valu20221031

valu20221031_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________________________ to __________________________________

Commission File Number: 0-11306

VALUE LINE, INC.

(Exact name of registrant as specified in its charter)

New York	13-3139843
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

551 Fifth Avenue, New York, New York	10176-0001
(Address of principal executive offices)	(Zip Code)

(212) 907-1500

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol	Name of each Exchange on which registered
Common stock, $0.10 par value per share	VALU	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class	Outstanding at November 30, 2022
Common stock, $0.10 par value per share	9,450,819 shares

VALUE LINE, INC.

TABLE OF CONTENTS


		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Consolidated Condensed Financial Statements

	Consolidated Condensed Balance Sheets as of October 31, 2022 and April 30, 2022	3

	Consolidated Condensed Statements of Income for the three and six months ended October 31, 2022 and October 31, 2021	4

	Consolidated Condensed Statements of Comprehensive Income for the three and six months ended October 31, 2022 and October 31, 2021	5

	Consolidated Condensed Statements of Cash Flows for the six months ended October 31, 2022 and October 31, 2021	6

	Consolidated Condensed Statement of Changes in Shareholders’ Equity for the six months ended October 31, 2022	7

	Consolidated Condensed Statement of Changes in Shareholders’ Equity for the six months ended October 31, 2021	7

	Notes to Consolidated Condensed Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4.	Controls and Procedures	35

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 4.	Mine Safety Disclosures	36

Item 5.	Other Information	36

Item 6.	Exhibits	37

	Signatures	38

Part I - Financial Information

Item 1. Financial Statements

Value Line, Inc.

Consolidated Condensed Balance Sheets

(in thousands, except share amounts)

	October 31,			April 30,
	2022			2022
	(unaudited)
Assets
Current Assets:
Cash and cash equivalents (including short term investments of $12,066 and $28,965, respectively)	$	12,668		$	29,703
Equity securities		17,122			17,647
Available-for-sale fixed income securities		27,954			10,475
Accounts receivable, net of allowance for doubtful accounts of $36 and $31, respectively		1,649			1,677
Prepaid and refundable income taxes		1,499			588
Prepaid expenses and other current assets		1,257			1,248
Total current assets		62,149			61,338

Long term assets:
Investment in EAM Trust		58,940			59,971
Restricted money market investments		305			305
Property and equipment, net		6,433			7,058
Capitalized software and other intangible assets, net		47			71
Total long term assets		65,725			67,405

Total assets	$	127,874		$	128,743

Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities	$	1,357		$	1,314
Accrued salaries		1,214			1,137
Dividends payable		2,364			2,378
Accrued taxes on income		-			2
Operating lease obligation-short term		1,291			1,239
Unearned revenue		16,674			17,688
Total current liabilities		22,900			23,758

Long term liabilities:
Unearned revenue		6,216			6,085
Operating lease obligation-long term		5,472			6,129
Deferred income taxes		13,066			13,126
Total long term liabilities		24,754			25,340
Total liabilities		47,654			49,098

Shareholders' Equity:
Common stock, $0.10 par value; authorized 30,000,000 shares; issued 10,000,000 shares		1,000			1,000
Additional paid-in capital		991			991
Retained earnings		91,700			87,645
Treasury stock, at cost (542,500 shares and 490,157 shares, respectively)		(13,449	)		(9,967	)
Accumulated other comprehensive income, net of tax		(22	)		(24	)
Total shareholders' equity		80,220			79,645

Total liabilities and shareholders' equity	$	127,874		$	128,743

The accompanying notes are an integral part of these consolidated condensed financial statements.

Part I - Financial Information

Item 1. Financial Statements

Value Line, Inc.

Consolidated Condensed Statements of Income

(in thousands, except share & per share amounts)

(unaudited)

	For the Three Months Ended					For the Six Months Ended
	October 31,					October 31,
	2022			2021		2022		2021

Revenues:
Investment periodicals and related publications	$	6,612		$	6,635	$	13,203	$	13,582
Copyright fees		3,454			3,338		6,807		6,557
Total publishing revenues		10,066			9,973		20,010		20,139

Expenses:
Advertising and promotion		723			676		1,544		1,723
Salaries and employee benefits		3,769			4,303		7,816		8,960
Production and distribution		1,243			1,311		2,458		2,527
Office and administration		1,158			946		2,463		1,927
Total expenses		6,893			7,236		14,281		15,137

Income from operations		3,173			2,737		5,729		5,002

Gain on forgiveness of PPP loan (see note 16)		-			2,331		-		2,331

Revenues and profits interests in EAM Trust		2,816			4,892		5,831		9,697
Investment gains/(losses)		(268	)		368		26		762
Income before income taxes		5,721			10,328		11,586		17,792
Income tax provision		1,391			1,824		2,798		3,391
Net income	$	4,330		$	8,504	$	8,788	$	14,401

Earnings per share, basic & fully diluted	$	0.46		$	0.89	$	0.93	$	1.51


Weighted average number of common shares		9,467,810			9,554,673		9,475,960		9,557,333

The accompanying notes are an integral part of these consolidated condensed financial statements.

