10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_________________

FORM 10-Q

_________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: April 30, 2019

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: _____________ to _____________

_________________

International Baler Corporation

(Exact name of registrant as specified in its charter)

_________________

Delaware	0-14443	13-2842053
(State or Other Jurisdiction of Incorporation or Organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

5400 Rio Grande Avenue, Jacksonville, FL 32254

(Address of Principal Executive Offices) (Zip Code)

904-358-3812

(Registrant’s telephone number, including area code)

N/A
(Former name or former address and former fiscal year, if changed since last report)

_________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 ☒  No ☐  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.)

Yes ☐  No ☒

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes ☐  No ☐

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 5,183,895 shares of common stock at May 31, 2019.

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INTERNATIONAL BALER CORPORATION

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION	3
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets as of April 30, 2019, (unaudited) and October 31, 2018	3
Statements of Income for the three months and six months ended April 30, 2019 and 2018 (unaudited)	4
Statements of Stockholders’ Equity for the six months ended April 30, 2019 (unaudited)	5
Statements of Cash Flows for the six months ended April 30, 2019 and 2018 (unaudited)	6
Notes to Financial Statements (unaudited)	7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	14
ITEM 4. CONTROLS AND PROCEDURES	14
PART II. OTHER INFORMATION	15
ITEM 1. LEGAL PROCEEDINGS	15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	16
ITEM 5. OTHER INFORMATION	17
ITEM 6. EXHIBITS	17
SIGNATURES	18

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS 

INTERNATIONAL BALER CORPORATION
CONDENSED BALANCE SHEETS
		April 30, 2019			October 31, 2018
		Unaudited
ASSETS
Current assets:
Cash and cash equivalents	$	4,038,598		$	4,733,510
Accounts receivable, net of allowance for doubtful accounts of $15,000 at April 30, 2019 and at October 31, 2018		824,883			556,666
Inventories		4,212,587			4,257,085
Prepaid expense and other current assets		73,595			166,604
Total current assets		9,149,663			9,713,865
Property, plant and equipment, at cost:		4,307,505			4,092,153
Less: accumulated depreciation		2,926,678			2,821,448
Net property, plant and equipment		1,380,827			1,270,705
Other assets
Deferred income taxes		61,494			61,494
Total other assets		61,494			61,494
TOTAL ASSETS	$	10,591,984		$	11,046,064
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	560,880		$	581,651
Accrued liabilities		265,164			386,416
Customer deposits		599,445			894,579
Total current liabilities		1,425,489			1,862,646
Total liabilities		1,425,489			1,862,646
Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock, par value $.0001, 10,000,000 shares authorized, none issued		—			—
Common stock, par value $.01, 25,000,000 shares authorized;6,429,875 shares issued		64,299			64,299
Additional paid-in capital		6,419,687			6,419,687
Retained earnings		3,363,919			3,380,842
		9,847,905			9,864,828
Less:Treasury stock, 1,245,980 shares, at cost		(681,410	)		(681,410	)
Total stockholders' equity		9,166,495			9,183,418
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	10,591,984		$	11,046,064
See accompanying notes to financial statements.

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INTERNATIONAL BALER CORPORATION
CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED APRIL 30, 2019 AND 2018
UNAUDITED
	Three Months					Six Months
		2019		2018			2019			2018
Net sales:
Equipment	$	2,199,466	$	1,176,241		$	3,858,690		$	4,434,151
Parts and service		715,085		786,391			1,525,117			1,539,117
Total net sales		2,914,551		1,962,632			5,383,807			5,973,268
Cost of sales		2,535,028		1,758,354			4,718,585			5,200,227
Gross profit		379,523		204,278			665,222			773,041
Operating expense:
Selling expense		142,208		115,866			253,019			215,534
Administrative expense		236,349		157,956			436,946			322,335
Total operating expense		378,557		273,822			689,965			537,869
Operating income (loss)		966		(69,544	)		(24,743	)		235,172
Other income (expense):
Interest income		899		1,072			1,820			4,045
Interest expense		—		—			—			—
Total other income		899		1,072			1,820			4,045
Income (loss) before income taxes		1,865		(68,472	)		(22,923	)		239,217
Income tax provision (benefit)		—		(16,000	)		(6,000	)		93,000
Net income (loss)	$	1,865	$	(52,472	)	$	(16,923	)	$	146,217
Income (loss) per share, basic and diluted	$	0.00	$	(0.01	)	$	(0.00	)	$	0.03
Weighted average number of shares outstanding		5,183,895		5,183,895			5,183,895			5,183,895
See accompanying notes to financial statements.

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INTERNATIONAL BALER CORPORATION
CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS AND SIX MONTHS ENDED APRIL 30, 2019 AND 2018
UNAUDITED
	Six Months Ended
	2019			2018
Common Stock
Balance beginning and end of period	$	64,299		$	64,299
Additional Paid In Capital
Balance beginning and end of period	$	6,419,687		$	6,419,687
Retained Earning
Balance beginning of period	$	3,380,842		$	3,070,613
Net income (loss)		(16,923	)		146,217
Balance end of period	$	3,363,919		$	3,216,830
Treasury Stock
Shares beginning and end of period		1,245,980			1,245,980
Cost	$	(681,410	)	$	(681,410	)
Total Stockholders Equity
Balance beginning of period	$	9,183,418		$	8,873,189
Net income (loss)		(16,923	)		146,217
Balance end of period	$	9,166,495		$	9,019,406
See accompanying notes to financial statements.

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INTERNATIONAL BALER CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 2019 AND 2018
UNAUDITED
		2019			2018
Cash flow from operating activities:
Net (loss) income	$	(16,923	)	$	146,217
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization		105,230			97,000
Deferred income taxes		—			10,373
Changes in operating assets and liabilities:
Accounts receivable		(268,217	)		311,074
Inventories		44,498			751,525
Prepaid expenses and other assets		93,009			(173,124	)
Income taxes receivable		—			126,886
Accounts payable		(20,771	)		(229,494	)
Accrued liabilities		(121,252	)		(105,030	)
Customer deposits		(295,134	)		(999,467	)
Net cash used in operating activities		(479,560	)		(64,040	)
Cash flows from investing activities:
Purchase of property and equipment		(215,352	)		(83,444	)
Net cash used in investing activities		(215,352	)		(83,444	)
Net decrease in cash and cash equivalents		(694,912	)		(147,484	)
Cash and cash equivalents at beginning of period		4,733,510			4,541,767
Cash and cash equivalents at end of period	$	4,038,598		$	4,394,283
Supplemental disclosure of cash flow information:
Cash paid during period for:
Interest	$	—		$	—
Income taxes	$	—		$	125,000
See accompanying notes to financial statements.

