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 Exchange Act of 1934 For the quarter ended July 31, 1999 [ ] Transition report under Section 13 or 15(d) of the Securities Exchange 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) (308) 235-4645 (Issuer's telephone number) n/a (Former name, address and fiscal year, if changed from last report) Securities registered under Section 12(b) of the Exchange Act: None Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock, $.10 par value (Title of class) Check whether the issuer (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 [ ] No [ X ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act, after the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 6,056,906 GEORGE RISK INDUSTRIES, INC. PART I. FINANCIAL INFORMATION Item 1. Financial Statements GEORGE RISK INDUSTRIES, INC. BALANCE SHEET JULY 31, 1999 AND JULY 31, 1998 [CAPTION] [S] [C] [C] ASSETS CURRENT ASSETS Cash $ 1,926,000 $ 753,000 Marketable Securities 5,516,000 4,783,000 Accounts Receivable: Trade, net of $50,000 doubfull account allowance 1,974,000 1,921,000 Notes Receivable - Officer and Employees 12,000 13,000 Inventories (Note 1) 2,237,000 2,126,000 Prepaid Expenses 51,000 62,000 ------------ ------------ Total Current Assets $11,716,000 $ 9,658,000 Property, Plant and Equipment, net at cost 821,000 677,000 Other Assets 205,000 266,000 ------------ ------------ TOTAL ASSETS $12,742,000 $10,601,000 ============ ============ [CAPTION] LIABILITIES AND STOCKHOLDERS' EQUITY [S] [C] [C] CURRENT LIABILITIES Accounts Payable, Trade $ 40,000 $ 239,000 Notes Payable, current 58,000 52,000 Accrued Expenses 656,000 525,000 Deferred Current Taxes (31,000) (31,000) ------------ ------------ Total Current Liabilities $ 723,000 $ 785,000 LONG-TERM LIABILITIES Notes Payable 160,000 144,000 Deferred Income Taxes 28,000 33,000 ------------ ------------ Total long-term liabilities $ 188,000 $ 177,000 STOCKHOLDERS' EQUITY Convertible Preferred Stock 257,000 257,000 Common Stock, Class A 850,000 850,000 Additional Paid-In Capital 1,734,000 1,674,000 Accumulated Other Comprehensive Income 134,000 (1,000) Retained Earnings 9,529,000 7,464,000 Less: Cost of Treasury Stock (673,000) (605,000) ------------ ------------ Total Stockholders' Equity $11,831,000 $ 9,639,000 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $12,742,000 $10,601,000 ============ ============ GEORGE RISK INDUSTRIES, INC. INCOME STATEMENT FOR THE THREE MONTHS ENDED July 31, 1999 July 31, 1998 Net Sales $ 3,235,000 $ 2,905,000 Less: Cost of Goods Sold (1,647,000) (1,529,000) ------------ ------------ Gross Profit $ 1,588,000 $ 1,376,000 Operating Expenses: General and Administrative 239,000 158,000 Sales 592,000 444,000 Engineering 25,000 27,000 ------------ ------------ Total Operating Expenses $ 856,000 $ 629,000 Income From Operations 732,000 747,000 Other Income (Expense) Interest Income 5,000 5,000 Interest Expense (4,000) (5,000) Investment Income (Loss) 67,000 62,000 Gain (Loss) on Investments (93,000) 0 Other Income (Loss) 4,000 0 ------------ ------------ $ (21,000) $ 62,000 Income Before Provisions for Income Taxes 711,000 809,000 Provisions for Income Taxes (296,000) (286,000) ------------ ------------ Net Income $ 415,000 $ 523,000 ============ ============ Income Per Share of Common Stock $ .07 $ .09 Weighted Average Number of Common Shares Outstanding 6,056,906 6,027,658 GEORGE RISK INDUSTRIES, INC. STATEMENT OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED [CAPTION] July 31, 1999 July 31, 1998 [S] [C] [C] Net Income $ 415,000 $ 523,000 ------------ ------------ Other Comprehensive Income, net of tax Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during period (79,000) (6,000) Less: reclassification adjustment for (gains) losses included in net income 95,000 0 ------------ ------------ Other Comprehensive Income $ 16,000 $ (6,000) Comprehensive Income $ 431,000 $ 517,000 ============ ============ GEORGE RISK INDUSTRIES, INC. STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED July 31, 1999 July 31, 1998 [S] [C] [C] CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 415,000 $ 523,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 39,000 27,000 Change in unrealized gain (loss) on investments 16,000 120,000 Changes in assets and liabilities: (Increase) Decrease in: Marketable Securities (98,000) (363,000) Accounts Receivable 101,000 (151,000) Inventories (43,000) (471,000) Prepaid Expenses 11,000 (18,000) Other Assets (82,000) (19,000) Receivables - officers and employees 2,000 3,000 Increase (Decrease) in: Accounts Payable (5,000) 43,000 Accrued Expense 73,000 (132,000) Notes Payable 61,000 (12,000) Income Tax Payable 233,000 286,000 ------------ ------------ Net cash provided by (used in) operating activities $ 723,000 $ (164,000) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Property and Equipment (44,000) (40,000) Purchase of Treasury Stock (7,000) 0 ------------ ------------ Net cash provided by (used in) investing activities $ (51,000) $ (40,000) CASH FLOWS FROM FINANCING ACTIVITIES Treasury Stock issued 49,000 11,000 ------------ ------------ Net cash provided by (used in) financing activities $ 49,000 $ 11,000 NET INCREASE (DECREASE) IN CASH $ 721,000 $ (193,000) ============ ============ Cash at beginning of period $ 1,160,000 $ 903,000 Cash at end of period $ 1,881,000 $ 710,000 GEORGE RISK INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JULY 31, 1999 Note 1. Inventories At July 31, 1999 and July 31, 1998, respectively, inventories consisted of the following: Raw Materials $ 1,717,000 $ 1,397,000 Work in Process 296,000 341,000 Finished Goods 294,000 434,000 ------------ ------------ $ 2,307,000 $ 2,172,000 Less: Allowance for obsolete inventory (70,000) (46,000) ------------ ------------ Net Inventories $ 2,237,000 $ 2,126,000 ============ ============ 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 consolidated financial statements, and with the Company's audited financial statements and discussion for the fiscal year ended April 30, 1999. Net cash increased $721,000 during the quarter ended July 31, 1999 as com- pared to a decrease of $193,000 during the corresponding quarter last year. Marketable securities only increased $98,000 this current quarter as com- pared to a $363,000 increase for the same quarter last year. The Company had to sell a stock for a $93,000 loss during the current period. Inven- tories increased $43,000 during the current quarter as compared to a $471,000 increase last year. Overall inventory and raw material are up in dollars, but work in process and finished goods are down in numbers because of the increase in demand for our products. Raw materials are also up as the Company is starting to have more inventory on hand in case of any Y2K problems that may arise from our vendors. Accounts receivable de- creased $101,000 during the current quarter as compared to a $151,000 de- crease for the corresponding quarter last year. The Company continues to collect its accounts within terms. At the quarter ended July 31, 1999, 70% of the receivables are considered current (less than 45 days) and only 3% of the total are over 90 days past due. At the quarter ended July 31, 1999, accounts payable shows a decrease of $5,000 as compared to an in- crease of $43,000 for the same quarter the year before. The Company con- tinues to strive to pay all of its bills within terms and take all purchase discounts that are available. The Company's notes payable numbers are up with the receipt of $75,000 in the form of a long-term note from the State of Nebraska Department of Economic Development. They offer a "Community Development Block Grant" (CDBG) program to help increase economic develop- ment in the state. The Company received this loan to help pay for the new building that will house our molding and tool and die departments. If, after five years, the Company complies with all of the conditions of the CDBG program, the note will be forgiven. The following is a list of ratios to help analyze the Company's performance: Qtr ended Qtr ended July 31, 1999 July 31, 1998 ------------- ------------- Working capital $ 10,993,000 $ 8,873,000 Current ratio 16.205 12.303 Quick ratio 13.024 9.499 Cash per share (including marketable securities) $ 1.23 $ 0.92 Equity per share $ 1.95 $ 1.60 Net sales were $3,235,000 for the quarter ended July 31, 1999, which is an 11% increase for the corresponding quarter last year. Cost of goods sold was 50% of gross sales for the quarter ended July 31, 1999 and the cost of goods sold percentage to gross sales was 51% for the quarter ended July 31, 1998. Having relatively the same percentage of cost of goods sold from period to