UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q/A10-Q

 

(Mark One)

 

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

 

For the quarterly period ended July 31, 20192020

 

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

 

For the transition period from ______________ to ________________

 

Commission File Number: 000-05378

 

GEORGE RISK INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

 

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

 

802 South Elm St.

Kimball, NE

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

 

(308) 235-4645

(Registrant’s telephone number, including area code)

 

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 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X][ X ] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically 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 [X][ X ] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, a small 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 ISSUERS

 

The number of shares of the Registrant’s Common Stock outstanding, as of September 18, 20192020 was 4,952,110.4,949,927.

 

 

 

 
 

 

EXPLANATORY NOTE

This Amendment No. 1 to Form 10-Q, or this Amendment, amends the Quarterly Report on Form 10-Q for the three months ended July 31, 2019 that we originally filed with the Securities and Exchange Commission, or the Commission, on September 18, 2019, or the Original Filing, in connection with our failure to give effect to the phase in of FASB ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”) in the financial statements included in the Original Filing.

All amendments and restatements to the financial statements are non-cash in nature.

Restatement

As further discussed in Note 9 to our unaudited financial statements in Part I, Item 1, “Financial Statements” of this Amendment, on March 4, 2020, we concluded that we would restate our previously issued financial statements as of and for the three months ended July 31, 2019, as set forth in the Original Filing in connection with our failure to give effect to the phase in of ASU 2016-01 in the financial statements included in the Original Quarterly Report on Form 10-Q.

Amendment

The purpose of this Amendment is to restate our previously issued unaudited financial statements and related disclosures as of and for the three months ended July 31, 2019 in connection with the application of ASU 2016-01. This Amendment also includes (a) an amended Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to reflect the correction of the error described above.

Except as expressly set forth herein, including in the notes to the unaudited financial statements, this Amendment does not reflect events occurring after the date of the Original Filing or modify or update any of the other disclosures contained therein in any way other than as required to reflect the amendment discussed above. Accordingly, this Amendment should be read in conjunction with the Original Filing and our other filings with the Commission. Information not affected by the restatement is unchanged and reflects disclosures made at the time of the filing of the Original Filing.

Items Amended in this Filing

For reasons discussed above, we are filing this Amendment in order to amend the following items in our Original Filing to the extent necessary to reflect the adjustments discussed above and make corresponding revisions to our financial data cited elsewhere in this Amendment in connection with the application of ASU 2016-01 in this Amendment that was not previously applied:

Part I, Item 1. Financial Statements

Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Part I, Item 4. Controls and Procedures

In accordance with applicable Commission rules, this Amendment includes new certifications required by Rule 13a-14 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, from our Chief Executive Officer and Chief Financial Officer dated as of the date of filing of this Amendment.

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

ITEM 1: Financial Statements

ITEM 1:Financial Statements

 

The unaudited financial statements for the three-month period ended July 31, 20192020 are attached hereto.

2

GEORGE RISK INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

 

 July 31, 2019 April 30, 2019  July 31, 2020 April 30, 2020 
 (unaudited)    (unaudited)   
ASSETS          
Current Assets:                
Cash and cash equivalents $5,667,000  $4,873,000  $7,491,000  $6,458,000 
Investments and securities, at fair value  27,657,000   27,291,000   27,657,000   25,322,000 
Accounts receivable:                
Trade, net of $8,764 and $9,321 doubtful account allowance  2,534,000   2,696,000 
Trade, net of $1,913 and $7,306 doubtful account allowance  2,920,000   2,964,000 
Other  4,000   6,000   19,000   18,000 
Income tax overpayment  —   259,000   —   56,000 
Inventories, net  4,863,000   4,583,000   5,507,000   5,103,000 
Prepaid expenses  320,000   282,000   334,000   516,000 
Total Current Assets  41,045,000   39,990,000   43,928,000   40,437,000 
                
Property and Equipment, net, at cost  1,095,000   984,000   1,505,000   1,465,000 
                
Other Assets                
Investment in Limited Land Partnership, at cost  293,000   293,000   320,000   320,000 
Projects in process  1,000   117,000   108,000   21,000 
Other  3,000   3,000   2,000   2,000 
Total Other Assets  297,000   413,000   430,000   343,000 
                
Intangible assets, net  1,609,000   1,640,000   1,486,000   1,517,000 
                
TOTAL ASSETS $44,046,000  $43,027,000  $47,349,000  $43,762,000 

 

See accompanying notes to the condensed financial statements

3

GEORGE RISK INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

(continued)

 

 July 31, 2019 April 30, 2019  July 31, 2020 April 30, 2020 
 (unaudited)    (unaudited)   
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current Liabilities                
Accounts payable, trade $261,000  $206,000  $304,000  $187,000 
Dividends payable  1,714,000   1,714,000   1,892,000   1,892,000 
Accrued expenses:                
Payroll and related expenses  287,000   356,000   386,000   450,000 
Property taxes  3,000   —   3,000   — 
Income tax payable  30,000   —   290,000   — 
Notes payable  950,000   950,000 
Total Current Liabilities  2,295,000   2,276,000   3,825,000   3,479,000 
                
Long-Term Liabilities                
Deferred income taxes  1,240,000   1,198,000   1,343,000   699,000 
Total Long-Term Liabilities  1,240,000   1,198,000   1,343,000   699,000 
                
Total Liabilities  3,535,000   3,474,000   5,168,000   4,178,000 
                
Commitments and contingencies  —   —   —   — 
                
Stockholders’ Equity                
Convertible preferred stock, 1,000,000 shares authorized, Series 1—noncumulative, $20 stated value, 25,000 shares authorized, 4,100 issued and outstanding  99,000   99,000   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  49,000   14,000   101,000   (4,000)
Retained earnings  41,859,000   40,883,000   43,498,000   41,006,000 
Less: treasury stock, 3,550,571 and 3,544,271 shares, at cost  (4,280,000)  (4,227,000)
Less: treasury stock, 3,552,954 and 3,552,954 shares, at cost  (4,301,000)  (4,301,000)
Total Stockholders’ Equity  40,511,000   39,553,000   42,181,000   39,584,000 
                
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $44,046,000  $43,027,000  $47,349,000  $43,762,000 

 

See accompanying notes to the condensed financial statements

4

GEORGE RISK INDUSTRIES, INC.

