U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2005
______________
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File Number: 0-5378
______
George Risk Industries, Inc.
____________________________
(Name of small business issuer 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)
Check whether the issuer (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 [ ]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [X]
State issuer's revenues for the most recent fiscal year. $ 13,113,000.
__________
The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of August 9, 2005 was approximately $13,458,000 based upon
the last reported sale, which occurred on August 8, 2005. For purposes of
this disclosure, Common Stock held by officers and directors of the Registrant
have been excluded in that such persons may be deemed to be "affiliates"
as that term is defined under the rules and regulations promulgated under
the Securities Act of 1933. This determination is not necessarily conclusive.
The number of shares of the Registrant's Common Stock outstanding as of
August 9, 2005 was 5,387,253.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Transitional Small Business Disclosure Format (Check one)
Yes X; No ___
Part I
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.
GRI Telemark Corporation (Telemark), a majority owned subsidiary, was
incorporated in October 1983 for the purpose of marketing security alarm
products. As of April 13, 1993, Telemark was merged into GRI and presently
operates as a marketing division of GRI.
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.
The security burglar alarm products comprise approximately 85 percent and pool
alarms comprise 9 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 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.
The keyboard segment has approximately 760 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 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 205 employees.
Item 2 PROPERTIES
The company owns the manufacturing and office facilities. The manufacturing
facilities were expanded by 7,200 square feet six years ago. 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
Eileen Risk, mother of Ken R. Risk, who is an officer and 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 leases approximately 3,600 square feet and
currently employs 48 employees at the Gering site.
Item 3 LEGAL PROCEEDINGS
None.
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Part II
Item 5 Market for the Registrant's Common Equity and Related Stockholders'
Matter
PRINCIPAL MARKET
The company's Class A Common Stock is currently quoted on the OTC Bulletin
Board by thirteen market makers.
STOCK PRICES AND DIVIDENDS INFORMATION
2005 Fiscal Year High Low
May 1-July 31 6.30 5.01
August 1-October 31 6.30 5.40
November 1-January 31 6.50 5.75
February 1-April 30 6.25 5.60
2004 Fiscal Year High Low
May 1-July 31 3.45 2.30
August 1-October 31 4.15 2.90
November 1-January 31 7.20 3.80
February 1-April 30 6.25 5.35
A dividend of $0.10 per common share was declared on September 30, 2004.
This is the first dividend that has ever been paid by the Company. With
the practices and procedures that have been developed, we hope to be able
to continue paying dividends on an annual basis.
The number of holders of record of the company's Class A Common Stock as
of April 30, 2005, was approximately 1,465.
Item 6 Management's Discussion and Analysis of Financial Condition and
Results of Operations
GRI completed the fiscal year ending April 30, 2005,with a net profit of
19.2% net of sales. Net sales were at $13,113,000, up 2.6% over the
previous year. Additionally, net income for the year ended April 30, 2005
was $2,515,000, up 4.3% from the prior year.
We expect sales to stay steady and hopefully increase for the fiscal year
ending April 30, 2006. We have several new products that are ready and being
sold. 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. We have had some problems with the ability to get product out
our doors on a timely basis, but we have taken steps to remedy this problem.
We have purchased a building in Gering, NE, our satellite location, in an
effort to be able to increase production. We have also applied and have
gotten approval from the State of Nebraska to receive grant money. This grant
money is contingent on increasing the number of workers at our Gering
location over the next five years.
The material and labor costs stayed very consistent between this year and last
year. At fiscal year end 2005 the material and labor percentage was at 36.7%
of gross sales while the same percentage for fiscal year 2004 was at 37.1%.
We continue to buy smart and we are always looking for quality material at the
best possible price. As far as labor goes, we only hire the number of
production workers that is needed to finish products in a timely matter and
we work very hard at keeping overtime expense down. With these good practices
embedded throughout, we expect to continue to achieve a gross profit margin of
about 50 percent for the coming year.
