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George Risk Industries (RSKIA)

Filed: 25 May 20, 8:00pm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q/A

Amendment No. 2

 

(Mark One)

 

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

 

For the quarterly period ended July 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 or organization)

 

(I.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 class Trading Symbol(s) Name of each exchange on which registered
Class A Common Stock, $0.10 par value RSKIA OTC Markets
Convertible Preferred Stock, $20 stated value RSKIA OTC Markets

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically 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 [X] No [  ]

 

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]
   Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

The number of shares of the Registrant’s Common Stock outstanding, as of September 18, 2019 was 4,952,110.

 

 

 

 

 

 

EXPLANATORY NOTE

 

This Amendment No. 2 to Form 10-Q, (“Amendment”), amends the Quarterly Report on Form 10-Q for the three months ended July 31, 2019 that we originally filed with the Securities and Exchange Commission, or the Commission, on September 18, 2019, or the Original Filing, in connection with our failure to give effect to the implementation of FASB ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”) in the financial statements included in the Original Filing.

 

All amendments and restatements to the financial statements are non-cash in nature.

 

Restatement

 

As further discussed in Note 9 to our unaudited financial statements in Part I, Item 1, “Financial Statements” of the Amendment #2, on April 1, 2020, we concluded that certain disclosures necessary to fairly explain the changes in the financial statements presented were excluded in our previous filings and that we would we would restate our previously issued financial statements as of July 31, 2019 and for the three months ended July 31, 2018 and 2019, as set forth in the Amended Filing to disclose the in connection with our failure to give effect to the implementation of ASU 2016-01 in the financial statements included in the Original Quarterly Report on Form 10-Q.

 

Amendment

 

The purpose of this Amendment is to restate our previously issued unaudited financial statements and related disclosures as of July 31, 2019 and for the three months ended July 31, 2018 and 2019 in connection with the application of ASU 2016-01. This Amendment also includes (a) an amended Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to reflect the correction of the error described above.

 

Except as expressly set forth herein, including in the notes to the unaudited financial statements, this Amendment, along with Amendment #1 (“Amendments”), does not reflect events occurring after the date of the Original Filing or modify or update any of the other disclosures contained therein in any way other than as required to reflect the amendment discussed above. Accordingly, this Amendment should be read in conjunction with the Original Filing and our other filings with the Commission. Information not affected by the restatement is unchanged and reflects disclosures made at the time of the filing of the Original Filing and Amendments.

 

See Note 9 to the financial statements included in Item 1 for additional information and a reconciliation of the previously reported amounts to the restated amounts.

 

Items Amended in this Filing

 

For reasons discussed above, we are filing this Amendment in order to amend the following items in our Original Filing to the extent necessary to reflect the adjustments discussed above and make corresponding revisions to our financial data cited elsewhere in this Amendment in connection with the application of ASU 2016-01 in this Amendment that was not previously applied:

 

Part I, Item 1. Financial Statements

 

Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Part I, Item 4. Controls and Procedures

 

In accordance with applicable Commission rules, this Amendment includes new certifications required by Rule 13a-14 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, from our Chief Executive Officer and Chief Financial Officer dated as of the date of filing of this Amendment.

 

2

 

 

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

 

ITEM 1: Financial Statements

 

The restated unaudited financial statements for the three-month period ended July 31, 2019 are attached hereto.

 

3

 

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

 

  July 31, 2019  April 30, 2019 
  (unaudited)    
  (Restated)  (Restated) 
ASSETS        
Current Assets:        
Cash and cash equivalents $5,667,000  $4,873,000 
Investments and securities, at fair value  27,657,000   27,291,000 
Accounts receivable:        
Trade, net of $8,764 and $9,321 doubtful account allowance  2,534,000   2,696,000 
Other  4,000   6,000 
Income tax overpayment     259,000 
Inventories, net  4,863,000   4,583,000 
Prepaid expenses  320,000   282,000 
Total Current Assets  41,045,000   39,990,000 
         
Property and Equipment, net, at cost  1,095,000   984,000 
         
Other Assets        
Investment in Limited Land Partnership, at cost  293,000   293,000 
Projects in process  1,000   117,000 
Other  3,000   3,000 
Total Other Assets  297,000   413,000 
         
Intangible assets, net  1,609,000   1,640,000 
         
TOTAL ASSETS $44,046,000  $43,027,000 

 

See accompanying notes to the condensed financial statements

 

4

 

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

(continued)

 