Part I - Financial Information

Item 1. Financial Statements

Value Line, Inc.

Consolidated Condensed Statements of Comprehensive Income

(in thousands)

(unaudited)

	For the Three Months Ended					For the Six Months Ended
	October 31,					October 31,
	2022			2021		2022		2021


Net income	$	4,330		$	8,504	$	8,788	$	14,401

Other comprehensive income/(loss), net of tax:
Change in unrealized gains/(losses) on fixed income securities, net of taxes		(3	)		-		2		(4	)
Other comprehensive income/(loss)		(3	)		-		2		(4	)
Comprehensive income	$	4,327		$	8,504	$	8,790	$	14,397

The accompanying notes are an integral part of these consolidated condensed financial statements.

Part I - Financial Information

Item 1. Financial Statements

Value Line, Inc.

Consolidated Condensed Statements of Cash Flows

(in thousands)

(unaudited)

	For the Six Months Ended
	October 31,
	2022			2021
Cash flows from operating activities:
Net income	$	8,788		$	14,401
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		672			669
Investment (gains)/losses		429			(356	)
Non-voting revenues interest in EAM Trust		(5,405	)		(8,412	)
Non-voting profits interest in EAM Trust		(426	)		(1,285	)
Distributions received from EAM Trust		6,862			9,616
Gain on forgiveness of PPP loan (see note 16)		-			(2,331	)
Deferred income taxes		(59	)		(225	)
Deferred rent		(605	)		(511	)
Changes in operating assets and liabilities:
Unearned revenue		(883	)		(2,488	)
Accounts payable & accrued expenses		43			(1,080	)
Accrued salaries		77			(17	)
Accrued taxes on income		(2	)		534
Prepaid and refundable income taxes		(911	)		251
Prepaid expenses and other current assets		(9	)		104
Accounts receivable		28			2,390
Total adjustments		(189	)		(3,141	)
Net cash provided by operating activities		8,599			11,260

Cash flows from investing activities:
Proceeds from sales of equity securities		1,016			687
Purchases of equity securities		(919	)		(3,434	)
Purchases of fixed income securities classified as available-for-sale		(17,479	)		(498	)
Proceeds from sales of fixed income securities classified as available-for-sale		-			2,496
Acquisition of property and equipment		(23	)		-
Net cash used in investing activities		(17,405	)		(749	)

Cash flows from financing activities:
Purchase of treasury stock at cost		(3,482	)		(517	)
Dividends paid		(4,747	)		(4,207	)
Net cash used in financing activities		(8,229	)		(4,724	)
Net change in cash and cash equivalents		(17,035	)		5,787
Cash, cash equivalents and restricted cash at beginning of period		30,008			19,640
Cash, cash equivalents and restricted cash at end of period	$	12,973		$	25,427

The accompanying notes are an integral part of these consolidated condensed financial statements.

Part I - Financial Information

Item 1. Financial Statements

Value Line, Inc.

Consolidated Condensed Statement of Changes in Shareholders' Equity

For the Six Months Ended October 31, 2022

(in thousands, except share amounts)

(unaudited)

																Accumulated
					*Additional*											*other*
	*Common stock*				*paid-in-*		*Treasury stock*						*Retained*			*comprehensive*
	*Shares*		*Amount*		*capital*		*Shares*			*Amount*			*earnings*			*income*			*Total*
Balance at April 30, 2022		10,000,000	$	1,000	$	991		(490,157	)	$	(9,967	)	$	87,645		$	(24	)	$	79,645

Net income														8,788						8,788
Change in unrealized gains on Fixed Income securities, net of taxes																	2			2
Purchase of treasury stock								(52,343	)		(3,482	)								(3,482	)
Dividends declared														(4,733	)					(4,733	)
Balance at October 31, 2022		10,000,000	$	1,000	$	991		(542,500	)	$	(13,449	)	$	91,700		$	(22	)	$	80,220

Dividends declared per common share were $0.50 for the six months ending October 31, 2022.

Part I - Financial Information

Item 1. Financial Statements

Value Line, Inc.

