UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly periodquarter ended JulyJanuary 31, 20202021

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 orOR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to ________________

 

Commission File Number: 000-05378

 

GEORGE RISK INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

 

Colorado 84-0524756
(State or other jurisdiction of incorporation or organization)incorporation) (I.R.S.IRS Employers Identification No.)

 

802 SouthS. Elm St.
, Kimball, NE 69145
(Address of principal executive offices) (Zip Code)

 

(308) 235-4645

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

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

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the pastpreceding 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (&232.405(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [ X ][X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smallsmaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [ X ][X]
  Emerging growth company [  ]

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [ X ][X]

 

APPLICABLE ONLY TO CORPORATE ISSUERSISSUERS:

 

The number of shares of the Registrant’s Common Stock outstanding, as of September 18, 2020March 17, 2021, was 4,949,927.4,946,902.

 

 

 

 
 

  

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

ITEM 1:Financial Statements

Item 1. Financial Statements

 

The unaudited financial statements for the three-monththree- and nine-month period ended JulyJanuary 31, 20202021, are attached hereto.

2

GEORGE RISK INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

GEORGE RISK INDUSTRIES, INC.GEORGE RISK INDUSTRIES, INC.
CONDENSED BALANCE SHEETSCONDENSED BALANCE SHEETS
     
 July 31, 2020 April 30, 2020  January 31, 2021 April 30, 2020 
 (unaudited)    (unaudited)   
ASSETS             
        
Current Assets:                
Cash and cash equivalents $7,491,000  $6,458,000  $6,936,000  $6,458,000 
Investments and securities, at fair value  27,657,000   25,322,000 
Investments and securities  30,880,000   25,322,000 
Accounts receivable:                
Trade, net of $1,913 and $7,306 doubtful account allowance  2,920,000   2,964,000 
Trade, net of $6,858 and $7,306 doubtful account allowance  3,340,000   2,964,000 
Other  19,000   18,000   42,000   18,000 
Income tax overpayment  —   56,000   —   56,000 
Inventories, net  5,507,000   5,103,000   5,901,000   5,103,000 
Prepaid expenses  334,000   516,000   160,000   516,000 
Total Current Assets  43,928,000   40,437,000   47,259,000   40,437,000 
                
Property and Equipment, net, at cost  1,505,000   1,465,000 
Property and Equipment, net  1,686,000   1,465,000 
                
Other Assets                
Investment in Limited Land Partnership, at cost  320,000   320,000   320,000   320,000 
Projects in process  108,000   21,000   51,000   21,000 
Other  2,000   2,000   1,000   2,000 
Total Other Assets  430,000   343,000   372,000   343,000 
                
Intangible assets, net  1,486,000   1,517,000 
Intangible Assets, net  1,425,000   1,517,000 
                
TOTAL ASSETS $47,349,000  $43,762,000  $50,742,000  $43,762,000 

 

See accompanying notes to the unaudited condensed financial statementsstatements.

3

GEORGE RISK INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

(continued)

GEORGE RISK INDUSTRIES, INC.GEORGE RISK INDUSTRIES, INC.
CONDENSED BALANCE SHEETSCONDENSED BALANCE SHEETS
(continued)(continued)
     
 January 31, 2021 April 30, 2020 
 July 31, 2020 April 30, 2020  (unaudited)   
 (unaudited)        
LIABILITIES AND STOCKHOLDERS’ EQUITY                
        
Current Liabilities                
Accounts payable, trade $304,000  $187,000  $498,000  $187,000 
Dividends payable  1,892,000   1,892,000   2,080,000   1,892,000 
Accrued expenses:        
Payroll and related expenses  386,000   450,000 
Property taxes  3,000   — 
Accrued expenses  504,000   450,000 
Income tax payable  290,000   —   193,000   — 
Notes payable  950,000   950,000   —   950,000 
Total Current Liabilities  3,825,000   3,479,000   3,275,000   3,479,000 
                
Long-Term Liabilities                
Deferred income taxes  1,343,000   699,000   2,058,000   699,000 
Total Long-Term Liabilities  1,343,000   699,000   2,058,000   699,000 
                
Total Liabilities  5,168,000   4,178,000   5,333,000   4,178,000 
                
Commitments and contingencies  —   — 
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   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   850,000   850,000 
Additional paid-in capital  1,934,000   1,934,000   1,934,000   1,934,000 
Accumulated other comprehensive income  101,000   (4,000)  129,000   (4,000)
Retained earnings  43,498,000   41,006,000   46,726,000   41,006,000 
Less: treasury stock, 3,552,954 and 3,552,954 shares, at cost  (4,301,000)  (4,301,000)
Less: treasury stock, 3,555,779 and 3,552,954 shares, at cost  (4,329,000)  (4,301,000)
Total Stockholders’ Equity  42,181,000   39,584,000   45,409,000   39,584,000 
                
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $47,349,000  $43,762,000 
TOTAL LIABILITES AND STOCKHOLDERS’ EQUITY $50,742,000  $43,762,000 

 

See accompanying notes to the unaudited condensed financial statements

4

GEORGE RISK INDUSTRIES, INC.

CONDENSED INCOME STATEMENTS

FOR THE THREE MONTHS ENDED JULY 31, 2020 AND 2019

(Unaudited)

GEORGE RISK INDUSTRIES, INC.GEORGE RISK INDUSTRIES, INC.
CONDENSED INCOME STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2021 AND 2020
(Unaudited)		CONDENSED INCOME STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2021 AND 2020
(Unaudited)
         
 Three months Three months Nine months Nine months 
 July 31, 2020 July 31, 2019  ended ended ended ended 
      Jan 31, 2021 Jan 31, 2020 Jan 31, 2021 Jan 31, 2020 
Net Sales $4,047,000  $3,552,000  $4,633,000  $3,589,000  $13,327,000  $10,852,000 
Less: Cost of Goods Sold  (1,952,000)  (1,769,000)  (2,385,000)  (1,832,000)  (6,631,000)  (5,462,000)
Gross Profit  2,095,000   1,783,000   2,248,000   1,757,000   6,696,000   5,390,000 
                        
Operating Expenses:        
Operating Expenses                
General and Administrative  313,000   297,000   362,000   302,000   1,040,000   928,000 
Sales  567,000   557,000   639,000   587,000   1,809,000   1,698,000 
Engineering  29,000   14,000   31,000   34,000   81,000   66,000 
Rent Paid to Related Parties  —   5,000   —   —   —   8,000 
Total Operating Expenses  909,000   873,000   1,032,000   923,000   2,930,000   2,700,000 
                        
