UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterquarterly period ended JanuaryOctober 31, 20182019
[ ] 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)
| Colorado | 84-0524756 | |
| (State or other jurisdiction of incorporation or organization) | ( Identification No.) |
| 802 South Elm St. | ||
| Kimball, NE | 69145 | |
| (Address of principal executive offices) | (Zip Code) | |
(308) 235-4645
(Registrant’s telephone number, including area code)
CheckSecurities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Class A Common Stock, $0.10 par value | RSKIA | OTC Markets | ||
| Convertible Preferred Stock, $20 stated value | RSKIA | OTC 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 [ ]
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 [ ]
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,December 20, 2019 was 4,968,447.4,950,760.
Transitional Small Business Disclosure Format:Yes [X] No [ ]
EXPLANATORY NOTE
This Amendment No. 1 to Form 10-Q, or this Amendment, amends the Quarterly Report on Form 10-Q for the three-and six months periods ended October 31, 2019 that we originally filed with the Securities and Exchange Commission, or the Commission, on December 20, 2019, or the Original Filing, in connection with our failure to give effect to the phase in of FASB ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”) in the financial statements included in the Original Filing.
All amendments and restatements to the financial statements are non-cash in nature.
Restatement
As further discussed in Note 9 to our unaudited financial statements in Part I, Item 1, “Financial Statements” of this Amendment, on March 4, 2020, we concluded that we would restate our previously issued financial statements as of and for the three-and six months periods ended October 31, 2019, as set forth in the Original Filing in connection with our failure to give effect to the phase in of ASU 2016-01 in the financial statements included in the Original Filing.
Amendment
The purpose of this Amendment is to restate our previously issued unaudited financial statements and related disclosures as of and for the three-and six months periods ended October 31, 2019 in connection with the application of ASU 2016-01. This Amendment also includes (a) an amended Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to reflect the correction of the error described above.
Except as expressly set forth herein, including in the notes to the unaudited financial statements, this Amendment does not reflect events occurring after the date of the Original Filing or modify or update any of the other disclosures contained therein in any way other than as required to reflect the amendment discussed above. Accordingly, this Amendment should be read in conjunction with the Original Filing and our other filings with the Commission. Information not affected by the restatement is unchanged and reflects disclosures made at the time of the filing of the Original Form 10-Q.
Items Amended in this Filing
For reasons discussed above, we are filing this Amendment in order to amend the following items in our Original Filing to the extent necessary to reflect the adjustments discussed above and make corresponding revisions to our financial data cited elsewhere in this Amendment in connection with the application of ASU 2016-01 in this Amendment that was not previously applied:
Part I, Item 1. Financial Statements
Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Part I, Item 4. Controls and Procedures
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
The unaudited financial statements for the three and nine-month periodthree-and six-month periods ended JanuaryOctober 31, 2018,2019, are attached hereto.
GEORGE RISK INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
| January 31, 2018 | April 30, 2017 | October 31, 2019 | April 30, 2019 | |||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| ASSETS | ||||||||||||||||
| Current Assets: | ||||||||||||||||
| Cash and cash equivalents | $ | 3,952,000 | $ | 6,456,000 | $ | 5,212,000 | $ | 4,873,000 | ||||||||
| Investments and securities | 27,496,000 | 26,382,000 | 27,385,000 | 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 $4,082 and $9,321 doubtful account allowance | 2,217,000 | 2,696,000 | ||||||||||||||
| Other | 2,000 | 3,000 | 1,000 | 6,000 | ||||||||||||
| Income tax overpayment | 474,000 | 253,000 | 145,000 | 259,000 | ||||||||||||
| Inventories, net | 3,594,000 | 2,304,000 | 5,163,000 | 4,583,000 | ||||||||||||
| Prepaid expenses | 487,000 | 193,000 | 111,000 | 282,000 | ||||||||||||
| Total Current Assets | $ | 38,476,000 | $ | 37,439,000 | 40,234,000 | 39,990,000 | ||||||||||
| Property and Equipment, net, at cost | 948,000 | 739,000 | 1,041,000 | 984,000 | ||||||||||||
| Other Assets | ||||||||||||||||
| Investment in Limited Land Partnership, at cost | 273,000 | 273,000 | 320,000 | 293,000 | ||||||||||||
| Projects in process | — | 13,000 | 17,000 | 117,000 | ||||||||||||
| Other | 77,000 | — | 3,000 | 3,000 | ||||||||||||
| Total Other Assets | $ | 350,000 | $ | 286,000 | 340,000 | 413,000 | ||||||||||
| Intangible Assets, net | $ | 1,794,000 | — | 1,578,000 | 1,640,000 | |||||||||||
| TOTAL ASSETS | $ | 41,568,000 | $ | 38,464,000 | $ | 43,193,000 | $ | 43,027,000 | ||||||||
See accompanying notes to the unaudited condensed financial statements.statements
GEORGE RISK INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
(continued)
| January 31, 2018 | April 30, 2017 | October 31, 2019 | April 30, 2019 | |||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
| Current Liabilities | ||||||||||||||||
| Accounts payable, trade | $ | 308,000 | $ | 69,000 | $ | 170,000 | $ | 206,000 | ||||||||
| Dividends payable | 1,580,000 | 1,416,000 | 1,892,000 | 1,714,000 | ||||||||||||
| Accrued expenses: | ||||||||||||||||
| Payroll and related expenses | 178,000 | 308,000 | ||||||||||||||
| Property taxes | 3,000 | — | ||||||||||||||
| Payroll and other expenses | 367,000 | 356,000 | ||||||||||||||
| Total Current Liabilities | $ | 2,069,000 | $ | 1,793,000 | 2,429,000 | 2,276,000 | ||||||||||
| Long-Term Liabilities | ||||||||||||||||
| Deferred income taxes | 1,902,000 | 906,000 | 1,278,000 | 1,198,000 | ||||||||||||
| Total Long-Term Liabilities | $ | 1,902,000 | $ | 906,000 | 1,278,000 | 1,198,000 | ||||||||||
| Total Liabilities | 3,707,000 | 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 | 50,000 | 14,000 | ||||||||||||
| Retained earnings | 36,232,000 | 35,981,000 | 40,834,000 | 40,883,000 | ||||||||||||
| Less: treasury stock, 3,533,934 and 3,557,606 shares, at cost | (4,141,000 | ) | (4,140,000 | ) | ||||||||||||
| Less: treasury stock, 3,550,771 and 3,544,271 shares, at cost | (4,281,000 | ) | (4,227,000 | ) | ||||||||||||
| Total Stockholders’ Equity | $ | 37,597,000 | $ | 35,765,000 | 39,486,000 | 39,553,000 | ||||||||||
| TOTAL LIABILITES AND STOCKHOLDERS’ EQUITY | $ | 41,568,000 | $ | 38,464,000 | ||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 43,193,000 | $ | 43,027,000 | ||||||||||||
See accompanying notes to the unaudited condensed financial statements
GEORGE RISK INDUSTRIES, INC.
