UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTIONQuarterly report under Section 13 or 15(d) OF THE SECURITIES EX-
CHANGE ACT OFof the Securities Ex-
change Act of 1934
For the quarterly periodquarter ended JanuaryOctober 31, 2013
[ ] TRANSITION REPORT UNDER SECTIONTransition report under Section 13 or 15(d) OF THE SECURITIES EX-
CHANGE ACT OFof the Securities Ex-
change Act of 1934
For the transition period from ___________ to _______________________
Commission File Number: 000-05378
GEORGE RISK INDUSTRIES, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 84-0524756
(State of incorporation) (IRS Employers Identification No.)
802 South Elm St.
Kimball, NE 69145
(Address of principal executive offices) (Zip Code)
(308) 235-4645
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ X ] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of the Registrant's Common Stock outstanding, as of
March 15,December 13, 2013 was 5,035,525.5,031,925.
Transitional Small Business Disclosure Format: Yes [ X ] No [ ]
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited financial statements for the three and ninesix month period
ended JanuaryOctober 31, 2013, are attached hereto.
GEORGE RISK INDUSTRIES, INC.
BALANCE SHEETS
JanuaryOctober 31, April 30,
2013 20122013
------------ ------------
(unaudited)
ASSETS
Current AssetsAssets:
Cash and cash equivalents $ 4,566,0004,922,000 $ 5,773,000
Marketable4,859,000
Investments and securities (Note 2) 21,575,000 20,280,00023,012,000 22,208,000
Accounts receivable:
Trade, net of $2,155$7,399 and $5,789$4,126
doubtful account allowance 1,675,000 1,669,0001,901,000 1,915,000
Other 01,000 1,000
Note receivable, current 3,000 4,000 5,000
Income tax overpayment 161,000 0183,000 347,000
Inventories (Note 3) 2,316,000 2,351,0002,042,000 2,074,000
Prepaid expenses 70,000 141,000108,000 60,000
Deferred current income taxes 0 119,000837,000 635,000
------------ ------------
Total Current Assets $30,366,000 $30,338,000$33,010,000 $32,104,000
Property and Equipment, net, at cost $ 738,000 $ 771,000669,000 701,000
Other Assets
Investment in Limited Land Limited Partnership,
at cost 228,000 228,000238,000 238,000
Projects in process 37,00039,000 45,000
Note receivable 3,000 5,0000 2,000
Other 1,000 1,000
------------ ------------
Total Other Assets $ 268,000278,000 $ 278,000286,000
TOTAL ASSETS $31,372,000 $31,387,000$33,957,000 $33,091,000
============ ============
See accompanying notes to the condensed financial statements.
GEORGE RISK INDUSTRIES, INC.
BALANCE SHEETS
JanuaryOctober 31, April 30,
2013 20122013
------------ ------------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade $ 86,000141,000 $ 96,00068,000
Dividends payable 955,000 817,000
589,000
Accrued expensesexpenses:
Payroll and otherrelated expenses 315,000 212,000 Property taxes 3,000 0
Income tax payable 0 246,000
Deferred income taxes 211,000 0259,000
------------ ------------
Total Current Liabilities $ 1,432,0001,308,000 $ 1,143,0001,144,000
Long-Term Liabilities
Aircraft owership deposit payable 4,000 5,000
Deferred income taxes 108,000 124,00090,000 133,000
------------ ------------
Total Long-Term Liabilities $ 112,00090,000 $ 129,000133,000
Stockholders' Equity
Convertible preferred stock, 1,000,000
shares authorized, Series 1-noncumulative,
$20 stated value, 25,000 shares authorized,
4,100 issued and outstanding 99,000 99,000
Common stock, Class A, $.10 par value,
10,000,000 shares authorized, 8,502,8328,502,881
shares issued and outstanding 850,000 850,000
Additional paid-in capital 1,736,000 1,736,000
Accumulated other comprehensive income 726,000 278,000998,000 743,000
Retained earnings 29,903,000 30,603,00032,387,000 31,873,000
Treasury stock, 3,467,3563,470,906 and 3,460,2823,467,356
shares, at cost (3,486,000) (3,451,000)(3,511,000) (3,487,000)
------------ ------------
Total Stockholders' Equity $29,828,000 $30,115,000$32,559,000 $31,814,000
TOTAL LIABILITIESLIABILITES AND STOCKHOLDERS' EQUITY $31,372,000 $31,387,000$33,957,000 $33,091,000
============ ============
See the companying notes to the condensed financial statements.
GEORGE RISK INDUSTRIES, INC.