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NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

1. Nature of Business:

International Baler Corporation (the “Company”) is a manufacturer of baling equipment which is designed to compress a variety of materials into bales for easier handling, shipping, disposal, storage, and for recycling. Materials commonly baled include scrap metal, corrugated boxes, newsprint, aluminum cans, plastic bottles, and other solid waste. More sophisticated applications include baling of textile materials, fibers and synthetic rubber. The Company offers a wide variety of balers, standard models as well as custom models, and conveyors to meet specific customer requirements.

The Company’s customers include recycling facilities, distribution centers, textile mills, and companies which generate the materials for baling and recycling. The Company sells its products worldwide with annual sales outside the United States typically ranging from 10% to 35%.

2. Basis of Presentation:

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information in footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. Operating results for the six-month period ended April 30, 2019 are not necessarily indicative of the results that may be expected for the year ending October 31, 2019. The accompanying balance sheet as of October 31, 2018 was derived from the audited financial statements as of October 31, 2018.

These unaudited condensed financial statements and notes thereto should be read in conjunction with the Management’s Discussion and the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended October 31, 2018.

3. Summary of Significant Accounting Policies:

(a) Accounts Receivable & Allowance for Doubtful Accounts:

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable. The Company reviews its allowance for doubtful accounts monthly including the analysis of historical trends, customer credit worthiness and the aging of receivables. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

(b) Inventories:

Inventories are stated at the lower of cost and net realizable value. Cost is determined by a method that approximates the first-in, first-out method. Work in process and finished goods are valued based on underlying costs to manufacture balers which include direct materials, direct and indirect labor, and overhead. The Company reviews inventory for obsolescence on a regular basis.

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(c) Warranties and Service:

The Company typically warrants its products for one (1) year from the date of sale as to materials, three (3) years for structural damage and six (6) months as to labor, and offers services for other required repairs and maintenance. Service is rendered by repairing or replacing parts at the Company’s Jacksonville, Florida facility, by on-site service provided by Company personnel who are based in Jacksonville, Florida or by local service agents who are engaged as needed. The Company maintains an accrued liability for expected warranty claims. The warranty accrual is based on historical warranty costs, the quantity and types of balers currently under warranty, and known warranty issues.

Following is a tabular reconciliation of the changes in the warranty accrual for the six-month period ended April 30:

	2019			2018
Beginning balance	$	80,000		$	70,000
Warranty service provided		(59,243	)		(60,491	)
New product warranties		38,587			44,342
Changes to pre-existing warranty accruals		10, 656			(16,149	)
Ending balance	$	70,000		$	70,000

(d) Fair Value of Financial Instruments:

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, short term certificates of deposit, accounts receivable, accounts payable, accrued liabilities, and customer deposits, approximate their fair value due to the short-term nature of these assets and liabilities.

(e) Recent Accounting Pronouncements:

Recently Adopted Accounting Pronouncements:

In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740), Amendment to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update), ("ASU-2015-05"). ASU 2018-05 amends certain Securities and Exchange Commission (“SEC”) guidance under Topic 740 related to the Tax Cuts and Jobs Act of 2017. It also adds guidance to the FASB Accounting Standards Codification that answers questions regarding how certain income tax effects from the Tax Cuts and Jobs Act of 2017 should be applied to companies’ financial statements. The guidance lists which financial statement disclosures are required under a measurement period approach. ASU 2018-05 was effective immediately and the Company made the disclosures required by ASU 2018-05 in Note 8 - Income Taxes.

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In May 2014, the FASB issued ASU 2014-09 establishing Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. The Company adopted this standard effective November 1, 2018 using the modified retrospective approach, which requires applying the new standard to all existing contracts not yet completed as of the effective date and recording a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Based on an evaluation of the impact ASC 606 the Company concluded that ASC 606 did not have a material impact on the process for, timing of, and presentation and disclosure of revenue recognition from customers therefore the Company did not record a cumulative transition adjustment.

Recently Issued Accounting Pronouncements Not Yet Adopted:

In February 2016, the FASB issued ASU No. 2016-02, Leases, ("ASU 2016-02"). ASU 2016-02 requires lessees to recognize assets and liabilities for most leases. All leases will be required to be recorded on the balance sheet with the exception of short-term leases. Early application is permitted. The guidance must be adopted using a modified retrospective transition method. ASU 2016-02 is effective for financial statements issued for annual periods beginning after December 15, 2018, and interim periods within those annual periods. ASU 2016-02 will therefore be effective in our fiscal year beginning November 1, 2019. We are evaluating the effect that ASU 2016-02 will have on our financial statements and related disclosures, however, we do not expect it to be material as we are not party to a significant number of leases. The Company has not yet selected a transition method.

4. Revenue from Contracts with Customers:

a) Overview

The Company adopted ASC 606 on November 1. 2018. The Company recognizes revenues from the sale of finished products upon shipment and the transfer of control to the customer. The other elements may include installation and, generally, a one-year warranty. Equipment installation revenue is valued based on estimated service person hours to complete installation and is recognized when the labor has been completed and the equipment has been accepted by the customer, which is generally within a couple days of the delivery of the equipment. Warranty revenue, if sold separately, is valued based on estimated service person hours to complete a service and generally is recognized over the contract period.

All other product sales with customer specific acceptance provisions are recognized at a point in time upon customer acceptance and the delivery of the parts or service. Revenues related to spare part sales are recognized upon shipment or delivery based on the trade terms.

Generally, pricing is fixed and the majority of the Company’s contracts have short duration and a single performance obligation to deliver a configured to order baler and related equipment to the customer. The Company has elected to expense shipping and handling costs as incurred.

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b) Disaggregation of Revenue

Disaggregated revenue is by primary geographic market is as follows:

Equipment Revenue by Geographic Area	Six Months Ended April 30, 2019
United States	$	3,542,040
International		316,650
Total	$	3,858,690

c) Contract Balances

Contract balances include accounts receivable and contract liabilities. Contract liabilities are reported as Customer Deposits on the accompanying Balance Sheets and consist of advances or deposits from customers before revenue is recognized. The change in contract liabilities is due to the timing of customer deposits for baler orders offset by customer deposits recognized as revenue during the period.

The Company does not record contract assets because the construction of a configured to order baler does not create an asset with an alternative use to the Company. The Company expenses incremental costs of obtaining or fulfilling a contract.

