UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

(Mark One)

 

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR

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

For the quarterly period ended October 31, 2019

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

For the quarter ended January 31, 2019

[  ]

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 registrant as specified in its charter)

 

Colorado 84-0524756
(State or other jurisdiction of incorporation)
incorporation or organization)		 (IRSI.R.S. 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)

 

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

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

Indicate by check mark whether the 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-T(§232.405S-T (&232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [  ] No [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, a small reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “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 March 21,December 20, 2019 was 4,960,710.4,950,760.

 

 

 

 
 

 

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

The unaudited financial statements for the three- and nine-month periodthree-and six-month periods ended JanuaryOctober 31, 2019, are attached hereto.

GEORGE RISK INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

 

 January 31, 2019 April 30, 2018  October 31, 2019 April 30, 2019 
 (unaudited)    (unaudited)   
     
ASSETS             
        
Current Assets:                
Cash and cash equivalents $4,589,000  $4,294,000  $5,212,000  $4,873,000 
Investments and securities  25,770,000   26,346,000   27,385,000   27,291,000 
Accounts receivable:                
Trade, net of $3,465 and $6,651 doubtful account allowance  2,034,000   2,545,000 
Trade, net of $4,082 and $9,321 doubtful account allowance  2,217,000   2,696,000 
Other  3,000   2,000   1,000   6,000 
Income tax overpayment  854,000   747,000   145,000   259,000 
Inventories, net  4,253,000   3,267,000   5,163,000   4,583,000 
Prepaid expenses  310,000   603,000   111,000   282,000 
Total Current Assets  37,813,000   37,804,000   40,234,000   39,990,000 
                
Property and Equipment, net, at cost  1,008,000   1,076,000   1,041,000   984,000 
                
Other Assets                
Investment in Limited Land Partnership, at cost  293,000   293,000   320,000   293,000 
Projects in process  132,000   —   17,000   117,000 
Other  3,000   6,000   3,000   3,000 
Total Other Assets  428,000   299,000   340,000   413,000 
                
Intangible Assets, net  1,671,000   1,763,000   1,578,000   1,640,000 
                
TOTAL ASSETS $40,920,000  $40,942,000  $43,193,000  $43,027,000 

 

See accompanying notes to the unaudited condensed financial statements.

GEORGE RISK INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

(continued)

  October 31, 2019  April 30, 2019 
  (unaudited)    
       
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current Liabilities        
Accounts payable, trade $170,000  $206,000 
Dividends payable  1,892,000   1,714,000 
Accrued expenses:        
Payroll and other expenses  367,000   356,000 
Total Current Liabilities  2,429,000   2,276,000 
         
Long-Term Liabilities        
Deferred income taxes  1,286,000   1,198,000 
Total Long-Term Liabilities  1,286,000   1,198,000 
         
Total Liabilities  3,715,000   3,474,000 
         
Commitments and Contingencies  —   — 
         
Stockholders’ Equity        
Convertible preferred stock, 1,000,000 shares authorized, Series 1—noncumulative, $20 stated value, 25,000 shares authorized, 4,100 issued and outstanding  99,000   99,000 
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   1,934,000 
Accumulated other comprehensive income  2,983,000   2,752,000 
Retained earnings  37,893,000   38,145,000 
Less: treasury stock, 3,550,771 and 3,544,271 shares, at cost  (4,281,000)  (4,227,000)
Total Stockholders’ Equity  39,478,000   39,553,000 
         
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $43,193,000  $43,027,000 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC.

CONDENSED INCOME STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2019 AND 2018
(Unaudited)

 

  January 31, 2019  April 30, 2018 
  (unaudited)    
 
LIABILITIES AND STOCKHOLDERS’ EQUITY        
         
Current Liabilities        
Accounts payable, trade $302,000  $336,000 
Dividends payable  1,713,000   1,580,000 
Accrued expenses:        
Payroll and related expenses  302,000   329,000 
Property taxes  3,000   12,000 
Total Current Liabilities  2,320,000   2,257,000 
         
Long-Term Liabilities        
Deferred income taxes  778,000   955,000 
Total Long-Term Liabilities  778,000   955,000 
         
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 
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   1,934,000 
Accumulated other comprehensive income  1,730,000   2,249,000 
Retained earnings  37,419,000   36,746,000 
Less: treasury stock, 3,542,171 and 3,534,784 shares, at cost  (4,210,000)  (4,148,000)
Total Stockholders’ Equity  37,822,000   37,730,000 
         
TOTAL LIABILITES AND STOCKHOLDERS’ EQUITY $40,920,000  $40,942,000 
  Three months  Six months  Three months  Six months 
  ended  ended  ended  ended 
  Oct 31, 2019  Oct 31, 2019  Oct 31, 2018  Oct 31, 2018 
Net Sales $3,710,000  $7,263,000  $3,667,000  $7,096,000 
Less: Cost of Goods Sold  (1,860,000)  (3,630,000)  (1,893,000)  (3,695,000)
Gross Profit  1,850,000   3,633,000   1,774,000   3,401,000 
                 
Operating Expenses                
General and Administrative  329,000   626,000   331,000   616,000 
Sales  555,000   1,112,000   525,000   1,080,000 
Engineering  17,000   32,000   28,000   37,000 
Rent Paid to Related Parties  3,000   8,000   4,000   9,000 
Total Operating Expenses  904,000   1,778,000   888,000   1,742,000 
                 
Income From Operations  946,000   1,855,000   886,000   1,659,000 
                 
Other Income (Expense)                
Other  1,000   2,000   6,000   8,000 
Dividend and Interest Income  166,000   359,000   152,000   345,000 
Gain (Loss) on Investments  10,000   59,000   (27,000)  (94,000)
   177,000   420,000   131,000   259,000 
                 
Income Before Provisions for Income Taxes  1,123,000   2,275,000   1,017,000   1,918,000 
                 
Provisions for Income Taxes:                
Current Expense  (258,000)  (552,000)  (261,000)  (508,000)
Deferred Tax Benefit (Expense)  (1,000)  6,000   12,000   (24,000)
Total Income Tax Expense  (259,000)  (546,000)  (249,000)  (532,000)
                 
Net Income $864,000  $1,729,000  $768,000  $1,386,000 
                 
Income Per Share of Common Stock                
Basic $0.17  $0.35  $0.15  $0.28 
Diluted $0.17  $0.35  $0.15  $0.28 
                 
Weighted Average Number of Common                
Shares Outstanding                
Basic  4,952,110   4,954,250   4,962,177   4,964,879 
Diluted  4,972,610   4,974,750   4,982,677   4,985,379 

 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC.

