10-K 1 gri10k10.txt GRI 10K 2010 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, 2010 [ ] 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 or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) 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 July 27, 2010, 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 $8,999,456. The number of outstanding shares of the common stock as of July 27, 2010 was 5,063,455. DOCUMENTS INCORPORATED BY REFERENCE None. 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 87 percent of net revenues and are sold through distributors and private board customers. The security segment has approximately 4,000 customers. One of the distributors accounts for approximately 43 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. The keyboard segment has approximately 950 customers. Keyboard products are sold to original equipment manufacturers to their specifications and to distributors of off-the-shelf keyboards of proprietary design. Page 3 Competition The company has intense competition in the keyboard and burglar alarm lines. The burglar alarm segment has five or six 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 150 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 Ken and Bonnie Risk. Ken Risk is the CEO and chairman of the board 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 24 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 symbal RSKIA, is currently quoted on the OTC Bulletin Board by eight market makers. Stock Prices and Dividends Information
2010 Fiscal Year High Low May 1-July 31 5.00 3.45 August 1-October 31 5.05 4.01 November 1-January 31 4.75 4.10 February 1-April 30 5.00 4.25
2009 Fiscal Year High Low May 1-July 31 7.00 5.00 August 1-October 31 6.00 4.25 November 1-January 31 5.23 2.91 February 1-April 30 3.95 3.25
A dividend of $0.17 per common share was declared on September 30, 2009. This was the only dividend declared and paid during the 2010 fiscal year. As for fiscal year 2009, a dividend of $0.17 per common share was declared on September 30, 2008. The number of holders of record of the company's Class A Common Stock as of April 30, 2010, was approximately 1,300. Item 6 Selected Financial Data As a smaller reporting company, we are not required to respond to this item. Page 5 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 our products to security installing companies. These products are used for residential, commercial, industrial and government installations. International sales accounted for approximately 5.0% of revenues for fiscal year 2010 and 9.1% for 2009. 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. 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 decreased $1,030,000 during the year ended April 30, 2010 while it increased $599,000 during the year ended April 30, 2009. Other cash flow changes are as follows. Accounts receivable increased $5,000 during the current year as compared to a $299,000 decrease for last year. The slight increase in cash flow for accounts receivable is a reflection that sales are trending to be on the rise. At April 30, 2010, 80.05% of the receivables were considered current (less than 45 days) and 6.03% of the total were over 90 days past due. For comparison, 83.5% of the receivables were current and 6.25% were past 90 days at April 30, 2009. Inventories decreased $732,000 for the current year as compared to a $336,000 decrease for the same period last year. Management has continued the trend of decreasing its purchases of raw materials in the current fiscal year to correspond to the decrease in sales. For the year ended April 30, 2010, prepaid expenses increased $62,000, and there was decrease of $22,000 for the corresponding period last year. The main reason for the increase in prepaid expenses for the current fiscal year is that the company has prepaid for raw materials that are coming from overseas. For the last two fiscal years, there have been income tax overpayments. There was a $79,000 increase in cash towards income tax overpayment for the year ending April 30, 2010. And there was a $334,000 decrease in cash towards income tax overpayment for the year ending April 30, 2009. Management paid income tax estimates based on what taxable income was estimated to be. And since there is an increase in taxable income, one can expect an increase in income taxes paid. Page 6 For the year ended April 30, 2010, accounts payable increased $22,000 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 decreased by $108,000 for the year ended April 30, 2010, and these expenses also decreased $15,000 for the corresponding year ended April 30, 2009. Investing As for our investment activities, $98,000 was spent on purchases of property and equipment during the current fiscal year and $143,000 was spent during the year ended April 30, 2009. 