INCOME STATEMENTS
(unaudited)
Three months NineSix months Three months NineSix months
ended ended ended ended
JanuaryOctober 31, JanuaryOctober 31, JanuaryOctober 31, JanuaryOctober 31,
2013 2013 2012 2012
---------------------------------------------------
Net Sales $ 2,551,0002,920,000 $ 7,662,0005,590,000 $ 2,584,0002,569,000 $ 7,742,0005,111,000
Less: cost of goods sold (1,031,000) (3,676,000) (1,247,000) (3,801,000)(1,308,000) (2,592,000) (1,289,000) (2,645,000)
------------ ------------ ------------ ------------
Gross Profit $ 1,520,0001,612,000 $ 3,986,0002,998,000 $ 1,337,0001,280,000 $ 3,941,0002,466,000
Operating Expenses:
General and
administrative 200,000 616,000 181,000 590,000
Selling 443,000 1,302,000 411,000 1,173,000177,000 361,000 215,000 417,000
Sales 423,000 883,000 433,000 858,000
Engineering 20,000 58,000 14,000 43,00013,000 25,000 21,000 38,000
Rent paid to related
parties 5,000 10,000 11,000 34,000 11,000 34,00023,000
------------ ------------ ------------ ------------
Total Operating Expenses $ 674,000618,000 $ 2,010,0001,279,000 $ 617,000680,000 $ 1,840,0001,336,000
Income From Operations 846,000 1,976,000 720,000 2,101,000994,000 1,719,000 600,000 1.130,000
Other Income (Expense)
Other (2,000) 17,0000 2,000 6,000 18,00019,000
Dividend and interest
income 238,000 605,000 222,000 562,000141,000 307,000 163,000 366,000
Gain (loss) on
sale of
investments 57,000 0 (384,000) (104,000)121,000 139,000 94,000 (57,000)
Gain (loss) on sale
of assets 127,000 127,000 0 0 0 13,000
------------ ------------ ------------ ------------
$ 293,000389,000 $ 622,000575,000 $ (156,000)263,000 $ 489,000328,000
Income Before Provisions
for Income Tax 1,139,000 2,598,000 564,000 2,590,0001,383,000 2,294,000 863,000 1,458,000
Provisions for Income Tax
Current Expense 330,000 786,000 283,000 786,000expense (413,000) (698,000) (235,000) (456,000)
Deferred tax expense
(benefit) 19,000 (7,000) (155,000) 163,000benefit
(expense) 400,000 428,000 (35,000) 27,000
------------ ------------ ------------ ------------
Total Income Tax Expense 349,000 779,000 128,000 949,000$ (13,000) $ (270,000) $ (270,000) $ (429,000)
Net Income $ 790,0001,370,000 $ 1,819,0002,024,000 $ 436,000593,000 $ 1,641,0001,029,000
============ ============ ============ ============
Cash Dividends
Common Stock ($0.500.30
per share) 0 (2,519,000)$(1,510,000) $(1,510,000)
Common Stock ($0.220.28
per share) (1,108,000) 0
Common Stock ($0.23
per share) 0 (1,160,000)$(1,411,000) $(1,411,000)
Income Per Share of Common Stock (Note 5):Stock:
Basic $0.16 $0.36 $0.09 $0.33
Diluted $0.16 $0.36 $0.09 $0.32$0.27 $0.40 $0.12 $0.20
Assuming Dilution $0.27 $0.40 $0.12 $0.20
Weighted Average Number of
Common Shares Outstanding:
Basic 5,035,851 5,038,583 5,043,585 5,045,898
Diluted 5,056,351 5,059,083 5,064,085 5,066,3985,032,109 5,032,976 5,037,348 5,039,949
See the accompanying notes to the condensed financial statements.
GEORGE RISK INDUSTRIES, INC.
STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
Three months NineSix months Three months NineSix months
ended ended ended ended
JanuaryOctober 31, JanuaryOctober 31, JanuaryOctober 31, JanuaryOctober 31,
2013 2013 2012 2012
----------------------------------------------------
Net Income $ 790,0001,370,000 $ 1,819,0002,024,000 $ 436,000593,000 $ 1,641,0001,029,000
------------ ------------ ------------ ------------
Other Comprehensive Income, net of tax
Unrealized gain (loss) on securities:
Unrealized holding
gains (losses) arising
during period 488,000 340,000 377,000 (582,000)565,000 532,000 313,000 (142,000)
Reclassification adjustment
for (gains) losses (35,000) 429,000 313,000 327,000gains (losses) included
in net income (102,000) (94,000) (96,000) 458,000
Income tax expensebenefit (expense)
related to other comprehensivecom-
prehensive income (189,000) (322,000) (288,000) 106,000(194,000) (183,000) (91,000) (132,000)
------------ ------------ ------------ ------------
Other Comprehensive
Income $ 264,000269,000 $ 447,000255,000 $ 402,000126,000 $ (149,000)184,000
Comprehensive Income $ 1,054,0001,639,000 $ 2,266,0002,279,000 $ 838,000719,000 $ 1,492,0001,213,000
============ ============ ============ ============
See accompanying notes to the condensed financial statements.
