GEORGE RISK INDUSTRIES, INC. 10-K

Item 5 Market for the Registrant’s Common Equity and Related Stockholders’ Matter Principal Market The Company’s Class A Common Stock, which is traded under the ticker symbol RSKIA, is currently quoted on the OTC Bulletin Board by one market maker. Stock Prices and Dividends Information 2021 Fiscal Year High Low May 1—July 31 8.90 7.16 August 1—October 31 11.00 8.02 November 1—January 31 11.25 9.80 February 1—April 30 13.60 10.75 2020 Fiscal Year High Low May 1—July 31 8.60 8.06 August 1—October 31 9.25 7.92 November 1—January 31 10.80 8.80 February 1—April 30 10.55 7.01 On September 30, 2020, a dividend of $.42 per common share was declared for the fiscal year ended April 30, 2021. For the prior fiscal year, a dividend of $.40 per common share was declared on September 30, 2019. The number of holders of record of the Company’s Class A Common Stock as of April 30, 2020, was approximately 1,119. Repurchases of Equity Securities On September 18, 2008, the Board of Directors approved an authorization for the repurchase of up to 500,000 shares of the Company’s common stock. Purchases can be made in the open market or in privately negotiated transactions. The Board did not specify an expiration date for the authorization. 4 The following tables show repurchases of GRI’s common stock made on a quarterly basis: 2021 Fiscal Year Number of shares repurchased May 1—July 31 -0- August 1—October 31 75 November 1—January 31 2,750 February 1—April 30 633 2020 Fiscal Year Number of shares repurchased May 1—July 31 6,300 August 1—October 31 200 November 1—January 31 1,850 February 1—April 30 333 There are still approximately 242,000 shares available to be repurchased under the current resolution. Item 6 Selected Financial Data Not Applicable 5 Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations Executive Overview George Risk Industries, Inc. (GRI) (the “Company”) is a diversified manufacturer of electronic components, encompassing the security industry’s widest variety of door and window contact switches, environmental products, wire and cable installation tools, proximity switches and custom keyboards. The security products division comprises the largest portion of GRI sales and products are sold worldwide through distributors, who in turn sell these products to security installation companies. These products are used for residential, commercial, industrial and government installations. International sales accounted for approximately 11.9% of revenues for fiscal year 2021 and 12.5% for 2020. GRI is known for its quality American made products, top-notch customer service and the willingness to work with customers on their special applications. GRI owns and operates its main manufacturing plant and offices in Kimball, Nebraska with a satellite plant 40 miles away in Gering, Nebraska. The Company has substantial marketable securities holdings and these holdings have a material impact on the financial results. For the fiscal year ending April 30, 2021, the percentage of other income (expense) was a gain of 63.27% of income before income taxes. In comparison, the percentage of other income (expense) was a loss of 39.96% of the income before income taxes for the year ending April 30, 2020. Management’s philosophy behind having holdings in marketable securities is to keep the money working and gaining interest on the cash that is not needed to be put back into the business. Over the years, the investments have kept the earnings per share up when the results from operations have not fared as well. Management is always open to the possibility of acquiring a business that would complement our existing operations, which is exactly what took place in October 2017 when the Company purchased substantially all of the assets from Labor Saving Devices, Inc. (“LSDI”) and Roy Bowling (“Bowling”). There are no known seasonal trends with any of GRI’s products, since the Company mostly sells to distributors and original equipment manufacturers (OEMs). The products are tied to the housing industry and will fluctuate with building trends. Liquidity and Capital Resources Operating Net cash increased by $868,000 during the year ended April 30, 2021 compared to an increase of $1,585,000 during the year ended April 30, 2020. Accounts receivable increased by $850,000 during the current year while showing a $266,000 increase in the prior year. The current larger increase in cash flow from accounts receivable is the result of increased sales. At April 30, 2021, 77.93% of receivables were less than 60 days and 3.76% were over 90 days. In comparison, 74.75% of the receivables were considered current (less than 60 days) and 5.70% of the total were over 90 days past due for the prior year during the same period. Inventories increased by $557,000 in fiscal year ended April 30, 2021, while the prior year showed an increase of $567,000 at year end. The current year increase is a result of having more raw materials on hand since sales have increased. Finished goods have also increased with the introduction of a new product, the high security switch. We expect these to be sold soon. 6 Prepaid expenses increased by $67,000 while they increased $137,000 in the current and prior year, respectively. The smaller increase in the current year is due to having less prepayments of raw materials than at year-end last year and not having to renew multi-year subscriptions in the current year. For the year ended April 30, 2021, accounts payable increased by $291,000 as compared to a decrease of $19,000 for the same period the year before. The change in cash with regards to accounts payable is largely based on timing. Payables are paid within terms and fluctuate based primarily on inventory needs for production. Accrued expenses decreased $91,000 for the year ended April 30, 2021, due to having a few less days of accrued payroll compared to the prior year. Income tax payable increased by $137,000 for the year ended April 30, 2021, compared to a $203,000 decrease in income tax overpayment for the year ended April 30,2020. The current increase is largely due to having increased sales and income before tax and not making enough income tax estimates. Investing As for investment activities, $517,000 was spent on purchases of property and equipment during the current fiscal year, compared to $731,000 during the year ended April 30, 2020. These capitalized costs mainly consisted of purchases machinery and equipment and making capital improvements. Additionally, the Company continues to purchase marketable securities, which include municipal bonds and quality