  July 31, 2019  April 30, 2019 
  (unaudited)    
  (Restated)  (Restated) 
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current Liabilities        
Accounts payable, trade $261,000  $206,000 
Dividends payable  1,714,000   1,714,000 
Accrued expenses:        
Payroll and related expenses  287,000   356,000 
Property taxes  3,000    
Income tax payable  30,000    
Total Current Liabilities  2,295,000   2,276,000 
         
Long-Term Liabilities        
Deferred income taxes  1,240,000   1,198,000 
Total Long-Term Liabilities  1,240,000   1,198,000 
         
Total Liabilities  3,535,000   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  49,000   14,000 
Retained earnings  41,859,000   40,883,000 
Less: treasury stock, 3,550,571 and 3,544,271 shares, at cost  (4,280,000)  (4,227,000)
Total Stockholders’ Equity  40,511,000   39,553,000 
         
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $44,046,000  $43,027,000 

 

See accompanying notes to the condensed financial statements

 

5

 

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED INCOME STATEMENTS

FOR THE THREE MONTHS ENDED JULY 31, 2019 AND 2018

(Unaudited)

 

  July 31, 2019  July 31, 2018 
  (Restated)  (Restated) 
       
Net Sales $3,552,000  $3,429,000 
Less: Cost of Goods Sold  (1,769,000)  (1,801,000)
Gross Profit  1,783,000   1,628,000 
         
Operating Expenses:        
General and Administrative  297,000   286,000 
Sales  557,000   555,000 
Engineering  14,000   9,000 
Rent Paid to Related Parties  5,000   5,000 
Total Operating Expenses  873,000   885,000 
         
Income From Operations  910,000   773,000 
         
Other Income (Expense)        
Other  1,000   3,000 
Dividend and Interest Income  193,000   193,000 
Unrealized gain (loss) on equity securities  145,000   432,000 
Gain (Loss) on Sale of Investments  49,000   (68,000)
Total Other Income  388,000   560,000 
         
Income Before Provisions for Income Taxes  1,298,000   1,333,000 
         
Provisions for Income Taxes        
Current Expense  294,000   247,000 
Deferred tax expense  28,000   161,000 
Total Income Tax Expense  322,000   408,000 
         
Net Income $976,000  $925,000 
         
Basic Earnings Per Share of Common Stock $0.20  $0.19 
Diluted Earnings Per Share of Common Stock $0.20  $0.19 
         
Weighted Average Number of Common Shares Outstanding  4,956,389   4,967,580 
Weighted Average Number of Shares Outstanding (Diluted)  4,976,889   4,988,080 

 

See accompanying notes to the condensed financial statements

 

6

 

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED JULY 31, 2019 AND 2018

(Unaudited)

 

  July 31, 2019  July 31, 2018 
  (Restated)  (Restated) 
       
Net Income $976,000  $925,000 
         
Other Comprehensive Income (Loss), Net of Tax        
Unrealized gain (loss) on securities:        
Unrealized holding gains arising during period  49,000   220,000 
Income tax expense related to other comprehensive income  (14,000)  (63,000)
Other Comprehensive Income (Loss)  35,000   157,000
         
Comprehensive Income (Loss) $1,011,000  $

1,082,000

 

See accompanying notes to the condensed financial statements

 

7

 

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JULY 31, 2019 and 2018

(Unaudited)

 

  Preferred
Stock
  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, April 30, 2019 (Restated)  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock            
                 
Unrealized gain (loss), net of tax effect            
                 
Net Income            
                 
Balances, July 31, 2019 (Restated)  4,100  $99,000   8,502,881  $850,000 

 

  Preferred
Stock
  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, April 30, 2018, as previously reported  4,100  $99,000   8,502,881  $850,000 
                 
Cumulative effect of restatement on prior periods, for adoption of ASU 2016-01            
                 
Balance at May 1, 2018 after adoption of ASU 2016-01, as restated            
                 
Purchases of common stock            
                 
Unrealized gain (loss), net of tax effect            
                 
Net Income            
                 
Balances, July 31, 2018 (Restated)  4,100  $99,000   8,502,881  $850,000 

 

See accompanying notes to the condensed financial statements

 

8

 

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITIY

FOR THE THREE MONTHS ENDED JULY 31, 2019 and 2018

(Unaudited)

 

   Accumulated    
   Treasury Stock  Other    
Paid-In  (Common Class A)  Comprehensive  Retained    
Capital  Shares  Amount  Income  Earnings  Total 
$1,934,000   3,544,271  $(4,227,000) $14,000  $40,883,000  $39,553,000 
                       
    6,300   (53,000)        (53,000)
                       
