in the business of creating long-term value by periodically realizing gains through the sale of income-producing properties. The Real Estate Segment’s net earnings include results from income-producing properties that are reflected as discontinued operations pursuant to SFAS 144, including gains on the sale of those properties.
 
(2)   The Company has changed its measurement of profit or loss previously disclosed from net (loss) earnings from continuing operations before income taxes to net (loss) earnings. The chief executive officer uses this measurement to analyze each Segment’s operating performance.
The following is a reconciliation of Segment net (loss) earnings shown in the table above to consolidated net (loss) earnings on the statements of operations for the quarters and six months ended October 31, 2005, and 2004:
                                 
    Quarter Ended   Six Months Ended
    October 31,   October 31,
    2005   2004   2005   2004
         
Consolidated Segment net (loss) earnings
  $ 2,089     $ 544,907     $ (318,407 )   $ (506,094 )
Discontinued Construction Segment net loss
    (25,003 )     (44,110 )     (41,533 )     (151,306 )
Eliminations related to Construction Segment
          20,543             73,286  
         
Consolidated net (loss) earnings
  $ (22,914 )   $ 521,340     $ (359,940 )   $ (584,114 )
         
NOTE 7. (LOSS) EARNINGS PER SHARE
Basic earnings per share are computed by dividing net (loss) earnings by the weighted average shares outstanding during the reporting period. Diluted earnings per share are computed giving effect to dilutive stock equivalents resulting from outstanding stock options and stock warrants. The dilutive effect on the number of common shares for the second quarter and for the first six months of fiscal 2006 was 86,267 and 56,453 shares, respectively, and was 0 and 52 shares for the second quarter and for the first six months of fiscal 2005, respectively. Since the Company had a loss from continuing operations for the periods in which there was a dilutive effect, all stock equivalents were antidilutive during that period, and therefore, are excluded when determining the diluted weighted average shares outstanding.
On August 25, 2005, the Company awarded a stock dividend of ten percent (10%) to all shareholders of record on September 27, 2005. On October 11, 2005, the Company issued 335,203 shares of stock related to the stock dividend. (Loss) earnings per share have been adjusted retroactively to present the shares issued and stock dividend as outstanding for all periods presented.

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NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
The gross carrying amounts and accumulated amortization for all of the Company’s intangible assets as of October 31, 2005, are as follows:
                 
    Gross Carrying     Accumulated  
    Amount     Amortization  
       
Amortized intangible assets:
               
 
Proprietary facility management software applications
  $ 2,124,956     $ 693,713  
Computer software
    417,210       386,077  
Real estate lease costs
    1,615,672       801,770  
Customer relationships
    218,000       79,933  
Deferred loan costs
    751,547       525,527  
Other
    55,608       32,933  
 
           
 
  $ 5,182,993     $ 2,519,953  
 
           
 
               
Unamortized intangible assets:
               
Trademark
  $ 708,707     $  
 
           
 
               
Goodwill
  $ 5,458,717     $  
 
           
         
Aggregate amortization expense for all amortized intangible assets
       
For the three months ended October 31, 2005
  $ 143,139  
For the six months ended October 31, 2005
    266,319  
For the three months ended October 31, 2004
    161,293  
For the six months ended October 31, 2004
    318,508  
NOTE 9. DISPOSITIONS
On October 28, 2005, the Company closed on the sale of one of its outparcels located in North Fort Myers, Florida, for a sales price of $625,000, resulting in a pre-tax gain of approximately $296,000. After selling expenses, the sale generated proceeds of approximately $577,000 of which $450,000 was recorded as a note receivable, bearing interest at 7.25%, interest only due monthly commencing on December 1, 2005, and matures on April 28, 2006.
On October 21, 2005, the Company closed on the sale of one of its outparcels located in North Fort Myers, Florida, for a sales price of approximately $529,000, resulting in a pre-tax gain of approximately $246,000. After selling expenses, the sale generated net cash proceeds of approximately $488,000.
NOTE 10. COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings and other claims that arise in the ordinary course of business. While the resolution of these matters cannot be predicted with certainty, the Company believes that the final outcome of these matters will not have a material adverse effect on the Company’s financial position or results of operations.

