# George Risk Industries, Inc.: Form 10-Q for the period ended Oct 31, 2018

- Company: [George Risk Industries, Inc.](/companies/rskia.md) (CIK 84112)
- Form: 10-Q
- Filed: 2018-12-17
- Accepted by EDGAR: Dec 17, 2018, 13:37 ET
- Period: 2018-10-31
- Accession: 0001493152-18-017590
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/84112/000149315218017590/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/84112/000149315218017590/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2018-10-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Cost of revenue | 3 months, 2018-08-01 to 2018-10-31 | $1.9m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2018-05-01 to 2018-10-31 | $3.7m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2018-08-01 to 2018-10-31 | $1.8m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2018-05-01 to 2018-10-31 | $3.4m | us-gaap:GrossProfit |
| Operating income | 3 months, 2018-08-01 to 2018-10-31 | $886.0k | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2018-05-01 to 2018-10-31 | $1.7m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2018-08-01 to 2018-10-31 | −$249.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2018-05-01 to 2018-10-31 | −$532.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2018-08-01 to 2018-10-31 | $768.0k | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2018-05-01 to 2018-10-31 | $1.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2018-08-01 to 2018-10-31 | $0.15 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2018-05-01 to 2018-10-31 | $0.28 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2018-08-01 to 2018-10-31 | $0.15 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2018-05-01 to 2018-10-31 | $0.28 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2018-08-01 to 2018-10-31 | 4,982,677 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2018-05-01 to 2018-10-31 | 4,985,379 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2018-05-01 to 2018-10-31 | $1.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 6 months, 2018-05-01 to 2018-10-31 | $1.8m | us-gaap:PaymentsOfDividends |
| Share repurchases | 6 months, 2018-05-01 to 2018-10-31 | $54.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2018-10-31 | $4.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2018-10-31 | $36.7m | us-gaap:AssetsCurrent |
| Total assets | at 2018-10-31 | $39.8m | us-gaap:Assets |
| Current liabilities | at 2018-10-31 | $2.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2018-10-31 | $3.0m | us-gaap:Liabilities |
| Shareholders' equity | at 2018-10-31 | $36.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 18,225 characters.

*This Quarterly Report on Form 10-Q, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), which are subject to the “safe harbor” created by those sections. Any statements herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as “may,” “will,” “could,” “would,” “should,” “anticipate,” “expect,” “intend,” “believe,” “estimate,” “project” or “continue,” and the negatives of such terms are intended to identify forward-looking statements. The information included herein represents our estimates and assumptions as of the date of this filing. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new 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, 2018.*

### Executive Summary

The Company’s performance has improved through the first half of the fiscal year and even seeing a bit of growth during the second quarter. This is due to the continuation of our quality USA made products with the ability for customization, our notable customer service, and the purchase of the assets of Labor Saving Devices, Inc. Additionally, the Company’s products are traditionally tied to the housing market and with that market being strong, it in turn makes the Company’s sales grow. Challenges in the coming months include continuing to get product out to customers in a timelier manner and to fill the stockroom with inventory to get back to shipping out core products the same day. Also, the price of raw materials has increased with the execution of tariffs by the US government. But management continues to work at keeping operations flowing as efficient as possible with the hopes of getting the facilities running leaner and more profitable than ever before.

#### Results of Operations

- Net sales were $3,667,000 for the quarter ended October 31, 2018, which is an 18.71% increase from the corresponding quarter last year. Year-to-date net sales were $7,096,000 at October 31, 2018, which is a 32.96% increase from the same period last year. The increases in sales shows the stability of the Company and loyalty of its customer base. The ongoing commitment towards outstanding customer service and customization of products are a few of the many reasons sales have grown. Also, new sales are emerging since GRI acquired the assets of Labor Saving Devices. The Company has been selling this product line for over a year now, which has been a factor in the increased sales.
- Cost of goods sold was 51.62% of net sales for the quarter ended October 31, 2018 and was 45.84% for the same quarter last year. Year-to-date cost of goods sold percentages were 52.07% for the current six months and 47.05% for the corresponding six months last year. The increases in percentages of cost of goods sold is just outside of Management’s goal of keeping labor and other manufacturing expenses at less than 50% for both the quarter and year-to-date results. Management has seen increases in labor and materials costs but has decided not to increase the selling prices of our products at this time.