Income From Operations  1,186,000   910,000   1,216,000   834,000   3,766,000   2,690,000 
                        
Other Income (Expense)        
Other Income                
Other  12,000   1,000   952,000   —   1,008,000   2,000 
Dividend and Interest Income  156,000   193,000   317,000   423,000   608,000   782,000 
Unrealized gain (loss) on equity securities  2,114,000   145,000 
Gain (Loss) on Sale of Investments  (28,000)  49,000 
  2,254,000   388,000 
Unrealized Gain on equity securities  2,654,000   508,000   4,653,000   782,000 
Gain on Investments  250,000   78,000   293,000   137,000 
Gain on Sale of Assets  —   5,000   4,000   5,000 
Total Other Income  4,173,000   1,014,000   6,566,000   1,708,000 
                        
Income Before Provisions for Income Taxes  3,440,000   1,298,000   5,389,000   1,848,000   10,332,000   4,398,000 
                        
Provisions for Income Taxes        
Provisions for Income Taxes:                
Current Expense  349,000   294,000   199,000   359,000   1,230,000   911,000 
Deferred tax expense  599,000   28,000 
Deferred Tax Expense (Benefit)  743,000   125,000   1,303,000   191,000 
Total Income Tax Expense  948,000   322,000   942,000   484,000   2,533,000   1,102,000 
                        
Net Income $2,492,000  $976,000  $4,447.000  $1,364,000  $7,799,000  $3,296,000 
                        
Basic Earnings Per Share of Common Stock $0.50  $0.20 
Diluted Earnings Per Share of Common Stock $0.50  $0.20 
Income Per Share of Common Stock                
Basic $0.90  $0.28  $1.58  $0.67 
Diluted $0.89  $0.27  $1.57  $0.66 
                        
Weighted Average Number of Common Shares Outstanding  4,949,927   4,956,389                 
Weighted Average Number of Shares Outstanding (Diluted)  4,970,427   4,976,889 
Basic  4,948,224   4,950,524   4,949,351   4,953,008 
Diluted  4,968,724   4,971,024   4,969,851   4,973,508 

 

See accompanying notes to the unaudited condensed financial statements

5

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTSSTATEMENT OF COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED JULY 31,JANUARY 31. 2021 AND 2020 AND 2019

(Unaudited)

 

 Three months Three months Nine months Nine months 
 July 31, 2020 July 31, 2019  ended ended ended ended 
      Jan 31, 2021 Jan 31, 2020 Jan 31, 2021 Jan 31, 2020 
Net Income $2,492,000  $976,000  $4,447,000  $1,364,000  $7,799,000  $3,296,000 
                        
Other Comprehensive Income, Net of Tax                        
Unrealized gain on debt securities:                        
Unrealized holding gains arising during period  149,000   49,000   59,000   27,000   189,000   77,000 
Income tax expense related to other comprehensive income  (44,000)  (14,000)
Income tax (expense) related to other comprehensive income  (17,000)  (8,000)  (56,000)  (22,000)
                
Other Comprehensive Income  105,000   35,000   42,000   19,000   133,000   55,000 
                        
Comprehensive Income $2,597,000  $1,011,000  $4,489,000  $1,383,000  $7,932,000  $3,351,000 

 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED JANUARY 31, 2021 AND 2020
(Unaudited)
 
  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, October 31, 2020  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of Common Stock  —   —   —   — 
                 
Unrealized gain, net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, January 31, 2021  4,100  $99,000   8,502,881  $850,000 

 

6

GEORGE RISK INDUSTRIES, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JULY 31, 2020 and 2019

(Unaudited)

  Preferred Stock  

Common Stock

Class A

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

  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, April 30, 2020  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock  —   —   —   — 
                 
Unrealized gain (loss), net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, July 31, 2020  4,100  $99,000   8,502,881  $850,000 
  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, October 31, 2019  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock  —   —   —   — 
                 
Unrealized gain, net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, January 31, 2020  4,100  $99,000   8,502,881  $850,000 

 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC. 
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY 
FOR THE THREE MONTHS ENDED JANUARY 31, 2021 AND 2020
(Unaudited)		 
  
Paid-In  

Treasury Stock

(Common Class A)

  

Accumulated

Other

Comprehensive

  Retained    
Capital  Shares  Amount  Income  Earnings  Total 
$1,934,000   3,553,029  $(4,302,000) $87,000  $42,279,000  $40,947,000 
                       
 —   2,750   (27,000)  —   —   (27,000)
                       
 —   —   —   42,000   —   42,000 
                       
 —   —   —   —   4,447,000   4,447,000 
                       
$1,934,000   3,555,779  $(4,329,000) $129,000  $46,726,000  $45,409,000 

 

7

GEORGE RISK INDUSTRIES, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITIY

FOR THE THREE MONTHS ENDED JULY 31, 2020 and 2019

(Unaudited)

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

      Accumulated      
  Treasury Stock  Other      
Paid-InPaid-In (Common Class A)  Comprehensive Retained    Paid-In  

Treasury Stock

(Common Class A)

 

Accumulated

Other

Comprehensive

  Retained    
CapitalCapital  Shares  Amount  Income  Earnings  Total Capital  Shares  Amount  Income  Earnings  Total 
$1,934,000   3,552,954  $(4,301,000) $(4,000) $41,006,000  $39,584,000 1,934,000   3,550,771  $(4,281,000) $50,000  $40,834,000  $39,486,000 
                                            
—   —   —   —   —   — —   1,850   (17,000)  —   —   (17,000)
                                            
—   —   —   105,000   —   105,000 —   —   —   19,000   —   19,000 
                                            
—   —   —   —   2,492,000   2,492,000 —   —   —   —   1,364,000   1,364,000 
                                            
$1,934,000   3,552,954  $(4,301,000) $101,000  $43,498,000  $42,181,000 1,934,000   3,552,621  $(4,297,000) $69,000  $42,198,000  $40,852,000 

 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED JANUARY 31, 2021 AND 2020
(Unaudited)
 
  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, April 30, 2020  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock  —   —   —   — 
                 
Dividend declared at $0.42 per common share outstanding  —   —   —   — 
                 
Unrealized gain, net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, January 31, 2021  4,100  $99,000   8,502,881  $850,000 

 

