UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

(Mark One)

 

[X]Quarterly report under Section

QUARTERLY REPORT PURSUANT TO SECTION 13 orOR 15(d) of the Securities Exchange Act ofOF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarter ended JulyJanuary 31, 20182019

 

[  ]Transition report under Section

TRANSITION REPORT PURSUANT TO SECTION 13 orOR 15(d) of the Securities Exchange Act ofOF 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 of incorporation) (IRS Employers Identification No.)

 

802 South Elm St. 
Kimball, NE 69145
(Address of principal executive offices) (Zip Code)

 

(308) 235-4645

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has 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-TS-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] No [X]

 

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

 

Large accelerated filer [  ]Accelerated filer [  ]
Non-accelerated filer [  ]Smaller reporting company [X][ 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 September 14, 2018March 21, 2019, was 4,962,447.4,960,710.

 

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

 

 

 
 

 

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

ITEM 1:Financial Statements

Item 1. Financial Statements

 

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

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

Condensed Balance SheetsCONDENSED BALANCE SHEETS

 

 January 31, 2019 April 30, 2018 
 July 31, 2018 April 30, 2018  (unaudited)   
 (unaudited)   
ASSETS                
        
Current Assets:                
Cash and cash equivalents $4,947,000  $4,294,000  $4,589,000  $4,294,000 
Investments and securities, at fair value  27,161,000   26,346,000 
Investments and securities  25,770,000   26,346,000 
Accounts receivable:                
Trade, net of $10,075 and $6,651 doubtful account allowance  2,308,000   2,545,000 
Trade, net of $3,465 and $6,651 doubtful account allowance  2,034,000   2,545,000 
Other  1,000   2,000   3,000   2,000 
Income tax overpayment  504,000   747,000   854,000   747,000 
Inventories, net  3,650,000   3,267,000   4,253,000   3,267,000 
Prepaid expenses  401,000   603,000   310,000   603,000 
Total Current Assets  38,972,000   37,804,000   37,813,000   37,804,000 
                
Property and Equipment, net, at cost  1,024,000   1,076,000   1,008,000   1,076,000 
                
Other Assets                
Investment in Limited Land Partnership, at cost  293,000   293,000   293,000   293,000 
Projects in process  132,000   — 
Other  41,000   6,000   3,000   6,000 
Total Other Assets  334,000   299,000   428,000   299,000 
                
Intangible assets, net  1,732,000   1,763,000 
Intangible Assets, net  1,671,000   1,763,000 
                
TOTAL ASSETS $42,062,000  $40,942,000  $40,920,000  $40,942,000 

 

See accompanying notes to the unaudited condensed financial statementsstatements.

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

Condensed Balance SheetsCONDENSED BALANCE SHEETS

(continued)

 

 January 31, 2019 April 30, 2018 
 July 31, 2018 April 30, 2018  (unaudited)   
 (unaudited)   
LIABILITIES AND STOCKHOLDERS’ EQUITY                
        
Current Liabilities                
Accounts payable, trade $329,000  $336,000  $302,000  $336,000 
Dividends payable  1,579,000   1,580,000   1,713,000   1,580,000 
Accrued expenses:                
Payroll and related expenses  166,000   329,000   302,000   329,000 
Property taxes  3,000   12,000   3,000   12,000 
Total Current Liabilities  2,077,000   2,257,000   2,320,000   2,257,000 
                
Long-Term Liabilities                
Deferred income taxes  1,179,000   955,000   778,000   955,000 
Total Long-Term Liabilities  1,179,000   955,000   778,000   955,000 
                
Commitments and contingencies  —   — 
Total Liabilities  3,098,000   3,212,000 
        
Commitments and Contingencies  —   — 
                
Stockholders’ Equity                
Convertible preferred stock, 1,000,000 shares authorized, Series 1—noncumulative, $20 stated value, 25,000 shares authorized, 4,100 issued and outstanding  99,000   99,000   99,000   99,000 
Common stock, Class A, $.10 par value, 10,000,000 shares authorized, 8,502,881 shares issued and outstanding  850,000   850,000   850,000   850,000 
Additional paid-in capital  1,934,000   1,934,000   1,934,000   1,934,000 
Accumulated other comprehensive income  2,712,000   2,249,000   1,730,000   2,249,000 
Retained earnings  37,364,000   36,746,000   37,419,000   36,746,000 
Less: treasury stock, 3,535,434 and 3,534,784 shares, at cost  (4,153,000)  (4,148,000)
Less: treasury stock, 3,542,171 and 3,534,784 shares, at cost  (4,210,000)  (4,148,000)
Total Stockholders’ Equity  38,806,000   37,730,000   37,822,000   37,730,000 
                
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $42,062,000  $40,942,000 
TOTAL LIABILITES AND STOCKHOLDERS’ EQUITY $40,920,000  $40,942,000 

 

See accompanying notes to the unaudited condensed financial statements

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

Condensed Income Statements

For the three months ended July 31, 2018 and 2017

CONDENSED INCOME STATEMENTS (Unaudited)

 

 Three months Nine months Three months Nine months 
 July 31, 2018 July 31, 2017  ended ended ended ended 
      Jan 31, 2019 Jan 31, 2019 Jan 31, 2018 Jan 31, 2018 
Net Sales $3,429,000  $2,248,000  $3,455,000  $10,551,000  $3,260,000  $8,597,000 
Less: Cost of Goods Sold  (1,801,000)  (1,095,000)  (1,772,000)  (5,467,000)  (1,826,000)  (4,337,000)
Gross Profit  1,628,000   1,153,000   1,683,000   5,084,000   1,434,000   4,260,000 
                        
