DEAR FELLOW SHAREHOLDERS:

Over the last decade, we have reinvented our Company to take advantage of emerging trends and opportunities. Today Servidyne is a provider of comprehensive energy efficiency, demand response and other related programs, products and services. I am pleased to report that fiscal 2010 was another year of progress and achievement for your Company.

Revenues from continuing operations in fiscal 2010 were approximately $21 million, 31% above the levels of fiscal 2009. Our core Building Performance Efficiency (BPE) Segment generated 87% of these revenues by providing energy efficiency and other related programs, products and services that helped our customers optimize the operational and financial performance of their existing buildings. Order activity from customers in both the private sector and the government sector strengthened throughout the year, including our largest energy services contract to date. As a result, the BPE Segment’s order backlog at year-end exceeded $15 million, representing an increase of 55% over last year.

We see significant opportunities for long-term growth through the addition of new products and services that leverage our expertise and technologies to enable multiple buildings to achieve high levels of energy efficiency and reduce total peak demand for electricity. To that end, this year we launched Fifth Fuel Management™, a new demand response (DR) product offering designed to provide technology-enabled real-time DR capabilities to complex buildings, such as large hotels and resorts, office buildings, retail stores, medical facilities, industrial plants and distribution centers. We believe that Fifth Fuel Management can be a scalable source of recurring revenues, and can allow us to leverage our established customer base of building owners and operators to help utilities gain better use of their existing energy generating facilities and infrastructures. We believe the market for energy efficiency and demand response products and services is large and growing.

We have assembled a team of highly skilled employee professionals led by talented, dedicated and innovative executives to help guide your Company in the years ahead. Thanks to their collective efforts, Servidyne was awarded the 2010 ENERGY STAR^® Sustained Excellence Award by the U.S. Environmental Protection Agency, in recognition of the Company’s continuing leadership in protecting the environment through energy efficiency. This is the eighth time Servidyne has been honored as an ENERGY STAR Partner of the Year and the fourth time we have received the prestigious Sustained Excellence Award, unprecedented achievements for a third party service and product provider, and a wonderful public recognition of our ongoing commitment to help our customers cut their buildings’ utility costs and shrink their carbon footprints.

Recently, Todd Jarvis became our Company’s new president and chief operating officer, a well deserved promotion. Todd joined Servidyne in 2004 when we acquired The Wheatstone Energy Group, a company he co-founded, and he has led the BPE Segment since its inception in 2006. Todd has been instrumental in helping us reposition the Company for accelerating growth, and he continues to have a creative and constructive impact on our business prospects.

As we enter our 86th year, we remain dedicated to our plan and excited about our future, despite the current uncertain economic conditions. We thank our customers for entrusting us with their business, and we thank you, our owners, for your continuing confidence and support.

Sincerely,

Alan R. Abrams
Chairman of the Board,
Chief Executive Officer