10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

(Mark one)

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

For the quarterly period ended January 31, 2020

or

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

For the transition period from ________________ to __________________

Commission File Number: 0-14443

____________________

INTERNATIONAL baler CORPORATION

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	13-2842053 (I.R.S. Employer Identification No.)
5400 Rio Grande Avenue, Jacksonville, Florida 32254 (Address of principal executive offices) (Zip Code)

(904) 358-3812
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(g) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $.01 par value per share	IBAL	Pink Sheets

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 Exchange Act).

YES ☐  NO ☒

As of March 13, 2020, there were 5,183,894 shares of common stock of the registrant outstanding.

1

INTERNATIONAL BALER CORPORATION

TABLE OF CONTENTS

ITEM 1. FINANCIAL STATEMENTS
Condensed Balance Sheets as of January 31, 2020, (unaudited) and October 31, 2019	3
Condensed Statements of Income for the three months ended January 31, 2020 and 2019 (unaudited)	4
Condensed Statements of Stockholders’ Equity for the three months ended January 31, 2020 (unaudited)	5
Condensed Statements of Cash Flows for the three months ended January 31, 2020 and 2019 (unaudited).	6
Notes to Condensed Financial Statements (unaudited)	7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	13
ITEM 4. CONTROLS AND PROCEDURES	13
PART II. OTHER INFORMATION	14
ITEM 1. LEGAL PROCEEDINGS	14
ITEM 5. OTHER INFORMATION	14
ITEM 6. EXHIBITS	15
SIGNATURES	16

2

INTERNATIONAL BALER CORPORATION
CONDENSED BALANCE SHEETS
		January 31, 2020			October 31, 2019
		Unaudited
ASSETS
Current assets:
Cash and cash equivalents	$	2,663,137		$	2,714,764
Certificate of deposit		1,006,778			1,003,389
Accounts receivable, net of allowance for doubtful accounts of $6,000 at January 31, 2020 and $15,000 at October 31, 2019		1,004,955			644,915
Inventories		3,842,080			4,119,057
Prepaid expense and other current assets		123,058			77,858
Total current assets		8,640,008			8,559,983
Property, plant and equipment, at cost:		4,347,770			4,336,733
Less: accumulated depreciation		3,079,913			3,026,513
Net property, plant and equipment		1,267,857			1,310,220
Other assets
Deferred income taxes		161,122			161,122
Total other assets		161,122			161,122
TOTAL ASSETS	$	10,068,987		$	10,031,325
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	480,406		$	329,618
Accrued liabilities		89,270			185,334
Customer deposits		823,988			656,569
Total current liabilities		1,393,664			1,171,521
Total liabilities		1,393,664			1,171,521
Commitments and contingencies (Note 7)
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		2,872,747			3,057,228
		9,356,733			9,541,214
Less:Treasury stock, 1,245,980 shares, at cost		(681,410	)		(681,410	)
Total stockholders' equity		8,675,323			8,859,804
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	10,068,987		$	10,031,325
See accompanying notes to condensed financial statements.

3

INTERNATIONAL BALER CORPORATION
CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JANUARY 31, 2020 AND 2019
UNAUDITED
		2020			2019
Net sales:
Equipment	$	1,442,981		$	1,659,224
Parts and service		567,280			810,032
Total net sales		2,010,261			2,469,256
Cost of sales		1,932,794			2,183,557
Gross profit		77,467			285,699
Operating expense:
Selling expense		133,573			110,811
Administrative expense		192,225			200,597
Total operating expense		325,798			311,408
Operating loss		(248,331	)		(25,709	)
Other income:
Interest income		5,850			921
Total other income		5,850			921
Loss before income taxes		(242,481	)		(24,788	)
Income tax benefit		(58,000	)		(6,000	)
Net loss	$	(184,481	)	$	(18,788	)
Loss per share, basic and diluted	$	(0.04	)	$	—
Weighted average number of shares outstanding		5,183,895			5,183,895
See accompanying notes to condensed financial statements.

