UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

(Mark One)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 ORor 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterquarterly period ended JanuaryJuly 31, 2022

 

☐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)incorporation or organization) 

(IRSI.R.S. Employers Identification No.)

 

802 S.South Elm St.,

Kimball, NE

 69145
 (Address(Address of principal executive offices) (Zip Code)

 

((308)308) 235-4645

(Registrant’s telephone number, including area code)

 

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

 

Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.10 par valueRSKIAOTC Markets
Convertible Preferred Stock, $20 stated valueRSKIAOTC 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 precedingpast 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 ☒ 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 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 ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smallersmall 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 ☒
  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 ☒

 

APPLICABLE ONLY TO CORPORATE ISSUERS:ISSUERS

 

The number of shares of the Registrant’s Common Stock outstanding, as of March 17,September 20, 2022 was 4,931,5884,930,988.

 

 

 

 

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ITEM 1:Financial Statements

 

The unaudited financial statements for the three- and nine-monththree-month period ended JanuaryJuly 31, 2022 are attached hereto.

 

2
 

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

 

        
 January 31, 2022 April 30, 2021  July 31, 2022 April 30, 2022 
 (unaudited)    (unaudited)   
ASSETS                
Current Assets:                
Cash and cash equivalents $6,388,000  $7,326,000  $7,649,000  $6,078,000 
Investments and securities  33,154,000   33,337,000 
Investments and securities, at fair value  30,827,000   30,979,000 
Accounts receivable:                
Trade, net of $25,747 and $9,947 doubtful account allowance  3,705,000   3,812,000 
Trade, net of allowance for credit losses of $20,036 and $33,531  3,629,000   4,114,000 
Other  16,000   16,000   17,000   16,000 
Inventories, net  6,858,000   5,622,000   8,841,000   7,940,000 
Prepaid expenses  1,395,000   405,000   1,091,000   1,362,000 
Total Current Assets  51,516,000   50,518,000   52,054,000   50,489,000 
                
Property and Equipment, net  1,641,000   1,704,000 
Property and Equipment, net, at cost  1,779,000   1,782,000 
                
Other Assets                
Investment in Limited Land Partnership, at cost  344,000   320,000   344,000   344,000 
Projects in process  259,000   200,000   92,000   83,000 
Other  41,000   —   8,000   62,000 
Total Other Assets  644,000   520,000   444,000   489,000 
                
Intangible Assets, net  1,302,000   1,394,000 
Intangible assets, net  1,240,000   1,271,000 
                
TOTAL ASSETS $55,103,000  $54,136,000  $55,517,000  $54,031,000 

 

See accompanying notes to the unaudited condensed financial statements.statements

3
 

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

(continued)

 

 January 31, 2022 April 30, 2021  July 31, 2022 April 30, 2022 
 (unaudited)    (unaudited)   
LIABILITIES AND STOCKHOLDERS’ EQUITY                
        
Current Liabilities                
Accounts payable, trade $301,000  $477,000  $300,000  $320,000 
Dividends payable  2,296,000   2,080,000   2,296,000   2,296,000 
Accrued expenses  489,000   359,000 
Accrued expenses:        
Payroll and related expenses  471,000   354,000 
Property taxes  4,000   — 
Income tax payable  244,000   81,000   686,000   277,000 
Total Current Liabilities  3,330,000   2,997,000   3,757,000   3,247,000 
                
Long-Term Liabilities                
Deferred income taxes  2,384,000   2,735,000   1,810,000   1,742,000 
Total Long-Term Liabilities  2,384,000   2,735,000   1,810,000   1,742,000 
                
Total Liabilities  5,714,000   5,732,000   5,567,000   4,989,000 
                
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 
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   850,000   850,000 
Additional paid-in capital  1,934,000   1,934,000   1,934,000   1,934,000 
Accumulated other comprehensive income  5,000   108,000   (117,000)  (137,000)
Retained earnings  50,872,000   49,749,000   51,733,000   50,843,000 
Less: treasury stock, 3,559,125 and 3,556,412 shares, at cost  (4,371,000)  (4,336,000)
Less: treasury stock, 3,571,893 and 3,571,693 shares, at cost  (4,549,000)  (4,547,000)
Total Stockholders’ Equity  49,389,000   48,404,000   49,950,000   49,042,000 
                
TOTAL LIABILITES AND STOCKHOLDERS’ EQUITY $55,103,000  $54,136,000 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $55,517,000  $54,031,000 

 

See accompanying notes to the unaudited condensed financial statements

 

4
 

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED INCOME STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED JANUARYJULY 31, 2022 AND 2021

(Unaudited)

 

 Three months Three months Nine months Nine months         
 ended ended ended ended  July 31, 2022 July 31, 2021 
 Jan 31, 2022 Jan 31, 2021 Jan 31, 2022 Jan 31, 2021      
Net Sales $5,054,000  $4,633,000  $15,252,000  $13,327,000  $5,210,000  $4,955,000 
Less: Cost of Goods Sold  (2,861,000)  (2,385,000)  (7,908,000)  (6,631,000)  (2,657,000)  (2,318,000)
Gross Profit  2,193,000   2,248,000   7,344,000   6,696,000   2,553,000   2,637,000 
                        
Operating Expenses                
Operating Expenses:        
General and Administrative  371,000   362,000   1,070,000   1,040,000   332,000   349,000 
Sales  649,000   639,000   2,109,000   1,809,000   734,000   740,000 
Engineering  29,000   31,000   67,000   81,000   21,000   18,000 
Total Operating Expenses  1,049,000   1,032,000   3,246,000   2,930,000   1,087,000   1,107,000 
                        
Income From Operations  1,144,000   1,216,000   4,098,000   3,766,000   1,466,000   1,530,000 
                        
Other Income (Expense)                        
Other  1,000   952,000   15,000   1,008,000   2,000   1,000 
Dividend and Interest Income  552,000   317,000   876,000   608,000   184,000   176,000 
Unrealized Gain (Loss) on equity securities  (1,729,000)  2,654,000   (687,000)  4,653,000 
Gain on Sale of Investments  91,000   250,000   391,000   293,000 
Gain on Sale of Assets  —   —   —   4,000 
Unrealized gain (loss) on equity securities  (189,000)  420,000 
Gain (Loss) on Sale of Investments  (99,000)  220,000 
Total Other Income (Expense)  (1,085,000)  4,173,000   595,000   6,566,000   (102,000)  817,000 
                        