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, 2010 was $2,748,000 and $1,296,000 was spent for the corresponding period last year. In addition, proceeds from the sale of marketable securities for the year ended April 30, 2010 were $747,000 and $260,000 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. There was some reorganizing of Money Manager accounts in the second quarter that will hopefully be beneficial to the Company. Also, $2 million was moved from a money market account into several certificates of deposits in order to be covered more fully by FDIC insurance. Unfortunately, all of these CDs have matured as of the date of this report and management has not found a worthy place to invest this money, so it is sitting in cash at this time. Furthermore, the Company continues to purchase back its common stock when the opportunity arises. For the year ended April 30, 2010, the Company purchased $263,000 worth of treasury stock and $171,000 worth was bought back for the year ended April 30, 2009. We have been actively searching for stockholders that have been "lost" over the years. The payment of dividends over the last five fiscal years has also prompted many stockholders and/or their relatives and descendants to sell back their stock to the Company. Financing Cash flows from financing activities were $780,000 for the year ended April 30, 2010, which $785,000 of that amount was for dividends payments. The company declared a dividend of $0.17 per share of common stock on September 30, 2009 and these dividends were paid by October 31, 2009. Net cash used in financing activities was $802,000 for the year ended April 30, 2009. A dividend of $0.17 per common share was also declared and paid during the second fiscal quarter last year. Results of Operations _____________________ GRI completed the fiscal year ending April 30, 2010, with a net profit of 19.72% net of sales. Net sales were at $7,821,000, down 11.35% over the previous year. Additionally, net income for the year ended April 30, 2009 was $1,542,000, up 198.84% from the prior year. Although sales were down for the fiscal year ending April 30, 2010 we expect sales to stay steady and increase for the fiscal year ending April 30, 2011. The company's main division of products that are sold (security switches) are directly tied to the housing industry. And since the housing industry has been performing poorly, the company's sales have decreased 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 2011. 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. Page 7 The costs of goods sold expenses stayed very consistent between this year and last year. For the year ended April 30, 2010, the cost of goods sold percentage was at 55.29% of net sales. This is an increase of 2.63% when comparing to fiscal year end 2009. We look for quality materials at the best possible price. We are overstocked on some raw materials due to a slow down in sales, and purchases that we were not able to delay vendor delivery times. We hire the number of production workers expected to finish products in a timely manner. As a result of reduced sales, management has implemented a temporary period of voluntary and mandatory days off to reduce labor costs. With these continued good practices, we expect to continue to achieve a gross profit margin of about 50 percent for the coming year. At April 30, 2010, working capital decreased by 5.7% 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 37.758 for the year ended April 30, 2010 from 32.878 for the year ended April 30, 2009. Marketable securities have increased in the current year, while current liabilities increase slightly from year to year. At April 30, 2010, the biggest long-term liability on the books is deferred income taxes of $75,000. New product development The new HD-1 Hold-Up Switch is now in production. The HD-1 requires no key to reset, is jumper selectable for latching or non-latching. It is tamper resistant and can be incorporated into an end-of-line resistor. Engineering is currently working with our international representative on a modified version for the European market. Mold design is currently being completed on a miniature surface mount contact switch with terminal blocks. Customers have been requesting this design for some time now. This switch will be the company's smallest surface mount terminal switch. The Company has added to its top selling plastic molded wire covers line (EZ Duct Raceway). The new Quarter Round, as its name implies, has rounded edges and is esthetically pleasing along wall lines and base boards. This will be packaged in six, 6' sticks per bag. The Quarter Round connecting pieces, which are for splices and corners, will be added to the product line soon. Engineering continues work on the wireless swimming pool alarm design, along with other wireless items, a garage door monitor, a pump guard watering station and a high security contact switch. 