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 Exchange Act of 1934
[X] | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarter ended JanuaryJuly 31, 2017
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934
[ ] | Transition report under 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 small business issuer as specified in its charter)
Colorado | 84-0524756 | |
(State of incorporation) | (IRS Employers Identification No.) |
802 South Elm | ||
Kimball, NE | 69145 | |
(Address of principal executive offices) | (Zip Code) |
(308) 235-4645
(Registrant’s telephone number, including area code)
CheckIndicate by check mark whether the issuerregistrant (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][ X ] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [ ] No [X][ X ]
Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] | ||
Non-accelerated filer [ ] | Smaller reporting 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][ X ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of the Registrant’s Common Stock outstanding, as of March 16,September 19, 2017 was 4,945,425.4,944,950.
Transitional Small Business Disclosure Format: Yes [X][ X ] No [ ]
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 1.ITEM 1: Financial Statements
The unaudited financial statements for the three and nine monththree-month period ended JanuaryJuly 31, 2017, are attached hereto.
George Risk Industries, Inc.
GEORGE RISK INDUSTRIES, INC.
CONDENSED BALANCE SHEETSCondensed Balance Sheets
January 31, 2017 | April 30, 2016 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 5,998,000 | $ | 5,918,000 | ||||
Investments and securities | 25,456,000 | 24,530,000 | ||||||
Accounts receivable: | ||||||||
Trade, net of $261 and $74 doubtful account allowance | 1,749,000 | 1,912,000 | ||||||
Other | 6,000 | — | ||||||
Income tax overpayment | 242,000 | 199,000 | ||||||
Inventories | 2,533,000 | 2,964,000 | ||||||
Prepaid expense | 162,000 | 68,000 | ||||||
Total Current Assets | $ | 36,146,000 | $ | 35,591,000 | ||||
Property and Equipment, net, at cost | 763,000 | 756,000 | ||||||
Other Assets | ||||||||
Investment in Limited Land Partnership, at cost | 273,000 | 253,000 | ||||||
Projects in process | 23,000 | 68,000 | ||||||
Total Other Assets | $ | 296,000 | $ | 321,000 | ||||
TOTAL ASSETS | $ | 37,205,000 | $ | 36,668,000 |
See accompanying notes to the condensed financial statements.
GEORGE RISK INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
(continued)
January 31, 2017 | April 30, 2016 | |||||||
(unaudited) | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable, trade | $ | 51,000 | $ | 31,000 | ||||
Dividends payable | 1,417,000 | 1,255,000 | ||||||
Accrued expenses: | ||||||||
Payroll and related expenses | 246,000 | 320,000 | ||||||
Property taxes | 2,000 | — | ||||||
Deferred income taxes | 389,000 | 87,000 | ||||||
Total Current Liabilities | $ | 2,105,000 | $ | 1,693,000 | ||||
Long-Term Liabilities | ||||||||
Deferred income taxes | 161,000 | 191,000 | ||||||
Total Long-Term Liabilities | $ | 161,000 | $ | 191,000 | ||||
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 | 759,000 | 347,000 | ||||||
Retained earnings | 35,631,000 | 35,337,000 | ||||||
Less: treasury stock, 3,557,156 and 3,481,021 shares, at cost | (4,136,000 | ) | (3,585,000 | ) | ||||
Total Stockholders’ Equity | $ | 34,939,000 | $ | 34,784,000 | ||||
TOTAL LIABILITES AND STOCKHOLDERS’ EQUITY | $ | 37,205,000 | $ | 36,668,000 |
July 31, 2017 | April 30, 2017 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 6,998,000 | $ | 6,456,000 | ||||
Investments and securities, at fair value | 27,111,000 | 26,382,000 | ||||||
Accounts receivable: | ||||||||
Trade, net of $2,425 and $2,425 doubtful account allowance | 1,590,000 | 1,848,000 | ||||||
Other | 2,000 | 3,000 | ||||||
Income tax overpayment | 46,000 | 253,000 | ||||||
Inventories, net | 2,366,000 | 2,304,000 | ||||||
Prepaid expenses | 129,000 | 193,000 | ||||||
Total Current Assets | $ | 38,242,000 | $ | 37,439,000 | ||||
Property and Equipment, net, at cost | 908,000 | 739,000 | ||||||
Other Assets | ||||||||
Investment in Limited Land Partnership, at cost | 273,000 | 273,000 | ||||||
Projects in process | 56,000 | 13,000 | ||||||
Other | 1,000 | - | ||||||
Total Other Assets | $ | 330,000 | $ | 286,000 | ||||
TOTAL ASSETS | $ | 39,480,000 | $ | 38,464,000 |
See accompanying notes to the condensed financial statements
George Risk Industries, Inc.
GEORGE RISK INDUSTRIES, INC.