Income Before Provisions for Income Taxes  59,000   5,389,000   4,693,000   10,332,000   1,364,000   2,347,000 
                        
Provisions for Income Taxes:                
Provisions for Income Taxes        
Current Expense  455,000   199,000   1,407,000   1,230,000   414,000   498,000 
Deferred Tax Expense (Benefit)  (557,000)  743,000   (309,000)  1,303,000 
Total Income Tax Expense (Benefit)  (102,000)  942,000   1,098,000   2,533,000 
Deferred tax (benefit) expense  (101,000)  103,000 
Total Income Tax Expense  313,000   601,000 
                        
Net Income $161,000  $4,447,000  $3,595,000  $7,799,000  $1,051,000  $1,746,000 
                        
Income Per Share of Common Stock                
Basic $0.03  $0.90  $0.73  $1.58 
Diluted $0.03  $0.89  $0.72  $1.57 
Basic Earnings Per Share of Common Stock $0.21  $0.35 
Diluted Earnings Per Share of Common Stock $0.21  $0.35 
                        
Weighted Average Number of Common                
Shares Outstanding                
Weighted Average Number of Common Shares Outstanding                  4,931,022   4,946,460 
Basic  4,943,985   4,948,224   4,945,192   4,949,351 
Diluted  4,964,485   4,968,724   4,965,692   4,969,851 
Weighted Average Number of Shares Outstanding (Diluted)  4,951,522   4,966,960 

 

See accompanying notes to the unaudited condensed financial statements

 

5
 

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTSTATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED JANUARY 31.JULY 31, 2022 AND 2021

(Unaudited)

 

  Three months  Three months  Nine months  Nine months 
  ended  ended  ended  ended 
  Jan 31, 2022  Jan 31, 2021  Jan 31, 2022  Jan 31, 2021 
Net Income $161,000  $4,447,000  $3,595,000  $7,799,000 
                 
Other Comprehensive Income (Loss), Net of Tax                
Unrealized gain (loss)on debt securities:                
Unrealized holding gains (losses)arising during period  (94,000)  59,000   (144,000)  189,000 
Income tax benefit (expense) related to other comprehensive income  27,000   (17,000)  41,000   (56,000)
Other Comprehensive Income (Loss)  (67,000)  42,000   (103,000)  133,000 
                 
Comprehensive Income $94,000  $4,489,000  $3,492,000  $7,932,000 
         
  July 31, 2022  July 31, 2021 
       
Net Income $1,051,000  $1,746,000 
         
Other Comprehensive Income, Net of Tax        
Unrealized gain on debt securities:        
Unrealized holding gains arising during period  29,000   11,000 
Income tax expense related to other comprehensive income  (9,000)  (4,000)
Other Comprehensive Income  20,000   7,000 
         
Comprehensive Income $1,071,000  $1,753,000 

 

See accompanying notes to the unaudited condensed financial statements

 

6
 

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JANUARYJULY 31, 2022 ANDand 2021

(Unaudited)

 

  Shares  Amount  Shares  Amount 
  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, October 31, 2021  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of Common Stock  —   —   —   — 
Dividend declared at $0.50 per common share outstanding  -       -     
                 
Unrealized gain, net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, January 31, 2022  4,100  $99,000   8,502,881  $850,000 
                 
  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, April 30, 2021  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock  —   —   —   — 
                 
Unrealized gain, net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, July 31, 2021  4,100  $99,000   8,502,881  $850,000 

 

 Preferred Stock 

Common Stock

Class A

  Preferred Stock  

Common Stock

Class A

 
 Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount 
Balances, October 31, 2020  4,100  $99,000   8,502,881  $850,000 
Balances, April 30, 2022  4,100  $99,000   8,502,881  $850,000 
                
Prior period adjustment for tax provisions related to depreciation  —   —   —   — 
                                
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 
Balances, July 31, 2022  4,100  $99,000   8,502,881  $850,000 

 

See accompanying notes to the unaudited condensed financial statements

 

7
 

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITYEQUITIY

FOR THE THREE MONTHS ENDED JANUARYJULY 31, 2022 ANDand 2021

(Unaudited)

 

 Capital  Shares  Amount  Income  Earnings  Total 
 Paid-In  

Treasury Stock

(Common Class A)

  Accumulated Other Comprehensive  Retained    
 Capital  Shares  Amoun  Income  Earnings  Total 
Balances, October 31, 2021$1,934,000   3,558,425  $(4,362,000) $72,000  $50,711,000  $49,304,000 
                        
Purchases of Common Stock —   700   (9,000)  —   —   (9,000)
Dividend declared at $0.50 per common share outstanding                       
                        
Unrealized gain, net of tax effect —   —   —   (67,000)  —   (67,000)
                        
Net Income —   —   —   —   161,000   161,000 
                        
Balances, January 31, 2022$1,934,000   3,559,125  $(4,371,000) $5,000  $50,872,000  $49,389,000 
                        
          Accumulated       
    Treasury Stock  Other       
 Paid-In  (Common Class A)  Comprehensive  Retained    
 Capital  Shares  Amount  Income  Earnings  Total 
Balances, April 30, 2021$1,934,000   3,556,412  $(4,336,000) $108,000  $49,749,000  $48,404,000 
                        
Purchases of common stock —   13   —   —   —   — 
                        
Unrealized gain (loss), net of tax effect —   —   —   7,000   —   7,000 
                        
Net Income —   —   —   —   1,746,000   1,746,000 
                        
Balances, July 31, 2021$1,934,000   3,556,425  $(4,336,000) $115,000  $51,495,000  $50,157,000 

 

Capital  Shares  Amount  Income  Earnings  Total        Accumulated      
Paid-In  

Treasury Stock

(Common Class A)

 

Accumulated

Other

Comprehensive

  Retained       Treasury Stock Other      
Capital  Shares  Amount  Income  Earnings  Total Paid-In  (Common Class A)  Comprehensive  Retained    
Balances, October 31, 2020$1,934,000   3,553,029  $(4,302,000) $87,000  $42,279,000  $40,947,000 
Capital  Shares  Amount  Income  Earnings  Total 
Balances, April 30, 2022$1,934,000   3,571,693  $(4,547,000) $(137,000) $50,843,000  $49,042,000 
                       
Prior period adjustment for tax provisions related to depreciation —   —   —   —   (161,000)  (161,000)
                                              
Purchases of common stock —   2,750   (27,000)  —   —   (27,000) —   200   (2,000)  —   —   (2,000)
                                              
Unrealized gain, net of tax effect —   —   —   42,000   —   42,000  —   —   —   20,000   —   20,000 
                                              