5. Related Party Transactions:

The Estate of Leland E. Boren is a stockholder of the Company and is the owner of Avis Industrial Corporation (Avis). The Estate controls over 80% of the outstanding shares of the Company. Avis owns 100% of The American Baler Company, a competitor of the Company. On January 1, 2014, Avis acquired The Harris Waste Management Group, Inc. (Harris), also a competitor of the Company. On July 31, 2014 Harris acquired the assets of IPS Balers, Inc. in Baxley, Georgia, another competitor of the Company. These baler companies operate completely independent of each other. The company had no purchases from these companies in the six months of fiscal 2019 and in the fiscal year ending October 31, 2018. The Company had no sales to The American Baler Company in the six months of fiscal 2019 and in the fiscal year ended October 31, 2018. The Company sold five closed door horizontal balers and one conveyor to Harris Waste Management for $295,032 in fiscal 2018 and had no sales to Harris Waste Management in the six months of fiscal 2019.

6. Inventories:

Inventories consisted of the following:

	April 30, 2019		October 31, 2018
Raw materials	$	2,096,209	$	1,901,707
Work in process		1,833,663		2,166,663
Finished goods		282,715		188,715
	$	4,212,587	$	4,257,085

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7. Debt:

The Company has a $1,650,000 line of credit agreement with First Merchants Bank of Muncie, Indiana which was renewed on May 15, 2019. The line of credit allows the Company to borrow at an interest rate equal to the Wall Street Journal prime rate minus 0.95%, adjusting daily. The line of credit is secured by all assets of the Company and expires on May 15, 2020. The line of credit had no outstanding balance at April 30, 2019 and at October 31, 2018.

8. Income Taxes:

Tax assets are recognized in the balance sheet if it is more likely than not that they will be realized on future tax returns. Factors considered included, historical results of operations, volatility of the economic conditions and projected earnings based on current operations. Based on this evidence, it is more likely than not that the deferred tax assets would be realized. Accordingly, there is no valuation allowance as of April 30, 2019 and at October 31, 2018. However, if it is determined that all or part of the deferred tax assets will not be used in the future, an adjustment to the deferred tax assets would be charged against net income in the period such determination is made. As of April 30, 2019 and October 31, 2018, net deferred tax assets were $61,494.

The Company records interest related to unrecognized tax benefits in interest expense and penalties in selling, general, and administrative expenses.

The Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into United States tax law on December 22, 2017. The Act makes significant changes to the U.S. corporate income tax system, including a Federal corporate rate reduction from 35% to 21%, and changes in business-related exclusions, and deductions and credits. As a result of the income tax rate reduction, the Company recorded a reduction of net deferred income tax assets of approximately $10,000 during the first quarter of the fiscal year ending October 31, 2018.

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9. Commitments and Contingencies:

The Company, in the ordinary course of business, is subject to claims made, and from time to time is named as a defendant in legal proceedings relating to the sales of its products. The Company believes that the reserves reflected in its financial statements are adequate to pay losses and loss adjustment expenses which may result from such claims and proceedings; however, such estimates may be more or less than the amount ultimately paid when the claims are settled. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity.

On December 1, 2017 the Company was served with a complaint related to an injury to an employee working at Integrated Coating and Seed Technology Inc.,(INCOTEC). The employee was operating a baler manufactured by the Company in 1994. The injury occurred on December 4, 2015. The plaintiff is Star Insurance Company. The Company’s insurer has retained an attorney and has begun the discovery process. The Company believes its exposure is $25,000, the amount of the Company’s deductible on its insurance policy. Accordingly, the Company accrued $25,000 during the six months ended April 30, 2018.

In December 2018 the Company discovered an employee theft of Company property. At the date of this report the Company has researched what items were stolen and our estimate is that the value of the stolen items was approximately $200,000. Since the Company conducts a physical inventory at the end of each fiscal year, any losses incurred for the fiscal year ended October 31, 2018 would have been reflected in the operating results of the Company for that fiscal year. The Company carries Crime Insurance which has an upper limit of $1,000,000 and a deductible of $25,000. In May 2019 the Company’s insurer approved the claim and agreed to reimburse the Company $175,841.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this Quarterly Report on Form 10-Q, the terms “Company,” “we,” “us,” and “our,” refer to International Baler Corporation.

Forward Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding  industry prospects or future results of operations or financial position, made in this Quarterly Report on Form 10-Q are forward-looking. We use words such as anticipates, believes, expects, future, intends, and similar expressions to identify forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Actual results could differ materially for a variety of reasons, including, but not limited to, changes in general economic conditions, changing competition and our ability to market and sell our commercial and industrial balers. These risks and uncertainties, as well as other risks and uncertainties, could cause our actual results to differ significantly from management’s expectations. The forward-looking statements included in this Quarterly Report on Form 10-Q reflect the beliefs of our management on the date of this Quarterly Report. We undertake no obligation to update publicly any forward-looking statements for any reason.

General

The following discussion should be read together with our unaudited condensed financial statements and the related notes thereto included in Part I, Item 1 “Financial Statements”. For further information, refer to the Company’s Annual Report on Form 10-K for the year ended October 31, 2018, and the Management Discussion and Analysis of Financial Condition and Results of Operations included in this Form 10-Q.

Results of Operations: Three Month Comparison

In the second quarter ended April 30, 2019, the Company had net sales of $2,914,551 compared to net sales of $1,962,632 in the second quarter of fiscal 2018. The increase in net sales was primarily the result of higher shipments of two-ram balers in the second quarter of fiscal 2019, four in 2019 ($1,182,635), compared to two in the second quarter of fiscal 2018 ($324,906).

The Company had a net income of $1,865, in the second quarter of fiscal 2019, compared to a net loss of $52,472 in the second quarter fiscal 2018. The higher net income was the result of the higher sales and gross profit offset by higher selling and administrative expenses.

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Results of Operations: Six Month Comparison

The Company had net sales of $5,383,807 in the first six months of fiscal 2019, compared to net sales of $5,973,268 in the same period of 2019. The lower net sales was the result of lower sales of auto-tie balers, two in fiscal 2019 versus twelve in the first six months of 2019. This was partially offset by higher sales of two-ram balers in the first six months of 2019, six, versus two in the first six months of 2018.

The Company had a net loss of $16,923 in the first six months of fiscal 2019, compared to net income of $146,217. The decrease in net income was the result of lower shipments and higher selling and administrative expense.

The sales order backlog was approximately $1,820,000 at April 30, 2019 and $1,330,000 at April 30, 2018.

Financial Condition and Liquidity:

Net working capital at April 30, 2019 was $7,724,174 as compared to $7,851,219 at October 31, 2018. The Company currently believes that it will have sufficient cash flow to be able to fund operating activities for the next twelve months.

Average days sales outstanding (DSO) in the first six months of fiscal 2019 were 22.9 days, as compared to 23.6 days in the first six months of fiscal 2018. DSO is calculated by dividing the total of the month-end net accounts receivable balances for the period by three, and dividing that result by the average day’s sales for the period (period sales ÷ 181).

