UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report under SectionQUARTERLY REPORT UNDER SECTION 13 or 15(d) of the Securities Ex-
change Act ofOF THE SECURITIES EX-
CHANGE ACT OF 1934
For the quarterquarterly period ended OctoberJanuary 31, 20132014
[ ] Transition report under SectionTRANSITION REPORT UNDER SECTION 13 or 15(d) of the Securities Ex-
change Act ofOF 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, 2013March 17, 2014 was 5,031,925.5,031,225.
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 sixnine month period
ended OctoberJanuary 31, 2013,2014, are attached hereto.
GEORGE RISK INDUSTRIES, INC.
BALANCE SHEETS
OctoberJanuary 31, April 30,
20132014 2013
------------ ------------
(unaudited)
ASSETS
Current Assets:Assets
Cash and cash equivalents $ 4,922,0005,174,000 $ 4,859,000
Investments andMarketable securities 23,012,000(Note 2) 23,071,000 22,208,000
Accounts receivable:
Trade, net of $7,399$8,379 and $4,126
doubtful account allowance 1,901,0001,687,000 1,915,000
Other 1,0000 1,000
Note receivable, current 4,0002,000 5,000
Income tax overpayment 183,000275,000 347,000
Inventories 2,042,000(Note 3) 2,121,000 2,074,000
Prepaid expenses 108,000232,000 60,000
Deferred current income taxes 837,000759,000 635,000
------------ ------------
Total Current Assets $33,010,000$33,321,000 $32,104,000
Property and Equipment, net at cost 669,000$ 632,000 $ 701,000
Other Assets
Investment in Land 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$34,231,000 $33,091,000
============ ============
See accompanying notes to the condensed financial statements.
GEORGE RISK INDUSTRIES, INC.
BALANCE SHEETS
OctoberJanuary 31, April 30,
20132014 2013
------------ ------------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade $ 141,000104,000 $ 68,000
Dividends payable 955,000954,000 817,000
Accrued expenses:expenses
Payroll and relatedother expenses 212,000203,000 259,000
Property taxes 3,000 0
------------ ------------
Total Current Liabilities $ 1,308,0001,264,000 $ 1,144,000
Long-Term Liabilities
Deferred income taxes 90,00082,000 133,000
------------ ------------
Total Long-Term Liabilities $ 90,00082,000 $ 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 998,000903,000 743,000
Retained earnings 32,387,00032,813,000 31,873,000
Treasury stock, 3,470,9063,471,656 and 3,467,356
shares, at cost (3,511,000)(3,516,000) (3,487,000)
------------ ------------
Total Stockholders' Equity $32,559,000$32,885,000 $31,814,000
TOTAL LIABILITESLIABILITIES AND STOCKHOLDERS' EQUITY $33,957,000$34,231,000 $33,091,000
============ ============
See the companyingaccompanying notes to the condensed financial statements.
GEORGE RISK INDUSTRIES, INC.
INCOME STATEMENTS
(unaudited)
Three months SixNine months Three months SixNine months
ended ended ended ended
OctoberJanuary 31, OctoberJanuary 31, OctoberJanuary 31, OctoberJanuary 31,
2014 2014 2013 2013 2012 2012
---------------------------------------------------
Net Sales $ 2,920,0002,480,000 $ 5,590,0008,070,000 $ 2,569,0002,551,000 $ 5,111,0007,662,000
Less: cost of goods sold (1,308,000) (2,592,000) (1,289,000) (2,645,000)(1,169,000) (3,761,000) (1,031,000) (3,676,000)
------------ ------------ ------------ ------------
Gross Profit $ 1,612,0001,311,000 $ 2,998,0004,309,000 $ 1,280,0001,520,000 $ 2,466,0003,986,000
Operating Expenses:
General and
administrative 177,000 361,000 215,000 417,000
