George Risk Industries, Inc.: Form 10-K for the period ended Apr 30, 2025

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 custom computer keyboards, proximity switches, security alarm components and systems, pool access alarms, EZ Duct wire covers, water sensors, electronic switching devices, high security switches and cable and wire installation tools.

Products, Market, and Distribution

The Company designs, manufactures, and sells computer keyboards, proximity switches, security alarm components and systems, pool access alarms, water sensors, electronic switching devices, high security switches, and wire and cable installation tools. The Security sales division, which concentrates on selling products for security purposes, comprises approximately 96.0% of net revenues and these goods are sold to distributors and alarm dealers/installers.

The security division has approximately 1,000 current customers. One of the distributors, Ademco, Inc. (previously known as ADI), accounts for approximately 38.6% of the Company’s sales of these products. Anixter, Inc. accounts for another 22.4% of the security division of the Company sales. The loss of these distributors would be significant to the Company. However, both companies have purchased products from the Company for many years and are expected to continue. The Company also 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 and proximity switch division has approximately 300 customers. These products are primarily 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/proximity and security/burglar alarm lines.

The security/burglar alarm division has approximately six major competitors. The Company competes well based on price, product design, quality, customization, and having products made in the USA.

The competitors in the keyboard/proximity division 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 conducts research and development for its customers when needed and as 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. The Company’s internal research and development activities support the development of new products.

Employees

GRI has approximately 185 employees.

We believe a proactive approach to cybersecurity risks and threats is essential to achieving our business objectives and protecting our business. We therefore have processes for assessing, identifying, and managing risks from cybersecurity threats, that are conducted both in-house and with the aid of a third-party IT service, Five Nines, and have integrated these processes into our overall risk management system. We continually monitor our safeguards and provide our employees at all levels with the tools and training on these safeguards. Five Nine’s security specialists monitor and aid with industry best practices and compliance and assist us in implementing our cybersecurity procedures. Additionally, they routinely assess risks from cybersecurity threats, including but not limited to changes to firmware, disruption/denial of service and any potential unauthorized occurrence on or conducted through our information systems that may result in adverse effects on the confidentiality, integrity, or availability of our information systems or any information residing therein. We have established policies for tracking, managing, and safely disposing of physical hardware that may contain confidential information. We intend to continually evaluate best practices and methods, including continued cyber defense systems and training programs to protect our business from a wide range of potential threats and the ever-evolving cybersecurity risks.

Governance

Our company IT Manager continually monitors company computers and information systems for potential malware, ransomware and other malicious activity. The IT Manager works directly with our third-party IT service, Five Nines, and periodically updates the CEO on our cybersecurity and information security policies, training, new concerns, and plans. The CEO reports, as and if needed, directly to the audit committee and board of directors. The board of directors and audit committee will be apprised of any cybersecurity incidents deemed to have a moderate or higher business impact and will be provided with updates as necessary.

The Company owns the manufacturing and the office facilities that it operates in. The total square footage of the plant in Kimball, Nebraska is approximately 50,000 sq. ft. A 7,500 sq. ft. warehouse for raw material storage was purchased in June 2017 when the Company acquired its cable and wiring division, and another 9,600 sq. ft. building was purchased in April 2020 to provide for additional expansion. Additionally, the Company purchased the 15,000 sq. ft. building that it previously leased from Bonita Risk, which is used mainly for offices, in November 2019. 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 approximately 36 employees at the Gering site.

Executive Overview

George Risk Industries, Inc. (“GRI” or 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 9.7% of revenues for fiscal year 2025 and 10.3% for 2024.

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 holdings have a material impact on the financial results. For the year ending April 30, 2025, net other income accounted for 31.55% of income before income taxes. In comparison, for the year ending April 30, 2024, net other income accounted for 39.08% of the income before income taxes. Management’s philosophy behind having holdings in marketable securities is to keep the money working and to gain interest on the cash that does not need to be put back into the business. 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, such as the October 2017 purchase of substantially all of the assets from Labor Saving Devices, Inc. and Roy Bowling.

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

Liquidity and Capital Resources

Operating

Net cash decreased by $641,000 during the year ended April 30, 2025, compared to an increase of $2,169,000 during the year ended April 30, 2024. Accounts receivable increased by $768,000 during the current fiscal year compared to a $417,000 increase in the prior fiscal year. The current fiscal year increase in cash flow from accounts receivable is the result of increased sales, offset by slightly faster collection of accounts receivable . The average collection time in days for the year ended April 30, 2025, is 65 days, compared to 66 days for the year ended April 30, 2024. As of April 30, 2025, 72.68% of receivables were aged less than 60 days (“Current”) and 7.65% were aged over 90 days. In comparison, 68.12% of the receivables were considered Current and 8.53% were over 90 days past due at April 30, 2024.