At April 30, 2005, working capital increased by 10.7% in comparison to the
previous fiscal year. Liquidity has dropped slightly this year as the ratio
of cash, securities and accounts receivables to current obligations was 30.569
and 41.029 for the fiscal years ending April 30, 2005 and April 30, 2004,
respectively. Current assets have increased as current liabilities have also
increased. At April 30, 2005, the only long-term liability that we have on
the books is deferred income tax of $61,000.
As for new products, the sash magnet and single gang box for the E-Z Duct
Raceway products line are out of Tool and Die and are ready for production.
Mold work continues on the new, short Roller Ball. This will replace both the
DS-01 and RB-01 series of switches. Prototype boards have been ordered for the
new version of the Pool Alarm. It will be submitted for ETL approval. The
Normally Closed Glassbreak sample boards are on order. Also, the Normally
Closed relays for the T8800 are in house. Production boards have also been
ordered for the High Security Switch to be submitted for UL approvals after
they are completed. There continues to be favorable interest on the
Magnasphere technology switches. Orders are increasing on a weekly basis as
the word gets out into the industry that we have them available.
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.
Item 7 Financial Statements
Index to Financial Statements
George Risk Industries, Inc.
Page
Independent Auditor's Report .............................................. 9
Balance Sheet-April 30, 2005 ............................................. 10
Statements of Income
For the Years Ended April 30, 2005 and 2004 ....................... 11
Statements of Comprehensive Income
For the Years Ended April 30, 2005 and 2004 ....................... 12
Statement of Changes in Stockholders' Equity
For the Years Ended April 30, 2005 and 2004 ....................... 13
Statements of Cash Flows
For the Years Ended April 30, 2005 and 2004 ....................... 14
Notes to Financial Statements ............................................. 15
Report of Independent Registered Public Accounting Firm
Board of Directors
George Risk Industries, Inc.
Kimball, Nebraska
We have audited the accompanying balance sheet of George Risk Industries, Inc.
as of April 30, 2005, 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 audit.
We conducted our audit 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. 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 audit provides 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, 2005, 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/ Mason Russell West, LLC
Littleton, Colorado
July 15, 2005
George Risk Industries, Inc.
Balance Sheet
April 30, 2004
Assets
Current Assets:
Cash and cash equivalents $ 5,451,000
Marketable securities 11,750,000
Accounts receivable:
Trade, net of allowance for doubtful
accounts of $50,000 2,241,000
Other 2,000
Inventories 2,054,000
Prepaid expenses 57,000
Deferred tax asset 164,000
___________
Total Current Assets 21,719,000
___________
Property and Equipment, net, at cost 786,000
___________
Other Assets
Investment in Land Limited Partnership, at cost 200,000
Projects in process 34,000
Other 12,000
___________
Total Other Assets 246,000
___________
Total Assets $22,751,000
___________
___________
See accompanying notes to financial statements
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable-trade $ 138,000
Dividends payable 50,000
Accrued expenses:
Payroll and related expenses 347,000
Income tax payable 101,000
___________
Total Current Liabilities 636,000
___________
Long-term Liabilities:
Deferred tax liability 61,000
Commitments and Contingencies -
___________
Total Long-Term Liabilities 61,000
___________
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
Common stock, Class A, $.10 par value, 10,000,000
shares authorized, 8,502,832 shares issued 850,000
Additional paid-in capital 1,736,000
Accumulated other comprehensive income (881,000)
Retained earnings 22,054,000
Treasury stock, 3,109,379 shares, at cost (1,804,000)
___________
Total Stockholders' Equity 22,054,000
___________
Total Liabilities and Stockholders' Equity $22,751,000
___________
___________
George Risk Industries, Inc.
