UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report under Section 13 or 15(d) of the Securities Ex-
change Act of 1934
For the quarter ended October 31, 2013
[ ] Transition report under Section 13 or 15(d) of the Securities Ex-
change Act of 1934
For the transition period from ___________ to ___________
Commission File Number: 000-05378
GEORGE RISK INDUSTRIES, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 84-0524756
(State of incorporation) (IRS Employers Identification No.)
802 South Elm St.
Kimball, NE 69145
(Address of principal executive offices) (Zip Code)
(308) 235-4645
(Registrant's telephone number, including area code)
Check whether the issuer (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 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
December 13, 2013 was 5,031,925.
Transitional Small Business Disclosure Format: Yes [ X ] No [ ]
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited financial statements for the three and six month period
ended October 31, 2013, are attached hereto.
GEORGE RISK INDUSTRIES, INC.
BALANCE SHEETS
October 31, April 30,
2013 2013
------------ ------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 4,922,000 $ 4,859,000
Investments and securities 23,012,000 22,208,000
Accounts receivable:
Trade, net of $7,399 and $4,126
doubtful account allowance 1,901,000 1,915,000
Other 1,000 1,000
Note receivable, current 4,000 5,000
Income tax overpayment 183,000 347,000
Inventories 2,042,000 2,074,000
Prepaid expenses 108,000 60,000
Deferred current income taxes 837,000 635,000
------------ ------------
Total Current Assets $33,010,000 $32,104,000
Property and Equipment, net, at cost 669,000 701,000
Other Assets
Investment in Limited Land Partnership,
at cost 238,000 238,000
Projects in process 39,000 45,000
Note receivable 0 2,000
Other 1,000 1,000
------------ ------------
Total Other Assets $ 278,000 $ 286,000
TOTAL ASSETS $33,957,000 $33,091,000
============ ============
See accompanying notes to the condensed financial statements.
GEORGE RISK INDUSTRIES, INC.
BALANCE SHEETS
October 31, April 30,
2013 2013
------------ ------------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade $ 141,000 $ 68,000
Dividends payable 955,000 817,000
Accrued expenses:
Payroll and related expenses 212,000 259,000
------------ ------------
Total Current Liabilities $ 1,308,000 $ 1,144,000
Long-Term Liabilities
Deferred income taxes 90,000 133,000
------------ ------------
Total Long-Term Liabilities $ 90,000 $ 133,000
Stockholders' Equity
Convertible preferred stock, 1,000,000
shares authorized, Series 1-noncumulative,
$20 stated value, 25,000 shares authorized,
4,100 issued and outstanding 99,000 99,000
Common stock, Class A, $.10 par value,
10,000,000 shares authorized, 8,502,881
shares issued and outstanding 850,000 850,000
Additional paid-in capital 1,736,000 1,736,000
Accumulated other comprehensive income 998,000 743,000
Retained earnings 32,387,000 31,873,000
Treasury stock, 3,470,906 and 3,467,356
shares, at cost (3,511,000) (3,487,000)
------------ ------------
Total Stockholders' Equity $32,559,000 $31,814,000
TOTAL LIABILITES AND STOCKHOLDERS' EQUITY $33,957,000 $33,091,000
============ ============
See the companying notes to the condensed financial statements.
GEORGE RISK INDUSTRIES, INC.