Sales 423,000 883,000 433,000 858,000186,000 547,000 200,000 616,000
Selling 469,000 1,352,000 443,000 1,302,000
Engineering 13,000 25,000 21,000 38,00019,000 45,000 20,000 58,000
Rent paid to related
parties 5,000 10,00014,000 11,000 23,00034,000
------------ ------------ ------------ ------------
Total Operating Expenses $ 618,000679,000 $ 1,279,0001,958,000 $ 680,000674,000 $ 1,336,0002,010,000
Income From Operations 994,000 1,719,000 600,000 1.130,000632,000 2,351,000 846,000 1,976,000
Other Income (Expense)
Other 0 2,000 6,000 19,0004,000 (2,000) 17,000
Dividend and interest
income 141,000 307,000 163,000 366,000222,000 529,000 238,000 605,000
Gain (loss) on sale of
investments 121,000 139,000 94,000 (57,000)38,000 176,000 57,000 0
Gain (loss) on sale of
assets 127,0000 127,000 0 0
------------ ------------ ------------ ------------
$ 389,000260,000 $ 575,000836,000 $ 263,000293,000 $ 328,000622,000
Income Before Provisions
for Income Tax 1,383,000 2,294,000 863,000 1,458,000892,000 3,187,000 1,139,000 2,598,000
Provisions for Income Tax
Current expense (413,000) (698,000) (235,000) (456,000)Expense 327,000 1,026,000 330,000 786,000
Deferred tax benefit
(expense) 400,000 428,000 (35,000) 27,000expense
(benefit) 138,000 (290,000) 19,000 (7,000)
------------ ------------ ------------ ------------
Total Income Tax Expense $ (13,000) $ (270,000) $ (270,000) $ (429,000)465,000 736,000 349,000 779,000
Net Income $ 1,370,000427,000 $ 2,024,0002,451,000 $ 593,000790,000 $ 1,029,0001,819,000
============ ============ ============ ============
Cash Dividends
Common Stock ($0.30
per share) $(1,510,000) $(1,510,000)0 (1,510,000)
Common Stock ($0.280.50
per share) $(1,411,000) $(1,411,000)(2,519,000)
Common Stock ($0.22
per share) (1,108,000)
Income Per Share of Common Stock:Stock (Note 5):
Basic $0.27 $0.40 $0.12 $0.20
Assuming Dilution $0.27 $0.40 $0.12 $0.20$0.08 $0.49 $0.16 $0.36
Diluted $0.08 $0.49 $0.16 $0.36
Weighted Average Number of
Common Shares Outstanding:
Basic 5,032,109 5,032,976 5,037,348 5,039,9495,031,689 5,032,547 5,035,851 5,038,583
Diluted 5,052,189 5,053,047 5,056,351 5,059,083
See the accompanying notes to the condensed financial statements.
GEORGE RISK INDUSTRIES, INC.
STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
Three months SixNine months Three months SixNine months
ended ended ended ended
OctoberJanuary 31, OctoberJanuary 31, OctoberJanuary 31, OctoberJanuary 31,
2014 2014 2013 2013 2012 2012
----------------------------------------------------
Net Income $ 1,370,000427,000 $ 2,024,0002,451,000 $ 593,000790,000 $ 1,029,0001,819,000
------------ ------------ ------------ ------------
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)(121,000) 411,000 488,000 340,000
Reclassification adjustment
for gains (losses) included
in net income (102,000) (94,000) (96,000) 458,000(gains) losses (42,000) (136,000) (35,000) 430,000
Income tax benefit (expense)expense related
to other com-
prehensivecomprehensive
income (194,000) (183,000) (91,000) (132,000)68,000 (115,000) (189,000) (322,000)
------------ ------------ ------------ ------------
Other Comprehensive
Income $ 269,000(95,000) $ 255,000160,000 $ 126,000264,000 $ 184,000448,000
Comprehensive Income $ 1,639,000332,000 $ 2,279,0002,611,000 $ 719,0001,054,000 $ 1,213,0002,267,000
============ ============ ============ ============
See accompanying notes to the condensed financial statements.