          35,000      35,000 
                       
             976,000   976,000 
                       
$1,934,000   3,550,571  $(4,280,000) $49,000  $41,859,000  $40,511,000 

 

   Accumulated    
   Treasury Stock  Other    
Paid-In  (Common Class A)  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 
                       
             (2,424,000)  2,424,000    
                       
 1,934,000   3,534,784   (4,148,000)  (175,000)  39,170,000   37,730,000 
                       
    650   (5,000)        (5,000)
                       
          157,000      157,000 
                       
             925,000   925,000 
                       
$1,934,000   3,535,434  $(4,153,000) $(18,000) $40,095,000  $38,807,000 

 

See accompanying notes to the condensed financial statements

 

9

 

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED JULY 31, 2019 AND 2018

(Unaudited)

 

  July 31, 2019  July 31, 2018 
  (Restated)  (Restated) 
Cash Flows from Operating Activities:        
Net Income $976,000  $925,000 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  89,000   83,000 
(Gain) loss on sale of investments  (83,000)  68,000 
Impairments on investments  34,000    
Unrealized (gain) loss on equity securities  (145,000)  (432,000)
Reserve for bad debts  (2,000)  3,000 
Reserve for obsolete inventory  8,000   6,000 
Deferred income taxes  28,000   161,000 
Changes in assets and liabilities:        
(Increase) decrease in:        
Accounts receivable  163,000   234,000 
Inventories  (288,000)  (389,000)
Prepaid expenses  79,000   166,000 
Employee receivables  2,000    
Income tax overpayment     244,000 
Increase (decrease) in:        
Accounts payable  55,000   (7,000)
Accrued expenses  (66,000)  (172,000)
Income tax payable  289,000    
Net cash provided by operating activities  1,139,000   890,000 
         
Cash Flows From Investing Activities:        
(Purchase) of property and equipment  (169,000)   
Proceeds from sale of marketable securities  9,000   2,000 
(Purchase) of marketable securities  (132,000)  (233,000)
Net cash (used in) investing activities  (292,000)  (231,000)
         
Cash Flows From Financing Activities:        
(Purchase) of treasury stock  (53,000)  (5,000)
Dividends paid     (1,000)
Net cash (used in) financing activities  (53,000)  (6,000)
         
Net Increase in Cash and Cash Equivalents $794,000  $653,000 
         
Cash and Cash Equivalents, beginning of period $4,873,000  $4,294,000 
Cash and Cash Equivalents, end of period $5,667,000  $4,947,000 
         
Supplemental Disclosure for Cash Flow Information:        
Cash payments for:        
Income taxes paid $0  $0 
Interest paid $0  $1,000 

 

See accompanying notes to the condensed financial statements

 

10

 

 

GEORGE RISK INDUSTRIES, INC.

NOTES TO RESTATED CONDENSED FINANCIAL STATEMENTS

JULY 31, 2019

 

Note 1: Unaudited Interim Financial Statements

 

The accompanying financial statements have been prepared in accordance with the instructions for Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s April 30, 2019 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 has adopted the ASUs in the first quarter of fiscal 2020 and the Company’s accounting systems have been upgraded to comply with the requirements of the new standard, however, the adoption of ASU 2016-02 did not have a material impact on the Company’s financial statements and related disclosures because leases are not material to the financial statements.

 

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

 

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

 

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires the Company to measure and recognize expected credit losses for financial assets held and not accounted for at fair value through net income. In November 2018, April 2019 and May 2019, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses,” “ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses,” “Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” and “ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief,” which provided additional implementation guidance on the previously issued ASU. The ASU is effective for fiscal years beginning after December 15, 2020. The ASU requires a modified retrospective adoption method. The Company is still evaluating the impact of adoption on its financial statements and disclosures.

 

11

 

 

Note 2: Investments (Restated)

 

The Company has investments in publicly traded equity securities, corporate bonds, state and municipal debt securities, real estate investment trusts, and money markets and they are recorded at fair value. The investments in debt securities have maturities between September 2019 and January 2044. The Company uses the average cost method to determine the cost of securities sold with any unrealized gains or losses reported in each respective period’s earnings. Dividend and interest income are reported as earned.