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 principals 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. Page 8 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. 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. Page 9 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 is the Chairman of the Board and President and CEO of the company. Bonnie Risk is Ken's wife, who is also 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, 2010 and 2009. The company also leases its airplane from President and CEO Ken Risk, who is also a majority stockholder, on a month-to-month basis requiring payments of $2,250. Airplane lease expenses charged to operations for the fiscal years ended April 30, 2010 and 2009, were $27,000 for each year. 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 newly purchased airplane, and will continue the lease on the officer's ownership of the plane. 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 $3,354,000 for the year ended April 30, 2010 and $4,616,000 for the year ended April 30, 2009. The Company also received interest income from FirsTier Bank in the amount of $31,000 for the year ended April 30, 2010 and $100,000 for the year ended April 30, 2009. Page 10 Item 8 Financial Statements Index to Financial Statements George Risk Industries, Inc. Page Independent Auditor's Report 12 Balance Sheets April 30, 2010 and 2009 13 Statements of Income For the Years Ended April 30, 2010 and 2009 15 Statements of Comprehensive Income For the Years Ended April 30, 2010 and 2009 16 Statement of Changes in Stockholders' Equity For the Years Ended April 30, 2010 and 2009 17 Statements of Cash Flows For the Years Ended April 30, 2010 and 2009 19 Notes to Financial Statements 21 Page 11 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, 2010 and 2009, and the related statements of income, comprehensive income, stockholders' equity, and cash flows for the two years then ended. 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 auditing 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, 2010 and 2009, and the results of their operations and their cash flows for the two years then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ Haynie & Company Littleton, Colorado July 28, 2010
George Risk Industries, Inc. Balance Sheets April 30, 2010 and 2009 2010 2009 ASSETS Current Assets Cash and cash equivalents $ 3,641,000 $ 4,671,000 Investments and securities 19,607,000 15,691,000 Accounts receivable: Trade, net of $19,700 and $7,492 doubtful account allowance for 2010 and 2009 1,295,000 1,272,000 Other 0 1,000 Note receivable, current 11,000 3,000 Income tax overpayment 216,000 137,000 Inventories 1,968,000 2,741,000 Prepaid expenses 142,000 81,000 Deferred current income taxes 266,000 1,127,000 ____________ ___________ Total Current Assets $ 27,146,000 25,724,000 Property and Equipment, net, at cost 733,000 802,000 Other Assets Investment in Limited Land Partnership, at cost 200,000 200,000 Projects in process 112,000 68,000 Long-term receivable 0 40,000 Note receivable 7,000 9,000 ____________ ____________ Total Other Assets $ 319,000 $ 317,000 TOTAL ASSETS $ 28,198,000 $ 26,843,000 ____________ ___________ ____________ ___________ See accompanying notes to financial statements. Page 13
George Risk Industries, Inc. Balance Sheets As of April 30, 2010 and 2009 Liabilities and Stockholders' Equity 2010 2009 Current Liabilities Accounts payable, trade $ 57,000 $ 35,000 Dividends payable 395,000 317,000 Accrued expenses: Payroll and related expenses 198,000 306,000 __________ ___________ Total Current Liabilities $ 650,000 $ 658,000 Long-Term Liabilities Aircraft ownership deposit payable 5,000 0 Deferred income taxes 75,000 86,000 ___________ ___________ Total Long-Term Liabilities $ 80,000 $ 86,000 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, 8,502,832 shares issued and outstanding 850,000 850,000 Additional paid-in capital 1,736,000 1,736,000 Accumulated other comprehensive income 13,000 (940,000) Retained earnings 28,102,000 27,423,000 Less: treasury stock,3,438,352 and 3,376,548 shares, at cost (3,332,000) (3,069,000) ___________ ___________ Total Stockholders' Equity $27,468,000 $26,099,000 ___________ ___________ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $28,198,000 $26,843,000 ___________ ___________ ___________ ___________
See accompanying notes to financial statements. Page 14