GEORGE RISK INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
SixNine months SixNine months
ended ended
OctoberJanuary 31, OctoberJanuary 31,
2014 2013
2012
-------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,024,0002,451,000 $ 1,029,0001,819,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 76,000 86,000114,000 128,000
(Gain) loss on sale of investments (139,000) 57,000(176,000) 0
(Gain) loss on salessale of assets (127,000) 0
Reserve for bad debts 3,0004,000 (4,000)
Reserve for obsolete inventory 40,000 (3,000)20,000 (1,000)
Deferred income taxes (428,000) (27,000)(290,000) (7,000)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 11,000 14,000224,000 (2,000)
Inventories (9,000) 95,000(67,000) 35,000
Prepaid expenses (45,000) 92,000(160,000) 71,000
Employee receivables 1,000 0
Income tax overpayment 164,000 072,000 (407,000)
Increase (decrease) in:
Accounts payable 73,000 23,00036,000 (10,000)
Accrued expenses (46,000) 41,000
Income tax payable 0 (20,000)(53,000) 106,000
------------ ------------
Net cash provided by (used in) operating
activities $ 1,597,0002,049,000 $ 1,383,0001,728,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Other assets manufactured 4,000 15,000(6,000) 8,000
Proceeds from sale of assets 127,000 0
(Purchase) of property and property/equipment (45,000) (81,000)(47,000) (95,000)
Proceeds from sale of marketable securities 2,000 78,0004,000 79,000
(Purchase) of marketable securities (229,000) (400,000)(415,000) (604,000)
Collections of loans to employees 5,000 3,000 3,000
(Purchase) of treasury stock (24,000) (28,000)
------------ ------------
Net cash provided by (used in) investing
activities $ (162,000)(332,000) $ (413,000)(609,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (1,372,000) (1,283,000)(1,373,000) (2,290,000)
(Purchase) of treasury stock (29,000) (36,000)
------------ ------------
Net cash provided by (used in) financing
activities $(1,372,000) $(1,283,000)$(1,402,000) $(2,326,000)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 63,000 $ (313,000)315,000 $(1,207,000)
Cash and cash equivalents, beginning of
period $ 4,859,000 $ 5,773,000
------------ ------------
Cash and cash equivalents, end of period $ 4,922,0005,174,000 $ 5,460,0004,566,000
============ ============
Supplemental Disclosure of Cash Flow
Information
Cash payments for:
Income taxes $ 530,0001,163,000 $ 473,0001,207,000
Interest expense $ 8,000 $ 02,000
Cash receipts for:
Income taxes $ 0 $ 0233,000 19,000
See accompanying notes to the condensed financial statements.
GEORGE RISK INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBERJANUARY 31, 20132014
Note 1 Unaudited Interim Financial Statements
The accompanying unaudited 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 principlesprin-
ciples in the United States of America (US GAAP) for com-
pletecomplete financial
statements. It is suggested that these condensedThese financial statements should be read in conjunction with
the financial statements and notes thereto includedcontained in the Company's April 30, 2013company's annual report
on Form 10-K.10-K for the year ended April 30, 2013. In the opinion of management,manage-
ment, all adjustments, consisting only of normal re-
curringrecurring adjustments consideredcon-
sidered 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. We have evaluated subsequent events
through March 17, 2014, the issuance date of these financial statements. The
Company did not have any material, recognizable subsequent events.
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 2013March 2014 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.stockholders'equity.
Dividend and interest in-
comeincome are accrued as earned.
As of OctoberJanuary 31, 2013,2014, investments available-for-sale consisted of the
following:
Gross Gross
Cost Unrealized Unrealized Fair
Basis Gains Losses Value
------------ ------------ ------------ ------------
Municipal bonds $ 6,666,0006,619,000 $ 122,000150,000 $ (73,000)(80,000) $ 6,715,000
REITs6,689,000
Corporate bonds $ 57,00030,000 $ 3,0000 $ (1,000) $ 59,00029,000
Equity securities $12,413,000$12,565,000 $ 1,780,0001,696,000 $ (117,000) $14,076,000(217,000) $14,044,000
REITs $ 56,000 $ 5,000 $ (2,000) $ 59,000
Money markets/markets and CDs $ 2,162,0002,250,000 $ --0 $ --0 $ 2,162,0002,250,000
------------ ------------ ------------ ------------
Total $21,298,000$21,520,000 $ 1,905,0001,851,000 $ (191,000) $23,012,000(300,000) $23,071,000
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-
pairmentimpairment losses for the quarter ended OctoberJanuary 31, 2013,2014, but did record im-
pairment losses of $18,000 for the sixnine months ended OctoberJanuary 31, 2013.2014. Like-
wise, as for the corresponding periods last year, management did not record
any impairment losses for the quarter ended OctoberJanaury 31, 2012,2013, but did record
impairment losses of $20,000 for the sixnine months ended OctoberJanuary 31, 2012.2013.
