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EX-31 - CERTIFICATION PURSUANT TO RULE 13A-14(A) - GEORGE RISK INDUSTRIES, INC.gri31113.txt
EX-32 - CERTIFICAITON PURSUANT TO 18 U.S.C. 1350 - GEORGE RISK INDUSTRIES, INC.gri32113.txt

                U.S. SECURITIES AND EXCHANGE COMMISSION
                          Washington, DC 20549

                              Form 10-K


[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
     SECURITIES EXCHANGE ACT OF 1934
           For the fiscal year ended April 30, 2013
[  ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934
For the transition period from  __________  to _________

                Commission File Number: 000-05378

                  George Risk Industries, Inc.
                  ____________________________

        (Exact Name of registrant as specified in its charter)
            Colorado                        84-0524756
            ________                        __________
  (State of  incorporation)          (IRS Employer Identificn No.)

         802 South Elm
          Kimball, NE                         69145
          ___________                         _____
(Address of principal executive             (Zip Code)
            offices)

Issuer's telephone number (308) 235-4645
                          ______________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class       Name of Exchange on Which Registered
          None                      None
          ____                      ____
Securities registered under Section 12(g) of the Act:
          Class A Common Stock, $.10 par value
                     (Title of class)


Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.

                                                   Yes [  ]    No [X]

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Sections 15(d) of the Act.

                                                   Yes [ ]     No [X]


Indicate by check mark whether the registrant (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act 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 [X]     No [ ]
Page 1

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 229-405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [X] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229-405 of this chapter) is not contained herein, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] (Do not check is smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [ X ] The aggregate market value, as of August 9, 2013, of the common stock (based on the average of the bid and asked prices of the shares on the OCTBB of George Risk Industries, Inc.) held by non-affiliates (assuming, for this purpose, that all directors, officers and owners of 5% or more of the registrant's common stock are deemed affiliates) was approximately $18,740,601. The number of outstanding shares of the common stock as of August 9, 2013 was 5,033,275. DOCUMENTS INCORPORATED BY REFERENCE A material vendor contract with a customer that accounts for a material portion of our sales. Page 2
Part I Preliminary Note Regarding Forward-Looking Statements and Currency Disclosure This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. Our financial statements are stated in United States dollars, rounded to the nearest thousand, and are prepared in accordance with United States Generally Accepted Accounting Principles. Item 1 Business (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, thermostats, EZ Duct wire covers and water sensors. Products, Market, and Distribution The company designs, manufactures, and sells computer keyboards, push-button switches, burglar alarm components and systems, pool alarms, and water sensors. Our security burglar alarm products comprise approximately 84 percent of net revenues and are sold through distributors and alarm dealers/installers. The security segment has approximately 3,000 customers. One of the distributors, ADI (which is a division of Honeywell International)accounts for approximately 40 percent of the company's sales of these products. Loss of this distributor would be significant to the company. However, this customer has purchased from the company for many years and is expected to continue. Also, the company has obtained a written agreement with our biggest customer. This agreement was signed in February 2011 and 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. Page 3
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 ten major competitors. The company competes well based on price, product design, quality, 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 160 employees. Item 2 Properties The company owns the manufacturing and some of the office facilities. Total square footage of the plant in Kimball, Nebraska is approximately 42,500 sq. ft. Additionally, the company leases 15,000 square feet for $1,535 per month with Bonnie Risk. Bonnie Risk is the director of the company. As of October 1, 1996, the company also began operating a satellite plant in Gering, NE. This expansion was done in coordination with Twin Cities Development. The company leased manufacturing facilities until July 2005. During the first quarter of fiscal year end 2006, the company purchased a building that is 7,200-sq. ft. in size. Currently, there are 28 employees at the Gering site. Item 3 Legal Proceedings None. Item 4 Submission of Matters to a Vote of Security Holders Not applicable. Page 4
Part II Item 5 Market for the Registrant's Common Equity and Related Stockholders' Matter Principal Market The company's Class A Common Stock, which is traded under the ticker symbol RSKIA, is currently quoted on the OTC Bulletin Board by one market maker. Stock Prices and Dividends Information 2013 Fiscal Year High Low May 1-July 31 6.20 5.02 August 1-October 31 7.24 5.76 November 1-January 31 7.59 6.55 February 1-April 30 7.40 6.60 2012 Fiscal Year High Low May 1-July 31 6.50 5.05 August 1-October 31 7.53 5.10 November 1-January 31 6.75 5.50 February 1-April 30 6.25 5.75 A dividend of $0.28 per common share was declared on September 30, 2012 and an additional dividend of $0.22 per common share was declared on December 16, 2012 for a total dividend payout of $0.50 per common share for the fiscal year end 2013. As for fiscal year 2012, a dividend of $0.23 per common share was declared on September 30, 2011. The number of holders of record of the company's Class A Common Stock as of April 30, 2013, was approximately 1,200. Repurchase of Equity Securities On September 18, 2008, the Board of Directors approved an authorization for the repurchase of up to 500,000 shares of the company's common stock. Purchases can be made in the open market or in privately negotiated transactions. The Board did not specify an expiration date for the authorization. The following tables show repurchases of GRI's common stock made on a quarterly basis: 2013 Fiscal Year Number of shares repurchased May 1-July 31 0 August 1-October 31 5,574 November 1-January 31 1,500 February 1-April 30 0 Page 5
2012 Fiscal Year Number of shares repurchased May 1-July 31 3,605 August 1-October 31 2,450 November 1-January 31 1,400 February 1-April 30 970 There are still approximately 359,000 shares available to be repurchased under the current resolution. Item 6 Selected Financial Data As a smaller reporting company, we are not required to respond to this item. Page 6
