UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

(Mark One)

 

[X]Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarter ended OctoberJuly 31, 20172018

 

[  ]Transition report under Section 13 or 15(d) of the Securities Exchange 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)

 

CheckIndicate by check mark whether the issuerregistrant (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 ] [X]No [  ]

 

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

Yes [  ]  No [ X ]]No [X]

 

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

 

Large accelerated filer [  ]Accelerated filer [  ]
Non-accelerated filer [  ]Smaller reporting company [ X ][X]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes [  ] No [ X ][X]

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

The number of shares of the Registrant’s Common Stock outstanding, as of December 19, 2017September 14, 2018 was 3,533,834.4,962,447.

 

Transitional Small Business Disclosure Format:Yes [ X ] [X]No [  ]

 

 

 

 
 

 

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ITEM 1:Financial Statements

 

The unaudited financial statements for the three and six-monththree-month period ended OctoberJuly 31, 2017,2018, are attached hereto.

GEORGE RISK INDUSTRIES, INC.George Risk Industries, Inc.

CONDENSED BALANCE SHEETSCondensed Balance Sheets

 

  October 31, 2017  April 30, 2017 
  (unaudited)    
       
ASSETS        
         
Current Assets:        
Cash and cash equivalents $6,324,000  $6,456,000 
Investments and securities  25,897,000   26,382,000 
Accounts receivable:        
Trade, net of $2,425 and $2,425 doubtful account allowance  2,212,000   1,848,000 
Other  —   3,000 
Income tax overpayment  127,000   253,000 
Inventories, net  3,593,000   2,304,000 
Prepaid expenses  254,000   193,000 
Total Current Assets $38,407,000  $37,439,000 
         
Property and Equipment, net, at cost  979,000   739,000 
         
Other Assets        
Investment in Limited Land Partnership, at cost  273,000   273,000 
Projects in process  1,000   13,000 
Other  77,000   — 
Total Other Assets $351,000  $286,000 
         
Intangible Assets, net  1,824,000   — 
         
TOTAL ASSETS $41,561,000  $38,464,000 

See accompanying notes to the condensed financial statements.

GEORGE RISK INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

  October 31, 2017  April 30, 2017 
  (unaudited)    
       
LIABILITIES AND STOCKHOLDERS’ EQUITY        
         
Current Liabilities        
Accounts payable, trade $166,000  $69,000 
Asset acquisition payable  2,000,000   — 
Dividends payable  1,580,000   1,416,000 
Accrued expenses:        
Deferred income taxes  275,000   308,000 
Total Current Liabilities $4,021,000  $1,793,000 
         
Long-Term Liabilities        
Deferred income taxes  1,408,000   906,000 
Total Long-Term Liabilities $1,408,000  $906,000 
         
Commitments and Contingencies  —   — 
         
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, 8,502,881 shares issued and outstanding  850,000   850,000 
Additional paid-in capital  1,933,000   1,736,000 
Accumulated other comprehensive income  1,949,000   1,239,000 
Retained earnings  35,441,000   35,981,000 
Less: treasury stock, 3,533,834 and 3,557,606 shares, at cost  (4,140,000)  (4,140,000)
Total Stockholders’ Equity $36,132,000  $35,765,000 
         
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $41,561,000  $38,464,000 
  July 31, 2018  April 30, 2018 
  (unaudited)    
ASSETS        
Current Assets:        
Cash and cash equivalents $4,947,000  $4,294,000 
Investments and securities, at fair value  27,161,000   26,346,000 
Accounts receivable:        
Trade, net of $10,075 and $6,651 doubtful account allowance  2,308,000   2,545,000 
Other  1,000   2,000 
Income tax overpayment  504,000   747,000 
Inventories, net  3,650,000   3,267,000 
Prepaid expenses  401,000   603,000 
Total Current Assets  38,972,000   37,804,000 
         
Property and Equipment, net, at cost  1,024,000   1,076,000 
         
Other Assets        
Investment in Limited Land Partnership, at cost  293,000   293,000 
Other  41,000   6,000 
Total Other Assets  334,000   299,000 
         
Intangible assets, net  1,732,000   1,763,000 
         
TOTAL ASSETS $42,062,000  $40,942,000 

 

See accompanying notes to the condensed financial statements

GEORGE RISK INDUSTRIES, INC.George Risk Industries, Inc.

CONDENSED INCOME STATEMENTS (Unaudited)Condensed Balance Sheets

(continued)

 

  Three months  Six months  Three months  Six months 
  ended  ended  ended  ended 
  Oct 31, 2017  Oct 31, 2017  Oct 31, 2016  Oct 31, 2016 
Net Sales $3,089,000  $5,337,000  $2,883,000  $5,549,000 
Less: Cost of Goods Sold  (1,416,000)  (2,511,000)  (1,284,000)  (2,670,000)
Gross Profit $1,673,000  $2,826,000  $1,599,000  $2,879,000 
                 
Operating Expenses                
General and Administrative  290,000   519,000   230,000   441,000 
Sales  443,000   859,000   487,000   971,000 
Engineering  35,000   48,000   24,000   42,000 
Rent Paid to Related Parties  4,000   9,000   4,000   9,000 
Total Operating Expenses $772,000  $1,435,000  $745,000  $1,463,000 
                 
Income From Operations  901,000   1,391,000   854,000   1,416,000 
                 
Other Income (Expense)                
Other  1,000   3,000   7,000   10,000 
Dividend and Interest Income  155,000   434,000   126,000   318,000 
Gain (Loss) on Investments  9,000   (28,000)  38,000   85,000 
Gain (Loss) on Sale of Assets  —   4,000   —   — 
  $165,000  $413,000  $171,000  $413,000 
                 
Income Before Provisions for Income Taxes  1,066,000   1,804,000   1,025,000   1,829,000 
                 
Provisions for Income Taxes:                
Current Expense  (360,000)  (572,000)  (325,000)  (583,000)
Deferred Tax Benefit (Expense)  16,000   8,000   (8,000)  13,000 
Total Income Tax Expense $(344,000) $(564,000) $(333,000) $(570,000)
                 
Net Income $722,000  $1,240,000  $692,000  $1,259,000 
                 
Cash Dividends                
Common Stock ($0.36 per share) $1,780,000  $1,780,000         
Common Stock ($0.35 per share)         $1,758,000  $1,758,000 
                 
Income Per Share of Common Stock                
Basic $0.15  $0.25  $0.14  $0.25 
Diluted $0.15  $0.25  $0.14  $0.25 
                 
Weighted Average Number of Common Shares Outstanding                
Basic  4,953,070   4,949,081   5,021,660   5,021,701 
Diluted  4,973,570   4,969,581   5,042,160   5,042,201 
  July 31, 2018  April 30, 2018 
  (unaudited)    
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current Liabilities        
Accounts payable, trade $329,000  $336,000 
Dividends payable  1,579,000   1,580,000 
Accrued expenses:        
Payroll and related expenses  166,000   329,000 
Property taxes  3,000   12,000 
Total Current Liabilities  2,077,000   2,257,000 
         
Long-Term Liabilities        
Deferred income taxes  1,179,000   955,000 
Total Long-Term Liabilities  1,179,000   955,000 
         
Commitments and contingencies  —   — 
         
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, 8,502,881 shares issued and outstanding  850,000   850,000 
Additional paid-in capital  1,934,000   1,934,000 
Accumulated other comprehensive income  2,712,000   2,249,000 
Retained earnings  37,364,000   36,746,000 
Less: treasury stock, 3,535,434 and 3,534,784 shares, at cost  (4,153,000)  (4,148,000)
Total Stockholders’ Equity  38,806,000   37,730,000 
         
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $42,062,000  $40,942,000 

 

See accompanying notes to the condensed financial statements

GEORGE RISK INDUSTRIES, INC.George Risk Industries, Inc.