CONDENSED INCOME STATEMENTS (Unaudited)Condensed Balance Sheets
Three months | Nine months | Three months | Nine months | |||||||||||||
ended | ended | ended | ended | |||||||||||||
Jan 31, 2017 | Jan 31, 2017 | Jan 31, 2016 | Jan 31, 2016 | |||||||||||||
Net Sales | $ | 2,645,000 | $ | 8,194,000 | $ | 2,680,000 | $ | 8,310,000 | ||||||||
Less: Cost of Goods Sold | (1,229,000 | ) | (3,899,000 | ) | (1,316,000 | ) | (3,864,000 | ) | ||||||||
Gross Profit | $ | 1,416,000 | $ | 4,295,000 | $ | 1,364,000 | $ | 4,446,000 | ||||||||
Operating Expenses | ||||||||||||||||
General and Administrative | 223,000 | 664,000 | 227,000 | 643,000 | ||||||||||||
Sales | 461,000 | 1,432,000 | 448,000 | 1,428,000 | ||||||||||||
Engineering | 17,000 | 59,000 | 31,000 | 68,000 | ||||||||||||
Rent Paid to Related Parties | 5,000 | 14,000 | 4,000 | 14,000 | ||||||||||||
Total Operating Expenses | $ | 706,000 | $ | 2,169,000 | $ | 710,000 | $ | 2,153,000 | ||||||||
Income From Operations | 710,000 | 2,126,000 | 654,000 | 2,293,000 | ||||||||||||
Other Income (Expense) | ||||||||||||||||
Other | 1,000 | 11,000 | 5,000 | 13,000 | ||||||||||||
Dividend and Interest Income | 332,000 | 650,000 | 437,000 | 746,000 | ||||||||||||
Gain (Loss) on Investments | 51,000 | 136,000 | (242,000 | ) | (288,000 | ) | ||||||||||
$ | 384,000 | $ | 797,000 | $ | 200,000 | $ | 471,000 | |||||||||
Income Before Provisions for Income Taxes | 1,094,000 | 2,923,000 | 854,000 | 2,764,000 | ||||||||||||
Provisions for Income Taxes: | ||||||||||||||||
Current Expense | 313,000 | 896,000 | 231,000 | 857,000 | ||||||||||||
Deferred Tax Expense (Benefit) | (11,000 | ) | (24,000 | ) | (12,000 | ) | (23,000 | ) | ||||||||
Total Income Tax Expense | $ | 302,000 | $ | 872,000 | $ | 219,000 | $ | 834,000 | ||||||||
Net Income | $ | 792,000 | $ | 2,051,000 | $ | 635,000 | $ | 1,930,000 | ||||||||
Cash Dividends | ||||||||||||||||
Common Stock ($0.35 per share) | $ | — | $ | 1,758,000 | ||||||||||||
Common Stock ($0.34 per share) | $ | — | $ | 1,709,000 | ||||||||||||
Income Per Share of Common Stock | ||||||||||||||||
Basic | $ | 0.16 | $ | 0.41 | $ | 0.13 | $ | 0.38 | ||||||||
Diluted | $ | 0.16 | $ | 0.41 | $ | 0.13 | $ | 0.38 | ||||||||
Weighted Average Number of Common Shares Outstanding | | | | | | | | | | | | | | | | |
Basic | 4,945,972 | 4,996,453 | 5,024,103 | 5,024,954 | ||||||||||||
Diluted | 4,966,472 | 5,016,953 | 5,044,603 | 5,045,454 |
July 31, 2017 | April 30, 2017 | |||||||
(unaudited) | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable, trade | $ | 181,000 | $ | 69,000 | ||||
Dividends payable | 1,416,000 | 1,416,000 | ||||||
Accrued expenses: | ||||||||
Payroll and related expenses | 140,000 | 308,000 | ||||||
Property taxes | 5,000 | - | ||||||
Total Current Liabilities | $ | 1,742,000 | $ | 1,793,000 | ||||
Long-Term Liabilities | ||||||||
Deferred income taxes | 1,141,000 | 906,000 | ||||||
Total Long-Term Liabilities | $ | 1,141,000 | $ | 906,000 | ||||
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 | 1,736,000 | 1,736,000 | ||||||
Accumulated other comprehensive income | 1,555,000 | 1,239,000 | ||||||
Retained earnings | 36,499,000 | 35,981,000 | ||||||
Less: treasury stock, 3,557,931 and 3,557,606 shares, at cost | (4,142,000 | ) | (4,140,000 | ) | ||||
Total Stockholders’ Equity | $ | 36,597,000 | $ | 35,765,000 | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 39,480,000 | $ | 38,464,000 |
See accompanying notes to the condensed financial statements
George Risk Industries, Inc.
Condensed Income Statements
GEORGE RISK INDUSTRIES, INC.
CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)For the three months ended July 31, 2017 and 2016
Three months | Nine months | Three months | Nine months | |||||||||||||
ended | ended | ended | ended | |||||||||||||
Jan 31, 2017 | Jan 31, 2017 | Jan 31, 2016 | Jan 31, 2016 | |||||||||||||
Net Income | $ | 792,000 | $ | 2,051,000 | $ | 635,000 | $ | 1,930,000 | ||||||||
Other Comprehensive Income, Net of Tax Unrealized gain (loss) on securities: | ||||||||||||||||
Unrealized holding gains (losses) arising during period | 570,000 | 796,000 | (1,385,000 | ) | (2,503,000 | ) | ||||||||||
Reclassification adjustment for gains(losses) included in net income | (5,000 | ) | (88,000 | ) | 144,000 | 274,000 | ||||||||||
Income tax benefit (expense) relatedto other comprehensive income | (236,000 | ) | (296,000 | ) | 519,000 | 932,000 | ||||||||||
Other Comprehensive Income | 329,000 | 412,000 | (722,000 | ) | (1,297,000 | ) | ||||||||||
Comprehensive Income | $ | 1,121,000 | $ | 2,463,000 | $ | (87,000 | ) | $ | 633,000 |
July 31, 2017 | July 31, 2016 | |||||||
(unaudited) | (unaudited) | |||||||
Net Sales | $ | 2,248,000 | $ | 2,666,000 | ||||
Less: Cost of Goods Sold | (1,095,000 | ) | (1,386,000 | ) | ||||
Gross Profit | $ | 1,153,000 | $ | 1,280,000 | ||||
Operating Expenses: | ||||||||
General and Administrative | 229,000 | 211,000 | ||||||
Sales | 416,000 | 484,000 | ||||||
Engineering | 13,000 | 18,000 | ||||||
Rent Paid to Related Parties | 5,000 | 5,000 | ||||||
Total Operating Expenses | $ | 663,000 | $ | 718,000 | ||||
Income From Operations | 490,000 | 562,000 | ||||||
Other Income (Expense) | ||||||||
Other | 3,000 | 3,000 | ||||||
Dividend and Interest Income | 279,000 | 192,000 | ||||||
Gain (Loss) on Sales of Assets | 4,000 | - | ||||||
Gain (Loss) on Sale of Investments | (38,000 | ) | 47,000 | |||||
$ | 248,000 | $ | 242,000 | |||||
Income Before Provisions for Income Taxes | 738,000 | 804,000 | ||||||
Provisions for Income Taxes | ||||||||
Current Expense | 213,000 | 258,000 | ||||||
Deferred tax expense (benefit) | 7,000 | (21,000 | ) | |||||
Total Income Tax Expense | 220,000 | 237,000 | ||||||
Net Income | $ | 518,000 | $ | 567,000 | ||||
Basic Earnings Per Share of Common Stock | $ | 0.10 | $ | 0.11 | ||||
Diluted Earnings Per Share of Common Stock | $ | 0.10 | $ | 0.11 | ||||
Weighted Average Number of Common Shares Outstanding | 4,945,092 | 5,021,727 | ||||||
Weighted Average Number of Shares Outstanding (Diluted) | 4,965,592 | 5,042,227 |
See accompanying notes to the condensed financial statements
George Risk Industries, Inc.
