UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[ X ] Quarterly report under Section 13 or 15(d) of the Securities Ex-
change Act of 1934
For the quarter ended October 31, 2002
[ ] Transition report under Section 13 or 15(d) of the Securities Ex-
change Act of 1934
For the transition period from ___________ to _____________
Commission File Number: 0-5378
GEORGE RISK INDUSTRIES, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 84-0524756
(State of incorporation) (IRS Employers Identification No.)
802 South Elm St.
Kimball, NE 69145
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (308) 235-4645
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of the Registrant's Common Stock outstanding, as of
December 13, 2002, was 5,402,528.
Transitional Small Business Disclosure Format: Yes [ X ] No [ ]
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited financial statements for the three month period ended
October 31, 2002, and the six month period ended October 31, 2002, are
attached hereto.
GEORGE RISK INDUSTRIES, INC.
BALANCE SHEET
OCTOBER 31, 2002
ASSETS
Current Assets
Cash and cash equivalents $ 1,891,000
Investments and securities (Note 2) 9,051,000
Accounts receivable:
Trade, net of $50,000 doubtful account allowance 2,021,000
Other 4,000
Notes receivable 1,000
Inventories (Note 3) 2,428,000
Prepaid expenses 63,000
Deferred income taxes 52,000
------------
Total Current Assets $15,511,000
Property and Equipment, net at cost $ 974,000
Other Assets
Projects in process 41,000
Other 2,000
------------
Total Other Assets $ 43,000
TOTAL ASSETS $16,528,000
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade $ 186,000
Accrued expenses
Payroll and related expenses 267,000
Property taxes (5,000)
Income tax payable 176,000
Notes payable, current 80,000
------------
Total Current Liabilities $ 704,000
Long-Term Liabilities
Notes payable 155,000
------------
Total Long-Term Liabilities $ 155,000
Stockholders' Equity
Convertible preferred stock, 1,000,000 shares
authorized, Series 1-noncumulative, $20 stated value,
25,000 shares authorized, 5,350 issued and outstanding 107,000
Common stock, Class A, $.10 par value, 10,000,000 shares
authorized, 8,502,832 shares issued and outstanding 850,000
Additional paid-in capital 1,736,000
Accumulated other comprehensive income (1,722,000)
Retained earnings 16,461,000
Less: cost of treasury stock, 3,100,304 shares, at cost (1,763,000)
------------
Total Stockholders' Equity $15,669,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $16,528,000
============
GEORGE RISK INDUSTRIES, INC.
INCOME STATEMENT
Three months Six months Three months Six months
ended ended ended ended
October 31, October 31, October 31, October 31,
2002 2002 2001 2001
----------------------------------------------------
Net Sales $ 3,564,000 $ 6,585,000 $ 3,369,000 $ 6,386,000
Less: cost of goods sold (1,489,000) (3,166,000) (1,698,000) (3,273,000)
----------- ------------ ------------ ------------
Gross Profit $ 2,075,000 $ 3,419,000 $ 1,671,000 $ 3,113,000
Operating Expenses:
General and
administrative 178,000 337,000 175,000 351,000
Selling 560,000 1,147,000 747,000 1,332,000
Engineering 16,000 34,000 19,000 32,000
Rent paid to related
parties 11,000 26,000 14,000 31,000
------------ ------------ ------------ ------------
Total Operating Expenses $ 765,000 $ 1,544,000 $ 955,000 $ 1,746,000
Income From Operations 1,310,000 1,875,000 716,000 1,367,000
Other Income (Expense)
Other (10,000) (10,000) 16,000 5,000
Dividend and interest
income 75,000 158,000 75,000 148,000
Interest expense 0 0 0 0
Gain(loss) on investments (175,000) (171,000) (1,000) (118,000)
------------ ------------ ------------ ------------
$ (110,000) $ (23,000) $ 90,000 $ 35,000
Income Before Provisions
for Income Tax 1,200,000 1,852,000 806,000 1,402,000
Provisions for Income Tax (502,000) (774,000) (337,000) (585,000)
------------ ------------ ------------ ------------
Net Income $ 698,000 $ 1,078,000 $ 469,000 $ 817,000
Retained Earnings,
beginning of period $15,763,000 $15,383,000 $13,874,000 $13,526,000
Retained Earnings,
end of period $16,461,000 $16,461,000 $14,343,000 $14,343,000
Income Per Share of Common
Stock: (Note 6)
Basic $ .13 $ .20 $ .08 $ .14
Assuming Dilution $ .13 $ .20 $ .08 $ .14
GEORGE RISK INDUSTRIES, INC.
