UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

(Mark One)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 orOR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly periodquarter ended JulyJanuary 31, 20212022

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 orOR 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)

 

(I.R.S.IRS Employers

Identification No.)

 

802 SouthS. Elm St.

,Kimball, NE

 69145
(Address (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 class

Trading 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) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the pastpreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smallsmaller 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 ☒
  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 ☒

 

APPLICABLE ONLY TO CORPORATE ISSUERSISSUERS:

 

The number of shares of the Registrant’s Common Stock outstanding, as of SeptemberMarch 17, 20212022, was 4,946,4564,931,588.

 

 

 

 

 

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

 

ITEM 1:Item 1. Financial Statements

 

The unaudited financial statements for the three-monththree- and nine-month period ended JulyJanuary 31, 20212022, are attached hereto.

 

2

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

 

 July 31, 2021 April 30, 2021  January 31, 2022 April 30, 2021 
 (unaudited)    (unaudited)   
ASSETS                
Current Assets:                
Cash and cash equivalents $8,331,000  $7,326,000  $6,388,000  $7,326,000 
Investments and securities, at fair value  34,085,000   33,337,000 
Investments and securities  33,154,000   33,337,000 
Accounts receivable:                
Trade, net of $15,622 and $9,947 doubtful account allowance  3,652,000   3,812,000 
Trade, net of $25,747 and $9,947 doubtful account allowance  3,705,000   3,812,000 
Other  13,000   16,000   16,000   16,000 
Inventories, net  6,166,000   5,622,000   6,858,000   5,622,000 
Prepaid expenses  554,000   405,000   1,395,000   405,000 
Total Current Assets  52,801,000   50,518,000   51,516,000   50,518,000 
                
Property and Equipment, net, at cost  1,668,000   1,704,000 
Property and Equipment, net  1,641,000   1,704,000 
                
Other Assets                
Investment in Limited Land Partnership, at cost  320,000   320,000   344,000   320,000 
Projects in process  240,000   200,000   259,000   200,000 
Other  7,000   —   41,000   — 
Total Other Assets  567,000   520,000   644,000   520,000 
                
Intangible assets, net  1,363,000   1,394,000 
Intangible Assets, net  1,302,000   1,394,000 
                
TOTAL ASSETS $56,399,000  $54,136,000  $55,103,000  $54,136,000 

 

See accompanying notes to the unaudited condensed financial statementsstatements.

3

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

(continued)

 

 July 31, 2021 April 30, 2021  January 31, 2022 April 30, 2021 
 (unaudited)    (unaudited)   
LIABILITIES AND STOCKHOLDERS’ EQUITY                
        
Current Liabilities                
Accounts payable, trade $241,000  $477,000  $301,000  $477,000 
Dividends payable  2,073,000   2,080,000   2,296,000   2,080,000 
Accrued expenses:        
Payroll and related expenses  455,000   359,000 
Property taxes  3,000   — 
Accrued expenses  489,000   359,000 
Income tax payable  628,000   81,000   244,000   81,000 
Total Current Liabilities  3,400,000   2,997,000   3,330,000   2,997,000 
                
Long-Term Liabilities                
Deferred income taxes  2,842,000   2,735,000   2,384,000   2,735,000 
Total Long-Term Liabilities  2,842,000   2,735,000   2,384,000   2,735,000 
                
Total Liabilities  6,242,000   5,732,000   5,714,000   5,732,000 
                
Commitments and contingencies  —   — 
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 
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   850,000   850,000 
Additional paid-in capital  1,934,000   1,934,000   1,934,000   1,934,000 
Accumulated other comprehensive income  115,000   108,000   5,000   108,000 
Retained earnings  51,495,000   49,749,000   50,872,000   49,749,000 
Less: treasury stock, 3,556,425 and 3,556,412 shares, at cost  (4,336,000)  (4,336,000)
Less: treasury stock, 3,559,125 and 3,556,412 shares, at cost  (4,371,000)  (4,336,000)
Total Stockholders’ Equity  50,157,000   48,404,000   49,389,000   48,404,000 
                
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $56,399,000  $54,136,000 
TOTAL LIABILITES AND STOCKHOLDERS’ EQUITY $55,103,000  $54,136,000 

 

See accompanying notes to the unaudited condensed financial statements

 

4

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED INCOME STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED JULYJANUARY 31, 20212022 AND 20202021

(Unaudited)

 

 Three months Three months Nine months Nine months 
 July 31, 2021 July 31, 2020  ended ended ended ended 
      Jan 31, 2022 Jan 31, 2021 Jan 31, 2022 Jan 31, 2021 
Net Sales $4,955,000  $4,047,000  $5,054,000  $4,633,000  $15,252,000  $13,327,000 
Less: Cost of Goods Sold  (2,318,000)  (1,952,000)  (2,861,000)  (2,385,000)  (7,908,000)  (6,631,000)
Gross Profit  2,637,000   2,095,000   2,193,000   2,248,000   7,344,000   6,696,000 
                        
Operating Expenses:        
Operating Expenses                
General and Administrative  349,000   313,000   371,000   362,000   1,070,000   1,040,000 
Sales  740,000   567,000   649,000   639,000   2,109,000   1,809,000 
Engineering  18,000   29,000   29,000   31,000   67,000   81,000 
Total Operating Expenses  1,107,000   909,000   1,049,000   1,032,000   3,246,000   2,930,000 
                        
Income From Operations  1,530,000   1,186,000   1,144,000   1,216,000   4,098,000   3,766,000 
                        
Other Income (Expense)                        
Other  1,000   12,000   1,000   952,000   15,000   1,008,000 
Dividend and Interest Income  176,000   156,000   552,000   317,000   876,000   608,000 
Unrealized gain (loss) on equity securities  420,000   2,114,000 
Gain (Loss) on Sale of Investments  220,000   (28,000)
Unrealized Gain (Loss) on equity securities  (1,729,000)  2,654,000   (687,000)  4,653,000 
Gain on Sale of Investments  91,000   250,000   391,000   293,000 
Gain on Sale of Assets  —   —   —   4,000 
Total Other Income (Expense)  817,000   2,254,000   (1,085,000)  4,173,000   595,000   6,566,000 
                        
Income Before Provisions for Income Taxes  2,347,000   3,440,000   59,000   5,389,000   4,693,000   10,332,000 
                        
Provisions for Income Taxes        
Provisions for Income Taxes:                
Current Expense  498,000   349,000   455,000   199,000   1,407,000   1,230,000 
Deferred tax expense  103,000   599,000 
Total Income Tax Expense  601,000   948,000 
Deferred Tax Expense (Benefit)  (557,000)  743,000   (309,000)  1,303,000 
Total Income Tax Expense (Benefit)  (102,000)  942,000   1,098,000   2,533,000 
                        