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NOTE 11. SUBSEQUENT EVENT
The Company has entered into a contract to sell its professional medical office building located in Douglasville, Georgia, at a gain. The contract specifies a closing date in fiscal 2006. The contract is subject to customary conditions, and there can be no assurance that the contract will close.
The Company has entered into a contract to sell a 4.7 acre tract of land in Louisville, Kentucky, at a gain. The contract specifies a closing date in fiscal 2006. The contract is subject to customary conditions, and there can be no assurance that the contract will close.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements, including the notes to those statements, which are presented elsewhere in this report. The Company also recommends that this discussion and analysis be read in conjunction with the 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, 2005.
The Company’s fiscal year 2006 ends April 30, 2006.
In the charts below, changes in revenues, costs and expenses and selling, general and administrative expenses from period to period are analyzed on both segment and consolidated bases. For net earnings and similar profit information on a consolidated basis, please see 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 are held for sale or that have been sold, including the gains on the sale of these properties; such amounts have been reclassified to discontinued operations. See “Critical Accounting Policies – Discontinued Operations” later in this discussion and analysis section.
Results of operations of the second quarter and first six months of fiscal 2006, compared to the second quarter and first six months of fiscal 2005
REVENUES From Continuing Operations
For the second quarter of fiscal 2006, consolidated revenues from continuing operations, including interest income and other income, and net of intersegment eliminations, were $5,976,921, compared to $6,905,992 for the second quarter of fiscal 2005, a decrease of 13%. For the first six months of fiscal 2006, consolidated revenues from continuing operations were $10,749,426, compared to $11,532,226 for the first six months of fiscal 2005, a decrease of 7%.
The figures in Chart A are segment revenues from continuing operations, net of intersegment eliminations, and do not include interest income or other income.
CHART A
REVENUES FROM CONTINUING OPERATIONS BY SEGMENT
(Dollars in Thousands)
                                                                 
    Second Quarter Ended   Amount   Percent   Six Months Ended   Amount   Percent
    October 31,   Increase   Increase   October 31,   Increase   Increase
    2005   2004   (Decrease)   (Decrease)   2005   2004   (Decrease)   (Decrease)
     
Energy and Facilities Solutions
  $ 970     $ 940     $ 30       3     $ 1,894     $ 1,830     $ 64       3  
Energy Services (1)
    1,875       1,994       (119 )     (6 )     3,970       3,956       14       0  
Real Estate (2)
    2,840       3,933       (1,093 )     (28 )     4,534       5,671       (1,137 )     (20 )
                         
 
  $ 5,685     $ 6,867     $ (1,182 )     (17 )   $ 10,398     $ 11,457     $ (1,059 )     (9 )
     

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NOTES TO CHART A
(1)   Revenues for the Energy Services Segment for the first six months of fiscal 2006 include the recognition of approximately $593,000 in revenues in the first quarter of fiscal 2006 from a consulting services contract that was substantially performed in prior periods and did not have any associated cost and expense (See Chart B).
(2)   Real estate revenues from continuing operations decreased $1,093,000 or 28% for the second quarter of fiscal 2006, and $1,137,000 or 20% for the first six months of fiscal 2006, compared to the same periods in fiscal 2005, primarily due to:
  (a)   rental revenues in fiscal 2005 included revenues of $2,250,000 from the sale of the Company’s leaseback interest in a shopping center in Minneapolis, Minnesota, in September 2004; whereas there were no rental revenues from a leaseback sale in the first six months of fiscal 2006;
offset by:
  (b)   the sale of land (two outparcels) located in North Fort Myers, Florida, for $1,154,000, in October 2005. There was no sale of land in the first six months of fiscal 2005.
The following table indicates the backlog of contracts and rental income for the next twelve months, by industry segment.
                 
    October 31,  
    2005     2004  
Energy and Facilities Solutions (a)
  $ 2,821,000     $ 2,572,000  
Energy Services (b)
    2,469,000       4,396,000  
Real Estate (c)
    6,602,000       6,509,000  
Less: Intersegment eliminations
    (540,000 )     (524,000 )
 
           
Total Backlog
  $ 11,352,000     $ 12,953,000  
 
           
 
(a)   The increase in backlog is primarily due to an increase in energy engineering service contracts. Backlog includes contracts that can be cancelled with less than one year’s notice, and assumes cancellations provisions will not be invoked. The cancellation rate for such contracts in the previous twelve months was approximately 9%.
(b)   The decrease in backlog is primarily due to one large contract included in the prior period in the education and government sector.
(c)   The increase in real estate backlog primarily relates to an increase in occupancy rates at leased properties. Revenues from any contract in which the prospective buyer is not materially at risk are not included in backlog. As of October 31, 2005, backlog does not include a contract to sell, at a gain, the Company’s professional medical office building located in Douglasville, Georgia. Backlog also does not include a contract to sell, at a gain, a 4.7 acre tract of land in Louisville, Kentucky. See Note 11 to the consolidated financial statements.
COSTS AND EXPENSES APPLICABLE TO REVENUES
From Continuing Operations
As a percentage of total segment revenues from continuing operations (See Chart A), the total applicable costs and expenses (See Chart B) were 62% and 47% for the second quarters of fiscal 2006 and 2005, respectively, and 59% and 56% for the first six months of fiscal 2006 and 2005, respectively. In

