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, 2020.





Executive Summary

The Company's performance continues to improve through the first half of the current fiscal year with the second quarter showing growth over the first quarter of the current fiscal year. This is mainly due the closure of a competitor 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 grow. Opportunities include keeping up with the business growth and to continue looking 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 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 $4,647,000 for the quarter ended October 31, 2020, which is a

25.26% increase from the corresponding quarter last year. Year-to-date net

sales were $8,694,000 at October 31, 2020, which is a 19.70% increase from the

same period last year. The increases in sales are primarily a result of a

competitor no longer selling competing products, as discussed above. Other than

the loss of a competitor, the Company does not believe COVID-19 has had a

significant effect on our net revenue and we do not expect it to have a

significant effect going forward. Also, the ongoing commitment towards

outstanding customer service and customization of products are a few of the

many reasons sales continue to grow.

? Cost of goods sold was 49.37% of net sales for the quarter ended October 31,

2020 and was 50.13% for the same quarter last year. Year-to-date cost of goods

sold percentages were 48.83% for the current six months and 49.98% for the

corresponding six months last year. The current cost of goods sold percentages

are right at Management's goal of keeping labor and other manufacturing

expenses at less than 50% for both the quarter and 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.

? Operating expenses were up $85,000 for the quarter and were up $121,000 for the

six-months ended October 31, 2020 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, 2020 was 21.28% of net sales while

it was 24.37% of net sales for the same quarter the prior year. For

year-to-date numbers, operating expense were 21.84% and 24.48% of net sales for

the six months ended October 31, 2020 and 2019, 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

hiring new employees and wage increases.

? Income from operations for the quarter ended October 31, 2020 was at

$1,364,000, which is a 44.19% increase from the corresponding quarter last

year, which had income from operations of $946,000. Income from operations for

the six months ended October 31, 2020 was at $2,550,000, which is a 37.47%

increase from the corresponding six months last year, which had income from


   operations of $1,855,000.

? Other income and expenses are down when comparing the current quarter to the

prior quarter, with a decrease of $167,000 in the current quarter. Conversely,

other income and expenses are up by $1,699,000 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 decrease in the current quarter as opposed to the increase

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, 2020 was down $97,000, or

10.14%, from the same quarter last year. Conversely, net income for the

six-month period ended October 31, 2020 was up $1,420,000, or 73.5%, from the

same period in the prior year.

? Earnings per common share for quarter ended October 31, 2020 were $0.17 per

share and $0.68 per share for the year-to-date numbers. EPS for the quarter and

six months ended October 31, 2019 were $0.19 per share and $0.39 per share,


   respectively.

Liquidity and capital resources





Operating



  ? Net cash decreased $603,000 during the six months ended October 31, 2020 as
    compared to an increase of $339,000 during the corresponding period last year.












  ? Accounts receivable decreased $32,000 for the six months ended October 31,
    2020 compared with a $486,000 decrease for the same period last year. The
    smaller current year decrease is a result of improved sales and collections on
    accounts receivable have improved over the last year. An analysis of accounts
    shows that there were only 0.27% that were over 90 days at October 31, 2020.

  ? Inventories increased $637,000 during the current six-month period as compared
    to a $583,000 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, such as we
    experienced last year.

  ? Prepaid expenses saw a $73,000 decrease for the current six months, primarily
    due to less prepayment of raw materials and running through some of our
    prepaid agreements without needing to renew them. The prior six months showed
    a $271,000 increase in prepaid expenses.

  ? Accounts payable shows an increase for the current six-month period of $28,000
    while it shows a decrease for the prior six-month periods of $36,000. The
    company strives to pay all invoices within terms, and the variance in the
    decreases is primarily due to the timing of receipt of products and payment of
    invoices.

  ? Accrued expenses decreased $104,000 for the current six-month period as
    compared to an $11,000 increase for the six-month period ended October 31,
    2019. The difference in the amounts is primarily due to timing issues.

  ? Income tax payable increased $376,000 for the current six-month period,
    compared to having a decrease in income tax overpayment for the six-months
    ended October 31, 2019. The current increase is largely due to having
    increased sales and income and not having income tax estimates large enough.
    Also, since the Company was notified that the PPP loan was forgiven, the
    forgiveness amount was included in the income tax expense calculation.




Investing



  ? As for our investment activities, the Company purchased $361,000 of property
    and equipment during the current six-month period. In comparison, $179,000 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, 2020 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, 2020 was $186,000 compared to $250,000
    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. The COVID-19 pandemic has had a negative impact on
    the performance of the stock market, which has affected the real and
    unrealized gains/losses. Management believes that more realized losses were
    recorded when investments were sold and more write downs had to be recorded.












Financing



  ? On April 15, 2020, the Company received loan proceeds of approximately
    $950,000 from FirsTier Bank, pursuant to the Paycheck Protection Program under
    Division A, Title I of the CARES Act, which was enacted March 27, 2020. Please
    refer to Note 8 for more information about the loan. In accordance with the
    terms of the loan, the Company used the proceeds for qualified operating
    expenses. As of December 3, 2020, the liability of this loan has been
    completely forgiven.

  ? The Company continues to purchase back its common stock when the opportunity
    arises. For the six-month period ended October 31, 2020, the Company purchased
    $1,000 worth of treasury stock, in comparison to $54,000 repurchased in the
    corresponding six-month period last year.

  ? The company declared a dividend of $0.42 per share of common stock on
    September 30, 2020, which was paid out during the second quarter. This is a
    slight increase to the dividend of $0.40, 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, 2020       October 31, 2019
Working capital
(current assets - current liabilities)                $       38,744,000     $       37,805,000
Current ratio
(current assets / current liabilities)                            10.901                 16.564
Quick ratio
((cash + investments + AR) / current liabilities)                  9.317                 14.333




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 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.

? In the high security realm, the Company has introduced the 2707 Series which is

a triple high biased magnetic reed contact and available in SPDT and DPDT

models. These contacts are resistant to magnetic tamper and defeat. They are

used in applications such as airports, biotechnology labs, manufacturing

plants, banks, military bases, and energy-generation facilities.

? The 3045 Panic Switch contains screw terminals and uses an actuating lever

which can be triggered with only the tip of the finger. It can be installed

under a counter or desk or any similar place. The 3045CT uses 12' extreme

temperature rated wire for installation in refrigerators and freezers. Both

models have a latching LED indicating when the switch is activated and

automatically resets when the lever is closed and is fully re-armed. Latching

LED and UL Listed versions will follow.






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.

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.

GEORGE RISK INDUSTRIES, INC.



                         PART I. FINANCIAL INFORMATION

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