During the six months ended April 30, 2019 and 2018, the Company made additions to plant and equipment of $215,352 and $83,344 respectively.

The Company has a $1,650,000 line of credit agreement with First Merchants Bank of Muncie, Indiana which was renewed on May 15, 2019. The line of credit allows the Company to borrow at an interest rate equal to the Wall Street Journal prime rate minus 0.95%, adjusting daily. The line of credit is secured by all assets of the Company and expires on May 15, 2020. The line of credit had no outstanding balance at April 30, 2019 and at October 31, 2018.

In the event that the Company’s line of credit would not be available, the Company would pursue a line of credit from other sources, and take steps to minimize expenditures, such as delaying capital expenditures and reducing overhead costs.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to changes in interest rates as a result of its financing activities, including its borrowings on the revolving line of credit facility. Based on the current level of borrowings, a change in interest rates is not expected to have a material effect on operations or financial position.

ITEM 4. CONTROLS AND PROCEDURES

Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosures.

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As of April 30, 2019, the end of the period covered by this Quarterly Report on Form 10-Q, and under the supervision and with the participation of the management, including the Company’s CEO and CFO, management evaluated the effectiveness of the Company’s disclosure controls and procedures. Based on this evaluation and subject to the foregoing, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective.

Management, with the participation of the Company’s principal executive and principal financial officers, also assessed the effectiveness of the Company’s internal control over financial reporting as of April 30, 2019. This assessment was performed using the criteria established under the Internal Control-Integrated Framework established by Committee of Sponsoring Organization of the Treadway Commission (“COSO”).

The Company previously reported a material weakness in certain purchasing and inventory controls in its Annual Report on Form 10-K for the year ending October 31, 2018. During the period ended April 30, 2019, management made certain improvements to purchasing controls, logical access controls to inventory records, and physical access to inventory items. Management believes the control improvements that have been initiated have fully remediated the control weakness previously reported and that and that internal controls over financial reporting were effective as of April 30, 2019.

In designing and evaluating the control systems, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control over Financial Reporting

The Company’s management, including CEO and CFO, confirm that there were no changes in the Company’s internal control over financial reporting during the fiscal quarter ended April 30, 2019, other than those related to the material weakness described above, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On December 1, 2017 the Company was served with a complaint related to an injury to an employee working at Integrated Coating and Seed Technology Inc., (INCOTEC). The employee was operating a baler manufactured by the Company in 1994. The injury occurred on December 4, 2015. The plaintiff is Star Insurance Company. The Company’s insurer has retained an attorney and has begun the discovery process. The Company believes its exposure is a range of $0 to $25,000, the amount of the Company’s deductible on its insurance policy. Accordingly, the Company accrued $25,000 during the six months ended April 30, 2018.

15

ITEM 4. Submission of Matters to a Vote of Security Holders

The Company held its Annual Meeting on April 22, 2019. As of the close of business on March 11, 2019, the record date for the Annual Meeting, there were 5,183,895 shares of Company common stock outstanding and entitled to vote at the Annual Meeting. Each share of Company common stock was entitled to one vote. Stockholders holding an aggregate of 5,029,337 shares of Company common stock entitled to vote at the Annual Meeting, representing 97.017% of the outstanding shares of Company common stock as of the record date, and which constituted a quorum thereof, were present in person or represented by proxy at the Annual Meeting.

At the Annual Meeting, the Company’s stockholders considered four proposals, each of which is described in more detail in the Company’s definitive proxy statement for the Annual Meeting filed with the Securities and Exchange Commission on March 21, 2019.

The final results of such stockholder voting on each proposal brought before the Annual Meeting are set forth below:

Proposal No. 1 - Election of Class III Directors. The three director nominees proposed by the Board were elected to serve as members of the Board until the next annual meeting of stockholders and until their successors are duly elected and qualified by the following final voting results:

	Votes For		Votes Withheld		Broker Non-Votes
Lael E. Boren		4,589,092		4,600		435,645
John Martorana		4,592,192		2,500		435,645
William E. Nielsen		4,590,092		3,600		435,645

Proposal No. 2 - Ratification of Appointment of Independent Registered Public Accounting Firm. The ratification of the appointment of Pivot CPA’S as the Company’s independent registered public accounting firm for the year ending October 31, 2019, was approved by the following final voting results:

Votes For		Votes Against		Votes Abstained		Broker Non-Votes
	5,026,915		1,630		792		—

Proposal No. 3 - Advisory Vote on Executive Compensation. Our executive compensation was approved, on an advisory basis, by the following final voting results:

Votes For		Votes Against		Votes Abstained		Broker Non-Votes
	4,475,394		115,036		3,262		435,645

Proposal No. 4 - Advisory Vote on Frequency of Executive Compensation.

The frequency of three years for future advisory votes on executive compensation was approved, on an advisory basis, by the following voting results:

One Year		Two Years		Three Years		Votes Abstained		Broker Non-Votes
	30,192		6,300		4,553,164		4,036		435,645

In accordance with the results of the advisory vote on Proposal 4 - Advisory Vote on Frequency of Future Advisory Votes on Executive Compensation, the Company’s Board of Directors has determined that the Company will conduct an advisory vote on say-on-pay every three years.

16

ITEM 5. OTHER INFORMATION

On January 10, 2017 Roger Griffin resigned as President, Chief Executive Officer and Director of International Baler Corporation. Mr. Griffin resigned in order to pursue other interests. The Board of Directors named William E. Nielsen, the Company’s Chief Financial Officer, to the position of President and Chief Executive Officer. Mr. Nielsen has been the Company’s Chief Financial Officer since 1994. On October 1, 2018 the Board of Directors of International Baler Corporation named Victor W. Biazis President and Chief Executive Officer of the Company. Mr. Nielsen remains the Chief Financial Officer of the Company.

On November 23, 2018, Leland E. Boren, a Director of the Company, passed away. Mr. Boren’s Estate is the largest shareholder of the Company.

ITEM 6. EXHIBITS

The following exhibits are submitted herewith:

Exhibit	Description
31.1	Certification of Victor W. Biazis, Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a–14(a)/15d-14(a).
31.2	Certification of William E. Nielsen, Chief Financial, pursuant to Rule 13a-14(a)/15d-14(a).
32.1	Certification of Victor W. Biazis, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of William E. Nielsen, Chief Financial Officer, pursuant To 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

17

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned there unto duly authorized.

