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 StSt. 
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 [X][ X ]

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.

 

2

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.

3

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

 

4

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

 

5

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

 

6

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

 

7

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 

 

8

   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)

9

  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.

10

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 

11
  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 

12
  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.

13

 

Note 7:Fair Value Measurements

 

Generally accepted accounting principles in the United States of America (US GAAP) defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions, and credit risk.

 

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

 

 Level 1Valuation is based upon quoted prices for identical instruments traded in active markets.
   
 Level 2Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
   
 Level 3Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

 

Investments and Marketable Securities

 

As of 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.

 

14
  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

15

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

 

Item 2.2: Management Discussion and Analysis of Financial Condition and Results of Operations

16

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 were $2,645,000 for the quarter ended January 31, 2017, which is onlyshowed a 1.3%15.68% decrease from the corresponding quarter last year. Year-to-date net sales were $8,194,000 at January 31, 2017, which is a 1.4% decrease fromover the same period lastin the prior year. The slight variation in sales shows the stability of the Company and loyalty of its customer base. Our ongoing commitmentManagement believes this is due to outstanding customer service and customization of products are a few of the many reasons sales remained relatively constant.reasons. New competition andhas sprung up within the inabilityindustry, the need for the company to bring new products to market in a timelier manner are a few of the reasons why management believes it has not beenbe able to increase salesengineer and manufacture newer wireless technology that has replaced the hard-wired market and unexpected delays in a timelier manner.our production flow due to the implementation of new computer software.
   
 ●Cost of goods sold was 46.4%saw a decrease from 51.99% of net sales forin the prior year, to 48.71% in the current quarter, ended January 31, 2017which is within Management’s goal to keep labor and was 49.1% forother manufacturing expenses within the same quarter last year. Year-to-daterange of 45 to 50%. The decreased cost of goods sold percentages were 47.6% for the current nine months and 46.5% for the corresponding nine months last year, keeping within the targetpercentage is a reflection of less than 50% for both the quarter and year-to-date results.inventory levels evening out from continued declining sales. Management has also postponed shipments from vendors in order to not be over inflated with raw material inventory.
   
 ●Operating expenses declined by $4,000have decreased when comparing the current year quarter to the same quarter for the prior year, but the percentage in relation to net sales increased slightly to 29.49% for the quarter but increased by $16,000 for the nine-months ended JanuaryJuly 31, 2017 as compared to 26.93% for the corresponding periodsquarter last year. The Company has been able to keep the operating expenses at less than 30% of net sales for many years now; however, the effects of paying for training of the new computer software and currently paying maintenance and support fees on two software platforms has added to these expenses.
 ●Income from operations for the quarter ended JanuaryJuly 31, 2017 was at $710,000$490,000, which is an 8.56% increasea 12.81% decrease from the corresponding quarter last year, which had income from operations of $654,000. Income from operations for the nine months ended January 31, 2017 was at $2,126,000, which is a 7.28% decrease from the corresponding nine months last year, which had income from operations of $2,293,000.

17

●Other income and expenses are up when comparing to the current quarter and nine-month periods the prior year, with an increase of $184,000 in the current quarter and an increase of $326,000 for the current year-to-date. The majority of activity in these accounts consists of investment interest, dividends, and gain or loss on sale of investments. With the recent uptick in the performance of the stock market, decisions were made to sell holdings and take the realized gain and dividends and interest payments exceeded expectations.$562,000.
   
 ●Overall,Other income and expenses showed a $248,000 gain for the quarter ended July 31, 2017 as compared to a $242,000 gain for the quarter ended July 31, 2016. The slight increase is primarily due to increased dividend and interest income, offset by losses on the sale of investments.
●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 JanuaryJuly 31, 2017 was up $157,000, or 24.47%,$518,000, an 8.64% decrease from the samecorresponding quarter last year. Similarly,year, which showed net income for the nine-month period ended January 31, 2017 was up $121,000, or 6.27%, from the same period in the prior year.of $567,000.
   
 ●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 JanuaryJuly 31, 2017 were $0.16 per share and $0.41 per share for the year-to-date numbers. EPS for the quarter and nine months ended January 31, 2016 were $0.13 per share and $0.38 per share, respectively.2016.

