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 JanuaryOctober 31, 2018

 

[  ]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)

 

Colorado84-0524756
(State of incorporation)(IRS Employers Identification No.)

 

802 South Elm St. 
Kimball, NE69145
(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 [  ]

Yes [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]

Yes [  ]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]

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]

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

The number of shares of the Registrant’s Common Stock outstanding, as of March 16,December 17, 2018 was 4,968,447.

Transitional Small Business Disclosure Format:Yes [X]   No [  ]4,961,447.

 

 

   

 

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

The unaudited financial statements for the three and nine-month periodthree-and six-month periods ended JanuaryOctober 31, 2018, are attached hereto.

GEORGE RISK INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

 

 October 31, 2018 April 30, 2018 
 January 31, 2018 April 30, 2017  (unaudited)   
 (unaudited)        
ASSETS                
        
Current Assets:                
Cash and cash equivalents $3,952,000  $6,456,000  $4,090,000  $4,294,000 
Investments and securities  27,496,000   26,382,000   25,221,000   26,346,000 
Accounts receivable:                
Trade, net of $16,422 and $2,425 doubtful account allowance  2,471,000   1,848,000 
Trade, net of $12,588 and $6,651 doubtful account allowance  2,516,000   2,545,000 
Other  2,000   3,000   4,000   2,000 
Income tax overpayment  474,000   253,000   844,000   747,000 
Inventories, net  3,594,000   2,304,000   3,683,000   3,267,000 
Prepaid expenses  487,000   193,000   360,000   603,000 
Total Current Assets $38,476,000  $37,439,000   36,718,000   37,804,000 
                
Property and Equipment, net, at cost  948,000   739,000   971,000   1,076,000 
                
Other Assets                
Investment in Limited Land Partnership, at cost  273,000   273,000   293,000   293,000 
Projects in process  —   13,000   8,000   — 
Other  77,000   —   73,000   6,000 
Total Other Assets $350,000  $286,000   374,000   299,000 
                
Intangible Assets, net $1,794,000   —   1,701,000   1,763,000 
                
TOTAL ASSETS $41,568,000  $38,464,000  $39,764,000  $40,942,000 

 

See accompanying notes to the unaudited condensed financial statements.

GEORGE RISK INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

(continued)

 October 31, 2018 April 30, 2018 
 January 31, 2018 April 30, 2017  (unaudited)   
 (unaudited)        
LIABILITIES AND STOCKHOLDERS’ EQUITY                
        
Current Liabilities                
Accounts payable, trade $308,000  $69,000  $147,000  $336,000 
Dividends payable  1,580,000   1,416,000   1,714,000   1,580,000 
Accrued expenses:                
Payroll and related expenses  178,000   308,000 
Payroll and other expenses  349,000   329,000 
Property taxes  3,000   —   —   12,000 
Total Current Liabilities $2,069,000  $1,793,000   2,210,000   2,257,000 
                
Long-Term Liabilities              �� 
Deferred income taxes  1,902,000   906,000   806,000   955,000 
Total Long-Term Liabilities $1,902,000  $906,000   806,000   955,000 
                
Total Liabilities  3,016,000   3,212,000 
        
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   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   850,000   850,000 
Additional paid-in capital  1,934,000   1,736,000   1,934,000   1,934,000 
Accumulated other comprehensive income  2,623,000   1,239,000   1,821,000   2,249,000 
Retained earnings  36,232,000   35,981,000   36,246,000   36,746,000 
Less: treasury stock, 3,533,934 and 3,557,606 shares, at cost  (4,141,000)  (4,140,000)
Less: treasury stock, 3,541,234 and 3,534,784 shares, at cost  (4,202,000)  (4,148,000)
Total Stockholders’ Equity $37,597,000  $35,765,000   36,748,000   37,730,000 
                
TOTAL LIABILITES AND STOCKHOLDERS’ EQUITY $41,568,000  $38,464,000 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $39,764,000  $40,942,000 

 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC.

CONDENSED INCOME STATEMENTS (Unaudited)

 

 Three months Nine months Three months Nine months  Three months Six months Three months Six months 
 ended ended ended ended  ended ended ended ended 
 Jan 31, 2018 Jan 31, 2018 Jan 31, 2017 Jan 31, 2017  Oct 31, 2018 Oct 31, 2018 Oct 31, 2017 Oct 31, 2017 
Net Sales $3,260,000  $8,597,000  $2,645,000  $8,194,000  $3,667,000  $7,096,000  $3,089,000  $5,337,000 
Less: Cost of Goods Sold  (1,826,000)  (4,337,000)  (1,229,000)  (3,899,000)  (1,893,000)  (3,695,000)  (1,416,000)  (2,511,000)
Gross Profit $1,434,000  $4,260,000  $1,416,000  $4,295,000   1,774,000   3,401,000   1,673,000   2,826,000 
                                
Operating Expenses                                
General and Administrative  313,000   833,000   223,000   664,000   331,000   616,000   290,000   519,000 
Sales  512,000   1,371,000   461,000   1,432,000   525,000   1,080,000   443,000   859,000 
Engineering  22,000   69,000   17,000   59,000   28,000   37,000   35,000   48,000 
Rent Paid to Related Parties  5,000   14,000   5,000   14,000   4,000   9,000   4,000   9,000 
Total Operating Expenses $852,000  $2,287,000  $706,000  $2,169,000   888,000   1,742,000   772,000   1,435,000 
                                