Operating Expenses:        
Operating Expenses                
General and Administrative  286,000   229,000   294,000   911,000   313,000   833,000 
Sales  555,000   416,000   531,000   1,611,000   512,000   1,371,000 
Engineering  9,000   13,000   21,000   57,000   22,000   69,000 
Rent Paid to Related Parties  5,000   5,000   5,000   14,000   5,000   14,000 
Total Operating Expenses  855,000   663,000   851,000   2,593,000   852,000   2,287,000 
                        
Income From Operations  773,000   490,000   832,000   2,491,000   582,000   1,973,000 
                        
Other Income (Expense)        
Other Income                
Other  3,000   3,000   1,000   10,000   —   3,000 
Dividend and Interest Income  193,000   279,000   471,000   816,000   376,000   811,000 
Gain (Loss) on Sales of Assets  —   4,000 
Gain (Loss) on Sale of Investments  (68,000)  (38,000)
Gain on Investments  169,000   74,000   123,000   94,000 
Gain on Sale of Assets  —   —   —   4,000 
  128,000   248,000   641,000   900,000   499,000   912,000 
                        
Income Before Provisions for Income Taxes  901,000   738,000   1,473,000   3,391,000   1,081,000   2,885,000 
                        
Provisions for Income Taxes        
Provisions for Income Taxes:                
Current Expense  247,000   213,000   291,000   799,000   281,000   852,000 
Deferred tax expense (benefit)  37,000   7,000 
Deferred Tax Expense  9,000   33,000   9,000   1,000 
Total Income Tax Expense  284,000   220,000   300,000   832,000   290,000   853,000 
                        
Net Income $617,000  $518,000  $1,173,000  $2,559,000  $791,000  $2,032,000 
                        
Basic Earnings Per Share of Common Stock $0.12  $0.10 
Diluted Earnings Per Share of Common Stock $0.12  $0.10 
Cash Dividends                
Common Stock ($0.38 per share) $—  $1,886,000         
Common Stock ($0.36 per share)         $—  $1,780,000 
                
Income Per Share of Common Stock                
Basic $0.24  $0.52  $0.16  $0.41 
Diluted $0.24  $0.51  $0.16  $0.41 
                        
Weighted Average Number of Common Shares Outstanding  4,967,580   4,945,092                 
Weighted Average Number of Shares Outstanding (Diluted)  4,988,080   4,965,592 
Basic  4,961,018   4,963,592   4,969,013   4,955,725 
Diluted  4,981,518   4,984,092   4,989,513   4,976,225 

 

See accompanying notes to the unaudited condensed financial statements

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

Condensed Statements of Comprehensive Income

For the three months ended July 31, 2018 and 2017

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

 

 Three months Nine months Three months Nine months 
 July 31, 2018 July 31, 2017  ended ended ended ended 
      Jan 31, 2019 Jan 31, 2019 Jan 31, 2018 Jan 31, 2018 
Net Income $617,000  $518,000  $1,173,000  $2,559,000  $791,000  $2,032,000 
                        
Other Comprehensive Income, Net of Tax                        
Unrealized gain (loss) on securities:                        
Unrealized holding gains (losses) arising during period  607,000   629,000   43,000   (595,000)  1,247,000   2,585,000 
Reclassification adjustment for gains (losses) included in net income  44,000   (84,000)  (171,000)  (134,000)  (88,000)  (205,000)
Income tax expense related to other comprehensive income  (188,000)  (228,000)
Other Comprehensive Income (Loss)  463,000   317,000 
Income tax benefit (expense) related to other comprehensive income  37,000   210,000   (485,000)  (995,000)
Other Comprehensive Income  (91,000)  (519,000)  674,000   1,385,000 
                        
Comprehensive Income $1,080,000  $835,000  $1,082,000  $2,040,000  $1,465,000  $3,417,000 

 

See accompanying notes to the unaudited condensed financial statements

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

Condensed Statements of Cash Flows

For the three months ended July 31, 2018 and 2017

CONDENSED STATEMENT OF CASH FLOWS (Unaudited)

 

 July 31, 2018 July 31, 2017 Nine months Nine months
Cash Flows from Operating Activities:        
ended ended
Jan 31, 2019 Jan 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net Income $617,000  $518,000  $2,559,000  $2,032,000 
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization  83,000   41,000   248,000   163,000 
(Gain) loss on sale of investments  68,000   38,000   (142,000)  (117,000)
Impairments on investments  68,000   23,000 
Reserve for bad debts  3,000   —   (3,000)  13,000 
Reserve for obsolete inventory  6,000   —   12,000   — 
Deferred income taxes  37,000   7,000   33,000   1,000 
(Gain) loss on sale of assets  —   (4,000)  —   (4,000)
Changes in assets and liabilities:                
(Increase) decrease in:                
Accounts receivable  234,000   257,000   514,000   (636,000)
Inventories  (389,000)  (62,000)  (999,000)  (1,291,000)
Prepaid expenses  166,000   63,000   164,000   (359,000)
Employee receivables  —   1,000 
Other receivables  (2,000)  2,000 
Income tax overpayment  244,000   208,000   (106,000)  (221,000)
Increase (decrease) in:                
Accounts payable  (7,000)  112,000   (35,000)  239,000 
Accrued expenses  (172,000)  (163,000)  (36,000)  (127,000)
Net cash provided by (used in) operating activities $890,000  $1,016,000   2,275,000   (282,000)
                
