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

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterquarterly period ended JanuaryJuly 31, 20182019

 

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

[  ] TRANSITION REPORT PURSUANT TO 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 issuerregistrant as specified in its charter)

 

Colorado84-0524756
(State or other jurisdiction of incorporation)
incorporation or organization)		(IRSI.R.S. 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)

 

CheckSecurities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.10 par valueRSKIAOTC Markets
Convertible Preferred Stock, $20 stated valueRSKIAOTC Markets

Indicate 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] 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 (&232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Yes [  ]No [X]

 

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

 

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

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, 2018,September 18, 2019 was 4,968,447.

Transitional Small Business Disclosure Format:Yes [X]   No [  ]4,952,110.

 

 

 

 
 

 

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

 

Item 1.ITEM 1: Financial Statements

 

The unaudited financial statements for the three and nine-monththree-month period ended JanuaryJuly 31, 2018,2019 are attached hereto.

GEORGE RISK INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

 

 January 31, 2018 April 30, 2017  July 31, 2019 April 30, 2019 
 (unaudited)    (unaudited)   
ASSETS                
Current Assets:                
Cash and cash equivalents $3,952,000  $6,456,000  $5,667,000  $4,873,000 
Investments and securities  27,496,000   26,382,000 
Investments and securities, at fair value  27,657,000   27,291,000 
Accounts receivable:                
Trade, net of $16,422 and $2,425 doubtful account allowance  2,471,000   1,848,000 
Trade, net of $8,764 and $9,321 doubtful account allowance  2,534,000   2,696,000 
Other  2,000   3,000   4,000   6,000 
Income tax overpayment  474,000   253,000   —   259,000 
Inventories, net  3,594,000   2,304,000   4,863,000   4,583,000 
Prepaid expenses  487,000   193,000   320,000   282,000 
Total Current Assets $38,476,000  $37,439,000   41,045,000   39,990,000 
                
Property and Equipment, net, at cost  948,000   739,000   1,095,000   984,000 
                
Other Assets                
Investment in Limited Land Partnership, at cost  273,000   273,000   293,000   293,000 
Projects in process  —   13,000   1,000   117,000 
Other  77,000   —   3,000   3,000 
Total Other Assets $350,000  $286,000   297,000   413,000 
                
Intangible Assets, net $1,794,000   — 
Intangible assets, net  1,609,000   1,640,000 
                
TOTAL ASSETS $41,568,000  $38,464,000  $44,046,000  $43,027,000 

 

See accompanying notes to the condensed financial statements.statements

GEORGE RISK INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

(continued)

 

 January 31, 2018 April 30, 2017  July 31, 2019 April 30, 2019 
 (unaudited)    (unaudited)   
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current Liabilities                
Accounts payable, trade $308,000  $69,000  $261,000  $206,000 
Dividends payable  1,580,000   1,416,000   1,714,000   1,714,000 
Accrued expenses:                
Payroll and related expenses  178,000   308,000   287,000   356,000 
Property taxes  3,000   —   3,000   — 
Income tax payable  30,000   — 
Total Current Liabilities $2,069,000  $1,793,000   2,295,000   2,276,000 
                
Long-Term Liabilities                
Deferred income taxes  1,902,000   906,000   1,247,000   1,198,000 
Total Long-Term Liabilities $1,902,000  $906,000   1,247,000   1,198,000 
        
Total Liabilities  3,542,000   3,474,000 
        
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   2,890,000   2,752,000 
Retained earnings  36,232,000   35,981,000   39,011,000   38,145,000 
Less: treasury stock, 3,533,934 and 3,557,606 shares, at cost  (4,141,000)  (4,140,000)
Less: treasury stock, 3,550,571 and 3,544,271 shares, at cost  (4,280,000)  (4,227,000)
Total Stockholders’ Equity $37,597,000  $35,765,000   40,504,000   39,553,000 
                
TOTAL LIABILITES AND STOCKHOLDERS’ EQUITY $41,568,000  $38,464,000 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $44,046,000  $43,027,000 

 

See accompanying notes to the condensed financial statements

GEORGE RISK INDUSTRIES, INC.

CONDENSED INCOME STATEMENTS

FOR THE THREE MONTHS ENDED JULY 31, 2019 AND 2018

(Unaudited)

 

 Three months Nine months Three months Nine months 
 ended ended ended ended  July 31, 2019 July 31, 2018 
 Jan 31, 2018 Jan 31, 2018 Jan 31, 2017 Jan 31, 2017      
Net Sales $3,260,000  $8,597,000  $2,645,000  $8,194,000  $3,552,000  $3,429,000 
Less: Cost of Goods Sold  (1,826,000)  (4,337,000)  (1,229,000)  (3,899,000)  (1,769,000)  (1,801,000)
Gross Profit $1,434,000  $4,260,000  $1,416,000  $4,295,000   1,783,000   1,628,000 
                        
