-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Po1UEcvSpl9bl+u7L4XjA0KnUlCEfT5M6u2TmbTXrVVl6kkqVcYxRZHPYKLnFBHc NZQPMM7hONkzt5BIg0KKSw== 0001031726-04-000001.txt : 20040729 0001031726-04-000001.hdr.sgml : 20040729 20040729173003 ACCESSION NUMBER: 0001031726-04-000001 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20040430 FILED AS OF DATE: 20040729 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RISK GEORGE INDUSTRIES INC CENTRAL INDEX KEY: 0000084112 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 840524756 STATE OF INCORPORATION: CO FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-05378 FILM NUMBER: 04939966 BUSINESS ADDRESS: STREET 1: 802 SOUTH ELM STREET 2: GRI PLAZA CITY: KIMBALL STATE: NE ZIP: 69145 BUSINESS PHONE: 3082354645 MAIL ADDRESS: STREET 1: 802 S ELM ST CITY: KIMBALL STATE: NE ZIP: 69145 10KSB 1 gri10ksb04.txt 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, 2004 ______________ [ ] 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. $ 2,411,000. __________ The aggregate market value of the voting stock held by non-affiliates of the Registrant as of July 28, 2004 was approximately $14,524,000 based upon the last reported sale, which occurred on July 27, 2004. 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 July 29, 2004 was 5,402,528. 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 hydro 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 hydro sensors. The security burglar alarm products comprise approximately 85 percent and pool alarms comprise 9 percent of net revenues which are sold through distributors and private board customers. The security segment has approximately 4,000 customers. One of the distributors accounts for approximately 42 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 720 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 225 employees. ITEM 2 PROPERTIES The manufacturing and office facilities are owned by the company. The manufacturing facilities were expanded by 7,200 square feet five years ago. Total square footage of the plant in Kimball, Nebraska is approximately 42,500. Additionally, the company leases 15,000 square feet for $1,535 per month from 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 34 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 over the counter in the NQB "Pink Sheets" by five market makers. STOCK PRICES and DIVIDENDS INFORMATION
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 2003 Fiscal Year High Low May 1-July 31 2.25 1.96 August 1-October 31 2.25 2.05 November 1-January 31 2.72 2.12 February 1-April 30 2.90 2.21
No dividends were paid during fiscal years ending April 30, 2003 and 2004. The number of holders of record of the company's Class A Common Stock as of April 30, 2004, was approximately 1,528. ITEM 6 MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS GRI completed the fiscal year ending April 30, 2004, with a net profit of 18.9% net of sales. Net sales were at $12,783,000, down 0.9% over the previous year. We expect sales to stay steady and hopefully increase for the fiscal year ending April 30, 2005. Any extra growth would 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. Also, although our warehouse in England has not performed quite as well for fiscal year end 2004 as it did in fiscal year end 2003, we have supplemented the European market by doing more drop shipments directly from the factory here in the US. Sales in the European market were down 1.5% for the fiscal year ending April 30, 2004. We are planning to put more focus into the overseas market for fiscal year end 2005. The material and labor costs stayed very consistent between this year and last year. At fiscal year end 2004 the material and labor percentage was at 37.1% of gross sales while the same percentage for fiscal year 2003 was at 38.5%. 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 45 to 50 percent for the coming year. At April 30, 2004, working capital increased by 18.2% in comparison to the previous fiscal year. Liquidity has risen this year as the ratio of cash, securities and accounts receivables to current obligations was 41.029 and 24.106 for the fiscal years ending April 30, 2004 and April 30, 2003, respectively. Current assets have increased while current liabilities have decreased. At April 30, 2004, the only long-term liability that we have on the books is deferred income tax of $27,000. Cash per share at April 30, 2004 was at $2.78, while it was $2.29 at April 30, 2003. Equity per share for the same dates was $3.72 and $3.18, respectively. New products in Research and Development at this time include the ADA series of touch sensors, which are the GRI T8800 wall temperature sensor and the H8800 humidity sensor. The T8800 is expected to be ready for sale by August 1, 2004. The molded box for ADA units is complete with the exception of a few modifications to