UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterquarterly period ended JanuaryJuly 31, 20182021
☐ 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
(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 ☒ 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 ☒ 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 | ||
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 17, 2021 was 4,968,447. .
Transitional Small Business Disclosure Format:Yes [X] No [ ]
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, 2018,2021 are attached hereto.
2 |
GEORGE RISK INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
January 31, 2018 | April 30, 2017 | July 31, 2021 | April 30, 2021 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
ASSETS | ||||||||||||||||
Current Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 3,952,000 | $ | 6,456,000 | $ | 8,331,000 | $ | 7,326,000 | ||||||||
Investments and securities | 27,496,000 | 26,382,000 | ||||||||||||||
Investments and securities, at fair value | 34,085,000 | 33,337,000 | ||||||||||||||
Accounts receivable: | ||||||||||||||||
Trade, net of $16,422 and $2,425 doubtful account allowance | 2,471,000 | 1,848,000 | ||||||||||||||
Trade, net of $15,622 and $9,947 doubtful account allowance | 3,652,000 | 3,812,000 | ||||||||||||||
Other | 2,000 | 3,000 | 13,000 | 16,000 | ||||||||||||
Income tax overpayment | 474,000 | 253,000 | ||||||||||||||
Inventories, net | 3,594,000 | 2,304,000 | 6,166,000 | 5,622,000 | ||||||||||||
Prepaid expenses | 487,000 | 193,000 | 554,000 | 405,000 | ||||||||||||
Total Current Assets | $ | 38,476,000 | $ | 37,439,000 | 52,801,000 | 50,518,000 | ||||||||||
Property and Equipment, net, at cost | 948,000 | 739,000 | 1,668,000 | 1,704,000 | ||||||||||||
Other Assets | ||||||||||||||||
Investment in Limited Land Partnership, at cost | 273,000 | 273,000 | 320,000 | 320,000 | ||||||||||||
Projects in process | — | 13,000 | 240,000 | 200,000 | ||||||||||||
Other | 77,000 | — | 7,000 | — | ||||||||||||
Total Other Assets | $ | 350,000 | $ | 286,000 | 567,000 | 520,000 | ||||||||||
Intangible Assets, net | $ | 1,794,000 | — | |||||||||||||
Intangible assets, net | 1,363,000 | 1,394,000 | ||||||||||||||
TOTAL ASSETS | $ | 41,568,000 | $ | 38,464,000 | $ | 56,399,000 | $ | 54,136,000 |
See accompanying notes to the condensed financial statements.
GEORGE RISK INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
(continued)
January 31, 2018 | April 30, 2017 | |||||||
(unaudited) | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable, trade | $ | 308,000 | $ | 69,000 | ||||
Dividends payable | 1,580,000 | 1,416,000 | ||||||
Accrued expenses: | ||||||||
Payroll and related expenses | 178,000 | 308,000 | ||||||
Property taxes | 3,000 | — | ||||||
Total Current Liabilities | $ | 2,069,000 | $ | 1,793,000 | ||||
Long-Term Liabilities | ||||||||
Deferred income taxes | 1,902,000 | 906,000 | ||||||
Total Long-Term Liabilities | $ | 1,902,000 | $ | 906,000 | ||||
Stockholders’ Equity | ||||||||
Convertible preferred stock, 1,000,000 shares authorized, Series 1—noncumulative, $20 stated value, 25,000 shares authorized, 4,100 issued and outstanding | 99,000 | 99,000 | ||||||
Common stock, Class A, $.10 par value, 10,000,000 shares authorized, 8,502,881 shares issued and outstanding | 850,000 | 850,000 | ||||||
Additional paid-in capital | 1,934,000 | 1,736,000 | ||||||
Accumulated other comprehensive income | 2,623,000 | 1,239,000 | ||||||
Retained earnings | 36,232,000 | 35,981,000 | ||||||
Less: treasury stock, 3,533,934 and 3,557,606 shares, at cost | (4,141,000 | ) | (4,140,000 | ) | ||||
Total Stockholders’ Equity | $ | 37,597,000 | $ | 35,765,000 | ||||
TOTAL LIABILITES AND STOCKHOLDERS’ EQUITY | $ | 41,568,000 | $ | 38,464,000 |
See accompanying notes to the condensed financial statements
3 |
GEORGE RISK INDUSTRIES, INC.