Cash Flows From Investing Activities:        
CASH FLOWS FROM INVESTING ACTIVITIES:        
Proceeds from sale of assets  —   4,000   —   4,000 
(Purchase) of property and equipment  —   (253,000)  (88,000)  (342,000)
Proceeds from sale of marketable securities  2,000   2,000   761,000   2,013,000 
(Purchase) of marketable securities  (233,000)  (224,000)  (839,000)  (653,000)
(Purchase) of intangible assets  —   (1,624,000)
Net cash provided by (used in) investing activities $(231,000) $(471,000)  (166,000)  (602,000)
        
Cash Flows From Financing Activities:        
CASH FLOWS FROM FINANCING ACTIVITIES:        
(Purchase) of treasury stock  (5,000)  (3,000)  (62,000)  (3,000)
Dividends paid  (1,000)  —   (1,752,000)  (1,617,000)
Net cash provided by (used in) financing activities $(6,000) $(3,000)  (1,814,000)  (1,620,000)
                
Net Increase (Decrease) in Cash and Cash Equivalents $653,000  $542,000 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  295,000   (2,504,000)
                
Cash and Cash Equivalents, beginning of period $4,294,000  $6,456,000   4,294,000   6,456,000 
Cash and Cash Equivalents, end of period $4,947,000  $6,998,000  $4,589,000  $3,952,000 
                
        
Supplemental Disclosure for Cash Flow Information:                
Cash payments for:                
Income taxes paid $0  $0 
Income taxes $900,000  $1,320,000 
Interest paid $1,000  $0  $1,000  $— 
Cash receipts for:        
Income taxes $—  $253,000 
        
Supplemental Disclosure of Noncash Investing and Financing Activities:        
Issuance of treasury stock as part of asset acquisition $—  $200,000 

 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JULYJANUARY 31, 20182019

 

Note 1: Unaudited Interim Financial Statements

 

The accompanying financial statements have been prepared in accordance with the instructions for Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. It is suggested that these unaudited condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s April 30, 2018 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 Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. In addition, ASU No. 2014-09 requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU No. 2014-09 supersedes most existing U.S. GAAP revenue recognition principles, and it permits the use of either the retrospective or cumulative effect transition method. ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. The Company has adopted ASU No. 2014-09 in the first quarter of fiscal 2019, which does not have a material impact on the Company’s financial statements and related disclosures.

In 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 for lessors remains largely unchanged from current GAAP. ASU 2016-02 is effective for the Company beginning NovemberMay 1, 2019. Early adoption is permitted. In July 2018, the FASB issued ASU No. 2018-10 “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”) and ASU No. 2018-11 “Leases (Topic 842) Targeted Improvements” (“ASU 2018-11”). ASU 2018-10 provides certain amendments that affect narrow aspects of the guidance issued in ASU 2016-02. ASU 2018-11 allows all entities adopting ASU 2016-02 to choose an additional (and optional) transition method of adoption, under which an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2018-11 also allows lessors to not separate non-lease components from the associated lease component if certain conditions are met. The Company will adopt the ASUs in the first quarter of 2019fiscal 2020 and the Company’s accounting systems will be upgraded to comply with the requirements of the new standard, however, the adoption of ASU 2016-02 willis not anticipated to have a material impact on the Company’s financial statements and related disclosures.

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). Under existing U.S. GAAP, the effects of changes in tax rates and laws on deferred tax balances are recorded as a component of income tax expense in the period in which the law was enacted. When deferred tax balances related to items originally recorded in accumulated other comprehensive income (loss) are adjusted, certain tax effects become stranded in accumulated other comprehensive income. The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive income (loss) to retained earnings (accumulated deficit) for stranded income tax effects resulting from the Tax Cuts and Jobs Act (the Tax Act). The amendments in this ASU also require certain disclosures about stranded income tax effects. The guidance 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 areThe Company is currently evaluating the potential impact of adopting the applicable guidance, however we dothe Company does 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 ifis 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, “Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.” Subsequently, in November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses”. ASU 2016-13 requires entities to measure all expected credit losses for most financial assets held at the reporting date based on an expected loss model which includes historical experience, current conditions, and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. ASU 2016-13 also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. ASU 2016-13 and ASU 2018-19 are effective for the Company on May 1, 2020, including interim periods within those fiscal periods, with early adoption permitted. Management is currently assessing the impact the new guidance will have on the Company’s financial statements.

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.markets funds. The investments in securities are classified as available-for-sale securities and are reported at fair value. Available-for-sale investments in debt securities mature between August 2018June 2019 and November 2048.January 2044. The Company uses the average cost method to determine the cost of securities sold and the amount reclassified out of accumulated other comprehensive income into earnings. Unrealized gains and losses are excluded from earnings and reported separately as a component of stockholders’ equity. Dividend and interest income are reported as earned.