Operating Expenses                
Operating Expenses:        
General and Administrative  313,000   833,000   223,000   664,000   297,000   286,000 
Sales  512,000   1,371,000   461,000   1,432,000   557,000   555,000 
Engineering  22,000   69,000   17,000   59,000   14,000   9,000 
Rent Paid to Related Parties  5,000   14,000   5,000   14,000   5,000   5,000 
Total Operating Expenses $852,000  $2,287,000  $706,000  $2,169,000   873,000   885,000 
                        
Income From Operations  582,000   1,973,000   710,000   2,126,000   910,000   773,000 
                        
Other Income (Expense)                        
Other  —   3,000   1,000   11,000   1,000   3,000 
Dividend and Interest Income  376,000   811,000   332,000   650,000   193,000   193,000 
Gain (Loss) on Investments  123,000   94,000   51,000   136,000 
Gain (Loss) on Sale of Assets  —   4,000   —   — 
Gain (Loss) on Sale of Investments  49,000   (68,000)
 $499,000  $912,000  $384,000  $797,000   243,000   128,000 
                        
Income Before Provisions for Income Taxes  1,081,000   2,885,000   1,094,000   2,923,000   1,153,000   901,000 
                        
Provisions for Income Taxes:                
Provisions for Income Taxes        
Current Expense  281,000   852,000   313,000   896,000   294,000   247,000 
Deferred Tax Expense (Benefit)  9,000   1,000   (11,000)  (24,000)
Deferred tax expense (benefit)  (7,000)  37,000 
Total Income Tax Expense $290,000  $853,000  $302,000  $872,000   287,000   284,000 
                        
Net Income $791,000  $2,032,000  $792,000  $2,051,000  $866,000  $617,000 
                        
Cash Dividends                
Common Stock ($0.36 per share) $—  $1,780,000         
Common Stock ($0.35 per share)         $—  $1,758,000 
Basic Earnings Per Share of Common Stock $0.17  $0.12 
Diluted Earnings Per Share of Common Stock $0.17  $0.12 
                        
Income Per Share of Common Stock                
Basic $0.16  $0.41  $0.16  $0.41 
Diluted $0.16  $0.41  $0.16  $0.41 
                
Weighted Average Number of Common                
Shares Outstanding                
Basic  4,969,013   4,955,725   4,945,972   4,996,453 
Diluted  4,989,513   4,976,225   4,966,472   5,016,953 
Weighted Average Number of Common Shares Outstanding  4,956,389   4,967,580 
Weighted Average Number of Shares Outstanding (Diluted)  4,976,889   4,988,080 

 

See accompanying notes to the condensed financial statements

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTSTATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED JULY 31, 2019 AND 2018

(Unaudited)

 

 Three months Nine months Three months Nine months 
 ended ended ended ended  July 31, 2019 July 31, 2018 
 Jan 31, 2018 Jan 31, 2018 Jan 31, 2017 Jan 31, 2017      
Net Income $791,000  $2,032,000  $792,000  $2,051,000  $866,000  $617,000 
                        
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 
Unrealized gain on securities:        
Unrealized holding gains arising during period  324,000   607,000 
Reclassification adjustment for gains (losses) included in net income  (88,000)  (205,000)  (5,000)  (88,000)  (130,000)  44,000 
Income tax benefit (expense) related to other comprehensive income  (485,000)  (995,000)  (236,000)  (296,000)
Income tax expense related to other comprehensive income  (56,000)  (188,000)
Other Comprehensive Income  674,000   1,385,000   329,000   412,000   138,000   463,000 
                        
Comprehensive Income $1,465,000  $3,417,000  $1,121,000  $2,463,000  $1,004,000  $1,080,000 

 

See accompanying notes to the condensed financial statements

GEORGE RISK INDUSTRIES, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JULY 31, 2019 and 2018

(Unaudited)

  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, April 30, 2019  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock  —   —   —   — 
                 
Unrealized gain (loss), net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, July 31, 2019  4,100  $99,000   8,502,881  $850,000 

  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, April 30, 2018  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock  —   —   —   — 
                 
Unrealized gain (loss), net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, July 31, 2018  4,100  $99,000   8,502,881  $850,000 

See accompanying notes to the condensed financial statements

GEORGE RISK INDUSTRIES, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITIY

FOR THE THREE MONTHS ENDED JULY 31, 2019 and 2018

(Unaudited)

Paid-In  Treasury Stock
(Common Class A)		  Accumulated Other Comprehensive  Retained    
Capital  Shares  Amount  Income  Earnings  Total 
$1,934,000   3,544,271  $(4,227,000) $2,752,000  $38,145,000  $39,553,000 
                       
 —   6,300   (53,000)  —   —   (53,000)
                       
 —   —   —   138,000   —   138,000 
                       
 —   —   —   —   866,000   866,000 
                       
$1,934,000   3,550,571  $(4,280,000) $2,890,000  $39,011,000  $40,504,000 

      