GEORGE RISK INDUSTRIES, INC.Condensed Statements of Comprehensive Income
CONDENSED STATEMENT OF CASH FLOWS (Unaudited)For the three months ended July 31, 2017 and 2016
Nine months | Nine months | |||||||
ended | ended | |||||||
Jan 31, 2017 | Jan 31, 2016 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Income | $ | 2,051,000 | $ | 1,930,000 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 138,000 | 187,000 | ||||||
(Gain) loss on sale of investments | (149,000 | ) | 219,000 | |||||
Impairments on investments | 13,000 | 69,000 | ||||||
Reserve for bad debts | — | 1,000 | ||||||
Reserve for obsolete inventory | 5,000 | 10,000 | ||||||
Deferred income taxes | (24,000 | ) | (23,000 | ) | ||||
Changes in assets and liabilities: | ||||||||
(Increase) decrease in: | ||||||||
Accounts receivable | 163,000 | 369,000 | ||||||
Inventories | 426,000 | (502,000 | ) | |||||
Prepaid expenses | (93,000 | ) | 29,000 | |||||
Other receivables | (5,000 | ) | (1,000 | ) | ||||
Income tax overpayment | (43,000 | ) | (263,000 | ) | ||||
Increase (decrease) in: | ||||||||
Accounts payable | 20,000 | 2,000 | ||||||
Accrued expenses | (72,000 | ) | (86,000 | ) | ||||
Net cash provided by (used in) operating activities | $ | 2,430,000 | $ | 1,941,000 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Other assets manufactured | 45,000 | 53,000 | ||||||
(Purchase) of property and equipment | (146,000 | ) | (119,000 | ) | ||||
Proceeds from sale of marketable securities | 586,000 | 63,000 | ||||||
(Purchase) of marketable securities | (668,000 | ) | (783,000 | ) | ||||
(Purchase) of long-term investment | (20,000 | ) | — | |||||
Collection of loans to employees | — | 1,000 | ||||||
Net cash provided by (used in) investing activities | $ | (203,000 | ) | $ | (785,000 | ) | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
(Purchase) of treasury stock | (551,000 | ) | (14,000 | ) | ||||
Dividends paid | (1,596,000 | ) | (1,553,000 | ) | ||||
Net cash provided by (used in) financing activities | $ | (2,147,000 | ) | $ | (1,567,000 | ) | ||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | $ | 80,000 | $ | (411,000 | ) | |||
Cash and Cash Equivalents, beginning of period | $ | 5,918,000 | $ | 5,691,000 | ||||
Cash and Cash Equivalents, end of period | $ | 5,998,000 | $ | 5,280,000 | ||||
Supplemental Disclosure for Cash Flow Information: | ||||||||
Cash payments for: | ||||||||
Income taxes | $ | 1,059,000 | $ | 1,115,000 | ||||
Interest paid | $ | 0 | $ | 0 | ||||
Cash receipts for: | ||||||||
Income taxes | $ | 125,000 | $ | 0 |
July 31, 2017 | July 31, 2016 | |||||||
(unaudited) | (unaudited) | |||||||
Net Income | $ | 518,000 | $ | 567,000 | ||||
Other Comprehensive Income, Net of Tax | ||||||||
Unrealized gain (loss) on securities: | ||||||||
Unrealized holding gains (losses) arising during period | 629,000 | 545,000 | ||||||
Reclassification adjustment for gains (losses) included in net income | (84,000 | ) | (18,000 | ) | ||||
Income tax expense related to other comprehensive income | (228,000 | ) | (220,000 | ) | ||||
Other Comprehensive Income (Loss) | 317,000 | 307,000 | ||||||
Comprehensive Income | $ | 835,000 | $ | 874,000 |
See accompanying notes to the condensed financial statements
George Risk Industries, Inc.