Inventories decreased by $773,000 for the year ended April 30, 2025, compared to an increase of $93,000 for the year ended April 30, 2024. The current fiscal year decrease is primarily a result of having less raw materials on hand, offset by increased raw material and labor costs and increased sales.

Prepaid expenses and other assets increased by $196,000 during the year ended April 30, 2025, compared to a decrease of $418,000 for the prior year. The current fiscal year’s increase is due to having increased prepayments for raw materials and renewing multi-year subscriptions in the current fiscal year.

The federal solar tax credit receivable represents the remaining federal solar tax credits we will receive from our purchase of transferable tax credits, pursuant to transferability provisions of the Inflation Reduction Act of 2022. Please see Note 1 - Purchase of Transferrable Tax Credits, to our consolidated financial statements, for further information.

For the year ended April 30, 2025, accounts payable increased by $10,000 compared to a decrease of $254,000 for the year ended April 30, 2024. This difference is primarily a result of timing. Payables are paid within terms and fluctuate based primarily on inventory needs for production. Accrued expenses increased $34,000 for the year ended April 30, 2025, compared to the prior year. This is primarily due to a higher year-end payroll accrual as of April 30, 2025, compared to April 30, 2024.

The Company’s income tax payable decreased $80,000 for the year ended April 30, 2025, compared to an increase of $508,000 for the year ended April 30, 2024. The decrease in the current fiscal year income tax payable is due to the purchase of federal solar tax credits.

Investing

The Company spent $396,000 on purchases of property and equipment during the year ended April 30, 2025, compared to $378,000 during the year ended April 30, 2024. These capitalized costs mainly consisted of purchases of machinery and equipment and making capital improvements. 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, 2025, was $980,000 versus $699,000 spent for the year ended April 30, 2024. Net proceeds from the sale of marketable securities were $678,000 and $527,000 at April 30, 2025 and 2024, 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.

The Company received a cash distribution of $269,000 from the sale of the investment in the limited land partnership during the year ended April 30, 2025. This was the second distribution received from the sale of the limited land partnership. The remainder of the proceeds are contingent on finishing wetland restoration of the land. Please see Note. 1 - Investment in Limited Land Partnership, to our consolidated financial statements for further information.

Financing

Cash used in financing activities consists of declared dividends and the repurchase of the Company’s Class A common Stock. For the year ended April 30, 2025, $4,447,000 was spent on the payment of dividends. The Company declared a dividend of $1.00 per share of common stock on September 30, 2024, for the current fiscal year, while a $0.65 per share of common stock dividend was declared on September 30, 2023 and issued in the prior fiscal year. The Company continues to purchase back its Class A common stock when the opportunity arises. For the year ended April 30, 2025, the Company purchased $72,000 of treasury stock and $391,000 was bought back for the year ended April 30, 2024. In an effort to repurchase its Class A Common Stock, the Company has been actively searching for stockholders that have been “lost” over the years.

As of April 30, 2025, working capital showed a year-over -year increase of 4.68%. 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 decreased to 11.252 for the year ended April 30, 2025, compared to 12.118 for the year ended April 30, 2024.

Results of Operations

The following table summarizes key income statement components, by product line and corporate, for the three months ended April 30, 2025 and the years ended April 30, 2025 and 2024:

(Unaudited)

GRI completed the year ending April 30, 2025 with a net profit of 31.65% of net sales. Net sales for the current fiscal year were $22,538,000, up 3.54% over the previous fiscal year. The increase in sales is a result of the Company continuing to provide quality products to our customers and a price increase that was implemented during the 4th quarter of the fiscal year. Cost of goods sold was 51.59% of net sales for the year ended April 30, 2025, and 50.2% for the same period last year. Management aims to keep the cost of goods sold percentage within 50% and was just slightly over that percentage for the current year. Management strives to be as efficient as possible as wages and material costs continue to increase. Management offset some of these added expenses by implementing a 5% price increase effective February 1, 2025, and a price increase of 2.5% that was effective on January 1, 2024.

Operating expenses were 20.73% of net sales for the year ended April 30, 2025, compared to 20.91% for the year ended April 30, 2024. Management’s goal is to keep the operating expenses around 25% 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, 2025 decreased to $6,238,000, or 0.81%, from the year ended April 30, 2024, which had income from operations of $6,289,000. This decrease was primarily due to increased cost of goods, slightly offset by increased sales.