CONDENSED INCOME STATEMENTS

FOR THE THREE MONTHS ENDED JULY 31, 20192020 AND 20182019

(Unaudited)

 

 July 31, 2019 July 31, 2018  July 31, 2020 July 31, 2019 
          
Net Sales $3,552,000  $3,429,000  $4,047,000  $3,552,000 
Less: Cost of Goods Sold  (1,769,000)  (1,801,000)  (1,952,000)  (1,769,000)
Gross Profit  1,783,000   1,628,000   2,095,000   1,783,000 
                
Operating Expenses:                
General and Administrative  297,000   286,000   313,000   297,000 
Sales  557,000   555,000   567,000   557,000 
Engineering  14,000   9,000   29,000   14,000 
Rent Paid to Related Parties  5,000   5,000   —   5,000 
Total Operating Expenses  873,000   885,000   909,000   873,000 
                
Income From Operations  910,000   773,000   1,186,000   910,000 
                
Other Income (Expense)                
Other  1,000   3,000   12,000   1,000 
Dividend and Interest Income  193,000   193,000   156,000   193,000 
Unrealized gain (loss) on marketable securities  145,000   — 
Unrealized gain (loss) on equity securities  2,114,000   145,000 
Gain (Loss) on Sale of Investments  49,000   (68,000)  (28,000)  49,000 
Total Other Income  388,000   128,000 
  2,254,000   388,000 
                
Income Before Provisions for Income Taxes  1,298,000   901,000   3,440,000   1,298,000 
                
Provisions for Income Taxes                
Current Expense  294,000   247,000   349,000   294,000 
Deferred tax expense  28,000   37,000   599,000   28,000 
Total Income Tax Expense  322,000   284,000   948,000   322,000 
                
Net Income $976,000  $617,000  $2,492,000  $976,000 
                
Basic Earnings Per Share of Common Stock $0.20  $0.12  $0.50  $0.20 
Diluted Earnings Per Share of Common Stock $0.20  $0.12  $0.50  $0.20 
                
Weighted Average Number of Common Shares Outstanding  4,956,389   4,967,580   4,949,927   4,956,389 
Weighted Average Number of Shares Outstanding (Diluted)  4,976,889   4,988,080   4,970,427   4,976,889 

 

See accompanying notes to the condensed financial statements

5

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED JULY 31, 20192020 AND 20182019

(Unaudited)

 

 July 31, 2019 July 31, 2018  July 31, 2020 July 31, 2019 
          
Net Income $976,000  $617,000  $2,492,000  $976,000 
                
Other Comprehensive Income, Net of Tax                
Unrealized gain (loss) on securities:        
Unrealized gain on debt securities:        
Unrealized holding gains arising during period  49,000   607,000   149,000   49,000 
Reclassification adjustment for gains included in net income  —   44,000 
Income tax expense related to other comprehensive income  (14,000)  (188,000)  (44,000)  (14,000)
Other Comprehensive Income  35,000   463,000   105,000   35,000 
                
Comprehensive Income $1,011,000  $1,080,000  $2,597,000  $1,011,000 

 

See accompanying notes to the condensed financial statements

6

GEORGE RISK INDUSTRIES, INC.

CONDENSEDSTATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JULY 31, 20192020 and 20182019

(Unaudited)

 

 Preferred
Stock		  

Common Stock

Class A

  Preferred Stock  

Common Stock

Class A

 
 Shares Amount Shares Amount  Shares  Amount  Shares  Amount 
Balances, April 30, 2019  4,100  $99,000   8,502,881  $850,000   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   4,100  $99,000   8,502,881  $850,000 
                
  Preferred
Stock		   

Common Stock

Class A

 
  Shares   Amount   Shares   Amount 
Balances, April 30, 2018  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, 2018  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 

 

See accompanying notes to the condensed financial statements

7

GEORGE RISK INDUSTRIES, INC.

CONDENSEDSTATEMENTS OF STOCKHOLDERS’ EQUITIY

FOR THE THREE MONTHS ENDED JULY 31, 20192020 and 20182019

(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           Accumulated      
  Treasury Stock Other       Treasury Stock  Other      
Paid-InPaid-In  (Common Class A)  Comprehensive  Retained    Paid-In (Common Class A)  Comprehensive Retained    
CapitalCapital  Shares  Amount  Income  Earnings  Total Capital  Shares  Amount  Income  Earnings  Total 
$1,934,000   3,534,784  $(4,148,000) $2,249,000  $36,746,000  $37,730,000 1,934,000   3,552,954  $(4,301,000) $(4,000) $41,006,000  $39,584,000 
                                            
—   650   (5,000)  —   —   (5,000)—   —   —   —   —   — 
                                            
—   —   —   463,000   —   463,000 —   —   —   105,000   —   105,000 
                                            
—   —   —   —   617,000   617,000 —   —   —   —   2,492,000   2,492,000 
                                            
$1,934,000   3,535,434  $(4,153,000) $2,712,000  $37,363,000  $38,805,000 1,934,000   3,552,954  $(4,301,000) $101,000  $43,498,000  $42,181,000 

 

See accompanying notes to the condensed financial statements

8

GEORGE RISK INDUSTRIES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED JULY 31, 20192020 AND 20182019