STATEMENT OF COMPREHENSIVE INCOME
Three months Six months Three months Six months
ended ended ended ended
October 31, October 31, October 31, October31,
2002 2002 2001 2001
----------------------------------------------------
Net Income $ 698,000 $ 1,078,000 $ 469,000 $ 817,000
------------ ------------ ------------ ------------
Other Comprehensive Income, net of tax
Unrealized gain (loss) on securities:
Unrealized holding
gains (losses) arising
during period (85,000) (466,000) (311,000) (470,000)
Reclassification adjustment
for (gains) losses included
in net income 175,000 171,000 0 118,000
------------ ------------ ------------ ------------
Other Comprehensive
Income $ 90,000 $ (295,000) $ (311,000) $ (352,000)
Comprehensive Income
(Loss) $ 788,000 $ 783,000 $ 158,000 $ 465,000
============ ============ ============ ============
GEORGE RISK INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
Three months Six months Three months Six months
ended ended ended ended
October 31, October 31, October 31, October 31,
2002 2002 2001 2001
----------------------------------------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income $ 698,000 $ 1,078,000 $ 469,000 $ 817,000
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 32,000 97,000 61,000 121,000
Change in unrealized gain/
(loss) on investments 90,000 (295,000) (311,000) (352,000)
Changes in assets and
liabilities:
(Increase) decrease in:
Investments/securities (137,000) (362,000) 64,000 (2,348,000)
Accounts receivable (517,000) (132,000) 404,000 476,000
Inventories (118,000) 0 235,000 129,000
Prepaid expenses (1,000) 5,000 (18,000) (14,000)
Other assets (7,000) 0 (36,000) (94,000)
Receivables-officers
and employees (1,000) (1,000) 2,000 3,000
Increase (decrease) in:
Accounts payable 80,000 83,000 (76,000) (51,000)
Accrued expenses (48,000) 22,000 (56,000) 4,000
Income tax payable 39,000 311,000 (335,000) (19,000)
------------ ------------ ------------ ------------
Net cash provided by (used in)
operating activities $ 110,000 $ 806,000 $ 403,000 ($1,328,000)
CASH FLOWS FROM INVESTING
ACTIVITIES:
(Purchase) Sale of property
and equipment 17,000 (5,000) (25,000) (42,000)
(Purchase) of treasury
stock 0 0 0 0
------------ ------------ ------------ ------------
Net cash provided by (used in)
investing activities $ 17,000 $ (5,000) $ (25,000) $ (42,000)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Principal payments on
long-term debt (1,000) (4,000) (3,000) (6,000)
Treasury stock issued 0 0 21,000 21,000
------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities $ (1,000) $ (4,000) $ 18,000 $ 15,000
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 126,000 $ 797,000 $ 396,000 ($1,355,000)
============ ============ ============ ============
Cash and cash equivalents,
beginning of period $ 1,765,000 $ 1,094,000 $ 751,000 $ 2,502,000
Cash and cash equivalents,
end of period $ 1,891,000 $ 1,891,000 $ 1,147,000 $ 1,147,000
GEORGE RISK INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2002
Note 1 Unaudited Interim Financial Statements
The accompanying financial statements have been prepared in accordance
with the instructions for Form 10QSB and do not include all of the inform-
ation and footnotes required by generally accepted accounting principals for
complete financial statements. 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.