Net Income —   —   —   —   4,447,000   4,447,000  —   —   —   —   1,051,000   1,051,000 
                                              
Balances, January 31, 2021$1,934,000   3,555,779  $(4,329,000) $129,000  $46,726,000  $45,409,000 
Balances, July 31, 2022$1,934,000   3,571,893  $(4,549,000) $(117,000) $51,733,000  $49,950,000 

 

See accompanying notes to the unaudited condensed financial statements

 

8
 

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITYCASH FLOWS

FOR THE NINETHREE MONTHS ENDED JANUARYJULY 31, 2022 AND 2021

(Unaudited)

 

  Shares  Amount  Shares  Amount 
  Preferred Stock  

Common Stock

Class A

 
  Shares  Amount  Shares  Amount 
Balances, April 30, 2021  4,100  $99,000   8,502,881  $850,000 
                 
Purchases of common stock  —   —   —   — 
                 
Dividend declared at $0.50 per common share outstanding  —   —   —   — 
                 
Unrealized gain, net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, January 31, 2022  4,100  $99,000   8,502,881  $850,000 

  Shares  Amount  Shares  Amount 
  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 (loss), net of tax effect  —   —   —   — 
                 
Net Income  —   —   —   — 
                 
Balances, January 31, 2021  4,100  $99,000   8,502,881  $850,000 
         
  July 31, 2022  July 31, 2021 
Cash Flows from Operating Activities:        
Net Income $1,051,000  $1,746,000 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  108,000   107,000 
(Gain) loss on sale of investments  99,000   (220,000)
Unrealized (gain) loss on equity securities  189,000   (420,000)
Provision for credit losses on accounts receivable  (13,000)  6,000 
Reserve for obsolete inventory  46,000   5,000 
Deferred income taxes  (101,000)  103,000 
Changes in assets and liabilities:        
(Increase) decrease in:        
Accounts receivable  499,000   154,000 
Inventories  (947,000)  (549,000)
Prepaid expenses  317,000   (196,000)
Employee receivables  (1,000)  2,000 
Increase (decrease) in:        
Accounts payable  (21,000)  (236,000)
Accrued expenses  121,000   99,000 
Income tax payable  409,000   547,000 
Net cash from operating activities  1,756,000   1,148,000 
         
Cash Flows From Investing Activities:        
(Purchase) of property and equipment  (74,000)  (40,000)
Proceeds from sale of marketable securities  2,000   2,000 
(Purchase) of marketable securities  (111,000)  (98,000)
Net cash from investing activities  (183,000)  (136,000)
         
Cash Flows From Financing Activities:        
(Purchase) of treasury stock  (2,000)  — 
Dividends paid  —   (7,000)
Net cash from financing activities  (2,000)  (7,000)
         
Net Change in Cash and Cash Equivalents $1,571,000  $1,005,000 
         
Cash and Cash Equivalents, beginning of period $6,078,000  $7,326,000 
Cash and Cash Equivalents, end of period $7,649,000  $8,331,000 
         
Supplemental Disclosure for Cash Flow Information:        
Cash payments for:        
Income taxes paid $0  $0 
Interest paid $0  $0 
         
Cash receipts for:        
Income taxes $0  $43,000 

 

See accompanying notes to the unaudited condensed financial statements

 

9
 

 

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED JANUARY 31, 2022 AND 2021

(Unaudited)

 Capital  Shares  Amount  Income  Earnings  Total 
 

Paid-In

  

Treasury Stock

(Common Class A)

  

Accumulated

Other

Comprehensive

  

Retained

    
 Capital  Shares  Amount  Income  Earnings  Total 
Balances, April 30, 2021$1,934,000   3,556,412  $(4,336,000) $108,000  $49,749,000  $48,404,000 
                        
Purchases of common stock —   2,713   (35,000)  —   —   (35,000)
                        
Dividend declared at $0.50 per common share outstanding —   —   —   —   (2,472,000)  (2,472,000)
                        
Unrealized gain, net of tax effect —   —   —   (103,000)  —   (103,000)
                        
Net Income —   —   —   —   3,595,000   3,595,000 
                        
Balances, January 31, 2022$1,934,000   3,559,125  $(4,371,000) $5,000  $50,872,000  $49,389,000 

 

Paid-In

  

Treasury Stock

(Common Class A)

  

Accumulated

Other

Comprehensive

  

Retained

    
 Capital  Shares  Amount  Income  Earnings  Total 
Balances, April 30, 2020$1,934,000   3,552,954  $(4,301,000) $(4,000) $41,006,000  $39,584,000 
                        
Purchases of common stock —   2,825   (28,000)  —   —   (28,000)
                        
Dividend declared at $0.42 per common share outstanding —   —   —   —   (2,079,000)  (2,079,000)
                        
Unrealized (loss), net of tax effect —   —   —   133,000   —   133,000 
                        
Net Income —   —   —   —   7,799,000   7,799,000 
                        
Balances, January 31, 2021$1,934,000   3,555,779  $(4,329,000) $129,000  $46,726,000  $45,409,000 

See accompanying notes to the unaudited condensed financial statements

10

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED JANUARY 31, 2022 AND 2021

(Unaudited)

  Jan 31, 2022  Jan 31, 2021 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net Income $3,595,000  $7,799,000 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  319,000   297,000 
(Gain) on sale of investments  (391,000)  (372,000)
Impairments on investments  —   79,000 
Unrealized (gain) loss on equity investments  686,000   (4,653,000)
Reserve for bad debts  16,000   — 
Reserve for obsolete inventory  229,000   25,000 
Deferred income taxes  (310,000)  1,303,000 
PPP loan debt forgiveness  —   (950,000)
(Gain) on sale of assets  —   (4,000)
Changes in assets and liabilities:        
(Increase) decrease in:        
Accounts receivable  91,000   (376,000)
Inventories  (1,465,000)  (823,000)
Prepaid expenses  (1,089,000)  327,000 
Other receivables  —   (24,000)
Increase (decrease) in:        
Accounts payable  (176,000)  311,000 
Accrued expenses  130,000   54,000 
Income tax payable  163,000   249,000 
Net cash from operating activities  1,798,000   3,242,000 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Proceeds from sale of assets  —   4,000 
(Purchase) of property and equipment  (164,000)  (426,000)
Proceeds from sale of marketable securities  383,000   18,000 
(Purchase) of marketable securities  (640,000)  (440,000)
(Purchase) of long-term investment  (24,000)  — 
Net cash from investing activities  (445,000)  (844,000)
CASH FLOWS FROM FINANCING ACTIVITIES:        
(Purchase) of treasury stock  (35,000)  (28,000)
Dividends paid  (2,256,000)  (1,892,000)
Net cash from financing activities  (2,291,000)  (1,920,000)
         