Statements of Income
For the Years Ended April 30, 2005 and 2004
2005 2004
Net Sales $13,113,000 $12,783,000
Less cost of goods sold 6,230,000 6,190,000
___________ ___________
Gross Profit 6,883,000 6,593,000
Operating Expenses:
Selling and shipping 2,403,000 2,351,000
General and administrative 719,000 693,000
Engineering and research 75,000 71,000
Rent expense paid to
related parties 49,000 49,000
___________ ___________
Total Operating Expenses 3,246,000 3,164,000
___________ ___________
Income From Operations 3,637,000 3,429,000
Other Income (Expense):
Other income 2,000 79,000
Dividend and interest income 357,000 348,000
Gain/(loss) on sale of assets (89,000) 40,000
___________ ___________
Total Other Income 270,000 467,000
Income Before Provision for Income
Taxes 3,907,000 3,896,000
Provision for Income Taxes:
Current expense 1,428,000 1,439,000
Deferred tax (benefit) expense (36,000) 46,000
___________ ___________
Total Income Taxes Expense 1,392,000 1,485,000
___________ ___________
Net Income $ 2,515,000 $ 2,411,000
___________ ___________
___________ ___________
Income per Share of Common Stock $ 0.47 $ 0.45
___________ ___________
___________ ___________
Weighted Average Number of Common
Shares Outstanding 5,399,982 5,402,528
___________ ___________
___________ ___________
See accompanying notes to financial statements
George Risk Industries, Inc.
Statements of Comprehensive Income
April 30, 2005
For the Years Ended April 30,
2005 2004
Net Income $2,515,000 $ 2,411,000
__________ __________
Other Comprehensive Income, Net of Tax
Unrealized loss on securities:
Unrealized holding gains (losses)
arising during period 30,000 484,000
Reclassification adjustment for
(gains) losses included in net income 88,000 (37,000)
Income tax related to other
comprehensive income (49,000) (187,000)
__________ __________
Other Comprehensive Income (Loss) 69,000 260,000
__________ __________
Comprehensive Income $2,584,000 $2,671,000
__________ __________
__________ __________
See accompanying notes to financial statements
George Risk Industries, Inc.
Statement of Changes in Stockholders' Equity
For the Years Ended April 30, 2005 and 2004
Common Stock
Preferred Stock Class A
Shares Amount Shares Amount
Balances, April 30,
2003 5,350 $107,000 8,502,832 $850,000
Unrealized gain (loss) - - - -
Net Income - - - -
________ ________ _________ ________
Balances, April 30,
2004 5,350 107,000 8,502,832 850,000
________ ________ _________ ________
Purchase of preferred
stock (1,250) (8,000) - -
Purchases of common
stock - - - -
Dividend declared at
$0.10 per common
share outstanding - - - -
Unrealized gain (loss) - - - -
Net Income - - - -
________ ________ _________ ________
Balances, April 30,
2005 4,100 $ 99,000 8,502,832 $850,000
________ ________ _________ ________
________ ________ _________ ________
See accompanying notes to financial statements
Accumulated
Treasury Stock Other
Paid-In (Common Class A) Comprehensive Retained
Capital Shares Amount Income Earnings Total
$1,736,000 3,100,304 $(1,763,000) $(1,395,000) $17,668,000 $17,203,000
- - - 484,000 - 484,000
- - - - 2,411,000 2,411,000
__________ _________ ___________ ___________ ___________ ___________
1,736,000 3,100,304 (1,763,000) (911,000) 20,079,000 20,098,000
__________ _________ ___________ ___________ ___________ ___________
- - - - - (8,000)
- 9,075 (41,000) - - (41,000)
- - - - (540,000) (540,000)
- - - 30,000 - 30,000
- - - - 2,515,000 2,515,000
__________ _________ ___________ ___________ ___________ ___________
$1,736,000 3,109,379 $(1,804,000) $ (881,000) $22,054,000 $22,054,000
__________ _________ ___________ ___________ ___________ ___________
__________ _________ ___________ ___________ ___________ ___________
George Risk Industries, Inc.