Net Income $1,746,000  $2,492,000  $161,000  $4,447,000  $3,595,000  $7,799,000 
                        
Basic Earnings Per Share of Common Stock $0.35  $0.50 
Diluted Earnings Per Share of Common Stock $0.35  $0.50 
Income Per Share of Common Stock                
Basic $0.03  $0.90  $0.73  $1.58 
Diluted $0.03  $0.89  $0.72  $1.57 
                        
Weighted Average Number of Common                
Shares Outstanding                
Weighted Average Number of Common Shares Outstanding  4,946,460   4,949,927                 
Weighted Average Number of Shares Outstanding (Diluted)  4,966,960   4,970,427 
Basic  4,943,985   4,948,224   4,945,192   4,949,351 
Diluted  4,964,485   4,968,724   4,965,692   4,969,851 

 

See accompanying notes to the unaudited condensed financial statements

 

5

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED JANUARY 31. 2022 AND 2021

(Unaudited)

  Three months  Three months  Nine months  Nine months 
  ended  ended  ended  ended 
  Jan 31, 2022  Jan 31, 2021  Jan 31, 2022  Jan 31, 2021 
Net Income $161,000  $4,447,000  $3,595,000  $7,799,000 
                 
Other Comprehensive Income (Loss), Net of Tax                
Unrealized gain (loss)on debt securities:                
Unrealized holding gains (losses)arising during period  (94,000)  59,000   (144,000)  189,000 
Income tax benefit (expense) related to other comprehensive income  27,000   (17,000)  41,000   (56,000)
Other Comprehensive Income (Loss)  (67,000)  42,000   (103,000)  133,000 
                 
Comprehensive Income $94,000  $4,489,000  $3,492,000  $7,932,000 

See accompanying notes to the unaudited condensed financial statements

6

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTS OF COMPREHENSIVE INCOMESTOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JULYJANUARY 31, 20212022 AND 20202021

(Unaudited)

 

  July 31, 2021  July 31, 2020 
       
Net Income $1,746,000  $2,492,000 
         
Other Comprehensive Income, Net of Tax        
Unrealized gain on debt securities:        
Unrealized holding gains arising during period  11,000   149,000 
Income tax expense related to other comprehensive income  (4,000)  (44,000)
Other Comprehensive Income  7,000   105,000 
         
Comprehensive Income $1,753,000  $2,597,000 
  Shares  Amount  Shares  Amount 
  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, October 31, 2021  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of Common Stock  —   —   —   — 
Dividend declared at $0.50 per common share outstanding  -       -     
                 
Unrealized gain, net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, January 31, 2022  4,100  $99,000   8,502,881  $850,000 

  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, October 31, 2020  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock  —   —   —   — 
                 
Unrealized gain, net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, January 31, 2021  4,100  $99,000   8,502,881  $850,000 

 

See accompanying notes to the condensed financial statements

6

GEORGE RISK INDUSTRIES, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JULY 31, 2021 and 2020

(Unaudited)

                 
  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, April 30, 2020  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock  —   —   —   — 
Purchases of common stock, shares  —   —   —   — 
Unrealized gain, net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, July 31, 2020  4,100  $99,000   8,502,881  $850,000 

  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, April 30, 2021  4,100  $99,000   8,502,881  $850,000 
Balance  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock  —   —   —   — 
                 
Unrealized gain, net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, July 31, 2021  4,100  $99,000   8,502,881  $850,000 
Balance  4,100  $99,000   8,502,881  $850,000 

See accompanying notes to theunaudited condensed financial statements

 

7

GEORGE RISK INDUSTRIES, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITIY

FOR THE THREE MONTHS ENDED JULY 31, 2021 and 2020

(Unaudited)

          Accumulated       
    Treasury Stock  Other       
 Paid-In  (Common Class A)  Comprehensive  Retained    
 Capital  Shares  Amount  Income  Earnings  Total 
Balances, April 30, 2020$1,934,000   3,552,954  $(4,301,000) $(4,000) $41,006,000  $39,584,000 
                        
Purchases of common stock —   —   —   —   —   — 
                        
Unrealized gain, net of tax effect —   —   —   105,000   —   105,000 
                        
Net Income —   —   —   —   2,492,000   2,492,000 
                        
Balances, July 31, 2020$1,934,000   3,552,954  $(4,301,000) $101,000  $43,498,000  $42,181,000 

          Accumulated       
    Treasury Stock  Other       
 Paid-In  (Common Class A)  Comprehensive  Retained    
 Capital  Shares  Amount  Income  Earnings  Total 
Balances, April 30, 2021$1,934,000   3,556,412  $(4,336,000) $108,000  $49,749,000  $48,404,000 
Balances$1,934,000   3,556,412  $(4,336,000) $108,000  $49,749,000  $48,404,000 
                        
Purchases of common stock —   13   —   —   —   — 
                        
Unrealized gain, net of tax effect —   —   —   7,000   —   7,000 
                        
Net Income —   —   —   —   1,746,000   1,746,000 
                        
Balances, July 31, 2021  $1,934,000   3,556,425  $(4,336,000) $115,000  $51,495,000  $50,157,000 
Balances  $1,934,000   3,556,425  $(4,336,000) $115,000  $51,495,000  $50,157,000 

See accompanying notes to the condensed financial statements

8

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTS OF CASH FLOWSSTOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JULYJANUARY 31, 20212022 AND 20202021

(Unaudited)

 

  July 31, 2021  July 31, 2020 
Cash Flows from Operating Activities:        
Net Income $1,746,000  $2,492,000 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  107,000   86,000 
(Gain) loss on sale of investments  (220,000)  — 
Impairments on investments  —   27,000 
Unrealized (gain) loss on equity securities  (420,000)  (2,114,000)
Reserve for bad debts  6,000   (5,000)
Reserve for obsolete inventory  5,000   1,000 
Deferred income taxes  103,000   599,000 
Changes in assets and liabilities:        
(Increase) decrease in:        
Accounts receivable  154,000   49,000 
Inventories  (549,000)  (405,000)
Prepaid expenses  (196,000)  94,000 
Employee receivables  2,000   (1,000)
Increase (decrease) in:        
Accounts payable  (236,000)  117,000 
Accrued expenses  99,000   (61,000)
Income tax payable  547,000   346,000 
Net cash from operating activities  1,148,000   1,225,000 
         
Cash Flows From Investing Activities:        
(Purchase) of property and equipment  (40,000)  (95,000)
Proceeds from sale of marketable securities  2,000   14,000 
(Purchase) of marketable securities  (98,000)  (111,000)
Net cash from investing activities  (136,000)  (192,000)
         
