# George Risk Industries, Inc.: Form 10-K/A for the period ended Apr 30, 2019

- Company: [George Risk Industries, Inc.](/companies/rskia.md) (CIK 84112)
- Form: 10-K/A
- Filed: 2020-03-25
- Accepted by EDGAR: Mar 24, 2020, 18:52 ET
- Period: 2019-04-30
- Accession: 0001493152-20-004642
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/84112/000149315220004642/form10-ka.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/84112/000149315220004642/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2019-04-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2019-02-01 to 2019-04-30 | $3.6m | us-gaap:Revenues |
| Revenue | 12 months, 2018-05-01 to 2019-04-30 | $14.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 12 months, 2018-05-01 to 2019-04-30 | $7.3m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 12 months, 2018-05-01 to 2019-04-30 | $6.8m | us-gaap:GrossProfit |
| Operating income | 3 months, 2019-02-01 to 2019-04-30 | $814.0k | us-gaap:OperatingIncomeLoss |
| Operating income | 12 months, 2018-05-01 to 2019-04-30 | $3.3m | us-gaap:OperatingIncomeLoss |
| Interest expense | 12 months, 2018-05-01 to 2019-04-30 | $1.0k | us-gaap:InterestExpense |
| Income tax | 12 months, 2018-05-01 to 2019-04-30 | $1.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 12 months, 2018-05-01 to 2019-04-30 | $3.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 12 months, 2018-05-01 to 2019-04-30 | $0.72 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 12 months, 2018-05-01 to 2019-04-30 | $0.73 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 12 months, 2018-05-01 to 2019-04-30 | 4,983,047 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 12 months, 2018-05-01 to 2019-04-30 | $2.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2019-02-01 to 2019-04-30 | $66.0k | us-gaap:PaymentsToAcquireProductiveAssets |
| Capital expenditure | 12 months, 2018-05-01 to 2019-04-30 | $154.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 12 months, 2018-05-01 to 2019-04-30 | $1.8m | us-gaap:PaymentsOfDividends |
| Share repurchases | 12 months, 2018-05-01 to 2019-04-30 | $79.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2019-04-30 | $4.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2019-04-30 | $40.0m | us-gaap:AssetsCurrent |
| Total assets | at 2019-04-30 | $43.0m | us-gaap:Assets |
| Current liabilities | at 2019-04-30 | $2.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2019-04-30 | $3.5m | us-gaap:Liabilities |
| Shareholders' equity | at 2019-04-30 | $39.6m | us-gaap:StockholdersEquity |

## Business

As filed, 2,674 characters.

(a) Business Development

George Risk Industries, Inc. (GRI or the Company) was incorporated in 1967 in Colorado. The Company is presently engaged in the design, manufacture, and sale of computer keyboards, push button switches, burglar alarm components and systems, pool alarms, EZ Duct wire covers, water sensors and wire and cable installation tools.

Products, Market, and Distribution

The Company designs, manufactures, and sells computer keyboards, push-button switches, burglar alarm components and systems, pool alarms, water sensors, and wire and cable installation tools. Their Telemark division, which concentrates on selling products for security purposes, comprises of approximately 94 percent of net revenues and are sold through distributors and alarm dealers/installers.

The security segment has approximately 1,000 current customers. One of the distributors, Ademco, Inc. (previously known as ADI), accounts for approximately 41.4 percent of the Company’s sales of these products. Anixter, Inc. (which finalized the purchased Tri Ed Distribution in 2018) accounts for another 10.7 percent of Company sales. Loss of these distributors would be significant to the Company. However, both companies have purchased from the Company for many years and are expected to continue. Also, the Company has a written agreement with Ademco. This agreement was signed in February 2011 and was initiated by the customer. The contents of the agreement include product terms, purchasing, payment terms, term and termination, product marketing, representations and warranties, product support, mutual confidentiality, indemnification and insurance, and general provisions.

The keyboard segment has approximately 800 customers. Keyboard products are sold to original equipment manufacturers to their specifications and to distributors of off-the-shelf keyboards of proprietary design.

Competition

The Company has intense competition in the keyboard and burglar alarm lines.