CONDENSED STATEMENT OF COMPREHENSIVE INCOME Condensed Income Statements

For the three months ended July 31, 2018 and 2017

(Unaudited)

 

  Three months  Six months  Three months  Six months 
  ended  ended  ended  ended 
  Oct 31, 2017  Oct 31, 2017  Oct 31, 2016  Oct 31, 2016 
             
Net Income $722,000  $1,240,000  $692,000  $1,259,000 
                 
Other Comprehensive Income, net of tax                
Unrealized gain (loss) on securities:                
Unrealized holding gains (losses) arising during period  709,000   1,338,000   (376,000)  168,000 
Reclassification adjustment for gains (losses) included in net income  (32,000)  (117,000)  (7,000)  (25,000)
Income tax benefit (expense) related  to other comprehensive income  (283,000)  (510,000)  160,000   (60,000)
                 
Other Comprehensive Income $394,000  $711,000  $(223,000) $83,000 
Comprehensive Income $1,116,000  $1,951,000  $469,000  $1,342,000 
  July 31, 2018  July 31, 2017 
       
Net Sales $3,429,000  $2,248,000 
Less: Cost of Goods Sold  (1,801,000)  (1,095,000)
Gross Profit  1,628,000   1,153,000 
         
Operating Expenses:        
General and Administrative  286,000   229,000 
Sales  555,000   416,000 
Engineering  9,000   13,000 
Rent Paid to Related Parties  5,000   5,000 
Total Operating Expenses  855,000   663,000 
         
Income From Operations  773,000   490,000 
         
Other Income (Expense)        
Other  3,000   3,000 
Dividend and Interest Income  193,000   279,000 
Gain (Loss) on Sales of Assets  —   4,000 
Gain (Loss) on Sale of Investments  (68,000)  (38,000)
   128,000   248,000 
         
Income Before Provisions for Income Taxes  901,000   738,000 
         
Provisions for Income Taxes        
Current Expense  247,000   213,000 
Deferred tax expense (benefit)  37,000   7,000 
Total Income Tax Expense  284,000   220,000 
         
Net Income $617,000  $518,000 
         
Basic Earnings Per Share of Common Stock $0.12  $0.10 
Diluted Earnings Per Share of Common Stock $0.12  $0.10 
         
Weighted Average Number of Common Shares Outstanding  4,967,580   4,945,092 
Weighted Average Number of Shares Outstanding (Diluted)  4,988,080   4,965,592 

 

See accompanying notes to the condensed financial statements

GEORGE RISK INDUSTRIES, INC.George Risk Industries, Inc.

CONDENSED STATEMENT OF CASH FLOWS Condensed Statements of Comprehensive Income

For the three months ended July 31, 2018 and 2017

(Unaudited)

 

  July 31, 2018  July 31, 2017 
       
Net Income $617,000  $518,000 
         
Other Comprehensive Income, Net of Tax        
Unrealized gain (loss) on securities:        
Unrealized holding gains (losses) arising during period  607,000   629,000 
Reclassification adjustment for gains (losses) included in net income  44,000   (84,000)
Income tax expense related to other comprehensive income  (188,000)  (228,000)
Other Comprehensive Income (Loss)  463,000   317,000 
         
Comprehensive Income $1,080,000  $835,000 

  Six months  Six months 
  ended  ended 
  Oct 31, 2017  Oct 31, 2016 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net Income $1,240,000  $1,259,000 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  86,000   91,000 
(Gain) loss on sale of investments  6,000   (98,000)
Impairments on investments  23,000   13,000 
Reserve for obsolete inventory  —   15,000 
Deferred income taxes  (9,000)  (13,000)
(Gain) loss on sale of assets  (4,000)  — 
Treasury stock issued  200,000   — 
Changes in assets and liabilities:        
(Increase) decrease in:        
Accounts receivable  (364,000)  53,000 
Inventories  (1,290,000)   286,000 
Prepaid expenses  (139,000)  12,000 
Other receivables  3,000   — 
Income tax overpayment  127,000   (2,000)
Increase (decrease) in:        
Accounts payable  98,000   97,000 
Accrued expenses  (33,000)  (16,000)
Asset acquisition payable  2,000,000   — 
Net cash provided by (used in) operating activities $1,944,000  $1,697,000 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Proceeds from sale of assets  4,000   — 
(Purchase) of property and equipment  (314,000)  (70,000)
Proceeds from sale of marketable securities  2,002,000   37,000 
(Purchase) of marketable securities  (324,000)  (373,000)
(Purchase) of intangible assets  (1,824,000)  — 
(Purchase) of long-term investment  —   (20,000)
Net cash provided by (used in) investing activities $(456,000) $(426,000)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
(Purchase) of treasury stock  (3,000)  (1,000)
Dividends paid  (1,617,000)  (1,596,000)
Net cash provided by (used in) financing activities $(1,620,000) $(1,597,000)
         
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $(132,000) $(326,000)
         
Cash and Cash Equivalents, beginning of period $6,456,000  $5,918,000 
Cash and Cash Equivalents, end of period $6,324,000  $5,592,000 
         
Supplemental Disclosure for Cash Flow Information:        
Cash payments for:        
Income taxes $440,000  $706,000 
Interest paid $0  $0 
Cash receipts for:        
Income taxes $0  $0 
         
Supplemental Disclosure of Noncash Investing and Financing Activities:        
Issuance of treasury stock as part of asset acquisition $     200,000   0 

See accompanying notes to the condensed financial statements

George Risk Industries, Inc.