		INTERNATIONAL BALER CORPORATION
Dated: June 14, 2019	By:	/s/ Victor W. Biazis
		Victor W. Biazis
		Chief Executive Officer
Dated: June 14, 2019	By:	/s/ William E. Nielsen
		William E. Nielsen
		Chief Financial Officer

18

EX-31.1

Exhibit 31.1

I, Victor W. Biazis, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended April 30, 2019 of International Baler Corp.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation.

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting, and

5. The registrants certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

		INTERNATIONAL BALER CORPORATION
Dated: June 14, 2019	By:	/s/ Victor W. Biazis
		Victor W. Biazis
		Chief Executive Oficer

EX-31.2

Exhibit 31.2

I, William E. Nielsen, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended April 30, 2019 of International Baler Corp.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation.

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting, and

5. The registrants certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

		INTERNATIONAL BALER CORPORATION
Dated: June 14, 2019	By:	/s/ William E. Nielsen
		William E. Nielsen
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 I hereby certify that:

I have reviewed the Quarterly Report of International Baler Corp. on Form 10-Q for the quarter ended April 30, 2019 (the “Report”);

To the best of my knowledge, the Report (i) fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and (ii) the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of International Baler Corporation during the period covered by this Report.

		INTERNATIONAL BALER CORPORATION
Dated: June 14, 2019	By:	/s/ Victor W. Biazis
		Victor W. Biazis
		Chief Executive Oficer

EX-32.2

Exhibit 32.2

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 I hereby certify that:

I have reviewed the Quarterly Report of International Baler Corp. on Form 10-Q for the quarter ended April 30, 2019 (the “Report”);

To the best of my knowledge, the Report (i) fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and (ii) the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of International Baler Corporation during the period covered by this Report.

		INTERNATIONAL BALER CORPORATION
Dated: June 14, 2019	By:	/s/ William E. Nielsen
		William E. Nielsen
		Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Apr. 30, 2019	May 31, 2019
Document And Entity Information
Entity Registrant Name	International Baler Corporation
Entity Central Index Key	0000781902
Document Type	10-Q
Document Period End Date	Apr. 30, 2019
Amendment Flag	false
Current Fiscal Year End Date	--10-31
Is Entity's Reporting Status Current?	Yes
Is Entity Smaller Reporting Company?	true
Is Entity Emerging Growth Company?	false
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		5,183,895
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2019
Is Entity Shell Company?	false

XML

Condensed Balance Sheets (Unaudited) - USD ($)	Apr. 30, 2019	Oct. 31, 2018
Current assets:
Cash and cash equivalents	$ 4,038,598	$ 4,733,510
Accounts receivable, net of allowance for doubtful accounts of $15,000 at April 30, 2019 and at October 31, 2018	824,883	556,666
Inventories	4,212,587	4,257,085
Prepaid expense and other current assets	73,595	166,604
Total current assets	9,149,663	9,713,865
Property, plant and equipment, at cost	4,307,505	4,092,153
Less: accumulated depreciation	2,926,678	2,821,448
Net property, plant and equipment	1,380,827	1,270,705
Other assets:
Deferred income taxes	61,494	61,494
Total other assets	61,494	61,494
TOTAL ASSETS	10,591,984	11,046,064
Current liabilities:
Accounts payable	560,880	581,651
Accrued liabilities	265,164	386,416
Customer deposits	599,445	894,579
Total current liabilities	1,425,489	1,862,646
Total liabilities	1,425,489	1,862,646
Stockholders' equity:
Preferred stock, par value $.0001, 10,000,000 shares authorized, none issued
Common stock, par value $.01, 25,000,000 shares authorized; 6,429,875 shares issued	64,299	64,299
Additional paid-in capital	6,419,687	6,419,687
Retained earnings	3,363,919	3,380,842
Total stockholders' equity before treasury stock	9,847,905	9,864,828
Less: Treasury stock, 1,245,980 shares, at cost	(681,410)	(681,410)
Total stockholders' equity	9,166,495	9,183,419
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 10,591,984	$ 11,046,064

XML

Condensed Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Apr. 30, 2019	Oct. 31, 2018
Current Assets:
Accounts receivable, net of allowance for doubtful accounts	$ 15,000	$ 15,000
Stockholders' equity:
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, share authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Common stock, par value	$ .01	$ 0.01
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares issued	6,429,875	6,429,875
Treasury stock, shares	1,245,980	1,245,980

XML

Condensed Statements of Income (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Apr. 30, 2019	Apr. 30, 2018	Apr. 30, 2019	Apr. 30, 2018
Net sales:
Equipment	$ 3,858,690	$ 4,434,151	$ 2,199,466	$ 1,176,241
Parts and service	1,525,117	1,539,117	715,085	786,391
Total net sales	5,383,807	5,973,268	2,914,551	1,962,632
Cost of sales	4,718,585	5,200,227	2,535,028	1,758,354
Gross profit	665,222	773,041	379,523	204,278
Operating expense:
Selling expense	253,019	215,534	142,208	115,866
Administrative expense	436,946	322,335	236,349	157,956
Total operating expense	689,965	537,869	378,557	273,822
Operating income (loss)	(24,743)	235,172	966	(69,544)
Other income (expense):
Interest income	1,820	4,045	899	1,072
Interest expense
Total other income	1,820	4,045	899	1,072
Income (loss) before income taxes	(22,923)	239,217	1,865	(68,472)
Income tax provision (benefit)	(6,000)	93,000		(16,000)
Net income (loss)	$ (16,923)	$ 146,217	$ 1,865	$ (52,472)
Income (loss) per share, basic and diluted	$ (0.00)	$ 0.03	$ 0.00	$ (0.01)
Weighted average number of shares outstanding	5,183,895	5,183,895	5,183,895	5,183,895

XML

Condensed Statements of Stockholders' Equity (Unaudited) - USD ($)	Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Stock	Cost	Total
Beginning Balace, Shares at Oct. 31, 2017				1,245,985
Beginning Balance, Value at Oct. 31, 2017	$ 64,299	$ 6,419,687	$ 3,070,613		$ (681,410)	$ 8,873,189
Net Income			146,217			(52,472)
End Balance, Shares at Apr. 30, 2018				1,245,980
End Balance, Value at Apr. 30, 2018	64,299	6,419,687	3,216,830		(681,410)	9,019,406
Beginning Balace, Shares at Oct. 31, 2018				1,245,980
Beginning Balance, Value at Oct. 31, 2018	64,299	6,419,687	3,380,842		(681,410)	9,183,419
Net Income			(16,923)			1,865
End Balance, Shares at Apr. 30, 2019				1,245,980
End Balance, Value at Apr. 30, 2019	$ 64,299	$ 6,419,687	$ 3,363,919		$ (681,410)	$ 9,166,495