Statements of Cash Flows
For the Years Ended April 30, 2005 and 2004
2005 2004
Cash Flows from Operating Activities:
Net income $2,515,000 $2,411,000
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 206,000 235,000
(Gain) loss on sale of investments 88,000 (37,000)
Economic development debt relieved - (75,000)
Gain on sale of assets - (3,000)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (506,000) (181,000)
Inventories 326,000 50,000
Prepaid expenses (12,000) 75,000
Other receivables 3,000 (3,000)
Income tax overpayment - (59,000)
Deferred income taxes (36,000) 46,000
Increase (decrease) in:
Accounts payable 46,000 (37,000)
Accrued expenses 34,000 28,000
Income tax liability 230,000 -
__________ __________
Net cash provided(used)by
operating activities 2,894,000 2,450,000
__________ __________
Cash Flows From Investing Activities:
Proceeds from sale of assets - 12,000
Other assets manufactured 15,000 34,000
Purchase of property and equipment (158,000) (191,000)
Proceeds from sale of marketable
securities 4,290,000 1,003,000
Purchase of marketable securities (5,331,000) (1,567,000)
Purchase of preferred stock (8,000) -
Purchase of treasury stock (41,000) -
__________ __________
Net cash provided(used) by
investing activities (1,233,000) (709,000)
__________ __________
Cash Flows From Financing Activities:
Principal payments on long-term debt - (160,000)
Dividends paid (490,000) -
__________ __________
Net cash provided (used) by
financing activities (490,000) (160,000)
__________ __________
Net Increase (Decrease) in Cash and
Cash Equivalents 1,171,000 1,581,000
Cash and Cash Equivalents, beginning
of year 4,280,000 2,699,000
__________ __________
Cash and Cash Equivalents, end of year $5,451,000 $4,280,000
__________ __________
__________ __________
Supplemental Disclosure of Cash
Flow Information:
Cash payments for:
Income taxes $1,384,000 $1,568,000
__________ __________
__________ __________
See accompanying notes to financial statements
GEORGE RISK INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2005
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.
At April 30, 1993, the financial statements of the company, George Risk
Industries, Inc. (GRI), and its majority-owned subsidiaries, GRI Telemark
Corp. (Telemark), and R&D Labs were consolidated. Effective April 30, 1993,
the company acquired the entire minority interest in Telemark by issuing
22,160 shares of its Class A common stock and merged Telemark into GRI.
Telemark continues to operate as a marketing division of GRI.
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. As of April 30, 2005 and 2004, the
company has recorded an allowance for doubtful accounts of $50,000 for the
years ended 2004 and 2003, respectively. Bad debt expense was $8,000 and
$11,000 for April 30, 2005 and 2004, 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.
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 $ 792,000
Machinery and equipment 5-10 1,011,000
Furniture and fixtures 5-10 129,000
Leasehold improvements 5-32 170,000
Buildings 20 492,000
Automotive and aircraft 3-5 329,000
Software 2-5 123,000
Land N/A 13,000
__________
Total 3,059,000
Accumulated depreciation (2,273,000)
__________
Net $ 786,000
__________
__________
Depreciation expense of $206,000 and $235,000 were charged to operations for
the years ended April 30, 2005 and 2004, 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 $310,000 and $378,000 for
the years ended April 30, 2005 and 2004, respectively.
Income Taxes-The company has adopted the provisions of the SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 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.
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, accounts receivable and accounts payable. The carrying values
of cash and cash equivalents, accounts receivable and accounts payable
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.
Benefit Plan Disclosures-SFAS No. 132, Employer's Disclosures about Pension
and other Post Retirement Benefits ("SFAS No. 132"), requires certain
disclosures about employers' pension and other post retirement benefit plans
and specifies the accounting and measurement or recognition of those plans.
SFAS No. 132 requires disclosure of information on changes in the benefit
obligations and fair values of the plan assets that facilitates financial
analysis. Please see Note 4 for further disclosure in accordance with SFAS
No. 132.