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations Executive Overview __________________ George Risk Industries, Inc. (GRI) is a diversified manufacturer of electronic components, encompassing the security industries widest variety of door and window contact switches, environmental products, proximity switches and custom keyboards. The security products division comprises the largest portion of GRI sales and are sold worldwide through distribution, who in turn sell these products to security installing companies. These products are used for residential, commercial, industrial and government installations. International sales accounted for approximately 6.3% of revenues for fiscal year 2013 and 5.5% for 2012. 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 fiscal year ending April 30, 2013, other income accounted for 31.66% of income before income taxes. In comparison, other income accounted for 21.20% of the income before income taxes for the year ending April 30, 2012. 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 faired as well. Management is always open to the possibility of acquiring a business that would complement our existing operations. This would probably not require any outside financing. The intent would be to utilize the equipment, marketing techniques and established customers to increase sales and profits. 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 $914,000 during the year ended April 30, 2013 as it increased $519,000 during the year ended April 30, 2012. Other cash flow changes are as follows. Accounts receivable increased $244,000 during the current year as compared to a $95,000 increase for last year. The increase in cash flow for accounts receivable is a reflection of increased sales. At April 30, 2013, 69.77% of the receivables were considered current (less than 45 days) and 0.43% of the total were over 90 days past due. For comparison, 69.12% of the receivables were current and 0.90% were past 90 days at April 30, 2012. Inventories decreased $277,000 for the current year as compared to a $535,000 increase for the same period last year. Since there is a smaller increase in sales for the current year, as compared to last year, management had already increased its inventory purchase levels. For the year ended April 30, 2013, prepaid expenses decreased $80,000, and decreased $10,000 for the corresponding period last year. The main reason for the decrease in prepaid expenses for the current fiscal year is that the company has received raw materials that it prepaid for last fiscal year. Cash towards payment of income taxes increased $593,000 for the year ended April 30, 2013. Management increased the amounts they paid on income tax estimates since the estimates were under estimated the prior fiscal year. Page 7
For the year ended April 30, 2013, accounts payable decreased $28,000 as compared to a $32,000 decrease for the same period the year before. The change in cash in regards to accounts payable can vary. It really depends on the time of the month the invoices are due, since the company pays all its invoices within the terms. Accrued expenses increased $47,000 for the year ended April 30, 2013, as these expenses remained constant for the corresponding year ended April 30, 2012. Investing As for our investment activities, a net amount of $1,000 was capitalized on other assets manufactured for the year ended April 30, 2013, while $169,000 was spent on these activities during the prior fiscal year. A few molds were completed and put to the fixed asset accounts as new molds have been started during the current fiscal year. $104,000 was spent on purchases of property and equipment during the current fiscal year and $298,000 was spent during the year ended April 30, 2012. 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, 2013 was $760,000 and $891,000 was spent for the corresponding period last year. In addition, proceeds from the sale of marketable securities for the year ended April 30, 2013 were $89,000 and $168,000 for the same period last year. We 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. Furthermore, the Company continues to purchase back its common stock when the opportunity arises. For the year ended April 30, 2013, the Company purchased $36,000 worth of treasury stock and $41,000 was bought back for the year ended April 30, 2012. We have been actively searching for stockholders that have been "lost" over the years. The payment of dividends over the last eight fiscal years has also prompted many stockholders and/or their relatives and descendants to sell back their stock to the Company. Financing Cash used in financing activities were $2,294,000 for the year ended April 30, 2013, which mostly consisted of dividends paid. The company declared a dividend of $0.28 per share of common stock on September 30, 2012 and these dividends were paid by October 31, 2012. Another dividend of $0.22 per share of common stock was declared on December 16, 2012 and paid by December 16, 2012. Net cash used in financing activities was $1,055,000 for the year ended April 30, 2012. A dividend of $0.23 per common share was declared and paid during the second fiscal quarter last year. Results of Operations _____________________ GRI completed the fiscal year ending April 30, 2013, with a net profit of 36.04% net of sales. Net sales were at $10,510,000, up 2.19% over the previous year. The slight increase in sales is a result of continued quality service and finding new customers. Cost of goods sold was 48.42% of net sales for the year ended April 30, 2013 and 46.28% for the same period last year. Management has been keeping labor and other manufacturing expenses in check, therefore keeping the cost of goods sold percentage in the desired range of 45 to 50%. Page 8
Operating expenses were 25.91% of net sales for the year ended April 30, 2013 as compared to 24.19% for the corresponding period last year. Management's goal is to keep the operating expenses around 30% or less of net sale, so the goal has been met for the current fiscal year. Income from operations for the year ended April 30, 2013 was at $2,698,000, which is an 11.69% decrease from the corresponding period last year, which had income from operations of $3,037,000. Other income and expenses results for the fiscal year ended April 30, 2013 produced a gain of $1,250,000. This is in comparison to a gain of $817,000 for the fiscal year ended April 30, 2012. Dividend and interest income was $789,000, which was up 7.35% for the year. Dividend and interest expense at April 30, 2012 was $735,000. Gains on investments for the fiscal year ending April 30, 2012 were $51,000. Net income for the year ended April 30, 2013 was $3,788,000, which is a 43.05% increase from the prior year, which produced a net gain of $2,648,000. Earnings per common share for the year ended April 30, 2013 were $0.75 per share. EPS for the year ended April 30, 2012 was $0.52 per share. Management expects sales to stay steady and hopefully increase for the fiscal year ending April 30, 2014. The company's main division of products that are sold (security switches) are directly tied to the housing industry. And since the housing industry's performance has improved, the company's sales have also improved in relation to the economy. We are always researching and developing new products that will help our sales increase. We have many new products (which will be discussed in detail below) that we are planning to release into the marketplace during fiscal year end 2014. Also, we are hopeful that extra growth can be achieved by volume increases with our present customers and with the addition of new customers. We have an excellent marketing department that is always on the lookout for new clients. At April 30, 2013, working capital increased by 6.05% 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 25.334 for the year ended April 30, 2013 from 24.254 for the year ended April 30, 2012. Accounts receivable, and marketable securities have increased during the current year, while cash decreased by 15.83% and current liabilities stayed fairly constant, increasing by 0.09%. New product development The GRI Engineering department is developing products in the following areas: Wireless technology is a main area of focus for product development. We are looking into adding wireless technology to some of our current products. First of all, we are working on a wireless version of our Pool Alarm that will be easy to install in current construction. We are also concentrating on making products compatible with the increasing popular Z-Wave standard for wireless home automation. We are working on high security switches. We have a triple biased high security switch design nearly complete and an adjustable magnet design completed for recessed mounting applications. Our molding department is working on new molds for a case for new versions of our Current Controller and a terminal cover of our 29-series switch. The new versions of the Current Controller will allow the user to control more lights with a single controller or to handle higher voltage applications for use overseas. Finally, we are researching our ability to get into fuel level sensing. Several security companies from around the world have been looking for ways to secure fuel tanks and trucks. Our emphasis would be in ways to safely monitor fuel levels and report tampering. Critical Accounting Policies ____________________________ The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make 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. Our 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 unantici- pated change in any one of these customers' credit worthiness or other matters affecting the collectibility 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 as well as certain state and municipal debt securities. These securities are classified as available-for-sale securities, and are reported at fair value. The Company uses the average cost method to determine the cost of securities sold and the amount reclassified out of accumulated other comprehensive income into earnings. Unrealized gains and losses 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. Page 10