 

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

 

     Gross  Gross    
Investments at Cost  Unrealized  Unrealized  Fair 
July 31, 2019 Basis  Gains  Losses  Value 
Municipal bonds $5,475,000  $117,000  $(43,000) $5,549,000 
Corporate bonds  26,000         26,000 
REITs  89,000   3,000   (9,000)  83,000 
Equity securities  16,729,000   4,252,000   (260,000)  20,721,000 
Money markets and CDs  1,278,000         1,278,000 
Total $23,597,000  $4,372,000  $(312,000) $27,657,000 

 

     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 

 

Marketable securities that are equity securities are carried at fair value on the balance sheets with changes in fair value recorded as an unrealized gain or (loss) in the Statements of Operations in the period of the change, and debt securities are carried at fair value on the balance sheet with changes in fair value recorded as unrealized gains or (losses) in the Statement of Comprehensive Income. Upon the disposition of a marketable security, the Company records a realized gain or (loss) on the Company’s statements of operations. On May 1, 2018, as a result of the adoption of ASU 2016-01 – Financial Instruments, the Company reclassified $2,424,000 of net unrealized gains on marketable securities, that were formerly classified as available-for-sale securities before the adoption of the new standard, from Accumulated Other Comprehensive Income to Retained Earnings.

 

The Company evaluates all marketable securities for other-than temporary declines in fair value, which are defined as when the cost basis exceeds the fair value for approximately on 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 $34,000 for the quarter ended July 31, 2019. For the prior quarter ended July 31, 2018, management did not need to record any impairment losses.

 

12

 

 

The following table 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 July 31, 2019 and April 30, 2019, respectively.

 

Unrealized Loss Breakdown by Investment Type at July 31, 2019

 

  Less than 12 months  12 months or greater  Total 
Description Fair Value  Unrealized Loss  Fair Value  Unrealized Loss  Fair Value  Unrealized Loss 
Municipal bonds $  $  $448,000  $(43,000) $448,000  $(43,000)
REITs        30,000   (9,000)  30,000   (9,000)
Equity securities  1,975,000   (147,000)  729,000   (113,000)  2,704,000   (260,000)
Total $1,975,000  $(147,000) $1,207,000  $(165,000) $3,182,000  $(312,000)

 

Unrealized Loss Breakdown by Investment Type at April 30, 2019

 

  Less than 12 months  12 months or greater  Total 
Description Fair Value  Unrealized Loss  Fair Value  Unrealized Loss  Fair Value  Unrealized Loss 
Municipal bonds $772,000  $(4,000) $580,000  $(50,000) $1,352,000  $(54,000)
REITs        32,000   (6,000)  32,000   (6,000)
Equity securities  932,000   (102,000)  1,652,000   (195,000)  2,584,000   (297,000)
Total $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 July 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 July 31, 2019.

 

Note 3: Inventories

 

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

 

  July 31, 2019  April 30, 2019 
       
Raw materials $3,878,000  $3,644,000 
Work in process  368,000   389,000 
Finished goods  715,000   641,000 
   4,961,000   4,674,000 
Less: allowance for obsolete inventory  (98,000)  (91,000)
Inventories, net $4,863,000  $4,583,000 

 

13

 

 

Note 4: Business Segments

 

The following is financial information relating to industry segments:

 

  July 31, 
  2019  2018 
Net revenue:        
Security alarm products $2,830,000  $2,150,000 
Cable & wiring tools  536,000   679,000 
Other products  186,000   600,000 
Total net revenue $3,552,000  $3,429,000 
         
Income from operations:        
Security alarm products $725,000  $485,000 
Cable & wiring tools  137,000   153,000 
Other products  48,000   135,000 
Total income from operations $910,000  $773,000 
         
Depreciation and amortization:        
Security alarm products $23,000  $10,000 
Cable & wiring tools  31,000   31,000 
Other products  20,000   27,000 
Corporate general  15,000   15,000 
Total depreciation and amortization $89,000  $83,000 
         
Capital expenditures:        
Security alarm products $169,000  $ 
Cable & wiring tools      
Other products      
Corporate general      
Total capital expenditures $169,000  $ 

 

Identifiable assets: July 31, 2019  April 30, 2019 
Security alarm products $6,369,000  $6,179,000 
Cable & wiring tools  2,725,000   2,713,000 
Other products  864,000   842,000 
Corporate general  34,088,000   33,293,000 
Total assets $44,046,000  $43,027,000 

 

14

 

 

Note 5: Earnings per Share (Restated)

 

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

 

  For the Three Months Ended July 31, 
  Originally
Filed 2019
  Adjustment
2019
  Restated 2019 
Numerator            
Net income $866,000  $110,000  $976,000 
             
Denominator            
Weighted average common shares outstanding, basic  4,956,389      4,956,389 
Convertible Preferred Stock  20,500      20,500 
Weighted average common shares outstanding, diluted  4,976,889      4,976,889 
Net Income per share - Basic $0.17  $0.03  $0.20 
Income per shares - Diluted $0.17  $0.03  $0.20 

 

  For the Three Months Ended July 31, 
  Originally
Filed 2018
  Adjustment
2018
  Restated 2018 
Numerator            
Net income $617,000  $308,000  $925,000 
             
Denominator            
Weighted average common shares outstanding, basic  4,967,580      4,967,580 
Convertible Preferred Stock  20,500      20,500 
Weighted average common shares outstanding, diluted  4,988,080      4,988,080 
Net Income per share - Basic $0.12  $0.07  $0.19 
Income per shares - Diluted $0.12  $0.07  $0.19 

 

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 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 were paid during both the quarter ending July 31, 2019 and 2018, respectively.