stocks. Cash spent on purchases of marketable securities for the year ended April 30, 2021 was $506,000 versus the $831,000 spent for the corresponding period last year. Conversely, net proceeds from the sale of marketable securities were $21,000 and $776,000 at April 30, 2021 and 2020, respectively. The Company uses “money manager” accounts for most stock transactions. By doing this, the Company gives an independent third-party firm, who are experts in this field, permission to buy and sell stocks at will. The Company pays quarterly service fees based on the value of the investments. Financing Cash used in financing activities consists of two items. First, for the year ended April 30, 2021, $1,891,000 was spent on the payment of dividends. The Company declared a dividend of $0.42 per share of common stock on September 30, 2020 for the current fiscal year, while a $0.40 per share of common stock dividend was declared on September 30, 2019 and issued in the prior fiscal year. Secondly, the Company continues to purchase back its Class A common stock when the opportunity arises. For the year ended April 30, 2021, the Company purchased $35,000 of treasury stock and $74,000 was bought back for the year ended April 30, 2020. The Company has been actively searching for stockholders that have been “lost” over the years. The payment of dividends over the last fifteen fiscal years has also prompted many stockholders and/or their relatives and descendants to sell back their stock to the Company. At April 30, 2021, working capital increased 28.58% in comparison to the previous fiscal year. The Company measures liquidity using the quick ratio, which is the ratio of cash, securities and accounts receivables to current obligations. The Company’s quick ratio increased to 16.856 for the year ended April 30, 2021 compared to 11.623 for the year ended April 30, 2020. 7 Results of Operations GRI completed the fiscal year ending April 30, 2021 with a net profit of 58.48% of net sales. Net sales were at $18,505,000, up 24.96% over the previous fiscal year. The increase in sales is a result of continued growth within our product lines and having a major competitor close its door at the end of calendar year 2019. Cost of goods sold was 49.59% of net sales for the year ended April 30, 2021 and 50.00% for the same period last year. Management’s goal is to keep the cost of goods sold percentage of less than 50% and has been able to stay right at that goal for the current fiscal year. This has been achieved by continuing to be as efficient as possible since wages and other expenses continue to increase to stay competitive with the workforce. Management also avoided having to increase prices during the fiscal year ended April 30, 2021. Our last global price increase was in January 2020. Operating expenses were 21.74% of net sales for the year ended April 30, 2021 as compared to 24.82% for the corresponding period last year. Management’s goal is to keep the operating expenses around 30% or less of net sales, so the goal has been met for the current fiscal year. Income from operations for the year ended April 30, 2021 was at $5,306,000, which is a 42.25% increase from the corresponding period last year, which had income from operations of $3,730,000. Other income and expense results for the fiscal year ended April 30, 2021 produced a gain of $9,140,000. This is in comparison to a loss of $(1,065,000) for the fiscal year ended April 30, 2020. Dividend and interest income was $757,000, which is down 18.67% over the prior year. Dividend and interest income at April 30, 2020 was $931,000. Investments in marketable securities are presented at fair value and an unrealized gain or loss is recorded within the statements of operations, a non-cash entry, at each period beginning May 1, 2018 and previously recorded unrealized gain or loss in other comprehensive income (loss). As a result, an unrealized gain of $7,007,000 was recorded for the fiscal year ended April 30, 2021 and an unrealized loss of $(1,619,000) was recorded for the prior year ended April 30, 2020. Net gain on the sale of investments for the current fiscal year was $363,000, which is a 194.53% increase over the prior year. Net loss on the sale of investments for the fiscal year ending April 30, 2020 was $(384,000). Net income for the year ended April 30, 2021 was $10,822,000, which is up 414.35% from the prior year, which produced net income of $2,104,000. Basic and diluted earnings per common share (EPS) for the year ended April 30, 2021 was $2.19 and $2.18 per share, respectively. Basic and diluted earnings per common share (EPS) for the year ended April 30, 2020 was $0.42 per share. Management is hopeful that sales will continue to increase for the fiscal year ending April 30, 2022. With the purchase of the assets from Labor Saving Devices, Inc., the Company has seen an overall increase in sales, and we have also seen growth in our existing product lines as well with a major competitor going out of business at the end of 2019. Because of this closure, we have seen our orders increase and we are still adjusting to grow to fulfill these orders. Our Security sales division, which is our largest sales generator, is directly tied to the housing industry and we normally experience the same fluctuations. We are always researching and developing new products that will help our sales increase. While only a few new or improved products were successfully launched in fiscal year 2021, we are confident that more new products will be released soon, and we are searching for products that complement our current offerings. Management is always open to the possibility of acquiring a business or product line that would complement our existing operations. Due to the Company’s strong cash position, management believes this could be achieved without the need for outside financing. The intent is to utilize the equipment, marketing techniques and established customers to deliver new products and increase sales and profits. 