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, 2006
[ ] 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, 2006 was 5,342,213.
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, 2006, are attached hereto.
GEORGE RISK INDUSTRIES, INC.
BALANCE SHEET
JULY 31, 2006
ASSETS
Current Assets
Cash and cash equivalents $ 6,098,000
Marketable securities (Note 2) 14,072,000
Accounts receivable:
Trade, net of $50,000 doubtful account allowance 1,858,000
Inventories (Note 3) 2,398,000
Prepaid expenses 94,000
Deferred income taxes 345,000
------------
Total Current Assets $24,865,000
Property and Equipment, net at cost $ 893,000
Other Assets
Investment in Land Limited Partnership, at cost 200,000
Projects in process 45,000
Other 1,000
------------
Total Other Assets $ 246,000
TOTAL ASSETS $26,004,000
============
GEORGE RISK INDUSTRIES, INC.
BALANCE SHEET
JULY 31, 2006
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade $ 132,000
Dividends payable, current 91,000
Accrued expenses
Payroll and other expenses 268,000
Property taxes 3,000
Income tax payable 122,000
------------
Total Current Liabilities $ 616,000
Long-Term Liabilities
Notes payable 25,000
Deferred income taxes 112,000
------------
Total Long-Term Liabilities $ 137,000
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 (158,000)
Retained earnings 24,794,000
Treasury stock, 3,160,619 shares, at cost (2,070,000)
------------
Total Stockholders' Equity $25,251,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $26,004,000
============
GEORGE RISK INDUSTRIES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED
July 31,
2006 2005
------------ ------------
Net Sales $ 3,411,000 $ 3,411,000
Less: cost of goods sold (1,693,000) (1,658,000)
------------ ------------
Gross Profit $ 1,718,000 $ 1,753,000
Operating Expenses:
General and administrative 162,000 166,000
Selling 629,000 617,000
Engineering 15,000 19,000
Rent paid to related parties 15,000 15,000
------------ ------------
Total Operating Expenses $ 821,000 $ 817,000
Income From Operations 897,000 936,000
Other Income (Expense)
Other 4,000 1,000
Dividend and interest income 128,000 105,000
Gain (loss) on sale of investments (87,000) 24,000
------------ ------------
$ 45,000 $ 130,000
Income Before Provisions for Income Tax 942,000 1,066,000
Provisions for Income Tax
Current expense 392,000 461,000
Deferred tax (benefit) expense 6,000 0
------------ ------------
Total Income Tax Expense $ 398,000 $ 461,000
Net Income $ 544,000 $ 605,000
Retained Earnings, beginning of period $24,250,000 $22,055,000
Retained Earnings, end of period $24,794,000 $22,660,000
Income Per Share of Common Stock $ .10 $ .11
Weighted Average Number of Common
Shares Outstanding 5,343,596 5,373,437
GEORGE RISK INDUSTRIES, INC.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED
July 31,
2006 2005
------------ ------------
Net Income $ 544,000 $ 605,000
------------ ------------
Other Comprehensive Income, net of tax
Unrealized gain (loss) on securities:
Unrealized holding gains (losses)
arising during period (120,000) 285,000
Reclassification adjustment for (gains)
losses included in net income 87,000 (24,000)
Income tax expense related to other
comprehensive income (14,000) 109,000
------------ ------------
Other Comprehensive Income (Loss) $ (47,000) $ 370,000
Comprehensive Income (Loss) $ 497,000 $ 975,000
============ ============
GEORGE RISK INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
For the three months
ended July 31,
2006 2005
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 544,000 $ 605,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 43,000 46,000
(Gain) loss on sale of investments 87,000 (24,000)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 280,000 38,000
Inventories (128,000) 24,000
Prepaid expenses 18,000 (82,000)
Deferred tax asset 6,000 0
Increase (decrease) in:
Accounts payable (8,000) 35,000
Accrued expenses (91,000) (111,000)
Income tax payable 392,000 461,000
------------ ------------
Net cash provided by (used in) operating
activities $ 1,143,000 $ 991,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Other assets manufactured (15,000) 23,000
(Purchase) of property and equipment (10,000) (200,000)
Proceeds from sale of marketable securities 670,000 266,000
(Purchase) of marketable securities (1,138,000) (572,000)
(Purchase) of treasury stock (39,000) (128,000)
------------ ------------
Net cash provided by (used in) investing
activities $ (532,000) $ (611,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term debt 0 100,000
Principal payments on short-term debt (8,000) (17,000)
Dividends paid 0 (4,000)
------------ ------------
Net cash provided by (used in) financing
activities $ (8,000) $ 79,000
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 603,000 $ 459,000
============ ============
Cash and cash equivalents, beginning of
period $ 5,495,000 $ 5,451,000
Cash and cash equivalents, end of period $ 6,098,000 $ 5,910,000
GEORGE RISK INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2006
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, 2006 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. Unrealized gains and losses
are excluded from earnings and reported separately as a component of stock-
holders' equity. 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, 2006:
Cost Basis $ 14,230,000
Market Value 14,072,000
-------------
Net Unrealized Gains (Losses) $ (158,000)
=============
Gross unrealized gain $ 551,000
=============
Gross unrealized loss $ (709,000)
=============
In accordance with SFAS 115, if the Company determines that a market-
able security has an other-than temporary decline in fair value, generally
defined as when the cost basis exceeds the fair value for approximately one
year, the Company will decrease the cost of the marketable security to the
new fair value and recognize a realized loss. The investments are period-
ically evaluated to determine if impairment changes are required. As a re-
sult of this standard, management recorded impairment losses of $53,000 for
the quarter ended July 31, 2006.