Income From Operations  582,000   1,973,000   710,000   2,126,000   886,000   1,659,000   901,000   1,391,000 
                                
Other Income (Expense)                                
Other  —   3,000   1,000   11,000   6,000   8,000   1,000   3,000 
Dividend and Interest Income  376,000   811,000   332,000   650,000   152,000   345,000   155,000   434,000 
Gain (Loss) on Investments  123,000   94,000   51,000   136,000   (27,000)  (94,000)  9,000   (28,000)
Gain (Loss) on Sale of Assets  —   4,000   —   —   —   —   —   4,000 
 $499,000  $912,000  $384,000  $797,000   131,000   259,000   165,000   413,000 
                                
Income Before Provisions for Income Taxes  1,081,000   2,885,000   1,094,000   2,923,000   1,017,000   1,918,000   1,066,000   1,804,000 
                                
Provisions for Income Taxes:                                
Current Expense  281,000   852,000   313,000   896,000   (261,000)  (508,000)  (360,000)  (572,000)
Deferred Tax Expense (Benefit)  9,000   1,000   (11,000)  (24,000)
Deferred Tax Benefit (Expense)  12,000   (24,000)  16,000   8,000 
Total Income Tax Expense $290,000  $853,000  $302,000  $872,000   (249,000)  (532,000)  (344,000)  (564,000)
                                
Net Income $791,000  $2,032,000  $792,000  $2,051,000  $768,000  $1,386,000  $722,000  $1,240,000 
                                
Cash Dividends                                
Common Stock ($0.38 per share) $1,886,000  $1,886,000   —   — 
Common Stock ($0.36 per share) $—  $1,780,000           —   —  $1,780,000  $1,780,000 
Common Stock ($0.35 per share)         $—  $1,758,000 
                                
Income Per Share of Common Stock                                
Basic $0.16  $0.41  $0.16  $0.41  $0.15  $0.28  $0.15  $0.25 
Diluted $0.16  $0.41  $0.16  $0.41  $0.15  $0.28  $0.15  $0.25 
                                
Weighted Average Number of Common                
Shares Outstanding                
Weighted Average Number of Common Shares Outstanding                
Basic  4,969,013   4,955,725   4,945,972   4,996,453   4,962,177   4,964,879   4,953,070   4,949,081 
Diluted  4,989,513   4,976,225   4,966,472   5,016,953   4,982,677   4,985,379   4,973,570   4,969,581 

 

See accompanying notes to the condensed financial statements

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

 

 Three months Nine months Three months Nine months  Three months Six months Three months Six months 
 ended ended ended ended  ended ended ended ended 
 Jan 31, 2018 Jan 31, 2018 Jan 31, 2017 Jan 31, 2017  Oct 31, 2018 Oct 31, 2018 Oct 31, 2017 Oct 31, 2017 
Net Income $791,000  $2,032,000  $792,000  $2,051,000  $768,000  $1,386,000  $722,000  $1,240,000 
                                
Other Comprehensive Income, Net of Tax                
Other Comprehensive Income, net of tax                
Unrealized gain (loss) on securities:                                
Unrealized holding gains (losses) arising during period  1,247,000   2,585,000   570,000   796,000   (1,245,000)  (638,000)  709,000   1,338,000 
Reclassification adjustment for gains (losses) included in net income  (88,000)  (205,000)  (5,000)  (88,000)  (7,000)  37,000   (32,000)  (117,000)
Income tax benefit (expense) related to other comprehensive income  (485,000)  (995,000)  (236,000)  (296,000)  361,000   173,000   (283,000)  (510,000)
                
Other Comprehensive Income  674,000   1,385,000   329,000   412,000   (891,000)  (428,000)  394,000   711,000 
                                
Comprehensive Income $1,465,000  $3,417,000  $1,121,000  $2,463,000 
Comprehensive Income (Loss) $(123,000) $958,000  $1,116,000  $1,951,000 

 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENT OF CASH FLOWS (Unaudited)

 

 Nine months Nine months  Six months Six months 
 ended ended  ended ended 
 Jan 31, 2018 Jan 31, 2017  Oct 31, 2018 Oct 31, 2017 
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net Income $2,032,000  $2,051,000  $1,386,000  $1,240,000 
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization  163,000   138,000   167,000   86,000 
(Gain) loss on sale of investments  (117,000)  (149,000)  62,000   6,000 
Impairments on investments  23,000   13,000   32,000   23,000 
Reserve for bad debts  13,000   —   6,000   — 
Reserve for obsolete inventory  —   5,000   18,000   — 
Deferred income taxes  1,000   (24,000)  25,000   (9,000)
(Gain) loss on sale of assets  (4,000)  —   —   (4,000)
Changes in assets and liabilities:                
(Increase) decrease in:                
Accounts receivable  (636,000)  163,000   23,000   (364,000)
Inventories  (1,291,000)  426,000   (435,000)  (1,290,000)
Prepaid expenses  (359,000)  (48,000)
Prepaid expenses and other  168,000   (139,000)
Other receivables  2,000   (5,000)  (2,000)  3,000 
Income tax overpayment  (221,000)  (43,000)  (97,000)  127,000 
Increase (decrease) in:                
Accounts payable  239,000   20,000   (189,000)  98,000 
Accrued expenses  (127,000)  (72,000)  8,000   (33,000)
Asset acquisition payable  —   2,000,000 
Net cash provided by (used in) operating activities $(282,000) $2,475,000   1,172,000   1,744,000 
                