The burglar alarm segment has approximately eight major competitors. The Company competes well based on price, product design, quality, customization and prompt delivery.

The competitors in the keyboard segment are larger companies with automated production facilities. GRI has emphasized small custom order sales that many of its competitors decline or discourage.

Research and Development

The Company performs research and development for its customers when needed and requested. Costs in connection with such product development have been borne by the customers. Costs associated with the development of new products are expensed as incurred.

Employees

GRI has approximately 175 employees.

## Properties

As filed, 454 characters.

The Company owns the manufacturing and some of the office facilities. Total square footage of the plant in Kimball, Nebraska is approximately 50,000 sq. ft. Additionally, the Company leases 15,000 square feet for $1,535 per month with Bonita Risk. Bonita Risk is a director of the Company.

The Company also owns a building in Gering, NE that is 7,200-sq. ft. in size. This is used for manufacturing. Currently, there are 35 employees at the Gering site.

## Management's discussion and analysis

As filed, 18,710 characters.

### Executive Overview

George Risk Industries, Inc. (GRI) (the “Company”) is a diversified manufacturer of electronic components, encompassing the security industry’s widest variety of door and window contact switches, environmental products, wire and cable installation tools, proximity switches and custom keyboards. The security products division comprises the largest portion of GRI sales and products are sold worldwide through distributors, who in turn sell these products to security installation companies. These products are used for residential, commercial, industrial and government installations. International sales accounted for approximately 11.4% of revenues for fiscal year 2019 and 13.0% for 2018.

GRI is known for its quality American made products, top-notch customer service and the willingness to work with customers on their special applications.

GRI owns and operates its main manufacturing plant and offices in Kimball, Nebraska with a satellite plant 40 miles away in Gering, Nebraska.

The Company has substantial marketable securities holdings and these holding have a material impact on the financial results. For the fiscal year ending April 30, 2019, other income accounted for 23.97% of income before income taxes. In comparison, other income accounted for 29.72% of the income before income taxes for the year ending April 30, 2018. Management’s philosophy behind having holdings in marketable securities is to keep the money working and gaining interest on the cash that is not needed to be put back into the business. And over the years, the investments have kept the earnings per share up when the results from operations have not fared as well.

Management is always open to the possibility of acquiring a business that would complement our existing operations, which is exactly what took place in October 2017 when the Company purchased substantially all of the assets from Labor Saving Devices, Inc. (“LSDI”) and Roy Bowling (“Bowling”).

There are no known seasonal trends with any of GRI’s products, since we mostly sell to distributors and OEM manufacturers. The products are tied to the housing industry and will fluctuate with building trends.

### Liquidity and Capital Resources

#### Operating

Net cash increased by $579,000 during the year ended April 30, 2019 compared to a decrease of $2,162,000 during the year ended April 30, 2018. Accounts receivable increased by $155,000 during the current year while showing a $701,000 increase in the prior year. The current smaller increase in cash flow from accounts receivable is result of collecting on accounts at a slightly faster pace than last year. At April 30, 2019, 72.17% of receivables were less than 60 days and 5.87% were over 90 days. In comparison, 71.05% of the receivables were considered current (less than 60 days) and 10.81% of the total were over 90 days past due for the prior year during the same period.

Inventories increased by $1,316,000 in fiscal year ended April 30, 2019 while the prior year showed an increase of $980,000 at year end. The current year increase is a result of having inventory available in relation to the increase in sales.

Prepaid expenses decreased by $207,000 while they increased $403,000 in the current and prior year, respectively. The decrease in the current year is due not having as many prepayments of raw materials at year end and not having to renew multi-year subscriptions.

Income tax overpayments decreased by $489,000 for the year ended April 30, 2019. This decrease in the current year is a result of having more sales and income in comparison to the calculated income tax estimates.

For the year ended April 30, 2019, accounts payable decreased by $130,000 as compared to an increase of $268,000 for the same period the year before. The change in cash with regards to accounts payable is largely based on timing. Payables are paid within terms and fluctuate based primarily on inventory needs for production. Accrued expenses increased $15,000 for the year ended April 30, 2019, due to an increase in commissions over the prior year.