the mold. Other new product developments are 110 and 220 volt versions of our Current Controller product line, a door strike control, a twelve-key keypad using the touch sensor technology, and the High Security switch. Testing continues on the High Security switch and the Smart Start prototypes. Our tool and die department's priorities are the new rollerball/dome switch molds, the 4460 spacer and the smoke box addition to the EZ Duct Raceway. Both the GB-551 glass break switch and the Fail Safe Water Sensor (GRI pt #2826FS) have been introduced to the marketplace with good response. Furthermore, we have begun packaging Magnasphere Corporation products in cases for their customers. This is a type of magnetic product recently introduced to the security market. 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. CERTIFICATION OF KEN R. RISK, PRESIDENT AND CHAIRMAN OF THE BOARD, PURSUANT TO RULE 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934 I, Ken R. Risk, certify that: 1. I have reviewed this annual report on Form 10KSB of George Risk Industries, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report. 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the registrant's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Ken R. Risk ______________________________ Ken R. Risk President and Chairman of the Board July 12, 2004 CERTIFICATION OF STEPHANIE RISK, CHIEF FINANCIAL OFFICER, PURSUANT TO RULE 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934 I, Stephanie Risk, certify that: 1. I have reviewed this annual report on Form 10KSB of George Risk Industries, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report. 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the registrant's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Stephanie Risk _________________________________ Stephanie Risk Chief Financial Officer July 12, 2004 ITEM 7 FINANCIAL STATEMENTS Independent Auditor's Report 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, 2004, 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 responsi- bility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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, 2004, 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. MASON RUSSELL WEST, LLC Littleton, Colorado July 12, 2004 George Risk Industries, Inc. Balance Sheet April 30, 2004
Assets Current Assets: Cash and cash equivalents $ 4,280,000 Marketable securities 10,766,000 Accounts receivable: Trade, net of allowance for doubtful accounts of $50,000 1,735,000 Income tax overpayment 129,000 Other 5,000 Inventories 2,379,000 Prepaid expenses 65,000 Deferred income taxes 94,000 ___________ Total Current Assets 19,453,000 ___________ Property and Equipment, net, at cost 835,000 ___________ Other Assets Investment in Land Limited Partnership, at cost 200,000 Projects in process 46,000 ___________ Total Other Assets 246,000 ___________ Total Assets $20,534,000 ___________ ___________ See accompanying notes to financial statements
Liabilities and Stockholders' Equity Current Liabilities: Accounts payable-trade $ 92,000 Accrued expenses: Payroll and related expenses 317,000 ___________ Total Current Liabilities 409,000 ___________ Deferred Income Taxes 27,000 Commitments and Contingencies - ___________ Total Long-Term Liabilities 27,000 ___________ Stockholders' Equity Convertible preferred stock, 1,000,000 shares authorized, Series 1-noncumulative, $20 stated value, 25,000 shares authorized, 5,350 issued and outstanding 107,000 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 (911,000) Retained earnings 20,079,000 Less cost of treasury stock, 3,100,304 shares, at cost (1,763,000) ___________ Total Stockholders' Equity 20,098,000 ___________ Total Liabilities and Stockholders' Equity $20,534,000 ___________ ___________
George Risk Industries, Inc. Statements of Income For the Years Ended April 30, 2004 and 2003 2004 2003 Net Sales $12,783,000 $12,895,000 Less cost of goods sold 6,190,000 6,327,000 ___________ ___________ Gross Profit 6,593,000 6,568,000 Operating Expenses: Selling and shipping 2,351,000 2,409,000 General and administrative 693,000 689,000 Engineering and research 71,000 62,000 Rent expense paid to related parties 49,000 49,000 ___________ ___________ Total Operating Expenses 3,164,000 3,209,000 ___________ ___________ Income From Operations 3,429,000 3,359,000 Other Income (Expense): Other income 79,000 11,000 Dividend and interest income 348,000 302,000 Gain/(loss) on sale of assets 40,000 (59,000) ___________ ___________ Total Other Income 467,000 254,000 Income Before Provision for Income Taxes 3,896,000 3,613,000 Provision for Income Taxes: Current expense 1,439,000 1,389,000 Deferred tax (benefit) expense 46,000 (61,000) ___________ ___________ Total Income Taxes Expense 1,485,000 1,328,000 ___________ ___________ Net Income $ 2,411,000 $ 2,285,000 ___________ ___________ ___________ ___________ Income per Share of Common Stock $ 0.44 $ 0.42 ___________ ___________ ___________ ___________ Weighted Average Number of Common Shares Outstanding 5,402,528 5,402,528 ___________ ___________ ___________ ___________ See accompanying notes to financial statements