 

15

 

 

Note 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 July 31, 2019, our investments consisted of money markets, certificates of deposits (CDs), publicly traded equity securities, real estate investment trusts (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.

 

16

 

 

Fair Value Hierarchy

 

The following table 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
July 31, 2019
 
  Level 1  Level 2  Level 3  Total 
Assets:                
Municipal Bonds $  $5,549,000  $  $5,549,000 
Corporate Bonds  26,000         26,000 
REITs     83,000      83,000 
Equity Securities  20,721,000         20,721,000 
Money Markets and CDs  1,278,000         1,278,000 
Total fair value of assets measured on a recurring basis $22,025,000  $5,632,000  $  $27,657,000 

 

  Assets Measured at Fair Value on a Recurring Basis as of
April 30, 2019
 
  Level 1  Level 2  Level 3  Total 
Assets:                
Municipal Bonds $  $5,483,000  $  $5,483,000 
Corporate Bonds  26,000         26,000 
REITs     84,000      84,000 
Equity Securities  20,465,000         20,465,000 
Money Markets and CDs  1,233,000         1,233,000 
Total fair value of assets measured on a recurring basis $21,724,000  $5,567,000  $  $27,291,000 

 

Note 8 Subsequent Events

 

None

 

Note 9 Correction of Previously Issued Financial Statements

 

Subsequent to the issuance of its Quarterly Report on SEC Form 10-Q for the three months ended July 31, 2019, the Company discovered an error due to missing a change in accounting related to other comprehensive income (loss) as reflected in the implementation of ASU 2016-01, which became effective for the Company on May 1, 2018. Under the new guidance in ASU 2016-01 the Company should record unrealized gains and losses in the value of the equity securities it owns in the statements of operations, whereas, under previous guidance (and in the Original Form 10-Q) those unrealized gains and losses were recorded as accumulated other comprehensive income (loss).

 

This restatement includes i) recording a one-time adjustment to retained earnings to reclassify the accumulated other comprehensive loss related to unrealized gains on equity securities as of May 1, 2018 and ii) recording an unrealized gain on marketable securities representing the value change in the equities for the three months ended July 31, 2019 and 2018.

 

No entries to correct for this restatement have any impact on our cash position, liquidity, or operations.

 

17

 

 

The tables below reflect the effect of restatement on the Company’s financial statements for the quarter:

 

  As of July 31, 2019 
  Original  Adjustment  As Restated 
Balance Sheet            
Deferred Income Taxes $1,247,000  $(7,000) $1,240,000 
Total Liabilities  3,542,000   (7,000)  3,535,000 
             
Accumulated other comprehensive income $2,890,000  $(2,841,000) $49,000 
Retained Earnings  39,011,000   2,848,000   41,859,000 
Total stockholder’s Equity $40,504,000  $7,000  $40,511,000 

 

  As of April 30, 2019 
  Original  Adjustment  As Restated 
Balance Sheet            
Accumulated other comprehensive income $2,752,000  $(2,738,000) $14,000 
Retained Earnings  38,145,000   2,738,000   40,883,000 

 

  For the Three Months Ended July 31, 2019 
  Original  Adjustment  As Restated 
Income Statement            
Unrealized Gain (Loss) on Equity Securities $  $145,000  $145,000 
Total Other Income (Expense) $243,000  $145,000  $388,000 
             
Income Before Provisions for Income Taxes  1,153,000   145,000   1,298,000 
             
Deferred tax expense (benefit)  (7,000)  35,000   28,000 
Total Income Tax Expense  287,000   42,000   329,000 
             
Net Income $866,000  $110,000  $976,000 
             
Earnings Per Share of Common Stock            
Basic $0.17  $0.03  $0.20 
Diluted $0.17  $0.03  $0.20 

 

  For the Three Months Ended July 31, 2018 
  Original  Adjustment  As Restated 
Income Statement            
Unrealized Gain (Loss) on Equity Securities $  $432,000  $432,000 
Total Other Income (Expense) $128,000  $432,000  $560,000 
             