 

As of JulyJanuary 31, 20182019 and April 30, 2018, investments consisted of the following:

 

   Gross Gross   
Investments at Cost Unrealized Unrealized Fair 
July 31, 2018 Basis Gains Losses Value 
Investments at
January 31, 2019		 Cost
Basis		 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Fair
Value		 
Municipal bonds $5,917,000  $65,000  $(99,000) $5,883,000  $5,487,000  $65,000  $(88,000) $5,464,000 
Corporate bonds $30,000  $1,000  $-  $31,000   56,000   1,000   —   57,000 
REITs $110,000  $11,000  $(3,000) $118,000   89,000   —   (2,000)  87,000 
Equity securities $16,103,000  $4,105,000  $(270,000) $19,938,000   16,532,000   2,933,000   (479,000)  18,986,000 
Money markets and CDs $1,191,000  $-  $-  $1,191,000   1,176,000   —   —   1,176,000 
Total $23,351,000  $4,182,000  $(372,000) $27,161,000  $23,340,000  $2,999,000  $(569,000) $25,770,000 

 

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

 

The Company evaluates all marketable securities for other-than temporary declines in fair value, which are defined as when the cost basis exceeds the fair value for approximately one year. The Company also evaluates the nature of the investment, cause of impairment and number of investments that are in an unrealized position. When an “other-than-temporary” decline is identified, the Company will decrease the cost of the marketable security to the new fair value and recognize a real loss. The investments are periodically evaluated to determine if impairment changes are required. As a result of this standard, management recorded an impairment loss of $36,000 for the quarter, and recorded a loss of $68,000 for the nine months ended January 31, 2019. For the corresponding periods last year, management did not need to record anya loss for the quarter, but did record a $23,000 impairment lossesloss for either of the quartersnine months ended JulyJanuary 31, 2018 and July 31, 2017.2018.

The following table showstables show 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 JulyJanuary 31, 20182019 and April 30, 2018, respectively.

 

Unrealized Loss Breakdown by Investment Type at JulyJanuary 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 $1,857,000  $(9,000) $1,211,000  $(90,000) $3,068,000  $(99,000) $2,678,000  $(33,000) $618,000  $(55,000) $3,296,000  $(88,000)
REITs $35,000  $(3,000) $—  $—  $35,000  $(3,000)  —   —   87,000   (2,000)  87,000   (2,000)
Equity securities $1,269,000  $(100,000) $1,146,000  $(170,000) $2,415,000  $(270,000)  4,806,000   (351,000)  519,000   (128,000)  5,325,000   (479,000)
Total $3,161,000  $(112,000) $2,357,000  $(260,000) $5,518,000  $(372,000) $7,484,000  $(384,000) $1,224,000  $(185,000) $8,708,000  $(569,000)

 

Unrealized Loss Breakdown by Investment Type at April 30, 2018

 

 Less than 12 months 12 months or greater Total  Less than 12 months 12 months or greater Total 
Description Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss  Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss 
Municipal bonds $702,000  $(152,000) $1,674,000  $(86,000) $2,376,000  $(238,000) $960,000  $(200,000) $2,385,000  $(109,000) $3,345,000  $(309,000)
REITs $56,000  $(5,000) $27,000  $(1,000) $83,000  $(6,000)  55,000   (6,000)  27,000   (1,000)  82,000   (7,000)
Equity securities $534,000  $(35,000) $590,000  $(168,000) $1,124,000  $(203,000)  2,545,000   (127,000)  823,000   (184,000)  3,368,000   (311,000)
Total $1,292,000  $(192,000) $2,291,000  $(225,000) $3,583,000  $(447,000) $3,560,000  $(333,000) $3,235,000  $(294,000) $6,795,000  $(627,000)

 

Municipal Bonds

 

The unrealized losses on the Company’s investments in municipal bonds were caused by interest rate increases. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company has the ability to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at JulyJanuary 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 JulyJanuary 31, 2018.

2019.

Note 3: Inventories

 

Inventories at JulyJanuary 31, 20182019 and April 30, 2018 consisted of the following:

 

 July 31, 2018 April 30, 2018  January 31, 2019 April 30, 2018 
          
Raw materials $2,774,000  $2,450,000  $3,275,000  $2,450,000 
Work in process  483,000   444,000   514,000   444,000 
Finished goods  489,000   463,000   567,000   463,000 
  3,746,000   3,357,000   4,356,000   3,357,000 
Less: allowance for obsolete inventory  (96,000)  (90,000)  (103,000)  (90,000)
Totals $3,650,000  $3,267,000  $4,253,000  $3,267,000 

Note 4: Business Segments

 

The following is financial information relating to industry segments:

 

 July 31, 
 2018 2017  Three months
ended
Jan 31, 2019		 Nine months
ended
Jan 31, 2019		 Three months
ended
Jan 31, 2018		 Nine months
ended
Jan 31, 2018		 
Net revenue:                        
Security alarm products $2,150,000  $1,798,000  $2,735,000  $8,103,000  $2,715,000  $6,683,000 
Cable & wiring tools  679,000   —   576,000   1,929,000   —   — 
Other products  600,000   450,000   144,000   519,000   545,000   1,914,000 
Total net revenue $3,429,000  $2,248,000  $3,455,000  $10,551,000  $3,260,000  $8,597,000 
                        
Income from operations:                        
Security alarm products $485,000  $392,000  $659,000  $1,972,000  $452,000  $1,534,000 
Cable & wiring tools  153,000   —   138,000   415,000   —   — 
Other products  135,000   98,000   35,000   104,000   130,000   439,000 
Total income from operations $773,000  $490,000  $832,000  $2,491,000  $582,000  $1,973,000 
        
Identifiable assets:        
Security alarm products $3,848,000  $3,934,000 
Cable & wiring tools  2,783,000   — 
Other products  2,024,000   749,000 
Corporate general  33,407,000   34,797,000 
Total assets $42,062,000  $39,480,000 
                        
Depreciation and amortization:                        
Security alarm products $10,000  $8,000  $37,000  $57,000  $10,000  $28,000 
Cable & wiring tools  31,000   —   30,000   92,000         
Other products  27,000   21,000   —   55,000   52,000   94,000 
Corporate general  15,000   12,000   14,000   44,000   15,000   41,000 
Total depreciation and amortization $83,000  $41,000  $81,000  $248,000  $77,000  $163,000 
                        