8

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED JULY 31, 2020 AND 2019

(Unaudited)

  July 31, 2020  July 31, 2019 
Cash Flows from Operating Activities:        
Net Income $2,492,000  $976,000 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  86,000   89,000 
(Gain) loss on sale of investments  —   (83,000)
Impairments on investments  27,000   34,000 
Unrealized (gain) loss on equity securities  (2,114,000)  (145,000)
Reserve for bad debts  (5,000)  (2,000)
Reserve for obsolete inventory  1,000   8,000 
Deferred income taxes  599,000   28,000 
Changes in assets and liabilities:        
(Increase) decrease in:        
Accounts receivable  49,000   163,000 
Inventories  (405,000)  (288,000)
Prepaid expenses  94,000   79,000 
Employee receivables  (1,000)  2,000 
Increase (decrease) in:        
Accounts payable  117,000   55,000 
Accrued expenses  (61,000)  (66,000)
Income tax payable  346,000   289,000 
Net cash from operating activities  1,225,000   1,139,000 
         
Cash Flows From Investing Activities:        
(Purchase) of property and equipment  (95,000)  (169,000)
Proceeds from sale of marketable securities  14,000   9,000 
(Purchase) of marketable securities  (111,000)  (132,000)
Net cash from investing activities  (192,000)  (292,000)
         
Cash Flows From Financing Activities:        
(Purchase) of treasury stock  —   (53,000)
Net cash from financing activities  —   (53,000)
         
Net Change in Cash and Cash Equivalents $1,033,000  $794,000 
         
Cash and Cash Equivalents, beginning of period $6,458,000  $4,873,000 
Cash and Cash Equivalents, end of period $7,491,000  $5,667,000 
         
Supplemental Disclosure for Cash Flow Information:        
Cash payments for:        
Income taxes paid $0  $0 
Interest paid $0  $0 
  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, April 30, 2019  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock  —   —   —   — 
                 
Dividend declared at $0.40 per common share outstanding                
                 
Unrealized (loss), net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, January 31, 2020  4,100  $99,000   8,502,881  $850,000 

 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC. 
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY 
FOR THE NINE MONTHS ENDED JANUARY 31, 2021 AND 2020
(Unaudited)		 
  
Paid-In  

Treasury Stock

(Common Class A)

  

Accumulated

Other

Comprehensive

  Retained    
Capital  Shares  Amount  Income  Earnings  Total 
$1,934,000   3,552,954  $(4,301,000) $(4,000) $41,006,000  $39,584,000 
                       
 —   2,825   (28,000)  —   —   (28,000)
                       
 —   —   —   —   (2,079,000)  (2,079,000)
                       
 —   —   —   133,000   —   134,000 
                       
 —   —   —   —   7,799,000   7,799,000 
                       
$1,934,000   3,555,779  $(4,329,000) $129,000  $46,726,000  $45,409,000 

 

9
Paid-In  

Treasury Stock

(Common Class A)

  

Accumulated

Other

Comprehensive

  Retained    
Capital  Shares  Amount  Income  Earnings  Total 
$1,934,000   3,544,271  $(4,227,000) $14,000  $40,883,000  $39,553,000 
                       
 —   8,350   (71,000)  —   —   (71,000)
                       
 —   —   —   —   (1,981,000)  (1,981,000)
                       
 —   —   —   55,000   —   55,000 
                       
 —   —   —   —   3,296,000   3,296,000 
                       
$1,934,000   3,552,621  $(4,298,000) $69,000  $42,198,000  $40,852,000 

 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JANUARY 31,2021 AND 2020
(Unaudited)
       
  Jan 31, 2021  Jan 31, 2020 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net Income $7,799,000  $3,296,000 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  297,000   276,000 
(Gain) on sale of investments  (372,000)  (178,000)
Impairments on investments  79,000   41,000 
Unrealized (gain) on equity investments  (4,653,000)  (782,000)
Reserve for bad debts  —   (6,000)
Reserve for obsolete inventory  25,000   42,000 
Deferred income taxes  1,303,000   191,000 
PPP loan debt forgiveness  (950,000)  — 
(Gain) on sale of assets  (4,000)  (5,000)
Net book value of assets retired  —   (17,000)
Changes in assets and liabilities:        
(Increase) decrease in:        
Accounts receivable  (376,000)  460,000 
Inventories  (823,000)  (506,000)
Prepaid expenses  327,000   43,000 
Other receivables  (24,000)  2,000 
Income tax overpayment  —   142,000 
Increase (decrease) in:        
Accounts payable  311,000   16,000 
Accrued expenses  54,000   — 
Income tax payable  249,000   — 
Net cash from operating activities  3,242,000   3,015,000 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Proceeds from sale of assets  4,000   7,000 
(Purchase) of property and equipment  (426,000)  (468,000)
Proceeds from sale of marketable securities  18,000   760,000 
(Purchase) of marketable securities  (440,000)  (640,000)
(Purchase) of long-term investment  —   (27,000)
Net cash from investing activities  (844,000)  (368,000)
CASH FLOWS FROM FINANCING ACTIVITIES:        
(Purchase) of treasury stock  (28,000)  (71,000)
Dividends paid  (1,892,000)  (1,802,000)
Net cash from financing activities  (1,920,000)  (1,873,000)
         
NET CHANGE IN CASH AND CASH EQUIVALENTS  478,000   774,000 
         
Cash and Cash Equivalents, beginning of period  6,458,000   4,873,000 
Cash and Cash Equivalents, end of period $6,936,000  $5,647,000 
         
Supplemental Disclosure for Cash Flow Information:        
Cash payments for:        
Income taxes $975,000  $870,000 
Interest paid $—  $— 
Cash receipts for:        
Income taxes $—  $159,000 

 

See accompanying notes to the unaudited condensed financial statements

GEORGE RISK INDUSTRIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JULYJANUARY 31, 20202021

 

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 unaudited condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s April 30, 2020 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 June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which requires entities to use a forward looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The FASB has subsequently issued updates to the standard to provide additional clarification on specific topics. Topic 326 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We have applied this guidance, as of May 1, 2020, using a modified-retrospective approach. The application of this guidance did not require a cumulative effect adjustment to retained earnings and did not have a material effect on our financial statements.

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements on fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. We applied this guidance, as of May 1, 2020. The application of this guidance did not have a material effect on our disclosures.

 

In January 2020, the FASB issued ASU 2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions. ASU 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. For public business entities, the amendments in the ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of ASU 2020-01 to have a material impact on its financial statements.