Income Before Provisions for Income Taxes  901,000   432,000   1,333,000 
             
Deferred tax expense (benefit)  37,000   124,000   161,000 
Total Income Tax Expense  284,000   124,000   408,000 
             
Net Income $617,000  $308,000  $925,000 
             
Earnings Per Share of Common Stock            
Basic $0.12  $0.07  $0.19 
Diluted $0.12  $0.07  $0.19 

 

18

 

 

  For the Three Months Ended July 31, 2019 
  Original  Adjustment  As Restated 
Statement of Comprehensive Income         
Net Income $866,000  $110,000  $976,000 
             
Other Comprehensive Income, net of Tax            
Unrealized gain (loss) on securities            
Unrealized holding gains arising during period  324,000   (275,000)  49,000 
Less: reclassification adjustment for (gains) losses included in net income  (130,000)  130,000    
Income tax expense related to other comprehensive income  (56,000)  42,000   (14,000)
Other Comprehensive Income (Loss) $138,000  $(103,000) $35,000 
             
Comprehensive Income $1,004,000  $7,000  $1,011,000 

 

  For the Three Months Ended July 31, 2018 
  Original  Adjustment  As Restated 
Statement of Comprehensive Income            
Net Income $617,000  $308,000  $925,000 
             
Other Comprehensive Income, net of Tax            
Unrealized gain (loss) on securities            
Unrealized holding gains arising during period  607,000   (387,000)  220,000 
Less: reclassification adjustment for (gains) losses included in net income  44,000   

(44,000

)  
Income tax expense related to other comprehensive income  (188,000)  125,000   (63,000)
Other Comprehensive Income (Loss) $463,000  $(306,000) $157,000
             
Comprehensive Income $1,080,000  $2,000 $

1,082,000

 

  Original  Adjustment  As Restated 
Statement of Stockholders’ Equity            
Balance, April 30, 2019 $39,553,000  $  $39,553,000 
Purchase of common stock  (53,000)     (53,000)
Unrealized gain (loss), net of tax effect  138,000   (103,000)  35,000 
Net Income  866,000   110,000   976,000 
Balance, July 31, 2019 $40,504,000  $7,000  $40,511,000 

 

  Original  Adjustment  As Restated 
Statement of Stockholders’ Equity            
Balance, April 30, 2018 $37,730,000  $  $37,730,000 
Purchase of common stock  (5,000)     (5,000)
Impact of adoption of ASU 2016-01         
Unrealized gain (loss), net of tax effect  463,000   (306,000)  157,000 
Net Income  617,000   308,000   925,000 
Balance, July 31, 2018 $38,805,000  $2,000  $38,807,000 

 

19

 

 

  For the Three Months Ended July 31, 2019 
  Original  Adjustment  As Restated 
Statement of Cash Flows            
Cash Flows From Operating Activities            
Net Income $866,000  $110,000  $976,000 
Adjustment to reconcile net income to net cash provided operating activities            
Unrealized (gain) loss on equity securities     (145,000)  (145,000)
Deferred income taxes  (7,000)  35,000   28,000 
Net cash provided by (used in) operating activities $1,139,000  $  $1,139,000 

 

  For the Three Months Ended July 31, 2018 
  Original  Adjustment  As Restated 
Statement of Cash Flows            
Cash Flows From Operating Activities            
Net Income $617,000  $308,000  $925,000 
Adjustment to reconcile net income to net cash provided operating activities            
Unrealized (gain) loss on equity securities     (432,000)  (432,000)
Deferred income taxes  37,000   124,000   161,000 
Net cash provided by (used in) operating activities $890,000  $  $890,000 

 

  For the Three Months Ended July 31, 
  Originally
Filed 2019
  Adjustment 2019  Restated 2019 
Numerator            
Net income $866,000  $110,000  $976,000 
Denominator            
Weighted average common shares outstanding, basic  4,956,389      4,956,389 
Convertible Preferred Stock  20,500      20,500 
Weighted average common shares outstanding, diluted  4,976,889      4,976,889 
Net Income per share - Basic $0.17  $0.03  $0.20 
Income per shares - Diluted $0.17  $0.03  $0.20 

 

  For the Three Months Ended July 31, 
  Originally
Filed 2018
  Adjustment 2018  Restated 2018 
Numerator            
Net income $617,000  $308,000  $925,000 
Denominator            
Weighted average common shares outstanding, basic  4,967,580      4,967,580 
Convertible Preferred Stock  20,500      20,500 
Weighted average common shares outstanding, diluted  4,988,080      4,988,080 
Net Income per share - Basic $0.12  $0.07  $0.19 
Income per shares - Diluted $0.12  $0.07  $0.19 

 

20

 

 

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

 

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

 

21

 

 

MANAGEMENT DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Restated)

 

This Quarterly Report on Form 10-Q/A, 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 current information becomes available in the future.