CASH FLOWS FROM INVESTING ACTIVITIES:                
Proceeds from sale of assets  4,000   —   —   4,000 
(Purchase) of property and equipment  (342,000)  (146,000)  —   (314,000)
Proceeds from sale of marketable securities  2,013,000   586,000   754,000   2,002,000 
(Purchase) of marketable securities  (653,000)  (668,000)  (324,000)  (324,000)
(Purchase) of intangible assets  (1,624,000)  —   —   (1,624,000)
(Purchase) of long-term investment  —   (20,000)
Net cash provided by (used in) investing activities $(602,000) $(248,000)  430,000   (256,000)
                
CASH FLOWS FROM FINANCING ACTIVITIES:                
(Purchase) of treasury stock  (3,000)  (551,000)  (54,000)  (3,000)
Dividends paid  (1,617,000)  (1,596,000)  (1,752,000)  (1,617,000)
Net cash provided by (used in) financing activities $(1,620,000) $(2,147,000)  (1,806,000)  (1,620,000)
                
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $(2,504,000) $80,000   (204,000)  (132,000)
                
Cash and Cash Equivalents, beginning of period $6,456,000  $5,918,000   4,294,000   6,456,000 
Cash and Cash Equivalents, end of period $3,952,000  $5,998,000  $4,090,000  $6,324,000 
                
        
Supplemental Disclosure for Cash Flow Information:                
Cash payments for:                
Income taxes $1,320,000  $1,059,000  $600,000  $440,000 
Interest paid $0  $0  $1,000  $0 
Cash receipts for:        
Income taxes $253,000  $125,000 
                
Supplemental Disclosure of Noncash Investing and Financing Activities:        
Supplemental Disclosure for Noncash Investing and Financing Information:        
Issuance of treasury stock as part of asset acquisition $200,000  $0   —  $200,000 

 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JANUARYOCTOBER 31, 2018

 

Note 1:1 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 FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers. The objective of this update is to provide a robust framework for addressing revenue recognition issues and, upon its effective date, replaces almost all existing revenue recognition guidance. This update is effective in annual reporting periods beginning after December 15, 2017 and the interim periods within that year. The Company is evaluating the impact of this update on the Company’s financial statements.

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 May 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”). UnderASU 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 guidance, lesseesleases 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 fiscal 2020 and the Company’s accounting systems will be requiredupgraded to recognize so-called right-of-use assets and liabilities for most leases having lease termscomply with the requirements of 12 months or more. This updatethe new standard, however, the adoption of ASU 2016-02 is effective in annual reporting periods beginning after December 31, 2019 and the interim periods starting thereafter. The Company is evaluating thenot anticipated to have a material impact of this update on the Company’s financial statements.statements and related disclosures.

 

In February of 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.Income (ASU 2018-02). Under this update, companies haveexisting U.S. GAAP, the optioneffects 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 reclassify strandeditems originally recorded in accumulated other comprehensive income (loss) are adjusted, certain tax effects caused by USbecome 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 (TCJA) from accumulated other comprehensive income (AOCI) to retained earnings. Under current US GAAP, effects from a change(the Tax Act). The amendments in tax law is recorded as a component of thethis ASU also require certain disclosures about stranded income tax provision related to continuing operations in the period of enactment, even if the deferred taxes were established for a financial statement component not part of continuing operations, such as accumulated other comprehensive income (AOCI). Adopting of this standard will remove tax effects stranded in AOCI by the tax law enactment. Adoption of this ASU is optional. This updateeffects. The guidance is effective in annual reporting periodsfor fiscal years beginning after December 15, 2018, and the interim periods starting thereafter.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 this updateadopting 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 periods beginning after December 15, 2018. We are currently evaluating the potential impact of adopting 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 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 is 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.

In August 2018, The FASB issued ASU 2018-14 to improve the effectiveness of disclosures for defined benefit plans under ASC 715-20. The ASU applies to employers that sponsor defined benefit pension or other postretirement plans. The FASB issued ASU 2018-14 as part of its disclosure framework project, which has an objective and primary focus to improve the effectiveness of disclosures in the notes to financial statements. As part of the project, during August 2018, the Board also issued a Concepts Statement, which the FASB used as a basis for amending the disclosure requirements for Subtopic 715-20. The guidance is effective or fiscal years ending after December 15, 2020 and early adoption is permitted. The Company is currently assessing the timing and impact of adopting the updated provisions.

