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 July 31, 2005
[ ] 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
September 14, 2005 was 5,362,153.
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
July 31, 2005, are attached hereto.
GEORGE RISK INDUSTRIES, INC.
BALANCE SHEET
JULY 31, 2005
ASSETS
Current Assets
Cash and cash equivalents $ 5,910,000
Marketable securities (Note 2) 12,365,000
Accounts receivable:
Trade, net of $50,000 doubtful account allowance 2,203,000
Other 3,000
Inventories (Note 3) 2,030,000
Prepaid expenses 143,000
Deferred income taxes 164,000
------------
Total Current Assets $22,818,000
Property and Equipment, net at cost $ 940,000
Other Assets
Investment in Land Limited Partnership, at cost 200,000
Projects in process 12,000
Other 8,000
------------
Total Other Assets $ 220,000
TOTAL ASSETS $23,978,000
============
GEORGE RISK INDUSTRIES, INC.
BALANCE SHEET
JULY 31, 2005
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade $ 173,000
Dividends payable, current 46,000
Notes payable, current 83,000
Accrued expenses
Payroll and other expenses 234,000
Property taxes 2,000
Income tax payable 562,000
------------
Total Current Liabilities $ 1,100,000
Long-Term Liabilities
Deferred income taxes 61,000
------------
Total Long-Term Liabilities $ 61,000
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
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 (596,000)
Retained earnings 22,660,000
Treasury stock, 3,140,579 shares, at cost (1,932,000)
------------
Total Stockholders' Equity $22,817,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $23,978,000
============
GEORGE RISK INDUSTRIES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED
July 31,
2005 2004
------------ ------------
Net Sales $ 3,411,000 $ 3,096,000
Less: cost of goods sold (1,658,000) (1,498,000)
------------ ------------
Gross Profit $ 1,753,000 $ 1,598,000
Operating Expenses:
General and administrative 166,000 170,000
Selling 617,000 619,000
Engineering 19,000 13,000
Rent paid to related parties 15,000 15,000
------------ ------------
Total Operating Expenses $ 817,000 $ 817,000
Income From Operations 936,000 781,000
Other Income (Expense)
Other 1,000 0
Dividend and interest income 105,000 82,000
Gain (loss) on sale of investments 24,000 (18,000)
------------ ------------
$ 130,000 $ 64,000
Income Before Provisions for Income Tax 1,066,000 845,000
Provisions for Income Tax (461,000) (352,000)
------------ ------------
Net Income $ 605,000 $ 493,000
Retained Earnings, beginning of period $22,055,000 $20,079,000
Retained Earnings, end of period $22,660,000 $20,572,000
Income Per Share of Common Stock $ .11 $ .09
Weighted Average Number of Common
Shares Outstanding 5,373,437 5,402,528
GEORGE RISK INDUSTRIES, INC.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED
July 31,
2005 2004
---------------------------
Net Income $ 605,000 $ 493,000
------------ -------------
Other Comprehensive Income, net of tax
Unrealized gain (loss) on securities:
Unrealized holding gains (losses)
arising during period 285,000 (59,000)
Reclassification adjustment for (gains)
losses included in net income (24,000) 18,000
Income tax expense related to other
comprehensive income 109,000 (17,000)
------------ ------------
Other Comprehensive Income (Loss) $ 370,000 $ (58,000)
Comprehensive Income (Loss) $ 975,000 $ 435,000
============ ============
GEORGE RISK INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
For the three months
ended July 31,
2005 2004
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 605,000 $ 493,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 46,000 49,000
(Gain) loss on sale of investments (24,000) 18,000
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 38,000 (103,000)
Inventories 24,000 (3,000)
Prepaid expenses (82,000) (40,000)
Other receivables (1,000) 1,000
Increase (decrease) in:
Accounts payable 35,000 17,000
Accrued expenses (111,000) (70,000)
Income tax payable 461,000 352,000
------------ ------------
Net cash provided by (used in) operating
activities $ 991,000 $ 714,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Other assets manufactured 23,000 33,000
(Purchase) of property and equipment (200,000) (64,000)
Proceeds from sale of marketable securities 266,000 104,000
(Purchase) of marketable securities (572,000) (350,000)
(Purchase) of treasury stock (128,000) 0
------------ ------------
Net cash provided by (used in) investing
activities $ (611,000) $ (277,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term debt 100,000 0
Principal payments on short-term debt (17,000) 0
Dividends paid (4,000) 0
------------ ------------
Net cash provided by (used in) financing
activities $ 79,000 $ 0
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 459,000 $ 437,000
============ ============
Cash and cash equivalents, beginning of
period $ 5,451,000 $ 4,280,000
Cash and cash equivalents, end of period $ 5,910,000 $ 4,717,000
GEORGE RISK INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2005
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. It is suggested that these condensed finan-
cial statements be read in conjunction with the financial statements and
notes thereto included in the Company's April 30, 2005 annual report on Form
10KSB. 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 Marketable Securities
The Company has investments in publicly traded equity securities as well
as certain state and municipal debt securities. These securities are class-
ified as available-for-sale securities, and are reported at fair value.
