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, 2007
[ ] 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: 000-05378
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, 2007 was 5,334,878.
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, 2007, are attached hereto.
GEORGE RISK INDUSTRIES, INC.
BALANCE SHEETS
July 31, April 30,
2007 2007
------------ ------------
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 5,236,000 $ 4,611,000
Marketable securities (Note 2) 17,093,000 16,738,000
Accounts receivable:
Trade, net of $50,000 doubtful
account allowance 1,821,000 1,925,000
Other 4,000 3,000
Income tax overpayment 0 137,000
Inventories (Note 3) 2,931,000 3,060,000
Prepaid expenses 107,000 125,000
Deferred income taxes 216,000 115,000
------------ ------------
Total Current Assets $27,408,000 $26,714,000
Property and Equipment, net at cost $ 874,000 $ 828,000
Other Assets
Investment in Land Limited Partnership,
at cost 200,000 200,000
Projects in process 70,000 75,000
Note receivable 60,000 60,000
Other 0 18,000
------------ ------------
Total Other Assets $ 330,000 $ 353,000
TOTAL ASSETS $28,612,000 $27,895,000
============ ============
GEORGE RISK INDUSTRIES, INC.
BALANCE SHEETS
July 31, April 30,
2007 2007
------------ ------------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade $ 51,000 $ 127,000
Dividends payable 161,000 161,000
Accrued expenses
Payroll and other expenses 266,000 337,000
Property taxes 2,000 0
Income tax payable 261,000 0
------------ ------------
Total Current Liabilities $ 741,000 $ 625,000
Long-Term Liabilities
Notes payable 25,000 25,000
Deferred income taxes 65,000 74,000
------------ ------------
Total Long-Term Liabilities $ 90,000 $ 99,000
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 99,000
Common stock, Class A, $.10 par value,
10,000,000 shares authorized, 8,502,832
shares issued and outstanding 850,000 850,000
Additional paid-in capital 1,736,000 1,736,000
Accumulated other comprehensive income (38,000) 165,000
Retained earnings 27,253,000 26,430,000
Treasury stock, 3,167,604 shares,
at cost (2,119,000) (2,109,000)
------------ ------------
Total Stockholders' Equity $27,781,000 $27,171,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $28,612,000 $27,895,000
============ ============
GEORGE RISK INDUSTRIES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED
July 31,
2007 2006
------------ ------------
Net Sales $ 3,239,000 $ 3,411,000
Less: cost of goods sold (1,530,000) (1,693,000)
------------ ------------
Gross Profit $ 1,709,000 $ 1,718,000
Operating Expenses:
General and administrative 174,000 162,000
Selling 543,000 629,000
Engineering 21,000 15,000
Rent paid to related parties 16,000 15,000
------------ ------------
Total Operating Expenses $ 754,000 $ 821,000
Income From Operations 955,000 897,000
Other Income (Expense)
Other 1,000 4,000
Dividend and interest income 205,000 128,000
Gain (loss) on sale of investments 96,000 (87,000)
------------ ------------
$ 302,000 $ 45,000
Income Before Provisions for Income Tax 1,257,000 942,000
Provisions for Income Tax
Current expense 398,000 392,000
Deferred tax (benefit) expense 36,000 6,000
------------ ------------
Total Income Tax Expense $ 434,000 $ 398,000
Net Income $ 823,000 $ 544,000
Retained Earnings, beginning of period $26,430,000 $24,250,000
Retained Earnings, end of period $27,253,000 $24,794,000
Income Per Share of Common Stock:
Basic $ .15 $ .10
Diluted $ .15 $ .10
Weighted Average Number of Common
Shares Outstanding:
Common 5,335,666 5,343,596
Diluted 5,356,166 5,364,096
GEORGE RISK INDUSTRIES, INC.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED
July 31,
2007 2006
---------------------------
Net Income $ 823,000 $ 544,000
----- -----
Other Comprehensive Income, net of tax
Unrealized gain (loss) on securities:
Unrealized holding gains (losses)
arising during period (203,000) (120,000)
Reclassification adjustment for (gains)
losses included in net income (96,000) 87,000
Income tax expense related to other
comprehensive income (125,000) (14,000)
------------ ------------
Other Comprehensive Income (Loss) $ (424,000) $ (47,000)
Comprehensive Income (Loss) $ 399,000 $ 497,000
============ ============
GEORGE RISK INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
For the three months
ended July 31,
2007 2006
