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 condensed financial statements, and with the Company's audited financial statements and discussion for the fiscal year ended April 30, 2021.





Executive Summary

The Company's performance continues to grow through the first half of the current fiscal year with the second quarter showing a slight decline over the first quarter of the current fiscal year. This is mainly due the inability to obtain all the raw materials that are needed to complete the manufacture of our products and keeping employees staffed at our locations. The state of Nebraska, where we are located, has recently issued news that it has one of the lowest unemployment rates in the country. 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 grow. Opportunities include keeping up with the business growth, finding ways to get our products out to our customers in a timelier manner, and to continue looking at businesses that might be a good fit to purchase. We also have new products that are expected to hit the marketplace 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 $5,244,000 for the quarter ended October 31, 2021, which is a
    12.85% increase from the corresponding quarter last year. Year-to-date net
    sales were $10,199,000 at October 31, 2021, which is a 17.31% increase from
    the same period last year. The increases in sales are primarily a result of a
    competitor no longer selling competing products and having the ability to
    continue to work through the COVID-19 pandemic. Also, the ongoing commitment
    towards outstanding customer service and customization of products are a few
    of the many reasons sales continue to grow.




19







  ? Cost of goods sold was 52.04% of net sales for the quarter ended October 31,
    2021 and was 49.37% for the same quarter last year. Year-to-date cost of goods
    sold percentages were 49.49% for the current six months and 48.83% for the
    corresponding six months last year. The current cost of goods sold percentages
    are right outside of Management's goal of keeping labor and other
    manufacturing expenses at less than 50% for both the quarter but reached that
    goal for year-to-date results. Management continues to work with and train
    employees to work more efficiently and they also work at getting the best
    price for raw materials. Also, a significant wage increase went into effect
    for the company at the beginning of the second quarter of the current fiscal
    year.

  ? Operating expenses were up $102,000 for the quarter and were up $299,000 for
    the six-months ended October 31, 2021 as compared to the corresponding periods
    last year. But when comparing percentages in relation to net sales, the
    operating expenses for the quarter ended October 31, 2021 was 20.80% of net
    sales while it was 21.28% of net sales for the same quarter the prior year.
    For year-to-date numbers, operating expense were 21.55% and 21.84% of net
    sales for the six months ended October 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
    because of increased commission amounts (since sales have increased) and
    additional labor costs for wage increases.

  ? Income from operations for the quarter ended October 31, 2021 was at
    $1,424,000, which is a 4.40% increase from the corresponding quarter last
    year, which had income from operations of $1,364,000. Income from operations
    for the six months ended October 31, 2021 was at $2,954,000, which is a 15.84%
    increase from the corresponding six months last year, which had income from
    operations of $2,550,000.

  ? Other income and expenses are up when comparing the current quarter to the
    same quarter the prior year, with an increase of $724,000 in the current
    quarter. Conversely, other income and expenses are down by $713,000 when
    comparing the current six-month period to the prior six-month period. Most of
    the activity in these accounts consists of investment interest, dividends,
    real gains or losses on sale of investments, and unrealized gains or losses on
    equity securities. The main reason for the increase in the current quarter as
    opposed to the decrease for the year-to-date numbers is the unrealized gain
    and loss on equity securities. The Company is at the mercy of the stock market
    when it comes to these figures and the COVID-19 pandemic influenced these
    numbers.

  ? Overall, net income for the quarter ended October 31, 2021 was up $828,000, or
    96.28%, from the same quarter last year. Similarly, net income for the
    six-month period ended October 31, 2021 was up $82,000, or 2.45%, from the
    same period in the prior year.

  ? Earnings per common share for quarter ended October 31, 2021 were $0.34 per
    share and $0.69 per share for the year-to-date numbers. EPS for the quarter
    and six months ended October 31, 2020 were $0.17 per share and $0.68 per
    share, respectively.

Liquidity and capital resources





Operating



  ? Net cash decreased $1,219,000 during the six months ended October 31, 2021 as
    compared to a decrease of $603,000 during the corresponding period last year.