Condensed Statements of Cash Flows

For the three months ended July 31, 2018 and 2017

(Unaudited)

  July 31, 2018  July 31, 2017 
Cash Flows from Operating Activities:        
Net Income $617,000  $518,000 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  83,000   41,000 
(Gain) loss on sale of investments  68,000   38,000 
Reserve for bad debts  3,000   — 
Reserve for obsolete inventory  6,000   — 
Deferred income taxes  37,000   7,000 
(Gain) loss on sale of assets  —   (4,000)
Changes in assets and liabilities:        
(Increase) decrease in:        
Accounts receivable  234,000   257,000 
Inventories  (389,000)  (62,000)
Prepaid expenses  166,000   63,000 
Employee receivables  —   1,000 
Income tax overpayment  244,000   208,000 
Increase (decrease) in:        
Accounts payable  (7,000)  112,000 
Accrued expenses  (172,000)  (163,000)
Net cash provided by (used in) operating activities $890,000  $1,016,000 
         
Cash Flows From Investing Activities:        
Proceeds from sale of assets  —   4,000 
(Purchase) of property and equipment  —   (253,000)
Proceeds from sale of marketable securities  2,000   2,000 
(Purchase) of marketable securities  (233,000)  (224,000)
Net cash provided by (used in) investing activities $(231,000) $(471,000)
         
Cash Flows From Financing Activities:        
(Purchase) of treasury stock  (5,000)  (3,000)
Dividends paid  (1,000)  — 
Net cash provided by (used in) financing activities $(6,000) $(3,000)
         
Net Increase (Decrease) in Cash and Cash Equivalents $653,000  $542,000 
         
Cash and Cash Equivalents, beginning of period $4,294,000  $6,456,000 
Cash and Cash Equivalents, end of period $4,947,000  $6,998,000 
         
Supplemental Disclosure for Cash Flow Information:        
Cash payments for:        
Income taxes paid $0  $0 
Interest paid $1,000  $0 

 

See accompanying notes to the condensed financial statements

GEORGE RISK INDUSTRIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

OCTOBERJULY 31, 20172018

 

Note 11: Unaudited Interim Financial Statements

 

The accompanying 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 principles for complete financial statements. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s April 30, 20172018 annual report on Form 10-K. In the opinion of management, all adjustments, consisting only of normal recurring adjustments considered 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.

 

Accounting Estimates—The preparation of these financial statements requires the use of estimates and assumptions including the carrying value of assets. The estimates and assumptions result in approximate rather than exact amounts.

 

Recently Issued Accounting Pronouncements —In May 2014, the FASBFinancial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, Revenue“Revenue from Contracts with Customers. The objectiveCustomers (Topic 606)” (“ASU 2014-09”), which requires an entity to recognize revenue to depict the transfer of this update ispromised goods or services to provide a robust frameworkcustomers in an amount that reflects the consideration to which it expects to be entitled in exchange for addressingthose goods or services. In addition, ASU No. 2014-09 requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU No. 2014-09 supersedes most existing U.S. GAAP revenue recognition issuesprinciples, and upon its effective date, replaces almost all existing revenue recognition guidance. This updateit permits the use of either the retrospective or cumulative effect transition method. ASU No. 2014-09 is effective infor annual reporting periods beginning after December 15, 2017, and theincluding interim periods within that year.those annual periods. The Company is evaluatinghas adopted ASU No. 2014-09 in the impactfirst quarter of this updatefiscal 2019, which does not have a material impact on the Company’s financial statements.statements and related disclosures.

 

In February of 2016, the FASB issued ASU 2016-02,Leases “Leases (Topic 842)” (“ASU 2016-02”), which provides guidance for accounting for leases. ASU 2016-02 requires lessees to classify leases as either finance or operating leases and to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of the lease classification. The lease classification will determine whether the lease expense is recognized based on an effective interest rate method or on a straight-line basis over the term of the lease. Accounting for lessors remains largely unchanged from current GAAP. ASU 2016-02 is effective for the Company beginning November 1, 2019. Early adoption is permitted. In July 2018, the FASB issued ASU No. 2018-10 “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”) and ASU No. 2018-11 “Leases (Topic 842) Targeted Improvements” (“ASU 2018-11”). ASU 2018-10 provides certain amendments that affect narrow aspects of the guidance issued in ASU 2016-02. ASU 2018-11 allows all entities adopting ASU 2016-02 to choose an additional (and optional) transition method of adoption, under which an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2018-11 also allows lessors to not separate non-lease components from the associated lease component if certain conditions are met. The Company will adopt the ASUs in the first quarter of 2019 and the Company’s accounting systems will be upgraded to comply with the requirements of the new standard, however, the adoption of ASU 2016-02 will not have a material impact on the Company’s financial statements and related disclosures.

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). Under existing U.S. GAAP, the neweffects of changes in tax rates and laws on deferred tax balances are recorded as a component of income tax expense in the period in which the law was enacted. When deferred tax balances related to items originally recorded in accumulated other comprehensive income (loss) are adjusted, certain tax effects become stranded in accumulated other comprehensive income. The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive income (loss) to retained earnings (accumulated deficit) for stranded income tax effects resulting from the Tax Cuts and Jobs Act (the Tax Act). The amendments in this ASU also require certain disclosures about stranded income tax effects. The guidance lessees will be required to recognize so-called right-of-use assets and liabilities for most leases having lease terms of 12 months or more. This update is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption in any period is permitted. The Company has not yet adopted ASU 2018-02 and is currently evaluating the potential impact of adopting the applicable guidance on the Company’s financial statements and related disclosures.

In July 2018, the FASB issued ASU No. 2018-09, “Codification Improvements” (“ASU 2018-09”). ASU 2018-09 provides amendments to a wide variety of topics in the FASB’s Accounting Standards Codification, which applies to all reporting entities within the scope of the affected accounting guidance. The transition and effective date guidance are based on the facts and circumstances of each amendment. Some of the amendments in ASU 2018-09 do not require transition guidance and were effective upon issuance of ASU 2018-09. However, many of the amendments do have transition guidance with effective dates for annual reporting periods beginning after December 31, 2019 and the interim periods starting thereafter. The Company is15, 2018. We are currently evaluating the potential impact of this updateadopting the applicable guidance, however we do not believe that the adoption of ASU 2018-09 will have a material impact on the Company’s financial statements.statements and related disclosures.

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements on fair value measurements. The updated guidance if effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently assessing the timing and impact of adopting the updated provisions.

Note 22: Investments

 

The Company has investments in publicly traded equity securities, corporate bonds, state and municipal debt securities, real estate investment trusts, and money markets funds.markets. The investments in securities are classified as available-for-sale securities, and are reported at fair value. Available-for-sale investments in debt securities mature between December 2017August 2018 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 as a component of stockholders’ equity. Dividend and interest income are reported as earned.

As of OctoberJuly 31, 20172018 and April 30, 2017,2018, investments consisted of the following:

 

   Gross Gross      Gross Gross   
Investments at Cost Unrealized Unrealized Fair  Cost Unrealized Unrealized Fair 
October 31, 2017 Basis Gains Losses Value 
July 31, 2018 Basis Gains Losses Value 
Municipal bonds $6,060,000  $111,000  $(218,000) $5,953,000  $5,917,000  $65,000  $(99,000) $5,883,000 
Corporate bonds $129,000  $2,000  $-  $131,000  $30,000  $1,000  $-  $31,000 
REITs $110,000  $2,000  $(5,000) $107,000  $110,000  $11,000  $(3,000) $118,000 
Equity securities $15,474,000  $3,700,000  $(243,000) $18,931,000  $16,103,000  $4,105,000  $(270,000) $19,938,000 
Money markets and CDs $775,000  $-  $-  $775,000  $1,191,000  $-  $-  $1,191,000 
Total $22,548,000  $3,815,000  $(466,000) $25,897,000  $23,351,000  $4,182,000  $(372,000) $27,161,000 

 