Net other income for the year ended April 30, 2025, was $2,875,000, compared to a net other income of $4,034,000 for the year ending April 30, 2024. Dividend and interest income was $1,410,000 for the current fiscal year, which is up 26.34% over the $1,116,000 dividend and interest income for the prior fiscal year. Investments in marketable securities are presented at fair value and a non-cash unrealized gain or loss is recorded within the statements of operations. As a result, an unrealized loss of $75,000 was recorded for the year ending April 30, 2025, compared to an unrealized gain of $2,771,000 for the year ending April 30, 2024. Net gain on the sale of investments for the current fiscal year was $937,000, which is a 533.11% increase over the net gain on the sale of investments of $148,000 for the prior fiscal year.

Net income for the year ended April 30, 2025 was $7,133,000, down 5.62% from the $7,558,000 net income for the year ended April 30, 2024. This reduction is primarily related to the reduction in other income, offset by increased sales. Basic earnings per common share (“EPS”) for the year ended April 30, 2025, was $1.46 per share, and the diluted earnings per common share for the same period was $1.45. Basic and diluted EPS for the year ended April 30, 2024, was $1.54 and $1.53 per share, respectively.

Management is hopeful that sales will continue to increase for the fiscal year ending April 30, 2026. Opportunities for Management include keeping up with business growth and focusing on finding ways to get our products out to our customers in a timelier manner. One way we are doing this is by looking into more automation. Challenges facing Management include keeping costs down as raw materials and labor costs continue to increase. The Company also struggles to get enough workers to fill production needs. 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 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.

Explosion proof contacts that will be Underwriters Laboratories (UL) listed for hazardous locations are in development. There has been demand from our customers for this type of high security magnetic reed switch.

Research is being done on programmable temperature and humidity sensors with built-in hysteresis, a miniature profile overhead door contact based on our popular 4532 series, and a brass water valve shut-off system.

Production has begun on a couple of newly developed products. First, there are magnetic contacts which are listed under UL 634 Level 2. These sensors will require additional UL testing and are used in high security applications such as government buildings, military use, nuclear facilities, and financial institutions. Secondly, we have updated our small profile glass break detector and, thirdly, an expansion of the GR3045 panic switch to include single-pull, double-throw (SPDT) versions, latching and non-latching with LED indicator lights.

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 monitoring devices which include glass break detection, tilt sensing and environmental monitoring.

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; and inventory; income taxes.

**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 credit losses 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, 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 loss position. When it is determined that a security will likely remain impaired, a recognized loss is recorded 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 net realizable value. Costs are determined using the average cost-pricing method. The Company uses actual 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 assets and 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 .

Related Party Transactions — 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. The year end balances of accounts held at this bank were $5,340,000 and $6,712,000 for the years ended April 30, 2025 and 2024, respectively. The Company also received interest income from FirsTier Bank in the amount of approximately $215,000 for the year ended April 30, 2025, and approximately $170,000 was received for the year ended April 30, 2024.

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, 2025 our president and chief executive officer (also working as our chief financial officer) has concluded that our disclosure controls and procedures were 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”). For the year ended April 30, 2024, Management’s evaluation determined that our internal control over financial reporting was ineffective due to the material weakness discussed below.

Management’s assessment identified the following material weakness in internal control over financial reporting for the year ended April 30, 2024:

• The small size of our Company limits our ability to achieve the desired level of separation of duties for proper internal controls and financial reporting, particularly as it relates to financial reporting to assure material disclosures or implementation of newly issued accounting standards are included. A secondary review of annual and quarterly filings does occur with an outside party. 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. We do not believe we have met the full requirement for separation of duties for financial reporting purposes.

The following steps were taken to mitigate the above material weakness during the year ended April 30, 2025:

• The Company hired a part-time controller in March 2023;and in March 2024 this controller became a full-time position with the Company. This hire has enabled more separation of duties within the accounting department and provided an opportunity for a second internal review of financial information.
• We continue to have our quarterly and annual financial statements reviewed by a third-party CPA. This third party ensures we have fulfilled our material disclosures and that newly issued accounting standards have been reviewed and addressed if necessary.
• We have increased our knowledge training, and documentation around internal controls over financial reporting and will continue to do so.

12

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 believes that the steps the Company has taken to mitigate the 2024 material weakness have improved our internal controls and believes that the material weakness no longer exists as of April 30, 2025.

Because of the mitigation of the material weakness in internal control over financial reporting described above, the Company’s management has concluded that, as of April 30, 2025, the Company’s internal control over financial reporting was 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.