INCOME STATEMENTS
Three months Six months Three months Six months
ended ended ended ended
October 31, October 31, October 31, October 31,
2013 2013 2012 2012
---------------------------------------------------
Net Sales $ 2,920,000 $ 5,590,000 $ 2,569,000 $ 5,111,000
Less: cost of goods sold (1,308,000) (2,592,000) (1,289,000) (2,645,000)
------------ ------------ ------------ ------------
Gross Profit $ 1,612,000 $ 2,998,000 $ 1,280,000 $ 2,466,000
Operating Expenses:
General and
administrative 177,000 361,000 215,000 417,000
Sales 423,000 883,000 433,000 858,000
Engineering 13,000 25,000 21,000 38,000
Rent paid to related
parties 5,000 10,000 11,000 23,000
------------ ------------ ------------ ------------
Total Operating Expenses $ 618,000 $ 1,279,000 $ 680,000 $ 1,336,000
Income From Operations 994,000 1,719,000 600,000 1.130,000
Other Income (Expense)
Other 0 2,000 6,000 19,000
Dividend and interest
income 141,000 307,000 163,000 366,000
Gain (loss) on
investments 121,000 139,000 94,000 (57,000)
Gain (loss) on sale
of assets 127,000 127,000 0 0
------------ ------------ ------------ ------------
$ 389,000 $ 575,000 $ 263,000 $ 328,000
Income Before Provisions
for Income Tax 1,383,000 2,294,000 863,000 1,458,000
Provisions for Income Tax
Current expense (413,000) (698,000) (235,000) (456,000)
Deferred tax benefit
(expense) 400,000 428,000 (35,000) 27,000
------------ ------------ ------------ ------------
Total Income Tax Expense $ (13,000) $ (270,000) $ (270,000) $ (429,000)
Net Income $ 1,370,000 $ 2,024,000 $ 593,000 $ 1,029,000
============ ============ ============ ============
Cash Dividends
Common Stock ($0.30
per share) $(1,510,000) $(1,510,000)
Common Stock ($0.28
per share) $(1,411,000) $(1,411,000)
Income Per Share of Common Stock:
Basic $0.27 $0.40 $0.12 $0.20
Assuming Dilution $0.27 $0.40 $0.12 $0.20
Weighted Average Number of
Common Shares Outstanding:
Basic 5,032,109 5,032,976 5,037,348 5,039,949
See the accompanying notes to the condensed financial statements.
GEORGE RISK INDUSTRIES, INC.
STATEMENTS OF COMPREHENSIVE INCOME
Three months Six months Three months Six months
ended ended ended ended
October 31, October 31, October 31, October 31,
2013 2013 2012 2012
----------------------------------------------------
Net Income $ 1,370,000 $ 2,024,000 $ 593,000 $ 1,029,000
------------ ------------ ------------ ------------
Other Comprehensive Income, net of tax
Unrealized gain (loss) on securities:
Unrealized holding
gains (losses) arising
during period 565,000 532,000 313,000 (142,000)
Reclassification adjustment
for gains (losses) included
in net income (102,000) (94,000) (96,000) 458,000
Income tax benefit (expense)
related to other com-
prehensive income (194,000) (183,000) (91,000) (132,000)
------------ ------------ ------------ ------------
Other Comprehensive
Income $ 269,000 $ 255,000 $ 126,000 $ 184,000
Comprehensive Income $ 1,639,000 $ 2,279,000 $ 719,000 $ 1,213,000
============ ============ ============ ============
See accompanying notes to the condensed financial statements.
GEORGE RISK INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
Six months Six months
ended ended
October 31, October 31,
2013 2012
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,024,000 $ 1,029,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 76,000 86,000
(Gain) loss on sale of investments (139,000) 57,000
(Gain) loss on sales of assets (127,000) 0
Reserve for bad debts 3,000 (4,000)
Reserve for obsolete inventory 40,000 (3,000)
Deferred income taxes (428,000) (27,000)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 11,000 14,000
Inventories (9,000) 95,000
Prepaid expenses (45,000) 92,000
Income tax overpayment 164,000 0
Increase (decrease) in:
Accounts payable 73,000 23,000
Accrued expenses (46,000) 41,000
Income tax payable 0 (20,000)
------------ ------------
Net cash provided by (used in) operating
activities $ 1,597,000 $ 1,383,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Other assets manufactured 4,000 15,000
Proceeds from sale of assets 127,000 0
(Purchase) of property and equipment (45,000) (81,000)
Proceeds from sale of marketable securities 2,000 78,000
(Purchase) of marketable securities (229,000) (400,000)
Collections of loans to employees 3,000 3,000
(Purchase) of treasury stock (24,000) (28,000)
------------ ------------
Net cash provided by (used in) investing
activities $ (162,000) $ (413,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (1,372,000) (1,283,000)
------------ ------------
Net cash provided by (used in) financing
activities $(1,372,000) $(1,283,000)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 63,000 $ (313,000)
Cash and cash equivalents, beginning of
period $ 4,859,000 $ 5,773,000
------------ ------------
Cash and cash equivalents, end of period $ 4,922,000 $ 5,460,000
============ ============
Supplemental Disclosure of Cash Flow
Information
Cash payments for:
Income taxes $ 530,000 $ 473,000
Interest expense $ 8,000 $ 0
Cash receipts for:
Income taxes $ 0 $ 0
See accompanying notes to the condensed financial statements.