Note 2:2 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. 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 June 20182019 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 JanuaryOctober 31, 2018 and April 30, 2017,2018, investments consisted of the following:

 

   Gross Gross      Gross Gross   
Investments at Cost Unrealized Unrealized Fair  Cost Unrealized Unrealized Fair 
January 31, 2018 Basis Gains Losses Value 
October 31, 2018 Basis Gains Losses Value 
Municipal bonds $5,966,000  $103,000  $(238,000) $5,831,000  $5,599,000   39,000   (110,000)  5,528,000 
Corporate bonds $129,000  $2,000  $—  $131,000   56,000   1,000   —   57,000 
REITs $110,000  $5,000  $(6,000) $109,000   89,000   —   (10,000)  79,000 
Equity securities $15,720,000  $4,844,000  $(203,000) $20,361,000   16,145,000   3,184,000   (546,000)  18,783,000 
Money markets and CDs $1,064,000  $—  $—  $1,064,000   774,000   —   —   774,000 
Total $22,989,000  $4,954,000  $(447,000) $27,496,000  $22,663,000  $3,224,000  $(666,000) $25,221,000 

 

    Gross  Gross    
Investments at Cost  Unrealized  Unrealized  Fair 
April 30, 2017 Basis  Gains  Losses  Value 
Municipal bonds $6,045,000  $90,000  $(97,000) $6,038,000 
Corporate bonds $129,000  $1,000  $—  $130,000 
REITs $64,000  $13,000  $(1,000) $76,000 
Equity securities $15,259,000  $2,441,000  $(319,000) $17,381,000 
Money markets and CDs $2,757,000  $—  $—  $2,757,000 
Total $24,254,000  $2,545,000  $(417,000) $26,382,000 

     Gross  Gross    
Investments at Cost  Unrealized  Unrealized  Fair 
April 30, 2018 Basis  Gains  Losses  Value 
Municipal bonds $5,984,000  $66,000  $(309,000) $5,741,000 
Corporate bonds  129,000   2,000   —   131,000 
REITs  110,000   3,000   (7,000)  106,000 
Equity securities  15,930,000   3,714,000   (311,000)  19,333,000 
Money markets and CDs  1,035,000   —   —   1,035,000 
Total $23,188,000  $3,785,000  $(627,000) $26,346,000 

 

The Company evaluates all marketable securities for other-than temporaryother-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 recordrecorded an impairment loss duringof $32,000 for both the quarter but did record a loss of $23,000 for the nine monthsand six-months ended JanuaryOctober 31, 2018. Likewise,As for the corresponding periods last year, management did not record arecorded an impairment loss of $23,000 for both the quarter but did record a $13,000 impairment loss for the nine monthsand six-months ended JanuaryOctober 31, 2017.

The following tables showtable 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 JanuaryOctober 31, 2018 and April 30, 2017,2018, respectively.

 

Unrealized Loss Breakdown by Investment Type at JanuaryOctober 31, 2018

 

 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 $702,000  $(152,000) $1,674,000  $(86,000) $2,376,000  $(238,000) $3,759,000  $(51,000) $543,000  $(59,000) $4,302,000  $(110,000)
REITs $56,000  $(5,000) $27,000  $(1,000) $83,000  $(6,000)  31,000   (8,000)  48,000   (2,000)  79,000   (10,000)
Equity securities $534,000  $(35,000) $590,000  $(168,000) $1,124,000  $(203,000)  4,886,000   (309,000)  798,000   (237,000)  5,684,000   (546,000)
Total $1,292,000  $(192,000) $2,291,000  $(255,000) $3,583,000  $(447,000) $8,676,000  $(368,000) $1,389,000   (298,000)  10,065,000  $(666,000)

 

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) $960,000  $(200,000) $2,385,000  $(109,000) $3,345,000  $(309,000)
REITs $—  $—  $27,000  $(1,000) $27,000  $(1,000)  55,000   (6,000)  27,000   (1,000)  82,000   (7,000)
Equity securities $983,000  $(92,000) $1,689,000  $(227,000) $2,672,000  $(319,000)  2,545,000   (127,000)  823,000   (184,000)  3,368,000   (311,000)
Total $2,403,000  $(111,000) $3,008,000  $(306,000) $5,411,000  $(417,000) $3,560,000  $(333,000) $3,235,000  $(294,000) $6,795,000  $(627,000)

 

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 JanuaryOctober 31, 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 JanuaryOctober 31, 20182018.

Note 3:3 Inventories

 

Inventories at JanuaryOctober 31, 2018 and April 30, 2017 consisted of the following:

  January 31,  April 30, 
  2018  2017 
       
Raw materials $2,704,000  $1,579,000 
Work in process  348,000   442,000 
Finished goods  615,000   356,000 
   3,667,000   2,377,000 
Less: allowance for obsolete inventory  (73,000)  (73,000)
Totals $3,594,000  $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 January 31, 2018 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  $(30,000) $1,784,000 
Total $3,200,000  $(30,000) $3,170,000 

 

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

  October 31, 2018  April 30, 2018 
       
Raw materials $2,781,000  $2,450,000 
Work in process  489,000   444,000 
Finished goods  522,000   463,000 
   3,792,000   3,357,000 
Less: allowance for obsolete inventory  (109,000)  (90,000)
Totals $3,683,000  $3,267,000 

Note 5:4 Business Segments

 

The following is financial information relating to industry segments:

 