CONDENSED INCOME STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2019 AND 2018

(Unaudited)

 

  Three months  Nine months  Three months  Nine months 
  ended  ended  ended  ended 
  Jan 31, 2019  Jan 31, 2019  Jan 31, 2018  Jan 31, 2018 
Net Sales $3,455,000  $10,551,000  $3,260,000  $8,597,000 
Less: Cost of Goods Sold  (1,772,000)  (5,467,000)  (1,826,000)  (4,337,000)
Gross Profit  1,683,000   5,084,000   1,434,000   4,260,000 
                 
Operating Expenses                
General and Administrative  294,000   911,000   313,000   833,000 
Sales  531,000   1,611,000   512,000   1,371,000 
Engineering  21,000   57,000   22,000   69,000 
Rent Paid to Related Parties  5,000   14,000   5,000   14,000 
Total Operating Expenses  851,000   2,593,000   852,000   2,287,000 
                 
Income From Operations  832,000   2,491,000   582,000   1,973,000 
                 
Other Income                
Other  1,000   10,000   —   3,000 
Dividend and Interest Income  471,000   816,000   376,000   811,000 
Gain on Investments  169,000   74,000   123,000   94,000 
Gain on Sale of Assets  —   —   —   4,000 
   641,000   900,000   499,000   912,000 
                 
Income Before Provisions for Income Taxes  1,473,000   3,391,000   1,081,000   2,885,000 
                 
Provisions for Income Taxes:                
Current Expense  291,000   799,000   281,000   852,000 
Deferred Tax Expense  9,000   33,000   9,000   1,000 
Total Income Tax Expense  300,000   832,000   290,000   853,000 
                 
Net Income $1,173,000  $2,559,000  $791,000  $2,032,000 
                 
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                
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 
  Three months  Six months  Three months  Six months 
  ended  ended  ended  ended 
  Oct 31, 2019  Oct 31, 2019  Oct 31, 2018  Oct 31, 2018 
             
Net Income $864,000  $1,729,000  $768,000  $1,386,000 
                 
Other Comprehensive Income, net of tax                
Unrealized gain (loss) on securities:                
Unrealized holding gains (losses) arising during period  241,000   565,000   (1,245,000)  (638,000)
Reclassification adjustment for gains (losses) included in net income  (111,000)  (240,000)  (7,000)  37,000 
Income tax benefit (expense) related to other comprehensive income  (37,000)  (94,000)  361,000   173,000 
Other Comprehensive Income (Loss)  93,000   231,000   (891,000)  (428,000)
                 
Comprehensive Income (Loss) $957,000  $1,960,000  $(123,000) $958,000 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED OCTOBER 31, 2019 AND 2018
(Unaudited)

  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, July 31, 2019  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock  —   —   —   — 
                 
Dividend declared at $0.40 per common share outstanding  —   —   —   — 
                 
Unrealized gain (loss), net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, October 31, 2019  4,100  $99,000   8,502,881  $850,000 

  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, July 31, 2018  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock  —   —   —   — 
                 
Dividend declared at $0.38 per common share outstanding                
                 
Unrealized gain (loss), net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, October 31, 2018  4,100  $99,000   8,502,881  $850,000 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED OCTOBER 31, 2019 AND 2018

(Unaudited)

Paid-In  

Treasury Stock

(Common Class A)

  

Accumulated

Other

Comprehensive

  Retained    
Capital  Shares  Amount  Income  Earnings  Total 
$1,934,000   3,550,571  $(4,280,000) $2,890,000  $39,011,000  $40,504,000 
                       
 —   200   (2,000)  —   —   (2,000)
                       
 —   —   —   —   (1,981,000)  (1,981,000)
                       
 —   —   —   93,000   —   93,000 
                       
 —   —   —   —   864,000   864,000 
                       
$1,934,000   3,550,771  $(4,282,000) $2,983,000  $37,894,000  $39,478,000 

Paid-In  

Treasury Stock

(Common Class A)

  

Accumulated

Other

Comprehensive

  Retained    
Capital  Shares  Amount  Income  Earnings  Total 
$1,934,000   3,535,434  $(4,153,000) $2,712,000  $37,364,000  $38,806,000 
                       
 —   5,800   (49,000)  —   —   (49,000)
                       
 —   —   —   —   (1,886,000)  (1,886,000)
                       
 —   —   —   (891,000)  —   (891,000)
                       
 —   —   —   —   768,000   768,000 
                       
$1,934,000   3,541,234  $(4,202,000) $1,821,000  $36,246,000  $36,748,000 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED OCTOBER 31, 2019 AND 2018

(Unaudited)

  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, April 30, 2019  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock  —   —   —   — 
                 
Dividend declared at $0.40 per common share outstanding  —   —   —   — 
                 
Unrealized gain (loss), net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, October 31, 2019  4,100  $99,000   8,502,881  $850,000 

  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, April 30, 2018  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock  —   —   —   — 
                 
Dividend declared at $0.38 per common share outstanding                
                 
Unrealized gain (loss), net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, October 31, 2018  4,100  $99,000   8,502,881  $850,000 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED OCTOBER 31, 2019 AND 2018

(Unaudited)

Paid-In

  

Treasury Stock

(Common Class A)

  

Accumulated

Other

Comprehensive

  

Retained

    
Capital  Shares  Amount  Income  Earnings  Total 
$1,934,000   3,544,271  $(4,227,000) $2,752,000  $38,145,000  $39,553,000 
                       
 —   6,500   (54,000)  —   —   (54,000)
                       
 —  ��—   —   —   (1,981,000)  (1,981,000)
                       
 —   —   —   231,000   —   231,000 
                       
 —   —   —   —   1,729,000   1,729,000 
                       
$1,934,000   3,550,771  $(4,281,000) $2,983,000  $37,893,000  $39,478,000 

Paid-In  

Treasury Stock

(Common Class A)

  