4

INTERNATIONAL BALER CORPORATION
CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE 3 MONTHS ENDED JANUARY 31, 2020 AND 2019
UNAUDITED
	Common Stock								Treasury Stock
	Shares		Amount		Additional Paid in Capital		Retained Earnings		Shares		Amount			Total
Balance - October 31, 2019	6,429,875	$	64,299	$	6,419,687	$	3,057,228		1,245,980	$	(681,410	)	$	8,859,804
Net loss							(184,481	)						(184,481	)
Balance - January 31, 2020	6,429,875		64,299		6,419,687		2,872,747		1,245,980		(681,410	)		8,675,323
	Common Stock								Treasury Stock
	Shares		Amount		Additional Paid in Capital		Retained Earnings		Shares		Amount			Total
Balance - October 31, 2018	6,429,875	$	64,299	$	6,419,687	$	3,380,842		1,245,980	$	(681,410	)	$	9,183,418
Net loss							(18,788	)						(18,788	)
Balance - January 31, 2019	6,429,875		64,299		6,419,687		3,362,054		1,245,980		(681,410	)		9,164,630
See accompanying notes to condensed financial statements.

5

INTERNATIONAL BALER CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 2020 AND 2019
UNAUDITED
		2020			2019
Cash flow from operating activities:
Net loss	$	(184,481	)	$	(18,788	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		53,400			51,000
Changes in operating assets and liabilities:
Accounts receivable		(360,040	)		70,630
Inventories		276,977			(52,481	)
Prepaid expenses and other assets		(45,200	)		69,649
Accounts payable		150,788			(200,377	)
Accrued liabilities		(96,064	)		(135,870	)
Customer deposits		167,419			(115,621	)
Net cash used in operating activities		(37,201	)		(331,858	)
Cash flows from investing activities:
Purchase of property and equipment		(11,037	)		(146,778	)
Interest earned on certificates of deposit		(3,389	)		—
Net cash used in investing activities		(14,426	)		(146,778	)
Net decrease in cash and cash equivalents		(51,627	)		(478,636	)
Cash and cash equivalents at beginning of period		2,714,764			4,733,510
Cash and cash equivalents at end of period	$	2,663,137		$	4,254,874
See accompanying notes to condensed financial statements.

6

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 three-month period ended January 31, 2020 are not necessarily indicative of the results that may be expected for the year ending October 31, 2020. The accompanying balance sheet as of October 31, 2019 was derived from the audited financial statements as of October 31, 2019.

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, 2019.

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.

7

(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 three-month period ended January 31:

	2020			2019
Beginning balance	$	60,000		$	80,000
Warranty service provided		(22,606	)		(39,946	)
New product warranties		14,430			16,592
Changes to pre-existing warranty accruals		8,176			13,354
Ending balance	$	60,000		$	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) Advertising Expenses

Advertising costs are expensed as incurred. Advertising expense was $27,546 and $20,927 for quarters ended January 31, 2020 and 2019, respectively, and are included in selling expense on the accompanying Condensed Statements of Income.

(f) 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.

8

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 was adopted in our fiscal year beginning November 1, 2019. The Company has concluded that ASU 2016-02 had no effect on our financial statements and related disclosures as we are not party to a significant number of leases.

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.

In the first quarter ended in January 31, 2020 deferred revenue of $638,890 from the fiscal year ended October 31, 2019 was recognized.

b) Disaggregation of Revenue

Disaggregated revenue is by primary geographic market is as follows:

Equipment Revenue by Geographic Area	Three Months Ended January 31, 2020
United States	$	1,397,401
International		45,580
Total	$	1,442,981

9

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 first quarter of fiscal 2020 and in the fiscal years ending October 31, 2019 and 2018. The Company had no sales to The American Baler Company in the first quarter of fiscal 2019 and in the fiscal years ended October 31, 2019 and 2018. The Company sold two closed door horizontal balers to Harris Waste Management for $122,950 in fiscal 2019 and had no sales to Harris Waste Management in the first quarter of fiscal 2020.

6. Inventories:

Inventories consisted of the following:

	January 31, 2020		October 31, 2019
Raw materials	$	2,296,135	$	2,035,612
Work in process		1,417,361		1,239,861
Finished goods		128,584		843,584
	$	3,842,080	$	4,119,057

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, 2019. The line of credit had no outstanding balance at January 31, 2020 and at October 31, 2019.

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 January 31, 2020 and at October 31, 2019. 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 January 31, 2020 and October 31, 2019, net deferred tax assets were $161,122.