Note 3 Inventories
Inventories at July 31, 2006, consisted of the following:
Raw Materials $ 1,476,000
Work in Process 553,000
Finished Goods 376,000
Warehouse in England 63,000
------------
$ 2,468,000
Less: allowance for obsolete inventory (70,000)
------------
Net Inventories $ 2,398,000
============
Note 4 Business Segments
The following is financial information relating to industry segments:
For the quarter ended
July 31,
2006 2005
---------------------------
Net revenue:
Pool alarm products $ 311,000 $ 339,000
Keyboard products 188,000 163,000
Security alarm and other products 2,912,000 2,909,000
------------ ------------
Total net revenue $ 3,411,000 $ 3,411,000
Income from operations:
Pool alarm products $ 82,000 $ 93,000
Keyboard products 49,000 45,000
Security alarm and other products 766,000 798,000
------------ ------------
Total income from operations $ 897,000 $ 936,000
Identifiable assets:
Pool alarm products $ 286,000 $ 362,000
Keyboard products 224,000 226,000
Security alarm and other products 4,463,000 4,407,000
Corporate general 21,031,000 18,983,000
------------ ------------
Total identifiable assets $26,004,000 $23,978,000
Depreciation and amortization:
Pool alarm products $ 3,000 $ 3,000
Keyboard products 0 0
Security alarm and other products 30,000 29,000
Corporate general 10,000 14,000
------------ ------------
Total depreciation and amortization $ 43,000 $ 46,000
Capital expenditures:
Pool alarm products $ 0 $ 0
Keyboard products 0 0
Security alarm and other products 10,000 200,000
Corporate general 0 0
------------ ------------
Total capital expenditures $ 10,000 $ 200,000
Note 5 Revenue Recognition
Revenue is recognized when risks and benefits in ownership are trans-
ferred, which normally occurs at the time of the shipment of products.
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, 2006
----------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
------------- -------------- ---------
Net Income $ 544,000
=============
Basic EPS $ 544,000 5,342,213 $ 0.10
Effect of dilutive securities:
Convertible preferred stock 0 20,500
------------- -------------- ---------
Diluted EPS $ 544,000 5,362,713 $ 0.10
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
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, 2006 and 2005. There were no discretionary contributions paid
during the quarters ending July 31, 2006 and 2005, 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, 2006.
Net cash increased $603,000 during the quarter ended July 31, 2006 as com-
pared to an increase of $459,000 during the corresponding quarter last year.
Accounts receivable decreased $280,000 for the quarter ending July 31, 2006,
as compared to a $38,000 decrease for the same quarter last year. At the
quarter ended July 31, 2006, 77.05% of the receivables are considered current
(less than 45 days) and 9.57% of the total are over 90 days past due. This
is in comparison to having 66.09% of the receivables considered current and
13.0% over 90 days past due at July 31, 2005. Inventories increased $128,000
during the current quarter as compared to a $24,000 decrease last year. The
main reason for the big increase during the quarter ended July 31, 2006 is
that our finished goods inventory increased heartily, largely in part to a
slow down in our sales. At the quarter ended July 31, 2006 there was an
$18,000 decrease in prepaid expenses while at July 31, 2005, there was a
$82,000 decrease. The main reason for the decrease in cash towards prepaid
expenses is that we have not had to replenish our supply of Jelly Bellies yet
in the first fiscal quarter. Jelly Bellies are GRI's adopted trademark. 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, 2006, accounts payable shows a decrease of
$8,000 as compared to an increase of $35,000 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
expenses decreased $91,000 for the current quarter as compared to a $111,000
decrease for the quarter ended July 31, 2005. Income tax payable increased
$392,000 for the quarter ended July 31, 2006. This compares to an increase
of $461,000 for the quarter ended July 31, 2005. The smaller increase
accounts for the fact that there is a slight decrease in profit for the first
quarter of fiscal year end 2007 than there was for the first quarter fiscal
year end 2006.