Accumulated

Other

Comprehensive

  Retained   
Capital  Shares  Amount  Income  Earnings  Total 
$1,934,000   3,534,784  $(4,148,000) $2,249,000  $36,746,000  $37,730,000 
                       
 —   6,450   (54,000)  —   —   (54,000)
                       
 —   —   —   —   (1,886,000)  (1,886,000)
                       
 —   —   —   (428,000)  —   (428,000)
                       
 —   —   —   —   1,386,000   1,386,000 
                       
$1,934,000   3,541,234  $(4,202,000) $1,821,000  $36,246,000  $36,748,000 

 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENT OF COMPREHENSIVE INCOME STATEMENTSOF CASH FLOWS

FOR THE SIX MONTHS ENDED OCTOBER 31, 2019 AND 2018

(Unaudited)

 

  Three months  Nine months  Three months  Nine months 
  ended  ended  ended  ended 
  Jan 31, 2019  Jan 31, 2019  Jan 31, 2018  Jan 31, 2018 
Net Income $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  43,000   (595,000)  1,247,000   2,585,000 
Reclassification adjustment for gains (losses) included in net income  (171,000)  (134,000)  (88,000)  (205,000)
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 $1,082,000  $2,040,000  $1,465,000  $3,417,000 
  Oct 31, 2019  Oct 31, 2018 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net Income $1,729,000  $1,386,000 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  183,000   167,000 
(Gain) loss on sale of investments  (100,000)  62,000 
Impairments on investments  41,000   32,000 
Reserve for bad debts  (6,000)  6,000 
Reserve for obsolete inventory  2,000   18,000 
Deferred income taxes  (6,000)  25,000 
(Gain) loss on sale of assets  —   (4,000)
Changes in assets and liabilities:        
(Increase) decrease in:        
Accounts receivable  486,000   23,000 
Inventories  (583,000)  (435,000)
Prepaid expenses and projects in process  271,000   168,000 
Other receivables  5,000   (2,000)
Income tax overpayment  114,000   (97,000)
Increase (decrease) in:        
Accounts payable  (36,000)  (189,000)
Accrued expenses  11,000   8,000 
Net cash provided by operating activities  2,111,000   1,172,000 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
(Purchase) of property and equipment  (179,000)  — 
Proceeds from sale of marketable securities  540,000   754,000 
(Purchase) of marketable securities  (250,000)  (324,000)
(Purchase) of long-term investment  (27,000)  — 
Net cash provided by investing activities  84,000   430,000 
CASH FLOWS FROM FINANCING ACTIVITIES:        
(Purchase) of treasury stock  (54,000)  (54,000)
Dividends paid  (1,802,000)  (1,752,000)
Net cash (used in) financing activities  (1,856,000)  (1,806,000)
         
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  339,000   (204,000)
         
Cash and Cash Equivalents, beginning of period  4,873,000   4,294,000 
Cash and Cash Equivalents, end of period $5,212,000  $4,090,000 
         
Supplemental Disclosure for Cash Flow Information:        
Cash payments for:        
Income taxes $605,000  $600,000 
Interest paid $—  $1,000 
         
Cash receipts for:        
Income taxes $159,000  $— 

 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENT OF CASH FLOWS (Unaudited)

 Nine months Nine months
 ended ended
 Jan 31, 2019 Jan 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net Income $2,559,000  $2,032,000 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  248,000   163,000 
(Gain) loss on sale of investments  (142,000)  (117,000)
Impairments on investments  68,000   23,000 
Reserve for bad debts  (3,000)  13,000 
Reserve for obsolete inventory  12,000   — 
Deferred income taxes  33,000   1,000 
(Gain) loss on sale of assets  —   (4,000)
Changes in assets and liabilities:        
(Increase) decrease in:        
Accounts receivable  514,000   (636,000)
Inventories  (999,000)  (1,291,000)
Prepaid expenses  164,000   (359,000)
Other receivables  (2,000)  2,000 
Income tax overpayment  (106,000)  (221,000)
Increase (decrease) in:        
Accounts payable  (35,000)  239,000 
Accrued expenses  (36,000)  (127,000)
Net cash provided by (used in) operating activities  2,275,000   (282,000)
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Proceeds from sale of assets  —   4,000 
(Purchase) of property and equipment  (88,000)  (342,000)
Proceeds from sale of marketable securities  761,000   2,013,000 
(Purchase) of marketable securities  (839,000)  (653,000)
(Purchase) of intangible assets  —   (1,624,000)
Net cash provided by (used in) investing activities  (166,000)  (602,000)
CASH FLOWS FROM FINANCING ACTIVITIES:        
(Purchase) of treasury stock  (62,000)  (3,000)
Dividends paid  (1,752,000)  (1,617,000)
Net cash provided by (used in) financing activities  (1,814,000)  (1,620,000)
         
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 
Cash and Cash Equivalents, end of period $4,589,000  $3,952,000 
         
         
Supplemental Disclosure for Cash Flow Information:        
Cash payments for:        
Income taxes $900,000  $1,320,000 
Interest paid $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 UNAUDITED CONDENSED FINANCIAL STATEMENTS

JANUARYOCTOBER 31, 2019

 

Note 1:1 Unaudited Interim Financial Statements

 

The accompanying financial statements have been prepared in accordance with the instructions for Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. It is suggested that these unaudited condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s April 30, 20182019 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 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 May 1, 2019. Early adoption is permitted. In July 2018, the FASB issued ASU No. 2018-10 “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”) and ASU No. 2018-11 “Leases (Topic 842) Targeted Improvements” (“ASU 2018-11”) and ASU 2018-20, “Narrow-Scope Improvements for Lessors”. 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. During the first quarter of 2019, the FASB issued ASU 2019-01, Leases (Topic 842) to amend ASU 2016-02. This amendment exempts both lessees and lessors from having to provide certain prior year interim disclosure information in the fiscal year in which a company adopts the new leases standard. The Company will adopthas adopted the ASUs in the first quarter of fiscal year 2020 and the Company’s accounting systems will behave been upgraded to comply with the requirements of the new standard, however, the adoption of ASU 2016-02 isdid not anticipated to have a material impact on the Company’s financial statements and related disclosures.

In February 2018,disclosures because leases are not material to 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. The Company is currently evaluating the potential impact of adopting the applicable guidance, however the 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.statements.