George Risk Industries, Inc. Income Statements For the Years Ended April 30, 2010 and 2009 Year Year Ended Ended Apr 30,2010 Apr 30, 2009 ___________ ____________ Net Sales $ 7,821,000 $ 8,822,000 Less: Cost of Goods Sold (4,324,000) (4,646,000) ___________ ___________ Gross Profit $ 3,497,000 $ 4,176,000 Operating Expenses: General and Administrative 719,000 748,000 Sales 1,575,000 1,813,000 Engineering 63,000 79,000 Rent Paid to Related Parties 46,000 51,000 ___________ ___________ Total Operating Expenses $ 2,403,000 $ 2,691,000 Income From Operations 1,094,000 1,485,000 Other Income (Expense) Other Income 142,000 58,000 Interest expense 0 (2,000) Dividend and Interest Income 712,000 768,000 Gain (Loss) on Investments 277,000 (1,374,000) Gain on Sale of Assets 7,000 0 ___________ ___________ $ 1,138,000 $ (550,000) Income Before Provision for Income Taxes 2,232,000 935,000 Provision for Income Taxes Current Expense 525,000 661,000 Deferred tax (benefit) expense 165,000 (242,000) ___________ ___________ Total Income Tax Expense 690,000 419,000 Net Income $ 1,542,000 $ 516,000 Basic and Diluted Earnings Per Share of Common Stock $ 0.30 $ 0.10 Weighted Average Number of Common Shares Outstanding 5,080,387 5,167,806
See accompanying notes to financial statements. Page 15
George Risk Industries, Inc. Statements of Comprehensive Income For the Years Ended April 30, 2010 and 2009 Year Year Ended Ended Apr 30,2010 Apr 30, 2009 ___________ ____________ Net Income $1,542,000 $ 516,000 __________ ___________ Other Comprehensive Income, Net of Tax Unrealized gain (loss) on securities: Unrealized holding gains (losses) arising during period 1,906,000 (2,740,000) Less: reclassification adjustment for (gains) losses included in net income (268,000) 1,239,000 Income tax expense related to other comprehensive income (685,000) 627,000 __________ __________ Other Comprehensive Income 953,000 (874,000) Comprehensive Income (Loss) $2,495,000 $ (358,000) __________ __________ __________ __________
See accompanying notes to financial statements. Page 16
George Risk Industries, Inc. Statement of Changes in Stockholders' Equity For the Years Ended April 30, 2010 and 2009 Common Stock Preferred Stock Class A ________________ ____________ Shares Amount Shares Amount Balances, April 30, 2008 4,100 $99,000 8,502,832 $850,000 Purchases of common stock - - - - Dividend declared at $0.17 per common share outstanding - - - - Unrealized gain (loss), net of tax effect - - - - Net Income - - - - ________ ________ _________ ________ Balances, April 30, 2009 4,100 99,000 8,502,832 850,000 ________ ________ _________ ________ Purchases of common stock - - - - Dividend declared at $0.17 per common share outstanding - - - - Unrealized gain (loss), net of tax effect - - - - Net Income - - - - ________ ________ _________ ________ Balances, April 30, 2010 4,100 $ 99,000 8,502,832 $850,000 ________ ________ _________ ________ ________ ________ _________ ________
See accompanying notes to financial statements. Page 17
George Risk Industries, Inc. Statement of Changes in Stockholders' Equity For the Years Ended April 30, 2010 and 2009 Accumulated Treasury Stock Other Paid-In (Common Class A) Comprehensive Retained ______________ Capital Shares Amount Income Earnings Total $1,736,000 3,326,551 $(2,898,000) $ (67,000) $27,787,000 $27,507,000 - 49,997 (171,000) - - (171,000) - - - - (880,000) (880,000) - - - (873,000) - (873,000) - - - - 516,000 516,000 __________ _________ ___________ ___________ ___________ ___________ 1,736,000 3,376,548 (3,069,000) (940,000) 27,423,000 26,099,000 __________ _________ ___________ ___________ ___________ ___________ - 61,804 (263,000) - - (263,000) - - - - (863,000) (863,000) - - - 953,000 - 953,000 - - - - 1,542,000 1,542,000 __________ _________ ___________ ___________ ___________ ___________ $1,736,000 3,483,352 $(3,332,000) $ 13,000 $28,102,000 $27,468,000 __________ _________ ___________ ___________ ___________ ___________ __________ _________ ___________ ___________ ___________ ___________
See accompanying notes to financial statements. Page 18
George Risk Industries, Inc. Statements of Cash Flows Year Year Ended Ended Apr 30,2010 Apr 30, 2009 ___________ ____________ Cash Flows from Operating Activities: Net income $1,542,000 $ 516,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 167,000 173,000 (Gain) loss on sale of investments (277,000) 1,376,000 (Gain) loss on sale of property and equipment (7,000) 0 Bad debt expense 22,000 (43,000) Reserve for obsolete inventory 41,000 24,000 Deferred income taxes 165,000 (242,000) Changes in assets and liabilities: (Increase) decrease in: Accounts receivable (5,000) 299,000 Inventories 732,000 336,000 Prepaid expenses (62,000) 22,000 Employee receivables 1,000 0 Income tax overpayment (79,000) 334,000 Increase (decrease) in: Accounts payable 22,000 (32,000) Accrued expenses (108,000) (15,000) __________ __________ Net cash provided by (used in) operating activities $2,154,000 $ 2,748,000 __________ __________ Cash Flows From Investing Activities: Other assets manufactured and purchased (44,000) 0 (Purchase) of property and equipment (98,000) (143,000) Proceeds from sale of marketable securities 747,000 260,000 (Purchase) of marketable securities (2,748,000) (1,296,000) (Loans) made to employees (5,000) 0 Collections of loans to employees 7,000 3,000 (Purchase) of treasury stock (263,000) (171,000) __________ __________ Net cash provided by (used in) investing activities ($2,404,000) ($1,347,000) __________ __________ Cash Flows From Financing Activities: Increase in long-term debt 5,000 0 Dividends paid (785,000) (802,000) __________ __________ Net cash provided by (used in) financing activities ($780,000) ($802,000) __________ __________ Net Increase (Decrease) in Cash and Cash Equivalents $(1,030,000) $ 599,000 __________ __________ __________ __________ Cash and Cash Equivalents, beginning of period $ 4,671,000 $4,072,000 Cash and Cash Equivalents, end of period $ 3,641,000 $4,671,000 __________ __________ __________ __________ Supplemental Disclosure for Cash Flow Information: Cash Payments for: Income taxes paid $ 639,000 $ 325,000 Interest paid $ 0 $ 2,000 Cash receipts for income taxes $ 38,000 $ 0
See accompanying notes to financial statements Page 19 George Risk Industries, Inc. Notes to Financial Statements April 30, 2010 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 $19,700 for the year ended April 30, 2010 and $7,492 for the year ended April 30, 2009. Bad debt expense was $19,135 and $380 for April 30, 2010 and 2009, respectively. 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:
Useful Classification Life Cost in Years Dies, jigs, and molds 3-7 $1,198,000 Machinery and equipment 5-10 1,114,000 Furniture and fixtures 5-10 147,000 Leasehold improvements 5-32 174,000 Buildings 20 659,000 Automotive and aircraft 3-5 389,000 Software 2-5 129,000 Land N/A 13,000 __________ Total 3,823,000 Accumulated depreciation (3,090,000) __________ Net $ 733,000 __________ __________
Depreciation expense of $167,000 and $173,000 were charged to operations for the years ended April 30 2010 and 2009, 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 $334,000 and $320,000 for the years ended April 30 2010 and 2009, 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, 2010, 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 June 2009, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Codification ("ASC") 105, "Generally Accepted Accounting Principles." ASC 105 establishes the FASB ASC as the single source of authoritative nongovernmental U.S. GAAP. The standard is effective for interim and annual periods ending after September 15, 2009. We adopted the provisions of the standard on September 30, 2009. The adoption of the standard has changed how we reference various elements of GAAP when preparing our financial statement disclosures, but did not have an impact on George Risk Industries' financial position, results of operations or cash flows. 2. INVENTORIES Inventories at April 30, 2010 consisted of the following: Raw materials $1,335,000 Work in process 521,000 Finished goods 282,000 __________ 2,138,000 __________ Less: allowance for obsolete inventory (170,000) __________ Totals $1,968,000 __________ __________
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 June 2010 and June 2042. 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, 2010, investments available-for-sale consisted of the following: Gross Gross Cost Unrealized Unrealized Fair Basis Gains Losses Value Municipal bonds $ 9,336,000 $ 119,000 $ (119,000) $ 9,336,000 Federal agency mortgage backed securities $ 125,000 $ 3,000 $ 0 $ 128,000 Corporate bonds $ 180,000 $ 6,000 $ 0 $ 186,000 Equity securities $ 6,949,000 $ 424,000 $ (420,000) $ 6,953,000 Money Markets and CDs $ 2,996,000 $ 8,000 $ 0 $ 3,004,000 Total $19,586,000 $ 560,000 $ (539,000) $19,607,000
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 $108,000 for the year ended April 30, 2010 and $782,000 for the year ended April 30, 2009. 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, 2010. 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 $1,368,000 $ (20,000) $1,917,000 $ (99,000) $3,285,000 $ (119,000) Equity securities $1,806,000 $ (105,000) $2,012,000 $ (317,000) $3,818,000 $ (422,000) Total $3,174,000 $ (125,000) $3,929,000 $ (416,000) $7,103,000 $ (541,000)
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, 2010. 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, 2010. 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 $11,000 were paid during the fiscal year ending April 30, 2010 and approximately $12,000 of matching contributions were paid during the fiscal year April 30, 2009. Discretionary contributions of approximately $3,700 and $6,600 were paid during 2010 and 2009, respectively. 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, 2010. 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 27 During the fiscal year ended April 30, 2010, the Company purchased 61,804 shares of Class A common stock. Of those shares 43,100 were purchased by the Company actively seeking shares on the open market. A total of $188,230 was spent acquiring shares on the open market. 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, 2010 ___________________________________ Income Shares Per-Share (Numerator) (Denominator) Amount Net Income $1,542,000 __________ __________ Basic EPS $1,542,000 5,080,387 $.303 Effect of dilutive Convertible Preferred Stock - 20,500 (.001) __________ _________ _____ Diluted EPS $1,542,000 5,100,887 $.302 __________ _________ _____ __________ _________ _____