GEORGE RISK INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
NineSix months NineSix months
ended ended
JanuaryOctober 31, JanuaryOctober 31,
2013 2012
-------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,819,0002,024,000 $ 1,641,0001,029,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 128,000 120,00076,000 86,000
(Gain) loss on sale of investments 0 104,000(139,000) 57,000
(Gain) loss on salesales of assets (127,000) 0 (13,000)
Reserve for bad debts 3,000 (4,000) 9,000
Reserve for obsolete inventory (1,000) 35,00040,000 (3,000)
Deferred income taxes (7,000) 163,000(428,000) (27,000)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (2,000) (127,000)11,000 14,000
Inventories 35,000 (315,000)(9,000) 95,000
Prepaid expenses 71,000 (7,000)(45,000) 92,000
Income tax overpayment (407,000)164,000 0
Increase (decrease) in:
Accounts payable (10,000) (69,000)73,000 23,000
Accrued expenses 106,000 63,000(46,000) 41,000
Income tax payable 0 104,000(20,000)
------------ ------------
Net cash provided by (used in) operating
activities $ 1,728,0001,597,000 $ 1,708,0001,383,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Other assets manufactured 8,000 189,0004,000 15,000
Proceeds from sale of assets 127,000 0 20,000
(Purchase) of property/property and equipment (95,000) (298,000)(45,000) (81,000)
Proceeds from sale of marketable securities 79,000 168,0002,000 78,000
(Purchase) of marketable securities (604,000) (748,000)
(Purchase) of long-term investment 0 (10,000)
(Loans) made to employees 0 (10,000)(229,000) (400,000)
Collections of loans to employees 3,000 5,0003,000
(Purchase) of treasury stock (36,000) (37,000)(24,000) (28,000)
------------ ------------
Net cash provided by (used in) investing
activities $ (645,000)(162,000) $ (721,000)(413,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (2,290,000) (1,055,000)(1,372,000) (1,283,000)
------------ ------------
Net cash provided by (used in) financing
activities $(2,290,000) $(1,055,000)$(1,372,000) $(1,283,000)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $(1,207,000) $ (68,000)63,000 $ (313,000)
Cash and cash equivalents, beginning of
period $ 5,773,0004,859,000 $ 5,254,0005,773,000
------------ ------------
Cash and cash equivalents, end of period $ 4,566,0004,922,000 $ 5,186,0005,460,000
============ ============
Supplemental Disclosure of Cash Flow
Information
Cash payments for:
Income taxes $ 1,207,000530,000 $ 680,000473,000
Interest expense 2,000$ 8,000 $ 0
Cash receipts for:
Income taxes 19,000$ 0 $ 0
See accompanying notes to the condensed financial statements.
GEORGE RISK INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARYOCTOBER 31, 2013
Note 1 Unaudited Interim Financial Statements
The accompanying unaudited financial statements have been prepared in accordance
with the instructions for Form 10-Q and do not include all of the information
and footnotes required by generally accepted accounting prin-
ciples in the United States of America (US GAAP)principles for completecom-
plete financial statements. TheseIt is suggested that these condensed financial
statements should be read in conjunction with the financial statements and notes
containedthereto included in the company'sCompany's April 30, 2013 annual report on Form 10-K for the year ended April 30, 2012.10-K.
In the opinion of manage-
ment,management, all adjustments, consisting only of normal recurringre-
curring adjustments con-
sideredconsidered necessary for a fair presentation, have been
included. Operating results for any quarter are not necessarily indicative
of the results for any other quarter or for the full year. We have evaluated subsequent events
through March 15, 2013, the issuance date of these financial statements. The
Company did not have any material, recognizable subsequent events.
Note 2 Marketable Securities
The Company has investments in publicly traded equity securities as well
as certain state and municipal debt securities. These securities are class-
ified as available-for-sale securities, and are reported at fair value.
Refer to Note 7, Fair Value Measurements, for additional information on the
fair value measurements for all assets and liabilities, including invest-
ments, that are measured at fair value in these financial statements. Avail-
able-for-sale investments in debt securities mature between AprilNovember 2013
and November 2048. The Company uses the average cost method to determine the
cost of securities sold and the amount reclassified out of accumulated other
comprehensive income into earnings. Unrealized gains and losses are excluded
from earnings and reported separately in the statement of comprehensive in-
come and as a component of stockholders'equity.stockholder's equity. Dividend and interest incomein-
come are accrued as earned.
As of JanuaryOctober 31, 2013, investments available-for-sale consisted of the
following:
Gross Gross
Cost Unrealized Unrealized Fair
Basis Gains Losses Value
------------ ------------ ------------ ------------
Municipal bonds $ 9,916,0006,666,000 $ 408,000122,000 $ (31,000) $10,293,000(73,000) $ 6,715,000
REITs $ 57,000 $ 3,000 $ (1,000) $ 59,000
Equity securities $12,413,000 $ 8,474,0001,780,000 $ 976,000 $ (106,000) $ 9,344,000(117,000) $14,076,000
Money markets and markets/CDs $ 1,938,0002,162,000 $ 0-- $ 0-- $ 1,938,0002,162,000
------------ ------------ ------------ ------------
Total $20,328,000$21,298,000 $ 1,384,0001,905,000 $ (137,000) $21,575,000(191,000) $23,012,000
In accordance with US GAAP, the Company evaluates all marketable
securities for other-than temporary declines in fair value, which are defined
as when the cost basis exceeds the fair value for approximately one year.
The Company also evaluates the nature of the investment, cause of impairment
and number of investments that are in an unrealized position. When an other-
than-temporary decline is identified, the Company will decrease the cost of
the marketable security to the new fair value and recognize a real loss. The
investments are periodically evaluated to determine if impairment changes are
required. As a result of this standard, management did not record any impairmentim-
pairment losses for the quarter ended JanuaryOctober 31, 2013, but did record im-
pairment losses of $20,000$18,000 for the ninesix months ended JanuaryOctober 31, 2013. AsLike-
wise, as for the corresponding periods last year, management recordeddid not record
any impairment losses for the quarter ended October 31, 2012, but did record
impairment losses of $5,000$20,000 for the quarter, while $71,000 of loss was recorded for the
ninesix months ended JanuaryOctober 31, 2012.
The following table shows the investments with gross unrealized losses
that are not deemed to be other-than-temporarily impaired, aggregated by
invest-
mentinvestment category and length of time that individual securities have been
in a continuous unrealized loss position, at JanuaryOctober 31, 2013.