CONDENSED INCOME STATEMENTS (Unaudited)BALANCE SHEETS
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 |
(continued)
July 31, 2021 | April 30, 2021 | |||||||
(unaudited) | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable, trade | $ | 241,000 | $ | 477,000 | ||||
Dividends payable | 2,073,000 | 2,080,000 | ||||||
Accrued expenses: | ||||||||
Payroll and related expenses | 455,000 | 359,000 | ||||||
Property taxes | 3,000 | — | ||||||
Income tax payable | 628,000 | 81,000 | ||||||
Total Current Liabilities | 3,400,000 | 2,997,000 | ||||||
Long-Term Liabilities | ||||||||
Deferred income taxes | 2,842,000 | 2,735,000 | ||||||
Total Long-Term Liabilities | 2,842,000 | 2,735,000 | ||||||
Total Liabilities | 6,242,000 | 5,732,000 | ||||||
Commitments and contingencies | — | — | ||||||
Stockholders’ Equity | ||||||||
Convertible preferred stock, | shares authorized, Series 1—noncumulative, $ stated value, shares authorized, issued and outstanding99,000 | 99,000 | ||||||
Common stock, Class A, $ | par value, shares authorized, shares issued and outstanding850,000 | 850,000 | ||||||
Additional paid-in capital | 1,934,000 | 1,934,000 | ||||||
Accumulated other comprehensive income | 115,000 | 108,000 | ||||||
Retained earnings | 51,495,000 | 49,749,000 | ||||||
Less: treasury stock, | and shares, at cost(4,336,000 | ) | (4,336,000 | ) | ||||
Total Stockholders’ Equity | 50,157,000 | 48,404,000 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 56,399,000 | $ | 54,136,000 |
See accompanying notes to the condensed financial statements
4 |
GEORGE RISK INDUSTRIES, INC.
CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)STATEMENTS
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 |
FOR THE THREE MONTHS ENDED JULY 31, 2021 AND 2020
(Unaudited)
July 31, 2021 | July 31, 2020 | |||||||
Net Sales | $ | 4,955,000 | $ | 4,047,000 | ||||
Less: Cost of Goods Sold | (2,318,000 | ) | (1,952,000 | ) | ||||
Gross Profit | 2,637,000 | 2,095,000 | ||||||
Operating Expenses: | ||||||||
General and Administrative | 349,000 | 313,000 | ||||||
Sales | 740,000 | 567,000 | ||||||
Engineering | 18,000 | 29,000 | ||||||
Total Operating Expenses | 1,107,000 | 909,000 | ||||||
Income From Operations | 1,530,000 | 1,186,000 | ||||||
Other Income (Expense) | ||||||||
Other | 1,000 | 12,000 | ||||||
Dividend and Interest Income | 176,000 | 156,000 | ||||||
Unrealized gain (loss) on equity securities | 420,000 | 2,114,000 | ||||||
Gain (Loss) on Sale of Investments | 220,000 | (28,000 | ) | |||||
Total Other Income (Expense) | 817,000 | 2,254,000 | ||||||
Income Before Provisions for Income Taxes | 2,347,000 | 3,440,000 | ||||||
Provisions for Income Taxes | ||||||||
Current Expense | 498,000 | 349,000 | ||||||
Deferred tax expense | 103,000 | 599,000 | ||||||
Total Income Tax Expense | 601,000 | 948,000 | ||||||
Net Income | $ | 1,746,000 | $ | 2,492,000 | ||||
Basic Earnings Per Share of Common Stock | $ | 0.35 | $ | 0.50 | ||||
Diluted Earnings Per Share of Common Stock | $ | 0.35 | $ | 0.50 | ||||
Weighted Average Number of Common Shares Outstanding | 4,946,460 | 4,949,927 | ||||||
Weighted Average Number of Shares Outstanding (Diluted) | 4,966,960 | 4,970,427 |
See accompanying notes to the condensed financial statements
5 |
GEORGE RISK INDUSTRIES, INC.
CONDENSED STATEMENTSTATEMENTS OF CASH FLOWS (Unaudited)COMPREHENSIVE INCOME
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 |
FOR THE THREE MONTHS ENDED JULY 31, 2021 AND 2020
(Unaudited)
July 31, 2021 | July 31, 2020 | |||||||
Net Income | $ | 1,746,000 | $ | 2,492,000 | ||||
Other Comprehensive Income, Net of Tax | ||||||||
Unrealized gain on debt securities: | ||||||||
Unrealized holding gains arising during period | 11,000 | 149,000 | ||||||
Income tax expense related to other comprehensive income | (4,000 | ) | (44,000 | ) | ||||
Other Comprehensive Income | 7,000 | 105,000 | ||||||
Comprehensive Income | $ | 1,753,000 | $ | 2,597,000 |
See accompanying notes to the condensed financial statements
6 |
GEORGE RISK INDUSTRIES, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED JULY 31, 2021 and 2020
(Unaudited)
Preferred Stock | Common Stock Class A | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Balances, April 30, 2020 | 4,100 | $ | 99,000 | 8,502,881 | $ | 850,000 | ||||||||||
Purchases of common stock | — | — | — | — | ||||||||||||
Purchases of common stock, shares | — | — | — | — | ||||||||||||
Unrealized gain, net of tax effect | — | — | — | — | ||||||||||||
Net Income | — | — | — | — | ||||||||||||
Balances, July 31, 2020 | 4,100 | $ | 99,000 | 8,502,881 | $ | 850,000 |
Preferred Stock | Common Stock Class A | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Balances, April 30, 2021 | 4,100 | $ | 99,000 | 8,502,881 | $ | 850,000 | ||||||||||
Balance | 4,100 | $ | 99,000 | 8,502,881 | $ | 850,000 | ||||||||||
Purchases of common stock | — | — | — | — | ||||||||||||
Unrealized gain, net of tax effect | — | — | — | — | ||||||||||||
Net Income | — | — | — | — | ||||||||||||
Balances, July 31, 2021 | 4,100 | $ | 99,000 | 8,502,881 | $ | 850,000 | ||||||||||