GEORGE RISK INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2013
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 com-
plete 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, 2013 annual report on Form 10-K.
In the opinion of management, all adjustments, consisting only of normal re-
curring 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.
Note 2 Marketable Securities
The Company has investments in publicly traded equity securities as well
as certain state and municipal debt securities. These securities are class-
ified as available-for-sale securities, and are reported at fair value.
Refer to Note 7, Fair Value Measurements, for additional information on the
fair value measurements for all assets and liabilities, including invest-
ments, that are measured at fair value in these financial statements. Avail-
able-for-sale investments in debt securities mature between November 2013
and November 2048. The Company uses the average cost method to determine the
cost of securities sold and the amount reclassified out of accumulated other
comprehensive income into earnings. Unrealized gains and losses are excluded
from earnings and reported separately in the statement of comprehensive in-
come and as a component of stockholder's equity. Dividend and interest in-
come are accrued as earned.
As of October 31, 2013, investments available-for-sale consisted of the
following:
Gross Gross
Cost Unrealized Unrealized Fair
Basis Gains Losses Value
------------ ------------ ------------ ------------
Municipal bonds $ 6,666,000 $ 122,000 $ (73,000) $ 6,715,000
REITs $ 57,000 $ 3,000 $ (1,000) $ 59,000
Equity securities $12,413,000 $ 1,780,000 $ (117,000) $14,076,000
Money markets/CDs $ 2,162,000 $ -- $ -- $ 2,162,000
------------ ------------ ------------ ------------
Total $21,298,000 $ 1,905,000 $ (191,000) $23,012,000
In accordance with US GAAP, the Company evaluates all marketable
securities for other-than temporary declines in fair value, which are defined
as when the cost basis exceeds the fair value for approximately one year.
The Company also evaluates the nature of the investment, cause of impairment
and number of investments that are in an unrealized position. When an other-
than-temporary decline is identified, the Company will decrease the cost of
the marketable security to the new fair value and recognize a real loss. The
investments are periodically evaluated to determine if impairment changes are
required. As a result of this standard, management did not record any im-
pairment losses for the quarter ended October 31, 2013, but did record im-
pairment losses of $18,000 for the six months ended October 31, 2013. Like-
wise, as for the corresponding periods last year, management did not record
any impairment losses for the quarter ended October 31, 2012, but did record
impairment losses of $20,000 for the six months ended October 31, 2012.
The following table shows the investments with gross 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 October 31, 2013.
Less than 12 months 12 months or greater Total
----------------------- --------------------- ---------------------
Fair Unrealized Fair Unrealized Fair Unrealized
Value Loss Value Loss Value Loss
...........................................................................
Municipal bonds
$2,762,000 $ (49,000) $ 511,000 $ (23,000) $ 3,273,000 $ (72,000)
REITs
$ 27,000 $ (1,000) $ -- $ -- $ 27,000 $ (1,000)
Equity securities
$1,986,000 $ (88,000) $ 146,000 $ (30,000) $ 2,132,000 $ (118,000)
----------- ------------ ----------- ---------- ------------ ------------
Total
$4,775,000 $ (138,000) $ 657,000 $ (53,000) $ 5,432,000 $ (191,000)
Municipal Bonds
---------------
The unrealized losses on the Company's investments in municipal bonds were
caused by interest rate increases. The contractual terms of these invest-
ments 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 October 31, 2013.
Marketable Equity Securities
----------------------------
The Company's investments in marketable equity securities consist of a wide
variety of companies. Investments in these companies include growth, growth
income, and foreign investment objectives. Management has evaluated the in-
dividual holdings, and because of the recent decline in the stock market,
does not consider these investments to be other-than-temporarily impaired at
October 31, 2013.