Accumulated

       
Paid-In  Treasury Stock
(Common Class A)		  Other
Comprehensive		  Retained    
Capital  Shares  Amount  Income�� Earnings  Total 
$1,934,000   3,534,784  $(4,148,000) $2,249,000  $36,746,000  $37,730,000 
                       
 —   650   (5,000)  —   —   (5,000)
                       
 —   —   —   463,000   —   463,000 
                       
 —   —   —   —   617,000   617,000 
                       
$1,934,000   3,535,434  $(4,153,000) $2,712,000  $37,363,000  $38,805,000 

See accompanying notes to the condensed financial statements

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTSTATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED JULY 31, 2019 AND 2018

(Unaudited)

 

 Nine months Nine months  July 31, 2019 July 31, 2018 
 ended ended 
 Jan 31, 2018 Jan 31, 2017 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Cash Flows from Operating Activities:        
Net Income $2,032,000  $2,051,000  $866,000  $617,000 
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization  163,000   138,000   89,000   83,000 
(Gain) loss on sale of investments  (117,000)  (149,000)  (83,000)  68,000 
Impairments on investments  23,000   13,000   34,000   — 
Reserve for bad debts  13,000   —   (2,000)  3,000 
Reserve for obsolete inventory  —   5,000   8,000   6,000 
Deferred income taxes  1,000   (24,000)  (7,000)  37,000 
(Gain) loss on sale of assets  (4,000)  — 
Changes in assets and liabilities:                
(Increase) decrease in:                
Accounts receivable  (636,000)  163,000   163,000   234,000 
Inventories  (1,291,000)  426,000   (288,000)  (389,000)
Prepaid expenses  (359,000)  (48,000)  79,000   166,000 
Other receivables  2,000   (5,000)
Employee receivables  2,000   — 
Income tax overpayment  (221,000)  (43,000)  —   244,000 
Increase (decrease) in:                
Accounts payable  239,000   20,000   55,000   (7,000)
Accrued expenses  (127,000)  (72,000)  (66,000)  (172,000)
Net cash provided by (used in) operating activities $(282,000) $2,475,000 
Income tax payable  289,000   — 
Net cash provided by operating activities  1,139,000   890,000 
                
CASH FLOWS FROM INVESTING ACTIVITIES:        
Proceeds from sale of assets  4,000   — 
Cash Flows From Investing Activities:        
(Purchase) of property and equipment  (342,000)  (146,000)  (169,000)  — 
Proceeds from sale of marketable securities  2,013,000   586,000   9,000   2,000 
(Purchase) of marketable securities  (653,000)  (668,000)  (132,000)  (233,000)
(Purchase) of intangible assets  (1,624,000)  — 
(Purchase) of long-term investment  —   (20,000)
Net cash provided by (used in) investing activities $(602,000) $(248,000)
Net cash (used in) investing activities  (292,000)  (231,000)
                
CASH FLOWS FROM FINANCING ACTIVITIES:        
Cash Flows From Financing Activities:        
(Purchase) of treasury stock  (3,000)  (551,000)  (53,000)  (5,000)
Dividends paid  (1,617,000)  (1,596,000)  —   (1,000)
Net cash provided by (used in) financing activities $(1,620,000) $(2,147,000)
Net cash (used in) financing activities  (53,000)  (6,000)
                
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $(2,504,000) $80,000 
Net Increase in Cash and Cash Equivalents $794,000  $653,000 
                
Cash and Cash Equivalents, beginning of period $6,456,000  $5,918,000  $4,873,000  $4,294,000 
Cash and Cash Equivalents, end of period $3,952,000  $5,998,000  $5,667,000  $4,947,000 
                
        
Supplemental Disclosure for Cash Flow Information:                
Cash payments for:                
Income taxes $1,320,000  $1,059,000 
Income taxes paid $0  $0 
Interest paid $0  $0  $0  $1,000 
Cash receipts for:        
Income taxes $253,000  $125,000 
        
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.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JANUARYJULY 31, 20182019

 

Note 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, 20172019 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”) and ASU 2018-20, “Narrow-Scope Improvements for Lessors”. 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,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. During the first quarter of 2019, the FASB issued ASU 2019-01, Leases (Topic 842) to amend ASU 2016-02. This amendment exempts both lessees will be requiredand lessors from having to recognize so-called right-of-use assets and liabilities for mostprovide certain prior year interim disclosure information in the fiscal year in which a company adopts the new leases having lease termsstandard. The Company has adopted the ASUs in the first quarter of 12 months or more. This update is effective in annual reporting periods beginning after December 31, 2019fiscal 2020 and the interim periods starting thereafter. The Company is evaluatingCompany’s accounting systems have been upgraded to comply with the impactrequirements of this updatethe new standard, however, the adoption of ASU 2016-02 did not have a material impact on the Company’s financial statements and related disclosures because leases are not material to the financial statements.