 

Liquidity and capital resources

 

Operating

 

 ●Net cash increased $80,000$542,000 during the nine monthsquarter ended JanuaryJuly 31, 2017 as compared to a decreasean increase of $411,000$714,000 during the corresponding periodquarter last year.
   
 ●Accounts receivable decreased $163,000$257,000 for the nine months ended Januaryquarter ending July 31, 2017 compared with a $369,000$125,000 decrease for the same periodquarter last year. The smaller current year decrease in accounts receivable is a result of a smalldirectly attributable to the decrease in sales and the Company’s ongoing ability to continue to collect on accounts receivable inas a timely manner. Management believes that only approximately $261minimal amount of accounts over 90 days have a possibility of beingwere found to be uncollectible.
   
 ●Inventories decreased $426,000increased $62,000 during the current nine month periodquarter as compared to an increase of $502,000a $136,000 decrease last year. The current decreaseThis is primarily due to the fact that there have been declines in sales, and that reduces the amount of goods that need to be purchased and stocked in the warehouse. This decrease is offset bycontinued raw material price increases from various vendors.and increased labor and manufacturing costs.
   
 ●Prepaid expenses sawAt the quarter ended July 31, 2017 there was a $93,000 increase for the current nine months, primarily due to the prepayment of inventory the Company purchased to get better pricing. Conversely, the prior nine months showed a $29,000$63,000 decrease in prepaid expenses.expenses and at July 31, 2016, there was a $28,000 increase. The current decrease is a result of having raw materials that were previously prepaid for arrive on our dock during the current quarter.
   
 ●Income tax overpayment for the nine monthsquarter ended JanuaryJuly 31, 2017 increased $43,000, as the overpayment also showed andecreased $208,000, while there was a $255,000 increase of 263,000towards income tax payable for the same period the prior year.quarter ending July 31, 2016. The main reason for the increases is that the Company gets an extension on itscurrent decrease in income tax returns and are waiting on refunds at this point in time.overpayment is a result of having lower sales than predicted.
   
 ●Accounts payable shows increasesan increase of $112,000 for both nine month periods at $20,000 and $2,000, respectively. The companythe quarter ended July 31, 2017 compared to an increase of $47,000 for the same quarter the year before, primarily due to timing issues. Management strives to pay all invoicespayables within terms, andunless there is a problem with the variance in increases is primarily due to the timing of receipt of products and payment of invoices.merchandise.
   
 ●Accrued expenses decreased $72,000$163,000 for the current nine month periodquarter as compared to an $86,000a $105,000 decrease for the nine month periodquarter ended JanuaryJuly 31, 2016.

 

18

Investing

 

 ●As for our investment activities, the Company spent approximately $146,000$210,000 on acquisitionsthe purchase of a building during the current fiscal quarter. In comparison with the corresponding quarter last year, there were purchases of property and equipment forin the current nine month period, in comparison with the corresponding nine months last year, where there was activityamount of $119,000. In addition, the Company has disbursed $45,000 towards assets manufactured on site for the current nine-month period.approximately $59,000.
 ●Additionally, the Company continues to purchase marketable securities, which include municipal bonds and quality stocks. During the nine month period ended January 31, 2017 there was quite a bit of buy/sell activity in the investment accounts. Net cashCash spent on purchases of marketable securities for the nine month periodquarter ended JanuaryJuly 31, 2017 was $668,000$224,000 compared to $783,000$257,000 spent induring the prior nine month period.quarter ended July 31, 2016. We continue to use “money manager” accounts for most stock transactions. By doing this, the Company gives an independent third party firm, who are experts in this field, permission to buy and sell stocks at will. The Company pays a quarterly service fee based on the value of the investments.

 

Financing

 

 ●TheFurthermore, the Company continues to purchase back common stock when the opportunity arises. For the nine month periodquarter ended JanuaryJuly 31, 2017, the Company purchased $551,000$3,000 worth of treasury stock. This includes one purchase of over 75,000 shares that was acquired duringstock, along with the current quarter. This is in comparison to $14,000$1,000 spent in the same nine months period the prior year.
●The company paid out dividends of $1,596,000 during the nine months ending January 31, 2017. These dividends were paid during the second quarter. The company declared a dividend of $0.35 per share of common stock on September 30, 2016 and these dividends were paid by October 31, 2016. As for the prior year numbers, dividend paid was $1,553,000 for the nine months ending January 31, 2016. A dividend of $0.34 per common share was declared and paid during the second fiscal quarter last year.