Note 3 Inventories
At October 31, 2013, inventories consisted of the following:
Raw Materials $ 1,471,000
Work in Process 455,000
Finished Goods 321,000
------------
$ 2,247,000
Less: allowance for obsolete inventory (205,000)
------------
Net Inventories $ 2,042,000
============
Note 4 Business Segments
The following is financial information relating to industry
segments:
For the quarter ended
October 31,
2013 2012
---------------------------
Net revenue:
Security alarm products 2,494,000 2,246,000
Other products 426,000 323,000
------------ ------------
Total net revenue $ 2,920,000 $ 2,569,000
Income from operations:
Security alarm products 849,000 525,000
Other products 145,000 75,000
------------ ------------
Total income from operations $ 994,000 $ 600,000
Identifiable assets:
Security alarm products 3,690,000 3,400,000
Other products 804,000 1,234,000
Corporate general 29,463,000 26,688,000
------------ ------------
Total assets $33,957,000 $31,322,000
Depreciation and amortization:
Security alarm products 4,000 6,000
Other products 29,000 34,000
Corporate general 5,000 4,000
------------ ------------
Total depreciation and amortization $ 38,000 $ 44,000
Capital expenditures:
Security alarm products 3,000 11,000
Other products 20,000 34,000
Corporate general 0 0
------------ ------------
Total capital expenditures $ 23,000 $ 45,000
Note 5 Earnings per Share
Basic and diluted earning per share, assuming convertible preferred
stock was converted for each period presented, are:
For the three months ended October 31, 2013
-------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $1,370,000
===========
Basic EPS $1,370,000 5,032,109 $ 0.27
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $1,370,000 5,052,609 $ 0.27
For the six months ended October 31, 2013
-------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $2,024,000
===========
Basic EPS $2,024,000 5,032,976 $ 0.40
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $2,024,000 5,053,476 $ 0.40
For the three months ended October 31, 2012
-------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $ 593,000
===========
Basic EPS $ 593,000 5,037,348 $ 0.12
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $ 593,000 5,057,848 $ 0.12
For the six months ended October 31, 2012
-------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $1,029,000
===========
Basic EPS $1,029,000 5,039,949 $ 0.20
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $1,029,000 5,060,449 $ 0.20
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 the quarter ending
October 31, 2013 and $3,000 were paid during the corresponding quarter the
prior fiscal year. Likewise, the Company paid matching contributions of
approximately $5,000 during the six-month period ending October 31, 2013 and
$6,000 during the six-month period ending October 31, 2012. There were no
discretionary contributions paid during either the quarters or six-month
periods ending October 31, 2013 and 2012, respectively.
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 in-
herent 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 measurements) and the lowest priority to un-
observable inputs (level 3 measurements). The levels of the fair value
hierarchy under US GAAP are described below:
Level 1 - Valuation is based upon quoted prices for identical in-
struments traded in active markets.
Level 2 - Valuation is based upon quoted prices for similar in-
struments in active markets, quoted prices for identical
or similar instruments in markets that are not active,
and model-based valuation techniques for which all sig-
nificant assumptions are observable in the market.
Level 3 - Valuation is generated from model-based techniques that
use significant assumptions not observable in the market.
These unobservable assumptions reflect our own estimates
of assumptions that market participants would use in
pricing the asset or liability. Valuation techniques
include use of option pricing models, discounted cash
flow models and similar techniques.
Marketable Securities
---------------------
As of October 31, 2013, our investments consisted of money markets, publicly
traded equity securities as well as certain state and municipal debt
securities. Our marketable securities are valued using third-party broker
statements. The value of the majority of securities is derived from quoted
market information. The inputs to the valuation are generally classified as
Level 1 given the active market for these securities, however, if an active
market does not exist, which is the case for municipal and coporate bonds,
the inputs are recorded at Level 2.
Fair Value Hierarchy
--------------------
The following tables set forth our assets and liabilities measured at fair
value on a recurring basis and a non-recurring basis by level within the fair
value hierarchy. As required by US GAAP, assets and liabilities are
classified in their entirety based on the lowest level of input that is
significant to the fair value measurement.
Assets Measured at Fair Value on a Recurring Basis
as of October 31, 2013
---------------------------------------------------
Level 1 Level 2 Level 3 Total
------- ------- ------- -------
Assets:
Money Markets $ 2,162,000 $ -- $ -- $ 2,162,000
Equity Securities $14,135,000 $ -- $ -- $14,135,000
Municipal Bonds $ -- $ 6,715,000 $ -- $ 6,715,000
------------ ------------ ---------- ------------
Total fair value of
assets measured on a
recurring basis $16,297,000 $ 6,715,000 $ -- $23,012,000
============ ============ ========== ============
Note 8 Subsequent Events
None
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 2. Management Discussion and Analysis of Financial Condition and
Results of Operations
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
condensed consolidated financial statements, and with the George Risk
Industries' audited financial statements and discussion for the fiscal year
ended April 30, 2013.