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements on fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently assessing the timing and impact of adopting the updated provisions.

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

 

In June 2016, the FASB issued ASU 2016-13, “Financial2016-13(“ASU 2016-13”), Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.”Losses. Subsequently, in November 2018, the FASB issued ASU 2018-19, “Codification Improvements2019-05, Financial Instruments- Credit Losses (Topic 326): Targeted Transition Relief and codification improvements to Topic 326 Financial Instruments-Credit Losses”.in ASU 2016-13 requires entities to measure all expected2019-11, ASU 2019-04 and ASU 2018-19. The amendments update guidance on reporting credit losses for mostfinancial assets. These amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets held atnot excluded from 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 informationscope that have the contractual right to better form their credit loss estimates.receive cash. The amendments in this 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,annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years. All entities may adopt the amendments through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). The ASU is effective for fiscal years beginning after December 15, 2020. Subsequent to September 30, 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842),” which defers the effective date for public filers that are considered small reporting companies (“SRC”) as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods with early adoption permitted. Managementwithin those fiscal years. Since the Company is currently assessingan SRC, implementation is not needed until May 1, 2023. The Company will continue to evaluate the impact the new guidanceeffect of adopting ASU 2016-13 will have on the Company’s financial statements.statements and disclosures.

Note 2:2 Investments

 

The Company has investments in publicly traded equity securities, corporate bonds, state and municipal debt securities, real estate investment trusts, certificates of deposit, and money markets funds. The investments in securities are classified as available-for-sale securities and are reported at fair value. Available-for-sale investments in debt securities mature between JuneNovember 2019 and January 2044.September 2042. The Company uses the average cost method to determine the cost of securities sold and the amount reclassified out of accumulated other comprehensive income into earnings. Unrealized gains and losses are excluded from earnings and reported separately as a component of stockholders’ equity. Dividend and interest income are reported as earned.

 

As of JanuaryOctober 31, 2019 and April 30, 2018,2019, investments consisted of the following:

 

Investments at
January 31, 2019		 Cost
Basis		 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Fair
Value		 
   Gross Gross   
Investments at Cost Unrealized Unrealized Fair 
October 31, 2019 Basis Gains Losses Value 
Municipal bonds $5,487,000  $65,000  $(88,000) $5,464,000  $5,362,000   122,000   (47,000)  5,437,000 
Corporate bonds  56,000   1,000   —   57,000   26,000   —   —   26,000 
REITs  89,000   —   (2,000)  87,000   89,000   2,000   (8,000)  83,000 
Equity securities  16,532,000   2,933,000   (479,000)  18,986,000   16,943,000   4,375,000   (254,000)  21,064,000 
Money markets and CDs  1,176,000   —   —   1,176,000   774,000   1,000   —   775,000 
Total $23,340,000  $2,999,000  $(569,000) $25,770,000  $23,194,000  $4,500,000  $(309,000) $27,385,000 

 

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 
Corporate bonds  129,000   2,000   —   131,000 
REITs  110,000   3,000   (7,000)  106,000 
Equity securities  15,930,000   3,714,000   (311,000)  19,333,000 
Money markets and CDs  1,035,000   —   —   1,035,000 
Total $23,188,000  $3,785,000  $(627,000) $26,346,000 

     Gross  Gross    
Investments at Cost  Unrealized  Unrealized  Fair 
April 30, 2019 Basis  Gains  Losses  Value 
Municipal bonds $5,459,000  $79,000  $(55,000) $5,483,000 
Corporate bonds  26,000   —   —   26,000 
REITs  89,000   1,000   (6,000)  84,000 
Equity securities  16,618,000   4,143,000   (296,000)  20,465,000 
Money markets and CDs  1,233,000   —   —   1,233,000 
Total $23,425,000  $4,223,000  $(357,000) $27,291,000 

 

The Company evaluates all marketable securities for other-than temporaryother-than-temporary declines in fair value, which are defined as when the cost basis exceeds the fair value for approximately one year. The Company also evaluates the nature of the investment, cause of impairment and number of investments that are in an unrealized position. When an “other-than-temporary” decline is identified, the Company will decrease the cost of the marketable security to the new fair value and recognize a real loss. The investments are periodically evaluated to determine if impairment changes are required. As a result of this standard, management recorded an impairment loss of $36,000$7,000 for the quarter, and recorded a loss of $68,000$41,000 for the ninesix months ended JanuaryOctober 31, 2019. ForAs for the corresponding periods last year, management did not record arecorded an impairment loss of $32,000 for both the quarter but did record a $23,000 impairment loss for the nine monthsand six-months ended JanuaryOctober 31, 2018.

The following tables showtable shows the investments with unrealized losses that are not deemed to be “other-than-temporarily impaired”, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at JanuaryOctober 31, 2019 and April 30, 2018,2019, respectively.

 

Unrealized Loss Breakdown by Investment Type at JanuaryOctober 31, 2019

 

 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 $2,678,000  $(33,000) $618,000  $(55,000) $3,296,000  $(88,000) $—  $—  $512,000  $(47,000) $512,000  $(47,000)
REITs  —   —   87,000   (2,000)  87,000   (2,000)  —   —   59,000   (8,000)  59,000   (8,000)
Equity securities  4,806,000   (351,000)  519,000   (128,000)  5,325,000   (479,000)  1,214,000   (66,000)  1,819,000   (188,000)  3,033,000   (254,000)
Total $7,484,000  $(384,000) $1,224,000  $(185,000) $8,708,000  $(569,000) $1,214,000  $(66,000) $2,390,000  $(243,000) $3,604,000  $(309,000)

 

Unrealized Loss Breakdown by Investment Type at April 30, 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 $960,000  $(200,000) $2,385,000  $(109,000) $3,345,000  $(309,000) $772,000  $(4,000) $580,000  $(50,000) $1,352,000  $(54,000)
REITs  55,000   (6,000)  27,000   (1,000)  82,000   (7,000)  —   —   32,000   (6,000)  32,000   (6,000)
Equity securities  2,545,000   (127,000)  823,000   (184,000)  3,368,000   (311,000)  932,000   (102,000)  1,652,000   (195,000)  2,584,000   (297,000)
Total $3,560,000  $(333,000) $3,235,000  $(294,000) $6,795,000  $(627,000) $1,704,000  $(106,000) $2,264,000  $(251,000) $3,968,000  $(357,000)

 

Municipal Bonds

 

The unrealized losses on the Company’s investments in municipal bonds were caused by interest rate increases. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company has the ability to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at JanuaryOctober 31, 2019.