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- Operating expenses were up $116,000 for the quarter and were up $307,000 for the six-months ended October 31, 2018 as compared to the corresponding periods last year. These increased costs for the quarter are primarily due to increased commissions, the addition of employees, and the amortization from the asset acquisition of Labor Saving Devices. The Company has been able to keep the operating expenses at less than 30% of net sales for many years; however, the effects of paying for training of the new computer software and currently paying maintenance and support fees on two software platforms has added to these expenses.
- Income from operations for the quarter ended October 31, 2018 was at $886,000, which is a 1.66% decrease from the corresponding quarter last year, which had income from operations of $901,000. Income from operations for the six months ended October 31, 2018 was at $1,659,000, which is a 19.27% increase from the corresponding six months last year, which had income from operations of $1,391,000.
- Other income and expenses are down when comparing the current quarter and six-month periods to the prior year, with a decrease of $34,000 in the current quarter and a decrease of $154,000 for the current year-to-date numbers. Most of the activity in these accounts consists of investment interest, dividends, and gain or loss on sale of investments. The decrease is primarily due to decreased dividend and interest income and taking losses on the sale of investments.
- Overall, net income for the quarter ended October 31, 2018 was up $46,000, or 6.37%, from the same quarter last year. Similarly, net income for the six-month period ended October 31, 2018 was up $146,000, or 11.77%, from the same period in the prior year.
- Earnings per common share for quarter ended October 31, 2018 were $0.15 per share and $0.28 per share for the year-to-date numbers. EPS for the quarter and six months ended October 31, 2017 were $0.15 per share and $0.25 per share, respectively.

#### Liquidity and capital resources

#### Operating

- Net cash decreased $204,000 during the six months ended October 31, 2018 as compared to a decrease of $132,000 during the corresponding period last year.
- Accounts receivable decreased $23,000 for the six months ended October 31, 2018 compared with a $364,000 increase for the same period last year. The current year decrease is a result of improved sales and collections on accounts receivable have improved over the last year. An analysis of accounts shows that there were only 6.05% that were over 90 days at October 31, 2018.
- Inventories increased $435,000 during the current six-month period as compared to a $1,290,000 increase last year. The smaller increase in the current year is primarily due to increased sales and not having a large influx of inventory from the asset acquisition of Labor Saving Devices last year.
- Prepaid expenses saw a $168,000 decrease for the current six months, primarily due to inventory being delivered that had to be paid for in advance. The prior six months showed a $139,000 increase in prepaid expenses.
- Income tax overpayment for the period ended October 31, 2018 increased $97,000, while there was a decrease of $127,000 for the same period the prior year. Since net income is higher than the same time last year and management estimated that there would be an uptick in sales with the new product line that is the reason for the current year increase.
- Accounts payable shows increases for the current six-month period of $189,000 and a decrease of $98,000 for the prior six-month period. The company strives to pay all invoices within terms, and the slight variance in the increases is primarily due to the timing of receipt of products and payment of invoices.
- Accrued expenses increased $8,000 for the current six-month period as compared to a $33,000 decrease for the six-month period ended October 31, 2017.

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#### Investing

- As for our investment activities, the Company did not buy any fixed assets during the current six-month period. In comparison with the corresponding six months last year, where there was activity of $314,000.
- Additionally, the Company continues to purchase marketable securities, which include municipal bonds and quality stocks. During the six-month period ended October 31, 2018 there was quite a bit of buy/sell activity in the investment accounts. Net cash spent on purchases of marketable securities for the six-month period ended October 31, 2018 was $324,000 compared to $324,000 spent in the prior six-month period. 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

- The Company continues to purchase back its common stock when the opportunity arises. For the six-month period ended October 31, 2018, the Company purchased $54,000 worth of treasury stock, in comparison to $3,000 repurchased in the corresponding six-month period last year.
- The company declared a dividend of $0.38 per share of common stock on September 30, 2018, which was paid out during the second quarter. This is a slight increase to the dividend of $0.36, which was declared and paid during the second fiscal quarter last year.