 

There are no other new accounting pronouncements that are expected to have a significant impact on our financial statements.

10

Note 2:Investments

 

The Company has investments in publicly traded equity securities, state and municipal debt securities, real estate investment trusts, and money markets. The investments in debt securities, which include municipal bonds and bond funds, mature between MarchApril 2021 and January 2044. The Company uses the average cost method to determine the cost of equity securities sold with any unrealized gains or losses reported in the respective period’s earnings. Unrealized gains and losses on debt securities are excluded from earnings and reported separately as a component of stockholder’s equity. Dividend and interest income are reported as earned.

 

As of JulyJanuary 31, 20202021 and April 30, 2020, investments consisted of the following:

 

   Gross Gross      Gross Gross   
Investments at Cost Unrealized Unrealized Fair  Cost Unrealized Unrealized Fair 
July 31, 2020 Basis Gains Losses Value 
January 31, 2021 Basis Gains Losses Value 
Municipal bonds $5,284,000  $180,000  $(38,000) $5,426,000  $5,748,000  $222,000  $(40,000) $5,930,000 
REITs  112,000   —   (36,000)  76,000   131,000   1,000   (20,000)  112,000 
Equity securities  17,101,000   5,000,000   (628,000)  21,473,000   17,012,000   7,048,000   (155,000)  23,905,000 
Money markets and CDs  682,000   —   —   682,000   933,000   —   —   933,000 
Total $23,179,000  $5,180,000  $(702,000) $27,657,000  $23,824,000  $7,271,000  $(215,000) $30,880,000 

 

     Gross  Gross    
Investments at Cost  Unrealized  Unrealized  Fair 
April 30, 2020 Basis  Gains  Losses  Value 
Municipal bonds $5,271,000  $80,000  $(89,000) $5,262,000 
Corporate bonds  26,000   —   —   26,000 
REITs  112,000   —   (44,000)  68,000 
Equity securities  17,119,000   3,446,000   (1,180,000)  19,385,000 
Money markets and CDs  581,000   —   —   581,000 
Total $23,109,000  $3,526,000  $(1,313,000) $25,322,000 

 

Marketable securities that are classified as equity securities are carried at fair value on the balance sheets with changes in fair value recorded as an unrealized gain or (loss) in the statements of income in the period of the change. Upon the disposition of a marketable security, the Company records a realized gain or (loss) on the Company’s statements of income.

 

The Company evaluates all marketable securities for other-than temporaryother-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 for the quarter, but recorded a loss of $79,000 for the nine months ended January 31, 2021. As for the corresponding periods last year, management did not need to record an impairment loss for the quarter ended January 31, 2020 but did record an impairment loss of $27,000$41,000 for the quarternine-months ended JulyJanuary 31, 2020. For the prior quarter ended July 31, 2019, an impairment loss of $34,000 was recorded.

11

The Company’s investments are actively traded in the stock and bond markets. Therefore, either a realized gain or loss is recorded when a sale happens. For the quarter ended JulyJanuary 31, 20202021 the Company had sales of equity securities which yielded gross realized gains of $102,000$288,000 and gross realized losses of $126,000.$35,000. For the same period, sales of debt securities did not yield any gross realized gains, but gross realized losses of $4,000$3,000 were recorded. As for the nine-months ended January 31, 2021 the Company had sales of equity securities which yielded gross realized gains of $575,000 and gross realized losses of $272,000. For the same nine-month period, sales of debt securities did not yield any gross realized gains, but gross realized losses of $9,000 were recorded. During the quarter ending JulyJanuary 31, 2019,2020, the Company recorded gross realized gains and losses on equity securities of $153,000$97,000 and $104,000,$17,000, respectively, while sales of debt securities did not yield any gross realized gains, but gross realized losses of $2,000 were recorded. During the nine-months ending January 31, 2020, the Company recorded gross realized gains and losses on equity securities of $317,000 and $178,000, respectively, as well as gross realized gains and losses on debt securities of $3,000 and $3,000,$5,000, respectively. The gross realized loss numbers include the impaired figures listed in the previous paragraph. Proceeds from sales of securities available for sale were $14,000 for the quarter ended July 31, 2020 and were $9,000 for the same quarter the prior year.

 

The following table showstables show 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 JulyJanuary 31, 20202021 and April 30, 2020, respectively.

 

Unrealized Loss Breakdown by Investment Type at JulyJanuary 31, 20202021

 

 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 $62,000  $—  $342,000  $(38,000) $404,000  $(38,000) $192,000  $(1,000) $     299,000  $(39,000) $491,000  $(40,000)
REITs  48,000   (26,000)  28,000   (10,000)  76,000   (36,000)  37,000   (8,000)  54,000   (13,000)  91,000   (21,000)
Equity securities  4,148,000   (478,000)  1,348,000   (150,000)  5,496,000   (628,000)  1,886,000   (91,000)  256,000   (63,000)  2,142,000   (154,000)
Total $4,258,000  $(504,000) $1,718,000  $(198,000) $5,976,000  $(702,000) $2,115,000  $(100,000) $609,000  $(115,000) $2,724,000  $(215,000)

 

Unrealized Loss Breakdown by Investment Type at April 30, 2020

 

  Less than 12 months  12 months or greater  Total 
Description Fair Value  Unrealized Loss  Fair Value  Unrealized Loss  Fair Value  Unrealized Loss 
Municipal bonds $2,203,000  $(42,000) $484,000  $(47,000) $2,687,000  $(89,000)
REITs  43,000   (30,000)  24,000   (14,000)  67,000   (44,000)
Equity securities  5,496,000   (866,000)  1,651,000   (314,000)  7,147,000   (1,180,000)
Total $7,742,000  $(938,000) $2,159,000  $(375,000) $9,901,000  $(1,313,000)

 

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 JulyJanuary 31, 2020.2021.

 

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 JulyJanuary 31, 2020.

12

2021.