Comprehensive Income-In the first quarter of fiscal 1999, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income". SFAS 130 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 discloses the results of
its segments in accordance with SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information ("SFAS No. 131"). The Company designated
the internal organization that is used by management for allocating resources
and assessing performance as the source of the Company's reportable segments.
SFAS No. 131 also requires disclosures about products and services, geographic
area and major customers. At April 30, 2005, the Company operated in three
segments organized by service line: pool alarm products, keyboard products,
and security alarm and other products. See Note 9 for further segment
information disclosures in accordance with SFAS No. 131.
Recently Issued Accounting Pronouncements-In November 2004, the FASB issued
SFAS No. 151, Inventory Costs - an Amendment of ARB No. 43, Chapter 4, which
amends the guidance in ARB No. 43 to clarity the accounting for abnormal
amounts of idle facility expense, freight, handling costs and wasted material.
SFAS No. 151 requires that these items be recognized as current period
charges.In addition, SFAS No. 151 requires the allocation of fixed production
overheads to inventory based on the normal capacity of the production
facilities. SFAS No. 151 is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. The Company is currently
evaluating the provisions of SFAS No. 151 and expects to adopt the provisions
of SFAS No. 151 as of May 1, 2006.
In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment. SFAS
123R revises SFAS No. 123, Accounting for Stock-Based Compensation, and
focuses on accounting for share-based payments for services by employer to
employee. The statement requires companies to expense the fair value of
employee stock options and other equity-based compensation at the grant date.
The statement does not require a certain type of valuation model and either a
binomial or Black-Scholes model may be used. The provisions of SFAS 123R are
effective for financial statements for annual or interim periods beginning
after June 15, 2005. The Company does not currently have a stock option plan
in place. Therefore, adoption of SFAS 123R is not expected to have an impact
on the Company's operating results.
In December 2004, the FASB issued FASB Staff Position No. 109-1 ("FSP 109-1"),
Application of FASB Statement No. 109, "Accounting for Income Taxes"("SFAS No.
109") to the Tax Deduction on Qualified Production Activities Provided by the
American Jobs Creation Act of 2004, which provides guidance on the recently
enacted American Jobs Creation Act of 2004 (the "Act"). The Act provides a tax
deduction for income from qualified domestic production activities. FSP 109-1
provides for the treatment of the deduction as a special deduction as described
in SFAS No. 109. As such, the deduction will have no effect on existing
deferred tax assets and liabilities. The impact of the deduction is to be
reported in the period in which the deduction is claimed on the Company's U.S.
tax return. The Company does not expect that this deduction will have a
material impact on our effective tax rate in future years. FSP 109-1 is
effective prospectively as of January 1, 2005.
2. INVENTORIES
Inventories at April 30, 2005 consisted of the following:
Raw materials $1,492,000
Work in process 452,000
Finished goods 180,000
__________
2,124,000
__________
Less allowance for obsolete inventory (70,000)
__________
Totals $2,054,000
__________
__________
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. Realized
gains and losses are determined on the average cost basis, and included in the
Company's statement of income. Unrealized gains and losses are excluded from
earnings and reported separately as a component of stockholders' equity.
Dividend and interest income are accrued as earned.
Marketable equity securities and related unrealized gains and losses consist
of the following as of April 30, 2005:
Cost basis $12,531,000
Market value 11,650,000
___________
Net unrealized gains (losses) $ (881,000)
___________
___________
Gross unrealized gain $ 319,000
___________
___________
Gross unrealized loss $(1,200,000)
___________
___________
In accordance with SFAS 115, if the Company determines that a marketable
security has an other-than temporary decline in fair value, generally defined
as when the cost basis exceeds the fair value for approximately one year. When
this happens the Company will decrease the cost of the marketable security to
the new fair value and recognize a realized loss. The investments are
periodically evaluated to determine if impairment changes are required.