NET CHANGE IN CASH AND CASH EQUIVALENTS  (938,000)  478,000 
         
Cash and Cash Equivalents, beginning of period  7,326,000   6,458,000 
Cash and Cash Equivalents, end of period $6,388,000  $6,936,000 
         
Supplemental Disclosure for Cash Flow Information:        
Cash payments for:        
Income taxes $1,290,000  $975,000 
Interest paid $—  $— 
Cash receipts for:        
Income taxes $—  $— 

See accompanying notes to the unaudited condensed financial statements

11

GEORGE RISK INDUSTRIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JANUARYJULY 31, 2022

 

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, 20212022 annual report on Form 10-K.10-K (the “Annual Report”). 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.

 

Significant Accounting Policies — The significant accounting policies used in preparation of these condensed consolidated financial statements are disclosed in our Annual Report, and there have been no changes to the Company’s significant accounting policies during the three months ended July 31, 2022.

Prior Period Financial Statement Adjustment – In connection with the preparation of our financial statements, we identified an immaterial misstatement to our financial statements in the Company’s Annual Report. The misstatement is related to a difference in deferred taxes on depreciation for a few years and up through the year ended April 30, 2022. In accordance with Staff Accounting Bulletins No. 99 (“SAB No. 99”) Topic 1.M, “Materiality” and SAB No. 99 Topic 1.N “Considering the Effects of Misstatements when Quantifying Misstatements in the Current Year Financial Statements,” we evaluated the misstatement and determined that the related impact was not consequential to our financial statements for any annual or interim period for fiscal 2022, any other prior period, nor would the cumulative impact of correcting the misstatement be consequential to our results of operations and equity for the fiscal and interim periods of 2023.

Recently Issued Accounting Pronouncements — In June 2016 the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326),” which was subsequently amended in February 2020 by ASU 2020-02, “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842).” The amendments introduce an impairment model that is based on expected credit losses, rather than incurred losses, to estimate credit losses on certain types of financial instruments (e.g., loans and held-to-maturity securities), including certain off-balance sheet financial instruments (e.g., loan commitments). The expected credit losses should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. Financial instruments with similar risk characteristics may be grouped together when estimating expected credit losses. The update with amendment is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company does not believe this new guidance will have a material impact on its financial statements and will implement the disclosures related to this update beginning in fiscal year 2023.

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. ASU 2020-01 deals with changes in the significant influence of derivative and investments, of which the Company has none and became effective for the Company in the first quarter of 2021. The adoption of this standard did not have any impact on the Company’s condensed financial statements.

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

 

1210
 

 

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 JuneAugust 2022 and September 2042.2042. 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 JanuaryJuly 31, 2022 and April 30, 2021,2022, investments consisted of the following:

Schedule of Investments

   Gross Gross   
Investments at   Gross Gross    Cost Unrealized Unrealized Fair 
January 31, 2022 Cost Unrealized Unrealized Fair 
 Basis Gains Losses Value 
July 31, 2022 Basis Gains Losses Value 
Municipal bonds $5,678,000  $92,000  $(79,000) $5,691,000  $5,538,000  $53,000  $(212,000) $5,379,000 
REITs  131,000   15,000   (5,000)  141,000   93,000   2,000   (4,000)  91,000 
Equity securities  18,360,000   8,723,000   (196,000)  26,887,000   18,251,000   6,715,000   (443,000)  24,523,000 
Money markets and CDs  435,000   —   —   435,000   834,000   —   —   834,000 
Total $24,604,000  $8,830,000  $(280,000) $33,154,000  $24,716,000  $6,770,000  $(659,000) $30,827,000 

 

   Gross Gross   
Investments at   Gross Gross    Cost Unrealized Unrealized Fair 
April 30, 2021 Cost Unrealized Unrealized Fair 
 Basis Gains Losses Value 
April 30, 2022 Basis Gains Losses Value 
Municipal bonds $5,854,000  $198,000  $(43,000) $6,009,000  $5,625,000  $41,000  $(229,000) $5,437,000 
REITs  131,000   11,000   (5,000)  137,000   131,000   16,000   (3,000)  144,000 
Equity securities  17,199,000   9,294,000   (74,000)  26,419,000   18,322,000   6,921,000   (473,000)  24,770,000 
Money markets and CDs  772,000   —   —   772,000   628,000   —   —   628,000 
Total $23,956,000  $9,503,000  $(122,000) $33,337,000  $24,706,000  $6,978,000  $(705,000) $30,979,000 

 

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, there were no impairment lossesloss was recorded for the quarterquarters ended July 31, 2022 and the nine months ended January 31, 2022. As for the corresponding periods last year, management did not record an impairment loss for the quarter ended January 31, 2021, but did record an impairment loss of $79,000 for the nine-months ended January 31, 2021.respectively.

 

1311
 

 

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 occurs.happens. For the quarter ended JanuaryJuly 31, 2022 the Company had sales of equity securities which yielded gross realized gains of $121,000197,000 and gross realized losses of $27,000267,000. For the same period, sales of debt securities did 0not yield any gross realized gains, but gross realized losses of $3,000 29,000were recorded. As for the nine-months ended January 31, 2022 the Company had sales of equity securities which yielded gross realized gains of $465,000 and gross realized losses of $61,000. For the same nine-month period last year, sales of debt securities did 0t yield any gross realized gains, but gross realized losses of $13,000 were recorded. During the quarter ending JanuaryJuly 31, 2021, the Company recorded gross realized gains and losses on equity securities of $288,000 238,000and $35,0008,000, respectively, while sales of debt securities did not yield any gross realized gains, but gross realized losses of $3,000 nowere recorded. During the nine-months ending January 31, 2021, the Company recorded gross realized gains and losses on equity securities of $575,000 and $272,000, respectively. For the same nine-month period last year, sales of debt securities did 0t yield any gross realized gains, but gross realized losses of $9,000 10,000were recorded. The gross realized loss numbers include the impaired figures listed in the previous paragraph.

 

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, 2022 and April 30, 2021,2022, respectively.