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.

10

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 a range of $20,000 to $25,000, the amount of the Company’s deductible on its insurance policy, and the Company has accrued $25,000 related to this case.

In December 2018 the Company discovered an employee theft of Company property. 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 crime insurance claim and agreed to reimburse the Company $175,841. Insurance proceeds were received in May of 2019 and were recorded as other income in the accompanying condensed statements of income.

11

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, 2019, 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 first quarter ended January 31, 2020, the Company had net sales of $2,010,261 compared to net sales of $2,469,256 in the first quarter of fiscal 2019. The decrease in net sales was primarily the result of market conditions in the first quarter of fiscal 2020, versus the first quarter of fiscal 2019. The Company had no shipments of two-ram balers and lower shipments of closed door horizontal balers in the first quarter of fiscal 2020.

Cost of sales increased to $1,932,794 in the first quarter of fiscal 2020 compared to $2,183,557 in the first quarter of 2019. Cost of sales sold as a percentage of net sales increased to 96.2% for the first quarter of fiscal 2020 compared to 88.4% for the first quarter of fiscal 2019.

The Company had a net loss of $184,481 in the first quarter of fiscal 2020, compared to a net loss of $18,788 in the first quarter fiscal 2019. The lower net income is the result of lower sales, gross profit and higher selling expenses.

The sales order backlog was approximately $1,950,000 at January 31, 2020 and $2,630,000 at January 31, 2019. The Company received $1,380,000 in new orders in the first week of February 2020.

Financial Condition and Liquidity:

Net working capital at January 31, 2020 was $7,246,344 as compared to $7,388,462 at October 31, 2019. The Company currently believes that it will have sufficient cash flow to be able to fund operating activities for the next twelve months.

12

Average days sales outstanding (DSO) in the first three months of fiscal 2020 were 33.7 days, as compared to 23.0 days in the first three months of fiscal 2019. 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 ÷ 91.25).

During the three months ended January 31, 2020 and 2019, the Company made additions to plant and equipment of $11,037 and $146,778 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 January 31, 2020 and at October 31, 2019.

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.

The Company had cash deposits in banks of $3,238,879 and $3,411,825 above the FDIC insured limit of $250,000 per bank at January 31, 2020 and October 31, 2019, respectively.

Off-Balance Sheet Arrangements

As of January 31, 2020, we have no material off-balance sheet arrangements with unconsolidated entities.

Critical Accounting Estimates

There have been no material changes to the critical accounting policies disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2019.

Recent Accounting Pronouncements

See Note 1(f) to our Financial Statements for a discussion of recent accounting pronouncements.

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.

13

As of January 31, 2020, 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 January 31, 2020. 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 second quarter of the fiscal year ended October 31, 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 January 31, 2020.

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 January 31, 2020, 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.

14

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 $20,000 to $25,000, the amount of the Company’s deductible on its insurance policy. Accordingly, the Company has accrued $25,000 related to this case.

ITEM 5. OTHER INFORMATON

None

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

15

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
March 13, 2020	By:	/s/ Victor W. Biazis
		Victor W. Biazis
		Chief Executive Officer
March 13, 2020	By:	/s/ William E. Nielsen
		William E. Nielsen
		Chief Financial Officer

16

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 January 31, 2020 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
March 13, 2020	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 January 31, 2020 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: March 13, 2020	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 January 31, 2020 (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: March 13, 2020	By:	/s/ Victor W. Biazis
		Victor W. Biazis
		Chief Executive Oficer

EX-32.2

Exhibit 32

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 January 31, 2020 (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: March 13, 2020	By:	/s/ William E. Nielsen
		William E. Nielsen
		Chief Financial Officer

XML

Revenue from Contracts with Customers (Details Narrative)	Jan. 31, 2020 USD ($)
Revenue from Contract with Customer [Abstract]
Deferred revenue	$ 638,890

XML

Income Taxes (Details Narrative) - USD ($)	Jan. 31, 2020	Oct. 31, 2019
Components of Deferred Tax Assets [Abstract]
Net deferred tax assets	$ 161,122	$ 161,122