Cash Flows From Financing Activities:        
Dividends paid  (7,000)  — 
Net cash from financing activities  (7,000)  — 
         
Net Change in Cash and Cash Equivalents $1,005,000  $1,033,000 
         
Cash and Cash Equivalents, beginning of period $7,326,000  $6,458,000 
Cash and Cash Equivalents, end of period $8,331,000  $7,491,000 
         
Supplemental Disclosure for Cash Flow Information:        
Cash payments for:        
Income taxes paid $0  $0 
Interest paid $0  $0 
         
Cash receipts for:        
Income taxes $43,000  $0 
 Capital  Shares  Amount  Income  Earnings  Total 
 Paid-In  

Treasury Stock

(Common Class A)

  Accumulated Other Comprehensive  Retained    
 Capital  Shares  Amoun  Income  Earnings  Total 
Balances, October 31, 2021$1,934,000   3,558,425  $(4,362,000) $72,000  $50,711,000  $49,304,000 
                        
Purchases of Common Stock —   700   (9,000)  —   —   (9,000)
Dividend declared at $0.50 per common share outstanding                       
                        
Unrealized gain, net of tax effect —   —   —   (67,000)  —   (67,000)
                        
Net Income —   —   —   —   161,000   161,000 
                        
Balances, January 31, 2022$1,934,000   3,559,125  $(4,371,000) $5,000  $50,872,000  $49,389,000 

 Capital  Shares  Amount  Income  Earnings  Total 
 Paid-In  

Treasury Stock

(Common Class A)

  

Accumulated

Other

Comprehensive

  Retained    
 Capital  Shares  Amount  Income  Earnings  Total 
Balances, October 31, 2020$1,934,000   3,553,029  $(4,302,000) $87,000  $42,279,000  $40,947,000 
                        
Purchases of common stock —   2,750   (27,000)  —   —   (27,000)
                        
Unrealized gain, net of tax effect —   —   —   42,000   —   42,000 
                        
Net Income —   —   —   —   4,447,000   4,447,000 
                        
Balances, January 31, 2021$1,934,000   3,555,779  $(4,329,000) $129,000  $46,726,000  $45,409,000 

 

See accompanying notes to the unaudited condensed financial statements

8

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED JANUARY 31, 2022 AND 2021

(Unaudited)

  Shares  Amount  Shares  Amount 
  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, April 30, 2021  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock  —   —   —   — 
                 
Dividend declared at $0.50 per common share outstanding  —   —   —   — 
                 
Unrealized gain, net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, January 31, 2022  4,100  $99,000   8,502,881  $850,000 

  Shares  Amount  Shares  Amount 
  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, April 30, 2020  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock  —   —   —   — 
                 
Dividend declared at $0.42 per common share outstanding                
                 
Unrealized (loss), net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, January 31, 2021  4,100  $99,000   8,502,881  $850,000 

See accompanying notes to the unaudited condensed financial statements

 

9

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED JANUARY 31, 2022 AND 2021

(Unaudited)

 Capital  Shares  Amount  Income  Earnings  Total 
 

Paid-In

  

Treasury Stock

(Common Class A)

  

Accumulated

Other

Comprehensive

  

Retained

    
 Capital  Shares  Amount  Income  Earnings  Total 
Balances, April 30, 2021$1,934,000   3,556,412  $(4,336,000) $108,000  $49,749,000  $48,404,000 
                        
Purchases of common stock —   2,713   (35,000)  —   —   (35,000)
                        
Dividend declared at $0.50 per common share outstanding —   —   —   —   (2,472,000)  (2,472,000)
                        
Unrealized gain, net of tax effect —   —   —   (103,000)  —   (103,000)
                        
Net Income —   —   —   —   3,595,000   3,595,000 
                        
Balances, January 31, 2022$1,934,000   3,559,125  $(4,371,000) $5,000  $50,872,000  $49,389,000 

 

Paid-In

  

Treasury Stock

(Common Class A)

  

Accumulated

Other

Comprehensive

  

Retained

    
 Capital  Shares  Amount  Income  Earnings  Total 
Balances, April 30, 2020$1,934,000   3,552,954  $(4,301,000) $(4,000) $41,006,000  $39,584,000 
                        
Purchases of common stock —   2,825   (28,000)  —   —   (28,000)
                        
Dividend declared at $0.42 per common share outstanding —   —   —   —   (2,079,000)  (2,079,000)
                        
Unrealized (loss), net of tax effect —   —   —   133,000   —   133,000 
                        
Net Income —   —   —   —   7,799,000   7,799,000 
                        
Balances, January 31, 2021$1,934,000   3,555,779  $(4,329,000) $129,000  $46,726,000  $45,409,000 

See accompanying notes to the unaudited condensed financial statements

10

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED JANUARY 31, 2022 AND 2021

(Unaudited)

  Jan 31, 2022  Jan 31, 2021 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net Income $3,595,000  $7,799,000 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  319,000   297,000 
(Gain) on sale of investments  (391,000)  (372,000)
Impairments on investments  —   79,000 
Unrealized (gain) loss on equity investments  686,000   (4,653,000)
Reserve for bad debts  16,000   — 
Reserve for obsolete inventory  229,000   25,000 
Deferred income taxes  (310,000)  1,303,000 
PPP loan debt forgiveness  —   (950,000)
(Gain) on sale of assets  —   (4,000)
Changes in assets and liabilities:        
(Increase) decrease in:        
Accounts receivable  91,000   (376,000)
Inventories  (1,465,000)  (823,000)
Prepaid expenses  (1,089,000)  327,000 
Other receivables  —   (24,000)
Increase (decrease) in:        
Accounts payable  (176,000)  311,000 
Accrued expenses  130,000   54,000 
Income tax payable  163,000   249,000 
Net cash from operating activities  1,798,000   3,242,000 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Proceeds from sale of assets  —   4,000 
(Purchase) of property and equipment  (164,000)  (426,000)
Proceeds from sale of marketable securities  383,000   18,000 
(Purchase) of marketable securities  (640,000)  (440,000)
(Purchase) of long-term investment  (24,000)  — 
Net cash from investing activities  (445,000)  (844,000)
CASH FLOWS FROM FINANCING ACTIVITIES:        
(Purchase) of treasury stock  (35,000)  (28,000)
Dividends paid  (2,256,000)  (1,892,000)
Net cash from financing activities  (2,291,000)  (1,920,000)
         
NET CHANGE IN CASH AND CASH EQUIVALENTS  (938,000)  478,000 
         
Cash and Cash Equivalents, beginning of period  7,326,000   6,458,000 
Cash and Cash Equivalents, end of period $6,388,000  $6,936,000 
         
Supplemental Disclosure for Cash Flow Information:        
Cash payments for:        
Income taxes $1,290,000  $975,000 
Interest paid $—  $— 
Cash receipts for:        
Income taxes $—  $— 

See accompanying notes to the unaudited condensed financial statements

11

 

GEORGE RISK INDUSTRIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JULYJANUARY 31, 20212022

 

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, 2021 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 June 2016 the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326),” which was subsequently amended in February 2020 by ASU 2020-02, “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842).” The amendments introduce an impairment model that is based on expected credit losses, rather than incurred losses, to estimate credit losses on certain types of financial instruments (e.g., loans and held-to-maturity securities), including certain off-balance sheet financial instruments (e.g., loan commitments). The expected credit losses should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. Financial instruments with similar risk characteristics may be grouped together when estimating expected credit losses. The update with amendment is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company does not believe this new guidance will have a material impact on its financial statements and will implement the disclosures related to this update beginning in fiscal year 2023.