 Three months Nine months Three months Nine months  Three months Six months Three months Six months 
 ended ended ended ended  ended ended ended ended 
 Jan 31, 2018 Jan 31, 2018 Jan 31, 2017 Jan 31, 2017  Oct 31, 2018 Oct 31, 2018 Oct 31, 2017 Oct 31, 2017 
Net revenue:                                
Security alarm products $2,715,000  $6,683,000  $2,214,000  $6,955,000  $2,852,000  $5,371,000  $2,170,000  $3,967,000 
Cable & wiring tools  649,000   1,351,000   —   — 
Other products  545,000   1,914,000   431,000   1,239,000   166,000   374,000   919,000   1,370,000 
Total net revenue $3,260,000  $8,597,000  $2,645,000  $8,194,000  $3,667,000  $7,096,000  $3,089,000  $5,337,000 
                                
Income from operations:                                
Security alarm products  452,000   1,534,000   603,000   1,805,000  $689,000  $1,291,000  $670,000  $1,034,000 
Cable & wiring tools  157,000   293,000   —   — 
Other products  130,000   439,000   107,000   321,000   40,000   75,000   231,000   357,000 
Total income from operations $582,000  $1,973,000  $710,000  $2,126,000  $886,000  $1,659,000  $901,000  $1,391,000 
                                
Depreciation and amortization:                                
Security alarm products  10,000   28,000   7,000   29,000  $10,000  $20,000  $10,000  $17,000 
Cable & wiring tools  31,000   62,000   —   — 
Other products  52,000   94,000   27,000   80,000   28,000   55,000   21,000   43,000 
Corporate general  15,000   41,000   13,000   29,000   15,000   30,000   14,000   26,000 
Total depreciation and amortization $77,000  $163,000  $47,000  $138,000  $84,000  $167,000  $45,000  $86,000 
                                
Capital expenditures:                                
Security alarm products  —   260,000   —   —  $—  $—  $50,000  $260,000 
Cable & wiring tools  —   —   —   — 
Other products  —   —   16,000   130,000   —   —   —   — 
Corporate general  16,000   81,000   10,000   16,000   —   —   56,000   56,000 
Total capital expenditures $16,000  $341,000  $26,000  $146,000  $—  $—  $106,000  $316,000 

 

  January 31, 2018  April 30, 2017 
Identifiable assets:        
Security alarm products  4,424,000   3,180,000 
Other products  2,371,000   1,517,000 
Corporate general  34,773,000   33,767,000 
Total assets $41,568,000  $38,464,000 
         

  October 31, 2018  April 30, 2018 
Identifiable assets:        
Security alarm products $4,683,000  $4,564,000 
Cable & wiring tools  2,743,000   2,347,000 
Other products  1,402,000   1,521,000 
Corporate general  30,936,000   32,510,000 
Total assets $39,764,000  $40,942,000 

Note 6:5 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 January 31, 2018  For the three months ended October 31, 2018 
 Income Shares Per-share  Income Shares Per-share 
 (Numerator) (Denominator) Amount  (Numerator) (Denominator) Amount 
Net Income $791,000          $768,000         
            
Basic EPS $791,000   4,969,013  $0.1592  $768,000   4,962,177  $.1548 
Effect of dilutive securities:                        
Convertible preferred stock  0   20,500       —   20,500   (.0007)
Diluted EPS $791,000   4,989,513  $0.1585  $768,000   4,982,677  $.1541 

 

  For the nine months ended January 31, 2018 
  Income  Shares  Per-share 
  (Numerator)  (Denominator)  Amount 
Net Income $2,032,000         
             
Basic EPS $2,032,000   4,955,725  $0.4100 
Effect of dilutive securities:            
Convertible preferred stock  0   20,500     
Diluted EPS $2,032,000   4,976,225  $0.4083 

  For the six months ended October 31, 2018 
  Income  Shares  Per-share 
  (Numerator)  (Denominator)  Amount 
Net Income $1,386,000         
Basic EPS $1,386,000   4,964,879   $.2792 
Effect of dilutive securities:            
Convertible preferred stock  —   20,500   (.0012)
Diluted EPS $1,386,000   4,985,379  $.2780 

 

  For the three months ended January 31, 2017 
  Income  Shares  Per-share 
  (Numerator)  (Denominator)  Amount 
Net Income $792,000         
             
Basic EPS $792,000   4,945,972  $0.1601 
Effect of dilutive securities:            
Convertible preferred stock  0   20,500     
Diluted EPS $792,000   4,966,472  $0.1595 
  For the nine months ended January 31, 2017 
  Income  Shares  Per-share 
  (Numerator)  (Denominator)  Amount 
Net Income $2,051,000         
Basic EPS $2,051,000   4,996,453  $0.4105 
Effect of dilutive securities:            
Convertible preferred stock  0   20,500     
Diluted EPS $2,051,000   5,016,953  $0.4088 
  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  —   20,500   (.0006)
Diluted EPS $722,000   4,973,570  $.1452 

  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  —   20,500   (.0011)
             
Diluted EPS $1,240,000   4,969,581  $.2495 

 

Note 7:6 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$3,000 were paid during both the quarters ending JanuaryOctober 31, 2018 and 2017, respectively.2017. Likewise, the Company paid matching contributions of approximately $8,000$5,000 during both the nine-month periodsix-month periods ending JanuaryOctober 31, 2018 and $7,000 during the corresponding period the prior fiscal year.2017.