 

Marketable Equity Securities and REITs

 

The Company’s investments in marketable equity securities and REITs consist of a wide variety of companies. Investments in these companies include growth, growth income, and foreign investment objectives. The individual holdings have been evaluated, and due to management’s plan to hold on to these investments for an extended period, the Company does not consider these investments to be other-than-temporarily impaired at JanuaryOctober 31, 2019.

Note 3:3 Inventories

 

Inventories at JanuaryOctober 31, 2019 and April 30, 20182019 consisted of the following:

 

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

  October 31, 2019  April 30, 2019 
       
Raw materials $4,131,000  $3,644,000 
Work in process  458,000   389,000 
Finished goods  667,000   641,000 
   5,256,000   4,674,000 
Less: allowance for obsolete inventory  (93,000)  (91,000)
Inventories, net $5,163,000  $4,583,000 

Note 4:4 Business Segments

 

The following is financial information relating to industry segments:

 

  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 $2,735,000  $8,103,000  $2,715,000  $6,683,000 
Cable & wiring tools  576,000   1,929,000   —   — 
Other products  144,000   519,000   545,000   1,914,000 
Total net revenue $3,455,000  $10,551,000  $3,260,000  $8,597,000 
                 
Income from operations:                
Security alarm products $659,000  $1,972,000  $452,000  $1,534,000 
Cable & wiring tools  138,000   415,000   —   — 
Other products  35,000   104,000   130,000   439,000 
Total income from operations $832,000  $2,491,000  $582,000  $1,973,000 
                 
Depreciation and amortization:                
Security alarm products $37,000  $57,000  $10,000  $28,000 
Cable & wiring tools  30,000   92,000         
Other products  —   55,000   52,000   94,000 
Corporate general  14,000   44,000   15,000   41,000 
Total depreciation and amortization $81,000  $248,000  $77,000  $163,000 
                 
Capital expenditures:                
Security alarm products $35,000  $35,000  $—  $260,000 
Cable & wiring tools  —   —         
Other products  37,000   37,000   —   — 
Corporate general  16,000   16,000   16,000   81,000 
Total capital expenditures $88,000  $88,000  $16,000  $341,000 

  Three months ended  Six months ended  Three months ended  Six months ended 
  Oct 31, 2019  Oct 31, 2019  Oct 31, 2018  Oct 31, 2018 
Net revenue:                
Security alarm products $2,985,000  $5,852,000  $2,852,000  $5,371,000 
Cable & wiring tools  571,000   1,071,000   649,000   1,351,000 
Other products  154,000   340,000   166,000   374,000 
Total net revenue $3,710,000  $7,263,000  $3,667,000  $7,096,000 
                 
Income from operations:                
Security alarm products $762,000  $1,495,000  $689,000  $1,291,000 
Cable & wiring tools  140,000   273,000   157,000   293,000 
Other products  44,000   87,000   40,000   75,000 
Total income from operations $946,000  $1,855,000  $886,000  $1,659,000 
                 
Depreciation and amortization:                
Security alarm products $71,000  $94,000  $10,000  $20,000 
Cable & wiring tools  31,000   62,000   31,000   62,000 
Other products  (4,000)  16,000   28,000   55,000 
Corporate general  (4,000)  11,000   15,000   30,000 
Total depreciation and amortization $94,000  $183,000  $84,000  $167,000 
                 
Capital expenditures:                
Security alarm products $10,000  $179,000  $—  $— 
Cable & wiring tools  —   —   —   — 
Other products  —   —   —   — 
Corporate general  —   —   —   — 
Total capital expenditures $10,000  $179,000  $—  $— 

 

  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 

  October 31, 2019  April 30, 2019 
Identifiable assets:        
Security alarm products $6,351,000  $6,179,000 
Cable & wiring tools  2,666,000   2,713,000 
Other products  835,000   842,000 
Corporate general  33,341,000   33,293,000 
Total assets $43,193,000  $43,027,000 

Note 6:5 Earnings per Share

 

Basic and diluted earnings per share, assuming convertible preferred stock was converted for each period presented, are:

 

 For the three months ended January 31, 2019  For the three months ended October 31, 2019 
 Income Shares Per-share  Income Shares Per-share 
 (Numerator) (Denominator) Amount  (Numerator) (Denominator) Amount 
Net Income $1,173,000          $864,000         
            
Basic EPS $1,173,000   4,961,018  $0.2364  $864,000   4,952,110  $.1745 
Effect of dilutive securities:                        
Convertible preferred stock  —   20,500     0   20,500   (.0007)
Diluted EPS $1,173,000   4,981,518  $0.2355  $864,000   4,972,610  $.1738 

 

 For the six months ended October 31, 2019 
 For the nine months ended January 31, 2019  Income Shares Per-share 
 Income
(Numerator)		 Shares
(Denominator)		 Per-share
Amount		  (Numerator) (Denominator) Amount 
Net Income $2,559,000          $1,729,000         
            
Basic EPS $2,559,000   4,963,592  $0.5156  $1,729,000   4,954,250  $.3490 
Effect of dilutive securities:                        
Convertible preferred stock  —   20,500     0   20,500   (.0014)
Diluted EPS $2,559,000   4,984,092  $0.5134  $1,729,000   4,974,750  $.3476 

 

  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 
  For the three months ended October 31, 2018 
  Income  Shares  Per-share 
  (Numerator)  (Denominator)  Amount 
Net Income $768,000         
Basic EPS $768,000   4,962,177  $.1548 
Effect of dilutive securities:            
Convertible preferred stock  0   20,500   (.0007)
Diluted EPS $768,000   4,982,677  $.1541 

  For the six months ended October 31, 2018 
  Income  Shares  Per-share 
  (Numerator)  (Denominator)  Amount 
Net Income $1,386,000         
Basic EPS $1,386,000   4,964,879  $.2792 
Effect of dilutive securities:            
Convertible preferred stock  0   20,500   (.0012)
Diluted EPS $1,386,000   4,985,379  $.2780 

 

Note 7:6 Retirement Benefit Plan

 

On January 1, 1998, the Company adopted the George Risk Industries, Inc. Retirement Savings Plan (the “Plan”). The Plan is a defined contribution savings plan designed to provide retirement income to eligible employees of the corporation. The Plan is intended to be qualified under Section 401(k) of the Internal Revenue Code of 1986, as amended. Matching contributions by the Company of approximately $2,000$7,000 and $3,000 were paid during both the quarterseach quarter ending JanuaryOctober 31, 2019 and 2018, respectively. Likewise, the Company paid matching contributions of approximately $7,000$9,000 and $5,000 during the nine-montheach six-month period ending JanuaryOctober 31, 2019 and $8,000 during the corresponding period the prior fiscal year.2018, respectively.