 

The following discussion should be read in conjunction with the attached condensed financial statements, and with the Company’s audited financial statements and discussion for the fiscal year ended April 30, 2019.

 

Executive Summary

 

The Company’s performance has increased through the first quarter in comparison to the prior quarter last year. In comparison to the most recent prior quarter, performance has stayed steady with similar sales figures. The main difference between this year’s quarter and last year’s quarter is that the Company doesn’t have a big back order log and is able to get inventory in the stockroom which allows the Company to ship products out on timely basis. Opportunities include continuing to learn and grow with our computer system and to continue looking at businesses that might be a good fit to purchase. Also, we have new products that are scheduled to enter the marketplace by the end of the calendar year. Challenges in the coming months include continuing to get product out to customers in a timelier manner. Raw material prices are also a concern with tariffs being levied by the US government and other factors. Management continues to work at keeping the facilities running leaner and more profitable than ever before.

 

Results of Operations

 

 Net sales showed a 3.59% increase over the same period in the prior year. Management believes that they have been successful at training employees on the new computer system and production is running smoothly. The Company has also seen some old customers buying from us again. Management believes that this may be in relation to price increases from our competitors
 Cost of goods sold saw a decrease from 52.52% of sales in the prior year, to 49.80% in the current quarter, which is inside of Management’s goal to keep labor and other manufacturing expenses within the range of 45 to 50%. The decreased cost of goods sold percentage is a reflection of having better training and working more efficiently when making product.
 Operating expenses have increased by $18,000 when comparing the current quarter to the same quarter for the prior year, but the percentage in relation to net sales decreased to 24.58% for the quarter ended July 31, 2019 as compared to 24.93% for the corresponding quarter last year. The Company has been able to keep the operating expenses at less than 30% of net sales for many years now; however, the actual dollar amount increase is because of increased commission amounts (since sales have increased) and additional labor costs for hiring new employees and wage increases.

 

22

 

 

 Income from operations for the quarter ended July 31, 2019 was at $910,000, which is a 17.72% increase from the corresponding quarter last year, which had income from operations of $773,000.
 Other income and expenses showed a $388,000 gain for the quarter ended July 31, 2019 as compared to a $560,000 gain for the quarter ended July 31, 2018. Investments in marketable securities are presented at fair value and an unrealized gain or loss is recorded within the statements of operations, a non-cash entry, at each period beginning May 1, 2018 and previously recorded unrealized gain or loss in other comprehensive income (loss). For the three months ended July 31, 2019, $145,000 of unrealized gains on equity securities were recorded and $432,000 of unrealized gains on equity securities were recorded for the three months ended July 31, 2018. The remainder of the increase is primarily due to gains realized from the sale of investments as compared to losses sustained during the same quarter last year.
 Provision for income taxes showed a decrease of $79,000, down from $408,000 in the quarter ended July 31, 2018 to $329,000 for the quarter ended July 31, 2019. The decrease is a direct result of the adoption of ASU 2016-01.
 In turn, net income for the quarter ended July 31, 2019 was $969,000, a 4.76% increase from the corresponding quarter last year, which showed net income of $925,000.
 Earnings per share for the quarter ended July 31, 2019 were $0.20 per common share and $0.19 per common share for the quarter ended July 31, 2018.

 

Liquidity and capital resources

 

Operating

 

 Net cash increased $794,000 during the quarter ended July 31, 2019 as compared to an increase of $653,000 during the corresponding quarter last year.
 Accounts receivable decreased $163,000 for the quarter ending July 31, 2019 compared with a $234,000 decrease for the same quarter last year. The decrease in accounts receivable is directly attributable to the Company’s ability to collect on accounts and to keep past due accounts to a minimum. An analysis of accounts shows that there were only 5.15% that were over 90 days at July 31, 2019.
 Inventories increased $288,000 during the current quarter as compared to a $389,000 increase last year. The smaller increase is primarily due to the fact that the Company selling more finished goods at a slightly faster rate than it is replenishing raw materials.
 At the quarter ended July 31, 2019 there was a $79,000 decrease in prepaid expenses and at July 31, 2018, there was a $166,000 decrease. The current decrease is due to capitalizing some projects in process.
 Accounts payable shows an increase of $55,000 for the quarter ended July 31, 2019 compared to a decrease of $7,000 for the same quarter the year before, primarily due to timing issues. Management strives to pay all payables within terms, unless there is a problem with the merchandise.
 Accrued expenses decreased $66,000 for the current quarter as compared to a $172,000 decrease for the quarter ended July 31, 2018. The difference in the amounts is primarily due to timing issues of when pay periods end.
 Income tax payable for the quarter ended July 31, 2019 increased $289,000, while there was a $244,000 decrease towards income tax overpayment for the quarter ended July 31, 2018. The current increase is due to waiting on tax refunds to be sent and not having to pay income tax estimates yet.