Less than 12 months 12 months or greater Total
----------------------- --------------------- ---------------------
Fair Unrealized Fair Unrealized Fair Unrealized
Value Loss Value Loss Value Loss
...........................................................................
Municipal bonds
$1,403,000$2,762,000 $ (13,000)(49,000) $ 466,000511,000 $ (18,000) $1,869,000(23,000) $ (31,000)3,273,000 $ (72,000)
REITs
$ 27,000 $ (1,000) $ -- $ -- $ 27,000 $ (1,000)
Equity securities
$1,986,000 $ 712,000(88,000) $ (59,000)146,000 $ 388,000(30,000) $ (47,000) $1,100,0002,132,000 $ (106,000)(118,000)
----------- ------------ ----------- ---------- ------------ ------------
Total
$2,115,000$4,775,000 $ (72,000)(138,000) $ 854,000657,000 $ (65,000) $2,969,000(53,000) $ (137,000)5,432,000 $ (191,000)
Municipal Bonds
---------------
The unrealized losses on the Company's investments in municipal bonds were
caused by interest rate increases. The contractual terms of these invest-
ments do not permit the issuer to settle the securities at a price less than
the amortized cost of the investment. Because the Company has the ability to
hold these investments until a recovery of fair value, which may be maturity,
the Company does not consider these investments to be other-than-temporarily
impaired at JanuaryOctober 31, 2013.
Marketable Equity Securities
----------------------------
The Company's investments in marketable equity securities consist of a wide
variety of companies. Investments in these companies include growth, growth
income, and foreign investment objectives. The individualManagement has evaluated the in-
dividual holdings, have been
evaluated, and due to management's plan to hold onto these investments for an
extended period,because of the Companyrecent decline in the stock market,
does not consider these investments to be other-
than-temporarilyother-than-temporarily impaired at
JanuaryOctober 31, 2013.
Note 3 Inventories
At JanuaryOctober 31, 2013, inventories consisted of the following:
Raw materialsMaterials $ 1,673,0001,471,000
Work in process 518,000Process 455,000
Finished goods 290,000Goods 321,000
------------
2,481,000$ 2,247,000
Less: allowance for obsolete inventory (165,000)(205,000)
------------
TotalsNet Inventories $ 2,316,0002,042,000
============
Note 4 Business Segments
The following is financial information relating to industry
segments:
For the quarter ended
JanuaryOctober 31,
2013 2012
---------------------------
Net revenue:
Security alarm products 2,211,000 2,287,0002,494,000 2,246,000
Other products 340,000 297,000426,000 323,000
------------ ------------
Total net revenue $ 2,551,0002,920,000 $ 2,584,0002,569,000
Income from operations:
Security alarm products 730,000 637,000849,000 525,000
Other products 116,000 83,000145,000 75,000
------------ ------------
Total income from operations $ 846,000994,000 $ 720,000600,000
Identifiable assets:
Security alarm products 3,508,000 3,302,0003,690,000 3,400,000
Other products 1,163,000 1,213,000804,000 1,234,000
Corporate general 26,701,000 25,594,00029,463,000 26,688,000
------------ ------------
Total assets $31,372,000 $30,109,000$33,957,000 $31,322,000
Depreciation and amortization:
Security alarm products 6,0004,000 6,000
Other products 33,000 33,00029,000 34,000
Corporate general 5,000 4,000 5,000
------------ ------------
Total depreciation and amortization $ 43,00038,000 $ 44,000
Capital expenditures:
Security alarm products 0 03,000 11,000
Other products 2,000 96,00020,000 34,000
Corporate general 12,0000 0
------------ ------------
Total capital expenditures $ 14,00023,000 $ 96,00045,000
Note 5 Earnings per Share
Basic and diluted earning per share, assuming convertible preferred
stock was converted for each period presented, are:
For the three months ended JanuaryOctober 31, 2013
-------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $ 790,000$1,370,000
===========
Basic EPS $1,370,000 5,032,109 $ 790,000 5,035,851 $ 0.1570.27
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $1,370,000 5,052,609 $ 790,000 5,056,351 $ 0.1560.27
For the ninesix months ended JanuaryOctober 31, 2013
-------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $1,819,000$2,024,000
===========
Basic EPS $1,819,000 5,038,583$2,024,000 5,032,976 $ 0.3610.40
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $1,819,000 5,059,083$2,024,000 5,053,476 $ 0.3600.40
For the three months ended JanuaryOctober 31, 2012
---------------------------------------------------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $ 436,000593,000
===========
Basic EPS $ 436,000 5,043,585593,000 5,037,348 $ 0.0860.12
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $ 436,000 5,064,085593,000 5,057,848 $ 0.0860.12
For the ninesix months ended JanuaryOctober 31, 2012
---------------------------------------------------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $1,641,000$1,029,000
===========
Basic EPS $1,641,000 5,045,898$1,029,000 5,039,949 $ 0.3250.20
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $1,641,000 5,066,398$1,029,000 5,060,449 $ 0.3240.20
Note 6 Retirement Benefit Plan
On January 1, 1998, the Company adopted the George Risk Industries, Inc.