CONDENSED INCOME STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2019 AND 2018
(Unaudited)
| 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 Sales | $ | 3,260,000 | $ | 8,597,000 | $ | 2,645,000 | $ | 8,194,000 | ||||||||
| Less: Cost of Goods Sold | (1,826,000 | ) | (4,337,000 | ) | (1,229,000 | ) | (3,899,000 | ) | ||||||||
| Gross Profit | $ | 1,434,000 | $ | 4,260,000 | $ | 1,416,000 | $ | 4,295,000 | ||||||||
| Operating Expenses | ||||||||||||||||
| General and Administrative | 313,000 | 833,000 | 223,000 | 664,000 | ||||||||||||
| Sales | 512,000 | 1,371,000 | 461,000 | 1,432,000 | ||||||||||||
| Engineering | 22,000 | 69,000 | 17,000 | 59,000 | ||||||||||||
| Rent Paid to Related Parties | 5,000 | 14,000 | 5,000 | 14,000 | ||||||||||||
| Total Operating Expenses | $ | 852,000 | $ | 2,287,000 | $ | 706,000 | $ | 2,169,000 | ||||||||
| Income From Operations | 582,000 | 1,973,000 | 710,000 | 2,126,000 | ||||||||||||
| Other Income (Expense) | ||||||||||||||||
| Other | — | 3,000 | 1,000 | 11,000 | ||||||||||||
| Dividend and Interest Income | 376,000 | 811,000 | 332,000 | 650,000 | ||||||||||||
| Gain (Loss) on Investments | 123,000 | 94,000 | 51,000 | 136,000 | ||||||||||||
| Gain (Loss) on Sale of Assets | — | 4,000 | — | — | ||||||||||||
| $ | 499,000 | $ | 912,000 | $ | 384,000 | $ | 797,000 | |||||||||
| Income Before Provisions for Income Taxes | 1,081,000 | 2,885,000 | 1,094,000 | 2,923,000 | ||||||||||||
| Provisions for Income Taxes: | ||||||||||||||||
| Current Expense | 281,000 | 852,000 | 313,000 | 896,000 | ||||||||||||
| Deferred Tax Expense (Benefit) | 9,000 | 1,000 | (11,000 | ) | (24,000 | ) | ||||||||||
| Total Income Tax Expense | $ | 290,000 | $ | 853,000 | $ | 302,000 | $ | 872,000 | ||||||||
| Net Income | $ | 791,000 | $ | 2,032,000 | $ | 792,000 | $ | 2,051,000 | ||||||||
| Cash Dividends | ||||||||||||||||
| Common Stock ($0.36 per share) | $ | — | $ | 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 | ||||||||
| 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 | ||||||||||||
| Three months ended Oct 31, 2019 | Six months ended Oct 31, 2019 | Three months ended Oct 31, 2018 | Six months ended Oct 31, 2018 | |||||||||||||
| Net Sales | $ | 3,710,000 | $ | 7,263,000 | $ | 3,667,000 | $ | 7,096,000 | ||||||||
| Less: Cost of Goods Sold | (1,860,000 | ) | (3,630,000 | ) | (1,893,000 | ) | (3,695,000 | ) | ||||||||
| Gross Profit | 1,850,000 | 3,633,000 | 1,774,000 | 3,401,000 | ||||||||||||
| Operating Expenses | ||||||||||||||||
| General and Administrative | 329,000 | 626,000 | 331,000 | 616,000 | ||||||||||||
| Sales | 555,000 | 1,112,000 | 525,000 | 1,080,000 | ||||||||||||
| Engineering | 17,000 | 32,000 | 28,000 | 37,000 | ||||||||||||
| Rent Paid to Related Parties | 3,000 | 8,000 | 4,000 | 9,000 | ||||||||||||
| Total Operating Expenses | 904,000 | 1,778,000 | 888,000 | 1,742,000 | ||||||||||||
| Income From Operations | 946,000 | 1,855,000 | 886,000 | 1,659,000 | ||||||||||||
| Other Income (Expense) | ||||||||||||||||
| Other | 1,000 | 2,000 | 6,000 | 8,000 | ||||||||||||
| Dividend and Interest Income | 166,000 | 359,000 | 152,000 | 345,000 | ||||||||||||
| Unrealized Gain (Loss) on Investments | 129,000 | 274,000 | — | — | ||||||||||||
| Gain (Loss) on Investments | 10,000 | 59,000 | (27,000 | ) | (94,000 | ) | ||||||||||
| Total Other Income | 306,000 | 694,000 | 131,000 | 259,000 | ||||||||||||
| Income Before Provisions for Income Taxes | 1,252,000 | 2,549,000 | 1,017,000 | 1,918,000 | ||||||||||||
| Provisions for Income Taxes: | ||||||||||||||||
| Current Expense | 258,000 | 552,000 | 261,000 | 508,000 | ||||||||||||
| Deferred Tax Expense (Benefit) | 37,000 | 65,000 | (12,000 | ) | 24,000 | |||||||||||
| Total Income Tax Expense | 295,000 | 617,000 | 249,000 | 532,000 | ||||||||||||
| Net Income | $ | 957,000 | $ | 1,932,000 | $ | 768,000 | $ | 1,386,000 | ||||||||
| Income Per Share of Common Stock | ||||||||||||||||
| Basic | $ | 0.19 | $ | 0.39 | $ | 0.15 | $ | 0.28 | ||||||||
| Diluted | $ | 0.19 | $ | 0.39 | $ | 0.15 | $ | 0.28 | ||||||||
| Weighted Average Number of Common Shares Outstanding | ||||||||||||||||
| Basic | 4,952,110 | 4,954,250 | 4,962,177 | 4,964,879 | ||||||||||||
| Diluted | 4,972,610 | 4,974,750 | 4,982,677 | 4,985,379 | ||||||||||||
See accompanying notes to the unaudited condensed financial statements
GEORGE RISK INDUSTRIES, INC.