Condensed Statements of Cash Flows
For the three months ended July 31, 2017 and 2016
July 31, 2017 | July 31, 2016 | |||||||
(unaudited) | (unaudited) | |||||||
Cash Flows from Operating Activities: | ||||||||
Net Income | $ | 518,000 | $ | 567,000 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 41,000 | 44,000 | ||||||
(Gain) loss on sale of investments | 38,000 | (60,000 | ) | |||||
Impairment of investments | - | 13,000 | ||||||
Reserve for bad debts | - | 1,000 | ||||||
Reserve for obsolete inventory | - | 20,000 | ||||||
Deferred income taxes | 7,000 | (21,000 | ) | |||||
(Gain) loss on sale of assets | (4,000 | ) | - | |||||
Changes in assets and liabilities: | ||||||||
(Increase) decrease in: | ||||||||
Accounts receivable | 257,000 | 125,000 | ||||||
Inventories | (62,000 | ) | 136,000 | |||||
Prepaid expenses | 63,000 | (28,000 | ) | |||||
Employee receivables | 1,000 | (1,000 | ) | |||||
Income tax overpayment | 208,000 | - | ||||||
Increase (decrease) in: | ||||||||
Accounts payable | 112,000 | 47,000 | ||||||
Accrued expenses | (163,000 | ) | (105,000 | ) | ||||
Income tax payable | - | 255,000 | ||||||
Net cash provided by (used in) operating activities | $ | 1,016,000 | $ | 993,000 | ||||
Cash Flows From Investing Activities: | ||||||||
Proceeds from sale of assets | 4,000 | - | ||||||
(Purchase) of property and equipment | (253,000 | ) | (25,000 | ) | ||||
Proceeds from sale of marketable securities | 2,000 | 4,000 | ||||||
(Purchase) of marketable securities | (224,000 | ) | (257,000 | ) | ||||
Net cash provided by (used in) investing activities | $ | (471,000 | ) | $ | (278,000 | ) | ||
Cash Flows From Financing Activities: | ||||||||
(Purchase) of treasury stock | (3,000 | ) | (1,000 | ) | ||||
Net cash provided by (used in) financing activities | $ | (3,000 | ) | $ | (1,000 | ) | ||
Net Increase (Decrease) in Cash and Cash Equivalents | $ | 542,000 | $ | 714,000 | ||||
Cash and Cash Equivalents, beginning of period | $ | 6,456,000 | $ | 5,918,000 | ||||
Cash and Cash Equivalents, end of period | $ | 6,998,000 | $ | 6,632,000 | ||||
Supplemental Disclosure for Cash Flow Information: | ||||||||
Cash payments for: | ||||||||
Income taxes paid | $ | 0 | $ | 0 | ||||
Interest paid | $ | 0 | $ | 0 |
See accompanying notes to the condensed financial statements
GEORGE RISK INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JANUARYJULY 31, 2017
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, 20162017 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 May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers. The objective of this update is to provide a robust framework for addressing revenue recognition issues and, upon its effective date, replaces almost all existing revenue recognition guidance. This update is effective in annual reporting periods beginning after December 15, 2017 and the interim periods within that year. The Company is evaluating the impact of this update on the Company's financial statements.
In February of 2016, the FASB issued ASU 2016-02Leases. Under the new guidance, lessees will be required to recognize so-called right-of-use assets and liabilities for most leases having lease terms of 12 months or more. This update is effective in annual reporting periods beginning after December 31, 2019 and the interim periods starting thereafter. The Company is evaluating the impact of this update on the Company’s financial statements.
Note 2: Investments
The Company has investments in publicly traded equity securities, corporate bonds, state and municipal debt securities, real estate investment trusts, and money markets funds.markets. The investments in securities are classified as available-for-sale securities, and are reported at fair value. Available-for-sale investments in debt securities mature between JulySeptember 2017 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 as a component of stockholders’ equity. Dividend and interest income are reported as earned.
As of JanuaryJuly 31, 2017 and April 30, 2016,2017, investments consisted of the following:
Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
Investments at | Cost | Unrealized | Unrealized | Fair | Cost | Unrealized | Unrealized | Fair | ||||||||||||||||||||||||
January 31, 2017 | Basis | Gains | Losses | Value | ||||||||||||||||||||||||||||
July 31, 2017 | Basis | Gains | Losses | Value | ||||||||||||||||||||||||||||
Municipal bonds | $ | 5,853,000 | $ | 85,000 | $ | (320,000 | ) | $ | 5,618,000 | $ | 6,062,000 | $ | 108,000 | $ | (186,000 | ) | $ | 5,984,000 | ||||||||||||||
Corporate bonds | $ | 129,000 | $ | 1,000 | $ | — | $ | 130,000 | $ | 129,000 | $ | 1,000 | $ | - | $ | 130,000 | ||||||||||||||||
REITs | $ | 64,000 | $ | 8,000 | $ | — | $ | 72,000 | $ | 63,000 | $ | - | $ | (6,000 | ) | $ | 57,000 | |||||||||||||||
Equity securities | $ | 15,655,000 | $ | 1,992,000 | $ | (462,000 | ) | $ | 17,185,000 | $ | 15,360,000 | $ | 2,982,000 | $ | (227,000 | ) | $ | 18,115,000 | ||||||||||||||
Money markets and CDs | $ | 2,451,000 | $ | — | $ | — | $ | 2,451,000 | $ | 2,825,000 | $ | - | $ | - | $ | 2,825,000 | ||||||||||||||||
Total | $ | 24,152,000 | $ | 2,086,000 | $ | (782,000 | ) | $ | 25,456,000 | $ | 24,439,000 | $ | 3,091,000 | $ | (419,000 | ) | $ | 27,111,000 |
Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
Investments at | Cost | Unrealized | Unrealized | Fair | Cost | Unrealized | Unrealized | Fair | ||||||||||||||||||||||||
April 30, 2016 | Basis | Gains | Losses | Value | ||||||||||||||||||||||||||||
April 30, 2017 | Basis | Gains | Losses | Value | ||||||||||||||||||||||||||||
Municipal bonds | $ | 6,489,000 | $ | 133,000 | $ | (239,000 | ) | $ | 6,383,000 | $ | 6,045,000 | $ | 90,000 | $ | (97,000 | ) | $ | 6,038,000 | ||||||||||||||
Corporate bonds | $ | 130,000 | $ | — | $ | (4,000 | ) | $ | 126,000 | $ | 129,000 | $ | 1,000 | $ | - | $ | 130,000 | |||||||||||||||
REITs | $ | 42,000 | $ | 4,000 | $ | (2,000 | ) | $ | 44,000 | $ | 64,000 | $ | 13,000 | $ | (1,000 | ) | $ | 76,000 | ||||||||||||||
Equity securities | $ | 14,796,000 | $ | 1,187,000 | $ | (484,000 | ) | $ | 15,499,000 | $ | 15,259,000 | $ | 2,441,000 | $ | (319,000 | ) | $ | 17,381,000 | ||||||||||||||
Money markets and CDs | $ | 2,478,000 | $ | — | $ | — | $ | 2,478,000 | $ | 2,757,000 | $ | - | $ | - | $ | 2,757,000 | ||||||||||||||||
Total | $ | 23,935,000 | $ | 1,324,000 | $ | (729,000 | ) | $ | 24,530,000 | $ | 24,254,000 | $ | 2,545,000 | $ | (417,000 | ) | $ | 26,382,000 |
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 need to record an impairment loss during the quarter, but did record a loss of $13,000 for the nine months ended January 31, 2017. For the corresponding periods last year, management recordedany impairment losses of $46,000 for the quarter ended JanuaryJuly 31, 2016, and2017 while $13,000 was recorded as an impairment losses of $69,000loss for the nine monthsquarter ended JanuaryJuly 31, 2016.2016
The following tables showtable shows the investments with unrealized losses that are not deemed to be “other-than-temporarily impaired”, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at JanuaryJuly 31, 2017 and April 30, 2016,2017, respectively.