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 Ken and Bonnie Risk. Ken Risk was the Chairman of the Board and President and CEO of the company until his death in February 2013. Bonnie Risk is Ken's wife, who is a director and an employee of the company. 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 the fiscal years ended April 30, 2013 and 2012. The company also leases its airplane from former President and CEO Ken Risk, who was also a majority stockholder, on a month-to-month basis requiring payments of $2,250. Airplane lease expenses charged to operations for the fiscal year ended April 30, 2013 were $22,500 and, were $27,000 for the fiscal year ended April 30, 2012. During the year ended April 30, 2000, the Company paid $210,000 and the former President/CEO contributed the airplane in trade for another airplane. The Company and this officer jointly own the airplane. The company has the airplane up for sale since there is no longer a pilot for the aircraft. 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 $3,350,000 for the year ended April 30, 2013 and $4,818,000 for the year ended April 30, 2012. The Company also received interest income from FirsTier Bank in the amount of $2,000 for the year ended April 30, 2013 and $3,000 for the year ended April 30, 2012. Page 11
Item 8 Financial Statements Index to Financial Statements George Risk Industries, Inc. Page Independent Auditor's Report 13 Balance Sheets April 30, 2013 and 2012 14 Statements of Income For the Years Ended April 30, 2013 and 2012 16 Statements of Comprehensive Income For the Years Ended April 30, 2013 and 2012 17 Statement of Changes in Stockholders' Equity For the Years Ended April 30, 2013 and 2012 18 Statements of Cash Flows For the Years Ended April 30, 2013 and 2012 20 Notes to Financial Statements 21 Page 12
Report of Independent Registered Public Accounting Firm Board of Directors George Risk Industries, Inc. Kimball, Nebraska We have audited the accompanying balance sheets of George Risk Industries, Inc. as of April 30, 2013 and 2012, and the related statements of income, comprehensive income, stockholders' equity, and cash flows for each of the years in the two-year period ended April 30, 2013. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of George Risk Industries, Inc. as of April 30, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the two year period ended April 30, 2013, in conformity with accounting principles generally accepted in the United States of America. /s/ Haynie & Company Littleton, Colorado August 13, 2013
George Risk Industries, Inc. Balance Sheets April 30, 2013 and 2012 2013 2012 ASSETS Current Assets Cash and cash equivalents $ 4,859,000 $ 5,773,000 Investments and securities 22,208,000 20,280,000 Accounts receivable: Trade, net of $4,126 and $5,789 doubtful account allowance for 2013 and 2012, respectively 1,915,000 1,669,000 Other 1,000 1,000 Note receivable, current 5,000 4,000 Income tax overpayment 347,000 - Inventories 2,074,000 2,351,000 Prepaid expenses 60,000 141,000 Deferred current income taxes 635,000 119,000 ____________ ____________ Total Current Assets $ 32,104,000 $ 30,338,000 Property and Equipment, net, at cost 701,000 771,000 Other Assets Investment in Limited Land Partnership, at cost 238,000 228,000 Projects in process 45,000 44,000 Note receivable 2,000 5,000 Other 1,000 1,000 ____________ ____________ Total Other Assets $ 286,000 $ 278,000 TOTAL ASSETS $ 33,091,000 $ 31,387,000 ____________ ___________ ____________ ___________ See accompanying notes to financial statements. Page 14
George Risk Industries, Inc. Balance Sheets As of April 30, 2013 and 2012 Liabilities and Stockholders' Equity 2013 2012 Current Liabilities Accounts payable, trade $ 68,000 $ 96,000 Dividends payable 817,000 589,000 Accrued expenses: Payroll and related expenses 259,000 212,000 Income tax payable - 246,000 __________ ___________ Total Current Liabilities $1,144,000 $ 1,143,000 Long-Term Liabilities Aircraft ownership deposit payable - 5,000 Deferred income taxes 133,000 124,000 ___________ ___________ Total Long-Term Liabilities $ 133,000 $ 129,000 Stockholders' Equity Convertible preferred stock, 1,000,000 shares authorized, Series 1--noncumulative, $20 stated value, 25,000 shares authorized, 4,100 issued and outstanding 99,000 99,000 Common stock, Class A, $.10 par value, 10,000,000 shares authorized, 8,502,881 shares issued 850,000 850,000 Additional paid-in capital 1,736,000 1,736,000 Accumulated other comprehensive income 743,000 278,000 Retained earnings 31,873,000 30,603,000 Less: treasury stock,3,467,356 and 3,460,282 shares, at cost (3,487,000) (3,451,000) ___________ ___________ Total Stockholders' Equity $31,814,000 $30,115,000 ___________ ___________ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $33,091,000 $31,387,000 ___________ ___________ ___________ ___________ See accompanying notes to financial statements. Page 15
George Risk Industries, Inc. Income Statements For the Years Ended April 30, 2013 and 2012 Year Year Ended Ended Apr 30,2013 Apr 30, 2012 ___________ ____________ Net Sales $10,510,000 $10,285,000 Less: Cost of Goods Sold (5,089,000) (4,760,000) ___________ ___________ Gross Profit $ 5,421,000 $ 5,525,000 Operating Expenses: General and Administrative 790,000 776,000 Sales 1,821,000 1,612,000 Engineering 71,000 54,000 Rent Paid to Related Parties 41,000 46,000 ___________ ___________ Total Operating Expenses $ 2,723,000 $ 2,488,000 Income From Operations 2,698,000 3,037,000 Other Income (Expense) Other 4,000 19,000 Interest Expense (3,000) - Dividend and Interest Income 789,000 735,000 Gain on Investments 460,000 51,000 Gain on Sale of Assets - 12,000 ___________ ___________ $ 1,250,000 $ 817,000 Income Before Provisions for Income Taxes 3,948,000 3,854,000 Provision for Income Taxes Current Expense 1,000,000 1,087,000 Deferred tax (benefit) expense (840,000) 119,000 ___________ ___________ Total Income Tax Expense 160,000 1,206,000 Net Income $ 3,788,000 $ 2,648,000 Basic and Diluted Earnings Per Share of Common Stock: $ 0.75 $ 0.52 Weighted Average Number of Common Shares Outstanding 5,037,837 5,045,103 See accompanying notes to financial statements. Page 16
George Risk Industries, Inc. Statements of Comprehensive Income For the Years Ended April 30, 2013 and 2012 Year Year Ended Ended Apr 30,2013 Apr 30, 2012 ___________ ____________ Net Income $3,788,000 $ 2,648,000 __________ ___________ Other Comprehensive Income, Net of Tax Unrealized gain (loss) on securities: Unrealized holding gains (losses) arising during period 736,000 (159,000) Reclassification adjustment for (gains) losses included in net income 62,000 154,000 Income tax expense related to other comprehensive income (333,000) 2,000 __________ __________ Other Comprehensive Income 465,000 (3,000) Comprehensive Income $4,253,000 $2,645,000 __________ __________ __________ __________ See accompanying notes to financial statements. Page 17
George Risk Industries, Inc. Statements of Stockholders' Equity For the Years Ended April 30, 2013 and 2012 Common Stock Preferred Stock Class A ________________ ____________ Shares Amount Shares Amount Balances, April 30, 2011 4,100 $ 99,000 8,502,881 $850,000 Purchases of common stock - - - - Dividend declared at $0.23 per common share outstanding - - - - Unrealized gain (loss), net of tax effect - - - - Net Income - - - - ________ ________ _________ ________ Balances, April 30, 2012 4,100 99,000 8,502,881 850,000 ________ ________ _________ ________ Purchases of common stock - - - - Dividend declared at $0.23 per common share outstanding - - - - Unrealized gain (loss), net of tax effect - - - - Net Income - - - - ________ ________ _________ ________ Balances, April 30, 2013 4,100 $ 99,000 8,502,881 $850,000 ________ ________ _________ ________ ________ ________ _________ ________ See accompanying notes to financial statements. Page 18