 

In February ofAugust 2018, the FASB issued ASU 2018-02 Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. Under this update, companies have2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the option to reclassify stranded tax effects caused by US Tax Cuts and Jobs Act (TCJA) from accumulated other comprehensive income (AOCI) to retained earnings. Under current US GAAP, effects from a change in tax law is recorded as a component of the 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 updatedisclosure requirements on fair value measurements. The updated guidance is effective in annual reportingfor fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 and the interim periods starting thereafter.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.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires the Company to measure and recognize expected credit losses for financial assets held and not accounted for at fair value through net income. In November 2018, April 2019 and May 2019, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses,” “ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses,” “Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” and “ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief,” which provided additional implementation guidance on the previously issued ASU. The ASU is effective for fiscal years beginning after December 15, 2020. The ASU requires a modified retrospective adoption method. The Company is still evaluating the impact of this updateadoption on the Company’sits financial statements.statements and disclosures.

Note 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.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 June 2018September 2019 and November 2048.January 2044. 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 JanuaryJuly 31, 20182019 and April 30, 2017,2019, 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 
July 31, 2019 Basis Gains Losses Value 
Municipal bonds $5,966,000  $103,000  $(238,000) $5,831,000  $5,475,000  $117,000  $(43,000) $5,549,000 
Corporate bonds $129,000  $2,000  $—  $131,000   26,000   —   —   26,000 
REITs $110,000  $5,000  $(6,000) $109,000   89,000   3,000   (9,000)  83,000 
Equity securities $15,720,000  $4,844,000  $(203,000) $20,361,000   16,729,000   4,252,000   (260,000)  20,721,000 
Money markets and CDs $1,064,000  $—  $—  $1,064,000   1,278,000   —   —   1,278,000 
Total $22,989,000  $4,954,000  $(447,000) $27,496,000  $23,597,000  $4,372,000  $(312,000) $27,657,000 

 

   Gross Gross      Gross Gross   
Investments at Cost Unrealized Unrealized Fair  Cost Unrealized Unrealized Fair 
April 30, 2017 Basis Gains Losses Value 
April 30, 2019 Basis Gains Losses Value 
Municipal bonds $6,045,000  $90,000  $(97,000) $6,038,000  $5,459,000  $79,000  $(55,000) $5,483,000 
Corporate bonds $129,000  $1,000  $—  $130,000   26,000   —   —   26,000 
REITs $64,000  $13,000  $(1,000) $76,000   89,000   1,000   (6,000)  84,000 
Equity securities $15,259,000  $2,441,000  $(319,000) $17,381,000   16,618,000   4,143,000   (296,000)  20,465,000 
Money markets and CDs $2,757,000  $—  $—  $2,757,000   1,233,000   —   —   1,233,000 
Total $24,254,000  $2,545,000  $(417,000) $26,382,000  $23,425,000  $4,223,000  $(357,000) $27,291,000 

 

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 did not recordrecorded an impairment loss duringof $34,000 for the quarter but did record a loss of $23,000 forended July 31, 2019. For the nine monthsprior quarter ended JanuaryJuly 31, 2018. Likewise, for the corresponding periods last year,2018, management did not need to record a loss for the quarter, but did record a $13,000any impairment loss for the nine months ended January 31, 2017.losses.

11


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 JanuaryJuly 31, 20182019 and April 30, 2017,2019, respectively.

 

Unrealized Loss Breakdown by Investment Type at JanuaryJuly 31, 20182019

 

 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) $—  $—  $448,000  $(43,000) $448,000  $(43,000)
REITs $56,000  $(5,000) $27,000  $(1,000) $83,000  $(6,000)  —   —   30,000   (9,000)  30,000   (9,000)
Equity securities $534,000  $(35,000) $590,000  $(168,000) $1,124,000  $(203,000)  1,975,000   (147,000)  729,000   (113,000)  2,704,000   (260,000)
Total $1,292,000  $(192,000) $2,291,000  $(255,000) $3,583,000  $(447,000) $1,975,000  $(147,000) $1,207,000  $(165,000) $3,182,000  $(312,000)

 

Unrealized Loss Breakdown by Investment Type at April 30, 20172019

 

 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) $772,000  $(4,000) $580,000  $(50,000) $1,352,000  $(54,000)
REITs $—  $—  $27,000  $(1,000) $27,000  $(1,000)  —   —   32,000   (6,000)  32,000   (6,000)
Equity securities $983,000  $(92,000) $1,689,000  $(227,000) $2,672,000  $(319,000)  932,000   (102,000)  1,652,000   (195,000)  2,584,000   (297,000)
Total $2,403,000  $(111,000) $3,008,000  $(306,000) $5,411,000  $(417,000) $1,704,000  $(106,000) $2,264,000  $(251,000) $3,968,000  $(357,000)

 

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 JanuaryJuly 31, 2018.2019.

 

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 JanuaryJuly 31, 20182019.

Note 3:Inventories

 

Inventories at JanuaryJuly 31, 20182019 and April 30, 20172019 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.