(Unaudited)

 

 July 31, 2019 July 31, 2018  July 31, 2020 July 31, 2019 
Cash Flows from Operating Activities:                
Net Income $976,000  $617,000  $2,492,000  $976,000 
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization  89,000   83,000   86,000   89,000 
(Gain) loss on sale of investments  (83,000)  68,000   —   (83,000)
Impairments on investments  34,000   —   27,000   34,000 
Unrealized (gain) loss on marketable securities  (145,000)  — 
Unrealized (gain) loss on equity securities  (2,114,000)  (145,000)
Reserve for bad debts  (2,000)  3,000   (5,000)  (2,000)
Reserve for obsolete inventory  8,000   6,000   1,000   8,000 
Deferred income taxes  28,000   37,000   599,000   28,000 
Changes in assets and liabilities:                
(Increase) decrease in:                
Accounts receivable  163,000   234,000   49,000   163,000 
Inventories  (288,000)  (389,000)  (405,000)  (288,000)
Prepaid expenses  79,000   166,000   94,000   79,000 
Employee receivables  2,000   —   (1,000)  2,000 
Income tax overpayment  —   244,000 
Increase (decrease) in:                
Accounts payable  55,000   (7,000)  117,000   55,000 
Accrued expenses  (66,000)  (172,000)  (61,000)  (66,000)
Income tax payable  289,000   —   346,000   289,000 
Net cash provided by operating activities  1,139,000   890,000 
Net cash from operating activities  1,225,000   1,139,000 
                
Cash Flows From Investing Activities:                
(Purchase) of property and equipment  (169,000)  —   (95,000)  (169,000)
Proceeds from sale of marketable securities  9,000   2,000   14,000   9,000 
(Purchase) of marketable securities  (132,000)  (233,000)  (111,000)  (132,000)
Net cash (used in) investing activities  (292,000)  (231,000)
Net cash from investing activities  (192,000)  (292,000)
                
Cash Flows From Financing Activities:                
(Purchase) of treasury stock  (53,000)  (5,000)  —   (53,000)
Dividends paid  —   (1,000)
Net cash (used in) financing activities  (53,000)  (6,000)
Net cash from financing activities  —   (53,000)
                
Net Increase in Cash and Cash Equivalents $794,000  $653,000 
Net Change in Cash and Cash Equivalents $1,033,000  $794,000 
                
Cash and Cash Equivalents, beginning of period $4,873,000  $4,294,000  $6,458,000  $4,873,000 
Cash and Cash Equivalents, end of period $5,667,000  $4,947,000  $7,491,000  $5,667,000 
                
Supplemental Disclosure for Cash Flow Information:                
Cash payments for:                
Income taxes paid $0  $0  $0  $0 
Interest paid $0  $1,000  $0  $0 

 

See accompanying notes to the condensed financial statements

9

GEORGE RISK INDUSTRIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JULY 31, 20192020

Note 1: Unaudited Interim Financial Statements

Note 1:Unaudited Interim Financial Statements

 

The accompanying financial statements have been prepared in accordance with the instructions for Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s April 30, 20192020 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 FebruaryJune 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-02”), which provides guidance for accounting for leases. ASU 2016-02 requires lesseesentities to classify leases as either finance or operating leases and to recorduse a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of the lease classification. The lease classification will determine whether the lease expense is recognizedforward looking approach based on an effective interest rate method orexpected losses to estimate credit losses on a straight-line basis overcertain types of financial instruments, including trade receivables. The FASB has subsequently issued updates to the term of the lease. Accounting for lessors remains largely unchanged from current GAAP. ASU 2016-02standard to provide additional clarification on specific topics. Topic 326 is effective for the Companyfiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We have applied this guidance, as of May 1, 2019. Early adoption is permitted. In July 2018, the FASB issued ASU No. 2018-10 “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”) and ASU No. 2018-11 “Leases (Topic 842) Targeted Improvements” (“ASU 2018-11”) and ASU 2018-20, “Narrow-Scope Improvements for Lessors”. ASU 2018-10 provides certain amendments that affect narrow aspects2020, using a modified-retrospective approach. The application of thethis guidance issued in ASU 2016-02. ASU 2018-11 allows all entities adopting ASU 2016-02 to choose an additional (and optional) transition method of adoption, under which an entity initially applies the new leases standard at the adoption date and recognizesdid not require a cumulative-effectcumulative effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2018-11 also allows lessors to not separate non-lease components from the associated lease component if certain conditions are met. During the first quarter of 2019, the FASB issued ASU 2019-01, Leases (Topic 842) to amend ASU 2016-02. This amendment exempts both lessees and lessors from having to provide certain prior year interim disclosure information in the fiscal year in which a company adopts the new leases standard. The Company has adopted the ASUs in the first quarter of fiscal 2020 and the Company’s accounting systems have been upgraded to comply with the requirements of the new standard, however, the adoption of ASU 2016-02 did not have a material impacteffect on the Company’sour financial statements and related disclosures because leases are not material to the 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 Company is currently assessing the timing and impactapplication of adopting the updated provisions.this guidance did not have a material effect on our disclosures.