George Risk Industries, Inc. Statements of Comprehensive Income April 30, 2004 For the Years Ended April 30, 2004 2003 Net Income $2,411,000 $ 2,285,000 __________ __________ Other Comprehensive Income, Net of Tax Unrealized loss on securities: Unrealized holding gains (losses) arising during period 484,000 (235,000) Reclassification adjustment for (gains) losses included in net income (37,000) 185,000 Income tax related to other comprehensive income (187,000) 17,000 __________ __________ Other Comprehensive Income (Loss) 260,000 (33,000) __________ __________ Comprehensive Income (Loss) $2,671,000 $2,252,000 __________ __________ __________ __________ See accompanying notes to financial statements
George Risk Industries, Inc. Statement of Changes in Stockholders' Equity For the Years Ended April 30, 2004 and 2003 Common Stock Preferred Stock Class A Shares Amount Shares Amount Balances, April 30, 2002 5,350 $107,000 8,502,832 $850,000 ________ ________ _________ ________ Unrealized gain (loss) - - - - Net Income - - - - ________ ________ _________ ________ 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 ________ ________ _________ ________ ________ ________ _________ ________ 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) $(1,428,000) $15,383,000 $14,885,000 __________ _________ ___________ ___________ ___________ ___________ - - - 33,000 - 33,000 - - - - 2,285,000 2,285,000 __________ _________ ___________ ___________ ___________ ___________ 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 __________ _________ ___________ ___________ ___________ ___________ __________ _________ ___________ ___________ ___________ ___________
George Risk Industries, Inc. Statements of Cash Flows For the Years Ended April 30, 2004 2003 Cash Flows from Operating Activities: Net income $2,411,000 $2,285,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 235,000 263,000 (Gain) loss on sale of investments (37,000) 58,000 Economic development debt relieved (75,000) - Gain on sale of assets (3,000) - Changes in assets and liabilities: (Increase) decrease in: Accounts receivable (181,000) 336,000 Inventories 50,000 (2,000) Prepaid expenses 75,000 (54,000) Other receivables (3,000) 2,000 Income tax overpayment (59,000) 65,000 Deferred income taxes 46,000 (61,000) Increase (decrease) in: Accounts payable (37,000) 25,000 Accrued expenses 28,000 43,000 __________ __________ Net cash provided(used)by operating activities 2,450,000 2,960,000 __________ __________ Cash Flows From Investing Activities: Proceeds from sale of assets 12,000 - Projects in progress 34,000 (50,000) Purchase of property and equipment (191,000) (84,000) Proceeds from sale of marketable securities 1,003,000 2,027,000 Purchase of marketable securities (1,567,000) (3,044,000) Purchase of Land Limited Partnership at cost - (200,000) __________ __________ Net cash provided(used) by investing activities (709,000) (1,351,000) __________ __________ Cash Flows From Financing Activities: Principal payments on long-term debt (160,000) (4,000) __________ __________ Net cash provided (used) by financing activities (160,000) (4,000) __________ __________ Net Increase (Decrease) in Cash and Cash Equivalents 1,581,000 1,605,000 Cash and Cash Equivalents, beginning of year 2,699,000 1,094,000 __________ __________ Cash and Cash Equivalents, end of year $4,280,000 $2,699,000 __________ __________ __________ __________ Supplemental Disclosure of Cash Flow Information: Cash payments for: Income taxes $1,568,000 $1,459,000 __________ __________ __________ __________ See accompanying notes to financial statements
George Risk Industries, Inc. Notes to Financial Statements 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 thermostats, E-Z Duct wire covers 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. 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 $ 715,000 Machinery and equipment 5-10 946,000 Furniture and fixtures 5-10 129,000 Leasehold improvements 5-32 171,000 Buildings 20 492,000 Automotive and aircraft 3-5 315,000 Software 2-5 123,000 Land N/A 13,000 __________ Total 2,904,000 Accumulated depreciation (2,069,000) Net $ 835,000 __________ __________
Depreciation expense of $234,000 and $263,000 were charged to operations for the years ended April 30, 2004 and 2003, 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 $378,000 and $411,000 for the years ended April 30, 2004 and 2003. 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. Shares issuable upon the conversion of preferred stock are excluded from the calculations since their effect is insignificant. 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. 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 - 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 includes all changes in equity during a period except those resulting from fiscal investments by and distributions to stockholders. 2. INVENTORIES