CONDENSED STATEMENTSTATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2019 AND 2018
(Unaudited)
| 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 Income | $ | 791,000 | $ | 2,032,000 | $ | 792,000 | $ | 2,051,000 | ||||||||
| 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 | ||||||||||||
| Reclassification adjustment for gains (losses) included in net income | (88,000 | ) | (205,000 | ) | (5,000 | ) | (88,000 | ) | ||||||||
| Income tax benefit (expense) related to other comprehensive income | (485,000 | ) | (995,000 | ) | (236,000 | ) | (296,000 | ) | ||||||||
| Other Comprehensive Income | 674,000 | 1,385,000 | 329,000 | 412,000 | ||||||||||||
| Comprehensive Income | $ | 1,465,000 | $ | 3,417,000 | $ | 1,121,000 | $ | 2,463,000 | ||||||||
| Three months ended Oct 31, 2019 | Six months ended Oct 31, 2019 | Three months ended Oct 31, 2018 | Six months ended Oct 31, 2018 | |||||||||||||
| Net Income | $ | 957,000 | $ | 1,932,000 | $ | 768,000 | $ | 1,386,000 | ||||||||
| Other Comprehensive Income, net of tax | ||||||||||||||||
| Unrealized gain (loss) on securities: | ||||||||||||||||
| Unrealized holding gains (losses) arising during period | 1,000 | 50,000 | (1,245,000 | ) | (638,000 | ) | ||||||||||
| Reclassification adjustment for gains (losses) included in net income | — | — | (7,000 | ) | 37,000 | |||||||||||
| Income tax benefit (expense) related to other comprehensive income | — | (14,000 | ) | 361,000 | 173,000 | |||||||||||
| Other Comprehensive Income (Loss) | 1,000 | 36,000 | (891,000 | ) | (428,000 | ) | ||||||||||
| Comprehensive Income (Loss) | $ | 958,000 | $ | 1,968,000 | $ | (123,000 | ) | $ | 958,000 | |||||||
See accompanying notes to the unaudited condensed financial statements
GEORGE RISK INDUSTRIES, INC.
CONDENSED STATEMENTSTATEMENTS OF CASH FLOWS STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED OCTOBER 31, 2019 AND 2018
(Unaudited)
| Nine months | Nine months | |||||||
| ended | ended | |||||||
| Jan 31, 2018 | Jan 31, 2017 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Income | $ | 2,032,000 | $ | 2,051,000 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 163,000 | 138,000 | ||||||
| (Gain) loss on sale of investments | (117,000 | ) | (149,000 | ) | ||||
| Impairments on investments | 23,000 | 13,000 | ||||||
| Reserve for bad debts | 13,000 | — | ||||||
| Reserve for obsolete inventory | — | 5,000 | ||||||
| Deferred income taxes | 1,000 | (24,000 | ) | |||||
| (Gain) loss on sale of assets | (4,000 | ) | — | |||||
| Changes in assets and liabilities: | ||||||||
| (Increase) decrease in: | ||||||||
| Accounts receivable | (636,000 | ) | 163,000 | |||||
| Inventories | (1,291,000 | ) | 426,000 | |||||
| Prepaid expenses | (359,000 | ) | (48,000 | ) | ||||
| Other receivables | 2,000 | (5,000 | ) | |||||
| Income tax overpayment | (221,000 | ) | (43,000 | ) | ||||
| Increase (decrease) in: | ||||||||
| Accounts payable | 239,000 | 20,000 | ||||||
| Accrued expenses | (127,000 | ) | (72,000 | ) | ||||
| Net cash provided by (used in) operating activities | $ | (282,000 | ) | $ | 2,475,000 | |||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Proceeds from sale of assets | 4,000 | — | ||||||
| (Purchase) of property and equipment | (342,000 | ) | (146,000 | ) | ||||
| Proceeds from sale of marketable securities | 2,013,000 | 586,000 | ||||||
| (Purchase) of marketable securities | (653,000 | ) | (668,000 | ) | ||||
| (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 | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| (Purchase) of treasury stock | (3,000 | ) | (551,000 | ) | ||||
| Dividends paid | (1,617,000 | ) | (1,596,000 | ) | ||||
| Net cash provided by (used in) financing activities | $ | (1,620,000 | ) | $ | (2,147,000 | ) | ||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | $ | (2,504,000 | ) | $ | 80,000 | |||
| Cash and Cash Equivalents, beginning of period | $ | 6,456,000 | $ | 5,918,000 | ||||
| Cash and Cash Equivalents, end of period | $ | 3,952,000 | $ | 5,998,000 | ||||
| Supplemental Disclosure for Cash Flow Information: | ||||||||
| Cash payments for: | ||||||||
| Income taxes | $ | 1,320,000 | $ | 1,059,000 | ||||
| Interest paid | $ | 0 | $ | 0 | ||||
| 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 | ||||
| Preferred Stock | Common Stock Class A | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
| Balances, July 31, 2019 | 4,100 | $ | 99,000 | 8,502,881 | $ | 850,000 | ||||||||||
| Purchases of common stock | — | — | — | — | ||||||||||||
| Dividend declared at $0.40 per common share outstanding | — | — | — | — | ||||||||||||
| Unrealized gain (loss), net of tax effect | — | — | — | — | ||||||||||||
| Net Income | — | — | — | — | ||||||||||||
| Balances, October 31, 2019 | 4,100 | $ | 99,000 | 8,502,881 | $ | 850,000 | ||||||||||
| Preferred Stock | Common Stock Class A | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
| Balances, July 31, 2018 | 4,100 | $ | 99,000 | 8,502,881 | $ | 850,000 | ||||||||||
| Purchases of common stock | — | — | — | — | ||||||||||||
| Dividend declared at $0.38 per common share outstanding | ||||||||||||||||
| Unrealized gain (loss), net of tax effect | — | — | — | — | ||||||||||||
| Net Income | — | — | — | — | ||||||||||||
| Balances, October 31, 2018 | 4,100 | $ | 99,000 | 8,502,881 | $ | 850,000 | ||||||||||
See accompanying notes to the unaudited condensed financial statements
GEORGE RISK INDUSTRIES, INC.
CONDENSEDSTATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED OCTOBER 31, 2019 AND 2018
(Unaudited)
| Treasury Stock (Common Class A) | Accumulated Other Comprehensive | Retained | ||||||||||||||||||||
| Paid-In Capital | Shares | Amount | Income | Earnings | Total | |||||||||||||||||
| $ | 1,934,000 | 3,550,571 | $ | (4,280,000 | ) | $ | 49,000 | $ | 41,859,000 | $ | 40,511,000 | |||||||||||
| — | 200 | (1,000 | ) | — | — | (1,000 | ) | |||||||||||||||
| — | — | — | — | (1,982,000 | ) | (1,982,000 | ) | |||||||||||||||
| — | — | — | 1,000 | — | 1,000 | |||||||||||||||||
| — | — | — | — | 957,000 | 957,000 | |||||||||||||||||
| $ | 1,934,000 | 3,550,771 | $ | (4,281,000 | ) | $ | 50,000 | $ | 40,834,000 | $ | 39,486,000 | |||||||||||
| Treasury Stock (Common Class A) | Accumulated Other Comprehensive | Retained | ||||||||||||||||||||
| Paid-In Capital | Shares | Amount | Income | Earnings | Total | |||||||||||||||||
| $ | 1,934,000 | 3,535,434 | $ | (4,153,000 | ) | $ | 2,712,000 | $ | 37,364,000 | $ | 38,806,000 | |||||||||||
| — | 5,800 | (49,000 | ) | — | — | (49,000 | ) | |||||||||||||||
| — | — | — | — | (1,886,000 | ) | (1,886,000 | ) | |||||||||||||||
| — | — | — | (891,000 | ) | — | (891,000 | ) | |||||||||||||||
| — | — | — | — | 768,000 | 768,000 | |||||||||||||||||
| $ | 1,934,000 | 3,541,234 | $ | (4,202,000 | ) | $ | 1,821,000 | $ | 36,246,000 | $ | 36,748,000 | |||||||||||
See accompanying notes to the unaudited condensed financial statements
GEORGE RISK INDUSTRIES, INC.
CONDENSEDSTATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED OCTOBER 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 | — | — | — | — | ||||||||||||
| Dividend declared at $0.40 per common share outstanding | — | — | — | — | ||||||||||||
| Unrealized gain (loss), net of tax effect | — | — | — | — | ||||||||||||
| Net Income | — | — | — | — | ||||||||||||
| Balances, October 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 | — | — | — | — | ||||||||||||
| Dividend declared at $0.38 per common share outstanding | ||||||||||||||||
| Unrealized gain (loss), net of tax effect | — | — | — | — | ||||||||||||
| Net Income | — | — | — | — | ||||||||||||
| Balances, October 31, 2018 | 4,100 | $ | 99,000 | 8,502,881 | $ | 850,000 | ||||||||||
See accompanying notes to the unaudited condensed financial statements
GEORGE RISK INDUSTRIES, INC.
CONDENSEDSTATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED OCTOBER 31, 2019 AND 2018
(Unaudited)
Treasury Stock (Common Class A) | Accumulated Other Comprehensive | Retained | ||||||||||||||||||||
Paid-In Capital | Shares | Amount | Income | Earnings | Total | |||||||||||||||||
| $ | 1,934,000 | 3,544,271 | $ | (4,227,000 | ) | $ | 14,000 | $ | 40,883,000 | $ | 39,553,000 | |||||||||||
| — | 6,500 | (54,000 | ) | — | — | (54,000 | ) | |||||||||||||||
| — | — | — | — | (1,981,000 | ) | (1,981,000 | ) | |||||||||||||||
| — | — | — | 36,000 | — | 36,000 | |||||||||||||||||
| — | — | — | — | 1,932,000 | 1,932,000 | |||||||||||||||||
| $ | 1,934,000 | 3,550,771 | $ | (4,281,000 | ) | $ | 50,000 | $ | 40,834,000 | $ | 39,486,000 | |||||||||||
Treasury Stock (Common Class A) | Accumulated Other Comprehensive | Retained | ||||||||||||||||||||
Paid-In Capital | Shares | Amount | Income | Earnings | Total | |||||||||||||||||
| $ | 1,934,000 | 3,534,784 | $ | (4,148,000 | ) | $ | 2,249,000 | $ | 36,746,000 | $ | 37,730,000 | |||||||||||
| — | 6,450 | (54,000 | ) | — | — | (54,000 | ) | |||||||||||||||
| — | — | — | — | (1,886,000 | ) | (1,886,000 | ) | |||||||||||||||
| — | — | — | (428,000 | ) | — | (428,000 | ) | |||||||||||||||
| — | — | — | — | 1,386,000 | 1,386,000 | |||||||||||||||||
| $ | 1,934,000 | 3,541,234 | $ | (4,202,000 | ) | $ | 1,821,000 | $ | 36,246,000 | $ | 36,748,000 | |||||||||||
See accompanying notes to the unaudited condensed financial statements
GEORGE RISK INDUSTRIES, INC.