Note 8:7 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 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 JanuaryOctober 31, 2018, our investments consisted of money markets, publicly traded equity securities, real estate investment trusts (REITS)(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 tables settable 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

January 31, 2018

   

Assets Measured at Fair Value on a Recurring Basis as of

October 31, 2018

 
 Level 1 Level 2 Level 3 Total   Level 1  Level 2  Level 3  Total 
Assets:                                
Municipal Bonds $-  $5,831,000  $-  $5,831,000  $—  $5,528,000  $—  $5,528,000 
Corporate Bonds $131,000  $-  $-  $131,000   57,000   —   —   57,000 
REITs $-  $109,000  $-  $109,000   —   79,000   —   79,000 
Equity Securities $20,361,000  $-  $-  $20,361,000   18,783,000   —   —   18,783,000 
Money Markets and CDs $1,064,000  $-  $-  $1,064,000   774,000   —   —   774,000 
Total fair value of assets measured on a recurring basis $21,556,000  $5,940,000  $-  $27,496,000  $19,614,000  $5,607,000  $—  $25,221,000 

 

 

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 9:8 Subsequent Events

 

None

MANAGEMENT DISCUSSION AND ANALYSIS

GEORGE RISK INDUSTRIES, INC.OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

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

 

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 new information becomes available in the future.

 

The following discussion should be read in conjunction with the attached condensed consolidated 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 steadyimproved through the three quarters, with increased sales, being offset by increased costfirst half of sales,the fiscal year and greatly improved investment returns.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. New challengesAdditionally, the Company has endured overCompany’s products are traditionally tied to the ninehousing market and with that market being strong, it in turn makes the Company’s sales grow. Challenges in the coming months of this fiscal year include continuing to get product out to customers in a timelier manner and to fill the continuation of training of our new software system, learning and incorporatingstockroom with inventory to get back to shipping out core products the Labor Saving Devices product line, and dealing with some shortages and defectssame day. Also, the price of raw materials.materials has increased with the execution of tariffs by the US government. But management continues to work at keeping operations flowing as efficient as possible with the hopes of getting the facilities running leaner and more profitable than ever before.

 

Results of Operations

 

 ●Net sales were $3,260,000$3,667,000 for the quarter ended JanuaryOctober 31, 2018, which is a 23.25%an 18.71% increase from the corresponding quarter last year. Year-to-date net sales were $8,597,000$7,096,000 at JanuaryOctober 31, 2018, which is a 4.92%32.96% increase from the same period last year. A significant part of growthThe increases in sales is a direct resultshows the stability of the asset purchaseCompany and loyalty of Labor Saving Devices and having a new product line to sell as a result of the purchase. Also, ourits customer base. The ongoing commitment totowards outstanding customer service and customization of products are a few of the many reasons sales remained steadyhave grown. Also, new sales are emerging since GRI acquired the assets of Labor Saving Devices. The Company has been selling this product line for over a year now, which has been a factor in the years.increased sales.
   
 ●Cost of goods sold was 56.0%51.62% of net sales for the quarter ended JanuaryOctober 31, 2018 and was 46.4%45.84% for the same quarter last year. Year-to-date cost of goods sold percentages were 50.4%52.07% for the current ninesix months and 47.6%47.05% for the corresponding ninesix months last year, whichyear. The increases in percentages of cost of goods sold is just slightly over the targetoutside of Management’s goal of keeping labor and other manufacturing expenses at less than 50% for both the quarter and year-to-date results. There were some added expenses that were incurred withManagement has seen increases in labor and materials costs but has decided not to increase the purchaseselling prices of Labor Saving Devices that happened duringour products at this quarter but they were “one time” expenses management expects the cost of goods sold percentage to fall to return to normal in the future.time.
 ●Operating expenses increased by $146,000were up $116,000 for the quarter and also increased by $118,000were up $307,000 for the nine-monthssix-months ended JanuaryOctober 31, 2018 as compared to the corresponding periods last year. These increased costs for the quarter are primarily due to increased commissions, the addition of employees, and the amortization from the asset acquisition of Labor Saving Devices. The Company has been able to keep the operating expenses at less than 30% of net sales for many years; however, the effects of paying for training of the new product development, increased commissions,computer software and additional trainingcurrently paying maintenance and maintenancesupport fees on our new computertwo software platforms has added to these expenses.
 ●Income from operations for the quarter ended JanuaryOctober 31, 2018 was at $582,000$886,000, which is an 18.02%a 1.66% decrease from the corresponding quarter last year, which had income from operations of $710,000.$901,000. Income from operations for the ninesix months ended JanuaryOctober 31, 2018 was at $1,973,000,$1,659,000, which is a 7.20% decrease19.27% increase from the corresponding ninesix months last year, which had income from operations of $2,126,000.$1,391,000.
   