  July 31, 2019  April 30, 2019 
       
Raw materials $3,878,000  $3,644,000 
Work in process  368,000   389,000 
Finished goods  715,000   641,000 
   4,961,000   4,674,000 
Less: allowance for obsolete inventory  (98,000)  (91,000)
Inventories, net $4,863,000  $4,583,000 

Note 5:4: Business Segments

 

The following is financial information relating to industry segments:

 

  July 31, 
  2019  2018 
Net revenue:        
Security alarm products $2,830,000  $2,150,000 
Cable & wiring tools  536,000   679,000 
Other products  186,000   600,000 
Total net revenue $3,552,000  $3,429,000 
        
Income from operations:        
Security alarm products $725,000  $485,000 
Cable & wiring tools  137,000   153,000 
Other products  48,000   135,000 
Total income from operations $910,000  $773,000 
         
Depreciation and amortization:        
Security alarm products $23,000  $10,000 
Cable & wiring tools  31,000   31,000 
Other products  20,000   27,000 
Corporate general  15,000   15,000 
Total depreciation and amortization $89,000  $83,000 
         
Capital expenditures:        
Security alarm products $169,000  $— 
Cable & wiring tools  —   — 
Other products  —   — 
Corporate general  —   — 
Total capital expenditures $169,000  $— 

 

  Three months  Nine months  Three months  Nine months 
  ended  ended  ended  ended 
  Jan 31, 2018  Jan 31, 2018  Jan 31, 2017  Jan 31, 2017 
Net revenue:                
Security alarm products $2,715,000  $6,683,000  $2,214,000  $6,955,000 
Other products  545,000   1,914,000   431,000   1,239,000 
Total net revenue $3,260,000  $8,597,000  $2,645,000  $8,194,000 
                 
Income from operations:                
Security alarm products  452,000   1,534,000   603,000   1,805,000 
Other products  130,000   439,000   107,000   321,000 
Total income from operations $582,000  $1,973,000  $710,000  $2,126,000 
                 
Depreciation and amortization:                
Security alarm products  10,000   28,000   7,000   29,000 
Other products  52,000   94,000   27,000   80,000 
Corporate general  15,000   41,000   13,000   29,000 
Total depreciation and amortization $77,000  $163,000  $47,000  $138,000 
                 
Capital expenditures:                
Security alarm products  —   260,000   —   — 
Other products  —   —   16,000   130,000 
Corporate general  16,000   81,000   10,000   16,000 
Total capital expenditures $16,000  $341,000  $26,000  $146,000 

 January 31, 2018 April 30, 2017  July 31, 2019 April 30, 2019 
Identifiable assets:                
Security alarm products  4,424,000   3,180,000  $6,369,000  $6,179,000 
Cable & wiring tools  2,725,000   2,713,000 
Other products  2,371,000   1,517,000   864,000   842,000 
Corporate general  34,773,000   33,767,000   34,088,000   33,293,000 
Total assets $41,568,000  $38,464,000  $44,046,000  $43,027,000 
        

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 
  Income  Shares  Per-share 
  (Numerator)  (Denominator)  Amount 
Net Income $791,000         
             
Basic EPS $791,000   4,969,013  $0.1592 
Effect of dilutive securities:            
Convertible preferred stock  0   20,500     
Diluted EPS $791,000   4,989,513  $0.1585 
  For the three months ended July 31, 2019 
  Income  Shares  Per-Share 
  (Numerator)  (Denominator)  Amount 
Net income $866,000         
Basic EPS $866,000   4,956,389  $.1747 
Effect of dilutive Convertible Preferred Stock  –   20,500   (.0007)
Diluted EPS $866,000   4,976,889  $.1740 

 

  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 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 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 

 

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)401 (k) of the Internal Revenue Code of 1986, as amended. Matching contributions by the Company of approximately $2,000 were paid during both the quartersquarter ending JanuaryJuly 31, 2019 and 2018, and 2017, respectively. Likewise, the Company paid matching contributions of approximately $8,000 during the nine-month period ending January 31, 2018 and $7,000 during the corresponding period the prior fiscal year.

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 JanuaryJuly 31, 2018,2019, our investments consisted of money markets, certificates of deposits (CDs), 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
July 31, 2019		 
 Level 1 Level 2 Level 3 Total  Level 1 Level 2 Level 3 Total 
Assets:                         
Municipal Bonds $-  $5,831,000  $-  $5,831,000  $—  $5,549,000  $—  $5,549,000 
Corporate Bonds $131,000  $-  $-  $131,000   26,000   —   —   26,000 
REITs $-  $109,000  $-  $109,000   —   83,000   —   83,000 
Equity Securities $20,361,000  $-  $-  $20,361,000   20,721,000   —   —   20,721,000 
Money Markets and CDs $1,064,000  $-  $-  $1,064,000   1,278,000   —   —   1,278,000 
Total fair value of assets measured on a recurring basis $21,556,000  $5,940,000  $-  $27,496,000  $22,025,000  $5,632,000  $—  $27,657,000 

 

 