Note 8:7 Fair Value Measurements

 

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

 

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

 

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

 

Investments and Marketable Securities

 

As of JanuaryOctober 31, 2019, our investments consisted of money markets, certificates of deposit,deposits (CDs), publicly traded equity securities, real estate investment trusts (REITS)(REITs) as well as certain state and municipal debt securities and corporate bonds. Our marketable securities are valued using third-party broker statements. The value of the investments is derived from quoted market information. The inputs to the valuation are generally classified as Level 1 given the active market for these securities, however, if an active market does not exist, which is the case for municipal bonds and REITs, the inputs are recorded as Level 2.

 

Fair Value Hierarchy

 

The following tables settable sets forth our assets and liabilities measured at fair value on a recurring basis and a non-recurring basis by level within the fair value hierarchy. As required by US GAAP, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

Assets Measured at Fair Value on a Recurring Basis as of

January 31, 2019

  Assets Measured at Fair Value on a Recurring Basis as of
October 31, 2019		 
 Level 1 Level 2 Level 3 Total  Level 1 Level 2 Level 3 Total 
Assets:                                
Municipal Bonds $—  $5,464,000  $—  $5,464,000  $—  $5,437,000  $—  $5,437,000 
Corporate Bonds  57,000   —   —   57,000   26,000   —   —   26,000 
REITs  —   87,000   —   87,000   —   83,000   —   83,000 
Equity Securities  18,986,000   —   —   18,986,000   21,064,000   —   —   21,064,000 
Money Markets and CDs  1,176,000   —   —   1,176,000   775,000   —   —   775,000 
Total fair value of assets measured on a recurring basis $20,219,000  $5,551,000  $—  $25,770,000  $21,865,000  $5,520,000  $—  $27,385,000 

 

 

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, 2019		 
 Level 1 Level 2 Level 3 Total  Level 1 Level 2 Level 3 Total 
Assets:                                
Municipal Bonds $—  $5,741,000  $—  $5,741,000  $—  $5,483,000  $—  $5,483,000 
Corporate Bonds  131,000   —   —   131,000   26,000   —   —   26,000 
REITs  —   106,000   —   106,000   —   84,000   —   84,000 
Equity Securities  19,333,000   —   —   19,333,000   20,465,000   —   —   20,465,000 
Money Markets and CDs  1,035,000   —   —   1,035,000   1,233,000   —   —   1,233,000 
Total fair value of assets measured on a recurring basis $20,499,000  $5,847,000  $—  $26,346,000  $21,724,000  $5,567,000  $—  $27,291,000 

 

Note 9:8 Subsequent Events

 

NoneIn an update to related party transactions, the Company finalized the purchase of the building that it had previously leased from Bonita Risk on November 22, 2019. Bonita Risk is a director and an employee of the Company and is the majority holder of George Risk Industries, Inc. stock. This building contains the Company’s sales and accounting departments, maintenance department, engineering department and some production facilities. Prior to the purchase, the lease required a minimum payment of $1,535 on a month-to-month basis. The purchase price of the building was $200,000, which was approximately the assessed value of the building at the time of purchase.

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

 

Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

 

This Quarterly Report on Form 10-Q, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), which are subject to the “safe harbor” created by those sections. Any statements herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as “may,” “will,” “could,” “would,” “should,” “anticipate,” “expect,” “intend,” “believe,” “estimate,” “project” or “continue,” and the negatives of such terms are intended to identify forward-looking statements. The information included herein represents our estimates and assumptions as of the date of this filing. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

 

The following discussion should be read in conjunction with the attached unaudited condensed financial statements, and with the Company’s audited financial statements and discussion for the fiscal year ended April 30, 2018.2019.

 

Executive Summary

 

The Company’s performance has improvedcontinues to improve through the threefirst half of the current fiscal year with the first and second quarters with increased sales, managing cost of sales numbers, and strong investment returns.presenting almost identical numbers. This is due to the continuation of our quality USA made products with the ability for customization, our notable customer service, and the purchase of the assets of Labor Saving Devices, Inc. New challengesAdditionally, the Company has endured overCompany’s products are traditionally tied to the ninehousing market and with that market remaining strong, it in turn helps the Company’s sales grow. Opportunities include gaining business from a competitor that is getting out of the security switch business and to continue looking at businesses that might be a good fit to purchase. Challenges in the coming months of this fiscal year include continuing to get product out to customers in a timeliertimely manner and to fill the stockroom with inventory to get back to shipping out core products the same day. Also, the pricethere have been some shortages of raw materials hasand prices of raw materials have increased with the execution of tariffs by the US government and other factors. But managementgovernment. Management continues to work at keeping operations flowing as efficient as possible with the hopes of getting the facilities running leaner and more profitable than ever before.