 

In January 2020, the FASB issued ASU 2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions. ASU 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. ASU 2020-01 deals with changes in the significant influence of derivative and investments, of which the Company has none and became effective for the Company in the first quarter of 2021. The adoption of this standard did not have any impact on the Company’s condensed financial statements.

 

There are no other new accounting pronouncements that are expected to have a significant impact on our financial statements.

 

1012

 

Note 2:Investments

 

The Company has investments in publicly traded equity securities, state and municipal debt securities, real estate investment trusts, and money markets. The investments in debt securities, which include municipal bonds and bond funds, mature between November 2021June 2022 and January 2044.September 2042. The Company uses the average cost method to determine the cost of equity securities sold with any unrealized gains or losses reported in the respective period’s earnings. Unrealized gains and losses on debt securities are excluded from earnings and reported separately as a component of stockholder’s equity. Dividend and interest income are reported as earned.

 

As of JulyJanuary 31, 20212022 and April 30, 2021, investments consisted of the following:

Schedule of Investments

Investments at   Gross Gross   
January 31, 2022 Cost Unrealized Unrealized Fair 
 

 

 

 Gross Gross    Basis Gains Losses Value 
Investments at Cost Unrealized Unrealized Fair 
July 31, 2021 Basis Gains Losses Value 
Municipal bonds $5,861,000  $200,000  $(34,000) $6,027,000  $5,678,000  $92,000  $(79,000) $5,691,000 
REITs  131,000   14,000   (6,000)  139,000   131,000   15,000   (5,000)  141,000 
Equity securities  17,492,000   9,730,000   (92,000)  27,130,000   18,360,000   8,723,000   (196,000)  26,887,000 
Money markets and CDs  789,000   —   —   789,000   435,000   —   —   435,000 
Total $24,273,000  $9,944,000  $(132,000) $34,085,000  $24,604,000  $8,830,000  $(280,000) $33,154,000 

 

   Gross Gross   
Investments at Cost Unrealized Unrealized Fair    Gross Gross   
April 30, 2021 Basis Gains Losses Value  Cost Unrealized Unrealized Fair 
 Basis Gains Losses Value 
Municipal bonds $5,854,000  $198,000  $(43,000) $6,009,000  $5,854,000  $198,000  $(43,000) $6,009,000 
REITs  131,000   11,000   (5,000)  137,000   131,000   11,000   (5,000)  137,000 
Equity securities  17,199,000   9,294,000   (74,000)  26,419,000   17,199,000   9,294,000   (74,000)  26,419,000 
Money markets and CDs  772,000   —   —   772,000   772,000   —   —   772,000 
Total $23,956,000  $9,503,000  $(122,000) $33,337,000  $23,956,000  $9,503,000  $(122,000) $33,337,000 

 

Marketable securities that are classified as equity securities are carried at fair value on the balance sheets with changes in fair value recorded as an unrealized gain or (loss) in the statements of income in the period of the change. Upon the disposition of a marketable security, the Company records a realized gain or (loss) on the Company’s statements of income.

 

The Company evaluates all marketable securities for other-than 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, there were no impairment loss waslosses recorded for the quarter and the nine months ended JulyJanuary 31, 2021. For2022. As for the priorcorresponding periods last year, management did not record an impairment loss for the quarter ended JulyJanuary 31, 2020,2021 but did record an impairment loss of $27,00079,000 was recorded.for the nine-months ended January 31, 2021.

 

1113

 

The Company’s investments are actively traded in the stock and bond markets. Therefore, either a realized gain or loss is recorded when a sale happens.occurs. For the quarter ended JulyJanuary 31, 20212022 the Company had sales of equity securities which yielded gross realized gains of $238,000121,000 and gross realized losses of $8,00027,000. For the same period, sales of debt securities did not0t yield any gross realized gains, but gross realized losses of $10,0003,000 were recorded. As for the nine-months ended January 31, 2022 the Company had sales of equity securities which yielded gross realized gains of $465,000 and gross realized losses of $61,000. For the same nine-month period last year, sales of debt securities did 0t yield any gross realized gains, but gross realized losses of $13,000 were recorded. During the quarter ending JulyJanuary 31, 2020,2021, the Company recorded gross realized gains and losses on equity securities of $102,000288,000 and $126,00035,000, respectively, while sales of debt securities did not yield any gross realized gains, but gross realized losses of $4,0003,000 were recorded. During the nine-months ending January 31, 2021, the Company recorded gross realized gains and losses on equity securities of $575,000 and $272,000, respectively. For the same nine-month period last year, sales of debt securities did 0t yield any gross realized gains, but gross realized losses of $9,000 were recorded. The gross realized loss numbers include the impaired figures listed in the previous paragraph.

 

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, 20212022 and April 30, 2021, respectively.