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 823,000 $ 544,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 41,000 43,000
(Gain) loss on sale of investments (96,000) 87,000
Deferred income taxes 36,000 6,000
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 104,000 280,000
Inventories 129,000 (128,000)
Prepaid expenses 18,000 18,000
Increase (decrease) in:
Accounts payable (76,000) (8,000)
Accrued expenses (69,000) (91,000)
Income tax payable 398,000 392,000
------------ ------------
Net cash provided by (used in) operating
activities $ 1,308,000 $ 1,143,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Other assets manufactured 23,000 (15,000)
(Purchase) of property and equipment (87,000) (10,000)
Proceeds from sale of marketable securities 1,443,000 670,000
(Purchase) of marketable securities (2,052,000) (1,138,000)
(Purchase) of treasury stock (10,000) (39,000)
------------ ------------
Net cash provided by (used in) investing
activities $ (683,000) $ (532,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on short-term debt 0 (8,000)
------------ ------------
Net cash provided by (used in) financing
activities $ 0 $ (8,000)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 625,000 $ 603,000
Cash and cash equivalents, beginning of
period $ 4,611,000 $ 5,495,000
------------ ------------
Cash and cash equivalents, end of period $ 5,236,000 $ 6,098,000
============ ============
Supplemental Disclosure of Cash Flow
Information
Cash payments for:
Income taxes $0 $0
Interest expense $0 $0
GEORGE RISK INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2007
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, 2007 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, 2007:
Market Value $ 17,094,000
Cost Basis 17,159,000
-------------
Net Unrealized Gains (Losses) $ (65,000)
=============
Gross unrealized gain $ 627,000
=============
Gross unrealized loss $ (692,000)
=============
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 $5,000 for
the quarter ended July 31, 2007 and $53,000 for the quarter ended
July 31, 2006.
Note 3 Inventories
Inventories at July 31, 2007, consisted of the following:
Raw Materials $ 1,747,000
Work in Process 893,000
Finished Goods 396,000
------------
$ 3,036,000
Less: allowance for obsolete inventory (105,000)
------------
Net Inventories $ 2,931,000
============
Note 4 Business Segments
The following is financial information relating to industry segments:
For the quarter ended
July 31,
2007 2006
Net revenue:
Pool alarm products $ 187,000 $ 311,000
Keyboard products 380,000 188,000
Security alarm and other products 2,672,000 2,912,000
------------ ------------
Total net revenue $ 3,239,000 $ 3,411,000
Income from operations:
Pool alarm products $ 55,000 $ 82,000
Keyboard products 112,000 49,000
Security alarm and other products 788,000 766,000
------------ ------------
Total income from operations $ 955,000 $ 897,000
Identifiable assets:
Pool alarm products $ 248,000 $ 286,000
Keyboard products 362,000 224,000
Security alarm and other products 4,925,000 4,463,000
Corporate general 23,077,000 21,031,000
------------ ------------
Total assets $28,612,000 $26,004,000
Depreciation and amortization:
Pool alarm products $ 3,000 $ 3,000
Keyboard products 0 0
Security alarm and other products 30,000 30,000
Corporate general 8,000 10,000
------------ ------------
Total depreciation and amortization $ 41,000 $ 43,000
Capital expenditures:
Pool alarm products $ 0 $ 0
Keyboard products 0 0
Security alarm and other products 82,000 10,000
Corporate general 0 0
------------ ------------
Total capital expenditures $ 82,000 $ 10,000
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, 2007
----------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
------------- -------------- ---------
Net Income $ 823,000
=============
Basic EPS $ 823,000 5,335,666 $ 0.15
Effect of dilutive securities:
Convertible preferred stock 0 20,500
------------- -------------- ---------
Diluted EPS $ 823,000 5,356,166 $ 0.15
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
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, 2007 and 2006. There were no discretionary contributions paid
during the quarters ending July 31, 2007 and 2006, 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
condensed consolidated financial statements, and with the Company's audited
financial statements and discussion for the fiscal year ended April 30, 2007.