Schedule of Unrealized Loss Breakdown by Investment

Unrealized Loss Breakdown by Investment Type at JanuaryJuly 31, 2022

Schedule of Unrealized Loss Breakdown by Investment 

Description Less than 12 months, Fair Value Less than 12 months, Unrealized Loss 12 months or greater, Fair Value 12 months or greater, Unrealized Loss Total, Fair Value Total, Unrealized Loss 
  Less than 12 months, Fair Value   Less than 12 months, Unrealized Loss   12 months or greater, Fair Value   12 months or greater, Unrealized Loss   Total, Fair Value   Total, Unrealized Loss 
       
 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 $1,885,000  $(35,000) $382,000  $(44,000) $2,267,000  $(79,000) $4,265,000  $(157,000) $363,000  $(55,000) $4,628,000  $(212,000)
REITs  —   —   24,000   (5,000)  24,000   (5,000)  17,000   (2,000)  27,000   (2,000)  44,000   (4,000)
Equity securities  1,799,000   (148,000)  295,000   (48,000)  2,094,000   (196,000)  4,112,000   (412,000)  185,000   (31,000)  4,297,000   (443,000)
Total $3,684,000  $(183,000) $701,000  $(97,000) $4,385,000  $(280,000) $8,394,000  $(571,000) $575,000  $(88,000) $8,969,000  $(659,000)

 

Unrealized Loss Breakdown by Investment Type at April 30, 20212022

 

Description Less than 12 months, Fair Value  Less than 12 months, Unrealized Loss  12 months or greater, Fair Value  12 months or greater, Unrealized Loss  Total, Fair Value  Total, Unrealized Loss 
  Less than 12 months  12 months or greater  Total 
Description Fair Value  Unrealized Loss  Fair Value  Unrealized Loss  Fair Value  Unrealized Loss 
Municipal bonds $390,000  $(6,000) $365,000  $(37,000) $755,000  $(43,000)
REITs  —   —   23,000   (5,000)  23,000   (5,000)
Equity securities  340,000   (35,000)  377,000   (39,000)  717,000   (74,000)
Total $730,000  $(41,000) $765,000  $(81,000) $1,495,000  $(122,000)

   Less than 12 months, Fair Value   Less than 12 months, Unrealized Loss   12 months or greater, Fair Value   12 months or greater, Unrealized Loss   Total, Fair Value   Total, Unrealized Loss 
          
  Less than 12 months  12 months or greater  Total 
Description Fair Value  Unrealized Loss  Fair Value  Unrealized Loss  Fair Value  Unrealized Loss 
Municipal bonds $4,420,000  $(142,000) $539,000  $(87,000) $4,959,000  $(229,000)
REITs  18,000   (1,000)  26,000   (2,000)  44,000   (3,000)
Equity securities  4,157,000   (424,000)  274,000   (49,000)  4,431,000   (473,000)
Total $8,595,000  $(567,000) $839,000  $(138,000) $9,434,000  $(705,000)

 

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 JanuaryJuly 31, 2022 and April 31, 2022.

 

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, 2022 and April 30, 2022.

 

1412
 

 

Note 3:Inventories

 

Inventories at JanuaryJuly 31, 2022 and April 30, 20212022 consisted of the following:

Schedule of Inventories

        
 January 31, April 30,  July 31, April 30, 
 2022 2021  2022 2022 
          
Raw materials $5,656,000  $4,399,000  $7,430,000  $6,772,000 
Work in process  692,000   457,000   727,000   618,000 
Finished goods  914,000   768,000 
Inventory in transit  —   173,000   1,018,000   838,000 
Inventory gross  7,262,000   5,797,000   9,175,000   8,228,000 
Less: allowance for obsolete inventory  (404,000)  (175,000)  (334,000)  (288,000)
Inventories, net $6,858,000  $5,622,000  $8,841,000  $7,940,000 

 

1513
 

 

Note 4:Business Segments

 

The following is financial information relating to industry segments:

Schedule of Financial Information Relating to Industry Segments

 Three months Three months Nine months Nine months  2022 2021 
 ended ended ended ended  July 31, 
 Jan 31, 2022 Jan 31, 2021 Jan 31, 2022 Jan 31, 2021  2022 2021 
Net revenue:                        
Security alarm products $4,377,000  $3,876,000  $13,180,000  $11,039,000  $4,502,000  $4,257,000 
Cable & wiring tools  498,000   551,000   1,553,000   1,596,000   484,000   538,000 
Other products  179,000   206,000   519,000   692,000   224,000   160,000 
Total net revenue $5,054,000  $4,633,000  $15,252,000  $13,327,000  $5,210,000  $4,955,000 
                        
Income from operations:                        
Security alarm products $988,000  $1,008,000  $3,541,000  $3,119,000  $1,267,000  $1,315,000 
Cable & wiring tools  117,000   145,000   418,000   451,000   136,000   166,000 
Other products  39,000   63,000   139,000   196,000   63,000   49,000 
Total income from operations $1,144,000  $1,216,000  $4,098,000  $3,766,000  $1,466,000  $1,530,000 
                        
Depreciation and amortization:                        
Security alarm products $42,000  $37,000  $117,000  $98,000  $48,000  $35,000 
Cable & wiring tools  31,000   31,000   92,000   92,000   30,000   31,000 
Other products  18,000   19,000   60,000   47,000   18,000   22,000 
Corporate general  15,000   21,000   50,000   60,000   12,000   19,000 
Total depreciation and amortization $106,000  $108,000  $319,000  $297,000  $108,000  $107,000 
                        
Capital expenditures:                        
Security alarm products $113,000  $65,000  $153,000  $307,000  $74,000  $40,000 
Cable & wiring tools  —   —   —   —   —   — 
Other products  11,000   —   11,000   113,000   —   — 
Corporate general  —   —   —   6,000   —   — 
Total capital expenditures $124,000  $65,000  $164,000  $426,000  $74,000  $40,000 

 

 January 31, 2022 April 30, 2021  July 31, 2022 April 30, 2022 
Identifiable assets:                
Security alarm products $10,138,000  $8,955,000  $11,975,000  $11,537,000 
Cable & wiring tools  2,378,000   2,534,000   2,397,000   2,509,000 
Other products  661,000   667,000   803,000   732,000 
Corporate general  41,926,000   41,980,000   40,342,000   39,253,000 
Total assets $55,103,000  $54,136,000  $55,517,000  $54,031,000 

1614
 

 

Note 5:Earnings per Share

 

Basic and diluted earnings per share, assuming convertible preferred stock was converted for each period presented, are:

Schedule of Basic and Diluted Earnings perPer Share

 For the three months ended January 31, 2022  For the three months ended July 31, 2022 
 Income Shares Per-Share  Income Shares Per-Share 
 (Numerator) (Denominator) Amount  (Numerator)  (Denominator)  Amount 
Net income $161,000                    $1,051,000         
Basic EPS $161,000   4,943,985  $.03  $1,051,000   4,931,022  $.21 
Effect of dilutive Convertible Preferred Stock  –   20,500   —   —   20,500   — 
Diluted EPS $161,000   4,964,485  $.03  $1,051,000   4,951,522  $.21 

 

  For the three months ended January 31, 2021 
  Income  Shares  Per-Share 
  (Numerator)  (Denominator)  Amount 
Net income $4,447,000                
Basic EPS $4,447,000   4,948,224  $.90 
Effect of dilutive Convertible Preferred Stock  –   20,500   — 
Diluted EPS $4,447,000   4,968,724  $.89 

  For the nine months ended January 31, 2022 
  Income  Shares  Per-Share 
  (Numerator)  (Denominator)  Amount 
Net income $3,595,000                 
Basic EPS $3,595,000   4,945,192  $.73 
Effect of dilutive Convertible Preferred Stock  –   20,500   — 
Diluted EPS $3,595,000   4,965,692  $.72 

 For the nine months ended January 31, 2021  For the three months ended July 31, 2021 
 Income Shares Per-Share  Income Shares Per-Share 
 (Numerator)  (Denominator)  Amount  (Numerator)  (Denominator)  Amount 
Net income $7,799,000                   $1,746,000         
Basic EPS $7,799,000   4,949,351  $1.58  $1,746,000   4,946,460  $.35 
Effect of dilutive Convertible Preferred Stock  –   20,500   —   —   20,500   — 
Diluted EPS $7,799,000   4,969,851  $1.57  $1,746,000   4,966,960  $.35 

 

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.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 $16,000 and $17,000 were paid duringin each quarterof the quarters ending January 31, 2022 and 2021. Likewise, the Company paid matching contributions of approximately $48,000 and $46,000 during each nine-month period ending JanuaryJuly 31, 2022 and 2021 respectively.

 

1715
 

 

Note 7:Fair Value Measurements

 

The carrying value of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate their fair value due to their short-termshort term nature. The fair value of our investments is determined utilizing market-basedmarket based information. Fair value is 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, 2022 and April 30, 2022, our investments consisted of money markets, publicly traded equity securities, real estate investment trusts (REITs) as well as certain state and municipal debt securities. OurThe marketable securities are valued using third-party broker statements. The value of the investmentsmajority of securities is derived from quoted market information. The inputs to the valuation are generally classified as Level 1 given the active market for these securities, however, if an active market does not exist, which is the case for municipal 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.

Schedule of Assets Measured at Fair Value on Recurring Basis

1816
 

 

 Level 1 Level 2 Level 3 Total   Level 1  Level 2  Level 3  Total 
 Assets Measured at Fair Value on a Recurring Basis as of
January 31, 2022		  Assets Measured at Fair Value on a Recurring Basis as of
July 31, 2022		 
 Level 1 Level 2 Level 3 Total  Level 1 Level 2 Level 3 Total 
Assets:                                
Municipal Bonds $—  $5,691,000  $—  $5,691,000  $—  $5,379,000  $—  $5,379,000 
REITs  —   141,000   —   141,000   —   91,000   —   91,000 
Equity Securities  26,887,000   —   —   26,887,000   24,523,000   —   —   24,523,000 
Money Markets  435,000   —   —   435,000 
Money Markets and CDs  834,000   —   —   834,000 
Total fair value of assets measured on a recurring basis $27,322,000  $5,832,000  $—  $33,154,000  $25,357,000  $5,470,000  $—  $30,827,000 

 

 Level 1 Level 2 Level 3 Total   Level 1  Level 2  Level 3  Total 
 Assets Measured at Fair Value on a Recurring Basis as of
April 30, 2021		  Assets Measured at Fair Value on a Recurring Basis as of
April 30, 2022		 
 Level 1 Level 2 Level 3 Total  Level 1 Level 2 Level 3 Total 
Assets:                                
Municipal Bonds $—  $6,009,000  $—  $6,009,000  $—  $5,437,000  $—  $5,437,000 
REITs  —   137,000   —   137,000   —   144,000   —   144,000 
Equity Securities  26,419,000   —   —   26,419,000   24,770,000   —   —   24,770,000 
Money Markets  772,000   —   —   772,000 
Money Markets and CDs  628,000   —   —   628,000 
Total fair value of assets measured on a recurring basis $27,191,000  $6,146,000  $—  $33,337,000  $25,398,000  $5,581,000  $—  $30,979,000 

 

Note 88: Subsequent Events

 

None

 

1917
 

 

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 newcurrent 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, 2021.2022.

 

Executive Summary

 

The Company’s performance in operations continuesremained steady during the quarter ended July 31, 2022 as compared to improve through the three quarters ofquarter ended July 31, 2021. Although sales have increased when comparing to the same quarter last year, overall net income is down because realized and unrealized gains on investments are showing losses in the current fiscalquarter, while for the same quarter last year withboth of those categories were income amounts. Also, gross profit and income from operations are lower when comparing to the thirdsame quarter dipping slightly in sales over the second quarter of the current fiscallast year. This is because of increased cost of raw materials and labor. The uptick in sales is mainly due to a price increase that implemented in January 2022. This was done to offset the inabilityincreases in raw material and labor costs that the Company has incurred to obtain all the raw materials that are neededcontinue to complete the manufacture of our products and keeping employees staffed at our locations.do business. The Company is on track tostill feeling the increased demand of having one of our major competitors close its doors at the end of calendar year 2019. The Company still has a considerable back-order log and there has been times that certain raw materials have another record setting year for sales. Additionally, the Company’s products are traditionally tied to the housing market and with that market remaining strong, it in turn helps the Company’s sales grow.not been available. Opportunities include keepingfocusing on ramping up with the business growth and finding waysproduction to meet customer’s needs to get our products outproduct to our customersthem in a timelier manner. One way we are doing this is bytimely manner, which includes looking into more automation. We alsoautomation, and to continue to looklooking 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 be introducedenter the marketplace by the end of the fiscalcalendar 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.restrictions and inflation. Possible COVID-19 challenges include, but are not limited to, price increases and/or delays in the supply chain, reduced sales, workforce interruptions, and economic conditions impacting the stock market. Management continues to work at keeping operations flowing as efficientlyefficient as possible with the hopes of getting the facilities running leaner and more profitable than ever before.