XML

Document and Entity Information - shares	3 Months Ended
	Jan. 31, 2020	Mar. 13, 2020
Document And Entity Information
Entity Registrant Name	International Baler Corporation
Entity Central Index Key	0000781902
Document Type	10-Q
Document Period End Date	Jan. 31, 2020
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		5,183,894
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2020
Is Entity Shell Company?	false

XML

Related Party Transactions

3 Months Ended

Jan. 31, 2020

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 first quarter of fiscal 2020 and in the fiscal years ending October 31, 2019 and 2018. The Company had no sales to The American Baler Company in the first quarter of fiscal 2019 and in the fiscal years ended October 31, 2019 and 2018. The Company sold two closed door horizontal balers to Harris Waste Management for $122,950 in fiscal 2019 and had no sales to Harris Waste Management in the first quarter of fiscal 2020.

XML

Commitments and Contingencies

3 Months Ended

Jan. 31, 2020

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 a range of $20,000 to $25,000, the amount of the Company’s deductible on its insurance policy, and the Company has accrued $25,000 related to this case.

In December 2018 the Company discovered an employee theft of Company property. 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 crime insurance claim and agreed to reimburse the Company $175,841. Insurance proceeds were received in May of 2019 and were recorded as other income in the accompanying condensed statements of income.

XML

Condensed Statements of Stockholders' Equity (Unaudited) - USD ($)	Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Stock	Total
Beginning Balace, Shares at Oct. 31, 2018	6,429,875			1,245,980
Beginning Balance, Value at Oct. 31, 2018	$ 64,299	$ 6,419,687	$ 3,380,842	$ (681,410)	$ 9,183,418
Net Income			(18,788)		(18,788)
End Balance, Shares at Jan. 31, 2019	6,429,875			1,245,980
End Balance, Value at Jan. 31, 2019	$ 64,299	6,419,687	3,362,054	$ (681,410)	9,164,630
Beginning Balace, Shares at Oct. 31, 2019	6,429,875			1,245,980
Beginning Balance, Value at Oct. 31, 2019	$ 64,299	6,419,687	3,057,228	$ (681,410)	8,859,804
Net Income			(184,481)		(184,481)
End Balance, Shares at Jan. 31, 2020	6,429,875			1,245,980
End Balance, Value at Jan. 31, 2020	$ 64,299	$ 6,419,687	$ 2,872,747	$ (681,410)	$ 8,675,323

XML

Summary of Significant Accounting Policies

3 Months Ended

Jan. 31, 2020

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 three-month period ended January 31:

	2020			2019
Beginning balance	$	60,000		$	80,000
Warranty service provided		(22,606	)		(39,946	)
New product warranties		14,430			16,592
Changes to pre-existing warranty accruals		8,176			13,354
Ending balance	$	60,000		$	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) Advertising Expenses

Advertising costs are expensed as incurred. Advertising expense was $27,546 and $20,927 for quarters ended January 31, 2020 and 2019, respectively, and are included in selling expense on the accompanying Condensed Statements of Income.

(f) 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.

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 was adopted in our fiscal year beginning November 1, 2019. The Company has concluded that ASU 2016-02 had no effect on our financial statements and related disclosures as we are not party to a significant number of leases.

XML

Inventories (Tables)

3 Months Ended

Jan. 31, 2020

Inventory Disclosure [Abstract]

Inventories

	January 31, 2020		October 31, 2019
Raw materials	$	2,296,135	$	2,035,612
Work in process		1,417,361		1,239,861
Finished goods		128,584		843,584
	$	3,842,080	$	4,119,057

XML

Revenue from Contracts with Customers (Tables)

3 Months Ended

Jan. 31, 2020

Revenue from Contract with Customer [Abstract]

Disaggregated revenue

Equipment Revenue by Geographic Area	Three Months Ended January 31, 2020
United States	$	1,397,401
International		45,580
Total	$	1,442,981

XML

Basis of Presentation

3 Months Ended

Jan. 31, 2020

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 three-month period ended January 31, 2020 are not necessarily indicative of the results that may be expected for the year ending October 31, 2020. The accompanying balance sheet as of October 31, 2019 was derived from the audited financial statements as of October 31, 2019.

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, 2019.

XML

Revenue from Contracts with Customers

3 Months Ended

Jan. 31, 2020

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.