CONDENSED STATEMENTSOF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2019 AND 2018
(Unaudited)
| Oct 31, 2019 | Oct 31, 2018 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Income | $ | 1,932,000 | $ | 1,386,000 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 183,000 | 167,000 | ||||||
| (Gain) loss on sale of investments | (100,000 | ) | 62,000 | |||||
| Impairments on investments | 41,000 | 32,000 | ||||||
| Unrealized (gain) loss on investments | (274,000 | ) | — | |||||
| Reserve for bad debts | (6,000 | ) | 6,000 | |||||
| Reserve for obsolete inventory | 2,000 | 18,000 | ||||||
| Deferred income taxes | 65,000 | 25,000 | ||||||
| (Gain) loss on sale of assets | — | (4,000 | ) | |||||
| Changes in assets and liabilities: | ||||||||
| (Increase) decrease in: | ||||||||
| Accounts receivable | 486,000 | 23,000 | ||||||
| Inventories | (583,000 | ) | (435,000 | ) | ||||
| Prepaid expenses and projects in process | 271,000 | 168,000 | ||||||
| Other receivables | 5,000 | (2,000 | ) | |||||
| Income tax over payment | 114,000 | (97,000 | ) | |||||
| Increase (decrease) in: | ||||||||
| Accounts payable | (36,000 | ) | (189,000 | ) | ||||
| Accrued expenses | 11,000 | 8,000 | ||||||
| Net cash provided by operating activities | 2,111,000 | 1,172,000 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| (Purchase) of property and equipment | (179,000 | ) | — | |||||
| Proceeds from sale of marketable securities | 540,000 | 754,000 | ||||||
| (Purchase) of marketable securities | (250,000 | ) | (324,000 | ) | ||||
| (Purchase) of long-term investment | (27,000 | ) | — | |||||
| Net cash provided by investing activities | 84,000 | 430,000 | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| (Purchase) of treasury stock | (54,000 | ) | (54,000 | ) | ||||
| Dividends paid | (1,802,000 | ) | (1,752,000 | ) | ||||
| Net cash (used in) financing activities | (1,856,000 | ) | (1,806,000 | ) | ||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 339,000 | (204,000 | ) | |||||
| Cash and Cash Equivalents, beginning of period | 4,873,000 | 4,294,000 | ||||||
| Cash and Cash Equivalents, end of period | $ | 5,212,000 | $ | 4,090,000 | ||||
| Supplemental Disclosure for Cash Flow Information: | ||||||||
| Cash payments for: | ||||||||
| Income taxes | $ | 605,000 | $ | 600,000 | ||||
| Interest paid | $ | — | $ | 1,000 | ||||
| Cash receipts for: | ||||||||
| Income taxes | $ | 159,000 | $ | — | ||||
See accompanying notes to the unaudited condensed financial statements
GEORGE RISK INDUSTRIES, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JANUARYOCTOBER 31, 20182019
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, 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,February 2016, the FASB issued ASU 2016-02, “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 Standards Updatefor 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. 2014-09, Revenue2018-10 “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”. ASU 2018-10 provides certain amendments that affect narrow aspects of the guidance issued in ASU 2016-02. ASU 2018-11 allows all entities adopting ASU 2016-02 to choose an additional (and optional) transition method of adoption, under which an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2018-11 also allows lessors to not separate non-lease components from Contracts with Customers. The objectivethe associated lease component if certain conditions are met. During the first quarter of this update is2019, 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 robust framework for addressing revenue recognition issuescompany adopts the new leases standard. The Company has adopted the ASUs in the first quarter of fiscal year 2020 and upon its effective date, replaces almost all existing revenue recognition guidance. This updatethe 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 statements and related disclosures because leases are not material to the financial statements.
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.
In June 2016, the FASB issued ASU 2016-13(“ASU 2016-13”), Financial Instruments—Credit Losses. Subsequently, the FASB issued ASU 2019-05, Financial Instruments- Credit Losses (Topic 326): Targeted Transition Relief and codification improvements to Topic 326 in ASU 2019-11, ASU 2019-04 and ASU 2018-19. The amendments update guidance on reporting credit losses for financial assets. These amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017 and the2019, including interim periods within those fiscal years. All entities may adopt the amendments through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). The ASU is effective for fiscal years beginning after December 15, 2020. Subsequent to September 30, 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842),” which defers the effective date for public filers that year.are considered small reporting companies (“SRC”) as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Since the Company is an SRC, implementation is not needed until May 1, 2023. The Company is evaluatingwill continue to evaluate the impacteffect of this updateadopting ASU 2016-13 will have on the Company’s financial statements.statements and disclosures.
In February of 2016, the FASB issued ASU 2016-02Leases. Under the new guidance, lessees will be required to recognize so-called right-of-use assets and liabilities for most leases having lease terms of 12 months or more. This update is effective in annual reporting periods beginning after December 31, 2019 and the interim periods starting thereafter. The Company is evaluating the impact of this update on the Company’s financial statements.
In February of 2018, the FASB issued ASU 2018-02 Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. Under this update, companies have 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 update is effective in annual reporting periods beginning after December 15, 2018 and the interim periods starting thereafter. The Company is evaluating the impact of this update on the Company’s financial statements.
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. Themarkets. Effective with the Company’s adoption of ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, on May 1, 2018, the Company carries all investments in securities are classified as available-for-sale securities and are reported at fair value. Available-for-salevalue, with unrealized gain or loss on equity securities reported through other income. The investments in debt securities maturehave maturities between June 2018November 2019 and November 2048.September 2042. The Company uses the average cost method to determine the cost of securities sold and the amount reclassified out of accumulated other comprehensive income intowith any unrealized gains or losses reported in each respective period’s 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, 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 | ||||||||||||||||||||||||||||
| October 31, 2019 | Basis | Gains | Losses | Value | ||||||||||||||||||||||||||||
| Municipal bonds | $ | 5,966,000 | $ | 103,000 | $ | (238,000 | ) | $ | 5,831,000 | $ | 5,362,000 | 122,000 | (47,000 | ) | 5,437,000 | |||||||||||||||||
| Corporate bonds | $ | 129,000 | $ | 2,000 | $ | — | $ | 131,000 | 26,000 | — | — | 26,000 | ||||||||||||||||||||
| REITs | $ | 110,000 | $ | 5,000 | $ | (6,000 | ) | $ | 109,000 | 89,000 | 2,000 | (8,000 | ) | 83,000 | ||||||||||||||||||
| Equity securities | $ | 15,720,000 | $ | 4,844,000 | $ | (203,000 | ) | $ | 20,361,000 | 16,943,000 | 4,375,000 | (254,000 | ) | 21,064,000 | ||||||||||||||||||
| Money markets and CDs | $ | 1,064,000 | $ | — | $ | — | $ | 1,064,000 | 774,000 | 1,000 | — | 775,000 | ||||||||||||||||||||
| Total | $ | 22,989,000 | $ | 4,954,000 | $ | (447,000 | ) | $ | 27,496,000 | $ | 23,194,000 | $ | 4,500,000 | $ | (309,000 | ) | $ | 27,385,000 | ||||||||||||||
| 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 | ||||||||||||||
Marketable securities that are equity securities are carried at fair value on the balance sheets with changes in fair value recorded as an unrealized gain or (loss) in the Statements of Operations in the period of the change; and debt securities are carried at fair value on the balance sheets with changes in fair value recorded as unrealized gains or losses in the Statement of Comprehensive Income. Upon the disposition of a marketable security, the Company records a realized gain or (loss) on the Company’s statements of operations. On April 30, 2019, as a result of the adoption of ASU 2016-01 – Financial Instruments, the Company reclassified $2,424,000 of net unrealized gains on marketable securities, that were formerly classified as available-for-sale securities before the adoption of the new standard, from Accumulated Other Comprehensive Income to Retained Earnings.