George Risk Industries, Inc. Statements of Changes in Stockholders' Equity For the Years Ended April 30, 2013 and 2012 Accumulated Treasury Stock Other Paid-In (Common Class A) Comprehensive Retained ______________ Capital Shares Amount Income Earnings Total $1,736,000 3,451,857 $(3,410,000) $ 281,000 $29,115,000 $28,671,000 - 8,425 (41,000) - - (41,000) - - - - (1,160,000) (1,160,000) - - - (3,000) - (3,000) - - - - 2,648,000 2,648,000 __________ _________ ___________ ___________ ___________ ___________ 1,736,000 3,460,282 (3,451,000) 278,000 30,603,000 30,115,000 __________ _________ ___________ ___________ ___________ ___________ - 7,074 (36,000) - - (36,000) - - - - (2,518,000) (2,518,000) - - - 465,000 - 465,000 - - - - 3,788,000 3,788,000 __________ _________ ___________ ___________ ___________ ___________ $1,736,000 3,467,356 $(3,487,000) $ 743,000 $31,873,000 $31,814,000 __________ _________ ___________ ___________ ___________ ___________ __________ _________ ___________ ___________ ___________ ___________ See accompanying notes to financial statements. Page 18
George Risk Industries, Inc. Statements of Cash Flows Year Year Ended Ended Apr 30,2013 Apr 30, 2012 ___________ ____________ Cash Flows from Operating Activities: Net income $3,788,000 $2,648,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 174,000 160,000 (Gain) on sale of investments (460,000) (51,000) (Gain) on sale of property and equipment 0 (12,000) Bad debt expense (2,000) 0 Reserve for obsolete inventory 0 38,000 Deferred income taxes (840,000) (119,000) Changes in assets and liabilities: (Increase) decrease in: Accounts receivable (244,000) (95,000) Inventories 277,000 (535,000) Prepaid expenses 80,000 10,000 Employee receivables (1,000) 0 Income tax overpayment (593,000) 0 Increase (decrease) in: Accounts payable (28,000) (32,000) Accrued expense 47,000 0 Income tax payable 0 210,000 __________ __________ Net cash provided by (used in) operating activities $2,198,000 $ 2,460,000 __________ __________ Cash Flows From Investing Activities: Other assets manufactured and purchased 1,000 169,000 Proceeds from sale of assets 0 20,000 (Purchase) of property and equipment (104,000) (298,000) Proceeds from sale of marketable securities 89,000 168,000 (Purchase) of marketable securities (760,000) (891,000) (Purchase) of long-term investment (10,000) (10,000) (Loans) made to employees (3,000) (10,000) Collections of loans to employees 5,000 7,000 (Purchase) of treasury stock (36,000) (41,000) __________ __________ Net cash provided by (used in) investing activities ($818,000) $ (886,000) __________ __________ Cash Flows From Financing Activities: Principal payments on long-term debt (4,000) 0 Dividends paid (2,290,000) (1,055,000) __________ __________ Net cash provided by (used in) financing activities $(2,294,000) $(1,055,000) __________ __________ Net Increase (Decrease) in Cash and Cash Equivalents $ 914,000 $ 519,000 __________ __________ __________ __________ See accompanying notes to financial statements Page 19
Cash and Cash Equivalents, beginning of period $ 5,773,000 $5,254,000 Cash and Cash Equivalents, end of period $ 4,859,000 $5,773,000 __________ __________ __________ __________ Supplemental Disclosure for Cash Flow Information: Cash Payments for: Income taxes paid $ 1,607,000 $ 855,000 Interest expense $ 3,000 $ 0 Cash receipts for: Income taxes $ 19,000 $ 21,000 See accompanying notes to financial statements Page 20
George Risk Industries, Inc. Notes to Financial Statements April 30, 2013 1. Nature of Business and Summary of Significant Accounting Policies Nature of Business-The company is engaged in the design, manufacture, and marketing of computer keyboards, push-button switches, security alarm components, pool alarms and hydro sensors. Cash and Cash Equivalents-The company considers all investments purchased with a maturity of three months or less to be cash equivalents. Allowance for Doubtful Accounts-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. The company 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 collectibility 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. The company has recorded an allowance for doubtful accounts of $4,000 for the year ended April 30, 2013 and $6,000 for the year ended April 30, 2012. For the fiscal year ended April 30, 2013 bad debt expense was a net credit of $1,926 due to bad debt recoveries during the year. For the fiscal year ended April 30, 2012, bad debt expense was a net credit of $213. Inventories-Inventories are stated at the lower of cost or market. Cost is determined using the average cost-pricing method. The company uses standard costs to price its manufactured inventories approximating average costs. Page 21
Property and Equipment-Property and equipment are recorded at cost. Depreciation is calculated based on the following estimated useful lives using the straight-line method: Classification Useful Life 2013 2012 in Years Cost Cost Dies, jigs, and molds 3-7 $1,570,000 $1,503,000 Machinery and equipment 5-10 1,137,000 1,134,000 Furniture and fixtures 5-10 147,000 147,000 Leasehold improvements 5-32 178,000 178,000 Buildings 20 658,000 658,000 Automotive and aircraft 3-5 411,000 406,000 Software 2-5 139,000 129,000 Land N/A 13,000 13,000 __________ __________ Total 4,253,000 4,168,000 Accumulated depreciation (3,552,000) (3,397,000) __________ __________ Net $ 701,000 $ 771,000 __________ __________ __________ __________ Depreciation expense of $174,000 and $160,000 were charged to operations for the years ended April 30 2013 and 2012, respectively. Maintenance and repairs are charged to expense as incurred, and expenditures for major improvements are capitalized. When assets are retired or otherwise disposed of, the property accounts are relieved of costs and accumulated depreciation and any resulting gain or loss is credited or charged to operations. Advertising-Advertising costs are expensed as incurred and included in selling expenses. Advertising expense amounted to $243,000 and $221,000 for the years ended April 30 2013 and 2012, respectively. 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. Page 22
The flow-through method of accounting for tax credits has been adopted by the company. Such credits are reflected as a reduction of the provision for income taxes in the year in which they become available. Net Income Per Common Share-Net income per common share is based on the weighted average number of common shares outstanding during each fiscal year. The dilutive effect of convertible preferred stock is reflected in diluted earnings per share by application of the if-converted method. Under this method, preferred dividends applicable to convertible preferred stock are added to the numerator and convertible preferred stock is assumed to have been converted at the beginning of the period. Accounting Estimates-The preparation of these financial statements requires the use of estimates and assumptions including the carrying value of assets. The estimates and assumptions result in approximate rather than exact amounts. Financial Instruments-Financial instruments consist of cash and cash equivalents, marketable securities, accounts receivable and accounts payable. The carrying values of these financial instruments approximate fair value due to their short-term nature. Revenue Recognition-Revenue is recognized when risks and benefits in ownership are transferred, which normally occurs at the time of shipment of products. Comprehensive Income-US GAAP requires disclosure of total non-stockholder changes in equity in interim periods and additional disclosures of the components of non-stockholder changes in equity on an annual basis. Total non- stockholder changes in equity include all changes in equity during a period except those resulting from fiscal investments by and distributions to stockholders. 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. At April 30, 2013, the Company operated in two segments organized by security line products and all other products. See Note 9 for further segment information disclosures. Page 23