 

Unrealized Loss Breakdown by Investment Type at JulyJanuary 31, 20212022

Schedule of Unrealized Loss Breakdown by Investment

  Less than 12 months  12 months or greater  Total 
Description Fair Value  Unrealized Loss  Fair Value  Unrealized Loss  Fair Value  Unrealized Loss 
Municipal bonds $355,000  $(5,000) $279,000  $(29,000) $634,000  $(34,000)
REITs  —   —   22,000   (6,000)  22,000   (6,000)
Equity securities  526,000   (35,000)  499,000   (57,000)  1,025,000   (92,000)
Total $881,000  $(40,000) $800,000  $(92,000) $1,681,000  $(132,000)

Description Less than 12 months, Fair Value  Less than 12 months, Unrealized Loss  12 months or greater, Fair Value  12 months or greater, Unrealized Loss  Total, Fair Value  Total, Unrealized Loss 
  Less than 12 months  12 months or greater  Total 
Description Fair Value  Unrealized Loss  Fair Value  Unrealized Loss  Fair Value  Unrealized Loss 
Municipal bonds $1,885,000  $(35,000) $382,000  $(44,000) $2,267,000  $(79,000)
REITs  —   —   24,000   (5,000)  24,000   (5,000)
Equity securities  1,799,000   (148,000)  295,000   (48,000)  2,094,000   (196,000)
Total $3,684,000  $(183,000) $701,000  $(97,000) $4,385,000  $(280,000)

 

Unrealized Loss Breakdown by Investment Type at April 30, 2021

 

Description Less than 12 months, Fair Value Less than 12 months, Unrealized Loss 12 months or greater, Fair Value 12 months or greater, Unrealized Loss Total, Fair Value Total, Unrealized Loss 
 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 $390,000  $(6,000) $365,000  $(37,000) $755,000  $(43,000) $390,000  $(6,000) $365,000  $(37,000) $755,000  $(43,000)
REITs  —   —   23,000   (5,000)  23,000   (5,000)  —   —   23,000   (5,000)  23,000   (5,000)
Equity securities  340,000   (35,000)  377,000   (39,000)  717,000   (74,000)  340,000   (35,000)  377,000   (39,000)  717,000   (74,000)
Total $730,000  $(41,000) $765,000  $(81,000) $1,495,000  $(122,000) $730,000  $(41,000) $765,000  $(81,000) $1,495,000  $(122,000)

 

Municipal Bonds

The unrealized losses on the Company’s investments in municipal bonds were caused by interest rate increases. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company has the ability to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at JulyJanuary 31, 2021.2022.

 

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, 2021.2022.

 

1214

 

Note 3:Inventories

 

Inventories at JulyJanuary 31, 20212022 and April 30, 2021 consisted of the following:

Schedule of Inventories

 July 31, April 30,  January 31, April 30, 
 2021 2021  2022 2021 
          
Raw materials $5,030,000  $4,399,000  $5,656,000  $4,399,000 
Work in process  574,000   457,000   692,000   457,000 
Finished goods  742,000   768,000   914,000   768,000 
Inventory in transit  —   173,000   —   173,000 
Inventory gross  6,346,000   5,797,000   7,262,000   5,797,000 
Less: allowance for obsolete inventory  (180,000)  (175,000)  (404,000)  (175,000)
Inventories, net $6,166,000  $5,622,000  $6,858,000  $5,622,000 

 

1315

 

Note 4:Business Segments

 

The following is financial information relating to industry segments:

Schedule of Financial Information Relating to Industry Segments

 Three months Three months Nine months Nine months 
 July 31,  ended ended ended ended 
 2021 2020  Jan 31, 2022 Jan 31, 2021 Jan 31, 2022 Jan 31, 2021 
Net revenue:                        
Security alarm products $4,257,000  $3,114,000  $4,377,000  $3,876,000  $13,180,000  $11,039,000 
Cable & wiring tools  538,000   800,000   498,000   551,000   1,553,000   1,596,000 
Other products  160,000   133,000   179,000   206,000   519,000   692,000 
Total net revenue $4,955,000  $4,047,000  $5,054,000  $4,633,000  $15,252,000  $13,327,000 
                        
Income from operations:                        
Security alarm products $1,315,000  $912,000  $988,000  $1,008,000  $3,541,000  $3,119,000 
Cable & wiring tools  166,000   235,000   117,000   145,000   418,000   451,000 
Other products  49,000   39,000   39,000   63,000   139,000   196,000 
Total income from operations $1,530,000  $1,186,000  $1,144,000  $1,216,000  $4,098,000  $3,766,000 
                        
Depreciation and amortization:                        
Security alarm products $35,000  $22,000  $42,000  $37,000  $117,000  $98,000 
Cable & wiring tools  31,000   31,000   31,000   31,000   92,000   92,000 
Other products  22,000   12,000   18,000   19,000   60,000   47,000 
Corporate general  19,000   21,000   15,000   21,000   50,000   60,000 
Total depreciation and amortization $107,000  $86,000  $106,000  $108,000  $319,000  $297,000 
                        
Capital expenditures:                        
Security alarm products $40,000  $93,000  $113,000  $65,000  $153,000  $307,000 
Cable & wiring tools  —   —   —   —   —   — 
Other products  —   2,000   11,000   —   11,000   113,000 
Corporate general  —   —   —   —   —   6,000 
Total capital expenditures $40,000  $95,000  $124,000  $65,000  $164,000  $426,000 

 

 July 31, 2021 April 30, 2021  January 31, 2022 April 30, 2021 
Identifiable assets:                
Security alarm products $9,415,000  $8,955,000  $10,138,000  $8,955,000 
Cable & wiring tools  2,428,000   2,534,000   2,378,000   2,534,000 
Other products  646,000   667,000   661,000   667,000 
Corporate general  43,910,000   41,980,000   41,926,000   41,980,000 
Total assets $56,399,000  $54,136,000  $55,103,000  $54,136,000 

1416

 

Note 5:Earnings per Share

 

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

Schedule of Basic and Diluted Earnings Perper Share 

 For the three months ended July 31, 2021  For the three months ended January 31, 2022 
 Income Shares Per-Share  Income Shares Per-Share 
 (Numerator)  (Denominator)  Amount  (Numerator) (Denominator) Amount 
Net income $1,746,000          $161,000                   
Basic EPS $1,746,000   4,946,460  $.35  $161,000   4,943,985  $.03 
Effect of dilutive Convertible Preferred Stock  –   20,500   —   –   20,500   — 
Diluted EPS $1,746,000   4,966,960  $.35  $161,000   4,964,485  $.03 

 

 For the three months ended July 31, 2020  For the three months ended January 31, 2021 
 Income Shares Per-Share  Income Shares Per-Share 
 (Numerator)  (Denominator)  Amount  (Numerator)  (Denominator)  Amount 
Net income $2,492,000          $4,447,000                
Basic EPS $2,492,000   4,949,927  $.50  $4,447,000   4,948,224  $.90 
Effect of dilutive Convertible Preferred Stock  –   20,500   —   –   20,500   — 
Diluted EPS $2,492,000   4,970,427  $.50  $4,447,000   4,968,724  $.89 

  For the nine months ended January 31, 2022 
  Income  Shares  Per-Share 
  (Numerator)  (Denominator)  Amount 
Net income $3,595,000                 
Basic EPS $3,595,000   4,945,192  $.73 
Effect of dilutive Convertible Preferred Stock  –   20,500   — 
Diluted EPS $3,595,000   4,965,692  $.72 