 

Investing

 

 As for our investment activities, the Company purchased $169,000 of property and equipment during the current fiscal quarter. In comparison with the corresponding quarter last year, there were not any purchases of property and equipment.
 Additionally, the Company continues to purchase marketable securities, which include municipal bonds and quality stocks. Cash spent on purchases of marketable securities for the quarter ended July 31, 2019 was $132,000 compared to $233,000 spent during the quarter ended July 31, 2018. We 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

 

 Furthermore, the Company continues to purchase back common stock when the opportunity arises. For the quarter ended July 31, 2019, the Company purchased $53,000 worth of treasury stock, along with the $5,000 spent in the same period the prior year.

 

23

 

 

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

 

  Qtr ended  Qtr ended 
  July 31, 2019  July 31, 2018 
Working capital        
(current assets – current liabilities) $38,750,000  $36,894,000 
Current ratio        
(current assets / current liabilities)  17.882   18.760 
Quick ratio        
((cash + investments + AR) / current liabilities)  15.622   16.567 

 

New Product Development

 

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

 

 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.
 A new version of the pool access alarm is currently going through electrical listing 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.
 Work continues on high security switches. They have a triple biased high security switch design nearly complete and an adjustable magnet design was completed for recessed mounting applications.
 Wireless technology is a main area of focus for product development. We are looking into adding wireless technology to some of our current products. A wireless contact switch is in the final stages of development. Also, we are working on wireless versions of our Pool Alarm and environmental sensors that will be easy to install in current construction. We are also concentrating on making products compatible with Wi-Fi, smartphone technology and the increasing popular Z-Wave standard for wireless home automation.
 We are ready to launch a new product in our cable and wiring tools segment, The Grabbit GR5. This is an ultra-compact, lightweight telescoping pole that extends 5’ to grab or push a wire. The GR5 is the newest member of the Grabbit family - joining the 10’, 12’ and 18’ versions. The Grabbits are an indispensable tool when running wire through drop ceilings and difficult-to-access areas. A Z-tip, J-tip and LED light are included with the Grabbits which are interchangeable depending on the situation.

 

Other Information

 

In addition to researching 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.

 

24

 

 

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 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 has adopted the ASUs in the first quarter of fiscal 2020 and the Company’s accounting systems have been upgraded to comply with the requirements of the new standard, however, the adoption of ASU 2016-02 did not have a material impact on the Company’s financial statements and related disclosures because leases are not material to the financial statements.

 

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

 

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

 

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires the Company to measure and recognize expected credit losses for financial assets held and not accounted for at fair value through net income. In November 2018, April 2019 and May 2019, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses,” “ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses,” “Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” and “ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief,” which provided additional implementation guidance on the previously issued ASU. The ASU is effective for fiscal years beginning after December 15, 2020. The ASU requires a modified retrospective adoption method. The Company is still evaluating the impact of adoption on its financial statements and disclosures.

 

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GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

This disclosure does not apply.

 

Item 4. Controls and Procedures

 

Our management, under the supervision and with the participation of our chief executive officer (also working as our chief financial officer), evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of July 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 a limited number of accounting and financial personnel. A new accounting professional was hired in 2018 to fill the Controller position. 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 restated financial statements included in this restated report fairly present our financial position, results of operations and cash flows as of and for the periods presented in all material respects.

 

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

 

Changes in Internal Control Over Financial Reporting

 

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

 

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GEORGE RISK INDUSTRIES, INC.

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

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 first quarter of fiscal year 2020.

 

Period Number of shares repurchased 
May 1, 2019 – May 31, 2019  -0- 
June 1, 2019 – June 30, 2019  300 
July 1, 2019 – July 31, 2019  6,000 

 

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.

 

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SIGNATURES

 

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

 

 George Risk Industries, Inc.
 (Registrant)
  
Date May 22, 2020By:/s/ Stephanie M. Risk-McElroy
  Stephanie M. Risk-McElroy
  President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board

 

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