Capital expenditures:                        
Security alarm products $—  $210,000  $35,000  $35,000  $—  $260,000 
Cable & wiring tools  —   —   —   —         
Other products  —   —   37,000   37,000   —   — 
Corporate general  —   43,000   16,000   16,000   16,000   81,000 
Total capital expenditures $—  $253,000  $88,000  $88,000  $16,000  $341,000 

  January 31, 2019  April 30, 2018 
Identifiable assets:        
Security alarm products $5,255,000  $4,564,000 
Cable & wiring tools  2,679,000   2,347,000 
Other products  842,000   1,521,000 
Corporate general  32,144,000   32,510,000 
Total assets $40,920,000  $40,942,000 

Note 5:6: 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 July 31, 2018 
  Income  Shares  Per-Share 
  (Numerator)  (Denominator)  Amount 
Net income $617,000        
Basic EPS $617,000   4,967,580  $.1242 
Effect of dilutive Convertible            
Preferred Stock  –   20,500   (.0005)
Diluted EPS $617,000   4,988,080  $.1237 
  For the three months ended January 31, 2019 
  Income  Shares  Per-share 
  (Numerator)  (Denominator)  Amount 
Net Income $1,173,000         
             
Basic EPS $1,173,000   4,961,018  $0.2364 
Effect of dilutive securities:            
Convertible preferred stock  —   20,500   
Diluted EPS $1,173,000   4,981,518  $0.2355 

 

  For the three months ended July 31, 2017 
  Income  Shares  Per-Share 
  (Numerator)  (Denominator)  Amount 
Net income $518,000         
Basic EPS $518,000   4,945,092  $.1048 
Effect of dilutive Convertible            
Preferred Stock  –   20,500   (.0005)
Diluted EPS $518,000   4,965,592  $.1043 
  For the nine months ended January 31, 2019 
  Income
(Numerator)		  Shares
(Denominator)		  Per-share
Amount		 
Net Income $2,559,000         
             
Basic EPS $2,559,000   4,963,592  $0.5156 
Effect of dilutive securities:            
Convertible preferred stock  —   20,500   
Diluted EPS $2,559,000   4,984,092  $0.5134 

  For the three months ended January 31, 2018 
  Income
(Numerator)		  Shares
(Denominator)		  Per-share
Amount		 
Net Income $791,000         
             
Basic EPS $791,000   4,969,013  $0.1592 
Effect of dilutive securities:            
Convertible preferred stock  —   20,500   
Diluted EPS $791,000   4,989,513  $0.1585 
  For the nine months ended January 31, 2018 
  Income
(Numerator)		  Shares
(Denominator)		  Per-share
Amount		 
Net Income $2,032,000         
             
Basic EPS $2,032,000   4,955,725  $0.4100 
Effect of dilutive securities:            
Convertible preferred stock  —   20,500   
Diluted EPS $2,032,000   4,976,225  $0.4083 

 

Note 6:7: Retirement Benefit Plan

 

On January 1, 1998, the Company adopted the George Risk Industries, Inc. Retirement Savings Plan (the “Plan”). The Plan is a defined contribution savings plan designed to provide retirement income to eligible employees of the corporation. The Plan is intended to be qualified under Section 401 (k)401(k) of the Internal Revenue Code of 1986, as amended. Matching contributions by the Company of approximately $2,000 were paid during both the quarterquarters ending JulyJanuary 31, 2019 and 2018, respectively. Likewise, the Company paid matching contributions of approximately $7,000 during the nine-month period ending January 31, 2019 and 2017, respectively.$8,000 during the corresponding period the prior fiscal year.

Note 7:8: Fair Value Measurements

 

Generally accepted accounting principles in the United States of America (US GAAP) defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions, and credit risk.

 

US GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). The levels of the fair value hierarchy under US GAAP are described below:

 

 Level 1Valuation is based upon quoted prices for identical instruments traded in active markets.
   
 Level 2Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
   
 Level 3Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

 

Investments and Marketable Securities

 

As of JulyJanuary 31, 2018,2019, our investments consisted of money markets, certificates of deposits (CDs),deposit, 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 table setstables set 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
July 31, 2018		  

Assets Measured at Fair Value on a Recurring Basis as of

January 31, 2019

 
 Level 1 Level 2 Level 3 Total  Level 1 Level 2 Level 3 Total 
Assets:                                
Municipal Bonds $—  $5,883,000  $—  $5,883,000  $—  $5,464,000  $—  $5,464,000 
Corporate Bonds $31,000  $—  $—  $31,000   57,000   —   —   57,000 
REITs $—  $118,000  $—  $118,000   —   87,000   —   87,000 
Equity Securities $19,938,000  $—  $—  $19,938,000   18,986,000   —   —   18,986,000 
Money Markets and CDs $1,191,000  $—  $—  $1,191,000   1,176,000   —   —   1,176,000 
Total fair value of assets measured on a recurring basis $21,160,000  $6,001,000  $—  $27,161,000  $20,219,000  $5,551,000  $—  $25,770,000 

 

 Assets Measured at Fair Value on a Recurring Basis as of
April 30, 2018		  

Assets Measured at Fair Value on a Recurring Basis as of

April 30, 2018

 
 Level 1 Level 2 Level 3 Total  Level 1 Level 2 Level 3 Total 
Assets:                                
Municipal Bonds $—  $5,741,000  $—  $5,741,000  $—  $5,741,000  $—  $5,741,000 
Corporate Bonds $131,000  $—  $—  $131,000   131,000   —   —   131,000 
REITs $—  $106,000  $—  $106,000   —   106,000   —   106,000 
Equity Securities $19,333,000  $—  $—  $19,333,000   19,333,000   —   —   19,333,000 
Money Markets and CDs $1,035,000  $—  $—  $1,035,000   1,035,000   —   —   1,035,000 
Total fair value of assets measured on a recurring basis $20,499,000  $5,847,000  $—  $26,346,000  $20,499,000  $5,847,000  $—  $26,346,000 

 

Note 89: 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 currentnew information becomes available in the future.

