MANAGEMENT DISCUSSION AND ANALYSIS



                             OF FINANCIAL CONDITION

                           AND RESULTS OF OPERATIONS

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 unaudited condensed financial statements, and with the Company's audited financial statements and discussion for the fiscal year ended April 30, 2020.





Executive Summary

The Company's performance continues to improve through the three quarters of the current fiscal year with the third quarter staying strong. The Company is on track to have a record setting year for sales. This is mainly due the closure of a competitor that got out of the security switch business at the end of calendar year 2019 and having the ability to continue to work through the COVID-19 pandemic. The state of Nebraska, where we are located, has kept businesses open during the pandemic. Additionally, the Company's products are traditionally tied to the housing market and with that market remaining strong, it in turn helps the Company's sales growth. Opportunities include keeping up with the business growth. One way we are doing this is by looking into more automation. We also continue to look at businesses that might be a good fit to purchase. We also have new products that have hit the marketplace and a couple more that are scheduled to be introduced by the end of the fiscal year. Challenges in the coming months include continuing to get product out to customers in a timely manner and dealing with the COVID-19 pandemic restrictions. Possible COVID-19 challenges include, but are not limited to, price increases and/or delays in the supply chain, reduced sales, workforce interruptions, and economic conditions impacting the stock market. 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 $4,633,000 for the quarter ended January 31, 2021, which is a
    29.09% increase from the corresponding quarter last year. Year-to-date net
    sales were $13,327,000 at January 31, 2021, which is a 22.81% increase from
    the same period last year. The significant growth in sales is due to our
    ongoing commitment to outstanding customer service and our ability to
    customize products. The Company is also seeing continued growth since a major
    competitor closed its doors at the end of 2019.

  ? Cost of goods sold was 51.48% of net sales for the quarter ended January 31,
    2021 and was 51.04% for the same quarter last year. Year-to-date cost of goods
    sold percentages were 49.76% for the current nine months and 50.33% for the
    corresponding nine months last year, which is right at the target of less than
    50% for both the quarter and year-to-date results. Management continues to
    train employees for more efficient production and strives to get the best
    price for raw materials.




19







  ? Operating expenses increased by $109,000 for the quarter as they increased by
    $230,000 for the nine-months ended January 31, 2021 as compared to the
    corresponding periods last year. When comparing percentages in relation to net
    sales, the operating expenses for the quarter ended January 31, 2021 was
    22.27% of net sales while it was 25.72% of net sales for the same quarter the
    prior year. For year-to-date numbers, operating expense were 21.99% and 24.88%
    of net sales for the nine months ended January 31, 2021 and 2020,
    respectively. The Company has been able to keep the operating expenses at less
    than 30% of net sales for many years now; however, the actual dollar amount
    increase is due to increased commission amounts, related to increased sales,
    and additional labor costs related to hiring new employees and wage increases.

  ? Income from operations for the quarter ended January 31, 2021 was $1,216,000,
    a 45.80% increase from the corresponding quarter last year, which had income
    from operations of $834,000. Income from operations for the nine months ended
    January 31, 2021 was $3,766,000, which is a 40.00% increase from the
    corresponding nine months last year, which had income from operations of
    $2,690,000.

  ? Other income and expenses are up $3,159,000 when comparing the current quarter
    to the same quarter last year. Comparatively, there is an increase of
    $4,858,000 in other income and expenses for the year-to-date numbers. The
    majority of activity in these accounts consists of investment interest,
    dividends, realized gains or losses on sale of investments, and unrealized
    gains or losses on equity securities. The majority of the larger than normal
    increases are from unrealized gains, which is a reflection of the stock market
    performing well.

  ? Overall, net income for the quarter ended January 31, 2021 was up $3,083,000,
    or 226.03%, from the same quarter last year. Similarly, net income for the
    nine-month period ended January 31, 2021 was up $4,503,000, or 136.62%, from
    the same period in the prior year.

  ? Earnings per common share for quarter ended January 31, 2021 were $0.90 per
    share and $1.58 per share for the year-to-date numbers. EPS for the quarter
    and nine months ended January 31, 2020 were $0.28 per share and $0.67 per
    share, respectively.

Liquidity and capital resources





Operating



  ? Net cash increased $478,000 during the nine months ended January 31, 2021 as
    compared to an increase of $774,000 during the corresponding period last year.