Unrealized Loss Breakdown by Investment Type at JanuaryJuly 31, 2017
Less than 12 months | 12 months or greater | Total | ||||||||||||||||||||||
Description | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||
Municipal bonds | $ | 1,405,000 | $ | (40,000 | ) | $ | 1,801,000 | $ | (281,000 | ) | $ | 3,206,000 | $ | (321,000 | ) | |||||||||
Corporate bonds | — | — | — | — | — | — | ||||||||||||||||||
REITs | — | — | $ | 28,000 | — | $ | 28,000 | — | ||||||||||||||||
Equity securities | $ | 1,341,000 | $ | (86,000 | ) | $ | 3,368,000 | $ | (375,000 | ) | $ | 4,709,000 | $ | (461,000 | ) | |||||||||
Total | $ | 2,746,000 | $ | (126,000 | ) | $ | 5,197,000 | $ | (656,000 | ) | $ | 7,943,000 | $ | (782,000 | ) |
Less than 12 months | 12 months or greater | Total | ||||||||||||||||||||||
Description | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||
Municipal bonds | $ | 968,000 | $ | (115,000 | ) | $ | 1,192,000 | $ | (71,000 | ) | $ | 2,160,000 | $ | (186,000 | ) | |||||||||
REITs | $ | 57,000 | $ | (6,000 | ) | $ | - | $ | - | $ | 57,000 | $ | (6,000 | ) | ||||||||||
Equity securities | $ | 833,000 | $ | (86,000 | ) | $ | 1,164,000 | $ | (141,000 | ) | $ | 1,997,000 | $ | (227,000 | ) | |||||||||
Total | $ | 1,858,000 | $ | (207,000 | ) | $ | 2,356,000 | $ | (212,000 | ) | $ | 4,214,000 | $ | (419,000 | ) |
Unrealized Loss Breakdown by Investment Type at April 30, 20162017
Less than 12 months | 12 months or greater | Total | Less than 12 months | 12 months or greater | Total | |||||||||||||||||||||||||||||||||||||||||||
Description | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||||||||||||||||||||
Municipal bonds | $ | 3,129,000 | $ | (215,000 | ) | $ | 609,000 | $ | (24,000 | ) | $ | 3,738,000 | $ | (239,000 | ) | $ | 1,420,000 | $ | (19,000 | ) | $ | 1,292,000 | $ | (78,000 | ) | $ | 2,712,000 | $ | (97,000 | ) | ||||||||||||||||||
Corporate bonds | — | — | $ | 27,000 | $ | (4,000 | ) | $ | 27,000 | $ | (4,000 | ) | ||||||||||||||||||||||||||||||||||||
REITs | $ | 27,000 | $ | (2,000 | ) | — | — | $ | 27,000 | $ | (2,000 | ) | $ | - | $ | - | $ | 27,000 | $ | (1,000 | ) | $ | 27,000 | $ | (1,000 | ) | ||||||||||||||||||||||
Equity securities | $ | 5,018,000 | $ | (323,000 | ) | $ | 1,171,000 | $ | (161,000 | ) | $ | 6,189,000 | $ | (484,000 | ) | $ | 983,000 | $ | (92,000 | ) | $ | 1,689,000 | $ | (227,000 | ) | $ | 2,672,000 | $ | (319,000 | ) | ||||||||||||||||||
Total | $ | 8,174,000 | $ | (54,000 | ) | $ | 1,807,000 | $ | (189,000 | ) | $ | 9,981,000 | $ | (729,000 | ) | $ | 2,403,000 | $ | (111,000 | ) | $ | 3,008,000 | $ | (306,000 | ) | $ | 5,411,000 | $ | (417,000 | ) |
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 January 31, 2017.
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 investment. 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 JanuaryJuly 31, 2017.
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 JanuaryJuly 31, 2017.