Note 2 Investments and Marketable Securities
Marketable equity securities are recorded at the lower of cost or market
and are classified as available-for-sale securities. The cost of marketable
securities sold is determined on the average cost method with realized gains
or losses being reflected in the income statement. The securities are
accounted for using fair value as required by FAS 115. Any unrealized gains
or losses are reported as a separate component of stockholder's equity until
realized. Dividend and interest income are accrued as earned.
Marketable equity securities and unrealized gains and losses consist of
the following as of October 31, 2002 and October 31, 2001:
Cost Basis $ 10,723,000 $ 9,767,000
Fair Value 9,001,000 8,565,000
------------- -------------
Net Unrealized Gain (Loss) $ (1,722,000) $ (1,202,000)
Note 3 Inventories
At October 31, 2002 and October 31, 2001, respectively, inventories con-
sisted of the following:
Raw Materials $ 1,581,000 $ 2,092,000
Work in Process 646,000 341,000
Finished Goods 191,000 227,000
Warehouse in England 80,000 40,000
------------- -------------
$ 2,498,000 $ 2,700,000
Less: allowance for obsolete
inventory (70,000) (70,000)
------------- -------------
Net Inventories $ 2,428,000 $ 2,630,000
============= =============
Note 4 Business Segments
The following is financial information relating to industry segments:
For the quarter ended
October 31,
2002 2001
----------------------------
Net revenue:
Keyboard, pool alarm, and other products $ 588,000 $ 364,000
Security alarm products 2,976,000 3,005,000
------------- -------------
Total net revenue $ 3,564,000 $ 3,369,000
Income from operations:
Keyboard, pool alarm, and other products $ 216,000 $ 77,000
Security alarm products 1,094,000 639,000
------------- -------------
Total income from operations $ 1,310,000 $ 716,000
Identifiable assets:
Keyboard, pool alarm, and other products $ 378,000 $ 334,000
Security alarm products 3,818,000 3,721,000
Corporate general 12,332,000 11,225,000
------------- -------------
Total assets $ 16,528,000 $ 15,280,000
Depreciation and amortization:
Keyboard pool alarm, and other products $ 2,000 $ 2,000
Security alarm products 39,000 37,000
Corporate general (9,000) 22,000
------------- -------------
Total depreciation and amortization $ 32,000 $ 61,000
Capital expenditures:
Keyboard, pool alarm, and other products $ 0 $ 3,000
Security alarm products 16,000 20,000
Corporate general (33,000) 2,000
------------- -------------
Total capital expenditures $ (17,000) $ 25,000
Note 5 Revenue Recognition
George Risk Industries recognizes its revenues when goods are shipped
and billed to its customers. There is a $50,000 allowance that was estab-
lished to account for any uncollectable accounts.
Note 6 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 October 31, 2002
-------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net income $ 698,000
===========
Basic EPS $ 698,000 5,402,528 $ 0.13
Effect of Dilutive Securities:
Convertible preferred stock 0 26,750
----------- ------------- -----------
Diluted EPS $ 698,000 5,429,278 $ 0.13
For the six months ended October 31, 2002
-------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $1,078,000
===========
Basic EPS $1,078,000 5,402,528 $ 0.20
Effect of Dilutive Securities:
Convertible preferred stock 0 26,750
----------- ------------- -----------
Diluted EPS $1,078,000 5,429,278 $ 0.20
For the three months ended October 31, 2001
--------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $ 469,000
===========
Basic EPS $ 469,000 5,720,773 $ 0.08
Effect of Dilutive Securities:
Convertible preferred stock 0 26,750
----------- ------------- -----------
Diluted EPS $ 469,000 5,747,523 $ 0.08
For the six months ended October 31, 2001
--------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $ 817,000
===========
Basic EPS $ 817,000 5,719,088 $ 0.14
Effect of Dilutive Securities:
Convertible preferred stock 0 26,750
----------- ------------- -----------
Diluted EPS $ 817,000 5,745,838 $ 0.14
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 2. Management Discussion and Analysis of Financial Condition and
Results of Operations
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
condensed financial statements, and with the George Risk Industries' audited
financial statements and discussion for the fiscal year ended April 30, 2002.