Consolidated Condensed Statement of Changes in Shareholders' Equity

For the Six Months Ended October 31, 2021

(in thousands, except share amounts)

(unaudited)

																Accumulated
					*Additional*											*other*
	*Common stock*				*paid-in-*		*Treasury stock*						*Retained*			*comprehensive*
	*Shares*		*Amount*		*capital*		*Shares*			*Amount*			*earnings*			*income*			*Total*
Balance at April 30, 2021		10,000,000	$	1,000	$	991		(436,830	)	$	(7,483	)	$	72,502		$	3		$	67,013

Net income														14,401						14,401
Change in unrealized gains on Fixed Income securities, net of taxes																	(4	)		(4	)
Purchase of treasury stock								(16,589	)		(517	)								(517	)
Dividends declared														(4,203	)					(4,203	)
Balance at October 31, 2021		10,000,000	$	1,000	$	991		(453,419	)	$	(8,000	)	$	82,700		$	(1	)	$	76,690

Dividends declared per common share were $0.44 for the six months ending October 31, 2021.

The accompanying notes are an integral part of these consolidated condensed financial statements.

Value Line, Inc.

Notes to Consolidated Condensed Financial Statements

October 31, 2022

(Unaudited)

Note 1 - Organization and Summary of Significant Accounting Policies:

Value Line, Inc. ("Value Line" or "VLI", and collectively with its subsidiaries, the “Company”) is incorporated in the State of New York. The name "Value Line" as used to describe the Company, its products, and its subsidiaries, is a registered trademark of the Company. The Company's core business is producing investment periodicals and their underlying research and making available certain Value Line copyrights, Value Line trademarks and Value Line Proprietary Ranks and other proprietary information, to third parties under written agreements for use in third-party managed and marketed investment products and for other purposes. The Company maintains a significant investment in Eulav Asset Management LLC ("EAM") from which it receives a non-voting revenues interest and a non-voting profits interest. Pursuant to the EAM Declaration of Trust dated as of December 23, 2010 (the "EAM Trust Agreement"), VLI granted EAM the right to use the Value Line name for all existing Value Line Funds and agreed to supply, without charge or expense, the Value Line Proprietary Ranking System information to EAM for use in managing the Value Line Funds. EAM was established to provide investment management services to the Value Line Mutual Funds ("Value Line Funds" or the "Funds").

The Consolidated Condensed Balance Sheets as of October 31, 2022 and April 30, 2022, which have been derived from the unaudited interim Consolidated Condensed Financial Statements and the audited Consolidated Financial Statements, respectively, were prepared following the interim reporting requirements of the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying Unaudited Interim Consolidated Condensed Financial Statements contain all adjustments (consisting of normal recurring accruals except as noted below) considered necessary for a fair presentation. This report should be read in conjunction with the audited financial statements and footnotes contained in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2022 filed with the SEC on July 26, 2022 (the “Form 10-K”). Results of operations covered by this report may not be indicative of the results of operations for the entire year.

Use of Estimates:

The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from those estimates.

Principles of Consolidation:

The Company follows the guidance in the Financial Accounting Standards Board's ("FASB") Topic 810 “Consolidation” to determine if it should consolidate its investment in a variable interest entity ("VIE"). A VIE is a legal entity in which either (i) equity investors do not have sufficient equity investment at risk to enable the entity to finance its activities independently or (ii) the equity holders at risk lack the obligation to absorb losses, the right to receive residual returns or the right to make decisions about the entity’s activities that most significantly affect the entity's economic performance. A holder of a variable interest in a VIE is required to consolidate the entity if it is determined that it has a controlling financial interest in the VIE and is therefore the primary beneficiary. The determination of a controlling financial interest in a VIE is based on a qualitative assessment to identify the variable interest holder, if any, that has (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) either the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The accounting guidance requires the Company to perform an ongoing assessment of whether the Company is the primary beneficiary of a VIE and the Company has determined it is not the primary beneficiary of a VIE (see Note 3).

In accordance with FASB's Topic 810, the assets, liabilities, and results of operations of subsidiaries in which the Company has a controlling interest have been consolidated. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company holds a significant non-voting revenues interest (excluding distribution revenues) and a significant non- voting profits interest in EULAV Asset Management, a Delaware statutory trust (“EAM” or “EAM Trust”). The Company relied on the guidance in FASB's ASC Topics 323 and 810 in its determination not to consolidate its investment in EAM and to account for such investment under the equity method of accounting. The Company reports the amount it receives for its non-voting revenues and non voting profits interests as a separate line item below operating income in the Consolidated Condensed Statements of Income.

Revenue Recognition:

Depending upon the product, subscription fulfillment for Value Line periodicals and related publications is available in print or digitally, via internet access. The length of a subscription varies by product and offer received by the subscriber. Generally, subscriptions are offered as annual subscriptions. Subscription revenues, net of discounts, are recognized ratably on a straight line basis when the product is served to the client over the life of the subscription. Accordingly, the amount of subscription fees to be earned by fulfilling subscriptions after the date of the balance sheets are shown as unearned revenue within current and long-term liabilities.