Note 3: Inventories
Inventories at JanuaryJuly 31, 2017 and April 30, 20162017 consisted of the following:
January 31, 2017 | April 30, 2016 | |||||||
Raw materials | $ | 1,733,000 | $ | 1,948,000 | ||||
Work in process | 448,000 | 641,000 | ||||||
Finished goods | 430,000 | 448,000 | ||||||
2,611,000 | 3,037,000 | |||||||
Less: allowance for obsolete inventory | (78,000 | ) | (73,000 | ) | ||||
Totals | $ | 2,533,000 | $ | 2,964,000 |
July 31, | April 30, | |||||||
2017 | 2017 | |||||||
Raw materials | $ | 1,568,000 | $ | 1,579,000 | ||||
Work in process | 543,000 | 442,000 | ||||||
Finished goods | 328,000 | 356,000 | ||||||
2,439,000 | 2,377,000 | |||||||
Less: allowance for obsolete inventory | (73,000 | ) | (73,000 | ) | ||||
Totals | $ | 2,366,000 | $ | 2,304,000 |
Note 4: Business Segments
The following is financial information relating to industry segments:
Three months | Nine months | Three months | Nine months | |||||||||||||
ended | ended | ended | ended | |||||||||||||
Jan 31, 2017 | Jan 31, 2017 | Jan 31, 2016 | Jan 31, 2016 | |||||||||||||
Net revenue: | ||||||||||||||||
Security alarm products | $ | 2,214,000 | $ | 6,955,000 | $ | 2,272,000 | $ | 7,134,000 | ||||||||
Other products | 431,000 | 1,239,000 | 408,000 | 1,176,000 | ||||||||||||
Total net revenue | $ | 2,645,000 | $ | 8,194,000 | $ | 2,680,000 | $ | 8,310,000 | ||||||||
Income from operations: | ||||||||||||||||
Security alarm products | 603,000 | 1,805,000 | 554,000 | 1,944,000 | ||||||||||||
Other products | 107,000 | 321,000 | 100,000 | 349,000 | ||||||||||||
Total income from operations | $ | 710,000 | $ | 2,126,000 | $ | 654,000 | $ | 2,293,000 | ||||||||
Depreciation and amortization: | ||||||||||||||||
Security alarm products | 7,000 | 29,000 | 4,000 | 12,000 | ||||||||||||
Other products | 27,000 | 80,000 | 92,000 | 152,000 | ||||||||||||
Corporate general | 13,000 | 29,000 | 12,000 | 23,000 | ||||||||||||
Total depreciation and amortization | $ | 47,000 | $ | 138,000 | $ | 108,000 | $ | 187,000 | ||||||||
Capital expenditures: | ||||||||||||||||
Security alarm products | — | — | — | 24,000 | ||||||||||||
Other products | 16,000 | 130,000 | 84,000 | 84,000 | ||||||||||||
Corporate general | 10,000 | 16,000 | 8,000 | 11,000 | ||||||||||||
Total capital expenditures | $ | 26,000 | $ | 146,000 | $ | 92,000 | $ | 119,000 |
January 31, 2017 | April 30, 2016 | |||||||
Identifiable assets: | ||||||||
Security alarm products | 3,470,000 | 4,203,000 | ||||||
Other products | 1,370,000 | 1,142,000 | ||||||
Corporate general | 32,365,000 | 31,323,000 | ||||||
Total assets | $ | 37,205,000 | $ | 36,668,000 |
July 31, | ||||||||
2017 | 2016 | |||||||
Net revenue: | ||||||||
Security alarm products | 1,798,000 | 2,273,000 | ||||||
Other products | 450,000 | 393,000 | ||||||
Total net revenue | $ | 2,248,000 | $ | 2,666,000 | ||||
Income from operations: | ||||||||
Security alarm products | 392,000 | 479,000 | ||||||
Other products | 98,000 | 83,000 | ||||||
Total income from operations | $ | 490,000 | $ | 562,000 | ||||
Identifiable assets: | ||||||||
Security alarm products | 3,934,000 | 3,947,000 | ||||||
Other products | 749,000 | 1,194,000 | ||||||
Corporate general | 34,797,000 | 32,598,000 | ||||||
Total assets | $ | 39,480,000 | $ | 37,739,000 | ||||
Depreciation and amortization: | ||||||||
Security alarm products | 8,000 | 14,000 | ||||||
Other products | 21,000 | 25,000 | ||||||
Corporate general | 12,000 | 5,000 | ||||||
Total depreciation and amortization | $ | 41,000 | $ | 44,000 | ||||
Capital expenditures: | ||||||||
Security alarm products | 210,000 | — | ||||||
Other products | — | 19,000 | ||||||
Corporate general | 43,000 | 6,000 | ||||||
Total capital expenditures | $ | 253,000 | $ | 25,000 |
Note 55: Earnings per Share
Basic and diluted earnings per share, assuming convertible preferred stock was converted for each period presented, are:
For the three months ended January 31, 2017 | ||||||||||||
Income (Numerator) | Shares (Denominator) | Per-share Amount | ||||||||||
Net Income | $ | 792,000 | ||||||||||
Basic EPS | $ | 792,000 | 4,945,972 | $ | 0.1601 | |||||||
Effect of dilutive securities: | 0 | 20,500 | ||||||||||
Convertible preferred stock | ||||||||||||
Diluted EPS | $ | 792,000 | 4,966,472 | $ | 0.1595 |
For the three months ended July 31, 2017 | ||||||||||||
Income | Shares | Per-Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
Net income | $ | 518,000 | ||||||||||
Basic EPS | $ | 518,000 | 4,945,092 | $ | .1048 | |||||||
Effect of dilutive Convertible Preferred Stock | - | 20,500 | (.0005 | ) | ||||||||
Diluted EPS | $ | 518,000 | 4,965,592 | $ | .1043 |
For the nine months ended January 31, 2017 | ||||||||||||
Income (Numerator) | Shares (Denominator) | Per-share Amount | ||||||||||
Net Income | $ | 2,051,000 | ||||||||||
Basic EPS | 2,051,000 | 4,996,453 | $ | 0.4105 | ||||||||
Effect of dilutive securities: | ||||||||||||
Convertible preferred stock | 0 | 20,500 | ||||||||||
Diluted EPS | $ | 2,051,000 | 5,016,953 | $ | 0.4088 |
For the three months ended January 31, 2016 | ||||||||||||
Income (Numerator) | Shares (Denominator) | Per-share Amount | ||||||||||
Net Income | $ | 635,000 | ||||||||||
Basic EPS | $ | 635,000 | 5,024,103 | $ | 0.1264 | |||||||
Effect of dilutive securities: | ||||||||||||
Convertible preferred stock | 0 | 20,500 | ||||||||||
Diluted EPS | $ | 635,000 | 5,044,603 | $ | 0.1259 |
For the nine months ended January 31, 2016 | ||||||||||||
Income (Numerator) | Shares (Denominator) | Per-share Amount | ||||||||||
Net Income | $ | 1,930,000 | ||||||||||
Basic EPS | $ | 1,930,000 | 5,024,954 | $ | 0.3841 | |||||||
Effect of dilutive securities: | ||||||||||||
Convertible preferred stock | 0 | 20,500 | ||||||||||
Diluted EPS | $ | 1,930,000 | 5,045,454 | $ | 0.3825 |
For the three months ended July 31, 2016 | ||||||||||||
Income | Shares | Per-Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
Net income | $ | 567,000 | ||||||||||
Basic EPS | $ | 567,000 | 5,021,727 | $ | .1129 | |||||||
Effect of dilutive Convertible Preferred Stock | – | 20,500 | (.0004 | ) | ||||||||
Diluted EPS | $ | 567,000 | 5,042,227 | $ | .1125 |
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)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 quartersquarter ending JanuaryJuly 31, 2017 and 2016, respectively. Likewise, the Company paid matching contributions of approximately $7,000 during the nine-month period ending January 31, 2017 and $8,000 during the corresponding period the prior fiscal year.