   Gross Gross      Gross Gross   
Investments at Cost Unrealized Unrealized Fair  Cost Unrealized Unrealized Fair 
April 30, 2017 Basis Gains Losses Value 
April 30, 2018 Basis Gains Losses Value 
Municipal bonds $6,045,000  $90,000  $(97,000) $6,038,000  $5,984,000  $66,000  $(309,000) $5,741,000 
Corporate bonds $129,000  $1,000  $—  $130,000  $129,000  $2,000  $—  $131,000 
REITs $64,000  $13,000  $(1,000) $76,000  $110,000  $3,000  $(7,000) $106,000 
Equity securities $15,259,000  $2,441,000  $(319,000) $17,381,000  $15,930,000  $3,714,000  $(311,000) $19,333,000 
Money markets and CDs $2,757,000  $—  $—  $2,757,000  $1,035,000  $—  $—  $1,035,000 
Total $24,254,000  $2,545,000  $(417,000) $26,382,000  $23,188,000  $3,785,000  $(627,000) $26,346,000 

 

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 recorded an impairment loss of $23,000 for both the quarter and six-months ended October 31, 2017. As for the corresponding periods last year, management did not need to record a lossany impairment losses for either of the quarter, but did record a $13,000 impairment loss for the six monthsquarters ended OctoberJuly 31, 2016.2018 and July 31, 2017.

The following table shows the investments with unrealized losses that are not deemed to be “other-than-temporarily impaired”, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at OctoberJuly 31, 20172018 and April 30, 2017,2018, respectively.

 

Unrealized Loss Breakdown by Investment Type at OctoberJuly 31, 20172018

 

 Less than 12 months 12 months or greater Total  Less than 12 months 12 months or greater Total 
Description Fair
Value		 Unrealized Loss Fair
Value		 Unrealized Loss Fair
Value		 Unrealized Loss  Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss 
Municipal bonds $780,000  $(149,000) $1,168,000  $(69,000) $1,948,000  $(218,000) $1,857,000  $(9,000) $1,211,000  $(90,000) $3,068,000  $(99,000)
REITs $22,000  $(1,000) $25,000  $(4,000) $47,000  $(5,000) $35,000  $(3,000) $—  $—  $35,000  $(3,000)
Equity securities $562,000  $(75,000) $943,000  $(168,000) $1,505,000  $(243,000) $1,269,000  $(100,000) $1,146,000  $(170,000) $2,415,000  $(270,000)
Total $1,364,000  $(225,000) $2,136,000  $(241,000) $3,500,000  $(466,000) $3,161,000  $(112,000) $2,357,000  $(260,000) $5,518,000  $(372,000)

 

Unrealized Loss Breakdown by Investment Type at April 30, 20172018

 

 Less than 12 months 12 months or greater Total  Less than 12 months 12 months or greater Total 
Description Fair
Value		 Unrealized Loss Fair
Value		 Unrealized Loss Fair
Value		 Unrealized Loss  Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss 
Municipal bonds $1,420,000  $(19,000) $1,292,000  $(78,000) $2,712,000  $(97,000) $702,000  $(152,000) $1,674,000  $(86,000) $2,376,000  $(238,000)
REITs $—  $—  $27,000  $(1,000) $27,000  $(1,000) $56,000  $(5,000) $27,000  $(1,000) $83,000  $(6,000)
Equity securities $983,000  $(92,000) $1,689,000  $(227,000) $2,672,000  $(319,000) $534,000  $(35,000) $590,000  $(168,000) $1,124,000  $(203,000)
Total $2,403,000  $(111,000) $3,008,000  $(306,000) $5,411,000  $(417,000) $1,292,000  $(192,000) $2,291,000  $(225,000) $3,583,000  $(447,000)

 

Municipal Bonds

 

The unrealized losses on the Company’s investments in municipal bonds were caused by interest rate increases. The contractual terms of these investments 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 OctoberJuly 31, 2017.2018.

 

Marketable Equity Securities and REITs

 

The Company’s investments in marketable equity securities and REITs consist of a wide variety of companies. Investments in these companies include growth, growth income, and foreign investment objectives. The individual holdings have been evaluated, and due to management’s plan to hold on to these investments for an extended period, the Company does not consider these investments to be other-than-temporarily impaired at OctoberJuly 31, 20172018.

Note 33: Inventories

 

Inventories at OctoberJuly 31, 20172018 and April 30, 20172018 consisted of the following:

 

  October 31, 2017  April 30, 2017 
       
Raw materials $2,804,000  $1,579,000 
Work in process  569,000   442,000 
Finished goods  293,000   356,000 
   3,666,000   2,377,000 
Less: allowance for obsolete inventory  (73,000)  (73,000)
Totals $3,593,000  $2,304,000 

Note 4 Asset Purchase

In October 2017, George Risk Industries, Inc. (the “Company”) purchased assets from Labor Saving Devices, Inc. (“LSDI”). The purchase price for the assets consisted of $3,000,000 in cash and 24,097 shares of the Company’s Class A common stock (valued at $200,000, or approximately $8.30 per share). An initial payment of $1,000,000 in cash was made at closing, with the remaining $2,000,000 in cash paid in November 2017.

The value of the assets purchased as described above at October 31, 2017 consisted of the following:

Type of Assets Beginning Balance  Amortization  Total Assets, Net 
Inventory $1,366,000   —  $1,366,000 
Fixed Assets $10,000   —  $10,000 
Non-compete agreement $10,000   —  $10,000 
Intangible assets $1,814,000   —  $1,814,000 
Total $3,200,000   —  $3,200,000 

Since the asset purchase took place in October 2017, there was no value to these assets at April 30, 2017.

  July 31, 2018  April 30, 2018 
       
Raw materials $2,774,000  $2,450,000 
Work in process  483,000   444,000 
Finished goods  489,000   463,000 
   3,746,000   3,357,000 
Less: allowance for obsolete inventory  (96,000)  (90,000)
Totals $3,650,000  $3,267,000 

Note 54: Business Segments

 

The following is financial information relating to industry segments:

 

  Three months  Six months  Three months  Six months 
  ended  ended  ended  ended 
  Oct 31, 2017  Oct 31, 2017  Oct 31, 2016  Oct 31, 2016 
Net revenue:                
Security alarm products $2,170,000  $3,967,000  $2,473,000  $4,746,000 
Other products  919,000   1,370,000   410,000   803,000 
Total net revenue $3,089,000  $5,337,000  $2,883,000  $5,549,000 
                 
Income from operations:                
Security alarm products  670,000   1,034,000   732,000   1,211,000 
Other products  231,000   357,000   122,000   205,000 
Total income from operations $901,000  $1,391,000  $854,000  $1,416,000 
                 
Depreciation and amortization:                
Security alarm products  10,000   17,000   7,000   21,000 
Other products  21,000   43,000   28,000   53,000 
Corporate general  14,000   26,000   12,000   17,000 
Total depreciation and amortization $45,000  $86,000  $47,000  $91,000 
                 
Capital expenditures:                
Security alarm products  50,000   260,000   —   — 
Other products  10,000   10,000   17,000   64,000 
Corporate general  44,000   44,000   2,000   6,000 
Total capital expenditures $104,000  $314,000  $19,000  $70,000 