 ●Other income and expenses are updown when comparing to the current quarter and nine-monthsix-month periods to the prior year, with an increasea decrease of $115,000$34,000 in the current quarter and an increasea decrease of $115,000$154,000 for the current year-to-date. The majorityyear-to-date numbers. Most of the activity in these accounts consists of investment interest, dividends, and gain or loss on sale of investments. With the continued growth in the performance of the stock market, decisions were madeThe decrease is primarily due to sell holdings and take the realized gain and dividendsdecreased dividend and interest payments exceeded expectationsincome and manytaking losses on the sale of our holdings had additional and increased dividend payouts.investments.
   
 ●Overall, net income for the quarter ended JanuaryOctober 31, 2018 was down $1,000,up $46,000, or 0.13%6.37%, from the same quarter last year. Similarly, net income for the nine-monthsix-month period ended JanuaryOctober 31, 2018 was down $19,000,up $146,000, or 0.93%11.77%, from the same period in the prior year.
   
 ●Earnings per common share for quarter ended JanuaryOctober 31, 2018 were $0.16$0.15 per share and $0.41$0.28 per share for the year-to-date numbers. EPS for the quarter and ninesix months ended JanuaryOctober 31, 2017 were also $0.16$0.15 per share and $0.41$0.25 per share, respectively.

 

Liquidity and capital resources

 

Operating

 

 ●Net cash decreased $2,504,000$204,000 during the ninesix months ended JanuaryOctober 31, 2018 as compared to an increasea decrease of $80,000$132,000 during the corresponding period last year. This is primarily due to the asset purchase of Labor Saving Devices, Inc., which was done without outside financing.
   
 ●Accounts receivable increased $636,000decreased $23,000 for the ninesix months ended JanuaryOctober 31, 2018 compared with a $163,000 decrease$364,000 increase for the same period last year. The current year increasedecrease is a result of improved sales and collections on accounts receivable taking a bit longer than normal. Management believeshave improved over the last year. An analysis of accounts shows that approximately $16,000 of accountsthere were only 6.05% that were over 90 days have a possibility of being uncollectible.at October 31, 2018.
   
 ●Inventories increased $1,291,000$435,000 during the current nine-monthsix-month period as compared to an decrease of $426,000a $1,290,000 increase last year. The smaller increase in the current year is primarily due to increased sales and not having a large influx of inventory from the inventory purchased fromasset acquisition of Labor Saving Devices.Devices last year.
   
 ●Prepaid expenses saw a $359,000 increase$168,000 decrease for the current ninesix months, primarily due to the prepayment of inventory the Company purchases. Likewise, thebeing delivered that had to be paid for in advance. The prior ninesix months showed a $48,000$139,000 increase in prepaid expenses.
   
 ●Income tax overpayment for the nine monthsperiod ended JanuaryOctober 31, 2018 increased $221,000, as the overpayment also showed an increase$97,000, while there was a decrease of $43,000$127,000 for the same period the prior year. The mainSince net income is higher than the same time last year and management estimated that there would be an uptick in sales with the new product line that is the reason for the current increase is that the Company expects to generate additional income with the asset acquisition that happened earlier this fiscal year.year increase.
   
 ●Accounts payable shows increases for both nine-month periods at $239,000the current six-month period of $189,000 and $20,000, respectively.a decrease of $98,000 for the prior six-month period. The company strives to pay all invoices within terms, and the slight variance in the increases is primarily due to the timing of receipt of products and payment of invoices.
   
 ●Accrued expenses decreased $127,000increased $8,000 for the current nine-monthsix-month period as compared to a $72,000$33,000 decrease for the nine-monthsix-month period ended JanuaryOctober 31, 2017.

Investing

 

 ●As for our investment activities, the Company spent approximately $342,000 on acquisitions of property and equipment fordid not buy any fixed assets during the current nine-month period, insix-month period. In comparison with the corresponding ninesix months last year, where there was activity of $146,000.
●As a result of the asset acquisition of Labor Saving Devices, Inc. (“LSDI”), a net amount of $1,624,000 of intangible assets were bought, along with inventory and fixed assets. Since the acquisition took place in the current year, there was no cash towards this item for the same reporting period last year.$314,000.
   
 ●Additionally, the Company continues to purchase marketable securities, which include municipal bonds and quality stocks. During the nine-monthsix-month period ended JanuaryOctober 31, 2018 there was quite a bit of buy/sell activity in the investment accounts. Net cash spent on purchases of marketable securities for the nine-monthsix-month period ended JanuaryOctober 31, 2018 was $653,000$324,000 compared to $668,000$324,000 spent in the prior nine-monthsix-month period. We continue to use “money manager” accounts for most stock transactions. 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 service fee based on the value of the investments.

 

Financing

 

 ●The Company continues to purchase back its common stock when the opportunity arises. For the nine-monthsix-month period ended JanuaryOctober 31, 2018, the Company purchased $3,000$54,000 worth of treasury stock. This isstock, in comparison to $551,000 spent$3,000 repurchased in the same nine monthscorresponding six-month period the priorlast year.
   