 

In August 2018, The FASB issued ASU 2018-14 to improve the effectiveness of disclosures for defined benefit plans under ASC 715-20. The ASU applies to employers that sponsor defined benefit pension or other postretirement plans. The FASB issued ASU 2018-14 as part of its disclosure framework project, which has an objective and primary focus to improve the effectiveness of disclosures in the notes to financial statements. As part of the project, during August 2018, the Board also issued a Concepts Statement, which the FASB used as a basis for amending the disclosure requirements for Subtopic 715-20. The guidance is effective or fiscal years ending after December 15,January 2020, and early adoption is permitted. The Company is currently assessing the timing and impact of adopting the updated provisions.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments2020-01, “Investments - Credit LossesEquity Securities (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires the Company to measure321), Investments - Equity Method and recognize expected credit losses for financial assets heldJoint Ventures (Topic 323), and not accounted for at fair value through net income. In November 2018, April 2019 and May 2019, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses,” “ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses,” “Topic 815, Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 825, Financial Instruments,815.” and “ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief,” which provided additional implementation guidance on the previously issued ASU. 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. The ASU requires a modified retrospective2020, and interim periods within those fiscal years. Early adoption method.is permitted. The Company is still evaluatingdoes not expect the impactadoption of adoptionASU 2020-01 to have a material impact on its financial statements and disclosures.statements.

Note 2: Investments

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

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Note 2:Investments

 

The Company has investments in publicly traded equity securities, corporate bonds, state and municipal debt securities, real estate investment trusts, and money markets. Effective with the Company’s adoption of ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, on May 1, 2018, the Company carries all investments at fair value, with unrealized gain or loss on equity securities reported through other income. The investments in debt securities, have maturitieswhich include municipal bonds and bond funds, mature between September 2019March 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 eachthe 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 July 31, 20192020 and April 30, 2019,2020, investments consisted of the following:

 

    Gross Gross       Gross Gross   
Investments at Cost Unrealized Unrealized Fair  Cost Unrealized Unrealized Fair 
July 31, 2019 Basis Gains Losses Value 
July 31, 2020 Basis Gains Losses Value 
Municipal bonds $5,475,000  $117,000  $(43,000) $5,549,000  $5,284,000  $180,000  $(38,000) $5,426,000 
Corporate bonds  26,000   —   —   26,000 
REITs  89,000   3,000   (9,000)  83,000   112,000   —   (36,000)  76,000 
Equity securities ��16,729,000   4,252,000   (260,000)  20,721,000   17,101,000   5,000,000   (628,000)  21,473,000 
Money markets and CDs  1,278,000   —   —   1,278,000   682,000   —   —   682,000 
Total $23,597,000  $4,372,000  $(312,000) $27,657,000  $23,179,000  $5,180,000  $(702,000) $27,657,000 

 

    Gross Gross       Gross Gross   
Investments at Cost Unrealized Unrealized Fair  Cost Unrealized Unrealized Fair 
April 30, 2019 Basis Gains Losses Value 
April 30, 2020 Basis Gains Losses Value 
Municipal bonds $5,459,000  $79,000  $(55,000) $5,483,000  $5,271,000  $80,000  $(89,000) $5,262,000 
Corporate bonds  26,000   —   —   26,000   26,000   —   —   26,000 
REITs  89,000   1,000   (6,000)  84,000   112,000   —   (44,000)  68,000 
Equity securities  16,618,000   4,143,000   (296,000)  20,465,000   17,119,000   3,446,000   (1,180,000)  19,385,000 
Money markets and CDs  1,233,000   —   —   1,233,000   581,000   —   —   581,000 
Total $23,425,000  $4,223,000  $(357,000) $27,291,000  $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 Statementsstatements of Operationsincome in the period of the change, and debt securities are carried at fair value on the balance sheet with changes in fair value recorded as unrealized gains or (losses) in the Statement of Comprehensive Income.change. Upon the disposition of a marketable security, the Company records a realized gain or (loss) on the Company’s statements of operations. On April 30, 2019, as a result of the adoption of ASU 2016-01 – Financial Instruments, the Company reclassified $2,424,000 of net unrealized gains on marketable securities, that were formerly classified as available-for-sale securities before the adoption of the new standard, from Accumulated Other Comprehensive Income to Retained Earnings.income.

 

The Company evaluates all marketable securities for other-than temporary declines in fair value, which are defined as when the cost basis exceeds the fair value for approximately onone 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 recorded an impairment loss of $34,000$27,000 for the quarter ended July 31, 2019.2020. For the prior quarter ended July 31, 2018, management2019, an impairment loss of $34,000 was recorded.

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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 July 31, 2020 the Company had sales of equity securities which yielded gross realized gains of $102,000 and gross realized losses of $126,000. For the same period, sales of debt securities did not need to recordyield any impairment losses.gross realized gains, but gross realized losses of $4,000 were recorded. During the quarter ending July 31, 2019, the Company recorded gross realized gains and losses on equity securities of $153,000 and $104,000, respectively, as well as gross realized gains and losses on debt securities of $3,000 and $3,000, 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 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 July 31, 20192020 and April 30, 2019,2020, respectively.

 

Unrealized Loss Breakdown by Investment Type at July 31, 20192020

 

 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 $—  $—  $448,000  $(43,000) $448,000  $(43,000) $62,000  $—  $342,000  $(38,000) $404,000  $(38,000)
REITs  —   —   30,000   (9,000)  30,000   (9,000)  48,000   (26,000)  28,000   (10,000)  76,000   (36,000)
Equity securities  1,975,000   (147,000)  729,000   (113,000)  2,704,000   (260,000)  4,148,000   (478,000)  1,348,000   (150,000)  5,496,000   (628,000)
Total $1,975,000  $(147,000) $1,207,000  $(165,000) $3,182,000  $(312,000) $4,258,000  $(504,000) $1,718,000  $(198,000) $5,976,000  $(702,000)

 

Unrealized Loss Breakdown by Investment Type at April 30, 20192020

 

 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 $772,000  $(4,000) $580,000  $(50,000) $1,352,000  $(54,000) $2,203,000  $(42,000) $484,000  $(47,000) $2,687,000  $(89,000)
REITs  —   —   32,000   (6,000)  32,000   (6,000)  43,000   (30,000)  24,000   (14,000)  67,000   (44,000)
Equity securities  932,000   (102,000)  1,652,000   (195,000)  2,584,000   (297,000)  5,496,000   (866,000)  1,651,000   (314,000)  7,147,000   (1,180,000)
Total $1,704,000  $(106,000) $2,264,000  $(251,000) $3,968,000  $(357,000) $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 July 31, 2019.2020.