  For the nine months ended January 31, 2021 
  Income  Shares  Per-Share 
  (Numerator)  (Denominator)  Amount 
Net income $7,799,000                  
Basic EPS $7,799,000   4,949,351  $1.58 
Effect of dilutive Convertible Preferred Stock  –   20,500   — 
Diluted EPS $7,799,000   4,969,851  $1.57 

 

Note 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 Company. The Plan is intended to be qualified under Section 401(k) of the Internal Revenue Code of 1986, as amended. It is funded by voluntary pre-tax and Roth (taxable) contributions from eligible employees who may contribute a percentage of their eligible compensation, limited and subject to statutory limits. Employees are eligible to participate in the Plan when they have attained the age of 21 and completed one thousand hours of service in any plan year with the Company. Upon leaving the Company, each participant is 100%100% vested with respect to the participants’ contributions while the Company’s matching contributions are vested over a sixsix-year-year period in accordance with the Plan document. Contributions are invested, as directed by the participant, in investment funds available under the Plan. Matching contributions by the Company of approximately $17,00016,000 were paid during each quarter ending January 31, 2022 and 2021. Likewise, the Company paid matching contributions of approximately $48,000 and $13,00046,000 were paid induring each of the quartersnine-month period ending JulyJanuary 31, 20212022 and 20202021, respectively.

 

1517

 

Note 7:Fair Value Measurements

 

The carrying value of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate their fair value due to their short termshort-term nature. The fair value of our investments is determined utilizing market basedmarket-based information. Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions, and credit risk.

 

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

 

 Level 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, 2021,2022, our investments consisted of money markets, publicly traded equity securities, real estate investment trusts (REITs) as well as certain state and municipal debt securities. TheOur marketable securities are valued using third-party broker statements. The value of the majority of securitiesinvestments 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.

16

Schedule of Assets Measured at Fair Value on Recurring Basis

18

 

 Level 1 Level 2 Level 3 Total 
 

Assets Measured at Fair Value on a Recurring Basis as of

July 31, 2021

  Assets Measured at Fair Value on a Recurring Basis as of
January 31, 2022		 
 Level 1 Level 2 Level 3 Total  Level 1 Level 2 Level 3 Total 
Assets:                                
Municipal Bonds $—  $6,027,000  $—  $6,027,000  $—  $5,691,000  $—  $5,691,000 
REITs  —   139,000   —   139,000   —   141,000   —   141,000 
Equity Securities  27,130,000   —   —   27,130,000   26,887,000   —   —   26,887,000 
Money Markets and CDs  789,000   —   —   789,000 
Money Markets  435,000   —   —   435,000 
Total fair value of assets measured on a recurring basis $27,919,000  $6,166,000  $—  $34,085,000  $27,322,000  $5,832,000  $—  $33,154,000 

 

 Level 1 Level 2 Level 3 Total 
 

Assets Measured at Fair Value on a Recurring Basis as of

April 30, 2021

  Assets Measured at Fair Value on a Recurring Basis as of
April 30, 2021		 
 Level 1 Level 2 Level 3 Total  Level 1 Level 2 Level 3 Total 
Assets:                                
Municipal Bonds $—  $6,009,000  $—  $6,009,000  $—  $6,009,000  $—  $6,009,000 
REITs  —   137,000   —   137,000   —   137,000   —   137,000 
Equity Securities  26,419,000   —   —   26,419,000   26,419,000   —   —   26,419,000 
Money Markets and CDs  772,000   —   —   772,000 
Money Markets  772,000   —   —   772,000 
Total fair value of assets measured on a recurring basis $27,191,000  $6,146,000  $—  $33,337,000  $27,191,000  $6,146,000  $—  $33,337,000 

 

Note 8Subsequent Events

 

None

 

1719

 

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, 2021.

 

Executive Summary

 

The Company’s performance remained steady duringin operations continues to improve through the three quarters of the current fiscal year with the third quarter ended July 31, 2021 as compareddipping slightly in sales over the second quarter of the current fiscal year. This is mainly due the inability to obtain all the raw materials that are needed to complete the manufacture of our products and keeping employees staffed at our locations. The Company is on track to have another record setting year for sales. Additionally, the Company’s products are traditionally tied to the quarter ended July 31, 2020. Althoughhousing market and with that market remaining strong, it in turn helps the Company’s sales have increased when comparinggrow. Opportunities include keeping up with the business growth and finding ways to the same quarter last year, overall net income is down because unrealized gains on investments aren’t as big as they were for the same quarter last year. The uptick in sales is direct result of the closure of a competitor at the end of calendar year 2019 and having the abilityget our products out to continue working through the COVID-19 pandemic. As a result of the increased demand, the Company is experiencing a sizable back order log; however, management has been able to increase inventory. Management now intends to focus on ramping up production to meet customer’s needsour customers in a timelytimelier manner. Opportunities include continuingOne way we are doing this is by looking into more automation. We also continue to learn and grow with our computer system and to continue lookinglook at businesses that might be a good fit to purchase. We also have new products that have hit the marketplace and a couple more that are scheduled to enter the marketplacebe introduced by the end of the calendarfiscal year. Challenges in the coming months include continuing to get product out to customers in a timely manner and dealing with the COVID-19 pandemic restrictions. Possible COVID-19 challenges include, but are not limited to, price increases and/or delays in the supply chain, reduced sales, workforce interruptions, and economic conditions impacting the stock market. Management continues to work at keeping operations flowing as efficientefficiently as possible with the hopes of getting the facilities running leaner and more profitable than ever before.

 

Results of Operations

 

 ●Net sales were $5,054,000 for the quarter ended JulyJanuary 31, 2021 showed2022, which is a 22.44%9.09% increase overfrom the corresponding quarter last year. Year-to-date net sales were $15,252,000 at January 31, 2022, which is a 14.44% increase from the same period in the priorlast year. The Company saw increasedsignificant growth in sales resulting primarily from a competitor no longer selling competing products and having the ability to continue to work through the COVID-19 pandemic. Management also believes that sales continue to growis due to our ongoing commitment to outstanding customer service and our ability to customize products. The Company is also seeing continued growth since a major competitor closed its doors at the end of 2019 and having the ability to continue to work through the COVID-19 pandemic.
   
 ●Cost of goods sold decreased from 48.23%was 56.61% of net sales infor the prior year, to 46.78% inquarter ended January 31, 2022 and was 51.48% for the same quarter last year. Year-to-date cost of goods sold percentages were 51.85% for the current quarter, which is insidenine months and 49.76% for the corresponding nine months last year. The current cost of goods sold percentages are right outside of Management’s goal to keepof keeping labor and other manufacturing expenses withinat less than 50% for both the rangequarter and year-to-date results. Management continues to work with and train employees to work more efficiently. Raw material prices have soared over the current fiscal year and a significant wage increase went into effect for the company at the beginning of 45 to 50%. The decreased costthe second quarter of goods sold percentage isthe current fiscal year. Management offset some of these added expenses by implementing a reflection of training initiatives resulting in more efficient production.10% price increase effective January 1, 2022.