Retirement Savings Plan (the "Plan"). The Plan is a defined contribution
savings plan designed to provide retirement income to eligible employees of
the corporation. The Plan is intended to be qualified under Section 401(k)
of the Internal Revenue Code of 1986, as amended. Matching contributions by
the Company of approximately $2,000 were paid during the quarter ending
October 31, 2013 and $3,000 were paid during eachthe corresponding quarter ending
January 31, 2013 and 2012.the
prior fiscal year. Likewise, the Company paid matching contributions of
$9,000approximately $5,000 during the nine-month periodssix-month period ending JanuaryOctober 31, 2013 and
$6,000 during the six-month period ending October 31, 2012. There were no
discretionary contributions paid during either the quarters or nine-monthsix-month
periods ending JanuaryOctober 31, 2013 and 2012, respectively.
Note 7 Fair Value Measurements
Generally accepted accounting principles in the United States of America
(US GAAP) defines fair value as the price that would be received from selling
an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. When determining the fair value
measurements for assets and liabilities, which are required to be recorded at
fair value, we consider the principal or most advantageous market in which we
would transact and the market-based risk measurements or assumptions that
market participants would use in pricing the asset or liability, such as inherentin-
herent risk, transfer restrictions, and credit risk.
US GAAP establishes a fair value hierarchy that prioritizes the inputs
to valuation techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (level 1 measurements) and the lowest priority to un-
observable inputs (level 3 measurements). The levels of the fair value
hierarchy under US GAAP are described below:
Level 1 - Valuation is based upon quoted prices for identical in-
struments traded in active markets.
Level 2 - Valuation is based upon quoted prices for similar in-
struments in active markets, quoted prices for identical
or similar instruments in markets that are not active,
and model-based valuation techniques for which all sig-
nificant assumptions are observable in the market.
Level 3 - Valuation is generated from model-based techniques that
use significant assumptions not observable in the market.
These unobservable assumptions reflect our own estimates
of assumptions that market participants would use in
pricing the asset or liability. Valuation techniques
include use of option pricing models, discounted cash
flow models and similar techniques.
Investments and Marketable Securities
----------------------------------------------------------
As of JanuaryOctober 31, 2013, our investments consisted of money markets, publicly
traded equity securities as well as certain state and municipal debt
securities. Our marketable securities are valued using third-party broker
statements. The value of the majority of the securities is derived from quoted
market information. The inputs to the valuation are generally classified as
Level 1 given the active market for these securities, however, if an active
market does not exist, which is the case for municipal and coporate bonds,
the inputs are recorded asat Level 2.
Fair Value Hierarchy
--------------------
The following tables set forth our assets and liabilities measured at fair
value on a recurring basis and a non-recurring basis by level within the fair
value hierarchy. As required by US GAAP, assets and liabilities are
classified in their entirety based on the lowest level of input that is
significant to the fair value measurement.
Assets Measured at Fair Value on a Recurring Basis
as of JanuaryOctober 31, 2013
---------------------------------------------------
Level 1 Level 2 Level 3 Total
------- ------- ------- -------
Assets:
Money Markets and CDs $ 1,938,0002,162,000 $ 0-- $ 0-- $ 1,938,0002,162,000
Equity Securities $14,135,000 $ 9,344,000-- $ 0 $ 0 $ 9,344,000-- $14,135,000
Municipal and Corporate Bonds $ 0 $10,293,000-- $ 0 $10,293,0006,715,000 $ -- $ 6,715,000
------------ ------------ ---------- ------------
Total fair value of
assets measured on a
recurring basis $11,282,000 $10,293,000$16,297,000 $ 0 $21,575,0006,715,000 $ -- $23,012,000
============ ============ ========== ============
Note 8 Subsequent Events
On Wednesday, February 27, 2013, George Risk Industries, Inc. (the Company)
lost its President and Chairman of the Board, Ken Risk, to caner.
On March 5, 2013, the Company's Board of Directors elected Stephanie Risk-
McElroy, already a member of the Board of Directors and the Chief Financial
Officer, to serve a President and Chairman of the Board. Stephanie will con-
tinue to serve as the Chief Financial Officer. Bonnie Risk was also elected
to serve on the Board of Directors.None
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 2. Management Discussion and Analysis of Financial Condition and
Results of Operations
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
con-
densedcondensed consolidated financial statements, and with the George Risk
Industries' audited financial statements and discussion for the fiscal year
ended April 30, 2012.2013.
Liquidity and capital resources
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Operating
---------
Net cash decreased $1,207,000increased $63,000 for the ninesix months ended JanuaryOctober 31, 2013, while,
for the same period last year, net cash decreased $68,000.$313,000. Accounts receivable increased $2,000re-
ceivable decreased $11,000 for the current ninesix months and increased
$127,000decreased $14,000
for the same period last year. The slight increasedecrease in cash flow for accounts
receivable for the current period is a reflection of sales being at the same
level as last year. At JanuaryOctober 31, 2013, 71.09%74.3% of the receivables were consideredcon-
sidered current (less than 45 days) and 0.32%0.73% of the total were over 90 days
past due. ForThis is in comparison 64.93%to having 70.94% of the receivables werecon-
sidered current and 2.82% were past-0.06% over 90 days past due at JanuaryOctober 31, 2012. Inventories decreased $35,000In-
ventory increased $9,000 for the current ninesix months, andwhile it increased $315,000decreased
$95,000 for the same period last year. The current decreasemain reason for the slight in-
crease in cash expenditures towards inventory is due tothat sales being at approximately the
same level ashave increased
over last year and the prices of raw materials remaining fairly con-
stant.have increased also. Changes in
prepaid expenses in regards to cash flow increased $45,000 for the six
months ending October 31, 2013. Conversely, changes in prepaid expenses in
regards to cash flow decreased by $71,000 and increased by $7,000$92,000 for the nine-month periodssix-month ending JanuaryOctober
31, 2013 and 2012, respectively.2012. Prepayment of raw materials, in order to buy at lower prices, is
the main reason for the current increase in prepaid expenses. Income tax
overpayment increased $407,000decreased by $164,000 for the nine monthsquarter ending JanuaryOctober 31, 2013, while there was not an income tax
overpayment for the corresponding period last year.2013.