Realized gains and losses are determined on the average cost basis, and are
included in the Company's statement of income. Dividend and interest income
are accrued as earned.
Marketable equity securities and related unrealized gains and losses
consist of the following as of July 31, 2005:
Cost Basis $12,961,000
Market Value 12,365,000
------------
Net Unrealized Gains (Losses) $ (596,000)
============
Gross unrealized gain $ 460,000
============
Gross unrealized loss $(1,056,000)
============
In accordance with SFAS 115, if the Company determines that a market-
able security has an other-than temporary decline in fair value, the Company
will decrease the cost of the marketable security to the new fair value and
recognize a realized loss. The investments are periodically evaluated to
determine if impairment changes are required.
Note 3 Inventories
Inventories at July 31, 2005, consisted of the following:
Raw Materials $ 1,491,000
Work in Process 406,000
Finished Goods 159,000
Warehouse in England 44,000
------------
$ 2,100,000
Less: allowance for obsolete inventory (70,000)
------------
Net Inventories $ 2,030,000
============
Note 4 Business Segments
The following is financial information relating to industry segments:
For the quarter ended
July 31,
2005 2004
------------ ------------
Net revenue:
Pool alarm products $ 339,000 $ 273,000
Keyboard products 163,000 127,000
Security alarm and other products 2,909,000 2,696,000
------------ ------------
Total net revenue $ 3,411,000 $ 3,096,000
Income from operations:
Pool alarm products $ 93,000 $ 69,000
Keyboard products 45,000 32,000
Security alarm and other products 798,000 680,000
------------ ------------
Total income from operations $ 936,000 $ 781,000
Identifiable assets:
Pool alarm products $ 362,000 $ 268,000
Keyboard products 226,000 241,000
Security alarm and other products 4,407,000 4,198,000
Corporate general 18,983,000 16,426,000
------------ ------------
Total assets $23,978,000 $21,133,000
Depreciation and amortization:
Pool alarm products $ 3,000 $ 2,000
Keyboard products 0 0
Security alarm and other products 29,000 30,000
Corporate general 14,000 17,000
------------ ------------
Total depreciation and amortization $ 46,000 $ 49,000
Capital expenditures:
Pool alarm products $ 0 $ 0
Keyboard products 0 0
Security alarm and other products 200,000 64,000
Corporate general 0 0
------------ ------------
Total capital expenditures $ 200,000 $ 64,000
Note 5 Revenue Recognition
George Risk Industries recognizes its revenues when goods are shipped
and billed to its customers.
Note 6 Earnings per Share
Basic and diluted earning per share, assuming convertible preferred
stock was converted for each period presented, are:
For the three months ended July 31, 2005
----------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
------------- -------------- ---------
Net Income $ 605,000
=============
Basic EPS $ 605,000 5,362,253 $ 0.11
Effect of dilutive securities:
Convertible preferred stock 0 20,500
------------- -------------- ---------
Diluted EPS $ 605,000 5,382,753 $ 0.11
For the three months ended July 31, 2004
-----------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
------------- -------------- ---------
Net Income $ 493,000
=============
Basic EPS $ 493,000 5,402,528 $ 0.09
Effect of dilutive securities:
Convertible preferred stock 0 26,750
------------- -------------- ---------
Diluted EPS $ 493,000 5,429,278 $ 0.09
Note 7 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. The Plan is intended to be qualified under Section 401 (k)
of the Internal Revenue Code of 1986, as amended. Matching contributions by
the Company of approximately $4,000 were paid during each quarter ending
July 31, 2005 and 2004. There were no discretionary contributions paid
during the quarters ending July 31, 2005 and 2004, respectively.
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 con-
densed consolidated financial statements, and with the Company's audited
financial statements and discussion for the fiscal year ended April 30, 2005.
Net cash increased $459,000 during the quarter ended July 31, 2005 as com-
pared to an increase of $437,000 during the corresponding quarter last year.