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 $7,000 for the quarter, but did recordand recorded a loss of $23,000$41,000 for the ninesix months ended JanuaryOctober 31, 2018. Likewise,2019. As for the corresponding periods last year, management did not record arecorded an impairment loss of $32,000 for both the quarter but did record a $13,000 impairment loss for the nine monthsand six-months ended JanuaryOctober 31, 2017.2018.
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, 20182019 and April 30, 2017,2019, respectively.
Unrealized Loss Breakdown by Investment Type at JanuaryOctober 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 | ) | $ | — | $ | — | $ | 512,000 | $ | (47,000 | ) | $ | 512,000 | $ | (47,000 | ) | |||||||||||||||||||
| REITs | $ | 56,000 | $ | (5,000 | ) | $ | 27,000 | $ | (1,000 | ) | $ | 83,000 | $ | (6,000 | ) | — | — | 59,000 | (8,000 | ) | 59,000 | (8,000 | ) | |||||||||||||||||||||||||
| Equity securities | $ | 534,000 | $ | (35,000 | ) | $ | 590,000 | $ | (168,000 | ) | $ | 1,124,000 | $ | (203,000 | ) | 1,214,000 | (66,000 | ) | 1,819,000 | (188,000 | ) | 3,033,000 | (254,000 | ) | ||||||||||||||||||||||||
| Total | $ | 1,292,000 | $ | (192,000 | ) | $ | 2,291,000 | $ | (255,000 | ) | $ | 3,583,000 | $ | (447,000 | ) | $ | 1,214,000 | $ | (66,000 | ) | $ | 2,390,000 | $ | (243,000 | ) | $ | 3,604,000 | $ | (309,000 | ) | ||||||||||||||||||
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 JanuaryOctober 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 JanuaryOctober 31, 20182019.
Note 3:3 Inventories
Inventories at JanuaryOctober 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.
| October 31, 2019 | April 30, 2019 | |||||||
| Raw materials | $ | 4,131,000 | $ | 3,644,000 | ||||
| Work in process | 458,000 | 389,000 | ||||||
| Finished goods | 667,000 | 641,000 | ||||||
| 5,256,000 | 4,674,000 | |||||||
| Less: allowance for obsolete inventory | (93,000 | ) | (91,000 | ) | ||||
| Inventories, net | $ | 5,163,000 | $ | 4,583,000 | ||||
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, 2019 | Oct 31, 2019 | Oct 31, 2018 | Oct 31, 2018 | |||||||||||||||||||||||||
| Net revenue: | ||||||||||||||||||||||||||||||||
| Security alarm products | $ | 2,715,000 | $ | 6,683,000 | $ | 2,214,000 | $ | 6,955,000 | $ | 2,985,000 | $ | 5,852,000 | $ | 2,852,000 | $ | 5,371,000 | ||||||||||||||||
| Cable & wiring tools | 571,000 | 1,071,000 | 649,000 | 1,351,000 | ||||||||||||||||||||||||||||
| Other products | 545,000 | 1,914,000 | 431,000 | 1,239,000 | 154,000 | 340,000 | 166,000 | 374,000 | ||||||||||||||||||||||||
| Total net revenue | $ | 3,260,000 | $ | 8,597,000 | $ | 2,645,000 | $ | 8,194,000 | $ | 3,710,000 | $ | 7,263,000 | $ | 3,667,000 | $ | 7,096,000 | ||||||||||||||||
| Income from operations: | ||||||||||||||||||||||||||||||||
| Security alarm products | 452,000 | 1,534,000 | 603,000 | 1,805,000 | $ | 762,000 | $ | 1,495,000 | $ | 689,000 | $ | 1,291,000 | ||||||||||||||||||||
| Cable & wiring tools | 140,000 | 273,000 | 157,000 | 293,000 | ||||||||||||||||||||||||||||
| Other products | 130,000 | 439,000 | 107,000 | 321,000 | 44,000 | 87,000 | 40,000 | 75,000 | ||||||||||||||||||||||||
| Total income from operations | $ | 582,000 | $ | 1,973,000 | $ | 710,000 | $ | 2,126,000 | $ | 946,000 | $ | 1,855,000 | $ | 886,000 | $ | 1,659,000 | ||||||||||||||||
| Depreciation and amortization: | ||||||||||||||||||||||||||||||||
| Security alarm products | 10,000 | 28,000 | 7,000 | 29,000 | $ | 71,000 | $ | 94,000 | $ | 10,000 | $ | 20,000 | ||||||||||||||||||||
| Cable & wiring tools | 31,000 | 62,000 | 31,000 | 62,000 | ||||||||||||||||||||||||||||
| Other products | 52,000 | 94,000 | 27,000 | 80,000 | (4,000 | ) | 16,000 | 28,000 | 55,000 | |||||||||||||||||||||||
| Corporate general | 15,000 | 41,000 | 13,000 | 29,000 | (4,000 | ) | 11,000 | 15,000 | 30,000 | |||||||||||||||||||||||
| Total depreciation and amortization | $ | 77,000 | $ | 163,000 | $ | 47,000 | $ | 138,000 | $ | 94,000 | $ | 183,000 | $ | 84,000 | $ | 167,000 | ||||||||||||||||
| Capital expenditures: | ||||||||||||||||||||||||||||||||
| Security alarm products | — | 260,000 | — | — | $ | 10,000 | $ | 179,000 | $ | — | $ | — | ||||||||||||||||||||
| Cable & wiring tools | — | — | — | — | ||||||||||||||||||||||||||||
| 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 | $ | 10,000 | $ | 179,000 | $ | — | $ | — | ||||||||||||||||
| January 31, 2018 | April 30, 2017 | October 31, 2019 | April 30, 2019 | |||||||||||||
| Identifiable assets: | ||||||||||||||||
| Security alarm products | 4,424,000 | 3,180,000 | $ | 6,351,000 | $ | 6,179,000 | ||||||||||
| Cable & wiring tools | 2,666,000 | 2,713,000 | ||||||||||||||
| Other products | 2,371,000 | 1,517,000 | 835,000 | 842,000 | ||||||||||||
| Corporate general | 34,773,000 | 33,767,000 | 33,341,000 | 33,293,000 | ||||||||||||
| Total assets | $ | 41,568,000 | $ | 38,464,000 | $ | 43,193,000 | $ | 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 nine months ended January 31, 2018 | For the three months ended October 31, 2019 | |||||||||||||||||||||||