XML

Condensed Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Apr. 30, 2019	Apr. 30, 2018
Cash flow from operating activities:
Net (loss) income	$ 1,865	$ (52,472)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	105,230	97,000
Deferred income taxes		10,373
Changes in operating assets and liabilities:
Accounts receivable	(268,217)	311,074
Inventories	44,498	751,525
Prepaid expenses and other assets	93,009	(173,124)
Income taxes receivable		126,886
Accounts payable	(20,771)	(229,494)
Accrued liabilities	(121,252)	(105,030)
Customer deposits	(295,134)	(999,467)
Net cash used in operating activities	(479,560)	(64,040)
Cash flows from investing activities:
Purchase of property and equipment	(215,352)	(83,444)
Net cash used in investing activities	(215,352)	(83,444)
Net decrease in cash and cash equivalents	(694,912)	(147,484)
Cash and cash equivalents at beginning of period	4,733,510	4,541,767
Cash and cash equivalents at end of period	4,038,598	4,394,283
Cash paid during period for:
Interest
Income taxes		$ 125,000

XML

Nature of Business

6 Months Ended

Apr. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business:

1. Nature of Business:

International Baler Corporation (the “Company”) is a manufacturer of baling equipment which is designed to compress a variety of materials into bales for easier handling, shipping, disposal, storage, and for recycling. Materials commonly baled include scrap metal, corrugated boxes, newsprint, aluminum cans, plastic bottles, and other solid waste. More sophisticated applications include baling of textile materials, fibers and synthetic rubber. The Company offers a wide variety of balers, standard models as well as custom models, and conveyors to meet specific customer requirements.

The Company’s customers include recycling facilities, distribution centers, textile mills, and companies which generate the materials for baling and recycling. The Company sells its products worldwide with annual sales outside the United States typically ranging from 10% to 35%.

XML

Basis of Presentation

6 Months Ended

Apr. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation

2. Basis of Presentation:

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information in footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. Operating results for the six-month period ended April 30, 2019 are not necessarily indicative of the results that may be expected for the year ending October 31, 2019. The accompanying balance sheet as of October 31, 2018 was derived from the audited financial statements as of October 31, 2018.

These unaudited condensed financial statements and notes thereto should be read in conjunction with the Management’s Discussion and the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended October 31, 2018.

XML

Summary of Significant Accounting Policies

6 Months Ended

Apr. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

3. Summary of Significant Accounting Policies:

(a) Accounts Receivable & Allowance for Doubtful Accounts:

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable. The Company reviews its allowance for doubtful accounts monthly including the analysis of historical trends, customer credit worthiness and the aging of receivables. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

(b) Inventories:

Inventories are stated at the lower of cost and net realizable value. Cost is determined by a method that approximates the first-in, first-out method. Work in process and finished goods are valued based on underlying costs to manufacture balers which include direct materials, direct and indirect labor, and overhead. The Company reviews inventory for obsolescence on a regular basis.

(c) Warranties and Service:

The Company typically warrants its products for one (1) year from the date of sale as to materials, three (3) years for structural damage and six (6) months as to labor, and offers services for other required repairs and maintenance. Service is rendered by repairing or replacing parts at the Company’s Jacksonville, Florida facility, by on-site service provided by Company personnel who are based in Jacksonville, Florida or by local service agents who are engaged as needed. The Company maintains an accrued liability for expected warranty claims. The warranty accrual is based on historical warranty costs, the quantity and types of balers currently under warranty, and known warranty issues.

Following is a tabular reconciliation of the changes in the warranty accrual for the six-month period ended April 30:

	2019			2018
Beginning balance	$	80,000		$	70,000
Warranty service provided		(59,243	)		(60,491	)
New product warranties		38,587			44,342
Changes to pre-existing warranty accruals		10, 656			(16,149	)
Ending balance	$	70,000		$	70,000

(d) Fair Value of Financial Instruments:

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, short term certificates of deposit, accounts receivable, accounts payable, accrued liabilities, and customer deposits, approximate their fair value due to the short-term nature of these assets and liabilities.

(e) Recent Accounting Pronouncements:

Recently Adopted Accounting Pronouncements:

In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740), Amendment to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update), ("ASU-2015-05"). ASU 2018-05 amends certain Securities and Exchange Commission (“SEC”) guidance under Topic 740 related to the Tax Cuts and Jobs Act of 2017. It also adds guidance to the FASB Accounting Standards Codification that answers questions regarding how certain income tax effects from the Tax Cuts and Jobs Act of 2017 should be applied to companies’ financial statements. The guidance lists which financial statement disclosures are required under a measurement period approach. ASU 2018-05 was effective immediately and the Company made the disclosures required by ASU 2018-05 in Note 8 - Income Taxes.\

In May 2014, the FASB issued ASU 2014-09 establishing Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. The Company adopted this standard effective November 1, 2018 using the modified retrospective approach, which requires applying the new standard to all existing contracts not yet completed as of the effective date and recording a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Based on an evaluation of the impact ASC 606 the Company concluded that ASC 606 did not have a material impact on the process for, timing of, and presentation and disclosure of revenue recognition from customers therefore the Company did not record a cumulative transition adjustment.

Recently Issued Accounting Pronouncements Not Yet Adopted:

In February 2016, the FASB issued ASU No. 2016-02, Leases, ("ASU 2016-02"). ASU 2016-02 requires lessees to recognize assets and liabilities for most leases. All leases will be required to be recorded on the balance sheet with the exception of short-term leases. Early application is permitted. The guidance must be adopted using a modified retrospective transition method. ASU 2016-02 is effective for financial statements issued for annual periods beginning after December 15, 2018, and interim periods within those annual periods. ASU 2016-02 will therefore be effective in our fiscal year beginning November 1, 2019. We are evaluating the effect that ASU 2016-02 will have on our financial statements and related disclosures, however, we do not expect it to be material as we are not party to a significant number of leases. The Company has not yet selected a transition method.

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Revenue from Contracts with Customers

6 Months Ended

Apr. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customers

4. Revenue from Contracts with Customers:

a) Overview

The Company adopted ASC 606 on November 1. 2018. The Company recognizes revenues from the sale of finished products upon shipment and the transfer of control to the customer. The other elements may include installation and, generally, a one-year warranty. Equipment installation revenue is valued based on estimated service person hours to complete installation and is recognized when the labor has been completed and the equipment has been accepted by the customer, which is generally within a couple days of the delivery of the equipment. Warranty revenue, if sold separately, is valued based on estimated service person hours to complete a service and generally is recognized over the contract period.

All other product sales with customer specific acceptance provisions are recognized at a point in time upon customer acceptance and the delivery of the parts or service. Revenues related to spare part sales are recognized upon shipment or delivery based on the trade terms.