Reclassifications-Certain reclassifications have been made to conform to the current year presentation. The total net income and equity are unchanged due to those reclassifications. Recently Issued Accounting Pronouncements- In May 2012, we adopted Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income. This guidance requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements and eliminates the option to present the components of other comprehensive income as part of the statement of equity. We have continued to present a separate statement of comprehensive income and the adoption of this guidance did not have any impact on our results of operations, financial position or cash flows. 2. INVENTORIES Inventories at April 30, 2013 and 2012 consisted of the following: 2013 2012 __________ __________ Raw materials $1,552,000 $1,682,000 Work in process 412,000 543,000 Finished goods 275,000 291,000 __________ __________ 2,239,000 2,516,000 __________ Less: allowance for obsolete inventory (165,000) (165,000) __________ __________ Totals $2,074,000 $2,351,000 __________ __________ __________ __________ Page 24
3. MARKETABLE SECURITIES The Company has investments in publicly traded equity securities as well as certain state and municipal debt securities. These securities are classified as available-for-sale securities, and are reported at fair value. Available- for-sale investments in debt securities mature between May 2013 and November 2048. The Company uses the average cost method to determine the cost of securities sold and the amount reclassified out of accumulated other comprehensive income into earnings. Unrealized gains and losses are excluded from earnings and reported separately as a component of stockholders' equity. Dividend and interest income are reported as earned. As of April 30, 2013, investments available-for-sale consisted of the following: Gross Gross Cost Unrealized Unrealized Fair Basis Gains Losses Value Municipal bonds $ 7,596,000 $ 291,000 $ (12,000) $ 7,875,000 REITs $ 67,000 $ 2,000 $ (2,000) $ 67,000 Equity securities $10,939,000 $1,099,000 $ (102,000) $11,936,000 Money Markets and CDs $ 2,330,000 $ 0 $ 0 $ 2,330,000 Total $20,932,000 $1,392,000 $ (116,000) $22,208,000 The Company evaluates all marketable securities for other-than temporary declines in fair value, which are defined as when the cost basis exceeds the fair value for approximately one year. The Company also evaluates the nature of the investment, cause of impairment and number of investments that are in an unrealized position. When an other-than-temporary decline is identified, the Company will decrease the cost of the marketable security to the new fair value and recognize a loss. The investments are periodically evaluated to determine if impairment changes are required. As a result of this standard, management recorded impairment losses of $20,000 for the year ended April 30, 2013 and $72,000 for the year ended April 30, 2012. The following table shows the investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at April 30, 2013. Page 25
Less than 12 months 12 months or greater Total Description Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss Municipal bonds $ 657,000 $ (8,000) $ 220,000 $ (4,000) $ 877,000 $ (12,000) Equity securities $1,033,000 $ (71,000) $ 143,000 $ (33,000) $1,176,000 $ (104,000) Total $1,690,000 $ (79,000) $ 363,000 $ (37,000) $2,053,000 $ (116,000) Municipal Bonds The unrealized losses on the Company's investments in municipal bonds were caused by interest rate increases. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company has the ability to hold these investments until a recovery of fair value occurs, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at April 30, 2013. Marketable Equity Securities The Company's investments in marketable equity securities consist of a wide variety of companies. Investments in these companies include growth, growth income, and foreign investment objectives. Management has evaluated the individual holdings, and because of the recent decline in the stock market, does not consider these investments to be other-than-temporarily impaired at April 30, 2013. Page 26
4. RETIREMENT BENEFIT PLAN On January 1, 1998, the company adopted the George Risk Industries, Inc. Retirement Savings Plan (the "Plan"). The Plan is a defined contribution savings plan designed to provide retirement income to eligible employees of the company and its subsidiaries. The Plan is intended to be qualified under Section 401(k) of the Internal Revenue Code of 1986, as amended. It is funded by voluntary pre-tax contributions from eligible employees who may contribute a percentage of their eligible compensation, limited and subject to statutory limits. The Plan is also funded by discretionary matching employer contributions from the company. Employees are eligible to participate in the Plan when they have attained the age of 21 and completed one thousand hours of service in any plan year with the company. Upon leaving the company, each participant is 100% vested with respect to the participants' contributions while the company's matching contributions are vested over a six-year period in accordance with the Plan document. Contributions are invested, as directed by the participant, in investment funds available under the Plan. Matching contributions of approximately $12,000 were paid during the fiscal year ending April 30, 2013 and $12,000 worth of matching contributions were paid during either of the fiscal years ended April 30, 2013 and 2012. 5. STOCKHOLDERS' EQUITY Preferred Stock-Each share of the Series #1 preferred stock is convertible at the option of the holder into five shares of Class A common stock and is also redeemable at the option of the board of directors at $20 per share. The holders of the convertible preferred stock shall be entitled to a dividend at a rate up to $1 per share annually, payable quarterly as declared by the board of directors. No dividends were declared or paid during the two years ended April 30, 2013. Convertible preferred stock without par value may be issued from time to time as determined by the board of directors. Shares of different series shall be of equal rank but may vary as to terms and conditions. Class A Common Stock-The holders of the Class A common stock are entitled to receive dividends as declared by the board of directors. No dividends may be paid on the Class A common stock until the holders of the Series #1 preferred stock have been paid a dividend for the four prior quarters and provision has been made for the full dividend in the current fiscal year. Page 28
During the fiscal year ended April 30, 2013, the Company purchased 7,074 shares of Class A common stock. This was accomplished by stockholders contacting the company. Stock Transfer Agent-The Company does not have an independent stock transfer agent. The company maintains all stock records. 6. EARNINGS PER SHARE Basic and diluted earnings per share, assuming convertible preferred stock was converted for each period presented are: April 30, 2013 ___________________________________ Income Shares Per-Share (Numerator) (Denominator) Amount Net Income $3,788,000 __________ __________ Basic EPS $3,788,000 5,037,837 $.7519 Effect of dilutive Convertible Preferred Stock - 20,500 (.0030) __________ _________ ______ Diluted EPS $3,788,000 5,058,337 $.7489 __________ _________ ______ __________ _________ ______ April 30, 2012 ___________________________________ Income Shares Per-Share (Numerator) (Denominator) Amount Net Income $2,648,000 __________ __________ Basic EPS $2,648,000 5,045,103 $.5249 Effect of dilutive Convertible Preferred Stock - 20,500 (.0022) __________ _________ ______ Diluted EPS $2,648,000 5,065,603 $.5227 __________ _________ ______ __________ _________ ______ Page 28
7. COMMITMENTS, CONTINGENCIES, AND RELATED PARTY TRANSACTIONS The Company leases a building from Ken and Bonnie Risk. Ken Risk was the Chairman of the Board and the President and CEO of the company until his death in February 2013. Bonnie Risk is Ken's wife, is also an director and employee of the company. 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 the fiscal years ended April 30, 2013 and 2012. The company also leased its airplane from former President and CEO Ken Risk, who was also a majority stockholder, on a month-to-month basis requiring payments of $2,250. Airplane lease expenses charged to operations for the fiscal year ended April 30, 2013 was $22,500 and it was $27,000 for the fiscal year ended April 30, 2012. During the year ended April 30,2000, the Company paid $210,000 and the President/CEO contributed the airplane in trade for another airplane. The Company and this officer jointly own the airplane. The company has the airplane up for sale since there is no longer a pilot for the aircraft. 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 $3,350,000 for the year ended April 30, 2013 and $4,818,000 for the year ended April 30, 2012. The Company also received interest income from FirstTier Bank in the amount of $2,000 for the year ended April 30, 2013 and $3,000 for the year ended April 30,2012. Page 29