 

1820

 

 ●Operating expenses increased by $198,000 when comparing$17,000 for the current year quarter and they increased by $316,000 for the nine-months ended January 31, 2022 as compared to the same quarter for the prior year; however, the percentage ofcorresponding periods last year. When comparing percentages in relation to net sales, decreased to 22.34%the operating expenses for the quarter ended JulyJanuary 31, 2020 compared to 22.46%2022 was 20.76% of net sales while it was 22.27% of net sales for the correspondingsame quarter lastthe prior year. For year-to-date numbers, operating expense were 21.28% and 21.99% of net sales for the nine months ended January 31, 2022 and 2021, 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 the result ofdue to increased personnel and commission expenseamounts, related to the increase in net sales; however, the Company maintained the ratio of operating expensesincreased sales, and additional labor costs related to net sales at less than 30%, which is in line with historical ratios.hiring new employees and wage increases.
   
 ●Income from operations for the quarter ended JulyJanuary 31, 20212022 was at $1,530,000, which is$1,144,000, a 29.01% increase5.92% decrease from the corresponding quarter last year, which had income from operations of $1,186,000.$1,216,000. Income from operations for the nine months ended January 31, 2022 was $4,098,000, which is an 8.82% increase from the corresponding nine months last year, which had income from operations of $3,766,000.
   
 ●Other income and expenses showed a $817,000 gain for the quarter ended JulyJanuary 31, 2021 as compared to2022 was $1,085,000, which is a $2,254,000 gain$5,258,000 decrease from the $4,173,000 other income from the same quarter last year. Comparatively, there is a decrease of $5,971,000 in other income for the quarter ended July 31, 2020. Foryear-to-date numbers. Most of the three months ended July 31, 2021, $420,000activity in these accounts consists of investment interest, dividends, real gains or losses on sale of investments, and unrealized gains fromor losses on equity securities were recorded, compared to the $2,114,000 of unrealized gains from equity securities recordedsecurities. The main reason for the three months ended July 31, 2020.decrease in the current quarter and year-to-date numbers is unrealized gain and loss on equity securities. The remainderCompany is at the mercy of the increase is primarily duestock market when it comes to dividendthese figures and interest incomethe COVID-19 pandemic and gains on sales of investments.other economic reasons have influenced those numbers.
   
 ●The Company’s provision for income taxes showed a decrease of $347,000 from $948,000 in the quarter ended July 31, 2020 to $601,000 for the quarter ended July 31, 2021. This decrease is primarily due to decreased deferred taxes resulting from a much smaller unrealized gain for the current quarter.
●In turn,Overall, net income for the quarter ended JulyJanuary 31, 20212022 was $1,746,000, a 29.94% decreasedown $4,286,000, or 96.38%, from the correspondingsame quarter last year, which showedyear. Similarly, net income of $2,492,000.for the nine-month period ended January 31, 2022 was down $4,204,000, or 53.90%, from the same period in the prior year.
   
 ●Earnings per common share for quarter ended January 31, 2022 were $0.03 per share and $0.73 per share for the year-to-date numbers. EPS for the quarter and nine months ended JulyJanuary 31, 2021 were $0.35$0.90 per common share and $0.50$1.58 per common share, for the quarter ended July 31, 2020.respectively.

21

 

Liquidity and capital resources

 

Operating

●OperatingNet cash decreased $938,000 during the nine months ended January 31, 2022 as compared to an increase of $478,000 during the corresponding period last year.
  
●Net cash increased $1,005,000 duringAccounts receivable decreased $91,000 for the quarternine months ended JulyJanuary 31, 2021 as2022 compared to anwith a $376,000 increase of $1,033,000 duringfor the corresponding quartersame period last year. The current year decrease is a result of improved sales offset by slightly slower collections of accounts receivable. An analysis of accounts receivable shows that there were 6.61% that were over 90 days at January 31, 2022.
  
●Accounts receivable decreased $154,000 forInventories increased $1,465,000 during the quarter ending July 31, 2021current nine-month period compared with a $49,000 decrease for the same quarterto an increase of $823,000 last year. The bigger decrease in accounts receivable is directly attributable to anlarger increase in salesthe current year is due to increases in the cost of raw materials and customers being ablehaving more raw materials on hand to pay timely assupply the COVID-19 pandemic has become a part of our everyday life. Management still has the ability to collect on accounts and to keep past due accounts to a minimum. An analysis of accounts shows that there were only 3.26% that were over 90 days at July 31, 2021.increase in sales.
  
●Inventories increased $549,000 duringPrepaid expenses saw a $1,089,000 increase for the current quarter as compared to a $405,000 increase last year. The larger increase isnine months, primarily due to the facthaving more prepayments for inventory and prepaying for some machines that the Company is continuing to buy more raw materials due to increased orders and that the prices of raw materials continue to increase.

19

●For the quarter ended July 31, 2021 there waswill aid in our production process. The prior nine months showed a $196,000 increase$327,000 decrease in prepaid expenses compared to a decrease of $94,000 for the quarter ended July 31, 2020. The current increase is due to more prepayments of raw materials. Lead times and costs have risen on raw materials, making it a challenge to obtain these raw materials.expenses.
  
●Accounts payable shows a $176,000 decrease of $236,000 for the quartercurrent nine-month period ended JulyJanuary 31, 20212022 compared to ana $311,000 increase of $117,000 for the same quarterprior nine-month period. The company strives to pay all invoices within terms, and the year before. The variance in increases is primarily due to the timing differences of when product is received. Management strives to pay all payables within terms, unless there is a problem with the merchandise.receipt of products and payment of invoices.
  
●Accrued expenses increased $99,000$130,000 for the current quarter asnine-month period compared to a $61,000 decrease$54,000 increase for the quarternine-month period ended JulyJanuary 31, 2020.2021. The difference in the amounts is primarily due to timing of when payroll periods end.increased sales commissions and wages.
  
●Income tax payable increased $163,000 for the quarter ended July 31, 2021 increased $547,000,current nine-month period, compared to a $346,000an increase of $249,000 in income tax payable for the quarternine-months ended JulyJanuary 31, 2020.2021. The current increase is largely due to largerhaving increased sales and income and not having large enough income tax estimatesestimates.

Investing

●As for our investment activities, the Company spent approximately $164,000 on acquisitions of property and equipment for the current nine-month period, in relation to increased income.comparison with the corresponding nine months last year, where there was activity of $426,000.
  