 July 31, 
 2018 2017 
Net revenue:        
Security alarm products $2,150,000  $1,798,000 
Cable & wiring tools  679,000   — 
Other products  600,000   450,000 
Total net revenue $3,429,000  $2,248,000 
        
Income from operations:        
Security alarm products $485,000  $392,000 
Cable & wiring tools  153,000   — 
Other products  135,000   98,000 
Total income from operations $773,000  $490,000 
 October 31, 2017 April 30, 2017         
Identifiable assets:                
Security alarm products  4,256,000   3,180,000  $3,848,000  $3,934,000 
Cable & wiring tools  2,783,000   — 
Other products  2,254,000   1,517,000   2,024,000   749,000 
Corporate general  35,051,000   33,767,000   33,407,000   34,797,000 
Total assets $41,561,000  $38,464,000  $42,062,000  $39,480,000 
        
Depreciation and amortization:        
Security alarm products $10,000  $8,000 
Cable & wiring tools  31,000   — 
Other products  27,000   21,000 
Corporate general  15,000   12,000 
Total depreciation and amortization $83,000  $41,000 
        
Capital expenditures:        
Security alarm products $—  $210,000 
Cable & wiring tools  —   — 
Other products  —   — 
Corporate general  —   43,000 
Total capital expenditures $—  $253,000 

Note 65: Earnings per Share

 

Basic and diluted earnings per share, assuming convertible preferred stock was converted for each period presented, are:

 

  For the three months ended October 31, 2017 
  Income  Shares  Per-share 
  (Numerator)  (Denominator)  Amount 
          
Net Income $722,000         
             
Basic EPS $722,000   4,953,070  $.1458 
Effect of dilutive securities:            
Convertible preferred stock  0   20,500   (.0006)
             
Diluted EPS $722,000   4,973,570  $.1452 
  For the three months ended July 31, 2018 
  Income  Shares  Per-Share 
  (Numerator)  (Denominator)  Amount 
Net income $617,000        
Basic EPS $617,000   4,967,580  $.1242 
Effect of dilutive Convertible            
Preferred Stock  –   20,500   (.0005)
Diluted EPS $617,000   4,988,080  $.1237 

 

  For the six months ended October 31, 2017 
  Income  Shares  Per-share 
  (Numerator)  (Denominator)  Amount 
          
Net Income $1,240,000         
             
Basic EPS $1,240,000   4,949,081  $.2506 
Effect of dilutive securities:            
Convertible preferred stock  0   20,500   (.0011)
             
Diluted EPS $1,240,000   4,969,581  $.2595 

  For the three months ended October 31, 2016 
  Income  Shares  Per-share 
  (Numerator)  (Denominator)  Amount 
          
Net Income $692,000         
             
Basic EPS $692,000   5,021,660  $.1378 
Effect of dilutive securities:            
Convertible preferred stock  0   20,500   (.0006)
             
Diluted EPS $692,000   5,042,160  $.1372 
  For the six months ended October 31, 2016 
  Income  Shares  Per-share 
  (Numerator)  (Denominator)  Amount 
          
Net Income $1,259,000         
             
Basic EPS $1,259,000   5,021,701  $.2507 
Effect of dilutive securities:            
Convertible preferred stock  0   20,500   (.0010)
             
Diluted EPS $1,259,000   5,042,201  $.2497 
  For the three months ended July 31, 2017 
  Income  Shares  Per-Share 
  (Numerator)  (Denominator)  Amount 
Net income $518,000         
Basic EPS $518,000   4,945,092  $.1048 
Effect of dilutive Convertible            
Preferred Stock  –   20,500   (.0005)
Diluted EPS $518,000   4,965,592  $.1043 

 

Note 76: 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)401 (k) of the Internal Revenue Code of 1986, as amended. Matching contributions by the Company of approximately $3,000$2,000 were paid during both the quartersquarter ending OctoberJuly 31, 2018 and 2017, and 2016, respectively. Likewise, the Company paid matching contributions of approximately $5,000 during both the six-month periods ending October 31, 2017 and 2016, respectively.

Note 87: 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 inherent 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 measurement) and the lowest priority to unobservable inputs (level 3 measurements). The levels of the fair value hierarchy under US GAAP are described below:

 

 Level 1Valuation is based upon quoted prices for identical instruments traded in active markets.
   
 Level 2Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
   
 Level 3Valuation 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 OctoberJuly 31, 2017,2018, our investments consisted of money markets, certificates of deposits (CDs), publicly traded equity securities, real estate investment trusts (REITs) as well as certain state and municipal debt securities and corporate bonds. Our marketable securities are valued using third-party broker statements. The value of the investments 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 bonds and REITs, the inputs are recorded as Level 2.

 

Fair Value Hierarchy

 

The following table sets 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
October 31, 2017		  Assets Measured at Fair Value on a Recurring Basis as of
July 31, 2018		 
 Level 1 Level 2 Level 3 Total  Level 1 Level 2 Level 3 Total 
Assets:                         
Municipal Bonds $-  $5,953,000  $-  $5,953,000  $—  $5,883,000  $—  $5,883,000 
Corporate Bonds $131,000  $-  $-  $131,000  $31,000  $—  $—  $31,000 
REITs $-  $107,000  $-  $107,000  $—  $118,000  $—  $118,000 
Equity Securities $18,931,000  $-  $-  $18,931,000  $19,938,000  $—  $—  $19,938,000 
Money Markets and CDs $775,000  $-  $-  $775,000  $1,191,000  $—  $—  $1,191,000 
Total fair value of assets measured on a recurring basis $19,837,000  $6,060,000  $-  $25,897,000  $21,160,000  $6,001,000  $—  $27,161,000 

 

 Assets Measured at Fair Value on a Recurring Basis as of
April 30, 2017		  Assets Measured at Fair Value on a Recurring Basis as of
April 30, 2018		 
 Level 1 Level 2 Level 3 Total  Level 1 Level 2 Level 3 Total 
Assets:                         
Municipal Bonds $—  $6,038,000  $—  $6,038,000  $—  $5,741,000  $—  $5,741,000 
Corporate Bonds $130,000  $—  $—  $130,000  $131,000  $—  $—  $131,000 
REITs $—  $76,000  $—  $76,000  $—  $106,000  $—  $106,000 
Equity Securities $17,381,000  $—  $—  $17,381,000  $19,333,000  $—  $—  $19,333,000 
Money Markets and CDs $2,757,000  $—  $—  $2,757,000  $1,035,000  $—  $—  $1,035,000 
Total fair value of assets measured on a recurring basis $20,268,000  $6,114,000  $—  $26,382,000  $20,499,000  $5,847,000  $—  $26,346,000 

 

Note 98 Subsequent Events

 

None

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

 

Item 2.2: Management Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

 

This Quarterly Report on Form 10-Q, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), which are subject to the “safe harbor” created by those sections. Any statements herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as “may,” “will,” “could,” “would,” “should,” “anticipate,” “expect,” “intend,” “believe,” “estimate,” “project” or “continue,” and the negatives of such terms are intended to identify forward-looking statements. The information included herein represents our estimates and assumptions as of the date of this filing. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if newcurrent information becomes available in the future.