Copyright fees are derived from providing certain Value Line trademarks and the Value Line Proprietary Ranks to third parties under written agreements for use in selecting securities for third party marketed products, including unit investment trusts, annuities and exchange traded funds ("ETFs"). The Company earns asset-based copyright fees upon delivery of the product to the customer as specified in the individual agreements. Revenue is recognized monthly and received either quarterly or in advance over the term of the agreement and, because it is asset-based, will fluctuate as the market value of the underlying portfolio increases or decreases in value.

Value Line, Inc.

Notes to Consolidated Condensed Financial Statements

October 31, 2022

(Unaudited)

Investment in Unconsolidated Entities:

The Company accounts for its investment in its unconsolidated entity, EAM, using the equity method of accounting in accordance with FASB’s ASC 323. The equity method is an appropriate means of recognizing increases or decreases measured by GAAP in the economic resources underlying the investments. Under the equity method, an investor recognizes its share of the earnings or losses of an investee in the periods for which they are reported by the investee in its financial statements rather than in the period in which an investee declares a dividend or distribution. An investor adjusts the carrying amount of an investment for its share of the earnings or losses recognized by the investee.

The Company’s “interests” in EAM, the investment adviser to and the sole member of the distributor of the Value Line Funds, consist of a "non-voting revenues interest" and a "non-voting profits interest" in EAM as defined in the EAM Trust Agreement. The non- voting revenues interest entitles the Company to receive a range of 41% to 55% of EAM’s adjusted gross revenues, excluding EULAV Securities' distribution revenues (“Revenues Interest”). The non-voting profits interest entitles the Company to receive 50% of EAM's profits, subject to certain limited adjustments as defined in the EAM Trust Agreement (“Profits Interest”). The Revenues Interest and at least 90% of the Profits Interest are to be distributed each quarter to all interest holders of EAM, including Value Line. The Company's Revenues Interest in EAM excludes participation in the service and distribution fees of EAM's subsidiary EULAV Securities. The Company reflects its non-voting revenues and non-voting profits interests in EAM as non-operating income under the equity method of accounting. Although the Company does not have control over the operating and financial policies of EAM, pursuant to the EAM Trust Agreement, the Company has a contractual right to receive its share of EAM's revenues and profits.

Valuation of Securities:

The Company's securities classified as cash equivalents, equity securities and available-for-sale fixed income securities consist of shares of money market funds that invest primarily in short-term U.S. Government securities and investments in equities including ETFs and are valued in accordance with the requirements of the Fair Value Measurements Topic of the FASB's ASC 820. The securities classified as equity securities reflected in the Consolidated Condensed Balance Sheets are valued at market and unrealized gains and losses are recorded in the Consolidated Condensed Statements of Income per FASB Accounting Standards Update No. 2016-01 ("ASU 2016-01"). The securities classified as available-for-sale fixed income securities reflected in the Consolidated Condensed Balance Sheets are valued at market and unrealized gains and losses, net of applicable taxes, are reported as a separate component of shareholders' equity. Investment gains and losses on sales of the equity securities are the difference between proceeds from sales and the fair value of the equity securities sold at the beginning of the period or the purchase date, if later. Investment gains and losses on sales of the available-for-sale fixed income securities are the difference between proceeds from sales and the cost of the securities. Investment gains and losses on sales of the securities are recorded in earnings as of the trade date and are determined on the identified cost method.

The Company classifies its equity securities and available-for-sale fixed income securities as current assets to properly reflect its liquidity and to recognize the fact that it has liquid assets available-for-sale should the need arise.

Market valuations of securities listed on a securities exchange and ETF shares are based on the closing sales prices on the last business day of each month. The market value of the Company's fixed maturity U.S. Government debt securities is determined utilizing publicly quoted market prices. Cash equivalents consist of investments in money market funds that invest primarily in U.S. Government securities valued in accordance with rule 2a-7 under the 1940 Act.

The Fair Value Measurements Topic of FASB's ASC defines fair value as the price that the Company would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market for the investment. The Fair Value Measurements Topic established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the information that market participants would use in pricing the asset or liability, including assumptions about risk. Examples of risks include those inherent in a particular valuation technique used to measure fair value such as the risk inherent in the inputs to the valuation technique. Inputs are classified as observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the factors market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

Value Line, Inc.

Notes to Consolidated Condensed Financial Statements

October 31, 2022

(Unaudited)

The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

Level 1 – quoted prices in active markets for identical investments

Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments)

The following summarizes the levels of fair value measurements of the Company’s investments:

		As of October 31, 2022
($ in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents	$	12,066	$	-	$	-	$	12,066
Equity securities		17,122		-		-		17,122
Available-for-sale fixed income securities		27,954		-		-		27,954
	$	57,142	$	-	$	-	$	57,142

As of April 30, 2022

($ in thousands)

Level 1

SEC Form 10-Q filed by Value Line Inc.