Generally, pricing is fixed and the majority of the Company’s contracts have short duration and a single performance obligation to deliver a configured to order baler and related equipment to the customer. The Company has elected to expense shipping and handling costs as incurred.

b) Disaggregation of Revenue

Disaggregated revenue is by primary geographic market is as follows:

Equipment Revenue by Geographic Area	Six Months Ended April 30, 2019
United States	$	3,542,040
International		316,650
Total	$	3,858,690

c) Contract Balances

Contract balances include accounts receivable and contract liabilities. Contract liabilities are reported as Customer Deposits on the accompanying Balance Sheets and consist of advances or deposits from customers before revenue is recognized. The change in contract liabilities is due to the timing of customer deposits for baler orders offset by customer deposits recognized as revenue during the period.

The Company does not record contract assets because the construction of a configured to order baler does not create an asset with an alternative use to the Company. The Company expenses incremental costs of obtaining or fulfilling a contract.

XML

Related Party Transactions

6 Months Ended

Apr. 30, 2019

Related Party Transactions [Abstract]

Related Party Transactions

5. Related Party Transactions:

The Estate of Leland E. Boren is a stockholder of the Company and is the owner of Avis Industrial Corporation (Avis). The Estate controls over 80% of the outstanding shares of the Company. Avis owns 100% of The American Baler Company, a competitor of the Company. On January 1, 2014, Avis acquired The Harris Waste Management Group, Inc. (Harris), also a competitor of the Company. On July 31, 2014 Harris acquired the assets of IPS Balers, Inc. in Baxley, Georgia, another competitor of the Company. These baler companies operate completely independent of each other. The company had no purchases from these companies in the six months of fiscal 2019 and in the fiscal year ending October 31, 2018. The Company had no sales to The American Baler Company in the six months of fiscal 2019 and in the fiscal year ended October 31, 2018. The Company sold five closed door horizontal balers and one conveyor to Harris Waste Management for $295,032 in fiscal 2018 and had no sales to Harris Waste Management in the six months of fiscal 2019.

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Inventories

6 Months Ended

Apr. 30, 2019

Inventory Disclosure [Abstract]

Inventories

6. Inventories:

Inventories consisted of the following:

	April 30, 2019		October 31, 2018
Raw materials	$	2,096,209	$	1,901,707
Work in process		1,833,663		2,166,663
Finished goods		282,715		188,715
	$	4,212,587	$	4,257,085

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Debt

6 Months Ended

Apr. 30, 2019

Debt Disclosure [Abstract]

Debt

7. Debt:

The Company has a $1,650,000 line of credit agreement with First Merchants Bank of Muncie, Indiana which was renewed on May 15, 2019. The line of credit allows the Company to borrow at an interest rate equal to the Wall Street Journal prime rate minus 0.95%, adjusting daily. The line of credit is secured by all assets of the Company and expires on May 15, 2020. The line of credit had no outstanding balance at April 30, 2019 and at October 31, 2018.

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Income Taxes

6 Months Ended

Apr. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

8. Income Taxes:

Tax assets are recognized in the balance sheet if it is more likely than not that they will be realized on future tax returns. Factors considered included, historical results of operations, volatility of the economic conditions and projected earnings based on current operations. Based on this evidence, it is more likely than not that the deferred tax assets would be realized. Accordingly, there is no valuation allowance as of April 30, 2019 and at October 31, 2018. However, if it is determined that all or part of the deferred tax assets will not be used in the future, an adjustment to the deferred tax assets would be charged against net income in the period such determination is made. As of April 30, 2019 and October 31, 2018, net deferred tax assets were $61,494.

The Company records interest related to unrecognized tax benefits in interest expense and penalties in selling, general, and administrative expenses.

The Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into United States tax law on December 22, 2017. The Act makes significant changes to the U.S. corporate income tax system, including a Federal corporate rate reduction from 35% to 21%, and changes in business-related exclusions, and deductions and credits. As a result of the income tax rate reduction, the Company recorded a reduction of net deferred income tax assets of approximately $10,000 during the first quarter of the fiscal year ending October 31, 2018.

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Commitments and Contingencies

6 Months Ended

Apr. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

9. Commitments and Contingencies:

The Company, in the ordinary course of business, is subject to claims made, and from time to time is named as a defendant in legal proceedings relating to the sales of its products. The Company believes that the reserves reflected in its financial statements are adequate to pay losses and loss adjustment expenses which may result from such claims and proceedings; however, such estimates may be more or less than the amount ultimately paid when the claims are settled. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity.

On December 1, 2017 the Company was served with a complaint related to an injury to an employee working at Integrated Coating and Seed Technology Inc.,(INCOTEC). The employee was operating a baler manufactured by the Company in 1994. The injury occurred on December 4, 2015. The plaintiff is Star Insurance Company. The Company’s insurer has retained an attorney and has begun the discovery process. The Company believes its exposure is $25,000, the amount of the Company’s deductible on its insurance policy. Accordingly, the Company accrued $25,000 during the six months ended April 30, 2018.

In December 2018 the Company discovered an employee theft of Company property. At the date of this report the Company has researched what items were stolen and our estimate is that the value of the stolen items was approximately $200,000. Since the Company conducts a physical inventory at the end of each fiscal year, any losses incurred for the fiscal year ended October 31, 2018 would have been reflected in the operating results of the Company for that fiscal year. The Company carries Crime Insurance which has an upper limit of $1,000,000 and a deductible of $25,000. In May 2019 the Company’s insurer approved the claim and agreed to reimburse the Company $175,841.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Apr. 30, 2019

Accounting Policies [Abstract]

Accounts Receivable and Allowance for Doubtful Accounts

(a) Accounts Receivable & Allowance for Doubtful Accounts:

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable. The Company reviews its allowance for doubtful accounts monthly including the analysis of historical trends, customer credit worthiness and the aging of receivables. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Inventories

(b) Inventories:

Inventories are stated at the lower of cost and net realizable value. Cost is determined by a method that approximates the first-in, first-out method. Work in process and finished goods are valued based on underlying costs to manufacture balers which include direct materials, direct and indirect labor, and overhead. The Company reviews inventory for obsolescence on a regular basis.

Warranties and Service

(c) Warranties and Service:

The Company typically warrants its products for one (1) year from the date of sale as to materials, three (3) years for structural damage and six (6) months as to labor, and offers services for other required repairs and maintenance. Service is rendered by repairing or replacing parts at the Company’s Jacksonville, Florida facility, by on-site service provided by Company personnel who are based in Jacksonville, Florida or by local service agents who are engaged as needed. The Company maintains an accrued liability for expected warranty claims. The warranty accrual is based on historical warranty costs, the quantity and types of balers currently under warranty, and known warranty issues.