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reviewing Chart B, the reader should recognize that the volume of revenues generally will affect the amounts and percentages presented there.
The figures in Chart B are net of intersegment eliminations.
CHART B
COSTS AND EXPENSES APPLICABLE TO REVENUES
FROM CONTINUING OPERATIONS BY SEGMENT
(Dollars in Thousands)
                                                                 
                    Percent of Segment                     Percent of Segment  
                    Revenues for                     Revenues for  
    Second Quarter Ended     Second Quarter Ended     Six Months Ended     Six Months Ended  
    October 31,     October 31,     October 31,     October 31,  
    2005     2004     2005     2004     2005     2004     2005     2004  
     
Energy and Facilities Solutions (1)
  $ 492     $ 553       51       59     $ 1,003     $ 1,034       53       57  
Energy Services (2)
    1,279       1,378       68       69       2,267       2,860       57       72  
Real Estate (3)
    1,747       1,275       62       32       2,840       2,550       63       45  
                                         
 
  $ 3,518     $ 3,206       62       47     $ 6,110     $ 6,444       59       56  
     
NOTES TO CHART B
(1)   The change in the percentage of costs and expenses applicable to revenues from continuing operations of the Energy and Facilities Solutions Segment for all periods presented is primarily due to:
  (a)   changes in the mix of services and products; and
 
  (b)   an increase in margins on energy engineering services and proprietary facility management software applications due to improved operational efficiencies.
(2)   On a dollar basis, costs and expenses from continuing operations decreased $593,000 or 21% for the first six months of fiscal 2006, compared to the same period of fiscal 2005, primarily due to a corresponding decrease in installation contract revenues.
 
    On a percentage basis, costs and expenses decreased for the first six months of fiscal 2006, primarily due to:
  (a)   the recognition of revenue from a consulting services contract in the first quarter of fiscal 2006, that had no associated cost and expense in the first six months of fiscal 2006; and
 
  (b)   an increase in margins on installation contract revenues due to improved operational efficiencies.
(3)   On a dollar basis, costs and expenses from continuing operations increased $472,000 or 37% for the second quarter of fiscal 2006, and $290,000 or 11% for the first six months of fiscal 2006, compared to the same periods of fiscal 2005, primarily due to:
  (a)   the cost of sales of land of $612,000, resulting from the sale of two outparcels located in North Fort Myers, Florida, in October 2005; there were no land sales in the first six months of fiscal 2005;
offset by:
  (b)   the absence of lease costs of $30,000 and $98,000, in the second quarter and first six months of fiscal 2006, respectively, related to the leaseback interest in a shopping center located in Minneapolis, Minnesota, that was sold in September 2004;
 
  (c)   a decrease in common area maintenance and operating expenses of $41,000 and $85,000, in the second quarter and first six months of fiscal 2006, respectively; and

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  (d)   a decrease in depreciation and amortization of $41,000 and $81,000 in the second quarter and first six months of fiscal 2006, respectively.
On a percentage basis, costs and expenses from continuing operations increased for both periods presented, primarily due to the rental revenues of $2,250,000 that resulted from the sale of the Company’s leaseback interest in the shopping center in Minneapolis, Minnesota, in the second quarter ended October 31, 2004; the cost of the sale was $42,115.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
From Continuing Operations
For the second quarters of fiscal 2006 and 2005, total selling, general and administrative expenses (“SG&A”) from continuing operations, net of intersegment eliminations, were $1,995,271 and $2,429,201, respectively. As a percentage of consolidated revenues from continuing operations, these expenses were 35% for both of the second quarters of fiscal 2006 and 2005. For the first six months of fiscal 2006 and 2005, total SG&A expenses from continuing operations, net of intersegment eliminations, were $4,260,975 and $4,767,184, respectively. As a percentage of consolidated revenues from continuing operations, these expenses were 41% and 42% for the first six months of fiscal 2006 and 2005, respectively. In reviewing Chart C, the reader should recognize that the volume of revenues generally will affect the amounts and percentages presented there. The percentages in Chart C are based upon expenses as they relate to segment revenues from continuing operations (Chart A), except that parent and total expenses relate to consolidated revenues from continuing operations.
CHART C
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
FROM CONTINUING OPERATIONS BY SEGMENT
(Dollars in Thousands)
                                                                 