| Income | Shares | Per-share | Income | Shares | Per-share | |||||||||||||||||||
| (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | |||||||||||||||||||
| Net Income | $ | 2,032,000 | $ | 957,000 | ||||||||||||||||||||
| Basic EPS | $ | 2,032,000 | 4,955,725 | $ | 0.4100 | $ | 957,000 | 4,952,110 | $ | .1933 | ||||||||||||||
| Effect of dilutive securities: | ||||||||||||||||||||||||
| Convertible preferred stock | 0 | 20,500 | 0 | 20,500 | (.0008 | ) | ||||||||||||||||||
| Diluted EPS | $ | 2,032,000 | 4,976,225 | $ | 0.4083 | $ | 957,000 | 4,972,610 | $ | .1925 | ||||||||||||||
| 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 six months ended October 31, 2019 | ||||||||||||
| Income | Shares | Per-share | ||||||||||
| (Numerator) | (Denominator) | Amount | ||||||||||
| Net Income | $ | 1,932,000 | ||||||||||
| Basic EPS | $ | 1,932,000 | 4,954,250 | $ | .3900 | |||||||
| Effect of dilutive securities: | ||||||||||||
| Convertible preferred stock | 0 | 20,500 | (.0016 | ) | ||||||||
| Diluted EPS | $ | 1,932,000 | 4,974,750 | $ | .3884 | |||||||
| For the three months ended October 31, 2018 | ||||||||||||
| Income | Shares | Per-share | ||||||||||
| (Numerator) | (Denominator) | Amount | ||||||||||
| Net Income | $ | 768,000 | ||||||||||
| Basic EPS | $ | 768,000 | 4,962,177 | $ | .1548 | |||||||
| Effect of dilutive securities: | ||||||||||||
| Convertible preferred stock | 0 | 20,500 | (.0007 | ) | ||||||||
| Diluted EPS | $ | 768,000 | 4,982,677 | $ | .1541 | |||||||
| 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 | 0 | 20,500 | (.0012 | ) | ||||||||
| Diluted EPS | $ | 1,386,000 | 4,985,379 | $ | .2780 | |||||||
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$7,000 and $3,000 were paid during both the quarterseach quarter ending JanuaryOctober 31, 20182019 and 2017,2018, respectively. Likewise, the Company paid matching contributions of approximately $8,000$9,000 and $5,000 during the nine-montheach six-month period ending JanuaryOctober 31, 2019 and 2018, and $7,000 during the corresponding period the prior fiscal year.respectively.
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 1 | Valuation is based upon quoted prices for identical instruments traded in active markets. | |
| Level 2 | Valuation 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 3 | Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. |
Investments and Marketable Securities
As of JanuaryOctober 31, 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 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Municipal Bonds | $ | - | $ | 5,831,000 | $ | - | $ | 5,831,000 | ||||||||
| Corporate Bonds | $ | 131,000 | $ | - | $ | - | $ | 131,000 | ||||||||
| REITs | $ | - | $ | 109,000 | $ | - | $ | 109,000 | ||||||||
| Equity Securities | $ | 20,361,000 | $ | - | $ | - | $ | 20,361,000 | ||||||||
| Money Markets and CDs | $ | 1,064,000 | $ | - | $ | - | $ | 1,064,000 | ||||||||
| Total fair value of assets measured on a recurring basis | $ | 21,556,000 | $ | 5,940,000 | $ | - | $ | 27,496,000 | ||||||||
| Assets Measured at Fair Value on a Recurring Basis as of October 31, 2019 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Municipal Bonds | $ | — | $ | 5,437,000 | $ | — | $ | 5,437,000 | ||||||||
| Corporate Bonds | 26,000 | — | — | 26,000 | ||||||||||||
| REITs | — | 83,000 | — | 83,000 | ||||||||||||
| Equity Securities | 21,064,000 | — | — | 21,064,000 | ||||||||||||
| Money Markets and CDs | 775,000 | — | — | 775,000 | ||||||||||||
| Total fair value of assets measured on a recurring basis | $ | 21,865,000 | $ | 5,520,000 | $ | — | $ | 27,385,000 | ||||||||
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
NoneIn an update to related party transactions, the Company finalized the purchase of the building that it had previously leased from Bonita Risk on November 22, 2019. Bonita Risk is a director and an employee of the Company and is the majority holder of George Risk Industries, Inc. stock. This building contains the Company’s sales and accounting departments, maintenance department, engineering department and some production facilities. Prior to the purchase, the lease required a minimum payment of $1,535 on a month-to-month basis. The purchase price of the building was $200,000, which was approximately the assessed value of the building at the time of purchase.
Note 9 Correction of Previously Issued Financial Statements
Subsequent to the issueanceof its Quarterly Report on SEC Form 10-Q for the three-and six months periods ended October 31, 2019, the Company discovered an error due to missing a change in accounting related to other comprehensive income (loss) as reflected in the phase in of ASU 2016-01, which became effective for the Company on May 1, 2018. Under the new guidance in ASU 2016-01 the Company should record unrealized gains and losses in the value of the equity securities it owns in the statements of operations, whereas, under previous guidance (and in the Original Form 10-Q) those unrealized gains and losses were recorded as accumulated other comprehensive income (loss).