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. Eligible employees cannot participate in the
Plan until 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 $16,000 were paid during each fiscal year ending
April 30, 2005 and 2004. Discretionary contributions of approximately $5,000
and $8,000 were paid during 2005 and 2004, 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, 2005.
During the year ended April 30, 2000, the Company purchased and retired 7,500
preferred shares for $167,000.
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.
In April 2001, the Company received 190,000 shares of GRI common stock that had
been held by a bank as collateral for a loan that had been paid several years
prior. The loan was made by GRI/FKI Trust (Trust) and the shares were owned by
the Trust. In April 2002, the Trust and the Company agreed that the Company
would pay a total of $160,000 in six month installments of $40,000 on June 1
and December 1 in 2002 and 2003. At April 30, 2004 the liability was paid.
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, 2005
___________________________________
Income Shares Per-Share
(Numerator) (Denominator) Amount
Net Income $2,515,000
__________
__________
Basic EPS $2,515,000 5,393,453 $.466
Effect of dilutive
Convertible Preferred
Stock - 20,500 .001
__________ _________ _____
Diluted EPS $2,515,000 5,413,953 $.465
__________ _________ _____
__________ _________ _____
April 30, 2004
___________________________________
Income Shares Per-Share
(Numerator) (Denominator) Amount
Net Income $2,411,000
__________
__________
Basic EPS $2,411,000 5,402,528 $.446
Effect of dilutive
Convertible Preferred
Stock - 26,750 (.002)
__________ _________ _____
Diluted EPS $2,411,000 5,429,278 $.444
__________ _________ _____
__________ _________ _____
7. Commitments, Contingencies, and Related Party Transactions
Leases-The Company leases a duplex and office space from secretary/treasurer of
the company. One half of the duplex is for storage of materials and accounting
records. The other half of the duplex is rented out as housing to an independent
third party at a rate of $325 per month. This lease requires an annual payment
of $3,400 due each July 1 and payments of $300 on a month-to-month basis to the
secretary/treasurer.
The office space leased from the secretary/treasurer 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.
Total lease expense under the above two arrangements for the fiscal years ended
April 30, 2005 and 2004, was $25,000 for each year.
The company leases an airplane from the President/CEO, 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, 2005
and 2004, 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.
8. Income Taxes
2005
Federal State
____________ ____________
Income before income taxes $3,907,000 $3,907,000
State income tax deduction (277,000) (277,000)
Capital loss carryforward 88,000 88,000
Nontaxable income (185,000) (185,000)
Nondeductible expenses
and timing differences 2,000 2,000
__________ __________
Taxable income $3,535,000 $3,535,000
__________ __________
__________ __________
Income tax - net of credits $1,150,000 $ 277,000
__________ __________
__________ __________
Tax rate to taxable income 34% 7.8%
___________ ___________
___________ ___________
2004
Federal State
____________ ____________
Income before taxes $3,896,000 $3,896,000
State income tax deduction (268,000) (268,000)
Capital loss carryforward applied (37,000) (37,000)
Nontaxable income (78,000) (78,000)
Nondeductible expenses
and timing differences (69,000) (69,000)
__________ __________
Taxable income $3,444,000 $3,444,000
__________ __________
__________ __________
Income tax - net of credits $1,171,000 $ 268,000
__________ __________
__________ __________
Tax rate to taxable income 34.0% 7.8%
___________ ___________
___________ ___________
Deferred tax asset (liability) consist of the following
components at April 30, 2005 and 2004:
2005 2004
_________ ________
Deferred tax current assets:
Accrued expenses and allowances
Capital Loss carry forward $134,000 $ 94,000
Accrued vacation 30,000 -
________ ________
Net deferred tax assets $164,000 $ 94,000
________ ________
________ ________
Deferred tax liabilities:
Depreciation $(61,000) $(27,000)
________ ________
Net deferred tax liability $(61,000) $(27,000)
________ ________
________ ________
9. Business Segments