The following is a list of ratios to help analyze George Risk Industries’ performance:

| Working capital | As of October 31, 2018 | October 31, 2017 |
| --- | ---: | ---: |
| (current assets – current liabilities) | $34,508,000 | $34,386,000 |
| Current ratio |  |  |
| (current assets / current liabilities) | 16.614 | 9.552 |
| Quick ratio |  |  |
| ((cash + investments + AR) / current liabilities) | 14.401 | 8.563 |

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#### New Product Development

The Company and its engineering department continue to develop enhancements to product lines, develop new products that complement existing products, and look for products that are well suited to our distribution network and manufacturing capabilities. Items currently in 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.
- An updated version of the pool access alarm is currently going through ETL for listing approval. 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.
- A new high voltage current controller is complete and has received U.L. approval for the US and Canada. The CC-15 series is 15-amps and comes in a variety of voltage configurations. These are used for appliance control, environmental control, and lighting systems.
- We continue to work on high security switches. We 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 considering adding wireless technology to some of our current products. A wireless contact switch is in the final stages of development. Also, we are working on wireless versions of 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.

#### Other Information

In addition to researching and developing new products, management is always open to the possibility of acquiring a business or product line that would complement our existing operations. Due to the Company’s strong cash position, management believes this could be achieved without the need for outside financing. The intent is to utilize the equipment, marketing techniques and established customers to deliver new products and increase sales and profits.

There are no known seasonal trends with any of GRI’s products, since we sell to distributors and OEM manufacturers. Our products are tied to the housing industry and will fluctuate with building trends.

#### Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. In addition, ASU No. 2014-09 requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU No. 2014-09 supersedes most existing U.S. GAAP revenue recognition principles, and it permits the use of either the retrospective or cumulative effect transition method ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. The Company has adopted ASU No. 2014-09 in the first quarter of fiscal 2019, which does not have a material impact on the Company’s financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which provides guidance for accounting for leases. ASU 2016-02 requires lessees to classify leases as either finance or operating leases and to record 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 recognized based on an effective interest rate method or on a straight-line basis over the term of the lease. Accounting for lessors remains largely unchanged from current GAAP. ASU 2016-02 is effective for the Company beginning November 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”). ASU 2018-10 provides certain amendments that affect narrow aspects of the 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 recognizes a cumulative-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. The Company adopted the ASUs in the first quarter of 2019 and the Company’s accounting systems will be upgraded to comply with the requirements of the new standard, however, the adoption of ASU 2016-02 will not have a material impact on the Company’s financial statements and related disclosures.

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). Under existing U.S. GAAP, the effects of changes in tax rates and laws on deferred tax balances are recorded as a component of income tax expense in the period in which the law was enacted. When deferred tax balances related to items originally recorded in accumulated other comprehensive income (loss) are adjusted, certain tax effects become stranded in accumulated other comprehensive income. The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive income (loss) to retained earnings (accumulated deficit) for stranded income tax effects resulting from the Tax Cuts and Jobs Act (the Tax Act). The amendments in this ASU also require certain disclosures about stranded income tax effects. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption in any period is permitted. The Company has not yet adopted ASU 2018-02 and is currently evaluating the potential impact of adopting the applicable guidance on the Company’s financial statements and related disclosures.

In July 2018, the FASB issued ASU No. 2018-09, “Codification Improvements” (“ASU 2018-09”). ASU 2018-09 provides amendments to a wide variety of topics in the FASB’s Accounting Standards Codification, which applies to all reporting entities within the scope of the affected accounting guidance. The transition and effective date guidance are based on the facts and circumstances of each amendment. Some of the amendments in ASU 2018-09 do not require transition guidance and were effective upon issuance of ASU 2018-09. However, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018. We are currently evaluating the potential impact of adopting the applicable guidance, however we do not believe that the adoption of ASU 2018-09 will have a material impact on the Company’s financial statements and related disclosures.

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. The Company is currently assessing the timing and impact of adopting the updated provisions.

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 for fiscal years ending after December 15, 2020, and early adoption is permitted. The Company is currently assessing the timing and impact of adopting the updated provisions.

## Controls and procedures

As filed, 2,408 characters.

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 October 31, 2018. Based on that evaluation, our chief executive officer (also working as our chief financial officer) 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.

We continue to operate with a limited number of accounting and financial personnel. A new accounting professional was hired in 2018 to fill the Controller position. 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.

Despite the material weaknesses in financial reporting noted above, we believe that our consolidated financial statements included in this report fairly present our financial position, results of operations and cash flows as of and for the periods presented in all material respects.

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

### Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the fiscal quarter ended October 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

GEORGE RISK INDUSTRIES, INC.

Filed Dec 17, 2018.
Source: SEC EDGAR, the filing index for accession 0001493152-18-017590. Last ingested by Listed: Oct 24, 2026, 14:54 ET. No prices; not investment advice.