Liquidity and capital resources
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Operating
---------
Net cash increased $63,000 for the six months ended October 31, 2013, while,
for the same period last year, net cash decreased $313,000. Accounts re-
ceivable decreased $11,000 for the current six months and decreased $14,000
for the same period last year. The slight decrease in cash flow for accounts
receivable for the current period is a reflection of sales being at the same
level as last year. At October 31, 2013, 74.3% of the receivables were con-
sidered current (less than 45 days) and 0.73% of the total were over 90 days
past due. This is in comparison to having 70.94% of the receivables con-
sidered current and -0.06% over 90 days past due at October 31, 2012. In-
ventory increased $9,000 for the current six months, while it decreased
$95,000 for the same period last year. The main reason for the slight in-
crease in cash expenditures towards inventory is that sales have increased
over last year and prices of raw materials have increased also. Changes in
prepaid expenses in regards to cash flow increased $45,000 for the six
months ending October 31, 2013. Conversely, changes in prepaid expenses in
regards to cash flow decreased by $92,000 for the six-month ending October
31, 2012. Prepayment of raw materials, in order to buy at lower prices, is
the main reason for the current increase in prepaid expenses. Income tax
overpayment decreased by $164,000 for the quarter ending October 31, 2013.
Management has increased tax estimates as a result of increased sales.
For the six months ended October 31, 2013, accounts payable increased
$73,000, and also increased $23,000 for the same period ended October 31,
2012. The change in cash in regards to accounts payable can vary. It really
depends on the time of the month the invoices are due, since the company pays
all invoices within terms. Accrued expenses decreased $46,000 for the six
months ended October 31, 2013, while it increased by $41,000 for the same
period last year. The current decrease is due to having four less days of
payroll accruals.
Investing
---------
As for our investment activities, the Company has spent approximately $45,000
on acquisitions of property and equipment for the current six-month period
and $81,000 was spent during the six months ended October 31, 2012. The
Company has also received proceeds of $127,000 from the sale of assets. The
airplane that was owned by the Company was sold during the second quarter of
the current fiscal year. Additionally, the Company continues to purchase
marketable securities, which include municipal bonds and quality stocks.
Cash spent on purchases of marketable securities for the six months ended
October 31, 2013 was $229,000 and $400,000 was spent for the corresponding
period last year. We use "money manager" accounts for most stock trans-
actions. 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 invest-
ments. Furthermore, the Company continues to purchase back its common stock
when the opportunity arises. For the six months ended October 31, 2013, the
Company purchased $24,000 worth of treasury stock and $28,000 worth was
bought back for the six months ended October 31, 2012. We have been actively
searching for stockholders that have been "lost" over the years. The payment
of dividends over the last nine fiscal years has also prompted many stock-
holders and/or their relatives and descendants to sell back their stock to
the Company. Also, we make purchases of company stock on the open market
when the opportunity arises.
Financing
---------
Cash flows from financing activities decreased by $1,372,000 for the six
months ending October 31, 2013. That figure consists of the payment of
dividends during the second quarter. The company declared a dividend of
$0.30 per share of common stock on September 30, 2013 and these dividends
were paid by October 31, 2013. As for the prior year numbers, net cash used
in financing activities was $1,283,000 for the six months ending October 31,
2012. A dividend of $0.28 per common share was declared and paid during the
second fiscal quarter last year.
The following is a list of ratios to help analyze George Risk Industries'
performance:
For the quarter ended
October 31,
2013 2012
---------------------------
Working capital
(current assets - current liabilities) $ 31,702,000 $ 28,980,000
Current ratio
(current assets / current liabilities) 25.237 23.038
Quick ratio
((cash + investments + AR) / current liabilities)
22.810 21.278
Results of Operations
~~~~~~~~~~~~~~~~~~~~~
Net sales were $2,920,000 for the quarter ended October 31, 2013, which is a
13.66% increase from the corresponding quarter last year. Year-to-date net
sales were $5,590,000 at October 31, 2013, which is a 9.37% increase from the
same period last year. The Company's products are tied to the housing market
and the consistency in sales is a result of the Company focusing on gaining
market share in the industry. The Company is accomplishing this by having
excellent customer service and being willing to make many customized parts.