 

The following discussion should be read in conjunction with the attached condensed financial statements, and with the Company’s audited financial statements and discussion for the fiscal year ended April 30, 2017.2018.

 

Executive Summary

 

The Company’s performance has remained consistentincreased through the first halfquarter, both in comparison to the most recent prior quarter and prior quarter last year. The most recent prior quarter increase is mainly due to traditionally having improved sales when the weather gets warmer. The Company’s products are tied to the housing market and the summertime usually shows an uptick in sales. In comparing the prior-year quarter, management has finally learned more about and gotten proper training to employees for the new computer system. Opportunities include continuing to learn and grow with our new computer system and to continue looking at businesses that might be a good fit to purchase. Also, we have new products that are scheduled to enter the marketplace by the end of the fiscal year and even seeing a bit of growth during the second quarter. This is due to the continuation of our quality USA made products with the ability for customization, our notable customer service, and the purchase of the assets of Labor Saving Devices, Inc. Additionally, impressive performance in the stock market has generated adequate returns on the marketable securities.calendar year. Challenges in the coming months include continuing to learn aboutget product out to customers in a timelier manner and train employees onto fill the new computer software,stockroom with inventory to get back to shipping out core products the same day. This is all with the hopes of getting our facilities running leaner and more lean and profitable than ever before and growing the business.before.

 

Results of Operations

 

 ●Net sales were $3,089,000 for the quarter ended October 31, 2017, which isshowed a 7.15%52.53% increase from the corresponding quarter last year. Year-to-date net sales were $5,337,000 at October 31, 2017, which is a 3.82% decrease fromover the same period in the prior year. Management believes this is due to many reasons. Last year there were unexpected delays in our production flow due to the implementation of new computer software. Over the last year. The slight variations in sales showsyear, management has worked hard to learn about and train employees on the stability of the Companynew computer system and loyalty of its customer base. Our ongoing commitmentproduction is running much smoother than a year ago. There is still room for improvement and management continues to outstanding customer service and customization of products are a few of the many reasons sales remained relatively constant. Also, new sales are emerging since GRI acquired the assets of the Labor Saving Devices. Direct competition and the inabilitystrive to bring new products to market in a timelier manner are a few of the reasons why management believes sales haven’t grown more.
be better.
 ●Cost of goods sold was 45.84%saw an increase from 48.71% of net sales forin the prior year, to 52.52% in the current quarter, ended October 31, 2017which is just outside of Management’s goal to keep labor and was 44.54% forother manufacturing expenses within the same quarter last year. Year-to-daterange of 45 to 50%. The increased cost of goods sold percentages were 47.05%percentage is a reflection of having increased inventory levels due to the purchase of the assets of Labor Saving Devices and to keep raw materials in stock to accommodate for the current six months and 48.12% for the corresponding six months last year, keeping within the target of less than 50% for both the quarter and year-to-date results.
increase in sales.
 ●Operating expenses were up $27,000have increased when comparing the current year quarter to the same quarter for the prior year, but the percentage in relation to net sales decreased to 24.93% for the quarter and were down $28,000 for the six-months ended OctoberJuly 31, 20172018 as compared to 29.49% for the corresponding periodsquarter last year. These increased costs for the quarter are primarily due to new product development, increased commissions, and training on our new computer software. The Company has been able to keep the operating expenses at less than 30% of net sales for many years;years now; however, the effects of paying for training of the new computer software and currently paying maintenance and support fees on two software platforms has added to these expenses. Management is hopefully that the increased sales of the new product lines will help keep operating expenses down.

18

 ●Income from operations for the quarter ended OctoberJuly 31, 20172018 was at $901,000$773,000, which is a 5.5%57.76% increase from the corresponding quarter last year, which had income from operations of $854,000. Income from operations for the six months ended October 31, 2017 was at $1,391,000, which is a 1.77% decrease from the corresponding six months last year, which had income from operations of $1,416,000.
$490,000.
 ●Other income and expenses are down slightly and remained steady when comparing to the current quarter and six-month periods in the prior year, withshowed a decrease of $6,000 in the current quarter and no change$128,000 gain for the current year-to-date.quarter ended July 31, 2018 as compared to a $248,000 gain for the quarter ended July 31, 2017. The majority of activity in these accounts consists of investmentdecrease is primarily due to decreased dividend and interest dividends, and gain or loss on sale of investments. With the recent uptick in the performance of the stock market, decisions were made to sell holdings that were not strong performers, so losses were realized. This has beenincome, offset by increased dividends and interest.
losses on the sale of investments.
 ●Overall,Provision for income taxes showed an increase of $64,000, up from $220,000 in the quarter ended July 31, 2017 to $248,000 for the quarter ended July 31, 2018.
●In turn, net income for the quarter ended OctoberJuly 31, 20172018 was up $41,000, or 4.0%,$617,000, a 19.11% increase from the samecorresponding quarter last year. Conversely,year, which showed net income for the six-month period ended October 31, 2017 was down $19,000, or 1.51%, from the same period in the prior year.
of $518,000.
 ●Earnings per share for the quarter ended July 31, 2018 were $0.12 per common share and $0.10 per common share for the quarter ended OctoberJuly 31, 2017 were $0.15 per share and $0.25 per share for the year-to-date period. EPS for the quarter and six months ended October 31, 2016 were $0.14 per share and $0.25 per share, respectively.2017.

 

Liquidity and capital resources

 

Operating

Operating
●Net cash decreased $132,000increased $653,000 during the six monthsquarter ended OctoberJuly 31, 20172018 as compared to a decreasean increase of $339,000$542,000 during the corresponding periodquarter last year.
 
●Accounts receivable increased $364,000decreased $234,000 for the six months ended Octoberquarter ending July 31, 20172018 compared with a $53,000$257,000 decrease for the same periodquarter last year. The decrease in accounts receivable is directly attributable to the Company’s ability to collect on accounts and to keep past due accounts to a minimum. An analysis of accounts shows that there were only 6.38% that were over 90 days at July 31, 2018.
●Inventories increased $389,000 during the current yearquarter as compared to a $62,000 increase last year. The bigger increase is primarily due to the fact that Labor Saving Devices was purchased in October 2017 and there is a need to have more inventory on hand.
●At the quarter ended July 31, 2018 there was a $166,000 decrease in prepaid expenses and at July 31, 2017, there was a $63,000 decrease. The current decrease is a result of improved saleshaving raw materials that were previously prepaid for arrive on our dock during the second quarter and collections on accounts receivable taking a bit longer than normal.current quarter.
 
●Inventories increased $1,290,000 during the current six-month period as compared to a $286,000 decrease last year, primarily due to the inventory purchased from Labor Saving Devices.
●Prepaid expenses saw a $139,000 increase for the current six months, primarily due to a large amount of inventory that has been paid for but not delivered yet. The prior six months showed a $12,000 decrease in prepaid expenses.
●Income tax overpayment for the periodquarter ended OctoberJuly 31, 20172018 decreased $127,000,$244,000, while there was an increase of $2,000a $208,000 decrease towards income tax payable for the same period the prior year. Management usually paysquarter ending July 31, 2017. The current decrease in income tax overpayment is a result of refining our estimates inwhen taking the same amounts that were actually taxed onnew income tax law for the prior year when we don’t expect a huge fluctuation in income2018 into account and since net income up to this point is close to the same as last year, the estimates are a close match to the actual expense.having increased sales.
 