                    Percent of Segment                     Percent of Segment  
                    Revenues for                     Revenues for  
    Second Quarter Ended     Second Quarter Ended     Six Months Ended     Six Months Ended  
    October 31,     October 31,     October 31,     October 31,  
    2005     2004     2005     2004     2005     2004     2005     2004  
     
Energy and Facilities Solutions (1)
  $ 542     $ 460       56       49     $ 1,088     $ 1,099       57       60  
Energy Services (2)
    531       482       28       24       1,086       1,122       27       28  
Real Estate (3)
    187       583       7       15       452       946       10       17  
Parent
    736       904       13       13       1,636       1,601       16       14  
                                         
 
  $ 1,996     $ 2,429       35       35     $ 4,262     $ 4,768       41       42  
     
NOTES TO CHART C
(1)   On a dollar basis, SG&A expenses from continuing operations increased $82,000 or 18% for the second quarter of 2006, compared to the same period of fiscal 2005, primarily due to an increase in personnel related costs.
(2)   On a dollar and percentage basis, SG&A expenses from continuing operations increased $49,000 or 10% for the second quarter of 2006, compared to the same period of fiscal 2005, primarily due to an increase in unallocated project development costs associated with a delay in contracts being awarded.
(3)   On a dollar and percentage basis, SG&A expenses from continuing operations decreased $396,000 or 68% for the second quarter of fiscal 2006 and $494,000 or 52% for the first six

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    months of fiscal 2006, compared to the same periods of fiscal 2005, primarily due to the legal costs and a net settlement cost that was expensed in fiscal 2005, due to the conclusion of arbitration proceedings.
Liquidity and capital resources
Between April 30, 2005, and October 31, 2005, working capital decreased by $1,467,189. Operating activities used cash of $1,850,000 primarily due to:
  (a)   an increase in note receivables of approximately $623,000 related to services performed on a consulting contract;
 
  (b)   the cash payment of $620,000, representing 58% of the incentive compensation generated by the successful achievement of Company-wide earnings and performance goals in fiscal 2005;
 
  (c)   a net decrease in trade and subcontractors payables, accrued expenses and billings in excess of costs and earnings of $562,000 due to the timing and submission of payments;
 
  (d)   an increase in other current assets of approximately $180,000 related to insurance prepayments and real estate tax prepayments; and
 
  (e)   losses from continuing operations;
offset by:
  (f)   a decrease in gross receivables and costs and earnings in excess of billings of approximately $758,000.
Investing activities provided cash of $7,911,000, primarily due to:
  (a)   the release of approximately $8,272,000 previously held in escrow for the purpose of purchasing a replacement property as part of an Internal Revenue Code Section 1031 federal tax deferred exchange for the Company’s former shopping center located in Cincinnati, Ohio, which was sold in February 2005, and the Company’s former shopping center located in Jackson, Michigan, which was sold in April 2005, as the Company did not purchase replacement properties;
 
  (b)   proceeds of $617,000 from the sale of two outparcels located in North Fort Myers, Florida, that were sold at gains in October 2005;
offset by:
  (c)   approximately $356,000 in tenant and building improvements; and
 
  (d)   additions to intangible assets of $474,000 primarily related to software development costs for one of the Company’s proprietary software solutions.
Financing activities used cash of $797,000 for scheduled principal payments of mortgage notes and other long-term debt and the regular quarterly dividends. Discontinued operations used cash of $32,000.
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.
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. 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 on 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

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unused portion. The bank line of credit expires January 31, 2006. As of October 31, 2005, there were no amounts outstanding on this line of credit.
Cautionary statement regarding forward-looking statements
Certain statements contained or incorporated by reference in this Quarterly Report on Form 10-Q, 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, natural disasters, 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 the ultimate disposition of legal proceedings in which the Company is involved; the potential loss of significant customers; co-tenancy provisions in anchor retail 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 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 interest rates; the level and volatility of energy prices; the failure of a subcontractor to perform; and the deterioration in the financial stability of an anchor tenant, significant subcontractor, vendor, or other significant customer.
Critical Accounting Policies
A critical accounting policy is one that is both important to the portrayal of the Company’s financial position and results of operations, and requires the Company to make estimates and assumptions in certain circumstances that affect the 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 include:
Revenue recognition
Energy and facilities solutions revenues primarily consist of services and product sales. Revenues are

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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.
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 changes in estimated total contract costs and revenues (change orders), in the amounts that are reasonably estimated based on the Company’s historical experience. The cumulative effects of 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 as reimbursement for their share of property operating expenses. In addition, certain tenants are required to pay incremental rental amounts, which are contingent on their store sales. These percentage rents are recognized only if and when earned.
Revenue from the sale of real estate is recognized when all of the following has occurred: (a) the property is transferred to the buyer; (b) the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property; and (c) the buyer has assumed all future ownership risks of the property. The cost of sales related to real estate is 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 stated 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 development are capitalized. Costs of development and construction of real estate assets are also capitalized. Capitalization of interest and other carrying costs is discontinued when a development 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 of an 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 estimated future net discounted cash flows expected to be generated by the asset. The most significant assumptions in the impairment analysis are revenue growth and the discount rate utilized. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the asset’s fair value. Assets to be disposed of are reported at the lower of their carrying amount or estimated fair value less costs to sell.