Cost of goods sold was 44.79% of net sales for the quarter ended October 31,
2013 and 50.17% for the same quarter last year. Year-to-date cost of goods
sold percentages were 46.37% for the current six months and 51.75% for the
corresponding six months last year. Management's goal is to keep labor and
other manufacturing expenses within the range of 45 to 50%.
Operating expenses were 21.16% of net sales for the quarter ended October 31,
2013 as compared to 26.47 % for the corresponding quarter last year. Year-
to-date operating expenses were 22.88% of net sales for the six months ended
October 31, 2013, while they were 26.14% for the same period last year.
Keeping operating expenses around 25% of net sales, as the company has been
able to achieve over the years, shows that management keeps a close eye on
these expenses from year to year. Income from operations for the quarter
ended October 31, 2013 was at $994,000, which is a 65.67% increase from the
corresponding quarter last year, which had income from operations of
$600,000. Income from operations for the six months ended October 31, 2013
was at $1,719,000, which is a 52.12% increase from the corresponding six
months last year, which had income from operations of $1,130,000.
Other income and expenses showed gains of $389,000 and $575,000 for the
quarter and six months ended October 31, 2013, respectively. The other in-
come and expense numbers for last year also showed gains of $263,000 for the
quarter and $328,000 for the six months ending October 31, 2012. Dividend
and interest income was down 13.5% for the current quarter and was down
16.12% for the current six-month period when compared to the same time
periods last year. During the current quarter, there was a $121,000 gain on
investments recorded. Management did not write down any investments during
the quarters ending October 31, 2013 and 2012, respectively.
Net income for the quarter ended October 31, 2013 was at $1,370,000, a
131.03% increase from the corresponding quarter last year, which showed net
income of $593,000. Net income for the six months ended October 31, 2013 was
$2,024,000, a 96.7% increase from the same period last year. Net income for
the six months ended October 31, 2012 was $1,029,000. Earnings per common
share for the quarter ended October 31, 2013 were $0.27 per share and $0.40
per share for the year-to-date numbers. EPS for the quarter and six months
ended October 31, 2012 were $0.12 per share and $0.20 per share,
respectively.
New Product Development
~~~~~~~~~~~~~~~~~~~~~~~
Engineering is currently working on the following products:
The High Security Switch is in final stages of testing prototypes. These
will have go through UL and possibly Department of Defense approval to get
clearance for certain applications.
Due to the obsolescence of parts, our pool alarm will have to be redesigned.
This will require a mold change and we expect these changes to be completed
by the end of the fiscal year.
A brand new product we have been researching is a product we plan to call a
Sprinkler Controller. This is a ground water sensor that can be installed
with a sprinkler system. The controller will monitor the amount of water in
the soil and prevent the sprinkler system from watering if the soil is moist
enough.
Other products we are developing include a twist lock for recessed steel door
contacts, including biased for high security. This variety will allow the
installer to set a precise gap. Another product we have been researching is
a fuel level monitor. Several security companies from around the world have
told us fuel theft is a major problem. They are looking for something that
will tie into the security system to be informed if tanks and trucks are
tampered with.
Molding is working on a different design for the case of our Current Con-
troller (CC-15). This will allow us to manufacture a couple of different
versions. One is a 15-amp version that can automatically turn on a whole
room of lights and the other is a 220-volt version for international markets.
Molding is also working on a new cover design for our 29-series terminal
switch.
Recently Issued Accounting Pronouncements
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
There are no new accounting pronouncements that significantly affect the
Company.
Other Information
~~~~~~~~~~~~~~~~~
Management is always open to the possibility to acquire a business that would
complement our existing operations. This would require no outside financing.
The intent is to utilize the equipment, marketing techniques and established
customers to increase sales and profits.
There are no known seasonal trends with any of our products, since we sell to
distributors and OEM manufacturers. The products are tied to the housing
industry and will fluctuate with building trends.