●Accounts payable shows increasesan increase of $7,000 for both six-month periods at $98,000 and $97,000, respectively. The companythe quarter ended July 31, 2018 compared to a decrease of $112,000 for the same quarter the year before, primarily due to timing issues. Management strives to pay all invoicespayables within terms, andunless there is a problem with the slight variance in the increases is primarily due to the timing of receipt of products and payment of invoices.merchandise.
 
●Accrued expenses decreased $33,000$172,000 for the current six-month periodquarter as compared to a $16,000$163,000 decrease for the six-month periodquarter ended OctoberJuly 31, 2016.
●Asset acquisition payable increased by $2,000,000 for the current six-month period in comparison to not having this payable on the books for the corresponding period last year. This line item corresponds with the asset acquisition of Labor Saving Devices. A down payment was made at the close of the agreement, which occurred in October 2017, and the rest of the funds were due to Labor Saving Devices upon the completion of the delivery of the assets to GRI.2017.

19

Investing

 

●As for our investment activities, the Company spent approximately $314,000 on acquisitionsdid not buy any fixed assets during the current fiscal quarter. In comparison with the corresponding quarter last year, there were purchases of property and equipment forin the current six-month period, in comparison to the corresponding six months last year, where there was activityamount of $70,000.approximately $253,000.
 
●

As a result of the asset acquisition of Labor Saving Devices, Inc. (“LSDI”), there were $1,824,000 worth of intangible assets that were bought, along with inventory and fixed assets. Since the acquisition took place in the current quarter, there was no cash towards this item for the same reporting period last year.

●Additionally, the Company continues to purchase marketable securities, which include municipal bonds and quality stocks. During the six-month period ended October 31, 2017 there was quite a bit of buy/sell activity in the investment accounts. Net cashCash spent on purchases of marketable securities for the six-month periodquarter ended OctoberJuly 31, 20172018 was $324,000$233,000 compared to $373,000$224,000 spent induring the prior six-month period.quarter ended July 31, 2017. We continue to use “money manager” accounts for most stock transactions. By doing this, the Company gives an independent third-partythird party firm, who are experts in this field, permission to buy and sell stocks at will. The Company pays a quarterly service fee based on the value of the investments.

 

Financing

 

●TheFurthermore, the Company continues to purchase back common stock when the opportunity arises. For the six-month periodquarter ended OctoberJuly 31, 2017,2018, the Company purchased $3,000$5,000 worth of treasury stock, in comparison to $1,000 repurchasedalong with the $3,000 spent in the corresponding six-monthsame period last year.
●The company declared a dividend of $0.36 per share of common stock on September 30, 2017, which was paid out during the second quarter. This is a slight increase to the dividend of $0.35, which was declared and paid during the second fiscal quarter lastprior year.

The following is a list of ratios to help analyze George Risk Industries’ performance:

 

  For the quarter ended 
  October 31, 2017  October 31, 2016 

Working capital

(current assets – current liabilities)

 $34,386,000  $33,469,000 

Current ratio

(current assets / current liabilities)

  9.552   17.760 

Quick ratio

((cash + investments + AR) / current liabilities)

  8.563   16.297 
  Qtr ended  Qtr ended 
  July 31, 2018  July 31, 2017 
Working capital        
(current assets – current liabilities) $36,894,000  $36,500,000 
         
Current ratio        
(current assets / current liabilities)  18.760   21.955 
         
Quick ratio        
((cash + investments + AR) / current liabilities)  16.567   20.496 

New Product Development

 

The Company and itsits’ engineering department continueperpetually work to develop enhancements to current product lines, develop new products which complement existing products, and look for products that are well suited to our distribution network and manufacturing capabilities. Items currently in various stages of the development process include:

 

●A new face plate for our pool alarms is nearing completion. The innovative design is slim in style and will also allow the homeowner to change the plate to match their décor.
 
●An updated version of the pool access alarm is currently going through ETLelectrical listing testing. This next-generation model combines our battery operated DPA series with our hard wired 289 series. A variety of installation options will be available through jumper pin settings.
 
●The case for our CC-15high voltage current controller (CC-15) is complete and has been submitted to U.L. forreceived UL approval for the US and Canada. ThisThe CC-15 series is 15-amps and will allow us to manufacture several different versions. One iscome in a 15-amp versionvariety of voltage configurations. Some examples that would automatically turn on a whole room of lights. Another is a 220-volt version tothese switches can be used in international markets.for are appliance control, environmental control and lighting systems.
 
●We have completed two new low voltage switching devices and they have been introduced into the marketplace. The LVSD is a 2-amp, 12/24-VDC switching device that will power devices such as small motors, fans, sirens, strobes and LED lights. The LEDSD is a 2amp, 12/24-VDC controller with 2.1mm x 5.5mm connectors for use with LED lighting (puck, rope, strip, track and more). It can be used to turn on LED lighting in cabinets, display cases, closets, pantries, etc.
●Mold work has been completed on connectors for our EZ-Duct line and these connectors are currently out for ETL. testing. This will allow the raceway line to be ETL Listed for fire rating and high voltage. A new mold design for the cover of our 29-Series terminal switch is also being worked on.
●We continue to workWork continues on high security switches. WeThey have a triple biased high security switch design nearly complete and an adjustable magnet design was completed for recessed mounting applications.
 
●We continue to researchResearch resumes on the possibilities of fuel level sensing and how that may also serve other agricultural based needs. Several companies from around the world have been looking for ways to secure fuel tanks and trucks. OurTheir emphasis would be in ways to safely monitor fuel levels and report tampering.
 
●A new float water sensor is being developed that will monitor water levels in livestock tanks and sump pumps.
 
●Wireless technology is a main area of focus for product development. We are consideringlooking into adding wireless technology to some of our current products. A wireless contact switch is in the final stages of development. Also, we are working on wireless versions of our Pool Alarm and environmental sensors that will be easy to install in current construction. We are also concentrating on making products compatible with Wi-Fi, smartphone technology and the increasing popular Z-Wave standard for wireless home automation.
 
●An updated versionUpdated versions of our 200-36 &and 4532 series overhead door switch line up is nearing completion with the new aluminum cases presently on order.complete and has been selling well. The modified versions, the 200-36UF and 4532UP,4532UF, are being made as a universal fit switch. This will allow an installer to replace an existing switch without drilling new holes into the cement or adjusting the location. The modified case has an additional mounting hole along with reshaped mounting holes.
●Two sizes of our custom power transfer device (PTDC) have been introduced. The PTDC series offers a secure way to channel electrical wiring from the door frame to the door and are used for powering exit bars, locks, electric strikes etc. GRI offers two different end pieces; 0.218” inside diameter and 0.313” inside diameter, which will allow different sizes of wire to be looped through the custom length armored cable.

Other Information

 

In addition to researching developing new products, management is always open to the possibility of acquiring a business or product line that would complement our existing operations. Due to the Company’s strong cash position, management believes this could be achieved without the need for outside financing. The intent is to utilize the equipment, marketing techniques and established customers to deliver new products and increase sales and profits.