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Income taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date of such change.
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 and the related historical operating results be reflected as discontinued operations in the statements of operations for all periods presented. Although net earnings is not affected, the Company has reclassified results previously included in continuing operations to discontinued operations for qualifying dispositions pursuant to SFAS 144.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes since April 30, 2005. Refer to the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2005, for detailed disclosures about quantitative and qualitative disclosures about market risk.
ITEM 4. CONTROLS AND PROCEDURES
Management has evaluated the Company’s disclosure controls and procedures as defined by Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. This evaluation was carried out with the participation of the Company’s Chief Executive Officer and Chief Financial Officer. No system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that the system of controls has operated effectively in all cases. The Company’s disclosure controls and procedures, however, are designed to provide reasonable assurance that the objectives of disclosure controls and procedures are met.
Based on management’s evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective, as of the end of the period covered by this report, to provide reasonable assurance that the objectives of disclosure controls and procedures were met.
There was no change in the Company’s internal control over financial reporting that occurred during the period covered by this quarterly report on Form 10-Q that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company’s Annual Meeting of Shareholders, held on August 24, 2005, the shareholders voted upon and approved the nominees for the Board of Directors. The voting was as follows:
         
DIRECTORS   VOTES FOR   VOTES WITHHELD
Alan R. Abrams
  2,986,014   1,200
David L. Abrams
  2,984,239   2,975
J. Andrew Abrams
  2,984,614   2,600
Samuel E. Allen
  2,965,888   21,326
Gilbert L. Danielson
  2,985,139   2,075
Melinda S. Garrett
  2,984,139   3,075
Robert T. McWhinney, Jr.
  2,986,914   300
Felker W. Ward, Jr.
  2,964,113   23,101
ITEM 5. OTHER INFORMATION
The Company is committed to attracting quality employees by offering competitive compensation programs. Accordingly, the Company has an annual incentive bonus program that covers all full-time employees of the Company and its subsidiaries, including the executive officers. At the beginning of each fiscal year, with recommendations from management, the Compensation Committee of the Board of Directors approves a specific consolidated net earnings target and an incentive bonus opportunity for each executive officer, generally expressed as a percentage of such officer’s base salary. The incentive bonus that can be earned by executive officers is contingent on the Company achieving consolidated net earnings, and is derived by a formula tied to the level of attainment of the consolidated net earnings target, or in the case of those executive officers who are presidents of operating segments, tied partially to the level of attainment of the consolidated net earnings target and partially to the level of attainment of a net earnings target for the operating segment. All executive officers receive any earned incentive bonuses in two installments, payable six months apart. To qualify to receive an incentive bonus installment, a plan participant must be actively employed by the Company at the time of such payment. The Company retains discretion to terminate or amend the plan at any time.
On July 15, 2005, the Company made the first installment payout under the annual incentive bonus program for the achievement of performance goals for the Company’s fiscal year ended April 30, 2005. The total amounts payable to the executive officers of the Company with respect to fiscal 2005, including the previously-paid July 2005 installment, were reported in the Company’s Proxy Statement related to its Annual Meeting of Shareholders filed with the Securities and Exchange Commission on July 26, 2005.
The Compensation Committee of the Board of Directors has renewed this annual incentive bonus program for fiscal 2006.

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ITEM 6. EXHIBITS
     
10(i)
  Summary Description of Annual Incentive Bonus Plan
 
   
31(a)
  Certification of Chief Executive Officer, pursuant Rules 13a-14(a)/15d-14(a)
 
   
31(b)
  Certification of Chief Financial Officer, pursuant Rules 13a-14(a)/15d-14(a)
 
   
32(a)
  Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes Oxley Act 2002
 
   
32(b)
  Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes Oxley Act 2002

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SIGNATURES
      Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
  ABRAMS INDUSTRIES, INC.
               (Registrant)
 
 
Date: December 15, 2005  /s/ Alan R. Abrams    
  Alan R. Abrams   
  Chief Executive Officer   
     
Date: December 15, 2005  /s/ Mark J. Thomas    
  Mark J. Thomas   
  Chief Financial Officer   

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