#### Investing

As for investment activities, $154,000 was spent on purchases of property and equipment during the current fiscal year, compared to $533,000 during the year ended April 30, 2018. Most of these capitalized costs were purchases of new machinery and equipment. Additionally, the Company continues to purchase marketable securities, which include municipal bonds and quality stocks. Cash spent on purchases of marketable securities for the year ended April 30, 2019 was $942,000 versus the $767,000 spent for the corresponding period last year. Conversely, net proceeds from the sale of marketable securities were $766,000 and $2,033,000 at April 30, 2019 and 2018, respectively. The Company uses “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 quarterly service fees based on the value of the investments.

#### Financing

Cash used in financing activities consists of two items. First, for the year ended April 30, 2019, $1,752,000 was spent on the payment of dividends. The Company declared a dividend of $0.38 per share of common stock on September 30, 2018 for the current year, while a $0.36 per share of common stock dividend was declared on September 30, 2017 was issued in the prior year. Furthermore, the Company continues to purchase back its common stock when the opportunity arises. For the year ended April 30, 2019, the Company purchased $79,000 of treasury stock and $10,000 was bought back for the year ended April 30, 2018. We have been actively searching for stockholders that have been “lost” over the years. The payment of dividends over the last fourteen fiscal years has also prompted many stockholders and/or their relatives and descendants to sell back their stock to the Company.

At April 30, 2019, working capital increased 6.096% in comparison to the previous fiscal year. The Company measures liquidity using the quick ratio, which is the ratio of cash, securities and accounts receivables to current obligations. The Company’s quick ratio increased to 15.316 for the year ended April 30, 2019 compared to 14.703 for the year ended April 30, 2018.

### Results of Operations

GRI completed the fiscal year ending April 30, 2019 with a net profit of 25.47% of net sales. Net sales were at $14,126,000, up 18.397% over the previous year. The increase in sales is a combined result of having a whole year of a new product line to sell (our cable and wiring tools product line) and continued growth with the legacy product lines. Cost of goods sold was 51.86% of net sales for the year ended April 30, 2019 and 52.94% for the same period last year. Management’s goal is to keep the cost of goods sold percentage of less than 50%, but since wages and other expenses have increased while the Company’s prices haven’t increased to customers is the reason why the cost of goods percentage is just past Management’s goal.

Operating expenses were 24.73% of net sales for the year ended April 30, 2019 as compared to 26.18% for the corresponding period last year. Management’s goal is to keep the operating expenses around 30% or less of net sales, so the goal has been met for the current fiscal year. Income from operations for the year ended April 30, 2019 was at $3,306,000, which is a 32.66% increase from the corresponding period last year, which had income from operations of $2,492,000.

Other income and expense results for the fiscal year ended April 30, 2019 produced a gain of $1,486,000. This is in comparison to a gain of $1,054,000 for the fiscal year ended April 30, 2018. Dividend and interest income was $981,000, which is up 2.19% over the prior year. Dividend and interest income at April 30, 2018 was $960,000. Investments in marketable securities are presented at fair value and an unrealized gain or loss is recorded within the statements of operations, a non-cash entry, at each period beginning May 1, 2018 and previously recorded unrealized gain or loss in other comprehensive income (loss). Net gain on the sale of investments for the current fiscal year was $61,000, which is a 69.5% decrease over the prior year. Net gain on the sale of investments for the fiscal year ending April 30, 2018 was $200,000.

Net income for the year ended April 30, 2019 was $3,598,000, which is up 41.32% from the prior year, which produced net income of $2,546,000. Basic and diluted earnings per common share (EPS) for the year ended April 30, 2019 was $0.73 and $0.72 per share, respectively. Basic and diluted earnings per common share (EPS) for the year ended April 30, 2018 was $0.51 per share.

Management is hopeful that sales will continue to increase for the fiscal year ending April 30, 2020. With the purchase of the assets from Labor Saving Devices, Inc., the Company has seen an overall increase in sales, and we have also seen growth in our existing product lines as well. Our Security sales division, which is our largest sales generator, is directly tied to the housing industry and we normally experience the same fluctuations. We are always researching and developing new products that will help our sales increase. While only a few new or improved products were successfully launched in fiscal year 2019, we are confident that more new products will be released soon, and we are searching for products that complement our current offerings. 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.