 

The following discussion should be read in conjunction with the attached unaudited condensed financial statements, and with the Company’s audited financial statements and discussion for the fiscal year ended April 30, 2018.

 

Executive Summary

 

The Company’s performance has increasedimproved through the first quarter, both in comparisonthree quarters, with increased sales, managing cost of sales numbers, and strong investment returns. This is due to the most recent prior quarter and prior quarter last year. The most recent prior quarter increase is mainly due to traditionally having improved sales whencontinuation of our quality USA made products with the weather gets warmer. The Company’s products are tied to the housing marketability for customization, our notable customer service, and the summertime usually shows an uptick in sales. In comparing the prior-year quarter, management has finally learned more about and gotten proper training to employees for the new computer system. Opportunities include continuing to learn and grow with our new computer system and to continue looking at businesses that might be a good fit to purchase. Also, we have new products that are scheduled to enter the marketplace by the endpurchase of the calendar year. Challenges inassets of Labor Saving Devices, Inc. New challenges the comingCompany has endured over the nine months of this fiscal year include continuing to get product out to customers in a timelier manner and to fill the stockroom with inventory to get back to shipping out core products the same day. This is allAlso, the price of raw materials has increased with the execution of tariffs by the US government and other factors. But management continues to work at keeping operations flowing as efficient as possible with the hopes of getting ourthe facilities running leaner and more profitable than ever before.

 

Results of Operations

 

 ●Net sales showedwere $3,455,000 for the quarter ended January 31, 2019, which is a 52.53%5.98% increase overfrom the corresponding quarter last year. Year-to-date net sales were $10,551,000 at January 31, 2019, which is a 22.73% increase from the same period last year. A significant part of growth in sales is a direct result of the prior year. Management believes this is dueasset purchase of Labor Saving Devices and having a new product line to sell as a result of the purchase. Also, our ongoing commitment to outstanding customer service and customization of products are a few of the many reasons. Last year there were unexpected delays in our production flow due toreasons sales remained steady over the implementation of new computer software. Over the last year, management has worked hard to learn about and train employees on the new computer system and production is running much smoother than a year ago. There is still room for improvement and management continues to strive to be better.years.
 ●Cost of goods sold saw an increase from 48.71%was 51.29% of net sales infor the prior year, to 52.52% inquarter ended January 31, 2019 and was 56.01% for the currentsame quarter which is just outside of Management’s goal to keep labor and other manufacturing expenses within the range of 45 to 50%. The increasedlast year. Year-to-date cost of goods sold percentagepercentages were 51.81% for the current nine months and 50.45% for the corresponding nine months last year, which is a reflectionjust slightly over the target of havingless than 50% for both the quarter and year-to-date results. Management has seen increases in labor and materials costs but has decided not to increase the selling prices of our products at this time.
●Operating expenses decreased by $1,000 for the quarter while they increased inventory levelsby $306,000 for the nine-months ended January 31, 2019 as compared to the corresponding periods last year. These increased costs are primarily due to increased commissions, amortization on the purchase of the assets of Labor Saving Devices and to keep raw materials in stock to accommodateadditional labor costs for the increase in sales.
●Operating expensesemployees that have increased when comparing the current year quarter to the same quarter for the prior year, but the percentage in relation to net sales decreased to 24.93% for the quarter ended July 31, 2018 as compared to 29.49% for the corresponding quarter last year. The Company has been able to keep the operating expenses at less than 30% of net sales for many years now; however, the effects of paying for training of the new computer software and currently paying maintenance and support fees on two software platforms has added to these expenses.hired.
 ●Income from operations for the quarter ended JulyJanuary 31, 20182019 was at $773,000,$832,000 which is a 57.76%42.96% increase from the corresponding quarter last year, which had income from operations of $490,000.$582,000. Income from operations for the nine months ended January 31, 2019 was at $2,491,000, which is a 26.25% increase from the corresponding nine months last year, which had income from operations of $1,973,000.
 ●

Other income and expenses showedare up $142,000 when comparing to the current quarter to the same quarter last year. Comparatively, there is a $128,000 gainslight decrease of $12,000 in other income and expenses for the quarter ended July 31, 2018 as comparedyear-to-date numbers. The majority of activity in these accounts consists of investment interest, dividends, and gain or loss on sale of investments. With the continued growth in the performance of the stock market, decisions were made to a $248,000 gain forsell holdings and take the quarter ended July 31, 2017. The decrease is primarily due to decreased dividendrealized gains. Additionally, dividends and interest income, offset bypayments exceeded expectations and many of our holdings had additional and increased losses on the sale of investments.dividend payouts.