 

Results of Operations

 

 ●Net sales were $5,054,000 for the quarter ended JanuaryJuly 31, 2022 which isshowed a 9.09%5.15% increase from the corresponding quarter last year. Year-to-date net sales were $15,252,000 at January 31, 2022, which is a 14.44% increase fromover the same period lastin the prior year. The significant growth inCompany saw increased sales isresulting primarily from a competitor no longer selling competing products and implementing a price increase that became effective on January 1, 2022. Management also believes that sales continue to grow due to our ongoing commitment to outstanding customer service and our ability to customize products. The Company is also seeing continued growth since a major competitor closed its doors at the end of 2019 and having the ability to continue to work through the COVID-19 pandemic.
   
 ●Cost of goods sold was 56.61%increased from 46.78% of net sales forin the quarter ended January 31, 2022 and was 51.48% for the same quarter last year. Year-to-date cost of goods sold percentages were 51.85% forprior year, to 51.00% in the current nine months and 49.76% for the corresponding nine months last year. The current cost of goods sold percentages are rightquarter, which is just outside of Management’s goal of keepingto keep labor and other manufacturing expenses at less thanbelow 50% for both. The increased cost of goods sold percentage is a result of inflation that has afflicted the quartereconomy recently. Management has seen significant price increases in raw material and year-to-date results. Management continueshas had to work with and train employeesraise wages to work more efficiently. Raw material prices have soared overremain competitive in the current fiscal year and a significant wage increase went into effect for the company at the beginning of the second quarter of the current fiscal year. Management offset some of these added expenses by implementing a 10% price increase effective January 1, 2022.job market.

 

2018
 

 

 ●Operating expenses increaseddecreased by $17,000$20,000 when comparing the current year quarter to the same quarter for the quarter and they increased by $316,000 for the nine-months ended January 31, 2022 as compared to the corresponding periods lastprior year. When comparing percentages in relation to net sales, the operating expenses decreased to 20.86% for the quarter ended JanuaryJuly 31, 2022 was 20.76% of net sales while it was 22.27% of net salesas compared to 22.34% for the samecorresponding quarter last year. The dollar amount decrease is the prior year. For year-to-date numbers, operating expense were 21.28%result of decreased general and 21.99% of net sales for the nine months ended January 31, 2022 and 2021, respectively.administration personnel. The Company has been ablemaintained the ratio of operating expenses to keep the operating expensesnet sales at less than 30% of net sales for many years now; however, the actual dollar amount increase, which is due to increased commission amounts, related to increased sales, and additional labor costs related to hiring new employees and wage increases.in line with historical ratios.
   
 ●Income from operations for the quarter ended JanuaryJuly 31, 2022 was $1,144,000,at $1,466,000, which is a 5.92%4.18% decrease from the corresponding quarter last year, which had income from operations of $1,216,000. Income from operations for the nine months ended January 31, 2022 was $4,098,000, which is an 8.82% increase from the corresponding nine months last year, which had income from operations of $3,766,000.$1,530,000.
   
 ●Other income and expenses showed a $102,000 loss for the quarter ended JanuaryJuly 31, 2022 was $1,085,000, which isas compared to a $5,258,000 decrease from the $4,173,000 other income from the same quarter last year. Comparatively, there is a decrease of $5,971,000 in other income$817,000 gain for the year-to-date numbers. Mostquarter ended July 31, 2021. For the three months ended July 31, 2022, $189,000 of unrealized losses from equity securities were recorded, compared to $420,000 of unrealized gains from equity securities recorded for the three months ended July 31, 2021. The remainder of the activity in these accounts consists of investment interest, dividends, real gains ordecrease is primarily due to losses on salesales of investments, and unrealized gains or losses on equity securities. The main reason for the decrease in the current quarter and year-to-date numbers is unrealized gain and loss on equity securities. The Company is at the mercy of the stock market when it comes to these figures and the COVID-19 pandemic and other economic reasons have influenced those numbers.investments.
   
 ●Overall,The Company’s provision for income taxes showed a decrease of $288,000 from $601,000 in the quarter ended July 31, 2021 to $313,000 for the quarter ended July 31, 2022. This decrease is primarily due to decreased deferred taxes resulting from unrealized losses on equity securities for the current quarter.
●In turn, net income for the quarter ended JanuaryJuly 31, 2022 was down $4,286,000, or 96.38%,$1,051,000, a 39.81% decrease from the samecorresponding quarter last year. Similarly,year, which showed net income for the nine-month period ended January 31, 2022 was down $4,204,000, or 53.90%, from the same period in the prior year.of $1,746,000.
   
 ●Earnings per share for the quarter ended July 31, 2022 were $0.21 per common share and $0.35 per common share for the quarter ended JanuaryJuly 31, 2022 were $0.03 per share and $0.73 per share for the year-to-date numbers. EPS for the quarter and nine months ended January 31, 2021 were $0.90 per share and $1.58 per share, respectively.2021.

21

 

Liquidity and capital resources

 

Operating

Operating
 

●Net cash decreased $938,000increased $1,571,000 during the nine monthsquarter ended JanuaryJuly 31, 2022 as compared to an increase of $478,000$1,005,000 during the corresponding periodquarter last year. The details are listed below.
  
●Accounts receivable decreased $91,000$499,000 for the nine months ended Januaryquarter ending July 31, 2022 compared with a $376,000 increase$154,000 decrease for the same periodquarter last year. The current yearbigger decrease in accounts receivable is directly attributable to an increase in sales and customers being able to pay timelier.  Management is always working with customers to collect on accounts and to keep past due accounts to a result of improved sales offset by slightly slower collections of accounts receivable.minimum. An analysis of accounts receivable shows that there were 6.61% that were5.24% of the balance was over 90 days at JanuaryJuly 31, 2022.
  
●Inventories increased $1,465,000$947,000 during the current nine-month periodquarter as compared to a $549,000 increase last year. The larger increase is primarily due to the fact that the Company is continuing to buy more raw materials due to increased orders and that the prices of raw material and labor costs continue to increase.

19

●For the quarter ended July 31, 2022 there was a $317,000 decrease in prepaid expenses compared to an increase of $823,000 last year.$196,000 for the quarter ended July 31, 2021. The larger increase in the current yeardecrease is due to increaseshaving inventory delivered during the quarter; therefore, having less money in the costprepayments of raw materials and having more raw materials on hand to supply the increase in sales.books.
  