Balance | 4,100 | $ | 99,000 | 8,502,881 | $ | 850,000 |
See accompanying notes to the condensed financial statements
7 |
GEORGE RISK INDUSTRIES, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITIY
FOR THE THREE MONTHS ENDED JULY 31, 2021 and 2020
(Unaudited)
Accumulated | |||||||||||||||||||||||
Treasury Stock | Other | ||||||||||||||||||||||
Paid-In | (Common Class A) | Comprehensive | Retained | ||||||||||||||||||||
Capital | Shares | Amount | Income | Earnings | Total | ||||||||||||||||||
Balances, April 30, 2020 | $ | 1,934,000 | 3,552,954 | $ | (4,301,000 | ) | $ | (4,000 | ) | $ | 41,006,000 | $ | 39,584,000 | ||||||||||
Purchases of common stock | — | — | — | — | — | — | |||||||||||||||||
Unrealized gain, net of tax effect | — | — | — | 105,000 | — | 105,000 | |||||||||||||||||
Net Income | — | — | — | — | 2,492,000 | 2,492,000 | |||||||||||||||||
Balances, July 31, 2020 | $ | 1,934,000 | 3,552,954 | $ | (4,301,000 | ) | $ | 101,000 | $ | 43,498,000 | $ | 42,181,000 |
Accumulated | |||||||||||||||||||||||
Treasury Stock | Other | ||||||||||||||||||||||
Paid-In | (Common Class A) | Comprehensive | Retained | ||||||||||||||||||||
Capital | Shares | Amount | Income | Earnings | Total | ||||||||||||||||||
Balances, April 30, 2021 | $ | 1,934,000 | 3,556,412 | $ | (4,336,000 | ) | $ | 108,000 | $ | 49,749,000 | $ | 48,404,000 | |||||||||||
Balances | $ | 1,934,000 | 3,556,412 | $ | (4,336,000 | ) | $ | 108,000 | $ | 49,749,000 | $ | 48,404,000 | |||||||||||
Purchases of common stock | — | 13 | — | — | — | — | |||||||||||||||||
Unrealized gain, net of tax effect | — | — | — | 7,000 | — | 7,000 | |||||||||||||||||
Net Income | — | — | — | — | 1,746,000 | 1,746,000 | |||||||||||||||||
Balances, July 31, 2021 | $ | 1,934,000 | 3,556,425 | $ | (4,336,000 | ) | $ | 115,000 | $ | 51,495,000 | $ | 50,157,000 | |||||||||||
Balances | $ | 1,934,000 | 3,556,425 | $ | (4,336,000 | ) | $ | 115,000 | $ | 51,495,000 | $ | 50,157,000 |
See accompanying notes to the condensed financial statements
8 |
GEORGE RISK INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JULY 31, 2021 AND 2020
(Unaudited)
July 31, 2021 | July 31, 2020 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net Income | $ | 1,746,000 | $ | 2,492,000 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 107,000 | 86,000 | ||||||
(Gain) loss on sale of investments | (220,000 | ) | — | |||||
Impairments on investments | — | 27,000 | ||||||
Unrealized (gain) loss on equity securities | (420,000 | ) | (2,114,000 | ) | ||||
Reserve for bad debts | 6,000 | (5,000 | ) | |||||
Reserve for obsolete inventory | 5,000 | 1,000 | ||||||
Deferred income taxes | 103,000 | 599,000 | ||||||
Changes in assets and liabilities: | ||||||||
(Increase) decrease in: | ||||||||
Accounts receivable | 154,000 | 49,000 | ||||||
Inventories | (549,000 | ) | (405,000 | ) | ||||
Prepaid expenses | (196,000 | ) | 94,000 | |||||
Employee receivables | 2,000 | (1,000 | ) | |||||
Increase (decrease) in: | ||||||||
Accounts payable | (236,000 | ) | 117,000 | |||||
Accrued expenses | 99,000 | (61,000 | ) | |||||
Income tax payable | 547,000 | 346,000 | ||||||
Net cash from operating activities | 1,148,000 | 1,225,000 | ||||||
Cash Flows From Investing Activities: | ||||||||
(Purchase) of property and equipment | (40,000 | ) | (95,000 | ) | ||||
Proceeds from sale of marketable securities | 2,000 | 14,000 | ||||||
(Purchase) of marketable securities | (98,000 | ) | (111,000 | ) | ||||
Net cash from investing activities | (136,000 | ) | (192,000 | ) | ||||
Cash Flows From Financing Activities: | ||||||||
Dividends paid | (7,000 | ) | — | |||||
Net cash from financing activities | (7,000 | ) | — | |||||
Net Change in Cash and Cash Equivalents | $ | 1,005,000 | $ | 1,033,000 | ||||
Cash and Cash Equivalents, beginning of period | $ | 7,326,000 | $ | 6,458,000 | ||||
Cash and Cash Equivalents, end of period | $ | 8,331,000 | $ | 7,491,000 | ||||
Supplemental Disclosure for Cash Flow Information: | ||||||||
Cash payments for: | ||||||||
Income taxes paid | $ | 0 | $ | 0 | ||||
Interest paid | $ | 0 | $ | 0 | ||||
Cash receipts for: | ||||||||
Income taxes | $ | 43,000 | $ | 0 |
See accompanying notes to the condensed financial statements
9 |
GEORGE RISK INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JANUARYJULY 31, 20182021
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, 20172021 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 ofJune 2016 the FASB issued ASU 2016-022016-13, “Financial Instruments - Credit Losses (Topic 326),” which was subsequently amended in February 2020 by ASU 2020-02, “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842).” The amendments introduce an impairment model that is based on expected credit losses, rather than incurred losses, to estimate credit losses on certain types of financial instruments (e.g., loans and held-to-maturity securities), including certain off-balance sheet financial instruments (e.g., loan commitments). UnderThe expected credit losses should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the new guidance, lessees willcontractual term. Financial instruments with similar risk characteristics may be required to recognize so-called right-of-use assets and liabilities for most leases having lease terms of 12 months or more. Thisgrouped together when estimating expected credit losses. The update with amendment is effective in annual reporting periodsfor fiscal years beginning after December 31, 2019 and the15, 2022, including interim periods starting thereafter.within those fiscal years. The Company is evaluatingdoes not believe this new guidance will have a material impact on its financial statements and will implement the impact ofdisclosures related to this update on the Company’s financial statements.beginning in 2023.