April 30, 2009 ___________________________________ Income Shares Per-Share (Numerator) (Denominator) Amount Net Income $ 516,000 __________ __________ Basic EPS $ 516,000 5,167,806 $.100 Effect of dilutive Convertible Preferred Stock - 20,500 (.001) __________ _________ _____ Diluted EPS $ 516,000 5,188,306 $.099 __________ _________ _____ __________ _________ _____
Page 28 7. COMMITMENTS, CONTINGENCIES, AND RELATED PARTY TRANSACTIONS The Company leases a building from Ken and Bonnie Risk. Ken Risk is the Chairman of the Board and the President and CEO of the company. Bonnie Risk is Ken's wife, is also 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, 2010 and 2009. The company also leases its airplane from President and CEO Ken Risk, who is also a majority stockholder, on a month-to-month basis requiring payments of $2,250. Airplane lease expenses charged to operations for the fiscal years ended April 30, 2010 and 2009, were $27,000 for each year. 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 newly purchased airplane and will continue the lease on the officer's ownership of the plane. 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 $3,354,000 for the year ended April 30, 2010 and $4,616,000 for the year ended April 30, 2009. The Company also received interest income from FirstTier Bank in the amount of $31,000 for the year ended April 30, 2010 and $100,000 for the year ended April 30,2009. Page 29 8. INCOME TAXES
Reconciliation of income taxes with Federal and State taxable income: 2010 2009 ____________ ____________ Income before income taxes $2,232,000 $ 935,000 State income tax deduction (102,000) (126,000) Capital loss carryforwards (utilized) accumulated (360,000) 0 Interest and dividend income (545,000) (537,000) Domestic production activities deduction (104,000) (98,000) Nondeductible expenses and timing differences 116,000 1,366,000 __________ __________ Taxable income $1,237,000 $1,540,000 __________ __________ __________ __________
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 $ 933,000 $ 391,000 Increase (decrease)income taxes resulting from: State income taxes (42,000) (53,000) Interest and dividend income (228,000) (225,000) Domestic production activities (43,000) (41,000) Deferred taxes 165,000 (242,000) Other temporary and permanent differences (95,000) 589,000 __________ __________ Income tax expense $ 690,000 $ 419,000 __________ __________ __________ __________ Federal Tax Rate 34.0% 34.0% State Tax Rate 7.8% 7.8% ____ ____ Blended statutory rate 41.8% 41.8% ____ ____ ____ ____
Deferred tax asset (liabilities) consist of the following components at April 30, 2010 and 2009: Deferred tax current assets: Capital loss carryforward $ 245,000 $ 420,000 Accrued vacation 30,000 31,000 Accumulated unrealized (gain)/loss on investments (9,000) 676,000 __________ __________ Net deferred tax assets $ 266,000 $1,127,000 __________ __________ __________ __________ Deferred tax liabilities: Depreciation (75,000) (86,000) __________ __________ Net deferred tax liability $ (75,000) $ (86,000) __________ __________ __________ __________
Page 30 9. BUSINESS SEGMENTS The following is financial information relating to industry segments:
April 30, 2010 2009 Net revenue: Security alarm products $ 6,922,000 $ 7,926,000 Other products 899,000 896,000 ___________ ___________ Total net revenue $ 7,821,000 $ 8,822,000 ___________ ___________ ___________ ___________ Income from operations: Security alarm products $ 968,000 $ 1,334,000 Other products 126,000 151,000 ___________ __________ Total income from operations $ 1,094,000 $ 1,485,000 ___________ ___________ ___________ ___________ Identifiable assets: Security alarm products $ 2,825,000 $ 3,435,000 Other products 1,029,000 1,185,000 Corporate general 24,344,000 22,223,000 ___________ ___________ Total assets $28,198,000 $26,843,000 ___________ ___________ ___________ ___________ Depreciation and amortization: Security alarm products $ 25,000 $ 28,000 Other products 112,000 113,000 Corporate general 30,000 32,000 ___________ ___________ Total depreciation and amortization $ 167,000 $ 173,000 ___________ ___________ ___________ ___________ Capital expenditures: Security alarm products $ 2,000 $ 3,000 Other products 76,000 108,000 Corporate general 20,000 32,000 ____________ ___________ Total capital expenditures $ 98,000 $ 143,000 ____________ ___________ ____________ ___________