The following is financial information relating to industry
segments:
April 30,
2005 2004
Net revenue:
Pool alarm products $1,137,000 $ 1,132,000
Keyboard and other products 586,000 616,000
Security alarm products 11,390,000 11,035,000
___________ ___________
Total net revenue $13,113,000 $12,783,000
___________ ___________
___________ ___________
Income from operations:
Pool alarm products $ 315,000 $ 304,000
Keyboard and other products 163,000 165,000
Security alarm products 3,159,000 2,960,000
___________ __________
Total income from operations $ 3,637,000 $ 3,429,000
___________ ___________
___________ ___________
Identifiable assets:
Pool alarm products $ 330,000 $ 275,000
Keyboard and other products 220,000 285,000
Security alarm products 4,202,000 4,025,000
Corporate general 15,949,000 15,949,000
___________ ___________
Total assets $22,751,000 $20,534,000
___________ ___________
___________ ___________
Depreciation and amortization:
Pool alarm products $ 10,000 $ 6,000
Keyboard and other products 0 4,000
Security alarm products 121,000 143,000
Corporate general 75,000 81,000
___________ ___________
Total depreciation and
amortization $ 206,000 $ 234,000
___________ ___________
___________ ___________
Capital expenditures:
Pool alarm products $ 43,000 $ 1,000
Keyboard and other products 0 0
Security alarm and other products 90,000 123,000
Corporate general 25,000 58,000
____________ ___________
Total capital expenditures $ 158,000 $ 182,000
____________ ___________
____________ ___________
10. Concentrations of Credit Risk
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 $100,000. For the years ended April 30, 2005
and 2004, the Company had uninsured balances of $4,952,000, and $3,786,000,
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 group of security alarm distributors representing 40%
of total sales for the year ended April 30, 2005 and 36% of accounts receivable
at April 30, 2005.
Item 8 Disagreements on Accounting and Financial Disclosures
There were no disagreements with accountants on accounting and financial
disclosure.
Item 8A Controls and Procedures
When evaluating the effectiveness of the Company's "disclosure controls and
procedures" (as defined in the Securities Exchange Act of 1934 (Exchange Act)
Rules 13a-15(e) or 15d-15(e)), our Chief Executive Officer and our Chief
Financial Officer, as of the end of the period covered by this annual report,
have concluded that the disclosure controls and procedures are effective. This
is based on the evaluation of these controls and procedures as required by
paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.
Furthermore, there were no changes in the Company's internal control over
financial reporting that occurred during the most recent fiscal quarter (the
fourth fiscal quarter in the case of this annual report) that has materially
affected, or is reasonably likely to materially affect, internal control over
financial reporting.
Part III
Item 9 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 as of April 30, 2005, 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 57 1976
Eileen M. Risk Secretary/Treasurer 87 1976
Mary Ann Brothers Executive Vice President 65 1984
Stephanie Risk Chief Financial Officer/Controller 33 1999
Jerry Andersen Director, retired 74 1978
Michael J. Nelson Chairman, Nebraska Region, FirsTier Banks 64 1992
(b) Business Experience of Directors and Executive Officers
Ken R. Risk and Eileen M. Risk, executive officers listed above, have served
in various executive capacities with the company over the past fifteen years.
Ken R. Risk, chairman of the board, president and director, worked with the
company after he returned from naval service for several years. 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. He moved to Kimball, Nebraska
in 1997.
Mary Ann Brothers was controller of the company for five years and also served
as executive vice president and general manager prior to becoming president of
GRI Telemark Corporation. She became executive vice president when Telemark
was merged with GRI in 1993.
Jerry Andersen, director, worked in the banking industry from 1967 until his
retirement in August 2000.
Michael J. Nelson, director, has worked in the banking business since 1963 and
was the president of the First State Bank in Kimball, Nebraska until 2001. He
is currently chairman of FirsTier Banks in Kimball, Nebraska.