Note 3:Inventories

 

Inventories at JulyJanuary 31, 20202021 and April 30, 2020 consisted of the following:

 

 July 31, April 30,  January 31, April 30, 
 2020 2020  2021 2020 
          
Raw materials $4,657,000  $4,233,000  $4,843,000  $4,233,000 
Work in process  421,000   402,000   491,000   402,000 
Finished goods  568,000   606,000   730,000   606,000 
  5,646,000   5,241,000   6,064,000   5,241,000 
Less: allowance for obsolete inventory  (139,000)  (138,000)  (163,000)  (138,000)
Inventories, net $5,507,000  $5,103,000  $5,901,000  $5,103,000 

 

13

Note 4:Business Segments

 

The following is financial information relating to industry segments:

 

 Three months Three months Nine months Nine months 
 July 31,  ended ended ended ended 
 2020 2019  Jan 31, 2021 Jan 31, 2020 Jan 31, 2021 Jan 31, 2020 
Net revenue:                        
Security alarm products $3,114,000  $2,830,000  $3,876,000  $2,909,000  $11,039,000  $8,700,000 
Cable & wiring tools  800,000   536,000   551,000   547,000   1,596,000   1,680,000 
Other products  133,000   186,000   206,000   133,000   692,000   472,000 
Total net revenue $4,047,000  $3,552,000  $4,633,000  $3,589,000  $13,327,000  $10,852,000 
                        
Income from operations:                        
Security alarm products $912,000  $725,000  $1,008,000  $669,000  $3,119,000  $2,156,000 
Cable & wiring tools  235,000   137,000   145,000   129,000   451,000   417,000 
Other products  39,000   48,000   63,000   36,000   196,000   117,000 
Total income from operations $1,186,000  $910,000  $1,216,000  $834,000  $3,766,000  $2,690,000 
                        
Depreciation and amortization:                        
Security alarm products $22,000  $23,000  $37,000  $(22,000) $98,000  $72,000 
Cable & wiring tools  31,000   31,000   31,000   31,000   92,000   92,000 
Other products  12,000   20,000   19,000   34,000   47,000   50,000 
Corporate general  21,000   15,000   21,000   50,000   60,000   62,000 
Total depreciation and amortization $86,000  $89,000  $108,000  $93,000  $297,000  $276,000 
                        
Capital expenditures:                        
Security alarm products $93,000  $169,000  $65,000  $—  $307,000  $178.000 
Cable & wiring tools  —   —   —   —   —   — 
Other products  2,000   —   —   18,000   113,000   18,000 
Corporate general  —   —   —   272,000   6,000   272,000 
Total capital expenditures $95,000  $169,000  $65,000  $290,000  $426,000  $468,000 

 

 July 31, 2020  April 30, 2020 
Identifiable assets:      
Security alarm products $7,391,000  $7,150,000 
Cable & wiring tools  3,152,000   2,684,000 
Other products  440,000   724,000 
Corporate general  36,366,000   33,204,000 
Total assets $47,349,000  $43,762,000 

14

  January 31, 2021  April 30, 2020 
Identifiable assets:        
Security alarm products $8,555,000  $7,150,000 
Cable & wiring tools  2,627,000   2,684,000 
Other products  777,000   724,000 
Corporate general  38,783,000   33,204,000 
Total assets $50,742,000  $43,762,000 
Note 5: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 July 31, 2020  For the three months ended January 31, 2021 
 Income Shares Per-Share  Income Shares Per-Share 
 (Numerator)  (Denominator)  Amount  (Numerator)  (Denominator)  Amount 
Net income $2,492,000          $4,447,000         
Basic EPS $2,492,000   4,949,927  $.50  $4,447,000   4,948,224  $.90 
Effect of dilutive Convertible Preferred Stock  –   20,500   —   –   20,500   — 
Diluted EPS $2,492,000   4,970,427  $.50  $4,447,000   4,968,724  $.89 

 

 For the three months ended July 31, 2019  For the three months ended January 31, 2020 
 Income Shares Per-Share  Income Shares Per-Share 
 (Numerator)  (Denominator)  Amount  (Numerator)  (Denominator)  Amount 
Net income $976,000          $1,364,000         
Basic EPS $976,000   4,956,389  $.20  $1,364,000   4,950,524  $.28 
Effect of dilutive Convertible Preferred Stock  –   20,500   —   –   20,500   — 
Diluted EPS $976,000   4,976,889  $.20  $1,364,000   4,971,024  $.27 

 

  For the nine months ended January 31, 2021 
  Income  Shares  Per-Share 
  (Numerator)  (Denominator)  Amount 
Net income $7,799,000         
Basic EPS $7,799,000   4,949,351  $1.58 
Effect of dilutive Convertible Preferred Stock  –   20,500   — 
Diluted EPS $7,799,000   4,969,851  $1.57 

  For the nine months ended January 31, 2020 
  Income  Shares  Per-Share 
  (Numerator)  (Denominator)  Amount 
Net income $3,296,000         
Basic EPS $3,296,000   4,953,008  $.67 
Effect of dilutive Convertible Preferred Stock  –   20,500   — 
Diluted EPS $3,296,000   4,973,508  $.66 

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 Company. The Plan is intended to be qualified under Section 401(k) of the Internal Revenue Code of 1986, as amended. It is funded by voluntary pre-tax and Roth (taxable) contributions from eligible employees who may contribute a percentage of their eligible compensation, limited and subject to statutory limits. Employees are eligible to participate in the Plan when they have attained the age of 21 and completed one thousand hours of service in any plan year with the Company. Upon leaving the Company, each participant is 100% vested with respect to the participants’ contributions while the Company’s matching contributions are vested over a six-year period in accordance with the Plan document. Contributions are invested, as directed by the participant, in investment funds available under the Plan. Matching contributions by the Company of approximately $13,000$16,000 and $2,000$14,000 were paid induring each quarter ending January 31, 2021 and 2020, respectively. Likewise, the Company paid matching contributions of the quartersapproximately $46,000 and $23,000 during each nine-month period ending JulyJanuary 31, 2021 and 2020, and 2019 respectively.