Page 31 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, 2010 and 2009, the Company's had uninsured balances of $3,104,000 and $4,366,000, 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 44% of total sales for the year ended April 30, 2010 and 42% for the year ended April 30, 2009. This distributor accounted for 42% and 48% of accounts receivable at April 30, 2010 and 2009, respectively. Security switch sales made up 87% of the total sales for the fiscal year ended April 30, 2010 and 84% for the year ended April 30, 2009. 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. SFAS No. 157 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 SFAS No. 157 are described below: Level 1 Valuation is based upon quoted prices for identical instruments traded in active markets. Page 32 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, 2010, our investments consisted of 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 generally classified as Level 1 given the active market for these securities, however, if an active market does not exist, the inputs are recorded at a lower level in the fair value hierarchy. 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 SFAS No. 157, 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, 2010 Level 1 Level 2 Level 3 Total Assets: Marketable Securities $19,607,000 - - $19,607,000 Total fair value of assets measured on a recurring basis $19,607,000 - - $19,607,000
Page 33 Item 9 Disagreements on Accounting and Financial Disclosures There were no disagreements with accountants on accounting and financial disclosure. Item 9A(T) 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, 2010, our president and chief executive officer and our chief financial officer have 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 and 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. Changes in internal controls over financial reporting: There was no change in our internal controls over financial reporting that occurred during the period covered by this report, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. Management's Annual Report on Internal Control over Financial Reporting: Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide no reasonable assurance of achieving their control objectives. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management, including our principal executive officer and principal accounting officer, conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on its evaluation, our management concluded that as of April 30, 2010 our internal control over financial reporting is effective. Page 34 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 temporary rules of the SEC that permit the Corporation to provide only the management's report in this annual report. Item 9B Other Information None. Page 35 Part III Item 10 Directors and Executive Officers of the Registrant (a) 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 is furnished with respect to each director and executive officer:
Director or Name Principal Occupation or Employment Age Officer Since Ken R. Risk Chairman of the Board and President 62 April 25, 1977 Stephanie Risk Chief Financial Officer/Director 38 August 8, 1999 Sharon Westby Secretary/Treasurer 58 June 16, 2006 Jerry Andersen Director, retired 79 August 28, 1978 Donna Debowey Director, retired GRI plant manager 72 July 12, 2005 Joel H. Wiens Vice-Chairman, FirsTier Banks 80 September 6, 2007
The following director compensation table is furnished with respect to each director that served during the year ended April 30, 2010:
Name Director's Stock Option Non-equity Non-qualified Fees Paid Awards Awards incentive deferred plan compensation compensation earnings Total Ken Risk (1) -- -- -- -- -- -- 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
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 36 (b) Business Experience of Directors and Executive Officers Ken R. Risk, chairman of the board, president and director, worked with the company after he returned from naval service for several years. His duties included the position of plant manager, and helping in purchasing and sales aspects of the company. He left GRI in 1977 to start his own company, Platte Valley Sales, in Hastings, Nebraska. He returned to the company to assume the position of president and CEO in late 1989 after the death of his father, George Risk. Stephanie Risk, chief financial officer and controller, has over fifteen years job experience in the accounting field. 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. Sharon Westby, the corporate secretary, worked at GRI right after high school for a couple of years as the personal secretary to the then 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, entered medical records transcripts at the Kimball County Hospital in Kimball, NE, and was the manager of Motel Kimball in Kimball, NE. Her current duties at GRI include being the executive assistant to the President and CEO and sales administrator of the keyboard and switch division. 