### New product development

The GRI Engineering department continues to develop enhancements to our existing products as well as to develop new products that will continue to secure our position in the industry.

A new face plate for our pool alarms is nearing completion. The innovative design is slim in style and will also allow the homeowner to change the plate to match their décor.

An updated version of the pool access alarm is currently going through electrical listing 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.

Engineering continues to work on a high security switch. A triple biased high security switch design nearly complete and an adjustable magnet design was completed for recessed mounting applications.

Wireless technology is a main area of focus for product development. We are looking into 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 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.

There have been several new products that have been introduced for our cable and wiring tools segment. They are listed below:

Black Light Rod Kits; these Fiberfuse™ rod kits are vibrant green in daylight, invisible in the dark, yet glow brilliantly under a black light flashlight. These kits are available in two popular sizes; 30’ & 36’. Used for surveillance wiring by security companies, private detectives and government agencies for top secret and covert installations.

Auto Noodle with Retriever Loop; the Auto Noodle is a coated, pliable 24” long noodle with an attachable, flexible loop perfect for tying wires to push or pull through difficult and hard to reach areas such as engines, dashboards, under seats, etc. The other end has a strong neodymium magnet which comes in handy for picking up dropped screws, bolts and even tools. The Auto Noodle is great for coach builders, recreational vehicles, agricultural equipment, trailers and much more.

We have reconfigured and reintroduced several of the popular Labor Saving Device’s Tool Kits; the Basic Installer Apprentice Kit, the All-Tool Mate Standard Threaded Tool Kit and the Roy Rods All-Tool Mate Master Tool Kit which is quick connect compared to the threaded. These kits contain a variety of must have LSDI products including Fiberfuse ™ rods, drill bits, soldering kits and tools in a convenient carrying case.

### Critical Accounting Policies

The discussion and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared in conformity with generally accepted accounting principles in the United States. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in those financial statements. These judgments can be subjective and complex, and consequently actual results could differ from those estimates. The most critical accounting policies relate to accounts receivable; marketable securities; inventory; income taxes; and segment reporting.

**Accounts receivable—**Accounts receivable are customer obligations due under normal trade terms. The Company sells its products to security alarm distributors, alarm installers, and original equipment manufacturers. Management performs continuing credit evaluations of its customers’ financial condition and the Company generally does not require collateral.

The Company records an allowance for doubtful accounts based on an analysis of specifically identified customer balances. The Company has a limited number of customers with individually large amounts due at any given date. Any unanticipated change in any one of these customers’ credit worthiness or other matters affecting the collectability of amounts due from such customers could have a material effect on the results of operations in the period in which such changes or events occur. After all attempts to collect a receivable have failed, the receivable is written off.

**Marketable securities—**The Company has investments in publicly traded equity securities, state and municipal debt securities, corporate bonds and real-estate investment trusts (REITs). The investments in securities are reported at fair value. The Company uses the average cost method to determine the cost of securities sold and any unrealized gains or losses on equity securities are reported in the respective period’s earnings. Unrealized gains and losses on debt securities are excluded from earnings and reported separately as a component of stockholder’s equity. Dividend and interest income are reported as earned.

In accordance with the Generally Accepted Accounting Principles in the United States (US GAAP), the Company evaluates all marketable securities for other-than temporary declines in fair value. When the cost basis exceeds the fair market value for approximately one year, management evaluates the nature of the investment, cause of impairment and number of investments that are in an unrealized position. When it is determined that a security will probably remain impaired, a recognized loss is booked and the investment is written down to its new fair value. The investments are periodically evaluated to determine if impairment changes are required.

**Inventories—**Inventories are valued at the lower of cost or market value. Costs are determined using the average cost-pricing method. The Company uses standard costs to price its manufactured inventories, approximating average costs. The reported net value of inventory includes finished saleable products, work-in-process and raw materials that will be sold or used in future periods. Inventory costs include raw materials, direct labor and overhead. The Company’s overhead expenses are applied, based in part, upon estimates of the proportion of those expenses that are related to procuring and storing raw materials as compared to the manufacture and assembly of finished products. These proportions, the method of their application, and the resulting overhead included in ending inventory, are based in part on subjective estimates and approximations and actual results could differ from those estimates.