Investing
●The Company purchased $40,000 of property and equipment duringAdditionally, the current fiscal quarter. In comparison, $95,000 was spent on purchases of property and equipment during the corresponding quarter last year.
●The Company continues to purchase marketable securities, which include municipal bonds and quality stocks. CashDuring the nine-month period ended January 31, 2022 the buy/sell activity in the investment accounts was high. Net cash spent on purchases of marketable securities for the quarternine-month period ended JulyJanuary 31, 20212022 was $98,000$640,000 compared to $111,000$440,000 spent duringin the quarter ended July 31, 2020. 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 feesfee based on the value of the investments.
Financing

 

22

Financing

●The Company continues to purchase back common stock when the opportunity arises, butarises. For the nine-month period ended January 31, 2022, the Company purchased $35,000 worth of treasury stock. This is in comparison to $28,000 spent in the same nine months period the prior year.
●The company paid out dividends of $2,256,000 during the nine months ending January 31, 2022. These dividends were paid during the second quarter. The company declared a dividend of $0.50 per share of common stock on September 30, 2021 and these dividends were paid by October 31, 2021. As for the prior year numbers, dividends paid was $1,892,000 for the nine months ending January 31, 2021. A dividend of $0.42 per common share was declared and paid during the second fiscal quarter ended July 31, 2021 and 2020, respectively, the Company did not buyback any treasury stock.last year.

 

20

In conjunction with the Company’s Condensed Financial Statements, we have provided theThe following is a list of ratios to help analyze George Risk Industries’ performance:

 

 Qtr ended Qtr ended  As of
 July 31, 2021 July 31, 2020  January 31, 2022 January 31, 2021
Working capital
(current assets – current liabilities)		 $49,401,000  $40,103,000  $48,186,000  $43,984,000 
Current ratio
(current assets / current liabilities)		  15.529   11.485   15.470   14.430 
Quick ratio
((cash + current investments + AR) / current liabilities)		  13.549   9.953 
Quick ratio
((cash + investments + AR) / current liabilities)		  12.987   12.567 

 

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:

 

●Explosion proof contacts that will be UL listed for hazardous locations are in development.locations. There has been demand from our customers for this type of high security magnetic reed switch.
  
●

An updated version of the pool access alarm (PAA) has met electrical listing testing (ETL) approval and production has started. This next-generation model combines our battery operated DPA series with our hard wired 289 series. A variety of installation options will beare available through jumper pin settings.

We are currently redesigning our glass break detector switchsettings such as instant alarm and water shutoff system to include a brass valve.seven second delay.

  
●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 Alarmmonitoring devices which include glass break detection, tilt sensing and environmental monitoring. A redesign of our brass water valve shut-off system is near completion.
●The Company is developing magnetic contacts which are listed under UL 634 Level 2. These sensors that will be easy to install in current construction. We are also concentrating on making products compatible with Wi-Fi, smartphone technologyfor high security applications such as government buildings, military use, nuclear facilities, and the increasing popular Z-Wave standard for wireless home automation.financial institutions.

 

2123

 

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 June 2016 the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326),” which was subsequently amended in February 2020 by ASU 2020-02, “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842).” The amendments introduce an impairment model that is based on expected credit losses, rather than incurred losses, to estimate credit losses on certain types of financial instruments (e.g., loans and held-to-maturity securities), including certain off-balance sheet financial instruments (e.g., loan commitments). The expected credit losses should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. Financial instruments with similar risk characteristics may be grouped together when estimating expected credit losses. The update with amendment is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company does not believe this new guidance will have a material impact on its financial statements and will implement the disclosures related to this update beginning in fiscal year 2023.

 

In January 2020, the FASB issued ASU 2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions. ASU 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. ASU 2020-01 deals with changes in the significant influence of derivative and investments, of which the Company has none and became effective for the Company in the first quarter of 2021. The adoption of this standard did not have any impact on the Company’s condensed financial statements.

 

There are no other new accounting pronouncements that are expected to have a significant impact on our financial statements.

 

2224

 

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, 2021.2022. Based on that evaluation, management concluded that the disclosure controls and procedures employed at the Company were not effective to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms.

 

In our annual report filed on Report 10-K for the year ended April 30, 2021, management identified the following material weakness in our internal control over financial reporting:

 

 ●The small size of our Company limits our ability to achieve the desired level of separation of duties for proper internal controls and financial reporting, particularly as it relates to financial reporting to assure material disclosures or implementation of newly issued accounting standards are included. A secondary review over annual and quarterly filings does occur with an outside party. Due to the departure of the Controller, the current CEO and CFO roles are being fulfilled by the same individual. We do not have an audit committee. We do not believe we have met the full requirement for separation of duties for financial reporting purposes.purposes

 

We continue to operate with a limited number of accounting and financial personnel. For the quarter ending JulyJanuary 31, 20212022 the Company did not have a Controller, but management is looking to fill this position as soon as possible. Training will be required to fulfill disclosure control and procedure responsibilities, including review procedures for key accounting schedules and timely and proper documentation of material transactions and agreements. Until sufficient training has taken place for this new Controller, we believe this control deficiency represents material weaknesses in internal control over financial reporting. To mitigate the effects of the material weakness identified in our annual report, the Company contracted with an outside CPA to perform a secondary review of our quarterly report filed on Form 10-Q.

 

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

 

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

 

Changes in Internal Control Overover Financial Reporting

 

Other than those mentioned above, there were no changes in our internal control over financial reporting during the fiscal quarter ended JulyJanuary 31, 20212022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

2325

 

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 2022.

 

PeriodNumber of shares repurchased
MayNovember 1, 2021 – May 31,November 30, 2021-0-100
JuneDecember 1, 2021 – June 30,December 31, 2021-13-500
JulyJanuary 1, 20212022 – JulyJanuary 31, 20212022-0-100

 

Item 3. Defaults upon Senior Securities

 

Not applicable

 

Item 4. Mine Safety Disclosures

Not applicable

 

Item 5. Other Information

 

Not applicable

 

Item 6. Exhibits

 

Exhibit No. Description
31.1 Certification of the Chief Executive Officer (Principal Financial and Accounting Officer), as required by Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.1 Certification of the Chief Executive Officer (Principal Financial and Accounting Officer), as required by Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS Inline XBRL Instance Document
   
101.SCH Inline XBRL Taxonomy Extension Schema Document
   
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

2426

 

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)

DateGeorge Risk Industries, Inc.
(Registrant)
Date September 20, 2021March 17, 2022By:/s/ Stephanie M. Risk-McElroy
  Stephanie M. Risk-McElroy
  President, Chief Executive Officer, Chief Financial Officer
and Chairman of the Board

 

2527