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

 

  For the quarter ended 
  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 

19
  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:

 

 ●Wireless contact switches, Wi-Fi to enable monitoring of sensors from a smartphone,A new face plate for our pool alarms is nearing completion. The innovative design is slim in style and environmental sensors are in developmentwill also allow the homeowner to change the plate to match their décor.
   
 ●A redesign ofThe case for our top selling resistor pack. The new design will be more automated whichCC-15 is complete and has been submitted to U.L. for approval. This will allow us to produce more in a shorter timeframe.
●Redesign of the connectors in our raceway line has gone through molding andmanufacture several different versions. One is going through product safety standards testing approval. The original raceway line connectors were not fire rated and high voltage rated compliant.
●Slim-line face plate for pool alarms that will also allow homeowner to change the plate to match their decor
●Triple biased High Security Switch
●Redesign of our Current Controller is complete and now is going through the U.L. approval process. The new design will allow us to manufacture a 15-amp version that would automatically turn on a whole room of lights andlights. Another is a 220-volt version forto be used in international markets. 12 and 24-volt versions are also being developed in response to many requests to turn on LED lighting.
   
 ●RedesignWe have completed two new low voltage switching devices and they have been introduced into the marketplace. The LVSD is a 2-amp, 12/24-VDC switching device that will power devices such as small motors, fans, sirens, strobes and LED lights. The LEDSD is a 2amp, 12/24-VDC controller with 2.1mm x 5.5mm connectors for the cover of the 29-Series terminal switchuse with LED lighting (puck, rope, strip, track and more). It can be used to turn on LED lighting in cabinets, display cases, closets, pantries, etc.
   
 ●New float water sensor thatMold work has been completed on connectors for our EZ-Duct line and these connectors are currently out for ETL. testing. This will monitor water levels in livestock tanksallow the raceway line to be ETL Listed for fire rating and sump pumpshigh voltage. A new mold design for the cover of our 29-Series terminal switch is also being worked on.
   
 ●FuelWe continue to work on high security switches. We have a triple biased high security switch design nearly complete and an adjustable magnet design was completed for recessed mounting applications.
●We continue to research the possibilities of fuel level monitor – With fuel theft being a major problemsensing and how that may also serve other agricultural based needs. Several companies from around the world we are crafting ahave been looking for ways to secure fuel tanks and trucks. Our emphasis would be in ways to safely monitor to tie into the security system to alarm if tanks or trucks are tampered with.fuel levels and report tampering.
   
 ●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 completion.completion with prototypes currently being die cast. The modified version, part #200-36UF,the 200-36UF, is forbeing made as a universal fit that allowsswitch. This will allow an installer to replace an existing competitor’s switch without drilling new holes into the cement or adjusting the location. The modified case has an additional mounting hole along with reshaped mounting holes.
   
 ●The smaller sizeTwo sizes of our custom power transfer device (PTDC) hashave been completed.introduced. The PTDC series offeroffers a secure way to channel electrical wiring from the door frame to the door and are used for powering exit bars, locks, electric strikes etc. We will offerGRI offers two different end pieces; 0.218” inside diameter and 0.313” inside diameter, which will allow different sizes orof wire to be looped through the custom length armored cable.

 

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.

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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.

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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 
NovemberMay 1, 20162017 – November 30, 2016May 31, 2017  75,410-0- 
December 1, 2016 – December 31, 2016300
JanuaryJune 1, 2017 – January 31,June 30, 2017  225 
July 1, 2017 – July 31, 2017100

 

Item 3. Defaults upon Senior Securities

 

Not applicable

 

Item 4. Mine Safety Disclosures

 

Not applicable

 

Item 5. Other Information

 

Not applicable

 

Item 6. Exhibits

 

Exhibit No. Description
 
31.1 Certification of the Chief Executive Officer (Principal Financial and Accounting Officer), as required by Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.1 Certification of the Chief Executive Officer (Principal Financial and Accounting Officer), as required by Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

 

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 March 16,September 19, 2017By:/s/ Stephanie M. Risk-McElroy
  Stephanie M. Risk-McElroy
  President, Chief Executive Officer, Chief Financial Officer
and Chairman of the Board

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