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 OctoberJanuary 31, 2013.2014.
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$1,992,000 $ (49,000)(50,000) $ 511,000622,000 $ (23,000)(30,000) $2,614,000 $ 3,273,000(80,000)
Corporate bonds
$ (72,000)
REITs
$ 27,00030,000 $ (1,000) $ --0 $ --0 $ 27,00030,000 $ (1,000)
Equity securities
$1,986,000$3,378,000 $ (88,000)(189,000) $ 146,000219,000 $ (30,000)(28,000) $3,597,000 $ 2,132,000(217,000)
REITs
$ (118,000)
----------- ------------ ----------- ---------- ------------ ------------26,000 $ (2,000) $ 0 $ 0 $ 26,000 $ (2,000)
Total
$4,775,000$5,426,000 $ (138,000)(242,000) $ 657,000841,000 $ (53,000)(58,000) $6,267,000 $ 5,432,000 $ (191,000)(300,000)
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 OctoberJanuary 31, 2013.2014.
Corporate Bonds
---------------
The Company's unrealized loss on investments in corporate bonds relates to
one bond. The contractual term of this investment does not permit the issuer
to settle the security at a price less than the amortized cost of the invest-
ment. Because the Company has the ability to hold this investment until a
recovery of fair value, which may be maturity, the Company does not consider
this investment to be other-than-temporarily impaired at January 31, 2014.
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 hasThe individual holdings have been
evaluated, and due to management's plan to hold onto these investments for an
extended period, the in-
dividual holdings, and because of the recent decline in the stock market,Company does not consider these investments to be other-than-temporarilyother-
than-temporarily impaired at OctoberJanuary 31, 2013.2014.
Note 3 Inventories
At OctoberJanuary 31, 2013,2014, inventories consisted of the following:
Raw Materialsmaterials $ 1,471,0001,507,000
Work in Process 455,000process 465,000
Finished Goods 321,000goods 333,000
------------
$ 2,247,0002,305,000
Less: allowance for obsolete inventory (205,000)(184,000)
------------
Net InventoriesTotals $ 2,042,000
============2,121,000
Note 4 Business Segments
The following is financial information relating to industry segments:
For the quarter ended
OctoberJanuary 31,
2014 2013 2012
---------------------------
Net revenue:
Security alarm products 2,494,000 2,246,0001,955,000 2,211,000
Other products 426,000 323,000525,000 340,000
------------ ------------
Total net revenue $ 2,920,0002,480,000 $ 2,569,0002,551,000
Income from operations:
Security alarm products 849,000 525,000498,000 730,000
Other products 145,000 75,000134,000 116,000
------------ ------------
Total income from operations $ 994,000632,000 $ 600,000846,000
Identifiable assets:
Security alarm products 3,690,000 3,400,0003,028,000 3,508,000
Other products 804,000 1,234,0001,297,000 1,163,000
Corporate general 29,463,000 26,688,00029,906,000 26,701,000
------------ ------------
Total assets $33,957,000 $31,322,000$34,231,000 $31,372,000
Depreciation and amortization:
Security alarm products 4,000 6,000
Other products 29,000 34,00033,000
Corporate general 5,000 4,000
------------ ------------
Total depreciation and amortization $ 38,000 $ 44,00043,000
Capital expenditures:
Security alarm products 3,000 11,0000 0
Other products 20,000 34,0000 2,000
Corporate general 0 02,000 12,000
------------ ------------
Total capital expenditures $ 23,0002,000 $ 45,00014,000
Note 5 Earnings per Share
Basic and diluted earningearnings per share, assuming convertible preferred
stock was converted for each period presented, are:
For the three months ended OctoberJanuary 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, 20122014
-------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $ 593,000427,000
===========
Basic EPS $ 593,000 5,037,348427,000 5,031,689 $ 0.120.084
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $ 593,000 5,057,848427,000 5,052,189 $ 0.120.084
For the sixnine months ended OctoberJanuary 31, 20122014
-------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $1,029,000$2,451,000
===========
Basic EPS $1,029,000 5,039,949$2,451,000 5,032,547 $ 0.200.487
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $1,029,000 5,060,449$2,451,000 5,053,047 $ 0.200.485
For the three months ended January 31, 2013
--------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $ 790,000
===========
Basic EPS $ 790,000 5,035,851 $ 0.157
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $ 790,000 5,056,351 $ 0.156
For the nine months ended January 31, 2013
--------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $1,819,000
===========
Basic EPS $1,819,000 5,038,583 $ 0.361
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $1,819,000 5,059,083 $ 0.360
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
OctoberJanuary 31, 20132014 and $3,000 were paid during the corresponding quarter the
prior fiscal year. Likewise, the Company paid matching contributions
of approximately $5,000$7,000 during the six-monthnine-month period ending OctoberJanuary 31, 20132014
and $6,000$9,000 during the six-monthnine-month period ending OctoberJanuary 31, 2012.2013. There were
no discretionary contributions paid during either the quarters or six-monthnine-month
periods ending OctoberJanuary 31, 20132014 and 2012,2013, 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-
herentinherent 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.