 

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 July 31, 2019.
2020.

 

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Note 3: Inventories

Note 3:Inventories

 

Inventories at July 31, 20192020 and April 30, 20192020 consisted of the following:

 

 July 31, April 30, 
 July 31, 2019  April 30, 2019  2020 2020 
          
Raw materials $3,878,000  $3,644,000  $4,657,000  $4,233,000 
Work in process  368,000   389,000   421,000   402,000 
Finished goods  715,000   641,000   568,000   606,000 
  4,961,000   4,674,000   5,646,000   5,241,000 
Less: allowance for obsolete inventory  (98,000)  (91,000)  (139,000)  (138,000)
Inventories, net $4,863,000  $4,583,000  $5,507,000  $5,103,000 

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Note 4: Business Segments

Note 4:Business Segments

 

The following is financial information relating to industry segments:

 

 July 31,  July 31, 
 2019 2018  2020 2019 
Net revenue:                
Security alarm products $2,830,000  $2,150,000  $3,114,000  $2,830,000 
Cable & wiring tools  536,000   679,000   800,000   536,000 
Other products  186,000   600,000   133,000   186,000 
Total net revenue $3,552,000  $3,429,000  $4,047,000  $3,552,000 
                
Income from operations:                
Security alarm products $725,000  $485,000  $912,000  $725,000 
Cable & wiring tools  137,000   153,000   235,000   137,000 
Other products  48,000   135,000   39,000   48,000 
Total income from operations $910,000  $773,000  $1,186,000  $910,000 
                
Depreciation and amortization:                
Security alarm products $23,000  $10,000  $22,000  $23,000 
Cable & wiring tools  31,000   31,000   31,000   31,000 
Other products  20,000   27,000   12,000   20,000 
Corporate general  15,000   15,000   21,000   15,000 
Total depreciation and amortization $89,000  $83,000  $86,000  $89,000 
                
Capital expenditures:                
Security alarm products $169,000  $—  $93,000  $169,000 
Cable & wiring tools  —   —   —   — 
Other products  —   —   2,000   — 
Corporate general  —   —   —   — 
Total capital expenditures $169,000  $—  $95,000  $169,000 

 

 July 31, 2020 April 30, 2020 
Identifiable assets: July 31, 2019 April 30, 2019      
Security alarm products $6,369,000  $6,179,000  $7,391,000  $7,150,000 
Cable & wiring tools  2,725,000   2,713,000   3,152,000   2,684,000 
Other products  864,000   842,000   440,000   724,000 
Corporate general  34,088,000   33,293,000   36,366,000   33,204,000 
Total assets $44,046,000  $43,027,000  $47,349,000  $43,762,000 

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Note 5: Earnings per Share

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, 2019  For the three months ended July 31, 2020 
 Income Shares Per-Share  Income Shares Per-Share 
 (Numerator)  (Denominator)  Amount  (Numerator)  (Denominator)  Amount 
Net income $976,000          $2,492,000         
Basic EPS $976,000   4,956,389  $.1969  $2,492,000   4,949,927  $.50 
Effect of dilutive Convertible Preferred Stock  –   20,500   (.0008)  –   20,500   — 
Diluted EPS $976,000   4,976,889  $.1961  $2,492,000   4,970,427  $.50 

 

 For the three months ended July 31, 2018  For the three months ended July 31, 2019 
 Income Shares Per-Share  Income Shares Per-Share 
 (Numerator)  (Denominator)  Amount  (Numerator)  (Denominator)  Amount 
Net income $617,000          $976,000         
Basic EPS $617,000   4,967,580  $.1242  $976,000   4,956,389  $.20 
Effect of dilutive Convertible Preferred Stock  –   20,500   (.0005)  –   20,500   — 
Diluted EPS $617,000   4,988,080  $.1237  $976,000   4,976,889  $.20 

Note 6: Retirement Benefit Plan

Note 6:Retirement Benefit Plan

 

On January 1, 1998, the Company adopted the George Risk Industries, Inc. Retirement Savings Plan (the “Plan”). The Plan is a defined contribution savings plan designed to provide retirement income to eligible employees of the corporation.Company. The Plan is intended to be qualified under Section 401 (k)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 and $2,000 were paid during bothin each of the quarterquarters ending July 31, 2020 and 2019 and 2018, respectively.

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Note 7: Fair Value Measurements

Note 7:Fair Value Measurements

 

Generally accepted accounting principles inThe carrying value of the United States of America (US GAAP) definesCompany’s cash and cash equivalents, accounts receivable and accounts payable approximate their fair value asdue to their short term nature. The fair value of our investments is determined utilizing market 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 July 31, 2019,2020, our investments consisted of money markets, certificates of deposits (CDs), publicly traded equity securities, real estate investment trusts (REITs) as well as certain state and municipal debt securities and corporate bonds. Oursecurities. The 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 table sets forth our assets and liabilities measured at fair value on a recurring basis and a non-recurring basis by level within the fair value hierarchy. As required by US GAAP, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

  Assets Measured at Fair Value on a Recurring Basis as of
July 31, 2019		 
  Level 1  Level 2  Level 3  Total 
Assets:                
Municipal Bonds $—  $5,549,000  $—  $5,549,000 
Corporate Bonds  26,000   —   —   26,000 
REITs  —   83,000   —   83,000 
Equity Securities  20,721,000   —   —   20,721,000 
Money Markets and CDs  1,278,000   —   —   1,278,000 
Total fair value of assets measured on a recurring basis $22,025,000  $5,632,000  $—  $27,657,000 
16