 

Results of Operations

 

 ●Net sales were $3,455,000$3,710,000 for the quarter ended JanuaryOctober 31, 2019, which is a 5.98%an 1.17% increase from the corresponding quarter last year. Year-to-date net sales were $10,551,000$7,263,000 at JanuaryOctober 31, 2019, which is a 22.73%2.35% increase from the same period last year. A significant part of growthThe increases in sales is a direct resultshows the stability of the asset purchaseCompany and loyalty of Labor Saving Devices and having a new product line to sell as a result of the purchase. Also, ourits customer base. The ongoing commitment totowards outstanding customer service and customization of products are a few of the many reasons sales remained steady overcontinue to grow. Also, new sales have emerged since GRI acquired the years.assets of Labor Saving Devices. The Company has been selling this product line for a couple of years now, which has been a factor in the increased sales.
 ●Cost of goods sold was 51.29%50.13% of net sales for the quarter ended JanuaryOctober 31, 2019 and was 56.01%51.62% for the same quarter last year. Year-to-date cost of goods sold percentages were 51.81%49.98% for the current ninesix months and 50.45%52.07% for the corresponding ninesix months last year, which is just slightly over the targetyear. The current cost of goods sold percentages are right at Management’s goal of keeping labor and other manufacturing expenses at less than 50% for both the quarter and year-to-date results. Labor costs have decreased because Management has seen increases in laborbeen working with and materials costs but has decided nottraining employees to increase the selling prices of our products at this time.work more efficiently.
 ●Operating expenses decreased by $1,000were up $16,000 for the quarter while they increased by $306,000and were up $36,000 for the nine-monthssix-months ended JanuaryOctober 31, 2019 as compared to the corresponding periods last year. TheseBut when comparing percentages in relation to net sales, the operating expenses for the quarter ended October 31, 2019 was 24.37% of net sales while it was 24.22% of net sales for the same quarter the prior year. For year-to-date numbers, operating expense were 24.48% and 24.55% of net sales for the six months ended October 31, 2019 and 2018, respectively. The Company has been able to keep the operating expenses at less than 30% of net sales for many years now; however, the actual dollar amount increase is because of increased costs are primarily due to increased commissions, amortization on the purchase of the assets of Labor Saving Devicescommission amounts (since sales have increased) and additional labor costs for hiring new employees that have been hired.and wage increases.
 ●Income from operations for the quarter ended JanuaryOctober 31, 2019 was at $832,000$946,000, which is a 42.96%6.77% increase from the corresponding quarter last year, which had income from operations of $582,000.$886,000. Income from operations for the ninesix months ended JanuaryOctober 31, 2019 was at $2,491,000,$1,855,000, which is a 26.25%11.81% increase from the corresponding ninesix months last year, which had income from operations of $1,973,000.$1,659,000.
 ●

Other income and expenses are up $142,000 when comparing to the current quarter and six-month periods to the sameprior year, with an increase of $46,000 in the current quarter last year. Comparatively, there is a slight decreaseand an increase of $12,000 in other income and expenses$161,000 for the current year-to-date numbers. The majorityMost of the activity in these accounts consists of investment interest, dividends, and gain or loss on sale of investments. With the continued growth in the performance of the stock market, decisions were madeThe increase is primarily due to sell holdings and take the realized gains. Additionally, dividendsincreased dividend and interest payments exceeded expectationsincome and manytaking gains on the sale of our holdings had additional and increased dividend payouts.

investments.
 ●Overall, net income for the quarter ended JanuaryOctober 31, 2019 was up $382,000,$96,000, or 48.29%12.50%, from the same quarter last year. Similarly, net income for the nine-monthsix-month period ended JanuaryOctober 31, 2019 was up $527,000,$343,000, or 25.94%24.75%, from the same period in the prior year.
 ●Earnings per common share for quarter ended JanuaryOctober 31, 2019 were $0.24$0.17 per share and $0.52$0.35 per share for the year-to-date numbers. EPS for the quarter and ninesix months ended JanuaryOctober 31, 2018 were also $0.16$0.15 per share and $0.41$0.28 per share, respectively.

 

Liquidity and capital resources

 

Operating

 

 ●Net cash increased $295,000$339,000 during the ninesix months ended JanuaryOctober 31, 2019 as compared to a decrease of $2,504,000$204,000 during the corresponding period last year.
 ●

Accounts receivable decreased $514,000$486,000 for the ninesix months ended JanuaryOctober 31, 2019 compared with a $636,000 increase$23,000 decrease for the same period last year. The current year decrease is a result of improved sales and collections on accounts receivable have improved over the last year. An analysis of accounts receivable improved over last year. Management believesshows that approximately $3,000 of accountsthere were only 0.02% that were over 90 days have a possibility of being uncollectible.

at October 31, 2019.
 ●Inventories increased $999,000$583,000 during the current nine-monthsix-month period as compared to ana $435,000 increase of $1,291,000 last year. The smallerbigger increase in the current year is primarily due to increased sales and not havingbeing able to have inventory on hand to get product out to customers in a large influx of inventory from the acquisition of assets from Labor Saving Devices last year.timely manner.
 ●Prepaid expenses saw a $164,000$271,000 decrease for the current ninesix months, primarily due to inventory being delivered that had beento be paid for in advance. The prior ninesix months showed a $359,000$168,000 increase in prepaid expenses.
 ●Income tax overpayment for the nine monthsperiod ended JanuaryOctober 31, 2019 increased $106,000, as the overpayment also showeddecreased $114,000, while there was an increase of $221,000$97,000 for the same period the prior year. The main reason forcurrent decrease is due to making an educated evaluation of the smaller current increase is that the Company has generated additionalCompany’s income with having another product line to sell.tax estimates.

 ●Accounts payable shows a $35,000 decreasedecreases for the current nine-month period ended January 31, 2019 as compared to a $239,000 increase for theand prior nine-month period.six-month periods of $36,000 and $189,000, respectively. The company strives to pay all invoices within terms, and the variance in increasesthe decreases is primarily due to the timing of receipt of products and payment of invoices.
 ●Accrued expenses decreased $36,000increased $11,000 for the current nine-monthsix-month period as compared to a $127,000 decrease$8,000 increase for the nine-monthsix-month period ended JanuaryOctober 31, 2018. The current year increase is due to increased wages and commissions.

Investing

 

 ●As for our investment activities, the Company spent approximately $88,000 on acquisitionspurchased $179,000 of property and equipment forduring the current nine-month period, insix-month period. In comparison with the corresponding ninesix months last year, where there was activity of $342,000.the Company did not buy any fixed assets.
 ●Additionally, the Company continues to purchase marketable securities, which include municipal bonds and quality stocks. During the nine-monthsix-month period ended JanuaryOctober 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 nine-monthsix-month period ended JanuaryOctober 31, 2019 was $839,000$250,000 compared to $653,000$324,000 spent in the prior nine-monthsix-month period. The Company continuesWe continue to use “money manager” accounts for most stock transactions. By doing this, the Company gives an independent third-party firm, who are experts in this field, permission to buy and sell stocks at will. The Company pays a quarterly service fee based on the value of the investments.