Net cash increased $126,000 during the quarter ended October 31, 2002 as com-
pared to an increase of $396,000 during the corresponding quarter last year.
As for the year-to-date numbers, net cash increased $797,000 for the six
months ended October 31, 2002, while, for the same period last year, net cash
decreased $1,355,000. The main reason for the big decrease in the year-to-
date figures last year is that we transferred $2,500,000 into an annuity in
the marketable securities section. Investments and marketable securities
increased $137,000 for the quarter while it increased $362,000 for the year-
to-date data. The increases in the investment account include the purchase
of a tract of land for future development in the Winter Park, CO area.
Inventories increased $118,000 during the current quarter as compared to a
$235,000 increase last year. The year-to-date numbers show the inventory
returned to the same amount that we had on the books at the fiscal year end
for the current year, while there was a $129,000 decrease for the same period
last year. The quarterly decrease in inventory occurred because our sales
have increased over the quarter. We are shipping out our products as soon as
they are finished. Accounts receivable increased $517,000 during the current
quarter as compared to a $404,000 decrease for the corresponding quarter last
year. The year-to-date figures show an increase of $132,000 for the current
six months and a $129,000 decrease for the same period last year. Again,
sales have increased, which accounts for the increase in accounts receivable.
At October 31, 2002, 81.3% of the receivables were considered current (less
than 45 days) and 2.2% of the total were over 90 days past due. For the
quarter ended October 31, 2002 there was a $7,000 increase in other assets
while for the quarter ended October 31, 2001, there was a $36,000 increase.
The six months ended October 31, 2002, shows a zero dollar change in other
assets while the same period last year shows a $94,000 increase. The reason
for the big increases in other assets last year is that we had just completed
a remodeling project in our main building. This project consisted of making
office space available for our sales staff.
At the quarter ended October 31, 2002, accounts payable increased $80,000 as
compared to a $76,000 decrease for the same quarter the year before. As for
year-to-date numbers, there was a $83,000 increase for the six months ended
October 31, 2002, and a $51,000 decrease for the same period ended October 31,
2001. As stated before, our sales have increased so we are buying more raw
materials than at the same time last year. Notes payable decreased by $1,000
for the current quarter, while it decreased $3,000 for the corresponding
quarter last year. Year-to-date figures displayed a $4,000 decrease for the
current six months, while there was a $6,000 decrease for same period last
year. No new notes have been needed to conduct our day to day business, and
we have just paid off a couple of vehicle notes that were on the books. In-
come tax payable increased $39,000 for the quarter ended October 31, 2002,
while it decreased $335,000 for the quarter ended October 31, 2001. For the
six months ended October 31, 2002, income tax payable increased $311,000,
while it decreased $19,000 for the corresponding period a year ago. These
increases reflect the increase in net income.
The following is a list of ratios to help analyze George Risk Industries'
performance:
For the quarter ended October 31,
2002 2001
---------------------------------
Working capital $14,807,000 $13,658,000
Current ratio 22.033 34.150
Quick ratio 18.413 27.432
Cash per share (including marketable
securities) $ 2.03 $ 1.70
Equity per share $ 2.90 $ 2.58
Net sales were $3,564,000 for the quarter ended October 31, 2002, which is a
5.8% increase from the corresponding quarter last year. Year-to-date net
sales were $6,585,000 at October 31, 2002, which is a 3.1% increase from the
same period last year. Cost of goods sold was 41.8% of net sales for the
quarter ended October 31, 2002 and 50.4% for the same quarter last year.