Management had to in-
crease incomehas increased tax estimates since the prior year taxes were underpaid.as a result of increased sales.
For the ninesix months ended JanuaryOctober 31, 2013, accounts payable decreased
$10,000,increased
$73,000, and decreased $69,000also increased $23,000 for the same period ended JanuaryOctober 31,
2012. The change in cash in regards to accounts payable can vary. It really
de-
pendsdepends on the time of the month the invoices are due, since the company pays
all its invoices within the terms. Accrued expenses increased $106,000decreased $46,000 for the ninesix
months ended JanuaryOctober 31, 2013, and these expenseswhile it increased $63,000by $41,000 for the corresponding nine monthssame
period last year. The current increasedecrease is a re-
sultdue to having four less days of
increased sales commissions and wages. There was not any income tax
payable for the nine months ended January 31, 2013, while there was a
$104,000 increase to income tax payable for the corresponding period last
year.payroll accruals.
Investing
---------
As for our investment activities, the Company has spent approximately $95,000$45,000
on acquisitions of property and equipment for the current nine-monthsix-month period
and $298,000$81,000 was spent during the ninesix months ended JanuaryOctober 31, 2012. The
Company has also received proceeds of $127,000 from the sale of assets. The
airplane that was owned by the Company was sold during the second quarter of
the current fiscal year. Additionally, the Company continues to purchase
marketable securities, which include municipal bonds and quality stocks.
Cash spent on purchases of mar-
ketablemarketable securities for the ninesix months ended
JanuaryOctober 31, 2013 was $604,000$229,000 and $748,000$400,000 was spent for the corresponding period last year. In addition,
proceeds from the sale of marketable securities for the nine months ended
January 31, 2013 were $79,000 and $168,000 for the same
period last year. We use "money manager" accounts for most stock transactions.trans-
actions. By doing this, the Company gives an independent third party firm,
who are experts in this field, permission to buy and sell stocks at will.
The Company pays a quarterly ser-
viceservice fee based on the value of the investments.invest-
ments. Furthermore, the Company continues to purchase back its common stock
when the opportunity arises. For the ninesix months ended JanuaryOctober 31, 2013, the
Company purchased $36,000$24,000 worth of treasury stock and $37,000$28,000 worth was
bought back for the ninesix months ended JanuaryOctober 31, 2012. We have been actively
searching for stockholders that have been "lost" over the years. The payment
of dividends over the last eightnine fiscal years has also prompted many stockholdersstock-
holders and/or their relatives and descendants to sell back their stock to
the Company. Also, we make purchases of company stock on the open market
when the opportunity arises.
Financing
---------
Cash flows from financing activities decreased by $2,290,000$1,372,000 for the ninesix
months ending JanuaryOctober 31, 2013. That figure consists of two dividend pay-
ments. First, the payment of
dividends during the second quarter. The company declared a dividend of
$0.28$0.30 per share of common stock on September 30, 20122013 and these dividends
were paid by October 31, 2012. Second, a special dividend of $0.22 was declared on December 16, 2012
and was paid by the end of December 2012.2013. As for the prior year numbers, net cash used
in financing activities was $1,055,000$1,283,000 for the ninesix months ending JanuaryOctober 31,
2012. A dividend of $0.23$0.28 per common share was also declared and paid during the
second fiscal quarter last year.
The following is a list of ratios to help analyze George Risk Industries'
performance:
For the quarter ended
JanuaryOctober 31,
2013 2012
---------------------------
Working capital
(current assets - current liabilities) $ 28,934,00031,702,000 $ 27,978,00028,980,000
Current ratio
(current assets / current liabilities) 21.205 27.32025.237 23.038
Quick ratio
((cash + investments+investments + AR) / current liabilities)
19.425 25.03622.810 21.278
Results of operationsOperations
~~~~~~~~~~~~~~~~~~~~~
Net sales were $2,551,00$2,920,000 for the quarter ended JanuaryOctober 31, 2013, which is a
1.28% decrease13.66% increase from the corresponding quarter last year. Year-to-date net
sales were $5,590,000 at JanuaryOctober 31, 2013, were $7,662,000, which is a 1.03% decrease9.37% increase from the
same period last year. The Company's products are tied to the housing market
and the consistency in sales is a result of the Company focusing on gaining
market share in the industry. The Company is accomplishing this by having
excellent customer service and being willing to make many customized parts.
Cost of goods sold was 40.42%44.79% of net sales for the quarter ended JanuaryOctober 31,
2013 and 48.26%50.17% for the same quarter last year. Year-to-date cost of goods
sold percentages were 47.98%46.37% for the current ninesix months and 49.1%51.75% for the
corresponding ninesix months last year. Management continuesManagement's goal is to keep labor and
other manufacturing expenses down and strives to stay inwithin the desired cost of
goods sold percentage range of 45 to 50%.