 

  Assets Measured at Fair Value on a Recurring Basis as of
April 30, 2019		 
  Level 1  Level 2  Level 3  Total 
Assets:                
Municipal Bonds $—  $5,483,000  $—  $5,483,000 
Corporate Bonds  26,000   —   —   26,000 
REITs  —   84,000   —   84,000 
Equity Securities  20,465,000   —   —   20,465,000 
Money Markets and CDs  1,233,000   —   —   1,233,000 
Total fair value of assets measured on a recurring basis $21,724,000  $5,567,000  $—  $27,291,000 

  Assets Measured at Fair Value on a Recurring Basis as of
July 31, 2020		 
  Level 1  Level 2  Level 3  Total 
Assets:                
Municipal Bonds $—  $5,426,000  $—  $5,426,000 
REITs  —   76,000   —   76,000 
Equity Securities  21,473,000   —   —   21,473,000 
Money Markets and CDs  682,000   —   —   682,000 
Total fair value of assets measured on a recurring basis $22,155,000  $5,502,000  $—  $27,657,000 

  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 Payable

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. The Company intends to use the entire PPP Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

Note 8 Subsequent Events

Note 9Subsequent Events

 

None

 

Note 9 Correction of Previously Issued Financial Statements

17

 

Subsequent to the issuance of its Quarterly Report on SEC Form 10-Q for the three months ended July 31, 2019, the Company discovered an error due to missing a change in accounting related to other comprehensive income (loss) as reflected in the phase in of ASU 2016-01, which became effective for the Company on May 1, 2018. Under the new guidance in ASU 2016-01 the Company should record unrealized gains and losses in the value of the equity securities it owns in the statements of operations, whereas, under previous guidance (and in the Original Form 10-Q) those unrealized gains and losses were recorded as accumulated other comprehensive income (loss).

This restatement includes i) recording a one-time adjustment to retained earnings to reclassify the accumulated other comprehensive loss related to unrealized gains on equity securities as of April 30, 2019 and ii) recording an unrealized gain on marketable securities representing the value change in the equities for the three months ended July 31, 2019.

No entries to correct for this restatement have any impact on our cash position, liquidity, or operations.

 

GEORGE RISK INDUSTRIES, INC.

 

PART I. FINANCIAL INFORMATION

Item 2:
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/A,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 current information becomes available in the future.

 

The following discussion should be read in conjunction with the attached condensed financial statements, and with the Company’s audited financial statements and discussion for the fiscal year ended April 30, 2019.2020.

 

Executive Summary

 

The Company’s performance has increased throughimproved during the first quarter in comparisonended July 31, 2020 as compared to the prior quarter last year. In comparison to the most recent prior quarter, performance has stayed steady with similar sales figures.ended July 31, 2019. The main difference between this year’s quarter and last year’s quarterreason for the increase is thatthe closure of a competitor at the end of calendar year 2019, resulting in a major uptick in sales. As a result of the increased demand, the Company doesn’t haveis experiencing a bigsizable back order log and islog; however, management has been able to get inventoryincrease inventory. Management now intends to focus on ramping up production to meet customer’s needs in the stockroom which allows the Company to ship products out ona timely basis.manner. Opportunities include continuing to learn and grow with our computer system and to continue looking at businesses that might be a good fit to purchase. Also, weWe also have new products that are scheduled to enter the marketplace by the end of the calendar year. Challenges in the coming months include continuing to get product out to customers in a timelier manner.timely manner and dealing with COVID-19 pandemic restrictions. Raw material prices are also a concern with tariffs being levied by the US government and other factors. Management continues to work at keeping the facilities running leaner and more profitable than ever before.

 

Results of Operations

 

 ●Net sales for the quarter ended July 31, 2020 showed a 3.59%13.94% increase over the same period in the prior year. The Company saw increased sales resulting primarily from a competitor no longer selling competing products. Management also believes that they have been successful at training employees on the new computer system and production is running smoothly. The Company has also seen some old customers buying from us again. Management believes that this may be in relation to price increases from our competitors
 ●Cost of goods sold saw a decreasedecreased from 52.52%49.80% of sales in the prior year, to 49.80%48.23% in the current quarter, which is inside of Management’s goal to keep labor and other manufacturing expenses within the range of 45 to 50%. The decreased cost of goods sold percentage is a reflection of having better training and workinginitiatives resulting in more efficiently when making product.efficient production.

18

 ●Operating expenses have increased by $18,000$36,000 when comparing the current year quarter to the same quarter for the prior year, butyear; however, the percentage in relation toof net sales decreased to 24.58%22.46% for the quarter ended July 31, 2019 as2020 compared to 24.93%24.58% for the corresponding quarter last year. The dollar amount increase is the result of increased personnel and commission expense related to the increase in net sales; however, the Company has been able to keepmaintained the ratio of operating expenses to net sales at less than 30% of net sales for many years now; however, the actual dollar amount increase, which is because of increased commission amounts (since sales have increased) and additional labor costs for hiring new employees and wage increases.in line with historical ratios.

