Annual Report for Fiscal Year Ending April 30, 2026 (Form 10-K)

Item 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

George Risk Industries, Inc. ("GRI" or 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 9.6% of revenues for fiscal year 2026 and 9.7% for 2025.

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 year ending April 30, 2026, net other income accounted for 51.96% of income before income taxes. In comparison, for the year ending April 30, 2025, net other income accounted for 31.55% of the income before income taxes. Management's philosophy for holding marketable securities is to keep the money working and earn interest on cash that does not need 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, as evidenced by the October 2017 purchase of substantially all of the assets from Labor Saving Devices, Inc. and Roy Bowling.

There are no known seasonal trends with any of GRI's products, since the Company mostly sells to distributors and original equipment manufacturers. The products are tied to the housing industry and will fluctuate with building trends.

Liquidity and Capital Resources

Operating

Net cash decreased by $1,315,000 during the year ended April 30, 2026, and by $641,000 during the year ended April 30, 2025. Accounts receivable increased by $375,000 during the current fiscal year compared to a $768,000 increase in the prior fiscal year. The current fiscal year increase in cash flow from accounts receivable is the result of increased sales, offset by slightly slower collection of accounts receivable. The average collection time in days for the year ended April 30, 2026, is 72 days, compared to 65 days for the year ended April 30, 2025. As of April 30, 2026, 75.67% of receivables were aged less than 60 days ("Current") and 5.49% were aged over 90 days. In comparison, 72.68% of the receivables were considered Current, and 7.65% were over 90 days past due as of April 30, 2025.

Inventories increased by $1,051,000 for the year ended April 30, 2026, compared to a decrease of $773,000 for the year ended April 30, 2025. The current fiscal year increase is primarily a result of having more raw materials on hand that have increased in price due to tariff increases implemented by the US government over the fiscal year, as well as increased labor costs and higher sales.

Prepaid expenses and other assets increased by $859,000 during the year ended April 30, 2026, compared to an increase of $196,000 for the prior year. The current fiscal year's increase is due to higher prepayments for raw materials and the renewal of multi-year subscriptions.

Income tax refund receivable increased by $351,000 during the year ended April 30, 2026, with no activity in the account during the prior fiscal year. The increase is the result of amending prior-year income tax returns (FY 2023 & 2024) to claim additional research and development tax credits under the One Big Beautiful Bill Act, which was passed in 2025.

The federal solar tax credit receivable represents additional and existing federal solar tax credits we will receive from our purchase of transferable tax credits, pursuant to transferability provisions of the Inflation Reduction Act of 2022. Please see Note 1 - Purchase of Transferable Tax Credits, to our consolidated financial statements for further information.

For the year ended April 30, 2026, accounts payable increased by $84,000 compared to an increase of $10,000 for the year ended April 30, 2025. This difference is primarily a result of timing. Payables are paid within terms and fluctuate primarily based on production inventory needs. Accrued expenses increased $44,000 for the year ended April 30, 2026, compared to the prior year. This is primarily due to a higher year-end payroll accrual as of April 30, 2026, compared to April 30, 2025.

The Company's income tax payable decreased $21,000 for the year ended April 30, 2026, compared to a decrease of $80,000 for the year ended April 30, 2025. The decrease in the current fiscal year income tax payable is due to the purchase of federal solar tax credits.

Investing

The Company spent $383,000 on property and equipment purchases during the year ended April 30, 2026, compared to $396,000 during the year ended April 30, 2025. These capitalized costs mainly consisted of purchases of 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, 2026, was $1,137,000, compared with $980,000 for the year ended April 30, 2025. Net proceeds from the sale of marketable securities were $25,000 and $678,000 at April 30, 2026 and 2025, 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.

The Company received a cash distribution of $25,000 from the sale of the investment in the limited land partnership during the year ended April 30, 2026. This was the third and final distribution received from the sale of the limited land partnership. Please see Note. 1 - Investment in Limited Land Partnership, to our consolidated financial statements for further information.

Financing

Cash used in financing activities consists of declared dividends and the repurchase of the Company's Class A common Stock. For the year ended April 30, 2026, $4,467,000 was spent on the payment of dividends. The Company declared a dividend of $1.00 per share of common stock on September 30, 2025, for the current fiscal year; equally, a $1.00 per share of common stock dividend was declared on September 30, 2024 and issued in the prior fiscal year. The Company continues to purchase back its Class A common stock when the opportunity arises. For the year ended April 30, 2026, the Company purchased $56,000 of treasury stock and $72,000 of treasury stock was repurchased for the year ended April 30, 2025. In an effort to repurchase its Class A Common Stock, the Company has been actively searching for stockholders that have been "lost" over the years.

As of April 30, 2026, working capital showed a year-over -year increase of 13.39%. The Company measures liquidity using the quick ratio, which is the ratio of cash, securities, and accounts receivable to current obligations. The Company's quick ratio decreased to 11.176 for the year ended April 30, 2026, compared to 11.252 for the year ended April 30, 2025.