Operating expenses were 26.42%21.16% of net sales for the quarter ended JanuaryOctober 31,
2013 as compared to 23.88%26.47 % for the corresponding quarter last year. Year-to-
dateYear-
to-date operating expenses were 26.23%22.88% of net sales for the ninesix months ended
JanuaryOctober 31, 2013, while they were 23.77%26.14% for the same period last year.
Having relativelyKeeping operating expenses around 25% of net sales, as the same percentages for operating expensescompany has been
able to achieve over the years, shows that management haskeeps a good gripclose eye on
spending habits.these expenses from year to year. Income from operations for the quarter
ended JanuaryOctober 31, 2013 was at $846,000,$994,000, which is a 17.5%65.67% increase from the
corresponding quarter last year, which had income from operations of
$720,000.$600,000. Income from operations for the ninesix months ended JanuaryOctober 31, 2013
was at $1,976,000,$1,719,000, which is a 5.95% decrease52.12% increase from the corresponding ninesix
months last year, which had income from operations of $2,101,000.$1,130,000.
Other income and expenses showed gains of $293,000$389,000 and $622,000 for the quar-
ter and nine months ended January 31, 2013. The numbers for the correspond-
ing periods last year were a loss of $156,000$575,000 for the
quarter and a gainsix months ended October 31, 2013, respectively. The other in-
come and expense numbers for last year also showed gains of $489,000$263,000 for the
nine-monthsquarter and $328,000 for the six months ending JanuaryOctober 31, 2012. Dividend
and interest income was up 7.21%down 13.5% for the current quarter and was up 7.65%down
16.12% for the current nine-
monthsix-month period when comparingcompared to the same time
periods last year. During the current quarter, there was a $57,000$121,000 gain on
investments recorded and the
Company experienced neither a loss or gain for the current year to date
figures. There were no impairment write-downsrecorded. Management did not write down any investments during
the quarterquarters ending January 31, 2013, while there was a $5,000 write down of investments for the
same quarter last year. As for the nine months ended JanuaryOctober 31, 2013 and 2012, there were write-downs of $20,000 and $71,000, respectively.
Net income for the quarter ended JanuaryOctober 31, 2013 was $790,000, which is an
81.19%at $1,370,000, a
131.03% increase from the corresponding quarter last year, which showed a net
gainincome of $436,000.$593,000. Net income for the ninesix months ended JanuaryOctober 31, 2013 was
$1,819,000,$2,024,000, a 10.85%96.7% increase from the same period last year. Net income for
the ninesix months ended JanuaryOctober 31, 2012 was $1,641,000.$1,029,000. Earnings per common
share for the quarter ended JanuaryOctober 31, 2013 was $0.16were $0.27 per share and $0.36$0.40
per share for the year-to-date numbers. EPS for the quarter and ninesix months
ended JanuaryOctober 31, 2012 was $0.09were $0.12 per share and $0.33$0.20 per share,
respectively.
New product informationProduct Development
~~~~~~~~~~~~~~~~~~~~~~~
Engineering is currently working on the following products:
The High Security Switch is in final stages of testing prototypes. These
will have go through UL and possibly Department of Defense approval to get
clearance for certain applications.
Due to the obsolescence of parts, our pool alarm will have to be redesigned.
This will require a mold change and we expect these changes to be completed
by the end of the fiscal year.
A brand new product we have been researching is a product we plan to call a
Sprinkler Controller. This is a ground water sensor that can be installed
with a sprinkler system. The controller will monitor the amount of water in
the soil and prevent the sprinkler system from watering if the soil is moist
enough.
Other products we are developing include a twist lock for recessed steel door
contacts, including biased for high security. This variety will allow the
installer to set a precise gap. Another product we have been researching is
a fuel level monitor is in the engineering stage.monitor. Several security companies from around the world have
told us fuel theft is a major problem. They are looking for a productsomething that
will tie into the security system to be informed if tanks orand trucks are
tampered with.
Other products in engineering includeMolding is working on a twist lockdifferent design for receded steel door
contacts including biased for high security.the case of our Current Con-
troller (CC-15). This will allow the installerus to setmanufacture a precise gap. We are also continuing workcouple of different
versions. One is a 15-amp version that can automatically turn on a wireless pool alarmwhole
room of lights and contact switch,the other is a sprinkler controller, and220-volt version for international markets.
Molding is also working on a triple biased high securitynew cover design for our 29-series terminal
switch.
Recently issued accounting pronouncementsIssued Accounting Pronouncements
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
There are no new accounting pronouncements that significantly affect the
Company.
Other Information
~~~~~~~~~~~~~~~~~
Management is always open to the possibility to acquire a business that would
complement our existing operations. This would require no outside financing.
The intent is to utilize the equipment, marketing techniques and established
customers to increase sales and profits.
There are no known seasonal trends with any of our products, since we sell to
distributors and OEM manufacturers. The products are tied to the housing
industry and will fluctuate with building trends.
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 3. Controls and Procedures
(a) Information required by Item 307
Our Chief Executive Officer (also working as our Chief Financial Officer),
after evaluating the effectiveness of the Company's "disclosure controls and
procedures" (as defined in the Securities Exchange Act of 1934 (Exchange Act)
Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this
quarterly report, has concluded that our disclosure controls and procedures
are effective based on their evaluation of these controls and procedures re-
quired by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.
(b) Information required by Item 308
This disclosure is not yet required.