15

Note 7:Fair Value Measurements

 

The carrying valueGenerally accepted accounting principles in the United States of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate theirAmerica (US GAAP) defines fair value due to their short term nature. The fair value of our investments is determined utilizing market based information. Fair value isas 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 JulyJanuary 31, 2020,2021, our investments consisted of money markets, certificates of deposit, publicly traded equity securities, real estate investment trusts (REITs) as well as certain state and municipal debt securities. Thesecurities and corporate bonds. Our marketable securities are valued using third-party broker statements. The value of the majority of securitiesinvestments 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 table setstables set forth our assets and liabilities measured at fair value on a recurring basis and a non-recurring basis by level within the fair value hierarchy. As required by US GAAP, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

16

 Assets Measured at Fair Value on a Recurring Basis as of
July 31, 2020		  Assets Measured at Fair Value on a Recurring Basis as of
January 31, 2021		 
 Level 1 Level 2 Level 3 Total  Level 1 Level 2 Level 3 Total 
Assets:                         
Municipal Bonds $—  $5,426,000  $—  $5,426,000  $—  $5,930,000  $—  $5,930,000 
REITs  —   76,000   —   76,000   —   112,000   —   112,000 
Equity Securities  21,473,000   —   —   21,473,000   23,905,000   —   —   23,905,000 
Money Markets and CDs  682,000   —   —   682,000   933,000   —   —   933,000 
Total fair value of assets measured on a recurring basis $22,155,000  $5,502,000  $—  $27,657,000  $24,838,000  $6,042,000  $—  $30,880,000 

 

  Assets Measured at Fair Value on a Recurring Basis as of
April 30, 2020		 
  Level 1  Level 2  Level 3  Total 
Assets:            
Municipal Bonds $—  $5,262,000  $—  $5,262,000 
Corporate Bonds  26,000   —   —   26,000 
REITs  —   68,000   —   68,000 
Equity Securities  19,385,000   —   —   19,385,000 
Money Markets and CDs  581,000   —   —   581,000 
Total fair value of assets measured on a recurring basis $19,992,000  $5,330,000  $—  $25,322,000 

 

Note 8Notes PayablePaycheck Protection Program Loan

 

On April 15, 2020, the Company received loan proceeds of approximately $950,000 (the “PPP Loan”) from FirsTier Bank, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The PPP Loan, which was in the form of a Note dated April 15, 2020 issued to the Company, matures on April 15, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing on November 15, 2020. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on certain other debt obligations.annum. The Company intends to useused the entire PPP Loan amount for qualifying expenses. Under the terms of the PPP, certain amountsproceeds of the PPP Loan may be forgiven if they are used for qualifying expenses as described inexpenses. On December 3, 2020, the CARES Act.

Note 9Subsequent Events

None

17

Company received notice from the lender that the entire amount of the PPP loan was forgiven. In January 2021 it was determined that PPP loan forgiveness was not taxable.

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

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

Item 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 currentnew information becomes available in the future.

 

The following discussion should be read in conjunction with the attached unaudited condensed financial statements, and with the Company’s audited financial statements and discussion for the fiscal year ended April 30, 2020.

 

Executive Summary

 

The Company’s performance improved duringcontinues to improve through the three quarters of the current fiscal year with the third quarter ended July 31, 2020 as comparedstaying strong. The Company is on track to the quarter ended July 31, 2019. The main reasonhave a record setting year for the increasesales. This is mainly due the closure of a competitor that got out of the security switch business at the end of calendar year 2019 resultingand having the ability to continue to work through the COVID-19 pandemic. The state of Nebraska, where we are located, has kept businesses open during the pandemic. Additionally, the Company’s products are traditionally tied to the housing market and with that market remaining strong, it in a major uptick in sales. As a result ofturn helps the increased demand, the Company is experiencing a sizable back order log; however, management has been able to increase inventory. Management now intends to focus on ramping up production to meet customer’s needs in a timely manner.Company’s sales growth. Opportunities include continuingkeeping up with the business growth. One way we are doing this is by looking into more automation. We also continue to learn and grow with our computer system and to continue lookinglook at businesses that might be a good fit to purchase. We also have new products that have hit the marketplace and a couple more that are scheduled to enter the marketplacebe introduced by the end of the calendarfiscal year. Challenges in the coming months include continuing to get product out to customers in a timely manner and dealing with the COVID-19 pandemic restrictions. Raw material pricesPossible COVID-19 challenges include, but are also a concern with tariffs being levied bynot limited to, price increases and/or delays in the US governmentsupply chain, reduced sales, workforce interruptions, and other factors.economic conditions impacting the stock market. Management continues to work at keeping operations flowing as efficient as possible with the hopes of getting the facilities running leaner and more profitable than ever before.

 

Results of Operations

 

 ●Net sales were $4,633,000 for the quarter ended JulyJanuary 31, 2020 showed2021, which is a 13.94%29.09% increase overfrom the corresponding quarter last year. Year-to-date net sales were $13,327,000 at January 31, 2021, which is a 22.81% increase from the same period in the priorlast year. The significant growth in sales is due to our ongoing commitment to outstanding customer service and our ability to customize products. The Company saw increased sales resulting primarily fromis also seeing continued growth since a major competitor no longer selling competing products. Management also believes that they have been successfulclosed its doors at training employees on the new computer system and production is running smoothly.end of 2019.
   
 ●Cost of goods sold decreased from 49.80%was 51.48% of net sales infor the prior year, to 48.23% inquarter ended January 31, 2021 and was 51.04% for the currentsame quarter which is inside of Management’s goal to keep labor and other manufacturing expenses within the range of 45 to 50%. The decreasedlast year. Year-to-date cost of goods sold percentagepercentages were 49.76% for the current nine months and 50.33% for the corresponding nine months last year, which is a reflectionright at the target of training initiatives resulting inless than 50% for both the quarter and year-to-date results. Management continues to train employees for more efficient production.production and strives to get the best price for raw materials.

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 ●Operating expenses increased by $36,000 when comparing$109,000 for the current year quarter as they increased by $230,000 for the nine-months ended January 31, 2021 as compared to the same quarter for the prior year; however, the percentage ofcorresponding periods last year. When comparing percentages in relation to net sales, decreased to 22.46%the operating expenses for the quarter ended JulyJanuary 31, 2020 compared to 24.58%2021 was 22.27% of net sales while it was 25.72% of net sales for the correspondingsame quarter lastthe prior year. For year-to-date numbers, operating expense were 21.99% and 24.88% of net sales for the nine months ended January 31, 2021 and 2020, respectively. The Company has been able to keep the operating expenses at less than 30% of net sales for many years now; however, the actual dollar amount increase is the result ofdue to increased personnel and commission expenseamounts, related to the increase in net sales; however, the Company maintained the ratio of operating expensesincreased sales, and additional labor costs related to net sales at less than 30%, which is in line with historical ratios.hiring new employees and wage increases.
   
 ●Income from operations for the quarter ended JulyJanuary 31, 20192021 was at $1,186,000, which is$1,216,000, a 30.33%45.80% increase from the corresponding quarter last year, which had income from operations of $910,000.$834,000. Income from operations for the nine months ended January 31, 2021 was $3,766,000, which is a 40.00% increase from the corresponding nine months last year, which had income from operations of $2,690,000.
   