  ? Accounts receivable increased $376,000 for the nine months ended January 31,
    2021 compared with a $460,000 decrease for the same period last year. The
    current year increase is a result of improved sales, partially offset by
    slower collections of accounts receivable. Multiple receipts were received
    after the close of the reporting period. An analysis of accounts receivable
    shows that there were only 3.65% that were over 90 days at January 31, 2021.




20







  ? Inventories increased $823,000 during the current nine-month period compared
    to an increase of $506,000 last year. The larger increase in the current year
    is primarily due to an increase in raw material and finished goods. The
    increase in raw material is a result of having enough supply of material for
    the increase sales. The increase in finished goods relates to the introduction
    of a new product, a high security switch. We expect these to be sold soon.

  ? Prepaid expenses saw a $327,000 decrease for the current nine months,
    primarily due to inventory being delivered that had been paid for in advance.
    The prior nine months showed a $43,000 decrease in prepaid expenses.

  ? Accounts payable shows a $311,000 increase for the current nine-month period
    ended January 31, 2021 compared to a $16,000 increase for the prior nine-month
    period. The company strives to pay all invoices within terms, and the variance
    in increases is primarily due to the timing of receipt of products and payment
    of invoices, as well asCOVID-19 related personnel constraints at the end of
    the current reporting period.

  ? Accrued expenses increased $54,000 for the current nine-month period compared
    to no change for the nine-month period ended January 31, 2020. The difference
    in the amounts is primarily due to timing of payroll periods ending.

  ? Income tax payable increased $249,000 for the current nine-month period,
    compared to a decrease in income tax overpayment for the nine-months ended
    January 31, 2020. The current increase is largely due to having increased
    sales and income and not having large enough income tax estimates.

    Investing

  ? As for our investment activities, the Company spent approximately $426,000 on
    acquisitions of property and equipment for the current nine-month period, in
    comparison with the corresponding nine months last year, where there was
    activity of $468,000.

  ? Additionally, the Company continues to purchase marketable securities, which
    include municipal bonds and quality stocks. During the nine-month period ended
    January 31, 2021 the buy/sell activity in the investment accounts was high.
    Net cash spent on purchases of marketable securities for the nine-month period
    ended January 31, 2021 was $440,000 compared to $640,000 spent in the prior
    nine-month period. The Company continues 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 common stock when the opportunity
    arises. For the nine-month period ended January 31, 2021, the Company
    purchased $28,000 worth of treasury stock. This is in comparison to $71,000
    spent in the same nine months period the prior year.




21







  ? The company paid out dividends of $1,892,000 during the nine months ending
    January 31, 2021. These dividends were paid during the second quarter. The
    company declared a dividend of $0.42 per share of common stock on September
    30, 2020 and these dividends were paid by October 31, 2020. As for the prior
    year numbers, dividends paid was $1,802,000 for the nine months ending January
    31, 2020. A dividend of $0.40 per common share 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:



                                                                      As of
                                                     January 31, 2021       January 31, 2020
Working capital
(current assets - current liabilities)              $       43,984,000     $       35,119,000
Current ratio
(current assets / current liabilities)                          14.430                 16.831
Quick ratio
((cash + investments + AR) / current liabilities)               12.567                 14.597




New Product Development

The Company and its engineering department continue to develop enhancements to product lines, develop new products which 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:





  ? Explosion proof contacts that will be UL listed for hazardous locations. There
    has been demand from our customers for this type of high security magnetic
    reed switch.

  ? An updated version of the pool access alarm (PAA) has met electrical listing
    testing (ETL) approval and we are currently waiting on component parts to
    begin production and field testing. 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.

  ? 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 access 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.





22

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 June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which requires entities to use a forward looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The FASB has subsequently issued updates to the standard to provide additional clarification on specific topics. Topic 326 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We have applied this guidance, as of May 1, 2020, using a modified-retrospective approach. The application of this guidance did not require a cumulative effect adjustment to retained earnings and did not have a material effect on our financial statements.

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. We applied this guidance, as of May 1, 2020. The application of this guidance did not have a material effect on our disclosures.

In January 2020, the FASB issued ASU 2020-01, "Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815." The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions. ASU 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. For public business entities, the amendments in the ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of ASU 2020-01 to have a material impact on its financial statements.

There are no other new accounting pronouncements that are expected to have a significant impact on our financial statements.





23







                          GEORGE RISK INDUSTRIES, INC.



                         PART I. FINANCIAL INFORMATION

© Edgar Online, source Glimpses