Item 3A. Controls and Procedures
Evaluation of disclosure controls and procedures:
-------------------------------------------------
Based on her evaluation of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of JanuaryOctober 31,
2013, our president and chief executive officer (also working as our chief
financial officer) has concluded that our disclosure controls and procedures
are effective such that information required to be disclosed by us in the
re-
portsreports that we file or submit under the Exchange Act is (i) recorded,
pro-
cessed,processed, summarized and reported within the time periods specified in the
Sec-
uritiesSecurities and Exchange Commission's rules and (ii) accumulated and
communicated to our management, including our chief executive officer, as
appropriate to allow timely decisions regarding disclosure. A control system
cannot provide absolute assurance, however, that the objectives of the controlcon-
trol systems are met, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within a
company have been de-
tected.
Changes in internal controlsdetected.
Internal control over financial reporting:
------------------------------------------------------
There was no change in our internal controls over financial reporting that
occurred during the period covered by this report, that has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.
Management's Annual Report on Internal Control over Financial Reporting:
------------------------------------------------------------------------
Our------------------------------------------
The Company's management is responsible for establishing and maintaining
adequate in-
ternal controlinternal controls over financial reporting as such term is defined in Rules
13a-15(f) and 15d-15(f) offor the Exchange Act. Our internal control system was
designedCompany. Due to
provide reasonable assurance regarding the reliability of finan-
cial reporting and the preparation of financial statements for external pur-
poses, in accordance with generally accepted accounting principles. Because
of inherent limitations, a system of internal control over financial re-
porting may not prevent or detect misstatements. Therefore, even those
systems determined to be effective can provide no reasonable assurance of
achieving their control objectives. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may
become inadequate due to change in conditions, or that the degree of com-
pliance with the policies or procedures may deteriorate.
Our management, including our principal executive officer (and acting as our
principal accounting officer),limited resources, Management conducted an evaluation of the effectiveness
of our internal control over financial reporting using thecontrols
based on criteria set forthestablished in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework. Based on itsCom-
mission ("COSO"). The results of this evaluation determined that our management concluded thatinter-
nal control over financial reporting was ineffective as of JanuaryOctober 31, 2013,
ourdue to a material weakness. A material weakness in internal control over
financial reporting is effective.defined as a deficiency, or a combination of de-
ficiencies, in internal control over financial reporting, such that there is
a reasonable possibility that a material misstatement of the Company's annual
or interim financial statements will not be prevented or detected on a timely
basis. A significant deficiency is a deficiency, or a combination of de-
ficiencies, in internal control over financial reporting that is less severe
than a material weakness, yet important enough to merit attention by those
responsible for oversight of our financial reporting.
Management's assessment identified the following material weakness in in-
ternal control over financial reporting:
* The small size of our Company limits our ability to achieve the
desired level of separation of internal controls and financial re-
porting, particularly as it relates to financial reporting and de-
ferred taxes. Due to the passing of our CEO, the current CEO and CFO
roles are being fulfilled by the same individual. We do not have an
audit committee. Until such time as the Company is able to hire a
Controller, we do not believe we meet the full requirement for
separation for financial reporting purposes.
As a result of the material weakness in internal control over financial re-
porting described above, the Company's management has concluded that, as of
October 31, 2013, the Company's internal control over financial reporting was
not effective based on the criteria in Internal Control - Integrated Frame-
work issued by the COSO.
To date, the Company has not been able hire a controller. We will continue
to follow the standards for the Public Company Accounting Oversight Board
(United States) for internal control over financial reporting to include
procedures that:
* Pertain to the maintenance of records in reasonable detail accurately
that fairly reflect the transactions and dispositions of the Company's
assets;
* Provide reasonable assurance that transactions are recorded as ne-
cessary to permit preparation of the financial statements in accord-
ance with generally accepted accounting principles, and that receipts
and expenditures are being made only in accordance with authorizations
of management and the Board of Directors; and
* Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the Company's
assets that could have a material effect on the financial statements.
Due to the passing of the CEO during the fiscal year 2013, our internal con-
trol structure has changed such that there is no separation of duties for
financial reporting and deferred taxes, as discussed above.
This quarterly report does not include an attestation report of the Corpor-
ation's registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by
the Corporation's registered public accounting firm pursuant to Section
404(c) of the Sarbanes-Oxley Act of 2002, as amended, that permits the Cor-
poration to provide only the management'smanagement?s report in this quarterly report.
GEORGE RISK INDUSTRIES, INC.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information relating to the Company's
repurchase of common stock for the thirdsecond quarter of fiscal year 2012.2013.
Period Number of shares repurchased
-------------------------------------- ----------------------------
November 1, 2012 - November 30, 2012 1,500
December 1, 2012 - December 31, 2012 0
JanuaryAugust 1, 2013 - JanuaryAugust 31, 2013 01,400
September 1, 2013 - September 30, 2013 200
October 1, 2013 - October 31, 2013 100
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Securities(Removed and Reserved)
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibit No. Description
----------- -----------
31.1 Certification of the Chief Executive Officer (Principal
Financial and AccoutingAccounting Officer), as required by SectionSec-
tion 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the Chief Executive Officer (Principal
Financial and Accounting Officer), as required by SectionSec-
tion 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
George Risk Industries, Inc.
(Registrant)
Date 03-15-201312-13-2013 By: /s/ Stephanie M. Risk-McElroy
Stephanie M. Risk-McElroy
President, Chief Financial Officer and
ChairmanChariman of the Board