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 1 | Valuation is based upon quoted prices for identical instruments traded in active markets. | |
Level 2 | Valuation 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 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 JanuaryJuly 31, 2017, our investments consisted of money markets, certificates of deposits (CDs), publicly traded equity securities, real estate investment trusts (REITS)(REITs) as well as certain state and municipal debt securities and corporate bonds. Our marketable securities are valued using third-party broker statements. The value of the investments is derived from quoted market information. The inputs to the valuation are generally classified as Level 1 given the active market for these securities, however, if an active market does not exist, which is the case for municipal bonds and REITs, the inputs are recorded as Level 2.
Fair Value Hierarchy
The following tables settable sets forth our assets and liabilities measured at fair value on a recurring basis and a non-recurring basis by level within the fair value hierarchy. As required by US GAAP, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
Assets Measured at Fair Value on a Recurring Basis as of July 31, 2017 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Municipal Bonds | $ | — | $ | 5,984,000 | $ | — | $ | 5,984,000 | ||||||||
Corporate Bonds | $ | 130,000 | $ | — | $ | — | $ | 130,000 | ||||||||
REITs | $ | — | $ | 57,000 | $ | — | $ | 57,000 | ||||||||
Equity Securities | $ | 18,115,000 | $ | — | $ | — | $ | 18,115,000 | ||||||||
Money Markets and CDs | $ | 2,825,000 | $ | — | $ | — | $ | 2,825,000 | ||||||||
Total fair value of assets measured on a recurring basis | $ | 21,070,000 | $ | 6,041,000 | $ | — | $ | 27,111,000 |
Assets Measured at Fair Value on a Recurring Basis as of January 31, 2017 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Municipal Bonds | $ | - | $ | 5,618,000 | $ | - | $ | 5,618,000 | ||||||||
Corporate Bonds | $ | 130,000 | $ | - | $ | - | $ | 130,000 | ||||||||
REITs | $ | - | $ | 72,000 | $ | - | $ | 72,000 | ||||||||
Equity Securities | $ | 17,185,000 | $ | - | $ | - | $ | 17,185,000 | ||||||||
Money Markets and CDs | $ | 2,451,000 | $ | - | $ | - | $ | 2,451,000 | ||||||||
Total fair value of assets measured on a recurring basis | $ | 19,766,000 | $ | 5,690,000 | $ | - | $ | 25,456,000 |
Assets Measured at Fair Value on a Recurring Basis as of April 30, 2016 | Assets Measured at Fair Value on a Recurring Basis as of April 30, 2017 | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Municipal Bonds | $ | - | $ | 6,383,000 | $ | - | $ | 6,383,000 | $ | — | $ | 6,038,000 | $ | — | $ | 6,038,000 | ||||||||||||||||
Corporate Bonds | $ | 126,000 | $ | - | $ | - | $ | 126,000 | $ | 130,000 | $ | — | $ | — | $ | 130,000 | ||||||||||||||||
REITs | $ | - | $ | 44,000 | $ | - | $ | 44,000 | $ | — | $ | 76,000 | $ | — | $ | 76,000 | ||||||||||||||||
Equity Securities | $ | 15,499,000 | $ | - | $ | - | $ | 15,499,000 | $ | 17,381,000 | $ | — | $ | — | $ | 17,381,000 | ||||||||||||||||
Money Markets and CDs | $ | 2,478,000 | $ | - | $ | - | $ | 2,478,000 | $ | 2,757,000 | $ | — | $ | — | $ | 2,757,000 | ||||||||||||||||
Total fair value of assets measured on a recurring basis | $ | 18,103,000 | $ | 6,427,000 | $ | - | $ | 24,530,000 | $ | 20,268,000 | $ | 6,114,000 | $ | — | $ | 26,382,000 |
Note 8 Subsequent8Subsequent Events
None
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 2.2: Management Discussion and Analysis of Financial Condition and Results of Operations
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), which are subject to the “safe harbor” created by those sections. Any statements herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as “may,” “will,” “could,” “would,” “should,” “anticipate,” “expect,” “intend,” “believe,” “estimate,” “project” or “continue,” and the negatives of such terms are intended to identify forward-looking statements. The information included herein represents our estimates and assumptions as of the date of this filing. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
The following discussion should be read in conjunction with the attached condensed consolidated financial statements, and with the Company’s audited financial statements and discussion for the fiscal year ended April 30, 2016.2017.
Executive Summary
The Company’s performance has remained steadydeclined slightly through the three quarters,first quarter. This is mainly due to increased competition and having to deal with onlyproduction impediments that have been a slight reductiondirect result from implementing our new computer software. Conversely, to offset the decline in sales, our investments have had strong returns. Opportunities include continuing to learn and greatly improved investment returns. New challengesgrow with our new computer system to be able to get product out to our customers in a productive and timely manner. Also, we have new products that are scheduled to enter the Company has endured overmarketplace by the nine monthsend of this fiscal year include the increasecalendar year. Challenges in the minimum wage requirements, implementationcoming months include continuing to learn about and train employees on the new computer software, with the hopes of new hardwaregetting our facilities running more lean and software systems which will enhance productivity and communication throughout the organization, and getting new products to the marketplace.profitable than ever before.