●Prepaid expenses saw a $1,089,000 increase for the current nine months, primarily due to having more prepayments for inventory and prepaying for some machines that will aid in our production process. The prior nine months showed a $327,000 decrease in prepaid expenses.
 
●Accounts payable shows a $176,000 decrease of $21,000 for the current nine-month periodquarter ended JanuaryJuly 31, 2022 compared to a $311,000 increasedecrease of $236,000 for the prior nine-month period.same quarter the year before. The companyvariance is primarily due to timing differences of when product is received. 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 increased $130,000$121,000 for the current nine-month periodquarter as compared to a $54,000$99,000 increase for the nine-month periodquarter ended JanuaryJuly 31, 2021. The difference in the amounts is primarily due to increasedtiming of when payroll periods end and increases in sales commissions and wages.
  
●Income tax payable increased $163,000 for the current nine-month period,quarter ended July 31, 2022 increased $409,000, compared to ana $547,000 increase of $249,000 in income tax payable for the nine-monthsquarter ended JanuaryJuly 31, 2021. The current smaller increase is largely due to having increased sales andsmaller tax estimates in relation to the decreased income and not having large enoughamount. Also, the corporate income tax estimates.

Investing

●As for our investment activities, the Company spent approximately $164,000 on acquisitions of property and equipmentrate in Nebraska decreased to 7.5% from 7.81% for the current nine-month period, in comparison with the corresponding nine months last year, where there was activity of $426,000.fiscal year.
  
Investing
●Additionally,The Company purchased $74,000 of property and equipment during the current fiscal quarter. In comparison, $40,000 was spent on purchases of property and equipment during the corresponding quarter last year.
●The Company continues to purchase marketable securities, which include municipal bonds and quality stocks. During the nine-month period ended January 31, 2022 the buy/sell activity in the investment accounts was high. Net cashCash spent on purchases of marketable securities for the nine-month periodquarter ended JanuaryJuly 31, 2022 was $640,000$111,000 compared to $440,000$98,000 spent induring the prior nine-month period. The Company continuesquarter ended July 31, 2021. We continue 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 feefees based on the value of the investments.

Financing
 

22

Financing

●The Company continues to purchase back common stock when the opportunity arises. For the nine-month periodquarter ended JanuaryJuly 31, 2022 the Company purchased $35,000bought back $2,000 worth of treasury stock. This is in comparison to $28,000 spent in the same nine months period the prior year.
●The company paid out dividends of $2,256,000 during the nine months ending January 31, 2022. These dividends were paid during the second quarter. The company declared a dividend of $0.50 per share of common stock, on September 30, 2021 and these dividends were paid by October 31, 2021. Asbut for the prior year numbers, dividends paid was $1,892,000 forquarter ended July 31, 2021, the nine months ending January 31, 2021. A dividend of $0.42 per common share was declared and paid during the second fiscal quarter last year.Company did not buyback any treasury stock.

 

20

The

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

 

 As of Qtr ended Qtr ended 
 January 31, 2022 January 31, 2021 July 31, 2022 July 31, 2021 
Working capital
(current assets – current liabilities)		 $48,186,000  $43,984,000  $48,297,000  $49,401,000 
Current ratio
(current assets / current liabilities)		  15.470   14.430   13.855   15.529 
Quick ratio
((cash + investments + AR) / current liabilities)		  12.987   12.567 
Quick ratio
((cash + current investments + AR) / current liabilities)		  11.207   13.549 

 

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:

 

●Explosion proof contacts that will be UL listed for hazardous locations.locations are in development. There has been demand from our customers for this type of high security magnetic reed switch.
  
●An updated version of the pool access alarm (PAA) has met electrical listing testing (ETL) approval and production has started. This next-generation model combines our battery operated DPA series with our hard wired 289 series. A variety of installation options arewill be available through jumper pin settings such as instant alarm and a seven second delay.
  
●The Company is developing magnetic contacts which are listed under UL 634 Level 2. These sensors are for high security applications such as government buildings, military use, nuclear facilities, and financial institutions.
●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 monitoring devices which include glass break detection, tilt sensing and environmental monitoring. A redesign of our brass water valve shut-off system is near completion.
●The Company is developing magnetic contacts which are listed under UL 634 Level 2. These sensors are for high security applications such as government buildings, military use, nuclear facilities, and financial institutions.

23

 

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 2016-13, “Financial Instruments - Credit Losses (Topic 326),” which was subsequently amended in February 2020 by ASU 2020-02, “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842).” The amendments introduce an impairment model that is based on expected credit losses, rather than incurred losses, to estimate credit losses on certain types of financial instruments (e.g., loans and held-to-maturity securities), including certain off-balance sheet financial instruments (e.g., loan commitments). The expected credit losses should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. Financial instruments with similar risk characteristics may be grouped together when estimating expected credit losses. The update with amendment is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company does not believe this new guidance will have a material impact on its financial statements and will implement the disclosures related to this update beginning in fiscal year 2023.

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. ASU 2020-01 deals with changes in the significant influence of derivative and investments, of which the Company has none and became effective for the Company in the first quarter of 2021. The adoption of this standard did not have any impact on the Company’s condensed financial statements.

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

2421
 

 

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

Item 3.Quantitative and Qualitative Disclosures About Market Risk

 

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

 

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 JanuaryJuly 31, 2022. 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, 2021,2022, 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 occur with an outside party. 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 of duties for financial reporting purposespurposes.

 

We continue to operate with a limited number of accounting and financial personnel. For the quarter ending JanuaryJuly 31, 2022, the Company did not have a Controller, but management is looking to fill this position as soon as possible. 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. Until sufficient training has taken place 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 JanuaryJuly 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

2522
 

 

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 thirdfirst quarter of fiscal year 2022.2023.

 

PeriodNumber of shares repurchased
November 1, 2021 – November 30, 2021100
December 1, 2021 – December 31, 2021500
JanuaryMay 1, 2022 – JanuaryMay 31, 2022100
June 1, 2022 – June 30, 2022100100
July 1, 2022 – July 31, 2022-0-

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.
101.INS Inline XBRL Instance Document
   
101.SCH Inline XBRL Taxonomy Extension Schema Document
   
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
   
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

2623
 

 

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)

DateMarch 17,George Risk Industries, Inc.
(Registrant)
Date September 20, 2022By:/s/ Stephanie M. Risk-McElroy
  Stephanie M. Risk-McElroy
  President, Chief Executive Officer, Chief Financial Officer
and Chairman of the Board

 

2724