 

There are no known seasonal trends with any of GRI’s products, since we sell to distributors and OEM manufacturers. Our products are tied to the housing industry and will fluctuate with building trends.

 

Recently Issued Accounting Pronouncements

 

In May 2014, the FASBFinancial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, Revenue“Revenue from Contracts with Customers. The objectiveCustomers (Topic 606)” (“ASU 2014-09”), which requires an entity to recognize revenue to depict the transfer of this update ispromised goods or services to provide a robust frameworkcustomers in an amount that reflects the consideration to which it expects to be entitled in exchange for addressingthose goods or services. In addition, ASU No. 2014-09 requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU No. 2014-09 supersedes most existing U.S. GAAP revenue recognition issuesprinciples, and upon its effective date, replaces almost all existing revenue recognition guidance. This updateit permits the use of either the retrospective or cumulative effect transition method. ASU No. 2014-09 is effective infor annual reporting periods beginning after December 15, 2017, and theincluding interim periods within that year.those annual periods. The Company is evaluatinghas adopted ASU No. 2014-09 in the impactfirst quarter of this updatefiscal 2019, which does not have a material impact on the Company’s financial statements.statements and related disclosures.

 

In February of 2016, the FASB issued ASU 2016-02,Leases “Leases (Topic 842)” (“ASU 2016-02”), which provides guidance for accounting for leases. ASU 2016-02 requires lessees to classify leases as either finance or operating leases and to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of the lease classification. The lease classification will determine whether the lease expense is recognized based on an effective interest rate method or on a straight-line basis over the term of the lease. Accounting for lessors remains largely unchanged from current GAAP. ASU 2016-02 is effective for the Company beginning November 1, 2019. Early adoption is permitted. In July 2018, the FASB issued ASU No. 2018-10 “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”) and ASU No. 2018-11 “Leases (Topic 842) Targeted Improvements” (“ASU 2018-11”). ASU 2018-10 provides certain amendments that affect narrow aspects of the guidance issued in ASU 2016-02. ASU 2018-11 allows all entities adopting ASU 2016-02 to choose an additional (and optional) transition method of adoption, under which an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2018-11 also allows lessors to not separate non-lease components from the associated lease component if certain conditions are met. The Company will adopt the ASUs in the first quarter of 2019 and the Company’s accounting systems will be upgraded to comply with the requirements of the new standard, however, the adoption of ASU 2016-02 will not have a material impact on the Company’s financial statements and related disclosures.

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). Under existing U.S. GAAP, the neweffects of changes in tax rates and laws on deferred tax balances are recorded as a component of income tax expense in the period in which the law was enacted. When deferred tax balances related to items originally recorded in accumulated other comprehensive income (loss) are adjusted, certain tax effects become stranded in accumulated other comprehensive income. The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive income (loss) to retained earnings (accumulated deficit) for stranded income tax effects resulting from the Tax Cuts and Jobs Act (the Tax Act). The amendments in this ASU also require certain disclosures about stranded income tax effects. The guidance lessees will be required to recognize so-called right-of-use assets and liabilities for most leases having lease terms of 12 months or more. This update is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption in any period is permitted. The Company has not yet adopted ASU 2018-02 and is currently evaluating the potential impact of adopting the applicable guidance on the Company’s financial statements and related disclosures.

In July 2018, the FASB issued ASU No. 2018-09, “Codification Improvements” (“ASU 2018-09”). ASU 2018-09 provides amendments to a wide variety of topics in the FASB’s Accounting Standards Codification, which applies to all reporting entities within the scope of the affected accounting guidance. The transition and effective date guidance are based on the facts and circumstances of each amendment. Some of the amendments in ASU 2018-09 do not require transition guidance and were effective upon issuance of ASU 2018-09. However, many of the amendments do have transition guidance with effective dates for annual reporting periods beginning after December 31, 2019 and the interim periods starting thereafter. The Company is15, 2018. We are currently evaluating the potential impact of this updateadopting the applicable guidance, however we do not believe that the adoption of ASU 2018-09 will have a material impact on the Company’s financial statements.statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements on fair value measurements. The updated guidance if effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently assessing the timing and impact of adopting the updated provisions.

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

 

Item 3. Quantitative and Qualitative Disclosures aboutAbout Market Risk

 

Not applicableThis disclosure does not apply.

 

Item 4. Controls and Procedures

 

Our management, under the supervision and with the participation of our chief executive officer (also working as our chief financial officer), evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of OctoberJuly 31, 2017.2018. Based on that evaluation, our chief executive officer (also working as our chief financial officer) concluded that the disclosure controls and procedures employed at the Company were not effective to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

 

We have taken measurescontinue to improve our disclosure controlsoperate with a limited number of accounting and procedures.financial personnel. A new accounting professional was hired in October 20172018 to fill the Controller position. Regarding this filing, moreposition Once the controller is hired, training will be required to fulfill disclosure control and procedure responsibilities, including review procedures for key accounting schedules and timely and proper documentation of material transactions and agreements. Until sufficient training has taken place offor this new Controller, we believe this control deficiency represents material weaknesses in internal control over financial reporting.

 

Despite the material weaknesses in financial reporting noted above, we believe that our consolidated financial statements included in this report fairly present our financial position, results of operations and cash flows as of and for the periods presented in all material respects.

 

We are committed to the establishment of effective internal controls over financial reporting and will place emphasis on quarterly and year-end closing procedures, timely documentation and internal review of accounting and financial reporting consequences of material contracts and agreements, and enhanced review of all schedules and account analyses by experienced accounting department personnel or independent consultants.

 

Changes in Internal Control Over Financial Reporting

 

There was no change in our internal control over financial reporting during the fiscal quarter ended OctoberJuly 31, 20172018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

GEORGE RISK INDUSTRIES, INC.

 

PartPART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Not applicable

 

Item 1A. Risk Factors

 

Not applicable.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

The following table provides information relating to the Company’s repurchase and issuance of common stock for the secondfirst quarter of fiscal year 2018. The issuance of the common stock was part of the asset acquisition of Labor Saving Devices that took place during the quarter.2019.

 

Period Number of shares repurchased/(issued)repurchased
AugustMay 1, 20172018 – AugustMay 31, 20172018 -0-400
SeptemberJune 1, 20172018 – SeptemberJune 30, 20172018 -0-100
OctoberJuly 1, 20172018 – OctoberJuly 31, 20172018 (24,097)150

 

Item 3. Defaults upon Senior Securities

 

Not applicable

 

Item 4. Mine Safety Disclosures

 

Not applicable

 

Item 5. Other Information

 

Not applicable

 

Item 6. Exhibits

 

 Exhibit No. Description
 31.1 Certification of the Chief Executive Officer (Principal Financial and Accounting Officer), as required by Section 302 of the Sarbanes-Oxley Act of 2002.
    
 32.1 Certification of the Chief Executive Officer (Principal Financial and Accounting Officer), as required by Section 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    December 19, 2017September 14, 2018By:/s/ Stephanie M. Risk-McElroy
  Stephanie M. Risk-McElroy
  President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board