Investments and Marketable Securities
----------------------------------------------------------
As of OctoberJanuary 31, 2013,2014, our investments consisted of money markets, publicly
traded equity securities, a corporate bond as well as certain state and
municipal debt
securities.debtvsecurities. Our marketable securities are valued using
third-party broker statements. The value of the majority of the 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 atas 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 OctoberJanuary 31, 20132014
---------------------------------------------------
Level 1 Level 2 Level 3 Total
------- ------- ------- -------
Assets:
Money Markets and CDs $ 2,162,0002,250,000 $ --0 $ --0 $ 2,162,0002,250,000
Equity Securities $14,135,000$14,103,000 $ --0 $ -- $14,135,0000 $14,103,000
Municipal and Corporate
Bonds $ --0 $ 6,715,0006,718,000 $ --0 $ 6,715,0006,718,000
------------ ------------ ---------- ------------
Total fair value of
assets measured on a
recurring basis $16,297,000$16,353,000 $ 6,715,0006,718,000 $ -- $23,012,000
============ ============ ========== ============0 $23,071,000
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 condensedcon-
densed 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$315,000 for the sixnine months ended OctoberJanuary 31, 2013,2014,
while, for the same period last year, net cash decreased $313,000.$1,207,000.
Accounts re-
ceivablereceivable decreased $11,000$224,000 for the current sixnine months and decreased $14,000in-
creased $2,000 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.able to
collect on accounts in a timelier manner and collecting on past due items.
At OctoberJanuary 31, 2013, 74.3%2014, 70.16% of the receivables were con-
sideredconsidered current (less
than 45 days) and 0.73%0.6% of the total were over 90 days past due. This is in comparison to having 70.94%For com-
parison, 71.09% of the receivables con-
sideredwere current and -0.06% over0.32% were past 90 days
past due at OctoberJanuary 31, 2012. In-
ventory2013. Inventories increased $9,000$67,000 for the current sixnine
months, while itand decreased $95,000$35,000 for the same period last year. The main reason for the slightcurrent in-
crease is due to the increase in cash expenditures towards inventory is that sales have increased
over last year and the prices of raw materials have increased also.rising
slightly. Changes in prepaid expenses in regards to cash flow increased $45,000by
$160,000 and decreased by $71,000 for the six
monthsnine-month periods ending OctoberJanuary
31, 2013. Conversely, changes in prepaid expenses in
regards2014 and 2013, respectively. The large increase is due to cash flow decreased by $92,000prepayment of
inventory from overseas and down payments on molds being developed 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.Company. Income tax overpayment decreased by $164,000$72,000 for the quarternine months ending
OctoberJanuary 31, 2013.2014, while it increased $407,000 for the corresponding period
last year. Management has increasedhad to increase income tax estimates as a result of increased sales.since the prior
year taxes were underpaid and the prior year refund was received.
For the sixnine months ended OctoberJanuary 31, 2013,2014, accounts payable increased
$73,000,$36,000, and also increased $23,000decreased $10,000 for the same period ended OctoberJanuary 31, 2012.2013.