Inventories at April 30, 2004, consisted of the following: Raw materials $1,693,000 Work in process 360,000 Finished goods 396,000 __________ 2,449,000 __________ Less allowance for obsolete inventory (70,000) __________ Totals $2,379,000 __________ __________
3. MARKETABLE SECURITIES Marketable equity securities are recorded at the lower of cost or market and are classified as available-for-sale securities. The cost of marketable securities sold is determined on the average cost method with realized gains or losses being reflected in the statement of operations and any unrealized gains and losses being reported as a separate component of stockholders' equity until realized. Dividend and interest income are accrued as earned. Marketable equity securities and unrealized gains and losses consist of the following as of April 30, 2004: Cost basis $11,677,000 Market value 10,766,000 ___________ Net unrealized gains (losses) $ (911,000) ___________ ___________ Gross unrealized gain $ 46,000 ___________ ___________ Gross unrealized loss $ (957,000) ___________ ___________
4. NOTES PAYABLE There are no notes payable at April 30, 2004. 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, 2004. 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 shall be 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. All stock records are maintained by the company. 6. EARNINGS PER SHARE Basic and diluted earnings per share, assuming convertible preferred stock was converted for each period presented are:
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 __________ _________ _____ __________ _________ _____
April 30, 2003 ___________________________________ Income Shares Per-Share (Numerator) (Denominator) Amount Net Income $2,285,000 __________ __________ Basic EPS $2,285,000 5,402,528 $.423 Effect of dilutive Convertible Preferred Stock - 26,750 (.002) __________ _________ _____ Diluted EPS $2,285,000 5,429,278 $.421 __________ _________ _____ __________ _________ _____
7. COMMITMENTS, CONTINGENCIES, and RELATED PARTY TRANSACTIONS Leases - The Company leases facilities from certain officers/directors/stockholders of the Company. One lease requires an annual payment of $3,400 due each July 1 while the other leases are on a month-to-month basis requiring payments of $1,535 and $300. Total lease expense under these arrangements for the fiscal years ended April 30, 2004 and 2003, was $25,000 for each year. The Company leases an airplane from an officer/director/ stockholder of the company on a month -to- month basis requiring payments of $2,250. Airplane lease expenses charged to operations for the fiscal years ended April 30, 2004 and 2003, were $27,000 for each year. During the year ended April 30, 2000, the Company paid $210,000 and the officer contri- buted the airplane in trade for another airplane. The Company and the officer jointly own the newly purchased airplane and will continue the lease on the officer's ownership of the plane. 8. INCOME TAXES Reconciliation of income before income taxes with Federal and State taxable income:
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% ___________ ___________ ___________ ___________
2003 Federal State ____________ ____________ Income before taxes $3,613,000 $3,613,000 State income tax deduction (258,000) (258,000) Capital loss carryforward 58,000 58,000 Nontaxable income (79,000) (79,000) Nondeductible expenses and timing differences (12,000) (12,000) __________ __________ Taxable income $3,322,000 $3,322,000 __________ __________ __________ __________ Income tax - net of credits $1,131,000 $1,131,000 __________ __________ __________ __________ Tax rate to taxable income 34.0% 7.8% ___________ ___________ ___________ ___________
Deferred tax asset (liability) consist of the following components at April 30, 2004 and 2003: 2004 2003 _________ ________ Deferred tax current assets: Accrued expenses and allowances Capital Loss carry forward $ 94,000 $113,000 Deferred tax liability: Timing differences (27,000) - ________ ________ Net deferred tax asset (liability) $ 67,000 $113,000 ________ ________ ________ ________
9. BUSINESS SEGMENTS
