Summary of Significant Accounting Policies

3 Months Ended

Jan. 31, 2012

Notes to Financial Statements

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. Past due balances are reviewed individually for collectibility. 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 or market. 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. Company personnel review the potential usage of inventory and inventory components on a regular basis.

(c) Revenue Recognition:

The Company recognizes revenue when finished products and/or parts are shipped and the customer takes ownership and assumes the risk of loss. Revenue from installation services is recognized on completion of the service. The Company recognizes revenue from installations and start-ups and repair services in the period in which the service is provided.

(d) Basic and Diluted Income Per Share:

Basic income per share is calculated using the weighted average number of common shares outstanding during each period. Diluted income per share includes the net additional number of shares that would be issued upon the exercise of stock options using the treasury stock method. Options are not considered in loss periods as they would be antidilutive. The dilutive impact of options outstanding at January 31, 2012 and January 31, 2011 was -0- shares and 130,952 shares, respectively.

(e) Warranties and Service

The Company warrants its products for one (1) year from the date of sale as to materials and six (6) months as to labor, and offers a service plan for other required repairs and maintenance. 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 under warranty, and known warranty issues.

Following is a tabular reconciliation of the changes in the warranty accrual for the three-month period ended January 31:

2012 2011

Beginning balance $ 54,859 $ 49,859

Warranty service provided (59,746) (39,045)

New product warranties 57,140 42,378

Changes to pre-existing warranty accruals 7,606 (3,333)

Ending balance $ 59,859 $ 49,859

(f) Fair Value of Financial Instruments

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

(g) Subsequent Events

The Company evaluated all events or transactions that occurred after January 31, 2012 up through the date the Company issued the accompanying financial statements.

4. Related Party Transactions:

The Company has a note receivable from its former president and director totaling $14,288 and $17,826 at January 31, 2012 and October 31, 2011, respectively. Interest accrues at the rate of 6% per annum.

The Company has an agreement with the former president and director of the Company for deferred compensation payments. The Company will make payments with a present value of $66,344, payable over the next through January 2013 at $5,813 per month. A portion of the payments will be used to repay the outstanding note receivable discussed above.

Leland E. Boren, a shareholder and director of the Company, is the owner of Avis Industrial Corporation (Avis). Mr. Boren controls 51.0% of the outstanding shares of the Company. Avis owns 100% of The American Baler Company, a competitor of the Company. These baler companies operate independent of each other. The Company had no equipment sales to, or purchases from, The American Baler Company for the three months ended January 31, 2012 or 2011.