 ●Income from operations for the quarter ended July 31, 2019 was at $910,000,$1,186,000, which is a 17.72%30.33% increase from the corresponding quarter last year, which had income from operations of $773,000.$910,000.
 ●Other income and expenses showed a $2,254,000 gain for the quarter ended July 31, 2020 as compared to a $388,000 gain for the quarter ended July 31, 2019 as compared to a $128,000 gain for the quarter ended July 31, 2018. Investments in marketable securities are presented at fair value and an unrealized gain or loss is recorded within the statements of operations, a non-cash entry, at each period beginning May 1, 2018 and previously recorded unrealized gain or loss in other comprehensive income (loss).2019. For the three months ended July 31, 2019 an2020, $2,114,000 of unrealized gain wasgains from equity securities were recorded, a non-cash entry, on marketablecompared to the $145,000 of unrealized gains from equity securities of $145,000. Forrecorded for the three months ended July 31, 2018 we recorded $463,000 of unrealized gains to other comprehensive income.2019. The remainder of the increase is primarily due to gains realized from the sale of investments as compared to losses sustained during the same quarter last year.dividend and interest income.
 ●ProvisionThe Company’s provision for income taxes showed an increase of $38,000, up$626,000 from $284,000$322,000 in the quarter ended July 31, 20182019 to $322,000$948,000 for the quarter ended July 31, 2019. The2020. This increase is primarily due to increased deferred taxes resulting from a direct result ofmuch larger unrealized gain for the adoption of ASU 2016-01.current quarter.
 ●In turn, net income for the quarter ended July 31, 20192020 was $976,000,$2,492,000, a 58.18%155.33% increase from the corresponding quarter last year, which showed net income of $617,000.$976,000.
 ●Earnings per share for the quarter ended July 31, 20192020 were $0.20$0.50 per common share and $0.12$0.20 per common share for the quarter ended July 31, 2018.2019.

 

Liquidity and capital resources

Operating

 

Operating
 ●Net cash increased $794,000$1,033,000 during the quarter ended July 31, 20192020 as compared to an increase of $653,000$794,000 during the corresponding quarter last year.
 
●Accounts receivable decreased $163,000$49,000 for the quarter ending July 31, 20192020 compared with a $234,000$163,000 decrease for the same quarter last year. The smaller decrease in accounts receivable is directly attributable to some 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. An analysis of accounts shows that there were only 5.15%0.63% that were over 90 days at July 31, 2019.2020.
 ●Inventories increased $288,000$405,000 during the current quarter as compared to a $389,000$288,000 increase last year. The smallerlarger increase is primarily due to the fact that the Company sellingis stocking up on more finished goods atraw materials due to increased orders. In addition, the Company is keeping more inventory on hand in order to reduce the likelihood of running into a slightly faster rate than it is replenishingshortage on some major raw materials.materials, such as we experienced last year.

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 ●AtFor the quarter ended July 31, 20192020 there was a $79,000$94,000 decrease in prepaid expenses and atcompared to a decrease of $79,000 for the quarter ended July 31, 2018, there was a $166,000 decrease.2019. The current decrease is due to capitalizingless prepayment of raw materials and running through some projects in process.of our prepaid agreements without needing to renew them.
 ●Accounts payable shows an increase of $55,000$117,000 for the quarter ended July 31, 20192020 compared to a decreasean increase of $7,000$55,000 for the same quarter the year before, primarily due to increases in inventory of raw materials and timing issues. Management strives to pay all payables within terms, unless there is a problem with the merchandise.
 
●Accrued expenses decreased $66,000$61,000 for the current quarter as compared to a $172,000$66,000 decrease for the quarter ended July 31, 2018.2019. The difference in the amounts is primarily due to timing issues of when pay periods end.issues.
 ●Income tax payable for the quarter ended July 31, 20192020 increased $346,000, compared to a $289,000 while there was a $244,000 decrease towards income tax overpaymentincrease for the quarter ended July 31, 2018.2019. The current increase is due to waiting on tax refunds to be sent and not having to pay incomelarger tax estimates yet.in relation to increased income.

Investing

Investing
 ●As for our investment activities, theThe Company purchased $169,000$95,000 of property and equipment during the current fiscal quarter. In comparison, with$169,000 was spent on purchases of property and equipment during the corresponding quarter last year, there were not any purchases of property and equipment.year.
 ●Additionally, theThe Company continues to purchase marketable securities, which include municipal bonds and quality stocks. Cash spent on purchases of marketable securities for the quarter ended July 31, 20192020 was $132,000$111,000 compared to $233,000$132,000 spent during the quarter ended July 31, 2018.2019. We continue to use “money manager” accounts for most stock transactions. By doing this, the Company gives an independent third party firm, who are experts in this field, permission to buy and sell stocks at will. The Company pays a quarterly service fee based on the value of the investments.

Financing

Financing
 ●Furthermore, theThe Company continues to purchase back common stock when the opportunity arises. For the quarter ended July 31, 2019,2020, the Company purchased $53,000 worth ofdid not buyback any treasury stock, along withcompared to the $5,000 spent in$53,000 of common stock purchased during the same period the prior year.

The

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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:

 

 Qtr ended Qtr ended  Qtr ended Qtr ended 
 July 31, 2019 July 31, 2018  July 31, 2020 July 31, 2019 

Working capital

(current assets – current liabilities)

 $38,750,000  $36,894,000  $40,103,000  $38,750,000 

Current ratio

(current assets / current liabilities)

  17.882   18.760   11.485   17.882 

Quick ratio

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

  15.622   16.567 

Quick ratio

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

  9.953   15.622 

 

New Product Development

 

The Company and its’ engineering department perpetually 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:

 

 ●A new face plate for 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.
 
●A newAn updated version of the pool access alarm is currently going through electrical listing testing. Since the COVID-19 pandemic has happened, not much testing has progressed 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.
 ●Work continues on high security switches. They have a triple biased high security switch design nearly complete and an adjustable magnet design was completed for recessed mounting applications.
 ●Wireless technology is a main area of focus for product development. We are looking into adding wireless technology to some of our current products. A wireless contact switch is in the final stages of development. Also, we are working on wireless versions of our Pool Alarm and environmental sensors that will be easy to install in current construction. We are also concentrating on making products compatible with Wi-Fi, smartphone technology and the increasing popular Z-Wave standard for wireless home automation.
 