Results of Operations

GRI completed the year ending April 30, 2026 with a net profit of 45.82% of net sales. Net sales for the current fiscal year were $24,852,000, up 10.27% over the previous fiscal year. The increase in sales is a result of the Company continuing to provide quality products to our customers and a price increase that was implemented during the 4^th quarter of the fiscal year. Cost of goods sold was 51.92% of net sales for the year ended April 30, 2026, and 51.59% for the same period last year. Management aims to keep the cost of goods sold percentage within 50% and was just slightly over that percentage for the current year. Management strives to be as efficient as possible as wages and material costs continue to increase. Management offset some of these added expenses by implementing a 5% price increase effective January 1, 2026. This price increase remains consistent with the prior year, raising prices 5% that became effective on February 1, 2025.

Operating expenses were 20.05% of net sales for the year ended April 30, 2026, compared to 20.73% for the year ended April 30, 2025. Management's goal is to keep operating expenses at or below 25% of net sales, and this goal has been met for the current fiscal year. Income from operations for the year ended April 30, 2026 increased to $6,966,000, or 11.67%, from the year ended April 30, 2025, which had income from operations of $6,238,000. This increase was primarily due to increased sales and lower operating expenses.

Net other income for the year ended April 30, 2026, was $7,535,000, compared to $2,875,000 for the year ended April 30, 2025. Dividend and interest income was $1,608,000 for the current fiscal year, up 14.04% from $1,410,000 for the prior fiscal year. Investments in marketable securities are presented at fair value and any non-cash unrealized gain or loss is recognized in the statements of operations. As a result, an unrealized gain of $4,517,000 was recorded for the year ending April 30, 2026, compared to an unrealized loss of $75,000 for the year ending April 30, 2025. Net gain on the sale of investments for the current fiscal year was $898,000, a 4.16% decrease from the prior fiscal year's $937,000.

Net income for the year ended April 30, 2026, was $11,388,000, up 59.65% from $7,133,000 for the year ended April 30, 2025. This escalation is primarily related to the greater amount in other income. Basic earnings per common share ("EPS") for the year ended April 30, 2026, was $2.33, and diluted EPS for the same period was $2.32. Basic and diluted EPS for the year ended April 30, 2025, was $1.46 and $1.45 per share, respectively.

Management is hopeful that sales will continue to increase for the fiscal year ending April 30, 2027. Opportunities for Management include keeping up with business growth and continuing to focus on finding ways to get our products out to our customers in a timelier manner. Some of the ways we are accomplishing this include exploring more automation and reconfiguring our production floor to improve workflow efficiency. Challenges facing Management include keeping costs down as raw materials and labor costs continue to increase. The Company also struggles to get enough workers to fill production needs. 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 continually researching and developing new products to increase sales, and we are seeking 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. Given the Company's strong cash position, management believes this could be achieved without outside financing. The intent is to utilize the equipment, marketing techniques, and established customers to deliver new products and increase sales and profits.

New product development

The GRI engineering department continues to develop enhancements to our existing products and to develop new products that will help secure our position in the industry.

Explosion proof contacts that will be Underwriters Laboratories (UL) listed for hazardous locations are in development. There has been demand from our customers for this type of high security magnetic reed switch.

Research is underway on programmable temperature and humidity sensors with built-in hysteresis, a miniature-profile overhead door contact based on our popular 4532 series, and a brass water valve shut-off system.

Production has begun on a couple of newly developed products. First, there are magnetic contacts which are listed under UL 634 Level 2. These sensors will require additional UL testing and are used in high security applications such as government buildings, military use, nuclear facilities, and financial institutions. Secondly, we have updated our small profile glass break detector, and thirdly, we have expanded the GR3045 panic switch to include single-pull, double-throw (SPDT) versions, latching and non-latching, with LED indicator lights.

Wireless technology is a main area of focus for product development. We are considering 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 monitoring devices which include glass break detection, tilt sensing, and environmental monitoring.

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, and income taxes.

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 credit losses based on an analysis of specifically identified customer balances. The Company has a limited number of customers, each with individually large amounts due on any given date. Any unanticipated change in any one of these customers' creditworthiness 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.

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 stockholders' 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 recorded 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 inventory that has not moved for 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.

Related Party Transactions - One of the directors of the board, Joel Wiens, was the principal shareholder of FirsTier Bank. After his death on March 8, 2026, this ownership transferred to his two sons, Tim and Tom Wiens. FirsTier Bank is the financial institution the Company uses for its day-to-day banking operations. The year-end balances of accounts held at this bank were $4,193,000 and $5,340,000 for the years ended April 30, 2026 and 2025, respectively. The Company also received interest income from FirsTier Bank in the amount of approximately $154,000 for the year ended April 30, 2026, and approximately $215,000 was received for the year ended April 30, 2025.