 ●Provision for income taxes showed an increase of $64,000, up from $220,000 in the quarter ended July 31, 2017 to $248,000 for the quarter ended July 31, 2018.
●In turn,Overall, net income for the quarter ended JulyJanuary 31, 20182019 was $617,000, a 19.11% increaseup $382,000, or 48.29%, from the correspondingsame quarter last year, which showedyear. Similarly, net income of $518,000.for the nine-month period ended January 31, 2019 was up $527,000, or 25.94%, from the same period in the prior year.
 ●Earnings per common share for quarter ended January 31, 2019 were $0.24 per share and $0.52 per share for the year-to-date numbers. EPS for the quarter and nine months ended JulyJanuary 31, 2018 were $0.12also $0.16 per common share and $0.10$0.41 per common share, for the quarter ended July 31, 2017.respectively.

 

Liquidity and capital resources

 

Operating

Operating
 ●Net cash increased $653,000$295,000 during the quarternine months ended JulyJanuary 31, 20182019 as compared to an increasea decrease of $542,000$2,504,000 during the corresponding quarterperiod last year.
 ●

Accounts receivable decreased $234,000$514,000 for the quarter ending Julynine months ended January 31, 20182019 compared with a $257,000 decrease$636,000 increase for the same quarterperiod last year. The current year decrease inis a result of improved sales and collections of accounts receivable is directly attributable to the Company’s ability to collect on accounts and to keep past due accounts to a minimum. An analysisimproved over last year. Management believes that approximately $3,000 of accounts shows that there were only 6.38% that were over 90 days at July 31, 2018.have a possibility of being uncollectible.

 ●Inventories increased $389,000$999,000 during the current quarternine-month period as compared to a $62,000an increase of $1,291,000 last year. The biggersmaller increase in the current year is primarily due to increased sales and not having a large influx of inventory from the fact thatacquisition of assets from Labor Saving Devices was purchased in October 2017 and there is a need to have more inventory on hand.last year.
 ●AtPrepaid expenses saw a $164,000 decrease for the quarter ended July 31, 2018 there wascurrent nine months, primarily due to inventory being delivered that had been paid for in advance. The prior nine months showed a $166,000 decrease$359,000 increase in prepaid expenses and at July 31, 2017, there was a $63,000 decrease. The current decrease is a result of having raw materials that were previously prepaid for arrive on our dock during the current quarter.expenses.
 ●Income tax overpayment for the quarternine months ended JulyJanuary 31, 2018 decreased $244,000, while there was a $208,000 decrease towards income tax payable2019 increased $106,000, as the overpayment also showed an increase of $221,000 for the quarter ending July 31, 2017.same period the prior year. The main reason for the smaller current decrease inincrease is that the Company has generated additional income tax overpayment is a result of refining our estimates when taking the new income tax law for 2018 into account andwith having increased sales.another product line to sell.
 ●Accounts payable shows an increase of $7,000a $35,000 decrease for the quartercurrent nine-month period ended JulyJanuary 31, 20182019 as compared to a decrease of $112,000$239,000 increase for the same quarter the year before, primarily due to timing issues. Managementprior nine-month period. The company strives to pay all payablesinvoices within terms, unless thereand the variance in increases is a problem withprimarily due to the merchandise.timing of receipt of products and payment of invoices.
 ●Accrued expenses decreased $172,000$36,000 for the current quarternine-month period as compared to a $163,000$127,000 decrease for the quarternine-month period ended JulyJanuary 31, 2017.2018.

Investing

 

 ●As for our investment activities, the Company did not buy any fixed assets duringspent approximately $88,000 on acquisitions of property and equipment for the current fiscal quarter. Innine-month period, in comparison with the corresponding quarternine months last year, where there were purchaseswas activity of property and equipment in the amount of approximately $253,000.$342,000.
 ●Additionally, the Company continues to purchase marketable securities, which include municipal bonds and quality stocks. CashDuring the nine-month period ended January 31, 2019 there was quite a bit of buy/sell activity in the investment accounts. Net cash spent on purchases of marketable securities for the quarternine-month period ended JulyJanuary 31, 20182019 was $233,000$839,000 compared to $224,000$653,000 spent duringin the quarter ended July 31, 2017. We continueprior nine-month period. The Company continues to use “money manager” accounts for most stock transactions. By doing this, the Company gives an independent third partythird-party firm, who are experts in this field, permission to buy and sell stocks at will. The Company pays a quarterly service fee based on the value of the investments.

 

Financing

 

 ●Furthermore, theThe Company continues to purchase back common stock when the opportunity arises. For the quarternine-month period ended JulyJanuary 31, 2018,2019, the Company purchased $5,000$62,000 worth of treasury stock, along with thestock. This is in comparison to $3,000 spent in the same nine months period the prior year.
●The company paid out dividends of $1,752,000 during the nine months ending January 31, 2019. These dividends were paid during the second quarter. The company declared a dividend of $0.38 per share of common stock on September 30, 2018 and these dividends were paid by October 31, 2018. As for the prior year numbers, dividends paid was $1,617,000 for the nine months ending January 31, 2018. A dividend of $0.36 per common share was declared and paid during the second fiscal quarter last year.