Accounts receivable decreased $38,000 for the quarter ending July 31, 2005,
as compared to a $103,000 increase for the same quarter last year. At the
quarter ended July 31, 2005, 69.13% of the receivables are considered current
(less than 45 days) and 13.0% of the total are over 90 days past due. The
biggest offender in the 90 days past due column on the Company's aging report
had over $150,000 at July 31, 2005, but as of August 31, 2005, that amount
has all been paid off and that customer did not have anything in the over 90
days past due column. Inventories decreased $24,000 during the current
quarter as compared to a $3,000 increase last year. At the quarter ended
July 31, 2005 there was a $82,000 increase in prepaid expenses while at July
31, 2004, there was a $40,000 increase. The main reason for the increase in
cash towards prepaid expenses is that we buy Jelly Bellies in bulk and had to
purchase some in the first quarter. Jelly Bellies are GRI's adopted trade-
mark. A package of jellybeans is put into every box that is shipped out and
our samples department also sends out thousands every month.
At the quarter ended July 31, 2005, accounts payable shows an increase of
$35,000 as compared to an increase of $17,000 for the same quarter the year
before. And, as usual, we continue to strive to pay all of our payables
within terms and take all purchase discounts that are available. Accrued ex-
penses decreased $111,000 for the current quarter as compared to a $70,000
decrease for the quarter ended July 31, 2004. Income tax payable increased
$461,000 for the quarter ended July 31, 2005. This compares to an increase
of $352,000 for the quarter ended July 31, 2004. The bigger increase
accounts for the fact that there is a bigger profit for the first quarter of
fiscal year end 2006 that there was for the first quarter fiscal year end
2005.
As for our investment activities, the Company purchased a building for the
workers at our Gering, NE facility. The building cost $151,200 and is bigger
than the facility that we were in before. This gives us an opportunity to
expand and hire new employees. In conjunction with the purchase of this
building, we have received grant and loan money from the City of Gering to
help defray the cost of the building purchase. The Company has received
$55,000 of the $80,000 that we have applied for. $30,000 of this money comes
in the form of a grant in lieu of the remaining amount of rent on the
original agreement the Company made with the City of Gering when the Company
started the manufacturing facility in Gering. The other $25,000 is half of
the $50,000 loan for a new agreement we have entered into with the City of
Gering. This loan will be converted into a grant, contingent on increasing
the number of workers at the Gering location over the next five years. The
Company will receive the other $25,000 that is due from this loan on
January 1, 2007, if certain conditions are met according to the contract with
the City of Gering. Management believes that there should not be any
problems with meeting all of the conditions of the new agreement. But, if
the Company should be in default on this agreement, management foresees the
risk as minimal as the Company would not have problem with paying back the
loan since we are in such good financial position.
Also, the Company has once again started to put money into the marketable
securities. We are taking a different approach to our investments than we
have done in the past. Much of the new money that is being invested in
marketable securities is going into a "money manager" brokerage account. By
doing this, the Company gives an independent third party firm, who are ex-
perts in this field, permission to buy and sell stocks at will. The Company
does not pay commission for each transaction. Instead, a quarterly service
fee is paid based on the value of the assets. Furthermore, the Company
bought back $128,000 worth of common stock for the quarter ended July 31,
2005. We have been actively searching for stockholders that have been "lost"
over the years. This, and the first ever dividend that was paid out last
fiscal year, has prompted many stockholders and/or their relatives and de-
scendants to sell back their stock.
The following is a list of ratios to help analyze George Risk Industries'
performance:
For the quarter ended
July 31,
2005 2004
---------------------------
Working capital $21,718000 $19,496,000
Current ratio 20.744 34.965
Quick ratio 18.616 30.469
Net sales were $3,411,000 for the quarter ended July 31, 2005, which is a
10.2% increase from the corresponding quarter last year. Cost of goods sold
was 48.6% of net sales for the quarter ended July 31, 2005 and the cost of
goods sold percentage to net sales was 48.4% for the quarter ended July 31,
2004. Having relatively the same percentage of cost of goods sold from
period to period shows that we keep our costs in line.
Operating expenses were 24.0% of net sales for the quarter ended July 31,
2005 as compared to 26.3.7% for the corresponding quarter last year. Having
relatively the same percentages for both periods shows that management keeps
a close eye on our operating expenses to keep them in line from year to year.
Income from operations for the quarter ended July 31, 2005 was at $936,000,
which is a 19.8% increase from the corresponding quarter last year, which had
income from operations of $781,000. Increased sales and keeping a good hold
on expenses account for the big increase in operating income.