In February of 2018,January 2020, the FASB issued ASU 2018-02 Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. Under this update, companies have2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the option to reclassify stranded tax effects caused by US Tax CutsInteractions between Topic 321, Topic 323, and Jobs Act (TCJA) from accumulated other comprehensive income (AOCI) to retained earnings. Under current US GAAP, effects fromTopic 815.” The ASU is based on a change in tax law is recorded as a componentconsensus of the income tax provision relatedEmerging Issues Task Force and is expected to continuing operationsincrease comparability in accounting for these transactions. ASU 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. ASU 2020-01 became effective for the Company in the periodfirst quarter 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). Adopting2021. The adoption 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 thedid not have any impact of this update on the Company’s condensed financial statements.
There are no other new accounting pronouncements that are expected to have a significant impact on our financial statements.
10 |
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, which include municipal bonds and bond funds, mature between June 2018November 2021 and November 2048.January 2044. The Company uses the average cost method to determine the cost of equity securities sold andwith any unrealized gains or losses reported in the amount reclassified out of accumulated other comprehensive income intorespective period’s earnings. Unrealized gains and losses on debt securities are excluded from earnings and reported separately as a component of stockholders’stockholder’s equity. Dividend and interest income are reported as earned.
As of JanuaryJuly 31, 20182021 and April 30, 2017,2021, investments consisted of the following:
Schedule of Investments
Gross | Gross |
| Gross | Gross | ||||||||||||||||||||||||||||
Investments at | Cost | Unrealized | Unrealized | Fair | Cost | Unrealized | Unrealized | Fair | ||||||||||||||||||||||||
January 31, 2018 | Basis | Gains | Losses | Value | ||||||||||||||||||||||||||||
July 31, 2021 | Basis | Gains | Losses | Value | ||||||||||||||||||||||||||||
Municipal bonds | $ | 5,966,000 | $ | 103,000 | $ | (238,000 | ) | $ | 5,831,000 | $ | 5,861,000 | $ | 200,000 | $ | (34,000 | ) | $ | 6,027,000 | ||||||||||||||
Corporate bonds | $ | 129,000 | $ | 2,000 | $ | — | $ | 131,000 | ||||||||||||||||||||||||
REITs | $ | 110,000 | $ | 5,000 | $ | (6,000 | ) | $ | 109,000 | 131,000 | 14,000 | (6,000 | ) | 139,000 | ||||||||||||||||||
Equity securities | $ | 15,720,000 | $ | 4,844,000 | $ | (203,000 | ) | $ | 20,361,000 | 17,492,000 | 9,730,000 | (92,000 | ) | 27,130,000 | ||||||||||||||||||
Money markets and CDs | $ | 1,064,000 | $ | — | $ | — | $ | 1,064,000 | 789,000 | — | — | 789,000 | ||||||||||||||||||||
Total | $ | 22,989,000 | $ | 4,954,000 | $ | (447,000 | ) | $ | 27,496,000 | $ | 24,273,000 | $ | 9,944,000 | $ | (132,000 | ) | $ | 34,085,000 |
Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
Investments at | Cost | Unrealized | Unrealized | Fair | Cost | Unrealized | Unrealized | Fair | ||||||||||||||||||||||||
April 30, 2017 | Basis | Gains | Losses | Value | ||||||||||||||||||||||||||||
April 30, 2021 | Basis | Gains | Losses | Value | ||||||||||||||||||||||||||||
Municipal bonds | $ | 6,045,000 | $ | 90,000 | $ | (97,000 | ) | $ | 6,038,000 | $ | 5,854,000 | $ | 198,000 | $ | (43,000 | ) | $ | 6,009,000 | ||||||||||||||
Corporate bonds | $ | 129,000 | $ | 1,000 | $ | — | $ | 130,000 | ||||||||||||||||||||||||
REITs | $ | 64,000 | $ | 13,000 | $ | (1,000 | ) | $ | 76,000 | 131,000 | 11,000 | (5,000 | ) | 137,000 | ||||||||||||||||||
Equity securities | $ | 15,259,000 | $ | 2,441,000 | $ | (319,000 | ) | $ | 17,381,000 | 17,199,000 | 9,294,000 | (74,000 | ) | 26,419,000 | ||||||||||||||||||
Money markets and CDs | $ | 2,757,000 | $ | — | $ | — | $ | 2,757,000 | 772,000 | — | — | 772,000 | ||||||||||||||||||||
Total | $ | 24,254,000 | $ | 2,545,000 | $ | (417,000 | ) | $ | 26,382,000 | $ | 23,956,000 | $ | 9,503,000 | $ | (122,000 | ) | $ | 33,337,000 |
Marketable securities that are classified as 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 income in the period of the change. Upon the disposition of a marketable security, the Company records a realized gain or (loss) on the Company’s statements of income.