Results of Operations
● | Net sales | |
● | Cost of goods sold | |
● | Operating expenses | |
● | Income from operations for the quarter ended |
● | ||
● | Provision for income taxes showed a decrease of $17,000, down from $237,000 in the quarter ended July 31, 2016 to $220,000 for the quarter ended July 31, 2017. | |
● | In turn, net income for the quarter ended | |
● | Earnings per share for the quarter ended July 31, 2017 were $0.10 per common share and $0.11 per common share for the quarter ended |
Liquidity and capital resources
Operating
● | Net cash increased | |
● | Accounts receivable decreased | |
● | Inventories | |
● | ||
● | Income tax overpayment for the | |
● | Accounts payable shows | |
● | Accrued expenses decreased |
Investing
● | As for our investment activities, the Company spent | |
● | Additionally, the Company continues to purchase marketable securities, which include municipal bonds and quality stocks. |
Financing
● | ||
The following is a list of ratios to help analyze George Risk Industries’ performance:
For the quarter ended | ||||||||
January 31, 2017 | January 31, 2016 | |||||||
Working capital | ||||||||
(current assets – current liabilities) | $ | 34,041,000 | $ | 32,523,000 | ||||
Current ratio | ||||||||
(current assets / current liabilities) | 17.171 | 21.493 | ||||||
Quick ratio | ||||||||
((cash + investments + AR) / current liabilities) | 15.773 | 19.147 |
Qtr ended | Qtr ended | |||||||
July 31, 2017 | July 31, 2016 | |||||||
Working capital (current assets – current liabilities) | $ | 36,500,000 | $ | 34,774,000 | ||||
Current ratio (current assets / current liabilities) | 21.955 | 19.237 | ||||||
Quick ratio ((cash + investments + AR) / current liabilities) | 20.496 | 17.713 |
New Product Development
The Company and itsits’ engineering department continueperpetually 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:
● | ||
● | ||
● | ||
● | ||
● | ||
● | We continue to research the possibilities of fuel level | |
● | A new float water sensor is being developed that will monitor water levels in livestock tanks and sump pumps. | |
● | Wireless technology is a main area of focus for product development. We are considering adding wireless technology to some of our current products. A wireless contact switch is in the final stages of development. Also, we are working on wireless versions of our Pool 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. |
● | An updated version of our 200-36 overhead door switch line up is nearing | |
● |
Other Information
In addition to researching and developing new products, management is always open to the possibility of acquiring a business or product line that would complement our existing operations. Due to the Company’s strong cash position, management believes this could be achieved without the need for outside financing. The intent is to utilize the equipment, marketing techniques and established customers to deliver new products and increase sales and profits.
There are no known seasonal trends with any of GRI’s products, since we sell to distributors and OEM manufacturers. Our products are tied to the housing industry and will fluctuate with building trends.
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers. The objective of this update is to provide a robust framework for addressing revenue recognition issues and, upon its effective date, replaces almost all existing revenue recognition guidance. This update is effective in annual reporting periods beginning after December 15, 2017 and the interim periods within that year. The Company is evaluating the impact of this update on the Company’s financial statements.
In January 2015, the FASB issued Accounting Standards Update No. 2015-04, “Requirement that All Deferred Income Tax Assets and Liabilities Be Presented as Non-Current in a Classified Balance Sheet”. The objective of this update is to require deferred tax liabilities and assets be classified entirely as non-current in a classified balance sheet. This update is effective in annual reporting periods beginning after December 15, 2016 and the interim periods within that year. The Company is evaluating the impact of this update on the Company’s financial statements.
In February of 2016, the FASB issued ASU 2016-02Leases. Under the new guidance, lessees will be required to recognize so-called right-of-use assets and liabilities for most leases having lease terms of 12 months or more. This update is effective in annual reporting periods beginning after December 31, 2019 and the interim periods starting thereafter. The Company is evaluating the impact of this update on the Company’s financial statements.
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 3. Quantitative3.Quantitative and Qualitative Disclosures aboutAbout Market Risk
Not applicableThis disclosure does not apply.
Item 4. Controls4.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 JanuaryJuly 31, 2017. 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. Although we addedThe controller that was hired in 2014 recently was compelled to end her employment at GRI due to medical reasons, so management is on the services of asearch to replace her with qualified candidate. Once the controller during 2014, moreis hired, 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. WeWithout the current employment of a controller, we believe thesethis control deficiencies representdeficiency represents material weaknesses in internal control over financial reporting.
Despite the material weaknesses in financial reporting noted above, we believe that our consolidated financial statements included in this report fairly present our financial position, results of operations and cash flows as of and for the periods presented in all material respects.
We are committed to the establishment of effective internal controls over financial reporting and will place emphasis on quarterly and year-end closing procedures, timely documentation and internal review of accounting and financial reporting consequences of material contracts and agreements, and enhanced review of all schedules and account analyses by experienced accounting department personnel or independent consultants.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting during the fiscal quarter ended JanuaryJuly 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
GEORGE RISK INDUSTRIES, INC.
PartPART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 1A. Risk Factors
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information relating to the Company’s repurchase of common stock for the thirdfirst quarter of fiscal year 2017.2018.
Period | Number of shares repurchased | |||
225 | ||||
July 1, 2017 – July 31, 2017 | 100 |
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits
SIGNATURES
Pursuant toIn accordance with the requirements of the Securities Exchange Act, of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
George Risk Industries, Inc. | ||
(Registrant) | ||
Date | By: | /s/ Stephanie M. Risk-McElroy |
Stephanie M. Risk-McElroy | ||
President, Chief Executive Officer, Chief Financial Officer | ||
and Chairman of the Board |