 

Financing

 

 ●The Company continues to purchase back its common stock when the opportunity arises. For the nine-monthsix-month period ended JanuaryOctober 31, 2019, the Company purchased $62,000$54,000 worth of treasury stock. This isstock, in comparison to $3,000 spent$54,000 repurchased in the same nine monthscorresponding six-month period the priorlast 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$0.40 per share of common stock on September 30, 2018 and these dividends were2019, which was paid by October 31, 2018. As forout during the prior year numbers, dividends paid was $1,617,000 forsecond quarter. This is a slight increase to the nine months ending January 31, 2018. A dividend of $0.36 per common share$0.38, which was declared and paid during the second fiscal quarter last year.

 

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

 

 As of  As of 
 January 31, 2019 January 31, 2018  October 31, 2019 October 31, 2018 
Working capital                
(current assets – current liabilities) $35,493,000  $36,407,000  $37,805,000  $34,508,000 
Current ratio                
(current assets / current liabilities)  16.299   18.596   16.564   16.614 
Quick ratio                
((cash + investments + AR) / current liabilities)  13.963   16.394   14.333   14.401 

New Product Development

 

The Company and its engineering department continue to develop enhancements to product lines, develop new products whichthat complement existing products, and look for products that are well suited to our distribution network and manufacturing capabilities. Items currently in the development process include:

 

 ●A new face plate for our pool alarms is nearing completion. The innovative design is slim in style and will also allow the homeowner to change the plate to match their décor.
 ●An updated version of the pool access alarm is currently at ETL forgoing through electrical listing approval.testing. This next-generation model combines our battery operated DPA series with our hard wired 289 series. A variety of installation options will be available through jumper pin settings.
 ●We continue to work on high security switches. We have a triple biased high security switch design nearly complete and an adjustable magnet design was completed for recessed mounting applications.
 ●Tool and die is currently working on a mold for a new version of the channel magnet. These magnets fit into the top channel of steel doors; no drilling of the recessed magnet required.
●Wireless technology is a main area of focus for product development. We are considering adding wireless technology to some of our current products. A wireless contact switch is in the final stages of development. Also, we are working on wireless versions of our pool access alarmPool 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.
●We are ready to launch a new Labor Saving Devices product. It is a 12” adjustable hole cutter which complements our popular 10” hole cutter. Using a standard drill, this tool allows you to drill various size holes in the ceiling for speakers and canned lights. The dust bin which, sits against the ceiling, keeps the ceiling material and dust enclosed making for a clean, time saving installation.

 

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 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 MayNovember 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 adoptadopted the ASUs in the first quarter of fiscal 20202019 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 iswill 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. The Company isWe are currently evaluating the potential impact of adopting the applicable guidance, however the Company doeswe do not believe that the adoption of ASU 2018-09 will have a material impact on the Company’s financial statements and related disclosures.

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements on fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently assessing the timing and impact of adopting the updated provisions.

 

In August 2018, The FASB issued ASU 2018-14 to improve the effectiveness of disclosures for defined benefit plans under ASC 715-20. The ASU applies to employers that sponsor defined benefit pension or other postretirement plans. The FASB issued ASU 2018-14 as part of its disclosure framework project, which has an objective and primary focus to improve the effectiveness of disclosures in the notes to financial statements. As part of the project, during August 2018, the Board also issued a Concepts Statement, which the FASB used as a basis for amending the disclosure requirements for Subtopic 715-20. The guidance is effective orfor 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, “Financial2016-13(“ASU 2016-13”), Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.”Losses. Subsequently, in November 2018, the FASB issued ASU 2018-19, “Codification Improvements2019-05, Financial Instruments- Credit Losses (Topic 326): Targeted Transition Relief and codification improvements to Topic 326 Financial Instruments-Credit Losses”.in ASU 2016-13 requires entities to measure all expected2019-11, ASU 2019-04 and ASU 2018-19. The amendments update guidance on reporting credit losses for mostfinancial assets. These amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets held atnot excluded from 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 informationscope that have the contractual right to better form their credit loss estimates.receive cash. The amendments in this 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,annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years. All entities may adopt the amendments through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). The ASU is effective for fiscal years beginning after December 15, 2020. Subsequent to September 30, 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842),” which defers the effective date for public filers that are considered small reporting companies (“SRC”) as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods with early adoption permitted. Managementwithin those fiscal years. Since the Company is currently assessingan SRC, implementation is not needed until May 1, 2023. The Company will continue to evaluate the impact the new guidanceeffect of adopting ASU 2016-13 will have on the Company’s financial statements.statements and disclosures.

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable

 

Item 4. Controls and Procedures

 

Our management, under the supervision and with the participation of our chief executive officer (also working as our chief financial officer), evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of JanuaryOctober 31, 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 recently hireda limited number of accounting and financial personnel. A new accounting professional was hired in 2018 to fill the Controller position. TrainingContinued 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 Overover Financial Reporting

 

There was no change in our internal control over financial reporting during the fiscal quarter ended JanuaryOctober 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

GEORGE RISK INDUSTRIES, INC.

 

Part II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Not applicable

 

Item 1A. Risk Factors

 

Not applicable.

 

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

 

The following table provides information relating to the Company’s repurchase and issuance of common stock for the thirdsecond quarter of fiscal year 2019.2020.

 

Period Number of shares repurchasedrepurchased/(issued)
November 1, 2018 – November 30, 2018200
December 1, 2018 – December 31, 2018537
JanuaryAugust 1, 2019 – JanuaryAugust 31, 2019 200
September 1, 2019 – September 30, 2019-0-
October 1, 2019 – October 31, 2019-0-

 

Item 3. Defaults upon Senior Securities

 

Not applicable

 

Item 4. Mine Safety Disclosures

 

Not applicable

 

Item 5. Other Information

 

Not applicable

 

Item 6. Exhibits

 

 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

 

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

 

 

George Risk Industries, Inc.

(Registrant)

(Registrant)
  
DateMarch 21, December 20, 2019By:/s/ Stephanie M. Risk-McElroy
  Stephanie M. Risk-McElroy
  President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board