8. INCOME TAXES Reconciliation of income taxes with Federal and State taxable income: 2013 2012 ____________ ____________ Income before income taxes $3,948,000 $3,854,000 State income tax deduction (196,000) (211,000) Capital loss carryforwards (utilized) accumulated (479,000) (120,000) Interest and dividend income (601,000) (603,000) Domestic production activities deduction (284,000) (266,000) Nondeductible expenses and timing differences 27,000 (85,000) __________ __________ Taxable income $2,415,000 $2,569,000 __________ __________ __________ __________ The following schedule reconciles the provision for income taxes to the amount computed by applying the statutory rate to income before income taxes: Income before taxes at statutory rate $1,650,000 $1,611,000 Increase (decrease)income taxes resulting from: State income taxes (82,000) (88,000) Interest and dividend income (251,000) (252,000) Domestic production activities (119,000) (111,000) Deferred taxes (840,000) 119,000 Other temporary and permanent differences (198,000) (73,000) __________ __________ Income tax expense $ 160,000 $1,206,000 __________ __________ __________ __________ Federal Tax Rate 34.0% 34.0% State Tax Rate 7.8% 7.8% ____ ____ Blended statutory rate 41.8% 41.8% ____ ____ ____ ____ Page 30
Deferred tax asset (liabilities) consist of the following components at April 30, 2013 and 2012: Deferred tax current assets: Capital loss carryforward $ 0 $ 287,000 Allowance for doubtful accounts 2,000 0 Inventory valuation 69,000 0 Accrued vacation 31,000 32,000 Accumulated unrealized (gain)/loss on investments 533,000 (200,000) __________ __________ Net deferred tax assets (liabilities) $ 635,000 $ 119,000 __________ __________ __________ __________ Deferred long-term tax assets (liabilities): Depreciation (133,000) (124,000) __________ __________ Net deferred long-term tax assets (liabilities) $ (133,000) $ (124,000) __________ __________ __________ __________ All capital loss carryforwards were used up during the current fiscal year. Page 31
9. BUSINESS SEGMENTS The following is financial information relating to industry segments: April 30, 2013 2012 Net revenue: Security alarm products $ 9,200,000 $ 9,054,000 Other products 1,310,000 1,240,000 ___________ ___________ Total net revenue $10,510,000 $10,285,000 ___________ ___________ ___________ ___________ Income from operations: Security alarm products $ 2,362,000 $ 2,671,000 Other products 336,000 366,000 ___________ __________ Total income from operations $ 2,698,000 $ 3,037,000 ___________ ___________ ___________ ___________ Identifiable assets: Security alarm products $ 3,778,000 $ 3,463,000 Other products 797,000 1,213,000 Corporate general 28,516,000 26,711,000 ___________ ___________ Total assets $33,091,000 $31,387,000 ___________ ___________ ___________ ___________ Depreciation and amortization: Security alarm products $ 23,000 $ 24,000 Other products 131,000 112,000 Corporate general 20,000 24,000 ___________ ___________ Total depreciation and amortization $ 174,000 $ 160,000 ___________ ___________ ___________ ___________ Capital expenditures: Security alarm products $ 12,000 $ 0 Other products 71,000 281,000 Corporate general 21,000 17,000 ____________ ___________ Total capital expenditures $ 104,000 $ 298,000 ____________ ___________ ____________ ___________ Page 32
10. CONCENTRATIONS The company maintains its cash balance in a financial institution in Kimball, Nebraska. Accounts at this institution are insured by the Federal Deposit Insurance Corporation for up to $250,000. For the years ended April 30, 2013 and 2012, the Company's had uninsured balances of $3,100,000 and $4,568,000, respectively. Management believes that this financial institution is financially sound and the risk of loss is minimal. The Company also maintains cash balances in money market funds at the above-mentioned financial institution. Such balances are not insured. The company has sales to a security alarm distributor representing 40% of total sales for the year ended April 30, 2013 and 41% for the year ended April 30, 2012. This distributor accounted for 55% and 51% of accounts receivable at April 30, 2013 and 2012, respectively. Security switch sales made up 84% of the total sales for the fiscal year ended April 30, 2013 and and 88% of the total sales for the fiscal year ended April 30, 2012. 11. Fair Value Measurements The carrying value of our cash and cash equivalents, accounts receivable and accounts payable approximate their fair value due to their short term nature. The fair value of our investments is determined utilizing market based information. Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions, and credit risk. US GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels of the fair value hierarchy under US GAAP are described below: Page 33
Level 1 Valuation is based upon quoted prices for identical instruments traded in active markets. Level 2 Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 3 Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. Marketable Securities As of April 30, 2013, our investments consisted of money markets, publicly traded equity securities as well as certain state and municipal debt securities. Our marketable securities are valued using third-party broker statements. The value of the majority of securities is derived from quoted market information. The inputs to the valuation are classified as Level 1 given the active market for these securities; however if an active market does not exist, which is the case for municipal bonds, the inputs are recorded as Level 2. Fair Value Hierarchy The following tables set forth our assets and liabilities measured at fair value on a recurring basis and a non-recurring basis by level within the fair value hierarchy. As required by US GAAP, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Assets Measured at Fair Value on a Recurring Basis As of April 30, 2013 Level 1 Level 2 Level 3 Total Assets: Money Markets and CDs $ 2,330,000 _ _ $ 2,330,000 Equity Securities $11,935,000 - _ $11,935,000 Municipal and Corporate Bonds _ $7,943,000 _ $ 7,943,000 Total fair value of assets measured on a recurring basis $14,265,000 $7,943,000 - $22,208,000 Page 34
Item 9 Disagreements on Accounting and Financial Disclosures There were no disagreements with accountants on accounting and financial disclosure. Item 9A Controls and Procedures 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, 2013, 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 as of April 30, 2013, 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: 1) 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 passing of our CEO, the current CEO and CFO roles are being fulfilled by the same individual. We do not have an audit committee. Until such time as the Company is able to hire a Controller, we do not believe we meet the full requirement for separation for financial reporting purposes and deferred taxes. Page 35
As a result of the material weakness in internal control over financial reporting described above, the Company's management has concluded that, as of April 30, 2013, the Company's internal control over financial reporting was not effective based on the criteria in Internal Control - Integrated Framework issued by the COSO. To date, the Company has not been able hire a controller. 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: 1) Pertain to the maintenance of records in reasonable detail accurately that fairly reflect the transactions and dispositions of the Company's assets; 2) 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 3) 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. Due to the passing of the CEO during the fiscal year 2013, our internal control structure has changed such that there is no separation of duties for financial reporting and deferred taxes, as discussed above. 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 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. Page 36
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 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. Item 9B Other Information None. Page 36