●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 are ready to launchhave 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 product inproducts that have been introduced for our cable and wiring tools segment,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 Grabbit GR5. This is an ultra-compact, lightweight telescoping pole that extends 5’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 grab or push a wire. The GR5 isgo along with the newest memberstandard clear lights. These colored lights are placed on FiberFuse wire running rods which allows easy location of the Grabbit family - joiningrod 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 10’, 12’ and 18’ versions. The Grabbits are an indispensable tool when running wire through drop ceilings and difficult-to-access areas. A Z-tip, J-tip and LED light are included with the Grabbits which are interchangeable depending on the situation.longevity of these new lights.

 

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Other Information

 

In addition to researching 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 FebruaryJune 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-02”), which provides guidance for accounting for leases. ASU 2016-02 requires lesseesentities to classify leases as either finance or operating leases and to recorduse a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of the lease classification. The lease classification will determine whether the lease expense is recognizedforward looking approach based on an effective interest rate method orexpected losses to estimate credit losses on a straight-line basis overcertain types of financial instruments, including trade receivables. The FASB has subsequently issued updates to the term of the lease. Accounting for lessors remains largely unchanged from current GAAP. ASU 2016-02standard to provide additional clarification on specific topics. Topic 326 is effective for the Companyfiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We have applied this guidance, as of May 1, 2019. Early adoption is permitted. In July 2018, the FASB issued ASU No. 2018-10 “Codification Improvements to Topic 842, Leases” (“ASU 2018-10”) and ASU No. 2018-11 “Leases (Topic 842) Targeted Improvements” (“ASU 2018-11”) and ASU 2018-20, “Narrow-Scope Improvements for Lessors”. ASU 2018-10 provides certain amendments that affect narrow aspects2020, using a modified-retrospective approach. The application of thethis guidance issued in ASU 2016-02. ASU 2018-11 allows all entities adopting ASU 2016-02 to choose an additional (and optional) transition method of adoption, under which an entity initially applies the new leases standard at the adoption date and recognizesdid not require a cumulative-effectcumulative effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2018-11 also allows lessors to not separate non-lease components from the associated lease component if certain conditions are met. During the first quarter of 2019, the FASB issued ASU 2019-01, Leases (Topic 842) to amend ASU 2016-02. This amendment exempts both lessees and lessors from having to provide certain prior year interim disclosure information in the fiscal year in which a company adopts the new leases standard. The Company has adopted the ASUs in the first quarter of fiscal 2020 and the Company’s accounting systems have been upgraded to comply with the requirements of the new standard, however, the adoption of ASU 2016-02 did not have a material impacteffect on the Company’s financial statements and related disclosures because leases are not material to theour 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 Company is currently assessing the timing and impactapplication of adopting the updated provisions.this guidance did not have a material effect on our disclosures.

 

In August 2018, The FASB issued ASU 2018-14 to improve the effectiveness of disclosures for defined benefit plans under ASC 715-20. The ASU applies to employers that sponsor defined benefit pension or other postretirement plans. The FASB issued ASU 2018-14 as part of its disclosure framework project, which has an objective and primary focus to improve the effectiveness of disclosures in the notes to financial statements. As part of the project, during August 2018, the Board also issued a Concepts Statement, which the FASB used as a basis for amending the disclosure requirements for Subtopic 715-20. The guidance is effective or fiscal years ending after December 15,January 2020, and early adoption is permitted. The Company is currently assessing the timing and impact of adopting the updated provisions.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments2020-01, “Investments - Credit LossesEquity Securities (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires the Company to measure321), Investments - Equity Method and recognize expected credit losses for financial assets heldJoint Ventures (Topic 323), and not accounted for at fair value through net income. In November 2018, April 2019 and May 2019, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses,” “ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses,” “Topic 815, Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 825, Financial Instruments,815.” and “ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief,” which provided additional implementation guidance on the previously issued ASU. 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. The ASU requires a modified retrospective2020, and interim periods within those fiscal years. Early adoption method.is permitted. The Company is still evaluatingdoes not expect the impactadoption of adoptionASU 2020-01 to have a material impact on its financial statements and disclosures.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

Item 3.Quantitative and Qualitative Disclosures About Market Risk

 

This disclosure does not apply.

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 July 31, 2019.2020. Based on that evaluation, our chief executive officer (also working as our chief financial officer)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, 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. A new accounting professionalFor the quarter ending July 31, 2020 the Company did not have a Controller, but this position was hiredfilled in 2018 to fill the Controller position.September 2020. 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 restated financial statements included in this restated report fairly present our financial position, results of operations and cash flows as of and for the periods presented in all material respects.

 

We are committed to the establishment of effective internal controls over financial reporting and will place emphasis on quarterly and year-end closing procedures, timely documentation and internal review of accounting and financial reporting consequences of material contracts and agreements, and enhanced review of all schedules and account analyses by experienced accounting department personnel or independent consultants.

 

Changes in Internal Control Over Financial Reporting

 

There wasOther than those mentioned above, there were no changechanges in our internal control over financial reporting during the fiscal quarter ended July 31, 20192020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

23

GEORGE RISK INDUSTRIES, INC.

 

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 1.Legal Proceedings

 

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 first quarter of fiscal year 2020.2021.

 

Period Number of shares repurchased
May 1, 20192020 – May 31, 20192020 -0-
June 1, 20192020 – June 30, 20192020 300-0-
July 1, 20192020 – July 31, 20192020 6,000-0-

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 with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 George Risk Industries, Inc.
 (Registrant)
  
Date March 24,September 18, 2020By:/s/ Stephanie M. Risk-McElroy
  Stephanie M. Risk-McElroy
  President, Chief Executive Officer, Chief Financial Officer
and Chairman of the Board

25