As for our investment activities, the Company has only spent approximately
$10,000 for the current fiscal quarter. But in comparison to the cor-
responding quarter last year, there was activity of approximately $200,000.
The bulk of this investment activity was that 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 in-
creasing 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 continues 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 Com-
pany gives an independent third party firm, who are experts in this field,
permission to buy and sell stocks at will. The Company does not pay com-
mission for each transaction. Instead, a quarterly service fee is paid based
on the value of the assets. Also, with interest rates on the rise, the Com-
pany has purchased more bonds since they are a more attractive holding at
this time. Furthermore, the Company continues to purchase back common stock
when the opportunity arises. For the quarter ended July 31, 2006, the Com-
pany purchased $39,000 worth of treasury stock and $128,000 worth of treasury
stock for the quarter ended July 31, 2005. We have been actively searching
for stockholders that have been "lost" over the years. With this, and the
payment of dividends over the last two fiscal years, has prompted many stock-
holders and/or their relatives and descendants 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,
2006 2005
---------------------------
Working capital $ 24,249,000 $ 21,718,000
Current ratio 40.365 20.744
Quick ratio 35.760 18.616
Net sales were $3,411,000 for the quarter ended July 31, 2006, which is the
same amount that was recorded for the corresponding quarter last year. Cost
of goods sold was 49.6% of net sales for the quarter ended July 31, 2006 and
the cost of goods sold percentage to net sales was 48.6% for the quarter
ended July 31, 2005. 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 24.1% of net sales for the quarter ended July 31,
2006 as compared to 24.0% 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, 2006 was at $897,000,
which is a 4.2% decrease from the corresponding quarter last year, which had
income from operations of $936,000.
Other income and expenses showed a $45,000 gain for the quarter ended
July 31, 2006 as compared to having a $130,000 gain for the quarter ended
July 31, 2005. The main reason for the difference in the amount of the gains
from one quarter to the other is that we had $53,000 worth of impaired in-
vestments that were realized as losses during the current quarter as compared
to showing $24,000 worth of net gains on the sale of investments for the same
period last year. We have reworked the way management examines the Com-
pany'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, 2006 was at $544,000, a 10.1% decrease from the
corresponding quarter last year, which showed net income of $605,000.
Earnings per share for the quarter ended July 31, 2006 were $0.10 per share
and $0.11 per share for the quarter ended July 31, 2005.
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 Pool Alarm board is complete and will be sent in
for ETL certification in September 2006. The new board design will be more
reliable and will use less parts when being assembled making them easier and
faster to build. Pool Alarms continue to see sales growth as more states
enact safety legislation aimed at preventing swimming pool accidents
involving children. The United States Senate and Congress have both issued
bills that would make it a Federal law to have some kind of an alarm or other
safety measure at the entry into pools and spas. If this law passed, man-
agement foresees that sales of the Pool Alarm could grow exponentially.
GRI is also designed a product called the Emergency Button that could be used
next to a swimming pool or in a freezer. If there is an emergency, such as a
drowning or someone being locked in a freezer, the button could be pushed and
it would cause the alarm systems to go off or it could be used with a dialer
to call 911.
GRI is now offering mini raceway to complement our existing raceway line.
The size is 3/8" x 3/8". This size is excellent to cover speaker wire or
phone cords.
GRI continues to see growth in special order products. One example is a
water sensor that was custom built with a connector on the wires for a major
US company.
We are also seeing growth with electrical contractors through the sales of
our Current Controller (pt #CC-01). This device can turn lights on in var-
ious areas when the door is opened. We are also offering a new Extreme Duty
armored cable with a pull-apart switch for applications such as securing
tractors, golf carts, or any items that are stored outside. This armored
cable is strung through and round such items to secure them and the end is
then wired into the security alarm panel.
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 31, 2006, a dividend of $0.15 per common share was declared. This
is an increase of $.05 per share as compared to previous two dividend de-
clarations. This dividend will be paid to stockholders of record as of
September 30, 2006, and will be paid by October 31, 2006.
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, 2006
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 09-14-2006 By: /s/ Kenneth R. Risk
Kenneth R. Risk
President and Chairman of the Board
Date 09-14-2006 By: /s/ Stephanie M. Risk
Stephanie M. Risk
Chief Financial Officer and Controller