Net cash increased $625,000 during the quarter ended July 31, 2007 as com-
pared to an increase of $603,000 during the corresponding quarter last year.
Accounts receivable decreased $103,000 for the quarter ending July 31, 2007,
as compared to a $280,000 decrease for the same quarter last year. The
reason for the decrease in cash flow towards accounts receivable is two fold.
First, the Company is collecting the receivables at a faster rate than the
same period last year and secondly, sales have decreased. At the quarter
ended July 31, 2007, 78.14% of the receivables are considered current (less
than 45 days) and 7.37% of the total are over 90 days past due. This is in
comparison to having 77.05% of the receivables considered current and 9.57%
over 90 days past due at July 31, 2006. Inventories decreased $129,000
during the current quarter as compared to a $128,000 increase last year.
The main reason for the decrease in cash flow towards inventory during the
quarter ended July 31, 2007 is that our sales have decreased and management
has adjusted its purchasing practices accordingly. At the quarter ended
July 31, 2007 there was an $18,000 decrease in prepaid expenses, while at
July 31, 2006, there was also a $18,000 decrease.
At the quarter ended July 31, 2007, accounts payable shows a decrease of
$76,000 as compared to a decrease of $8,000 for the same quarter the year
before. And, as stated before, the Company's sales are down and management
has reduced some purchases of raw materials. Accrued expenses decreased
$64,000 for the current quarter as compared to a $91,000 decrease for the
quarter ended July 31, 2006. Because sales are down, commissions are also
down. This is reflected in the accrued expenses. Income tax payable in-
creased $398,000 for the quarter ended July 31, 2007. This compares to an
increase of $392,000 for the quarter ended July 31, 2006. The larger in-
crease accounts for the fact that profit is up for the first quarter of fis-
cal year end 2008 when comparing the same quarter for fiscal year end 2007.
As for our investment activities, the Company has spent approximately $87,000
on acquisitions of property and equipment for the current fiscal quarter.
But in comparison to the corresponding quarter last year, there was activity
of only $10,000. One piece of machinery management purchased in the quarter
ended July 31, 2007 is a Pick and Place machine. This machine aids us in the
production of our pool alarms. The pool alarm has been redesigned and this
piece of equipment allows us to manufacture the new pool alarms. By re-
designing the pool alarm, the Company is able to use less parts and labor on
these products. Additionally, the Company continues to put money into the
marketable securities. Much of this has been gone towards the purchase of
municipal bonds. Most brokers and analysts believe that interest rates will
be lowered in light of the problems that the housing and mortgage industries
are currently facing. The idea in purchasing bonds at this time is that the
Company can lock-in the higher interest rates, before the rates are reduced.
We continue the use of our "money manager" accounts. 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 does not pay com-
mission for each transaction. Instead, a quarterly service fee is paid based
on the value of the assets. Approximately 23% of the Company's marketable
securities are invested in the money manager accounts. Furthermore, the Com-
pany continues to purchase back common stock when the opportunity arises.
For the quarter ended July 31, 2007, the Company purchased $10,000 worth of
treasury stock and $39,000 worth of treasury stock for the quarter ended
July 31, 2006. We have been actively searching for stockholders that have
been "lost" over the years. The payment of dividends over the last three
fiscal years has also prompted many stockholders and/or their relatives and
descendants to sell back their stock to the Company.