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

 

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

  As of 
  January 31, 2019  January 31, 2018 
Working capital        
(current assets – current liabilities) $35,493,000  $36,407,000 
Current ratio        
(current assets / current liabilities)  16.299   18.596 
Quick ratio        
((cash + investments + AR) / current liabilities)  13.963   16.394 

New Product Development

 

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

 

 ●A new face plate for our pool alarms is nearing completion. The innovative design is slim in style and will also allow the homeowner to change the plate to match their décor.
 ●An updated version of the pool access alarm is currently going through electricalat ETL for listing testing.approval. This next-generation model combines our battery operated DPA series with our hard wired 289 series. A variety of installation options will be available through jumper pin settings.
 ●The high voltage current controller (CC-15) is complete and has received UL approval for the US and Canada. The CC-15 series is 15-amps and will come in a variety of voltage configurations. Some examples that these switches can be used for are appliance control, environmental control and lighting systems.
●Work continuesWe continue to work on high security switches. TheyWe have a triple biased high security switch design nearly complete and an adjustable magnet design was completed for recessed mounting applications.
 ●Research resumes on the possibilities of fuel level sensing and how that may also serve other agricultural based needs. Several companies from around the world have been looking for ways to secure fuel tanks and trucks. Their emphasis would be in ways to safely monitor fuel levels and report tampering.
●A new float water sensor is being developed that will monitor water levels in livestock tanks and sump pumps.
●Wireless technology is a main area of focus for product development. We are looking intoconsidering 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 Alarmpool access 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.
●Updated versions of our 200-36 and 4532 series overhead door switch line up is complete and has been selling well. The modified versions, the 200-36UF and 4532UF, are being made as a universal fit switch. This will allow an installer to replace an existing switch without drilling new holes into the cement or adjusting the location. The modified case has an additional mounting hole along with reshaped mounting holes.

Other Information

 

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

 

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

 

Recently Issued Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. In addition, ASU No. 2014-09 requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU No. 2014-09 supersedes most existing U.S. GAAP revenue recognition principles, and it permits the use of either the retrospective or cumulative effect transition method. ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. The Company has adopted ASU No. 2014-09 in the first quarter of fiscal 2019, which does not have a material impact on the Company’s financial statements and related disclosures.

In 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 for lessors remains largely unchanged from current GAAP. ASU 2016-02 is effective for the Company beginning NovemberMay 1, 2019. Early adoption is permitted. In July 2018, the FASB issued ASU No. 2018-10 “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”) and ASU No. 2018-11 “Leases (Topic 842) Targeted Improvements” (“ASU 2018-11”). ASU 2018-10 provides certain amendments that affect narrow aspects of the guidance issued in ASU 2016-02. ASU 2018-11 allows all entities adopting ASU 2016-02 to choose an additional (and optional) transition method of adoption, under which an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2018-11 also allows lessors to not separate non-lease components from the associated lease component if certain conditions are met. The Company will adopt the ASUs in the first quarter of 2019fiscal 2020 and the Company’s accounting systems will be upgraded to comply with the requirements of the new standard, however, the adoption of ASU 2016-02 willis not anticipated to have a material impact on the Company’s financial statements and related disclosures.

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). Under existing U.S. GAAP, the effects of changes in tax rates and laws on deferred tax balances are recorded as a component of income tax expense in the period in which the law was enacted. When deferred tax balances related to items originally recorded in accumulated other comprehensive income (loss) are adjusted, certain tax effects become stranded in accumulated other comprehensive income. The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive income (loss) to retained earnings (accumulated deficit) for stranded income tax effects resulting from the Tax Cuts and Jobs Act (the Tax Act). The amendments in this ASU also require certain disclosures about stranded income tax effects. The guidance 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 areThe Company is currently evaluating the potential impact of adopting the applicable guidance, however we dothe Company does 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 ifis 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, “Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.” Subsequently, in November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses”. ASU 2016-13 requires entities to measure all expected credit losses for most financial assets held at the reporting date based on an expected loss model which includes historical experience, current conditions, and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. ASU 2016-13 also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. ASU 2016-13 and ASU 2018-19 are effective for the Company on May 1, 2020, including interim periods within those fiscal periods, with early adoption permitted. Management is currently assessing the impact the new guidance will have on the Company’s financial statements.

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

 

Item 3. Quantitative and Qualitative Disclosures Aboutabout Market Risk

 

This disclosure does not apply.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 JulyJanuary 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 continue to operate with a limited number ofrecently hired accounting and financial personnel. A new accounting professional was hired in 2018 to fill the Controller position Once the controller is hired, trainingposition. 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 for this new Controller, we believe this control deficiency represents material weaknesses in internal control over financial reporting.

 

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

 

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

 

Changes in Internal Control Over Financial Reporting

 

There was no change in our internal control over financial reporting during the fiscal quarter ended JulyJanuary 31, 20182019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

GEORGE RISK INDUSTRIES, INC.

 

PARTPart II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Not applicable

 

Item 1A. Risk Factors

 

Not applicable.

 

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

 

The following table provides information relating to the Company’s repurchase of common stock for the firstthird quarter of fiscal year 2019.

 

Period Number of shares repurchased
MayNovember 1, 2018 – MayNovember 30, 2018200
December 1, 2018 – December 31, 2018 400537
JuneJanuary 1, 20182019 – June 30, 2018January 31, 2019 100
July 1, 2018 – July 31, 2018150200

 

Item 3. Defaults upon Senior Securities

 

Not applicable

 

Item 4. Mine Safety Disclosures

 

Not applicable

 

Item 5. Other Information

 

Not applicable

 

Item 6. Exhibits

 

 Exhibit No. Description
 31.1 Certification of the Chief Executive Officer (Principal Financial and Accounting Officer), as required by Section 302 of the Sarbanes-Oxley Act of 2002.
    
 32.1 Certification of the Chief Executive Officer (Principal Financial and Accounting Officer), as required by Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

 

In accordance withPursuant to 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    September 14, 2018March 21, 2019By:/s/ Stephanie M. Risk-McElroy
  Stephanie M. Risk-McElroy
  President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board