 ●Other income and expenses showed a $2,254,000 gainare up $3,159,000 when comparing the current quarter to the same quarter last year. Comparatively, there is an increase of $4,858,000 in other income and expenses for the quarter ended July 31, 2020 as compared to a $388,000 gain for the quarter ended July 31, 2019. For the three months ended July 31, 2020, $2,114,000year-to-date numbers. The majority of activity in these accounts consists of investment interest, dividends, realized gains or losses on sale of investments, and unrealized gains fromor losses on equity securities were recorded, compared tosecurities. The majority of the $145,000 oflarger than normal increases are from unrealized gains, from equity securities recorded for the three months ended July 31, 2019. The remainderwhich is a reflection of the increase is primarily due to dividend and interest income.stock market performing well.
   
 ●The Company’s provision for income taxes showed an increase of $626,000 from $322,000 in the quarter ended July 31, 2019 to $948,000 for the quarter ended July 31, 2020. This increase is primarily due to increased deferred taxes resulting from a much larger unrealized gain for the current quarter.
●In turn,Overall, net income for the quarter ended JulyJanuary 31, 20202021 was $2,492,000, a 155.33% increaseup $3,083,000, or 226.03%, from the correspondingsame quarter last year, which showedyear. Similarly, net income of $976,000.for the nine-month period ended January 31, 2021 was up $4,503,000, or 136.62%, from the same period in the prior year.
   
 ●Earnings per common share for quarter ended January 31, 2021 were $0.90 per share and $1.58 per share for the year-to-date numbers. EPS for the quarter and nine months ended JulyJanuary 31, 2020 were $0.50$0.28 per common share and $0.20$0.67 per common share, for the quarter ended July 31, 2019.respectively.

 

Liquidity and capital resources

 

Operating

Operating
 ●Net cash increased $1,033,000$478,000 during the quarternine months ended JulyJanuary 31, 20202021 as compared to an increase of $794,000$774,000 during the corresponding quarterperiod last year.
   
 ●Accounts receivable decreased $49,000increased $376,000 for the quarter ending Julynine months ended January 31, 20202021 compared with a $163,000$460,000 decrease for the same quarterperiod last year. The smaller decrease incurrent year increase is a result of improved sales, partially offset by slower collections of accounts receivable is directly attributable to somereceivable. Multiple receipts were received after the close of the Company’s customers not paying as timely as before. Management believes this is because of the COVID-19 pandemic. Management still has the ability to collect on accounts and to keep past due accounts to a minimum.reporting period. An analysis of accounts receivable shows that there were only 0.63%3.65% that were over 90 days at JulyJanuary 31, 2020.2021.
●Inventories increased $823,000 during the current nine-month period compared to an increase of $506,000 last year. The larger increase in the current year is primarily due to an increase in raw material and finished goods. The increase in raw material is a result of having enough supply of material for the increase sales. The increase in finished goods relates to the introduction of a new product, a high security switch. We expect these to be sold soon.
   
 ●Inventories increased $405,000 duringPrepaid expenses saw a $327,000 decrease for the current quarter as compared to a $288,000 increase last year. The larger increase isnine months, primarily due to the factinventory being delivered that the Company is stocking up on more raw materials due to increased orders. In addition, the Company is keeping more inventory on handhad been paid for in order to reduce the likelihood of running intoadvance. The prior nine months showed a shortage on some major raw materials, such as we experienced last year.

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●For the quarter ended July 31, 2020 there was a $94,000$43,000 decrease in prepaid expenses compared to a decrease of $79,000 for the quarter ended July 31, 2019. The current decrease is due to less prepayment of raw materials and running through some of our prepaid agreements without needing to renew them.expenses.
   
 ●Accounts payable shows ana $311,000 increase of $117,000 for the quartercurrent nine-month period ended JulyJanuary 31, 20202021 compared to ana $16,000 increase of $55,000 for the same quarter the year before, primarily due to increases in inventory of raw materials and timing issues. Managementprior nine-month period. The company strives to pay all payablesinvoices within terms, unless thereand the variance in increases is a problem withprimarily due to the merchandise.timing of receipt of products and payment of invoices, as well asCOVID-19 related personnel constraints at the end of the current reporting period.
   
 ●Accrued expenses decreased $61,000increased $54,000 for the current quarter asnine-month period compared to a $66,000 decreaseno change for the quarternine-month period ended JulyJanuary 31, 2019.2020. The difference in the amounts is primarily due to timing issues.of payroll periods ending.
   
 ●Income tax payable increased $249,000 for the quarter ended July 31, 2020 increased $346,000,current nine-month period, compared to a $289,000 increasedecrease in income tax overpayment for the quarternine-months ended JulyJanuary 31, 2019.2020. The current increase is largely due to largerhaving increased sales and income and not having large enough income tax estimates in relation to increased income.estimates.
   
  Investing
   
 ●TheAs for our investment activities, the Company purchased $95,000spent approximately $426,000 on acquisitions of property and equipment duringfor the current fiscal quarter. Innine-month period, in comparison $169,000 was spent on purchases of property and equipment duringwith the corresponding quarternine months last year.year, where there was activity of $468,000.
   
 ●TheAdditionally, the Company continues to purchase marketable securities, which include municipal bonds and quality stocks. CashDuring the nine-month period ended January 31, 2021 the buy/sell activity in the investment accounts was high. Net cash spent on purchases of marketable securities for the quarternine-month period ended JulyJanuary 31, 20202021 was $111,000$440,000 compared to $132,000$640,000 spent duringin the quarter ended July 31, 2019. We continueprior nine-month period. The Company continues to use “money manager” accounts for most stock transactions. By doing this, the Company gives an independent third partythird-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
   
 ●The Company continues to purchase back common stock when the opportunity arises. For the quarternine-month period ended JulyJanuary 31, 2020,2021, the Company did not buyback anypurchased $28,000 worth of treasury stock, comparedstock. This is in comparison to the $53,000 of common stock purchased during$71,000 spent in the same nine months period the prior year.

20●The company paid out dividends of $1,892,000 during the nine months ending January 31, 2021. These dividends were paid during the second quarter. The company declared a dividend of $0.42 per share of common stock on September 30, 2020 and these dividends were paid by October 31, 2020. As for the prior year numbers, dividends paid was $1,802,000 for the nine months ending January 31, 2020. A dividend of $0.40 per common share was declared and paid during the second fiscal quarter last year.