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 recordno impairment loss was recorded for the quarter ended July 31, 2021. For the prior quarter ended July 31, 2020, an impairment loss duringof $27,000 was recorded.
11 |
The Company’s investments are actively traded in the stock and bond markets. Therefore, either a realized gain or loss is recorded when a sale happens. For the quarter ended July 31, 2021 the Company had sales of equity securities which yielded gross realized gains of $238,000 and gross realized losses of $8,000. For the same period, sales of debt securities did not yield any gross realized gains, but did record a lossgross realized losses of $23,000 for$10,000 were recorded. During the nine months ended Januaryquarter ending July 31, 2018. Likewise, for2020, the corresponding periods last year, managementCompany recorded gross realized gains and losses on equity securities of $102,000 and $126,000, respectively, while sales of debt securities did not record ayield any gross realized gains, but gross realized losses of $4,000 were recorded. The gross realized loss fornumbers include the quarter, but did record a $13,000 impairment loss forimpaired figures listed in the nine months ended January 31, 2017.previous paragraph.
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, 20182021 and April 30, 2017,2021, respectively.
Unrealized Loss Breakdown by Investment Type at JanuaryJuly 31, 20182021
Schedule of Unrealized Loss Breakdown by Investment
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 | ) | $ | 355,000 | $ | (5,000 | ) | $ | 279,000 | $ | (29,000 | ) | $ | 634,000 | $ | (34,000 | ) | ||||||||||||||||||
REITs | $ | 56,000 | $ | (5,000 | ) | $ | 27,000 | $ | (1,000 | ) | $ | 83,000 | $ | (6,000 | ) | — | — | 22,000 | (6,000 | ) | 22,000 | (6,000 | ) | |||||||||||||||||||||||||
Equity securities | $ | 534,000 | $ | (35,000 | ) | $ | 590,000 | $ | (168,000 | ) | $ | 1,124,000 | $ | (203,000 | ) | 526,000 | (35,000 | ) | 499,000 | (57,000 | ) | 1,025,000 | (92,000 | ) | ||||||||||||||||||||||||
Total | $ | 1,292,000 | $ | (192,000 | ) | $ | 2,291,000 | $ | (255,000 | ) | $ | 3,583,000 | $ | (447,000 | ) | $ | 881,000 | $ | (40,000 | ) | $ | 800,000 | $ | (92,000 | ) | $ | 1,681,000 | $ | (132,000 | ) |
Unrealized Loss Breakdown by Investment Type at April 30, 20172021
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 | ) | $ | 390,000 | $ | (6,000 | ) | $ | 365,000 | $ | (37,000 | ) | $ | 755,000 | $ | (43,000 | ) | ||||||||||||||||||
REITs | $ | — | $ | — | $ | 27,000 | $ | (1,000 | ) | $ | 27,000 | $ | (1,000 | ) | — | — | 23,000 | (5,000 | ) | 23,000 | (5,000 | ) | ||||||||||||||||||||||||||
Equity securities | $ | 983,000 | $ | (92,000 | ) | $ | 1,689,000 | $ | (227,000 | ) | $ | 2,672,000 | $ | (319,000 | ) | 340,000 | (35,000 | ) | 377,000 | (39,000 | ) | 717,000 | (74,000 | ) | ||||||||||||||||||||||||
Total | $ | 2,403,000 | $ | (111,000 | ) | $ | 3,008,000 | $ | (306,000 | ) | $ | 5,411,000 | $ | (417,000 | ) | $ | 730,000 | $ | (41,000 | ) | $ | 765,000 | $ | (81,000 | ) | $ | 1,495,000 | $ | (122,000 | ) |
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, 2018.2021.