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 3. Controls and Procedures
(a) Information required by Item 307
Our Chief Executive Officer (also working as our Chief Financial Officer),
after evaluating the effectiveness of the Company's "disclosure controls and
procedures" (as defined in the Securities Exchange Act of 1934 (Exchange Act)
Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this
quarterly report, has concluded that our disclosure controls and procedures
are effective based on their evaluation of these controls and procedures re-
quired by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.
(b) Information required by Item 308
This disclosure is not yet required.
Item 3A. Controls and Procedures
Evaluation of disclosure controls and procedures:
-------------------------------------------------
Based on her evaluation of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of October 31,
2013, our president and chief executive officer (also working as our chief
financial officer) has concluded that our disclosure controls and procedures
are effective such that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is (i) recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and (ii) accumulated and
communicated to our management, including our chief executive officer, as
appropriate to allow timely decisions regarding disclosure. A control system
cannot provide absolute assurance, however, that the objectives of the con-
trol systems are met, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within a
company have been detected.
Internal control over financial reporting:
------------------------------------------
The Company's management is responsible for establishing and maintaining
adequate internal controls over financial reporting for the Company. Due to
limited resources, Management conducted an evaluation of internal controls
based on criteria established in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Com-
mission ("COSO"). The results of this evaluation determined that our inter-
nal control over financial reporting was ineffective as of October 31, 2013,
due to a material weakness. A material weakness in internal control over
financial reporting is defined as a deficiency, or a combination of de-
ficiencies, in internal control over financial reporting, such that there is
a reasonable possibility that a material misstatement of the Company's annual
or interim financial statements will not be prevented or detected on a timely
basis. A significant deficiency is a deficiency, or a combination of de-
ficiencies, in internal control over financial reporting that is less severe
than a material weakness, yet important enough to merit attention by those
responsible for oversight of our financial reporting.
Management's assessment identified the following material weakness in in-
ternal control over financial reporting:
* The small size of our Company limits our ability to achieve the
desired level of separation of internal controls and financial re-
porting, particularly as it relates to financial reporting and de-
ferred taxes. Due to the passing of our CEO, the current CEO and CFO
roles are being fulfilled by the same individual. We do not have an
audit committee. Until such time as the Company is able to hire a
Controller, we do not believe we meet the full requirement for
separation for financial reporting purposes.
As a result of the material weakness in internal control over financial re-
porting described above, the Company's management has concluded that, as of
October 31, 2013, the Company's internal control over financial reporting was
not effective based on the criteria in Internal Control - Integrated Frame-
work issued by the COSO.
To date, the Company has not been able hire a controller. We will continue
to follow the standards for the Public Company Accounting Oversight Board
(United States) for internal control over financial reporting to include
procedures that:
* Pertain to the maintenance of records in reasonable detail accurately
that fairly reflect the transactions and dispositions of the Company's
assets;
* Provide reasonable assurance that transactions are recorded as ne-
cessary to permit preparation of the financial statements in accord-
ance with generally accepted accounting principles, and that receipts
and expenditures are being made only in accordance with authorizations
of management and the Board of Directors; and
* Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the Company's
assets that could have a material effect on the financial statements.
Due to the passing of the CEO during the fiscal year 2013, our internal con-
trol structure has changed such that there is no separation of duties for
financial reporting and deferred taxes, as discussed above.
This quarterly report does not include an attestation report of the Corpor-
ation's registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by
the Corporation's registered public accounting firm pursuant to Section
404(c) of the Sarbanes-Oxley Act of 2002, as amended, that permits the Cor-
poration to provide only the management?s report in this quarterly report.
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 second quarter of fiscal year 2013.
Period Number of shares repurchased
-------------------------------------- ----------------------------
August 1, 2013 - August 31, 2013 1,400
September 1, 2013 - September 30, 2013 200
October 1, 2013 - October 31, 2013 100
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. (Removed and Reserved)
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibit No. Description
----------- -----------
31.1 Certification of the Chief Executive Officer (Principal
Financial and Accounting Officer), as required by Sec-
tion 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the Chief Executive Officer (Principal
Financial and Accounting Officer), as required by Sec-
tion 906 of the Sarbanes-Oxley Act of 2002.
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 12-13-2013 By: /s/ Stephanie M. Risk-McElroy
Stephanie M. Risk-McElroy
President, Chief Financial Officer and
Chariman of the Board