The following is financial information relating to industry segments: April 30, 2004 2003 Net revenue: Pool alarm products $ 1,132,000 $ 1,095,000 Keyboard and other products 616,000 1,054,000 Security alarm products 11,035,000 10,746,000 ___________ ___________ Total net revenue $12,783,000 $12,895,000 ___________ ___________ ___________ ___________ Income from operations: Pool alarm products $ 304,000 $ 282,000 Keyboard and other products 165,000 272,000 Security alarm products 2,960,000 2,805,000 ___________ __________ Total income from operations $ 3,429,000 $ 3,359,000 ___________ ___________ ___________ ___________ Identifiable assets: Pool alarm products $ 275,000 $ 233,000 Keyboard and other products 285,000 271,000 Security alarm products 4,025,000 3,975,000 Corporate general 15,949,000 13,377,000 ___________ ___________ Total assets $20,534,000 $17,856,000 ___________ ___________ ___________ ___________ Depreciation and amortization: Pool alarm products $ 6,000 $ 3,000 Keyboard and other products 4,000 8,000 Security alarm products 143,000 158,000 Corporate general 81,000 94,000 ___________ ___________ Total depreciation and amortization $ 234,000 $ 263,000 ___________ ___________ ___________ ___________ Capital expenditures: Pool alarm products $ 1,000 $ 30,000 Keyboard and other products - 5,000 Security alarm and other products 123,000 45,000 Corporate general 58,000 5,000 ____________ ___________ Total capital expenditures $ 182,000 $ 85,000 ____________ ___________ ____________ ___________
10. CONCENTRATIONS of CREDIT RISK ARISING from CASH DEPOSITS in EXCESS of INSURED LIMITS The company maintains its cash balance in a financial institution in Kimball, Nebraska. The balance is insured by the Federal Deposit Insurance Corporation up to $100,000. At April 30, 2004, the company's uninsured cash balance totaled $2,359,000. The company has sales to a group of security alarm distributors representing 42% of total sales for the year ended April 30, 2004 and 26% of accounts receivable at April 30, 2004. Item 8 DISAGREEMENTS on ACCOUNTING and FINANCIAL DISCLOSURES There were no disagreements with accountants on accounting and financial disclosure. 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, 2004, 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 56 1976 Eileen M. Risk Secretary/Treasurer 86 1976 Mary Ann Brothers Executive Vice President 64 1984 Stephanie Risk Chief Financial Officer/Controller 32 1999 Jerry Andersen Director, retired 73 1978 Michael J. Nelson Chairman, FirsTier Banks 63 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 fourteen 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 the FirsTier Banks in Kimball, Nebraska. Stephanie Risk, chief financial officer and controller, has nine 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 officers and 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, 2002, 2003, and 2004: Annual Compensation
(a) (b) (c) (d) (e) Other Annual Position Year Salary Bonuses Compensation Ken R. Risk 2004 183,000 - - Chief Executive 2003 180,000 - - Officer 2002 181,000 - - Mary Ann Brothers 2004 120,000 - - Executive Vice 2003 120,000 - - President 2002 119,000 - 10,000 stock shares Donna Debowey 2004 14,000 - - Senior Vice 2003 37,000 - - President 2002 36,000 - - David Luppen 2004 51,000 - - Director of 2003 50,000 - - Engineering 2002 43,000 - - Dan Douglas 2004 46,000 - - Vice President of 2003 45,000 - - Materials 2002 44,000 - - Stephanie Risk 2004 36,000 - - Chief Financial 2003 35,000 - - Officer 2002 33,000 - -
Long-Term Compensation (a) (b) (f) (g) (h) (i) Restricted Options LTIP All Position Year Stock /SARS Payouts Other Awards Ken R. Risk 2004 - - - - 2003 - - - - 2002 - - - - Mary Ann 2004 - - - - Brothers 2003 - - - - 2002 - - - - Donna 2004 - - - - Debowey 2003 - - - - 2002 - - - - David Luppen 2004 - - - - 2003 - - - - 2002 - - - - Dan Douglas 2004 - - - - 2003 - - - - 2002 - - - - Stephanie 2004 - - - - Risk 2003 - - - - 2002 - - - -
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 outstanding on April 30, 2004.
Title Name and Address Amount of Percent of of Beneficial Beneficial of Class Ownership Ownership Class Class Ken R. Risk 2,952,905 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 the three years ended April 30, 2004, 2003, and 2002, 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 2004 2003 2002 Airplane Lease Ken R. Risk $27,000 $27,000 $27,000 President Building and Warehouse Leases/Rentals Eileen M. Risk $ 3,400 $ 3,400 $ 3,400 Secretary/Treasurer Eileen M. Risk $ 3,600 $ 3,600 $ 3,600 Secretary/Treasurer Eileen M. Risk $18,420 $18,420 $18,420 Secretary/Treasurer Stock Transfer Agent Eileen M. Risk $20,000 $20,000 $20,000 Secretary/Treasurer
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 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. By: /s/ Ken R. Risk Ken R. Risk, President and Chairman of the Board July 12, 2004 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 July 29, 2004 Ken R. Risk Chairman of the Board /s/ Stephanie Risk Chief Financial Officer July 29, 2004 Stephanie Risk and Controller /s/ Jerry Andersen Director July 29, 2004 Jerry Andersen /s/ Michael J. Nelson Director July 29, 2004 Michael J. Nelson -----END PRIVACY-ENHANCED MESSAGE-----