8 New product development The GRI Engineering department continues to develop enhancements to our existing products as well as to develop new products that will continue to secure our position in the industry. Explosion proof contacts that will be UL listed for hazardous locations are in development. There has been demand from our customers for this type of high security magnetic reed switch. An updated version of the pool access alarm (PAA) has met electrical listing testing (ETL) approval and production has started. This next-generation model combines our battery operated DPA series with our hard wired 289 series. A variety of installation options will be available through jumper pin settings. We are currently redesigning our glass break detector switch and water shutoff system to include a brass valve. Wireless technology is a main area of focus for product development. We are looking into adding wireless technology to some of our current products. A wireless contact switch is in the final stages of development. Also, we are working on wireless versions of our pool access alarm and environmental sensors that will be easy to install in current construction. We are also concentrating on making products compatible with Wi-Fi, smartphone technology and the increasing popular Z-Wave standard for wireless home automation. Critical Accounting Policies The discussion and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared in conformity with generally accepted accounting principles in the United States. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in those financial statements. These judgments can be subjective and complex, and consequently actual results could differ from those estimates. The most critical accounting policies relate to accounts receivable; marketable securities; inventory; income taxes; and segment reporting. Accounts receivable —Accounts receivable are customer obligations due under normal trade terms. The Company sells its products to security alarm distributors, alarm installers, and original equipment manufacturers. Management performs continuing credit evaluations of its customers’ financial condition and the Company generally does not require collateral. The Company records an allowance for doubtful accounts based on an analysis of specifically identified customer balances. The Company has a limited number of customers with individually large amounts due at any given date. Any unanticipated change in any one of these customers’ credit worthiness or other matters affecting the collectability of amounts due from such customers could have a material effect on the results of operations in the period in which such changes or events occur. After all attempts to collect a receivable have failed, the receivable is written off. 9 Marketable securities— The Company has investments in publicly traded equity securities, state and municipal debt securities, and real-estate investment trusts (REITs). The investments in securities are reported at fair value. The Company uses the average cost method to determine the cost of securities sold and any unrealized gains or losses on equity securities are reported in the respective period’s earnings. Unrealized gains and losses on debt securities are excluded from earnings and reported separately as a component of stockholder’s equity. Dividend and interest income are reported as earned. In accordance with the Generally Accepted Accounting Principles in the United States (US GAAP), the Company evaluates all marketable securities for other-than temporary declines in fair value. When the cost basis exceeds the fair market value for approximately one year, management evaluates the nature of the investment, cause of impairment and number of investments that are in an unrealized loss position. When it is determined that a security will likely remain impaired, a recognized loss is booked and the investment is written down to its new fair value. The investments are periodically evaluated to determine if impairment changes are required. Inventories —Inventories are valued at the lower of cost or net realizable value. Costs are determined using the average cost-pricing method. The Company uses actual costs to price its manufactured inventories, approximating average costs. The reported net value of inventory includes finished saleable products, work-in-process and raw materials that will be sold or used in future periods. Inventory costs include raw materials, direct labor and overhead. The Company’s overhead expenses are applied, based in part, upon estimates of the proportion of those expenses that are related to procuring and storing raw materials as compared to the manufacture and assembly of finished products. These proportions, the method of their application, and the resulting overhead included in ending inventory, are based in part on subjective estimates and approximations and actual results could differ from those estimates. In addition, the Company records an inventory obsolescence reserve, which represents the cost of the inventory that has had no movement in over two years. There is inherent professional judgment and subjectivity made by management in determining the estimated obsolescence percentage. In addition, and as necessary, the Company may establish specific reserves for future known or anticipated events. Income Taxes —US GAAP requires use of the assets and liability method; whereby current and deferred tax assets and liabilities are determined based on tax rates and laws enacted as of the balance sheet date. Deferred tax expense represents the change in the deferred tax asset/liability balances. Segment Reporting and Related Information —The Company designates the internal organization that is used by management for allocating resources and assessing performance as the source of the Company’s reportable segments. US GAAP also requires disclosures about products and services, geographic area and major customers. Related Party Transactions — The Company purchased a building in November 2019 that was previously leased from Bonita Risk, thus terminating the lease during the fiscal year ended April 30, 2020. Bonita Risk is a director and an employee of the Company and is the majority holder of George Risk Industries, Inc. stock. This building contains the Company’s sales and accounting departments, maintenance department, engineering department and some production facilities. This lease required a minimum payment of $1,535 on a month-to-month basis. The total lease expense for this arrangement was $0 during the fiscal year ended April 30, 2021 and $7,675 for the fiscal year ended April 30, 2020. One of the directors of the board, Joel Wiens, is the principal shareholder of FirsTier Bank. FirsTier Bank is the financial institution the Company uses for its day-to-day banking operations. Year end balances of accounts held at this bank are $6,885,000 for the year ended April 30, 2021 and $5,167,000 for the year ended April 30, 2020. The Company also received interest income from FirsTier Bank in the amount of approximately $54,800 for the fiscal year ended April 30, 2021 and approximately $74,600 was received for the fiscal year ended April 30, 2020. 10