This restatement includes i) recording a one-time adjustment to retained earnings to reclassify the accumulated other comprehensive loss related to unrealized gains on equity securities as of April 30, 2019 and ii) recording an unrealized gain on marketable securities representing the value change in the equities for the three-and six months periods ended October 31, 2019.
No entries to correct for this restatement have any impact on our cash position, liquidity, or operations.
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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, 2017.2019.
Executive Summary
The Company’s performance has remained steadycontinues to improve through the threefirst half of the current fiscal year with the first and second quarters with increased sales, being offset by increased cost of sales, and greatly improved investment returns.presenting almost identical numbers. 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 remaining strong, it in turn helps the Company’s sales grow. Opportunities include gaining business from a competitor that is getting out of the security switch business and to continue looking at businesses that might be a good fit to purchase. Challenges in the coming months of this fiscal year include continuing to get product out to customers in a timely 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 withsame day. Also, there have been some shortages and defects of raw materials.materials and prices of raw materials have increased with the execution of tariffs by the US government. 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 | ||
| Cost of goods sold was |
| ● | Operating expenses |
| ● | Income from operations for the quarter ended | |
| ● | Other income and expenses showed a $306,000 gain for the quarter ended October 31, 2019 as compared to a $131,000 gain for the quarter ended October 31, 2018. Investments in marketable securities are | |
| ● | Overall, net income for the quarter ended | |
| ● | Earnings per common share for quarter ended |
Liquidity and capital resources
Operating
| ● | Net cash | |
| ● | Accounts receivable | |
| ● | Inventories increased |
| ● | Prepaid expenses saw a $271,000 decrease for the current six months, primarily due to inventory being delivered that had to be paid for in advance. The prior six months showed a $168,000 increase in prepaid expenses. | |
| ● | ||
Income tax overpayment for the | ||
| tax estimates. | ||
| ● | Accounts payable shows | |
| ● | Accrued expenses |
Investing
| ● | As for our investment activities, the Company | |
| ● | Additionally, the Company continues to purchase marketable securities, which include municipal bonds and quality stocks. During the |
Financing
| ● | The Company continues to purchase back its common stock when the opportunity arises. For the | |
| ● | The company |
The following is a list of ratios to help analyze George Risk Industries’ performance:
| As of | ||||||||
| October 31, 2019 | October 31, 2018 | |||||||
| Working capital | ||||||||
| (current assets – current liabilities) | $ | 37,805,000 | $ | 34,508,000 | ||||
| Current ratio | ||||||||
| (current assets / current liabilities) | 16.564 | 16.614 | ||||||
| Quick ratio | ||||||||
| ((cash + investments + AR) / current liabilities) | 14.333 | 14.401 | ||||||
| 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 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 | |
| ● | 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. | |
| ● | ||
| ● | 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. | |
| ● |
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 “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(the Tax Act). The amendments in this ASU also require certain disclosures about stranded income tax effects. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption in any period is permitted. The Company has not yet adopted ASU 2018-02 and is currently evaluating the potential impact of adopting the applicable guidance on the Company’s financial statements and related disclosures.
In July 2018, the FASB issued ASU No. 2018-09, “Codification Improvements” (“ASU 2018-09”). ASU 2018-09 provides amendments to a wide variety of topics in the FASB’s Accounting Standards Codification, which applies to all reporting entities within the scope of the affected accounting guidance. The transition and effective date guidance are based on the facts and circumstances of each amendment. Some of the amendments in ASU 2018-09 do not require transition guidance and were effective upon issuance of ASU 2018-09. However, many of the amendments do have transition guidance with effective dates for annual 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 comprehensive income (AOCI)postretirement plans. The FASB issued ASU 2018-14 as part of its disclosure framework project, which has an objective and primary focus to retained earnings. Under current US GAAP, effects fromimprove the effectiveness of disclosures in the notes to financial statements. As part of the project, during August 2018, the Board also issued a change in tax law is recordedConcepts Statement, which the FASB used as a componentbasis 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 income tax provision relatedupdated provisions.
In June 2016, the FASB issued ASU 2016-13(“ASU 2016-13”), Financial Instruments—Credit Losses. Subsequently, the FASB issued ASU 2019-05, Financial Instruments- Credit Losses (Topic 326): Targeted Transition Relief and codification improvements to continuing operationsTopic 326 in ASU 2019-11, ASU 2019-04 and ASU 2018-19. The amendments update guidance on reporting credit losses for financial assets. These amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the period of enactment, even ifscope that have 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 strandedcontractual right to receive cash. The amendments in AOCI by the tax law enactment. Adoption of this ASU is optional. This update isare effective infor annual reporting periods beginning after December 15, 2018 and the2019, including interim periods starting thereafter.within those fiscal years. All entities may adopt the amendments through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). The ASU is effective for fiscal years beginning after December 15, 2020. Subsequent to September 30, 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842),” which defers the effective date for public filers that are considered small reporting companies (“SRC”) as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Since the Company is an SRC, implementation is not needed until May 1, 2023. The Company is evaluatingwill continue to evaluate the impacteffect of this updateadopting ASU 2016-13 will have on the Company’s financial statements.
statements and disclosures.
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
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, 2018.2019. 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, moreContinued training will be required to fulfill disclosure control and procedure responsibilities, including review procedures for key accounting schedules and timely and proper documentation of material transactions and agreements. Until sufficient training has taken place offor this new Controller, we believe this control deficiency represents material weaknesses in internal control over financial reporting.
Despite the material weaknesses in financial reporting noted above, we believe that our consolidatedrestated financial statements included in this restated 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, 20182019 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 2018.2020.
| Period | Number of shares | |||
| August 1, 2019 – August 31, 2019 | 200 | |||
| 2019 | -0- | |||
| 2019 | -0- | |||
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits
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 | By: | /s/ Stephanie M. Risk-McElroy | |
| Stephanie M. Risk-McElroy | |||
| President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board | |||