Following is a tabular reconciliation of the changes in the warranty accrual for the six-month period ended April 30:

	2019			2018
Beginning balance	$	80,000		$	70,000
Warranty service provided		(59,243	)		(60,491	)
New product warranties		38,587			44,342
Changes to pre-existing warranty accruals		10, 656			(16,149	)
Ending balance	$	70,000		$	70,000

Fair Value of Financial Instruments

(d) Fair Value of Financial Instruments:

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, short term certificates of deposit, accounts receivable, accounts payable, accrued liabilities, and customer deposits, approximate their fair value due to the short-term nature of these assets and liabilities.

Recent Accounting Pronouncements

(e) Recent Accounting Pronouncements:

Recently Adopted Accounting Pronouncements:

In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740), Amendment to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update), ("ASU-2015-05"). ASU 2018-05 amends certain Securities and Exchange Commission (“SEC”) guidance under Topic 740 related to the Tax Cuts and Jobs Act of 2017. It also adds guidance to the FASB Accounting Standards Codification that answers questions regarding how certain income tax effects from the Tax Cuts and Jobs Act of 2017 should be applied to companies’ financial statements. The guidance lists which financial statement disclosures are required under a measurement period approach. ASU 2018-05 was effective immediately and the Company made the disclosures required by ASU 2018-05 in Note 8 - Income Taxes.

In May 2014, the FASB issued ASU 2014-09 establishing Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. The Company adopted this standard effective November 1, 2018 using the modified retrospective approach, which requires applying the new standard to all existing contracts not yet completed as of the effective date and recording a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Based on an evaluation of the impact ASC 606 the Company concluded that ASC 606 did not have a material impact on the process for, timing of, and presentation and disclosure of revenue recognition from customers therefore the Company did not record a cumulative transition adjustment.

Recently Issued Accounting Pronouncements Not Yet Adopted:

In February 2016, the FASB issued ASU No. 2016-02, Leases, ("ASU 2016-02"). ASU 2016-02 requires lessees to recognize assets and liabilities for most leases. All leases will be required to be recorded on the balance sheet with the exception of short-term leases. Early application is permitted. The guidance must be adopted using a modified retrospective transition method. ASU 2016-02 is effective for financial statements issued for annual periods beginning after December 15, 2018, and interim periods within those annual periods. ASU 2016-02 will therefore be effective in our fiscal year beginning November 1, 2019. We are evaluating the effect that ASU 2016-02 will have on our financial statements and related disclosures, however, we do not expect it to be material as we are not party to a significant number of leases. The Company has not yet selected a transition method.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Apr. 30, 2019

Accounting Policies [Abstract]

Warranty Accrual

	2019			2018
Beginning balance	$	80,000		$	70,000
Warranty service provided		(59,243	)		(60,491	)
New product warranties		38,587			44,342
Changes to pre-existing warranty accruals		10, 656			(16,149	)
Ending balance	$	70,000		$	70,000

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Revenue from Contracts with Customers (Tables)

6 Months Ended

Apr. 30, 2019

Revenue from Contract with Customer [Abstract]

Disaggregated revenue

Equipment Revenue by Geographic Area	Six Months Ended April 30, 2019
United States	$	3,542,040
International		316,650
Total	$	3,858,690

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Inventories (Tables)

6 Months Ended

Apr. 30, 2019

Inventory Disclosure [Abstract]

Inventories

	January 31, 2019		October 31, 2018
Raw materials	$	2,036,188	$	1,901,707
Work in process		2,092,663		2,166,663
Finished goods		180,715		188,715
	$	4,309,566	$	4,257,085

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Summary of Significant Accounting Policies - Warranty Accrual (Details) - USD ($)	6 Months Ended
	Apr. 30, 2019	Apr. 30, 2018
Standard Product Warranty Accrual, Balance Sheet Classification [Abstract]
Beginning balance	$ 80,000	$ 70,000
Warranty service provided	(59,243)	(60,491)
New product warranties	38,587	44,342
Changes to pre-existing warranty accruals	10,656	(16,149)
Ending balance	$ 70,000	$ 70,000

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Revenue from Contracts with Customers - Disaggregated revenue (Details)	6 Months Ended
	Apr. 30, 2019 USD ($)
Equipment Revenue by Geographic Area
Total	$ 3,858,690
United States
Equipment Revenue by Geographic Area
Total	3,542,040
International
Equipment Revenue by Geographic Area
Total	$ 316,650

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Related Party Transactions (Details Narrative) - USD ($)	6 Months Ended	12 Months Ended
	Apr. 30, 2019	Oct. 31, 2018	Oct. 31, 2016
Sales	$ 3,858,690
Leland E. Boren
Ownership of Avis			80.00%
Avis Industrial Corp.
Ownership of The American Baler			100.00%
Harris Waste Management
Sales		$ 295,032

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Inventories - Inventories (Details) - USD ($)	Apr. 30, 2019	Oct. 31, 2018
Inventory Disclosure [Abstract]
Raw materials	$ 2,096,209	$ 1,901,707
Work in process	1,833,663	2,166,663
Finished goods	282,715	188,715
Inventories	$ 4,212,587	$ 4,257,085

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Debt (Details Narrative) - USD ($)	6 Months Ended
	Apr. 30, 2019	Oct. 31, 2018
Short-term Debt [Line Items]
Line of Credit Agreement	$ 1,650,000
Interest Rate Terms	<p style="margin: 0; text-align: justify"><font style="font-size: 10pt">The line of credit allows the Company to borrow at an interest rate equal to the Wall Street Journal prime rate minus 0.95%, adjusting daily. The line of credit is secured by all assets of the Company and expires on May 15, 2019.</font></p>
Outstanding balance	$ 0
Line of Credit [Member]
Short-term Debt [Line Items]
Outstanding balance		$ 0

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Income Taxes (Details Narrative) - USD ($)	3 Months Ended	6 Months Ended
	Jan. 31, 2018	Apr. 30, 2019	Oct. 31, 2018
Components of Deferred Tax Assets [Abstract]
Federal Statutory Rate		21.00%
Net deferred tax assets		$ 61,494	$ 61,494
Reduction of net deferred income tax assets	$ 10,000

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Commitment and Contingencies (Details Narrative) - USD ($)	3 Months Ended	6 Months Ended
	Jan. 31, 2018	Apr. 30, 2018	May 31, 2019
Loss Contingency, Information about Litigation Matters [Abstract]
Lawsuit exposure		$ 25,000
Theft	$ 200,000
Reimbursement from insurance claim			$ 175,841