20







  ? Accounts receivable decreased $185,000 for the six months ended October 31,
    2021 compared with a $32,000 decrease for the same period last year. The
    bigger current year decrease is a result of improved sales while collections
    on accounts receivable have declined over the last year. An analysis of
    accounts receivable shows that 4.84% of the receivables were over 90 days at
    October 31, 2021, while only 0.27% were over 90 days for the same period last
    year.

  ? Inventories increased $1,528,000 during the current six-month period as
    compared to a $637,000 increase last year. The bigger increase in the current
    year is primarily due to being prepared for the increase we have seen in
    sales. In addition, the Company is keeping more inventory on hand to reduce
    the likelihood of running into a shortage on some major raw materials, as we
    have experienced in the past.

  ? Prepaid expenses saw a $337,000 increase for the current six months, primarily
    due to having more prepayments of raw materials. Lead times and costs have
    risen on raw materials, making it a challenge to obtain. The prior year six
    months showed a $73,000 decrease in prepaid expenses.

  ? Accounts payable shows a decrease for the current six-month period of $183,000
    while it shows an increase for the prior six-month periods of $28,000. The
    company strives to pay all invoices within terms, and the variance is
    primarily due to the timing of receipt of products and payment of invoices.

  ? Accrued expenses decreased $4,000 for the current six-month period as compared
    to a $104,000 decrease for the six-month period ended October 31, 2020. The
    difference in the amounts is primarily due to timing issues.

  ? Income tax payable increased $140,000 for the current six-month period,
    compared to having an increase of $376,000 in income tax overpayment for the
    six-months ended October 31, 2020. The current increase is largely due to
    having increased sales and income and not having income tax estimates large
    enough.




Investing



  ? As for our investment activities, the Company purchased $40,000 of property
    and equipment during the current six-month period. In comparison, $361,000 was
    spent on purchases of property and equipment during the corresponding six
    months last year.




  ? The Company continues to purchase marketable securities, which include
    municipal bonds and quality stocks. During the six-month period ended October
    31, 2021 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, 2021 was $208,000 compared to $186,000
    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, 2021, the Company purchased
    $26,000 worth of treasury stock, in comparison to $1,000 repurchased in the
    corresponding six-month period last year.




21







  ? The company declared a dividend of $0.50 per share of common stock on
    September 30, 2021, which was paid out during the second quarter. This is an
    increase to the dividend of $0.42, 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:



                                                                      As of
                                                     October 31, 2021       October 31, 2020
Working capital
(current assets - current liabilities)              $       48,623,000     $       38,744,000
Current ratio
(current assets / current liabilities)                          16.358                 10.901
Quick ratio
((cash + investments + AR) / current liabilities)               13.940                  9.317




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:





  ? 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 production has started. 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
    such as instant alarm and seven second delay.

  ? 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. A redesign of
    our brass water valve shut-off system is near completion.

  ? The Company is developing magnetic contacts which are listed under UL 634
    Level 2. These sensors are for high security applications such as government
    buildings, military use, nuclear facilities, and financial institutions.




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 2016-13, "Financial Instruments - Credit Losses (Topic 326)," which was subsequently amended in February 2020 by ASU 2020-02, "Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842)."The amendments introduce an impairment model that is based on expected credit losses, rather than incurred losses, to estimate credit losses on certain types of financial instruments (e.g., loans and held-to-maturity securities), including certain off-balance sheet financial instruments (e.g., loan commitments). The expected credit losses should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. Financial instruments with similar risk characteristics may be grouped together when estimating expected credit losses. The update with amendment is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company does not believe this new guidance will have a material impact on its financial statements and will implement the disclosures related to this update beginning in 2023.

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. ASU 2020-01 deals with changes in the significant influence of derivative and investments, of which the Company has none and became effective for the Company in the first quarter of 2021. The adoption of this standard did not have any impact on the Company's condensed 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