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. His position with the bank for many years was as loan officer and for the last four years he was put in charge of legal and compliance requirements. 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, head of quality control and she was named the plant manager and senior vice president in 1998 and held that position until her retirement in 2003. Joel H. Wiens, director, is an entrepreneur who has many business interests. A few of his many jobs include: vice-chairman and principal shareholder of FirsTier Banks Nebraska/Wyoming, chairman of FirsTier II BanCorporation (which owns FirsTier Bank Nebraska/Wyoming), vice-chairman and principal shareholder of FirsTier Banks Colorado, chairman of FirsTier BanCorp (which owns FirsTier Bank Colorado), chairman of Rite-A-Way Industries (lodging and hospitality industries), real estate investments, ranching and livestock, and insurance products. (c)Identification of Certain Significant Employees Ken R. Risk, Sharon Westby and Stephanie Risk are also employees of the company. (See Item 10 [b].) (d) Involvement in Certain Legal Proceedings None. Page 37 (e) Audit Committee Financial Expert The Company has no standing audit, nominating, or compensation committee, or any committee performing similar functions. 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, 2010 and 2009 (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 A. Risk, 2010 $76,000 $78,000 -- -- -- -- $2,000 $156,000 Chief Executive 2009 $74,000 $89,000 -- -- -- -- $2,000 $165,000 Officer
Ken R. Risk does not have an employment contract with the company. He receives a base salary and bonus/commission based on a percentage of sales for the year. Other compensation consists of a yearly discretionary match by the company, which includes the unused medical reimbursement funds from the prior year, and 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 38 Item 12 Security Ownership of Certain Beneficial Owners and Management Below is certain information concerning persons who are known by the company to own beneficially more than 5 percent of any class of the company's voting shares on April 30, 2010.
Title Name and Address Amount of Percent of of Beneficial Beneficial of Class Ownership Ownership Class Class Ken R. Risk 2,945,936 58.17% A Kimball, NE 69145
None of the directors or officers has the right to acquire any additional shares either directly or indirectly through any contracts or arrangements with other shareholders. Item 13 Certain Relationships and Related Party Transactions During each of three years ended April 30, 2010, 2009, and 2008, 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 2010 2009 2008 Airplane Lease Ken R. Risk, President and CEO $ 27,000 $ 27,000 $ 27,000 Building and Warehouse Leases/Rentals Eileen M. Risk, Mother of CEO $ 0 $ 3,400 $ 3,400 Eileen M. Risk, Mother of CEO $ 0 $ 2,400 $ 3,600 Eileen M. Risk, Mother of CEO $ 0 $ 0 $ 9,210 Ken R. Risk, President and CEO $ 18,420 $ 18,420 $ 9,210 Bank Balances Joel Wiens, Director $3,353,855 $4,616,381 $4,071,929 Interest Income Joel Wiens, Director $ 31,272 $ 99,826 $ 192,880
Page 38 Page 39 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 accountant for the audit of our annual financial statements and review of our financial statements for Form 10-QSB. The amounts are listed below: FYE 2010 $34,250 Haynie & Company FYE 2009 $32,500 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 2010 $ 5,500 Haynie & Company FYE 2009 $ 5,200 Haynie & Company 3) Tax Fees There were no aggregate fees or expenses incurred for professional services rendered by the principal accountants for tax compliance, tax advice, and tax planning for the last two fiscal years. 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 40 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 31.1 Certification pursuant to Rule 13a-14(a) of the Chief Executive Officer 31.2 Certification pursuant to Rule 13a-14(a) of the Chief Financial Officer 32.1 Certification pursuant to 18 U.S.C. 1350 of the Chief Executive Officer 32.2 Certification pursuant to 18 U.S.C. 1350 of the Chief Financial Officer Page 41 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/ Ken R. Risk Date Ken R. Risk, President and Chairman of the Board July 29, 2010 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/ Ken R. Risk President and Date Ken R. Risk Chairman of the Board July 29, 2010 /s/ Stephanie M. Risk Chief Financial Officer Date Stephanie M. Risk and Controller July 29, 2010 /s/ Jerry Andersen Director Date Jerry Andersen July 29, 2010 /s/ Joel H. Wiens Director Date Joel H. Wiens July 29, 2010 /s/ Donna Debowey Director Date Donna Debowey July 29, 2010 Page 42