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, 2019		 
 Level 1 Level 2 Level 3 Total  Level 1 Level 2 Level 3 Total 
Assets:                                
Municipal Bonds $—  $6,038,000  $—  $6,038,000  $—  $5,483,000  $—  $5,483,000 
Corporate Bonds $130,000  $—  $—  $130,000   26,000   —   —   26,000 
REITs $—  $76,000  $—  $76,000   —   84,000   —   84,000 
Equity Securities $17,381,000  $—  $—  $17,381,000   20,465,000   —   —   20,465,000 
Money Markets and CDs $2,757,000  $—  $—  $2,757,000   1,233,000   —   —   1,233,000 
Total fair value of assets measured on a recurring basis $20,268,000  $6,114,000  $—  $26,382,000  $21,724,000  $5,567,000  $—  $27,291,000 

 

Note 9:8 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 consolidated financial statements, and with the Company’s audited financial statements and discussion for the fiscal year ended April 30, 2017.2019.

 

Executive Summary

 

The Company’s performance has remained steadyincreased through the three quarters, with increased sales, being offset by increased cost of sales, and greatly improved investment returns. This is duefirst quarter in comparison to the continuation ofprior quarter last year. In comparison to the most recent prior quarter, performance has stayed steady with similar sales figures. The main difference between this year’s quarter and last year’s quarter is that the Company doesn’t have a big back order log and is able to get inventory in the stockroom which allows the Company to ship products out on timely basis. Opportunities include continuing to learn and grow with our quality USA madecomputer system and to continue looking at businesses that might be a good fit to purchase. Also, we have new products withthat are scheduled to enter the ability for customization, our notable customer service, andmarketplace by the purchaseend of the assets of Labor Saving Devices, Inc. New challengescalendar year. Challenges in the Company has endured overcoming months include continuing to get product out to customers in a timelier manner. Raw material prices are also a concern with tariffs being levied by the nine months of this fiscal year includeUS government and other factors. Management continues to work at keeping the continuation of training of our new software system, learningfacilities running leaner and incorporating the Labor Saving Devices product line, and dealing with some shortages and defects of raw materials.more profitable than ever before.

 

Results of Operations

 

 ●Net sales were $3,260,000 for the quarter ended January 31, 2018, which isshowed a 23.25%3.59% increase from the corresponding quarter last year. Year-to-date net sales were $8,597,000 at January 31, 2018, which is a 4.92% increase fromover the same period lastin the prior year. A significant part of growthManagement believes that they have been successful at training employees on the new computer system and production is running smoothly. The Company has also seen some old customers buying from us again. Management believes that this may be in sales is a direct result of the asset purchase of Labor Saving Devices and having a new product linerelation to sell as a result of the purchase. Also,price increases from our ongoing commitment to outstanding customer service and customization of products are a few of the many reasons sales remained steady over the years.
competitors
 ●Cost of goods sold was 56.0%saw a decrease from 52.52% of net sales forin the quarter ended January 31, 2018 and was 46.4% for the same quarter last year. Year-to-date cost of goods sold percentages were 50.4% forprior year, to 49.80% in the current nine months and 47.6% for the corresponding nine months last year,quarter, which is just slightly overinside of Management’s goal to keep labor and other manufacturing expenses within the targetrange of less than45 to 50% for both the quarter and year-to-date results. There were some added expenses that were incurred with the purchase of Labor Saving Devices that happened during this quarter but they were “one time” expenses management expects the. The decreased cost of goods sold percentage to fall to return to normal in the future.
is a reflection of having better training and working more efficiently when making product.
 ●Operating expenses have increased by $146,000$18,000 when comparing the current year quarter to the same quarter for the prior year, but the percentage in relation to net sales decreased to 24.58% for the quarter and also increased by $118,000 for the nine-months ended JanuaryJuly 31, 20182019 as compared to 24.93% for the corresponding periodsquarter last year. TheseThe Company has been able to keep the operating expenses at less than 30% of net sales for many years now; however, the actual dollar amount increase is because of increased costs are primarily due to increased new product development, increased commissions,commission amounts (since sales have increased) and additional traininglabor costs for hiring new employees and maintenance fees on our new computer softwarewage increases.
 ●Income from operations for the quarter ended JanuaryJuly 31, 20182019 was at $582,000$910,000, which is an 18.02% decreasea 17.72% increase from the corresponding quarter last year, which had income from operations of $710,000. Income from operations for the nine months ended January 31, 2018 was at $1,973,000, which is a 7.20% decrease from the corresponding nine months last year, which had income from operations of $2,126,000.
$773,000.
 ●Other income and expenses are up when comparing to the current quarter and nine-month periods the prior year, with an increase of $115,000 in the current quarter and an increase of $115,000showed a $243,000 gain for the current year-to-date.quarter ended July 31, 2019 as compared to a $128,000 gain for the quarter ended July 31, 2018. The majorityincrease is primarily due to having gains on the sale of activity in these accounts consistsinvestments instead of investment interest, dividends, and gain orhaving a loss on sale of investments. Withthat number as it was for the continued growth in the performance of the stock market, decisions were made to sell holdings and take the realized gain and dividends and interest payments exceeded expectations and many of our holdings had additional and increased dividend payouts.
same quarter last year.
 ●Overall,Provision for income taxes showed an increase of $3,000, up from $284,000 in the quarter ended July 31, 2018 to $287,000 for the quarter ended July 31, 2019. The tax cuts implemented by the Federal government have kept income tax numbers lower.
●In turn, net income for the quarter ended JanuaryJuly 31, 20182019 was down $1,000, or 0.13%,$866,000, a 40.36% increase from the samecorresponding quarter last year. Similarly,year, which showed net income for the nine-month period ended January 31, 2018 was down $19,000, or 0.93%, from the same period in the prior year.
of $617,000.
 ●Earnings per share for the quarter ended July 31, 2019 were $0.17 per common share and $0.12 per common share for the quarter ended JanuaryJuly 31, 2018 were $0.16 per share and $0.41 per share for the year-to-date numbers. EPS for the quarter and nine months ended January 31, 2017 were also $0.16 per share and $0.41 per share, respectively.2018.