period shows that the Company keeps its costs in line. The Company has increased its cost of materials and direct labor in proportion to how its sales have increased. Operating expenses were 26% of net sales for the quarter ended July 31, 1999 as compared to 22% for the corresponding quarter last year. Having relatively the same percentages for both periods shows that management keeps a close eye on its operating expenses to keep them in line from year to year. As sales have increased, management has increased wages and staff accordingly. Other income and expenses showed a $21,000 expense for the quarter ended July 31, 1999 as compared to having $62,000 increase in income for the quarter ended July 31, 1998. The Company had to sell one of its stock holdings for a loss of $93,000 in the current quarter. In turn, net in- come for the quarter ended July 31, 1999 was at $415,000, a 26% decrease from the preceding quarter, which had a net income of $523,000. Earnings per share for the quarter ended July 31, 1999 were $0.07 per share and $0.09 per share for the quarter ended July 31, 1998. The Company recognizes its revenues when goods are shipped and billed to its customers. There is a $50,000 allowance that was established by the Company to account for any uncollectable accounts. The Company does have two distinct business segments, security alarm products and keyboard products that are subject to disclosure under SFAS No. 131. Since the keyboard products line is less than 10% of the total sales, the Company is not required to recognize it as a separate segment. As far as Y2K readiness goes, management has taken many steps to be ready when the year 2000 arrives. All of the Company's products are ready be- cause none of the products manufactured create or use date/data inform- ation. The Company has purchased new computer accounting software, which the manufacturer has stated is Y2K compliant. Also the Company has re- placed hardware systems that did not meet compliance issues. The Company has also polled its vendors and suppliers with a questionnaire about their Y2K readiness and the replies have been favorable. The Y2K issue may affect the systems of suppliers and vendors of GRI. While the Company is addressing the issue, there is no assurance that any potential Y2K non- compliance within the systems of these other companies will not have a material adverse effect on the company. New product development at the Company has become very aggressive in order to stay competitive in the industry and to have continued business growth. Several new products that are currently in development include a door channel magnet, a hold-up switch, a relay module, a high security switch, and a multi-functional thermostat. The Company just introduced these new products to the industry at the International Security Conference in New York in early September 1999 and the response to these products was excellent. The Company is continuing to search for a business that would complement the existing business. This would require no outside financing. The in- tent is to utilize the equipment, marketing techniques and established customers to increase sales and profits. The Company is building a 10,000 square foot extension to its manufactur- ing facility. It is expected to be completed by the end of September 1999. This new building will house the tool and die and molding departments and will also allow for additional stockroom storage. This additional stock- room storage will enable the Company to stock more finished goods for the increasing demand for products. There are no known seasonal trends with any of the Company's products, since they 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 The Company is a defendant in a patent infringement action. The likelihood of an unfavorable outcome or an estimate of potential loss is not determinable. The Company believes the suit is without merit and in- tends to vigorously defend its' position. 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. Exhibits Exhibit 27. Financial Data Schedule B. Reports on Form 8-K No 8-K reports filed during the quarter ended July 31, 1999 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the under- signed, thereunto duly authorized. George Risk Industries, Inc. (Registrant) Date 09-13-99 By: /s/ Kenneth R. Risk Kenneth R. Risk, President and CEO