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, 20182021.
12 |
Note 3:Inventories
Inventories at JanuaryJuly 31, 20182021 and April 30, 20172021 consisted of the following:
Schedule of Inventories
July 31, | April 30, | |||||||
2021 | 2021 | |||||||
Raw materials | $ | 5,030,000 | $ | 4,399,000 | ||||
Work in process | 574,000 | 457,000 | ||||||
Finished goods | 742,000 | 768,000 | ||||||
Inventory in transit | — | 173,000 | ||||||
Inventory gross | 6,346,000 | 5,797,000 | ||||||
Less: allowance for obsolete inventory | (180,000 | ) | (175,000 | ) | ||||
Inventories, net | $ | 6,166,000 | $ | 5,622,000 |
13 |
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.
Note 5:4:Business Segments
The following is financial information relating to industry segments:
Schedule of Financial Information Relating to Industry Segments
July 31, | ||||||||
2021 | 2020 | |||||||
Net revenue: | ||||||||
Security alarm products | $ | 4,257,000 | $ | 3,114,000 | ||||
Cable & wiring tools | 538,000 | 800,000 | ||||||
Other products | 160,000 | 133,000 | ||||||
Total net revenue | $ | 4,955,000 | $ | 4,047,000 | ||||
Income from operations: | ||||||||
Security alarm products | $ | 1,315,000 | $ | 912,000 | ||||
Cable & wiring tools | 166,000 | 235,000 | ||||||
Other products | 49,000 | 39,000 | ||||||
Total income from operations | $ | 1,530,000 | $ | 1,186,000 | ||||
Depreciation and amortization: | ||||||||
Security alarm products | $ | 35,000 | $ | 22,000 | ||||
Cable & wiring tools | 31,000 | 31,000 | ||||||
Other products | 22,000 | 12,000 | ||||||
Corporate general | 19,000 | 21,000 | ||||||
Total depreciation and amortization | $ | 107,000 | $ | 86,000 | ||||
Capital expenditures: | ||||||||
Security alarm products | $ | 40,000 | $ | 93,000 | ||||
Cable & wiring tools | — | — | ||||||
Other products | — | 2,000 | ||||||
Corporate general | — | — | ||||||
Total capital expenditures | $ | 40,000 | $ | 95,000 |
July 31, 2021 | April 30, 2021 | |||||||
Identifiable assets: | ||||||||
Security alarm products | $ | 9,415,000 | $ | 8,955,000 | ||||
Cable & wiring tools | 2,428,000 | 2,534,000 | ||||||
Other products | 646,000 | 667,000 | ||||||
Corporate general | 43,910,000 | 41,980,000 | ||||||
Total assets | $ | 56,399,000 | $ | 54,136,000 |
14 |
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 | |||||||
Identifiable assets: | ||||||||
Security alarm products | 4,424,000 | 3,180,000 | ||||||
Other products | 2,371,000 | 1,517,000 | ||||||
Corporate general | 34,773,000 | 33,767,000 | ||||||
Total assets | $ | 41,568,000 | $ | 38,464,000 | ||||
Schedule of Basic and Diluted Earnings Per Share
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, 2021 | ||||||||||||
Income | Shares | Per-Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
Net income | $ | 1,746,000 | ||||||||||
Basic EPS | $ | 1,746,000 | 4,946,460 | $ | .35 | |||||||
Effect of dilutive Convertible Preferred Stock | – | 20,500 | — | |||||||||
Diluted EPS | $ | 1,746,000 | 4,966,960 | $ | .35 |
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, 2020 | ||||||||||||
Income | Shares | Per-Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
Net income | $ | 2,492,000 | ||||||||||
Basic EPS | $ | 2,492,000 | 4,949,927 | $ | .50 | |||||||
Effect of dilutive Convertible Preferred Stock | – | 20,500 | — | |||||||||
Diluted EPS | $ | 2,492,000 | 4,970,427 | $ | .50 |
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.Company. The Plan is intended to be qualified under Section 401(k) of the Internal Revenue Code of 1986, as amended. It is funded by voluntary pre-tax and Roth (taxable) contributions from eligible employees who may contribute a percentage of their eligible compensation, limited and subject to statutory limits. Employees are eligible to participate in the Plan when they have attained the age of 21 and completed one thousand hours of service in any plan year with the Company. Upon leaving the Company, each participant is 100% vested with respect to the participants’ contributions while the Company’s matching contributions are vested over a six-year period in accordance with the Plan document. Contributions are invested, as directed by the participant, in investment funds available under the Plan. Matching contributions by the Company of approximately $2,000$17,000 and $13,000 were paid during bothin each of the quarters ending JanuaryJuly 31, 20182021 and 2017,2020 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.