 

Liquidity and capital resources

 

Operating

 

 ●Net cash decreased $2,504,000increased $794,000 during the nine monthsquarter ended JanuaryJuly 31, 20182019 as compared to an increase of $80,000$653,000 during the corresponding periodquarter 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 $163,000 for the nine months ended Januaryquarter ending July 31, 20182019 compared with a $163,000$234,000 decrease for the same periodquarter last year. The current year increasedecrease in accounts receivable is a result of improved sales and collectionsdirectly attributable to the Company’s ability to collect on accounts receivable takingand to keep past due accounts to a bit longer than normal. Management believesminimum. An analysis of accounts shows that approximately $16,000 of accountsthere were only 5.15% that were over 90 days have a possibility of being uncollectible.
at July 31, 2019.
 ●Inventories increased $1,291,000$288,000 during the current nine-month periodquarter as compared to an decrease of $426,000a $389,000 increase last year,year. The smaller increase is primarily due to the inventory purchased from Labor Saving Devices.
fact that the Company selling more finished goods at a slightly faster rate than it is replenishing raw materials.
 ●PrepaidAt the quarter ended July 31, 2019 there was a $79,000 decrease in prepaid expenses sawand at July 31, 2018, there was a $359,000 increase for the$166,000 decrease. The current nine months, primarilydecrease is due to the prepayment of inventory the Company purchases. Likewise, the prior nine months showed a $48,000 increasecapitalizing some projects in prepaid expenses.
●Income tax overpayment for the nine months ended January 31, 2018 increased $221,000, as the overpayment also showed an increase of $43,000 for the same period the prior year. The main reason for the current increase is that the Company expects to generate additional income with the asset acquisition that happened earlier this fiscal year.
process.
 ●Accounts payable shows increasesan increase of $55,000 for both nine-month periods at $239,000 and $20,000, respectively. The companythe quarter ended July 31, 2019 compared to a decrease of $7,000 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 variance in increases is primarily due to the timing of receipt of products and payment of invoices.
merchandise.
 ●Accrued expenses decreased $127,000$66,000 for the current nine-month periodquarter as compared to a $72,000$172,000 decrease for the nine-month periodquarter ended JanuaryJuly 31, 2017.2018. The difference in the amounts is primarily due to timing issues of when pay periods end.
●Income tax payable for the quarter ended July 31, 2019 increased $289,000, while there was a $244,000 decrease towards income tax overpayment for the quarter ended July 31, 2018. The current increase is due to waiting on tax refunds to be sent and not having to pay income tax estimates yet.

Investing

 

 ●As for our investment activities, the Company spent approximately $342,000 on acquisitionspurchased $169,000 of property and equipment forduring the current nine-month period, infiscal quarter. In comparison with the corresponding nine monthsquarter last year, where there was activitywere not any purchases 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 inventoryproperty 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.
equipment.
 ●Additionally, the Company continues to purchase marketable securities, which include municipal bonds and quality stocks. During the nine-month period ended January 31, 2018 there was quite a bit of buy/sell activity in the investment accounts. Net cashCash spent on purchases of marketable securities for the nine-month periodquarter ended JanuaryJuly 31, 20182019 was $653,000$132,000 compared to $668,000$233,000 spent induring the prior nine-month period.quarter ended July 31, 2018. 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 nine-month periodquarter ended JanuaryJuly 31, 2018,2019, the Company purchased $3,000$53,000 worth of treasury stock. This is in comparison to $551,000stock, along with the $5,000 spent in the same nine months period the prior 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 per share of common stock on September 30, 2017 and these dividends were paid by October 31, 2017. As for the prior year numbers, dividend paid was $1,596,000 for the nine months ending January 31, 2017. A dividend of $0.35 per common share 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:

  Qtr ended  Qtr ended 
  July 31, 2019  July 31, 2018 
Working capital        
(current assets – current liabilities) $38,750,000  $36,894,000 
Current ratio        
(current assets / current liabilities)  17.882   18.760 
Quick ratio        
((cash + investments + AR) / current liabilities)  15.622   16.567 

 

  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 

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 updatedA new 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 CC15 is complete and has been submitted to U.L. for approval for the US and Canada. This will allow us to manufacture several different versions. One is a 15-amp version that would automatically turn on a whole room of lights. Another is a 220-volt version to be used in international markets.
●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 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 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 versionWe are ready to launch a new product in our cable and wiring tools segment, The Grabbit GR5. This is an ultra-compact, lightweight telescoping pole that extends 5’ to grab or push a wire. The GR5 is the newest member of our 200-36 & 4532 overhead door switch line up is nearing completionthe Grabbit family - joining the 10’, 12’ and 18’ versions. The Grabbits are an indispensable tool when running wire through drop ceilings and difficult-to-access areas. A Z-tip, J-tip and LED light are included with the new aluminum cases presentlyGrabbits which are interchangeable depending 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.situation.

 

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 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. Under the new “Leases (Topic 842)” (“ASU 2016-02”), which provides guidance for accounting for leases. ASU 2016-02 requires lessees will be required to recognize so-calledclassify leases as either finance or operating leases and to record a right-of-use assetsasset and liabilitiesa lease liability for mostall leases having lease terms ofwith 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 more. This updateon a straight-line basis over the term of the lease. Accounting for lessors remains largely unchanged from current GAAP. ASU 2016-02 is effective in annual reporting periodsfor the Company beginning after December 31, 2019 and the interim periods starting thereafter. The CompanyMay 1, 2019. Early adoption is evaluating the impact of this update on the Company’s financial statements.

permitted. In February ofJuly 2018, the FASB issued ASU 2018-02 Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. Under this update, companies have the optionNo. 2018-10 “Codification Improvements to reclassify stranded tax effects caused by US Tax CutsTopic 842, Leases” (“ASU 2018-10”) and Jobs Act (TCJA) from accumulated other comprehensive income (AOCI) to retained earnings. Under current US GAAP, effects from a change in tax law is recorded as a componentASU No. 2018-11 “Leases (Topic 842) Targeted Improvements” (“ASU 2018-11”) and ASU 2018-20, “Narrow-Scope Improvements for Lessors”. ASU 2018-10 provides certain amendments that affect narrow aspects of the income tax provision relatedguidance issued in ASU 2016-02. ASU 2018-11 allows all entities adopting ASU 2016-02 to continuing operationschoose 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 enactment, evenadoption. ASU 2018-11 also allows lessors to not separate non-lease components from the associated lease component if certain conditions are met. During the deferred taxes were established forfirst quarter of 2019, the FASB issued ASU 2019-01, Leases (Topic 842) to amend ASU 2016-02. This amendment exempts both lessees and lessors from having to provide certain prior year interim disclosure information in the fiscal year in which a company adopts the new leases standard. The Company has adopted the ASUs in the first quarter of fiscal 2020 and the Company’s accounting systems have been upgraded to comply with the requirements of the new standard, however, the adoption of ASU 2016-02 did not have a material impact on the Company’s financial statement componentstatements and related disclosures because leases are not part of continuing operations, such as accumulated other comprehensive income (AOCI)material to the financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). Adopting of this standard will remove tax effects stranded in AOCI byThe updated guidance improves the tax law enactment. Adoption of this ASU is optional. This updatedisclosure requirements on fair value measurements. The updated guidance is effective in annual reportingfor fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 and the interim periods starting thereafter.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.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires the Company to measure and recognize expected credit losses for financial assets held and not accounted for at fair value through net income. In November 2018, April 2019 and May 2019, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses,” “ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses,” “Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” and “ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief,” which provided additional implementation guidance on the previously issued ASU. The ASU is effective for fiscal years beginning after December 15, 2020. The ASU requires a modified retrospective adoption method. The Company is still evaluating the impact of this updateadoption on the Company’sits financial statements.

statements and disclosures.

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 JanuaryJuly 31, 2018.2019. 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 Over Financial Reporting

 

There was no change in our internal control over financial reporting during the fiscal quarter ended JanuaryJuly 31, 20182019 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 of common stock for the thirdfirst quarter of fiscal year 2018.2020.

 

Period Number of shares repurchased
NovemberMay 1, 20172019 – November 30, 2017May 31, 2019 -0-
DecemberJune 1, 20172019 – December 31, 2017June 30, 2019 -0-300
JanuaryJuly 1, 20182019 – JanuaryJuly 31, 20182019 1006,000

 

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)
  
Date March 16, 2018September 18, 2019By:/s/ Stephanie M. Risk-McElroy
  Stephanie M. Risk-McElroy
  

President, Chief Executive Officer, Chief Financial Officer

and Chairman of the Board