Part III Item 10 Directors and Executive Officers of the Registrant (a & b) Identification of Directors and Executive Officers All of the executive officers of the corporation serve at the pleasure of the board of directors and do not have fixed terms. The following information as of April 30, 2013 is furnished with respect to each director and executive officer: Director or Name Principal Occupation or Employment Age Officer Since Stephanie M. Risk- Chairman of the Board, Chief Executive 41 August 8, 1999 McElroy Officer and Chief Financial Officer Sharon Westby Secretary/Treasurer 61 June 16, 2006 Jerry Andersen Director, retired 82 August 28, 1978 Donna Debowey Director, retired GRI plant manager 75 July 12, 2005 Joel H. Wiens Director, FirsTier Banks 83 September 6, 2007 Bonnie P. Risk Director, Stock Transfer Agent at GRI 63 March 15, 2013 The following director compensation table is furnished with respect to each director that served during the year ended April 30, 2013: Name Director's Stock Option Non-equity Non-qualified Fees Paid Awards Awards incentive deferred plan compensation compensation earnings Total Stephanie Risk (1) -- -- -- -- -- -- Sharon Westby (1) -- -- -- -- -- -- Jerry Andersen (2) $ 150.00 -- -- -- -- $ 150.00 Donna Debowey (2) $ 150.00 -- -- -- -- $ 150.00 Joel H. Wiens (2) $ 150.00 -- -- -- -- $ 150.00 Bonnie P. Risk (1) -- -- -- -- -- -- The inside directors (1), or employees of the company, do not receive additional compensation for their services. Outside directors (2) are paid $150 per meeting for their services. Page 37
(c) Identification of Certain Significant Employees None. (d) Family Relationships Stephanie Risk-McElroy and Bonnie P. Risk have a daughter-mother relationship. (e) Business Experience of Directors and Executive Officers Stephanie Risk-McElroy, Chairman of the Board, Chief Executive Officer and Chief Financial Officer, has over seventeen years of experience in the accounting field. Ms. Risk-McElroy graduated from Hastings College with a degree in Accounting. Stephanie worked for Platte Valley Sales from May 1990 until January 1997 as a staff accountant. In 1997, she pursued her career with an accounting manager position at Kershner's Auto Korner. She joined the accounting staff at GRI in 1999 and then was promoted to CFO upon retirement of the prior CFO. Upon the death of her father, Ken R. Risk, in February, 2013, she was appointed to the position of Chairman of the Board and Chief Executive Officer. Ms. Risk-McElroy serves on the Board of Directors of GRI, as a direct link to the financial condition of the company. She and her staff oversee all the accounting obligations of the Company. She has knowledge and experience in business outside of the company that makes her an asset to the Board. And with her new appointment as President, she oversees all the day to day operations as well. Sharon Westby, the corporate secretary, worked at GRI right after high school for a couple of years as the personal secretary to the founder of the company, George Risk, who was president and CEO. Before she returned to the company in 1982, Sharon was a Clerk Steno 1 at Jackson County Welfare in Kansas City, MO, worked in medical records at the Kimball County Hospital in Kimball, NE, and also managed motels in Texas and Nebraska. She is the Executive Assistant to the President and CEO and Sales Administrator of the Keyboard and Switch division of GRI. Ms. Westby continues in her position on the Board of Directors at GRI with over 27 years of experience with the company. She has seen the company through many years of ups and downs, has great knowledge of her product line and is very customer oriented in trying to sell her products to the "non-security use" industry. Jerry Andersen, director, worked in the banking industry from 1967 until his retirement in August 2000. He was the Senior Vice President at American National Bank in Kimball, NE as well as serving several years in high positions at First State Bank in Kimball. His position with the bank for many years was as loan officer and for the last four years he held the position of Compliance Officer. Page 38
Mr. Andersen has served many years on the Board of Directors at GRI. He brings knowledge in financial and business matters to the table and although is retired, he still has an active interest in the success of the company. Donna Debowey, director, worked in various retail stores and restaurants until she started at GRI in 1968. She started on the production line, but quickly worked her way up the ranks. She has been a Production Line Supervisor, Director of Quality Control and was named Plant Manager and Senior Vice President in 1998. She held that position until her retirement in 2003. Ms. Debowey made the transition from employee of GRI to a member of the Board of Directors with no hesitation after her retirement. She brings her 40+ years of experience in the industry to the table and has a vested interest in seeing the continued success of the company that she helped to build. Joel H. Wiens, Director, is an entrepreneur with many business interests. He is a director and principal shareholder of FirsTier Banks Nebraska/Wyoming, director of FirsTier II BanCorporation (which owns FirsTier Bank Nebraska/ Wyoming), Chairman of Rite-A-Way Industries (lodging and hospitality industries), real estate investments, and ranching and livestock. Mr. Wiens took his place on the Board of Directors when his predecessor Mike Nelson, (who is affiliated with Mr. Wiens' financial institutions) retired from the Board to take another position within the Banks and moved away. Joel's knowledge and experience in business and industry span 50+ years and serves as a valuable asset to GRI. Bonnie P. Risk, Director, attended Wayne State College in Wayne, Nebraska. Upon returning back home to Columbus, NE, she worked in factory positions. Upon her marriage to Ken Risk, she became a homemaker, raising 3 children and working at several sales positions. In 1981, she and Ken started Platte Valley Sales in Hastings, Nebraska, and her expertise was in accounting and sales. For 8 years, she ran the Hastings business while Ken devoted his time to both GRI in Kimball and Platte Valley Sales in Hastings. Ken and Bonnie moved to Kimball in 1997. In 1998, she began at GRI in sales support. She continues in sales support, and became the company stock transfer agent in 2004 upon retirement of Eileen Risk and is an assistant to the chief financial officer. (f) Involvement in Certain Legal Proceedings None. (g) Promoters and Control Persons None. Page 39
Compliance with Section 16(a) of the Securities Exchange Act of 1934 Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file. Based solely on our review of copies of the Section 16(a) reports filed for the fiscal year ended April 30, 2013, we believe that all filing requirements applicable to our officers, directors, and greater than 10% beneficial owners were complied with. Code of Ethics and Code of Business Conduct The company does not have a written code of ethics at this time. The company is a small business and employees know that the President of the company must approve all material business. The company also has checks and balances to make sure that there is not any fraud or illegal activities taking place. Corporate Governance Nominating and Compensation Committees We do not have standing nominating or compensation committees, or committees performing similar functions. Our Board of Directors believes that it is not necessary to have a standing compensation committee at this time because our Board of Directors adequately performs the functions of such committee. Our Board of Directors also is of the view that it is appropriate for us not to have a standing nominating committee because our Board of Directors has performed and will perform adequately the functions of a nominating committee. Our Board of Directors has not adopted a charter for the nomination committee. There have not been any defined policy or procedure requirements for stock-holders to submit recommendations or nomination for directors. Our Board of Directors does not believe that a defined policy with regard to the consideration of candidates recommended by stockholders is necessary at this time because we believe that, given the early stages of our development, a specific nominating policy would be premature and of little assistance until our business operations are at a more advanced level. Page 40