Stephanie Risk, chief financial officer and controller, has ten years'
experience in the accounting field. Stephanie also worked for the family
business (Platte Valley Sales) during and after college 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.
(c) Identification of Certain Significant Employees
Ken R. Risk, Mary Ann Brothers and Stephanie Risk are also employees of the
company. (See Item 9 [b].)
(d) Involvement in Certain Legal Proceedings
None.
Item 10 Executive Compensation
The following table sets forth certain information regarding the compensation
paid or accrued by the company to or for the account of the chief executive
officer and each of the four other most highly compensated executive officers
of the company for services rendered in all capacities during each of the
company's fiscal years ended April 30, 2003, 2004, and 2005:
Annual Compensation
(a) (b) (c) (d) (e)
Other Annual
Position Year Salary Bonuses Compensation
Ken R. Risk 2005 187,000 - -
Chief Executive 2004 183,000 - -
Officer 2003 180,000 - -
Mary Ann Brothers 2005 123,000 - -
Executive Vice 2004 120,000 - -
President 2003 120,000 - -
Kathy Walker 2005 23,000 - -
Senior Vice
President
Donna Debowey 2004 14,000 - -
Senior Vice 2003 37,000 - -
President
David Luppen 2005 52,000 - -
Director of 2004 51,000 - -
Engineering 2003 50,000 - -
Dan Douglas 2005 48,000 - -
Vice President of 2004 46,000 - -
Materials 2003 45,000 - -
Stephanie Risk 2005 38,000 - -
Chief Financial 2004 36,000 - -
Officer 2003 35,000 - -
Long-Term Compensation
(a) (b) (f) (g) (h) (i)
Restricted Options LTIP All
Position Year Stock /SARS Payouts Other
Awards
Ken R. Risk 2005 - - - -
2004 - - - -
2003 - - - -
Mary Ann 2005 - - - -
Brothers 2004 - - - -
2003 - - - -
Kathy Walker 2005 - - - -
Donna 2004 - - - -
Debowey 2003 - - - -
David Luppen 2005 - - - -
2004 - - - -
2003 - - - -
Dan Douglas 2005 - - - -
2004 - - - -
2003 - - - -
Stephanie 2005 - - - -
Risk 2004 - - - -
2003 - - - -
Members of the board of directors were each compensated $150 for their
services during the fiscal year.
Ken R. Risk and Mary Ann Brothers do not have employment contracts with the
company. Both officers have a base salary and also receive compensation based
on a percentage of net sales for the year.
Item 11 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, 2005.
Title Name and Address Amount of Percent
of of Beneficial Beneficial of
Class Ownership Ownership Class
Class Ken R. Risk 2,951,955 55%
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 12 Certain Relationships and Related Party Transactions
During each of three years ended April 30, 2005, 2004 and 2003, 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 2005 2004 2003
Airplane Lease
Ken R. Risk, President $27,000 $27,000 $27,000
Building and Warehouse
Leases/Rentals
Eileen M. Risk,
Secretary/Treasurer $ 3,400 $ 3,400 $ 3,400
Eileen M. Risk,
Secretary/Treasurer $ 3,600 $ 3,600 $ 3,600
Eileen M. Risk,
Secretary/Treasurer $18,420 $18,420 $18,420
Stock Transfer Agent
Eileen M. Risk,
Secretary/Treasurer $20,000 $20,000 $20,000
Item 13 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
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.
George Risk Industries, Inc.
/s/ Ken R. Risk Date
Ken R. Risk, President and Chairman of the Board August 9, 2005
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.
Signature Title Date
/s/ Ken R. Risk President and August 9, 2005
Ken R. Risk Chairman of the Board
/s/ Stephanie Risk Chief Financial Officer August 9, 2005
Stephanie Risk and Controller
/s/ Jerry Andersen Director August 9, 2005
Jerry Andersen
/s/ Michael J. Nelson Director August 9, 2005
Michael J. Nelson