The change in cash in regards to accounts payable can vary. It really dependsde-
pends on the time of the month the invoices are due, since the company pays
all its invoices within the terms. Accrued expenses decreased $46,000$53,000 for
the sixnine months ended OctoberJanuary 31, 2013, while it2014, and these expenses increased by $41,000$106,000
for the same
periodcorresponding nine months last year. The current decrease is due to having foura re-
sult of when the payroll pay date landed this year. There were nine less
days of
payroll accruals.being accrued this year.
Investing
---------
As for our investment activities, the Company has spent approximately $45,000$47,000
on acquisitions of property and equipment for the current six-monthnine-month period
and $81,000$95,000 was spent during the sixnine months ended OctoberJanuary 31, 2012.2013. The
Company has also received proceeds of $127,000 from the sale of assets.an asset.
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 corporate and municipal bonds and
quality stocks. Cash spent on purchases of marketable securities for the
sixnine months ended OctoberJanuary 31, 20132014 was $229,000$415,000 and $400,000$604,000 was spent for
the corresponding period last year. In addition, proceeds from the sale of
marketable securities for the nine months ended January 31, 2014 were $4,000
and $79,000 for the same period last year. We use "money manager" accounts
for most stock trans-
actions.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 invest-
ments. Furthermore,investments.
Financing
---------
During the nine months ending Janaury 31, 2014, 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 backspent $1,373,000
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 sixpayment of dividends was $2,290,000 for the nine months ending
OctoberJanuary 31, 2012. A dividend2013. Two dividends of $0.28 and $0.22 per common share was declaredwere de-
clared and paid during the second and third quarters last fiscal quarteryear,
respectively. Furthermore, the Company continues to purchase back its common
stock when the opportunity arises. For the nine months ended January 31,
2014, the Company purchased $29,000 worth of treasury stock and $36,000 worth
was bought back for the nine months ended January 31, 2013. We have been
actively searching for stockholders that have been "lost" over the years.
The payment of dividends over the last year.nine fiscal years has also prompted
many stockholders and/or their relatives and descendants to sell back their
stock to the Company.
The following is a list of ratios to help analyze George Risk Industries'
performance:
For the quarter ended
OctoberJanuary 31,
2014 2013 2012
---------------------------
Working capital
(current assets - current liabilities) $ 31,702,00032,057,000 $ 28,980,00028,934,000
Current ratio
(current assets / current liabilities) 25.237 23.03826.362 21.205
Quick ratio
((cash + investments +investments+ AR) / current
liabilities) 22.810 21.27823.680 19.425
Results of Operationsoperations
~~~~~~~~~~~~~~~~~~~~~
Net sales were $2,920,000$2,480,000 for the quarter ended OctoberJanuary 31, 2013,2014, which is a
13.66% increase2.78% decrease from the corresponding quarter last year. Year-to-date net
sales at January 31, 2014 were $5,590,000 at October 31, 2013,$8,070,000, which is a 9.37%5.32% increase from the
same period last year. The Company's products are tied to the housing market
and the consistencyslight gain 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%47.14% of net sales for the quarter ended OctoberJanuary 31,
20132014 and 50.17%40.42% for the same quarter last year. Year-to-date cost of goods
sold percentages were 46.37%46.6% for the current sixnine months and 51.75%47.98% for the
corresponding sixnine months last year. Management's goal isManagement continues to keep labor and
other manufacturing expenses withindown and strives to stay in the desired cost of
goods sold percentage range of 45 to 50%.
Operating expenses were 21.16%27.38% of net sales for the quarter ended OctoberJanuary 31,
20132014 as compared to 26.47 %26.42% for the corresponding quarter last year. Year-
to-dateYear-to-
date operating expenses were 22.88%24.26% of net sales for the sixnine months ended
OctoberJanuary 31, 2013,2014, while they were 26.14%26.23% for the same period last year.
KeepingHaving relatively the same percentages for operating expenses around 25% of net sales, as the company has been
able to achieve over the years, shows that
management keepshas a close eyegood grip on these expenses from year to year.spending habits. Income from operations for
the quarter ended OctoberJanuary 31, 20132014 was at $994,000,$632,000, which is a 65.67% increase25.3% decrease
from the corresponding quarter last year, which had income from operations of
$600,000.$846,000. Income from operations for the sixnine months ended OctoberJanuary 31, 20132014
was at $1,719,000,$2,351,000, which is a 52.12%an 18.98% increase from the corresponding sixnine
months last year, which had income from operations of $1,130,000.$1,976,000.