Year-to-date cost of goods sold percentages were 48.1% for the current six
months and 51.3% for the corresponding six months last year. Having
relatively the same percentage of cost of goods sold from period to period
shows that we keep our costs in line. But the decreases for the current year
help account for the increase in net income. Our cost of materials and
direct labor fluctuate in proportion to how our sales vary.
Operating expenses were 21.5% of net sales for the quarter ended October 31,
2002 as compared to 28.3% for the corresponding quarter last year. Year-to-
date operating expenses were 23.4% of net sales for the six months ended
October 31, 2002, while they were 27.3% for the same period last year. The
primary reason for the decreases in operating expenses is that our "Dis-
tributor Volume Rebate" program has finally been in the works for over two
years, and the figures compare to each other in a more reasonable manner.
Also, the rebate for the previous quarter always hits the books in the current
quarter. Since our sales have increased almost 18% for the second quarter
over the first quarter the rebate is not as big. Income from operations for
the quarter ended October 31, 2002 was at $1,310,000, which is an 83% in-
crease from the corresponding quarter last year, which had income from oper-
ations of $716,000. Income from operations for the six months ended October
31, 2002 was at $1,875,000, which is a 37.2% increase from the corresponding
six months last year, which had income from operations of $1,367,000.
Other income and expenses showed losses of $110,000 and $23,000 for the
quarter and six months ended October 31, 2002, respectively. The other in-
come and expense numbers for last year were a $90,000 increase for the quarter
and a $35,000 increase for the six months ending October 31, 2001. The main
reason for the losses is that we sold our WorldCom stock in the second
quarter. That accounted for a $175,000 loss on our investments. Net income
for the quarter ended October 31, 2002 was at $698,000, a 48.8% increase from
the corresponding quarter last year, which showed a net income of $469,000.
Net income for the six months ended October 31, 2002 was $1,078,000, a 31.9%
increase from the same period last year. Net income for the six months ended
October 31, 2001 was $817,000. Earnings per common share for the quarter
ended October 31, 2002 was $0.13 per share and $0.20 per share for the year-
to-date numbers. EPS for the quarter and six moths ended October 31, 2001
was $0.08 per share and $0.14 per share, respectively.
We have two distinct business segments, security alarm products and keyboard/
pool alarms/other products that are subject to disclosure under SFAS No. 131.
See the notes to the financial statements in order to examine the segments.
Our security division's marketing department has introduced several additional
products. These include a Fluid Sensor with Relay Contact that operates on
an AC circuit and a Liquid Level Detector for use with wireless transmitters.
Also, an overhead door switch that is buried in the concrete floor for pro-
tection from heavy equipment has been received well.
The Thermstat 3 & 4's are in production now and have been submitted for C.E.
approval in Europe. We have also received the ETL approval on our 189/289
pool alarms recently.
Tool and die is completing the Single and Double Gang Boxes for the E-Z Duct
raceway line, along with new connectors for the new, larger raceway. We
should be able to begin shipping the larger raceway in the beginning of 2003.
Research and development continues on a wireless module that, once it is
approved by the FCC, can be used in many of our existing products, such as
our pool alarms and door and window contacts without resubmitting.
Management is always open to the possibility to acquire a business that would
complement our existing operations. This would require no outside financing.
The intent is to utilize the equipment, marketing techniques and established
customers to increase sales and profits.
There are no known seasonal trends with any of GRI's products, since we sell
to distributors and OEM manufacturers. The products are tied to the housing
industry and will fluctuate with building trends.
GEORGE RISK INDUSTRIES, INC.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Securities
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
A. Reports on Form 8-K
No 8-K reports were filed during the quarter ended October 31, 2002.
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 12-13-2002 By: /s/ Kenneth R. Risk
Kenneth R. Risk, President and Chairman
of the Board
By: /s/ Stephanie M. Risk
Stephanie M. Risk, Chief Financial Officer