15 |
Note 8: 7:Fair Value Measurements
Generally accepted accounting principles inThe carrying value of the United States of America (US GAAP) definesCompany’s cash and cash equivalents, accounts receivable and accounts payable approximate their fair value asdue to their short term nature. The fair value of our investments is determined utilizing market based information. Fair value is 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 JanuaryJuly 31, 2018,2021, our investments consisted of money markets, publicly traded equity securities, real estate investment trusts (REITS)(REITs) as well as certain state and municipal debt securities and corporate bonds. Oursecurities. The marketable securities are valued using third-party broker statements. The value of the investmentsmajority of securities is derived from quoted market information. The inputs to the valuation are generally classified as Level 1 given the active market for these securities, however, if an active market does not exist, which is the case for municipal 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 |
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Assets Measured at Fair Value on a Recurring Basis as of April 30, 2017 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Municipal Bonds | $ | — | $ | 6,038,000 | $ | — | $ | 6,038,000 | ||||||||
Corporate Bonds | $ | 130,000 | $ | — | $ | — | $ | 130,000 | ||||||||
REITs | $ | — | $ | 76,000 | $ | — | $ | 76,000 | ||||||||
Equity Securities | $ | 17,381,000 | $ | — | $ | — | $ | 17,381,000 | ||||||||
Money Markets and CDs | $ | 2,757,000 | $ | — | $ | — | $ | 2,757,000 | ||||||||
Total fair value of assets measured on a recurring basis | $ | 20,268,000 | $ | 6,114,000 | $ | — | $ | 26,382,000 |
Schedule of Assets Measured at Fair Value on Recurring Basis
Assets Measured at Fair Value on a Recurring Basis as of July 31, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Municipal Bonds | $ | — | $ | 6,027,000 | $ | — | $ | 6,027,000 | ||||||||
REITs | — | 139,000 | — | 139,000 | ||||||||||||
Equity Securities | 27,130,000 | — | — | 27,130,000 | ||||||||||||
Money Markets and CDs | 789,000 | — | — | 789,000 | ||||||||||||
Total fair value of assets measured on a recurring basis | $ | 27,919,000 | $ | 6,166,000 | $ | — | $ | 34,085,000 |
Assets Measured at Fair Value on a Recurring Basis as of April 30, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Municipal Bonds | $ | — | $ | 6,009,000 | $ | — | $ | 6,009,000 | ||||||||
REITs | — | 137,000 | — | 137,000 | ||||||||||||
Equity Securities | 26,419,000 | — | — | 26,419,000 | ||||||||||||
Money Markets and CDs | 772,000 | — | — | 772,000 | ||||||||||||
Total fair value of assets measured on a recurring basis | $ | 27,191,000 | $ | 6,146,000 | $ | — | $ | 33,337,000 |
Note 8Subsequent Events
None
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Note 9: 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, 2017.2021.
Executive Summary
The Company’s performance has remained steady during the quarter ended July 31, 2021 as compared to the quarter ended July 31, 2020. Although sales have increased when comparing to the same quarter last year, overall net income is down because unrealized gains on investments aren’t as big as they were for the same quarter last year. The uptick in sales is direct result of the closure of a competitor at the end of calendar year 2019 and having the ability to continue working through the three quarters, with increased sales, being offset by increased cost of sales, and greatly improved investment returns. This is due to the continuation of our quality USA made products with the ability for customization, our notable customer service, and the purchaseCOVID-19 pandemic. As a result of the assets of Labor Saving Devices, Inc. New challengesincreased demand, the Company is experiencing a sizable back order log; however, management has endured overbeen able to increase inventory. Management now intends to focus on ramping up production to meet customer’s needs in a timely manner. Opportunities include continuing to learn and grow with our computer system and to continue looking at businesses that might be a good fit to purchase. We also have new products that are scheduled to enter the ninemarketplace by the end of the calendar year. Challenges in the coming months of this fiscal year include the continuation of training of our new software system, learning and incorporating the Labor Saving Devicescontinuing to get product line,out to customers in a timely manner and dealing with some shortagesCOVID-19 pandemic restrictions. Possible COVID-19 challenges include, but are not limited to, price increases and/or delays in the supply chain, reduced sales, workforce interruptions, and defectseconomic conditions impacting the stock market. Management continues to work at keeping operations flowing as efficient as possible with the hopes of raw materials.getting the facilities running leaner and more profitable than ever before.