Audit Committee We do not have a standing audit committee at the present time. Our Board of Directors has determined that we do not have a board member that qualifies as an "audit committee financial expert" as defined in Item 401(h) of Regulation S-K, nor do we have a board member that qualifies as "independent" as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended. Other Committees All proceedings of our Board of Directors for the year ended April 30, 2013 were conducted by resolutions consented to in writing by our directors and filed with the minutes of the proceedings of the Board of Directors. Our Company currently does not have any committees. Page 41
Item 11 Executive Compensation The following table sets forth certain information regarding the compensation paid to or accrued by the company for the chief executive officer for services rendered in all capacities during each of the company's fiscal years ended April 30, 2013 and 2012 (no other officer had compensation over $100,000): Change in Pension Value and Non-qualified Name and Non-Equity Deferred All Other principal Stock Option Incentive Plan Compensation Compen- position Year Salary Bonus Awards Awards Compensation Earnings sation Total ______ ____ ______ _____ _____ ____ ________ ________ ________ ________ Ken R. Risk, 2013 $73,000 $ 82,000 -- -- -- -- $2,000 $157,000 Former Chief Executive 2012 $83,000 $102,000 -- -- -- -- $2,000 $187,000 Officer Ken R. Risk did not have an employment contract with the company. He received a base salary and bonus/commission based on a percentage of sales for the year. Other compensation consisted of a yearly discretionary match by the company, which included the contribution match made by the company into the 401K plan. The match consists of 25% of the deferral that is made by the employee, up to 4% of their earnings. Page 42
Item 12 Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information regarding our Common Stock beneficially owned as of April 30, 2013, for (i) each stockholder known to be the beneficial owner of 5% or more of our outstanding Common Stock, (ii) each executive officer and director, and (iii) all executive officers and directors as a group. In general, a person is deemed to be a beneficial owner of a security if that person has or shares the power to vote or direct the voting of such security, or the power to dispose or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which the person has the right to acquire beneficial ownership within 60 days. Share of Common Stock subject to options, warrants or convertible securities exercisable or convertible within 60 days are deemed outstanding for computing the percentage of the person or entity holding such options, warrants or convertible securities but are not deemed outstanding for computing the percentage of any other person. Percentages are determined based on 5,035,525 shares of Common Stock of the Company issued and outstanding and less treasury shares as of April 30, 2013. To the best of our knowledge, subject to community and marital property laws, all persons named have sole voting and investment power with respect to such shares, except as otherwise noted. Name and Address Number of Shares % of Class of Beneficial Owner (1) of Common Stock (2) of Stock Outstanding (3) Ken R. Risk - Prior Chairman and CEO 2,187,056 43.42% Stephanie M. Risk-McElroy - Chairman, CEO & CFO 1,775 Less than 1% Donna Debowey - Director 500 Less than 1% Bonnie Risk - Director 25,685 Less than 1% Bonita Risk Family Irrevocable Trust 732,470 14.5% Sharon Westby - Secretary 250 Less than 1% Daniel Douglas - Vice President, Materials 250 Less than 1% All Officers and Directors as a group (6 persons and 1 trust) 2,950,986 58.6% RWWM, Inc. 3260 Penry Road Suite 100 Loomis, CA 95650 291,743 5.79% (1) unless otherwise indicated, the address of the named beneficial owner is George Risk Industries, Inc., 802 S. Elm Street, Kimball, NE 69145 (2) Security ownership information for named beneficial owners (other than executive officers and directors of the Company) is taken from statements filed with the Securities and Exchange Commission pursuant to information made known by the Company and from the Company's transfer agent. (3) Based on teh net shares outstanding as of April 30, 2013. This consists of Common Shares issued and outstanding (8,502,881) less treasury shares (3,467,356). Page 43
Changes in Control We are not aware of any arrangements, including any pledge by any person of our securities, the operation of which may result in a change in control of the Company. Item 13 Certain Relationships and Related Party Transactions During each of three years ended April 30, 2013, 2012, and 2011, the company executed transactions with related entities and individuals. Each of the transactions was in terms at least as favorable as could be obtained from unrelated third parties. Related Party 2013 2012 2011 Airplane Lease Ken R. Risk, Former President and CEO $ 22,500 $ 27,000 $ 27,000 Building and Warehouse Leases/Rentals Ken R. Risk, Former President and CEO $ 15,350 $ 18,420 $ 18,420 Bonnie Risk, Director $ 3,070 -- -- Bank Balances Joel Wiens, Director $3,349,596 $4,818,466 $4,648,365 Interest Income Joel Wiens, Director $ 2,211 $ 3,150 $ 8,373 Page 44
Item 14 Principal Accountant Fees and Services 1)Audit Fees For each of the last two fiscal years the company incurred aggregate fees and expenses for professional services rendered by our principal accountants for the audit of our annual financial statements and review of our financial statements for Form 10-Q. The amounts are listed below: FYE 2013 $38,000 Haynie & Company FYE 2012 $37,000 Haynie & Company 2) Audit-Related Fees The company incurred aggregate fees and expenses for professional services rendered by our principal accountants for the audit of the company's employee benefit plan. The amounts are listed below: FYE 2013 $ 6,000 Haynie & Company FYE 2012 $ 5,800 Haynie & Company 3) Tax Fees The company incurred aggregate fees or expenses for professional services rendered by our principal accountants for tax compliance, tax advice, and tax planning for the last two fiscal years. The amounts are listed below: FYE 2013 $ 3,945 Haynie & Company FYE 2012 $ 1,500 Haynie & Company 4)All Other Fees There were no other fees incurred during each of the last two fiscal years. 5) The Board of Directors, considered whether, and determined that, the auditor's provisions of non-audit services were compatible with maintaining the auditor's independence. All the services described above were approved by the Board of Directors pursuant to its policies and procedures. Page 45
Part IV Item 15 Exhibits and Reports on Form 8-K 3.(1).a Articles of Incorporation - Filed as Exhibit 5 to the Registrant's Form 10-K for the fiscal year ended April 10, 1970, and incorporated by reference herein 3.(i).b Certificate of Amendment to the Articles of Incorporation of the Registrant - Filed as Exhibit 1.2 to the Registrant's Form 10-K for the fiscal year ended April 30, 1971, and incorporated by reference herein 3.(ii).c By-laws - Filed as Exhibit 1.3 to the Registrant's Form 10-K for the fiscal year ended April 10, 1971, and incorporated by reference herein 10.1 Vendor agreement dated as of February 16, 2011 between Honeywell International, Inc., acting through the ADI business of its Security Group ("ADI") and George Risk Industries, Inc. - filed herewith (see footnote below) 10.2 8-k for special dividend 10.3 Ken Risk death 31.1 Certification pursuant to Rule 13a-14(a) of the Chief Executive Officer (Principal Financial and Accounting Officer) 32.1 Certification pursuant to 18 U.S.C. 1350 of the Chief Executive Officer (Principal Financial and Accounting Officer) Portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 24b-2 under the Securities Exchange Act of 1934. The request is currently under review. Page 46
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. /s/ Stephanie Risk-McElroy Date Stephanie Risk-McElroy, President and Chairman of the Board August 13, 2013 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Stephanie M. Risk-McElroy President and Chairman Date Stephanie Risk-McElroy of the Board August 13, 2013 /s/ Jerry Andersen Director Date Jerry Andersen August 13, 2013 /s/ Joel H. Wiens Director Date Joel H. Wiens August 13, 2013 /s/ Donna Debowey Director Date Donna Debowey August 13, 2013 /s/ Bonnie P. Risk Director Date Bonnie P. Risk August 13, 2013 Page 47