The following is a list of ratios to help analyze George Risk Industries'
performance:
For the quarter ended
July 31,
2007 2006
---------------------------
Working capital $ 26,667,000 $ 24,249,000
Current ratio 36.988 40.365
Quick ratio 32.591 35.760
Net sales were $3,239,000 for the quarter ended July 31, 2007, which is a de-
crease of 5.04% from the corresponding quarter last year. Net sales for the
quarter ended July 31, 2006 were $3,411,000. As stated before, the majority
of the Company's products are tied to the housing market. The decline in
sales for the company is a direct result of the decline in the housing market
of late. Cost of goods sold was 47.2% of net sales for the quarter ended
July 31, 2007 and the cost of goods sold percentage to net sales was 49.6%
for the quarter ended July 31, 2006. Having relatively the same percentage
of cost of goods sold from period to period shows that we keep our costs in
line. As a result of the slow down in sales, management has compensated by
taking extra effort in keeping labor and other manufacturing expenses down.
Operating expenses were 23.3% of net sales for the quarter ended July 31,
2007 as compared to 24.1% 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.
Specifically, selling expense has decreased 13.7% for the quarter ending
July 31, 2007. This is a result of the decrease in sales because commissions
are less when comparing the same numbers to the corresponding quarter last
year. Income from operations for the quarter ended July 31, 2007 was at
$955,000, which is a 6.5% increase from the corresponding quarter last year,
which had income from operations of $897,000.
Other income and expenses showed a $302,000 gain for the quarter ended
July 31, 2007 as compared to only having a $45,000 gain for the quarter ended
July 31, 2006. The main reason for the difference in the amount of the gains
from one quarter to the other is that our managed accounts had sold many
stocks for gains during the current quarter. Also, management had $48,000
less to book in impaired investments. In turn, net income for the quarter
ended July 31, 2007 was at $823,000, a 51.3% increase from the corresponding
quarter last year, which showed net income of $544,000. Earnings per share
for the quarter ended July 31, 2007 were $0.15 per common share and $0.10 per
common share for the quarter ended July 31, 2006.
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, a new self-contained water leak detector has just
started production this last month. This detector is perfect for the home-
owner as it contains a built in sounder and can run off of a 9-volt battery
or the alarm panel. It can be mounted on a wall or directly to an appliance
where water damage may occur. Sales of this product are expected to be fair,
but management is looking at marketing this product to larger retail outlets,
which could increase sales immensely. Engineering is currently developing a
version of this leak detector for the United Kingdom. The need for this kind
of product has come about as a result of flooding in that country over the
past summer.
Due to popular demand, our 189 open loop series pool alarm is being brought
back into production. The 189-series pool alarm was discontinued several
years ago, due to minimal sales. The open loop feature is being designed on
the new pool alarm circuit board with the 289-series closed loop. The in-
staller will be able to use it either open or closed with a simple jumper pin
change. The purchase of the pick and place machine, as discussed earlier,
allows us to make this interchangeable circuit pool alarm.
The wireless pool alarm and wireless contact switch designs are nearing com-
pletion. These products will have to be submitted to the FCC for approval.
Also, work on the various molds to manufacture these wireless products is
being done. Production on these wireless products is expected to begin in
the spring of 2008
A new version of our Glass Guard window sensor is in its final stages of
development. Management has created this sensor in direct response to cust-
omer feedback about how our offshore competitors have long delays in de-
livering this type of product.
Research and Development continues on the Pump Guard, a water valve con-
troller and other wireless sensors. Specific research and development is
being done for the wireless sensor market in Iceland. Engineering is also
upgrading the CC-01 Current Controller. The CC-01 is used to automatically
turn on closed and/or cabinet lights when the door is opened. The new ver-
sion will be able to handle more current and inductive load and is currently
at UL for approval.
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 September 6, 2007, a dividend of $0.17 per common share was declared.
This is an increase of $.02 per share over the last dividend declaration.
This dividend will be paid to stockholders of record as of September 30,
2007, and will be paid by October 31, 2007.
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, 2007
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 09-14-2007 By: /s/ Kenneth R. Risk
Kenneth R. Risk
President and Chairman of the Board
Date 09-14-2007 By: /s/ Stephanie M. Risk
Stephanie M. Risk
Chief Financial Officer and Controller