Other income and expenses showed a $130,000 gain for the quarter ended
July 31, 2005 as compared to having a $64,000 gain for the quarter ended
July 31, 2004. The main reason for the difference in the amount of the gains
from one quarter to the other is that we had a $24,000 gain on the sale of
investments for the current quarter as compared to an $18,000 loss for the
same period last year. We have reworked the way management examinations the
Company's marketable securities over the last year or so. We have put a
good amount of the monies that are in the marketable securities account into
"money manager" accounts. These accounts are looked after by an independent
third party that are constantly being watched. We do not pay any commission
on the trades that are done. Instead, a quarterly service fee is figured as
a percentage of the total assets in the accounts. In turn, net income for
the quarter ended July 31, 2005 was at $605,000, a 22.7% increase from the
corresponding quarter last year, which showed net income of $493,000. Earn-
ings per share for the quarter ended July 31, 2005 were $0.11 per share and
$0.09 per share for the quarter ended July 31, 2004.
George Risk Industries has three distinct business segments, security alarm
products, keyboard, and pool alarm products that are subject to disclosure
under SFAS No. 131. See the notes to the financial statements in order to
examine the three segments.
As for new products, the new Roller Ball molds are approximately three-
quarters complete at this time and sample magnets have been ordered to test
the new Roller Balls. Roller Ball contact are unique in that they can be
activated from any direction within 360 degrees when using a sliding motion
into its frame. The mini EZ Duct line, our plastic wire and cabling
covering, is temporarily on hold while tool and die finds the time to work on
the connector molds.
The MagnaSphere displays are complete except for the label artwork. The
MagnaSphere switch has patented technology that utilizes the principal of
Spherical Magnetism. The heart of the switch is a magnetic sphere, or ball
contact. The sphere is housed in a durable metal housing. Completing the
switch is a seal that contains the contacting electrode, insulated from the
magnetic perimeter by a time proven ceramic to metal bond. These displays
will be given to our outside representatives and our distribution network.
They will be used to demonstrate a new, high security technology. Interest
continues to grow on this product line. Many orders have been received on
the MagnaSphere product, including the Federal government. They are con-
ducting their own tests to determine if these switches can be used to replace
an older, more expensive technology presently being used.
Testing continues in Research and Development on the new Pool Alarm sounder.
This new design should be ready for ETL submittal in last September 2005 or
early October 2005. It was shown at the ISC East trade show in New York City
in late August 2005 and received good marks and approvals from our customers
attending the show.
A new resistor switch has been designed and the PC boards are in-house and
ready for production. This method of production will eliminate a lot of
labor costs since the majority of it will be built on a pick and place
machine.
The High Security Switch design is complete. When the advertising labels
arrive, the product will be submitted to UL for approval. This is a triple
biased switch using three reeds and magnets, which makes it most resistant to
tampering and defeat. The U.S. Government is a major user of this type of
switch set.
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. Our products are tied to the housing
industry and will fluctuate with building trends.
At George Risk Industries' latest Board of Director's meeting, which was
held on August 29, 2005, a dividend of $0.10 per common share was declared.
This dividend will be paid to stockholders of record as of September 30,
2005, and will be paid by October 31, 2005.
Item 3. Controls and Procedures
(a) Information required by Item 307
Our Chief Executive Officer and our Chief Financial Officer, after evaluating
the effectiveness of the Company's "disclosure controls and procedures" (as
defined in the Securities Exchange Act of 1934 (Exchange Act) Rules 13a-15(e)
or 15d-15(e)) as of the end of the period covered by this quarterly report,
have concluded that our disclosure controls and procedures are effective
based on their evaluation of these controls and procedures required by para-
graph (b) of Exchange Act Rules 13a-15 or 15d-15.
(b) Information required by Item 308
This disclosure is not yet required.
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. Exhibits
31. Certifications pursuant to Rule 13a-14(a)
31.1 Certification of the Chief Executive Officer
31.2 Certification of the Chief Financial Officer
32. Certifications pursuant to 18 U.S.C 1350
32.1 Certification of the Chief Executive Officer
32.2 Certification of the Chief Financial Officer
B. Reports on Form 8-K
No 8-K reports were filed during the quarter ended July 31, 2005
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 09-14-2005 By: /s/ Kenneth R. Risk
Kenneth R. Risk
President and Chairman of the Board
Date 09-14-2005 By: /s/ Stephanie M. Risk
Stephanie M. Risk
Chief Financial Officer and Controller