In addition, the Company records an inventory obsolescence reserve, which represents the cost of the inventory that has had no movement in over two years. There is inherent professional judgment and subjectivity made by management in determining the estimated obsolescence percentage. In addition, and as necessary, the Company may establish specific reserves for future known or anticipated events.

**Income Taxes—**US GAAP requires use of the liability method, whereby current and deferred tax assets and liabilities are determined based on tax rates and laws enacted as of the balance sheet date. Deferred tax expense represents the change in the deferred tax asset/liability balances.

**Segment Reporting and Related Information—**The Company designates the internal organization that is used by management for allocating resources and assessing performance as the source of the Company’s reportable segments. US GAAP also requires disclosures about products and services, geographic area and major customers.

**Related Party Transactions —** The Company leases a building from Bonita Risk. Bonita Risk is a director and an employee of the Company and is the majority holder of George Risk Industries, Inc. stock. This building contains the Company’s sales and accounting departments, maintenance department, engineering department and some production facilities. This lease requires a minimum payment of $1,535 on a month-to-month basis. The total lease expense for this arrangement was $18,420 for each of the fiscal years ended April 30, 2019 and 2018.

One of the directors of the board, Joel Wiens, is the principal shareholder of FirsTier Bank. FirsTier Bank is the financial institution the Company uses for its day to day banking operations. Year end balances of accounts held at this bank are $4,224,000 for the year ended April 30, 2019 and $3,819,000 for the year ended April 30, 2018. The Company also received interest income from FirsTier Bank in the amount of approximately $63,400 for the fiscal year ended April 30, 2019 and approximately $33,200 was received for the fiscal year ended April 30, 2018.

## Controls and procedures

As filed, 4,846 characters.

#### Evaluation of disclosure controls and procedures:

Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of April 30, 2019 our president and chief executive officer (also working as our chief financial officer) has concluded that our disclosure controls and procedures are effective such that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and (ii) accumulated and communicated to our management, including our chief executive officer (also working as our chief financial officer), as appropriate to allow timely decisions regarding disclosure. A control system cannot provide absolute assurance, however, that the objectives of the control systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

#### Internal control over financial reporting:

The Company’s management is responsible for establishing and maintaining adequate internal controls over financial reporting for the Company. Due to limited resources, Management conducted an evaluation of internal controls based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The results of this evaluation determined that our internal control over financial reporting was ineffective for the years ended of April 30, 2019 and 2018, due to a material weakness. A material weakness in internal control over financial reporting is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.

Management’s assessment identified the following material weakness in internal control over financial reporting:

- The small size of our Company limits our ability to achieve the desired level of separation of internal controls and financial reporting, particularly as it relates to financial reporting and deferred taxes. Due to the departure of the Controller, the current CEO and CFO roles are being fulfilled by the same individual. We do not have an audit committee. The Company hired an individual in 2018 to fulfill the controller position, but more training is required to satisfy disclosure control and procedure responsibilities, including review procedures for key accounting schedules and timely and proper documentation of material transactions and agreements. We do not believe we have met the full requirement for separation for financial reporting purposes.

Because of the material weakness in internal control over financial reporting described above, the Company’s management has concluded that, as of April 30, 2019 and 2018, the Company’s internal control over financial reporting was not effective based on the criteria in Internal Control - Integrated Framework issued by the COSO.

We will continue to follow the standards for the Public Company Accounting Oversight Board (United States) for internal control over financial reporting to include procedures that:

- Pertain to the maintenance of records in reasonable detail that fairly reflect the transactions and dispositions of the Company’s assets;
- Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and
- Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

This annual report does not include an attestation report of the Corporation’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Corporation’s independent registered public accounting firm pursuant to Section 404(c) of the Sarbanes-Oxley Act of 2002, as amended, that permit the Corporation to provide only the management’s report in this annual report.

Filed Mar 25, 2020.
Source: SEC EDGAR, the filing index for accession 0001493152-20-004642. Last ingested by Listed: Oct 24, 2026, 14:54 ET. No prices; not investment advice.