 

In conjunction with the Company’s Condensed Financial Statements, we have provided theThe following is a list of ratios to help analyze George Risk Industries’ performance:

 

 Qtr ended Qtr ended  As of 
 July 31, 2020 July 31, 2019  January 31, 2021 January 31, 2020 

Working capital

(current assets – current liabilities)

 $40,103,000  $38,750,000  $43,984,000  $35,119,000 

Current ratio

(current assets / current liabilities)

  11.485   17.882   14.430   16.831 

Quick ratio

((cash + current investments + AR) / current liabilities)

  9.953   15.622 

Quick ratio

((cash + investments + AR) / current liabilities)

  12.567   14.597 

 

New Product Development

 

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

 

 ●A new face plateExplosion proof contacts that will be UL listed for hazardous locations. There has been demand from our pool alarms is nearing completion. The innovative design is slim in style and will also allow the homeowner to change the plate to match their décor.customers for this type of high security magnetic reed switch.
   
 ●An updated version of the pool access alarm is currently going through(PAA) has met electrical listing testing. Since the COVID-19 pandemic has happened, not much testing has progressed(ETL) approval and we are currently waiting on component parts to begin production and field testing. This next-generation model combines our battery operated DPA series with our hard wired 289 series. A variety of installation options will be available through jumper pin settings.
   
 ●Wireless technology is a main area of focus for product development. We are looking intoconsidering 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 Alarmpool access 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.
●In the next months we are introducing a couple of new security products. First, the 2707 Series are triple high biased magnetic reed contacts for high security and are available in SPDT and DPDT models. These contacts are resistant to magnetic tamper and defeat. They are used in applications such as airports, biotechnology labs, manufacturing plants, banks, military bases and energy-generation facilities. Secondly, the 3040 Panic Switch contains screw terminals and uses an actuating lever which can be triggered with only the tip of the finger. It can be installed under a counter or desk or any similar place. The 3040CT uses 12’ extreme temperature rated wire for installation in refrigerators and freezers. Both models have a latching LED indicating when the switch is activated and automatically resets when the lever is closed and is fully re-armed. Latching LED and UL Listed versions are planned to follow.
●We have launched our new GR1840 Oval Metal Door Channel Magnet. This is a direct replacement for the obsolete Interlogix magnet. This magnet fits into the top channel of a metal door and does not require drilling into the door core. We have also paired this with several of our ¾” and 1” steel door contacts.
●There have been several new products that have been introduced for our cable and wiring tools segment. First, a 12” adjustable hole cutter which compliments the popular 10” hole cutter. Using a standard drill, this tool allows you to drill various size holes in the ceiling for speakers and canned lights. The dust bin which buts against the ceiling keeps the ceiling material and dust enclosed making for a clean, time saving installation. Secondly, the lighted Bullnose tips come in a variety of colors; red, green and blue to go along with the standard clear lights. These colored lights are placed on FiberFuse wire running rods which allows easy location of the rod ends in dark places such as attics and crawlspaces. The rods can be color coded for wire paths running into different rooms. Larger batteries add to the longevity of these new lights.

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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 June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which requires entities to use a forward looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The FASB has subsequently issued updates to the standard to provide additional clarification on specific topics. Topic 326 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We have applied this guidance, as of May 1, 2020, using a modified-retrospective approach. The application of this guidance did not require a cumulative effect adjustment to retained earnings and did not have a material effect on our financial statements.

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements on fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. We applied this guidance, as of May 1, 2020. The application of this guidance did not have a material effect on our disclosures.

 

In January 2020, the FASB issued ASU 2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions. ASU 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. For public business entities, the amendments in the ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of ASU 2020-01 to have a material impact on its financial statements.

 

There are no other new accounting pronouncements that are expected to have a significant impact on our financial statements.

22

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

Item 3.Quantitative and Qualitative Disclosures About Market Risk

 

This disclosure does not apply.Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable

Item 4.Controls and Procedures

Item 4. Controls and Procedures

 

Our management, under the supervision and with the participation of our chief executive officer (also working as our chief financial officer), evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of JulyJanuary 31, 2020.2021. Based on that evaluation, management 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.

 

In our annual report filed on Report 10-K for the year ended April 30, ,2020,2020, management identified the following material weakness in our internal control over financial reporting:

 

 ●The small size of our Company limits our ability to achieve the desired level of separation of duties for proper internal controls and financial reporting, particularly as it relates to financial reporting to assure material disclosures or implementation of newly issued accounting standards are included. A secondary review over annual and quarterly filings does not occur. Due to the departure of the Controller, the current CEO and CFO roles are being fulfilled by the same individual. We do not have an audit committee. We do not believe we have met the full requirement for separation for financial reporting purposes.

We continue to operate with a limited number of accounting and financial personnel. For the quarter ending July 31, 2020A Controller was hired by the Company did not have a Controller, but this position was filled in September 2020. Training will be requiredis currently happening to fulfill disclosure control and procedure responsibilities, including review procedures for key accounting schedules and timely and proper documentation of material transactions and agreements. Until further sufficient training has taken placebeen completed for this new Controller, we believe this control deficiency represents material weaknesses in internal control over financial reporting. To mitigate the effects of the material weakness identified in our annual report, the Company contracted with an outside CPA to perform a secondary review of our quarterly report filed on Form 10-Q.

 

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 Overover Financial Reporting

 

Other than those mentioned above, there were no changes in our internal control over financial reporting during the fiscal quarter ended JulyJanuary 31, 20202021 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

Item 1. Legal Proceedings

 

Not applicable

 

Item 1A. Risk Factors

Not applicable.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

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 firstthird quarter of fiscal year 2021.

 

Period Number of shares repurchased
MayNovember 1, 2020 – MayNovember 30, 2020550
December 1, 2020 – December 31, 2020 -0-1,000
JuneJanuary 1, 20202021 – June 30, 2020January 31, 2021 -0-
July 1, 2020 – July 31, 20201,200 -0-

Item 3.Defaults upon Senior Securities

Item 3. Defaults upon Senior Securities

 

Not applicable

Item 4.Mine Safety Disclosures

Item 4. Mine Safety Disclosures

 

Not applicable

Item 5.Other Information

Item 5. Other Information

 

Not applicable

Item 6.Exhibits

Item 6. Exhibits

 

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

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SIGNATURES

 

In accordance withPursuant to 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 September 18, 2020March 17, 2021By:/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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