 ●The company paid out dividends of $1,617,000 during the nine months ending January 31, 2018. These dividends were paid during the second quarter. The company declared a dividend of $0.36$0.38 per share of common stock on September 30, 2017 and these dividends were2018, which was paid by October 31, 2017. As forout during the prior year numbers, dividend paid was $1,596,000 forsecond quarter. This is a slight increase to the nine months ending January 31, 2017. A dividend of $0.35 per common share$0.36, which was 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 
  January 31, 2018  January 31, 2017 

Working capital

(current assets – current liabilities)

 $36,407,000  $34,041,000 

Current ratio

(current assets / current liabilities)

  18.596   17.171 

Quick ratio

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

  16.394   15.773 
  As of 
  October 31, 2018  October 31, 2017 
Working capital
        
(current assets – current liabilities) $34,508,000  $34,386,000 
         
Current ratio
        
(current assets / current liabilities)  16.614   9.552 
         
Quick ratio
        
((cash + investments + AR) / current liabilities)  14.401   8.563 

New Product Development

 

The Company and its engineering department continue to develop enhancements to product lines, develop new products whichthat complement existing products, and look for products that are well suited to our distribution network and manufacturing capabilities. Items currently in 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 ETL testing.for listing approval. 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 CC15A new high voltage current controller is complete and has been submitted toreceived U.L. for approval for the US and Canada. This will allow us to manufacture several different versions. OneThe CC-15 series is 15-amps and comes in a 15-amp version that would automatically turn on a whole roomvariety of lights. Another is a 220-volt version to bevoltage configurations. These are used in international markets.for appliance control, environmental control, and lighting systems.
   
 ●We continue to work on high security switches. We have a triple biased high security switch design nearly complete and an adjustable magnet design was completed for recessed mounting applications.
●We continue to research 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. Our 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 considering 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 version of our 200-36 & 4532 overhead door switch line up is nearing completion with the new aluminum cases presently on order. The modified versions, the 200-36UF and 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.

 

Other Information

 

In addition to researching and 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”). UnderASU 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 guidance, lessees will be requiredleases standard at the adoption date and recognizes a cumulative-effect adjustment to recognize so-called right-of-use assets and liabilities for most leases havingthe 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 termscomponent if certain conditions are met. The Company adopted the ASUs in the first quarter of 12 months or more. This update is effective in annual reporting periods beginning after December 31, 2019 and the interim periods starting thereafter. The Company is evaluatingCompany’s accounting systems will be upgraded to comply with the impactrequirements of this updatethe new standard, however, the adoption of ASU 2016-02 will not have a material impact on the Company’s financial statements.statements and related disclosures.

 

In February of 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.Income (ASU 2018-02). Under this update, companies haveexisting U.S. GAAP, the optioneffects 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 reclassify strandeditems originally recorded in accumulated other comprehensive income (loss) are adjusted, certain tax effects caused by USbecome 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 (TCJA) from accumulated other comprehensive income (AOCI) to retained earnings. Under current US GAAP, effects from a change(the Tax Act). The amendments in tax law is recorded as a component of thethis ASU also require certain disclosures about stranded income tax provision related to continuing operations in the period of enactment, even if the deferred taxes were established for a financial statement component not part of continuing operations, such as accumulated other comprehensive income (AOCI). Adopting of this standard will remove tax effects stranded in AOCI by the tax law enactment. Adoption of this ASU is optional. This updateeffects. The guidance is effective in annual reporting periodsfor fiscal years beginning after December 15, 2018, and the interim periods starting thereafter.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 this updateadopting the applicable guidance on the Company’s financial statements.statements and related disclosures.

 

GEORGE RISK INDUSTRIES, INC.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 periods beginning after December 15, 2018. We are currently evaluating the potential impact of adopting 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 and related disclosures.

 

PART I. FINANCIAL INFORMATIONIn 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 is 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.

In August 2018, The FASB issued ASU 2018-14 to improve the effectiveness of disclosures for defined benefit plans under ASC 715-20. The ASU applies to employers that sponsor defined benefit pension or other postretirement plans. The FASB issued ASU 2018-14 as part of its disclosure framework project, which has an objective and primary focus to improve the effectiveness of disclosures in the notes to financial statements. As part of the project, during August 2018, the Board also issued a Concepts Statement, which the FASB used as a basis for amending the disclosure requirements for Subtopic 715-20. The guidance is effective for fiscal years ending after December 15, 2020, and early adoption is permitted. The Company is currently assessing the timing and impact of adopting the updated provisions.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable

 

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 JanuaryOctober 31, 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, more trainingTraining 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 Overover Financial Reporting

 

There was no change in our internal control over financial reporting during the fiscal quarter ended JanuaryOctober 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

GEORGE RISK INDUSTRIES, INC.

 

Part 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 thirdsecond quarter of fiscal year 2018.2019.

 

Period Number of shares repurchasedrepurchased/(issued)
November 1, 2017 – November 30, 2017-0-
December 1, 2017 – December 31, 2017-0-
JanuaryAugust 1, 2018 – JanuaryAugust 31, 2018 5,000
100September 1, 2018 – September 30, 2018 -0-
October 1, 2018 – October 31, 2018800

 

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
10.1Material Contract – Purchase Agreement
    
 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

 

Pursuant toIn accordance with the requirements of the Securities Exchange Act, of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

George Risk Industries, Inc.

(Registrant)

 

George Risk Industries, Inc.
(Registrant)
Date March 16,December 17, 2018By:/s/ Stephanie M. Risk-McElroy
  Stephanie M. Risk-McElroy
  President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board