Results of Operations
● | Net sales | |
● | Cost of goods sold |
18 |
● | ||
Operating expenses increased by |
● | Income from operations for the quarter ended | |
● | Other income and expenses | |
● | The Company’s provision for income taxes showed a decrease of $347,000 from $948,000 in the | |
● | ||
● | Earnings per share for the | |
Liquidity and capital resources
Operating
Operating | ||
● | Net cash | |
● | Accounts receivable decreased $154,000 for the quarter ending July 31, 2021 compared with a $49,000 decrease for the same quarter last year. The bigger decrease in accounts receivable is directly attributable to an increase in sales and customers being able to pay timely as the COVID-19 pandemic has become a part of our everyday life. Management still has the ability to collect on accounts and to keep past due accounts to a minimum. An analysis of accounts shows that there were only 3.26% that were over 90 days at July 31, 2021. | |
● | Inventories increased $549,000 during the current quarter as compared to a $405,000 increase last year. The larger increase is primarily due to the |
19 |
● | For the quarter ended July 31, 2021 there was | |
● | Accounts | |
● | Accrued expenses increased $99,000 for the current quarter as compared to a $61,000 decrease for the quarter ended July 31, 2020. The difference in | |
● |
Investing
Investing | ||
● | The Company | |
● | ||
Financing
Financing | ||
● | The Company continues to purchase back common stock when the opportunity | |
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TheIn conjunction with the Company’s Condensed Financial Statements, we have provided the following is a list of ratios to help analyze George Risk Industries’ performance:
Qtr ended | Qtr ended | |||||||
July 31, 2021 | July 31, 2020 | |||||||
Working capital (current assets – current liabilities) | $ | 49,401,000 | $ | 40,103,000 | ||||
Current ratio (current assets / current liabilities) | 15.529 | 11.485 | ||||||
Quick ratio ((cash + current investments + AR) / current liabilities) | 13.549 | 9.953 |
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:
● | ||
● | An updated version of the pool access alarm We are currently redesigning our glass break detector switch and water shutoff system to include a brass valve. | |
● | ||
Wireless technology is a main area of focus for product development. We are | ||
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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 ofJune 2016 the FASB issued ASU 2016-022016-13, “Financial Instruments - Credit Losses (Topic 326),” which was subsequently amended in February 2020 by ASU 2020-02, “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842).” The amendments introduce an impairment model that is based on expected credit losses, rather than incurred losses, to estimate credit losses on certain types of financial instruments (e.g., loans and held-to-maturity securities), including certain off-balance sheet financial instruments (e.g., loan commitments). UnderThe expected credit losses should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the new guidance, lessees willcontractual term. Financial instruments with similar risk characteristics may be required to recognize so-called right-of-use assets and liabilities for most leases having lease terms of 12 months or more. Thisgrouped together when estimating expected credit losses. The update with amendment is effective in annual reporting periodsfor fiscal years beginning after December 31, 2019 and the15, 2022, including interim periods starting thereafter.within those fiscal years. The Company is evaluatingdoes not believe this new guidance will have a material impact on its financial statements and will implement the impact ofdisclosures related to this update on the Company’s financial statements.beginning in 2023.
In February of 2018,January 2020, the FASB issued ASU 2018-02 Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. Under this update, companies have2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the option to reclassify stranded tax effects caused by US Tax CutsInteractions between Topic 321, Topic 323, and Jobs Act (TCJA) from accumulated other comprehensive income (AOCI) to retained earnings. Under current US GAAP, effects fromTopic 815.” The ASU is based on a change in tax law is recorded as a componentconsensus of the income tax provision relatedEmerging Issues Task Force and is expected to continuing operationsincrease comparability in accounting for these transactions. ASU 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. ASU 2020-01 became effective for the Company in the periodfirst quarter 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). Adopting2021. The adoption 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 thedid not have any impact of this update on the Company’s condensed financial statements.
There are no other new accounting pronouncements that are expected to have a significant impact on our financial statements.
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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, 2018.2021. Based on that evaluation, our chief executive officer (also working as our chief financial officer)management 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.
In our annual report filed on Report 10-K for the year ended April 30, 2021, management identified the following material weakness in our internal control over financial reporting:
● | The small size of our Company limits our ability to achieve the desired level of separation of duties for proper internal controls and financial reporting, particularly as it relates to financial reporting to assure material disclosures or implementation of newly issued accounting standards are included. A secondary review over annual and quarterly filings does occur with an outside party. Due to the departure of the Controller, the current CEO and CFO roles are being fulfilled by the same individual. We do not have an audit committee. We do not believe we have met the full requirement for separation of duties for financial reporting purposes. |
We continue to operate with a limited number of accounting and financial personnel. For the quarter ending July 31, 2021 the Company did not have taken measures to improve our disclosure controls and procedures. A new accounting professional was hired in October 2017a Controller, but management is looking to fill the Controller position. Regarding this filing, more trainingposition as soon as possible. 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. To mitigate the effects of the material weakness identified in our annual report, the Company contracted with an outside CPA to perform a secondary review of our quarterly report filed on Form 10-Q.
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 wasOther than those mentioned above, there were no changechanges in our internal control over financial reporting during the fiscal quarter ended JanuaryJuly 31, 20182021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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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 2018.2022.
Period | Number of shares repurchased | |||
-0- | ||||
-13- | ||||
-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
Exhibit No. | Description | ||
31.1 | |||
Certification of the Chief Executive Officer (Principal Financial and Accounting Officer), as required by Section 302 of the Sarbanes-Oxley Act of 2002. | |||
32.1 | Certification of the Chief Executive Officer (Principal Financial and Accounting Officer), as required by Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101.INS | Inline XBRL Instance Document | ||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | ||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
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Pursuant to
SIGNATURES
In 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 | By: | /s/ Stephanie M. Risk-McElroy |
Stephanie M. Risk-McElroy | ||
President, Chief Executive Officer, Chief Financial Officer | ||
and Chairman of the Board |
25 |