Other income and expenses showed gains of $389,000$260,000 and $575,000$836,000 for the
quarter and sixnine months ended OctoberJanuary 31, 2013, respectively.2014. The other in-
comeincome and expense
numbers for last year also showed gains of $263,000$293,000 for the quarter and
$328,000$622,000 for the six monthsnine-months ending OctoberJanuary 31, 2012.2013. Dividend and interest
income was down 13.5%6.72% for the current quarter and was down 16.12%12.56% for the current
six-monthnine-month period when comparedcomparing to the same time periods last year. During
the current quarter, there was a $121,000$38,000 gain on investments recorded.recorded and a
gain of $176,000 for the current year to date figures. Management did not
write down any investments during the quarters ending OctoberJanuary 31, 20132014 and
2012,2013, respectively.
Net income for the quarter ended OctoberJanuary 31, 20132014 was at $1,370,000,$427,000, which is a
131.03% increase45.95% decrease from the corresponding quarter last year, which showed a net
incomegain of $593,000.$790,000. Net income for the sixnine months ended OctoberJanuary 31, 20132014 was
$2,024,000,$2,451,000, a 96.7%34.74% increase from the same period last year. Net income for
the sixnine months ended OctoberJanuary 31, 20122013 was $1,029,000.$1,819,000. Earnings per common
share for the quarter ended OctoberJanuary 31, 2013 were $0.272014 was $0.08 per share and $0.40$0.49
per share for the year-to-date numbers. EPS for the quarter and sixnine months
ended OctoberJanuary 31, 2012 were $0.122013 was $0.16 per share and $0.20$0.36 per share, respectively.
New Product Developmentproduct information
~~~~~~~~~~~~~~~~~~~~~~~
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 ofobsolete component parts, our pool alarm will have to be redesigned.
This will require mold changes that are nearing completion. Management is
working with a mold changeconsultant who is helping with the development of a wireless
pool alarm.
Molding is working on a CC-15 case for our Current Controller. This will
allow us to manufacture a couple of different versions: a 15-amp version that
would automatically turn on a whole room of lights and we expect these changes to be completed
bya 220-volt version for
international markets.
Molding is developing a new design for the endcover of our 29-Series terminal
switch.
Progress continues on the fiscal year.
A brand new product wefuel level monitor. Several security companies
from around the world have been researchingtold us fuel theft is a product we plan to callmajor problem and they are
looking for something that will tie into their security system if fuel tanks
or trucks are tampered with.
Engineering continues working on 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.has enough moisture.
Recently Issued Accounting Pronouncementsissued 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 OctoberJanuary 31,
2013,2014, 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 reportsre-
ports that we file or submit under the Exchange Act is (i) recorded, processed,pro-
cessed, summarized and reported within the time periods specified in the SecuritiesSec-
urities 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-
trolcontrol 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.de-
tected.
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-
missionCommission ("COSO"). The results of this evaluation determined that our inter-
nalin-
ternal control over financial reporting was ineffective as of OctoberJanuary 31,
2013,2014, 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,deficiencies, 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,deficiencies, 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-
ferreddeferred 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
OctoberJanuary 31, 2013,2014, 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-
cessarynecessary to permit preparation of the financial statements in
accord-
anceaccordance 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 detectionde-
tection 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?smanagement'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 secondthird quarter of fiscal year 2013.2014.
Period Number of shares repurchased
-------------------------------------- ----------------------------
AugustNovember 1, 2013 - August 31,November 30, 2013 1,400
September50
December 1, 2013 - September 30, 2013 200
October 1, 2013 - OctoberDecember 31, 2013 1000
January 1, 2014 - January 31, 2014 700
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. (Removed and Reserved)Submission of Matters to a Vote of Securities
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 AccountingAccouting Officer), as required by Sec-
tionSection
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-
tionSection
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 12-13-201303-17-2014 By: /s/ Stephanie M. Risk-McElroy
Stephanie M. Risk-McElroy
President, Chief Financial Officer and CharimanChairman
of the Board