In the first quarter ended in January 31, 2020 deferred revenue of $638,890 from the fiscal year ended October 31, 2019 was recognized.

b) Disaggregation of Revenue

Disaggregated revenue is by primary geographic market is as follows:

Equipment Revenue by Geographic Area	Three Months Ended January 31, 2020
United States	$	1,397,401
International		45,580
Total	$	1,442,981

XML

Condensed Statements of Income (Unaudited) - USD ($)	3 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Net sales:
Equipment	$ 1,442,981	$ 1,659,224
Parts and service	567,280	810,032
Total net sales	2,010,261	2,469,256
Cost of sales	1,932,794	2,183,557
Gross profit	77,467	285,699
Operating expense:
Selling expense	133,573	110,811
Administrative expense	192,225	200,597
Total operating expense	325,798	311,408
Operating loss	(248,331)	(25,709)
Other income:
Interest income	5,850	921
Total other income	5,850	921
Loss before income taxes	(242,481)	(24,788)
Income tax benefit	(58,000)	(6,000)
Net loss	$ (184,481)	$ (18,788)
Income per share, basic and diluted	$ (0.04)
Weighted average number of shares outstanding	5,183,895	5,183,895

XML

Income Taxes

3 Months Ended

Jan. 31, 2020

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 January 31, 2020 and at October 31, 2019. 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 January 31, 2020 and October 31, 2019, net deferred tax assets were $161,122.

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.

XML

Revenue from Contracts with Customers - Disaggregated revenue (Details)	3 Months Ended
	Jan. 31, 2020 USD ($)
Equipment Revenue by Geographic Area
Total	$ 1,442,981
United States
Equipment Revenue by Geographic Area
Total	1,397,401
International
Equipment Revenue by Geographic Area
Total	$ 45,580

XML

Debt (Details Narrative) - USD ($)	3 Months Ended
	Jan. 31, 2020	Oct. 31, 2019
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

XML

Inventories

3 Months Ended

Jan. 31, 2020

Inventory Disclosure [Abstract]

Inventories

6. Inventories:

Inventories consisted of the following:

	January 31, 2020		October 31, 2019
Raw materials	$	2,296,135	$	2,035,612
Work in process		1,417,361		1,239,861
Finished goods		128,584		843,584
	$	3,842,080	$	4,119,057

XML

Condensed Balance Sheets (Unaudited) - USD ($)	Jan. 31, 2020	Oct. 31, 2019
Current assets:
Cash and cash equivalents	$ 2,663,137	$ 2,714,764
Certificate of deposit	1,006,778	1,003,389
Accounts receivable, net of allowance for doubtful accounts of $6,000 at January 31, 2020 and $15,000 at October 31, 2019	1,004,955	644,915
Inventories	3,842,080	4,119,057
Prepaid expense and other current assets	123,058	77,858
Total current assets	8,640,008	8,559,983
Property, plant and equipment, at cost	4,347,770	4,336,733
Less: accumulated depreciation	3,079,913	3,026,513
Net property, plant and equipment	1,267,857	1,310,220
Other assets:
Deferred income taxes	161,122	161,122
Total other assets	161,122	161,122
TOTAL ASSETS	10,068,987	10,031,325
Current liabilities:
Accounts payable	480,406	329,618
Accrued liabilities	89,270	185,334
Customer deposits	823,988	656,569
Total current liabilities	1,393,664	1,171,521
Total liabilities	1,393,664	1,171,521
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	2,872,747	3,057,228
Total stockholders' equity before treasury stock	9,356,733	9,541,214
Less: Treasury stock, 1,245,980 shares, at cost	(681,410)	(681,410)
Total stockholders' equity	8,675,323	8,859,804
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 10,068,987	$ 10,031,325

XML

Condensed Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Cash flow from operating activities:
Net income	$ (184,481)	$ (18,788)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	53,400	51,000
Changes in operating assets and liabilities:
Accounts receivable	(360,040)	70,630
Inventories	276,977	(52,481)
Prepaid expenses and other assets	(45,200)	69,649
Accounts payable	150,788	(200,377)
Accrued liabilities	(96,064)	(135,870)
Customer deposits	167,419	(115,621)
Net cash (used in) provided by operating activities	(37,201)	(331,858)
Cash flows from investing activities:
Purchase of property and equipment	(11,037)	(146,778)
Interest earned on certificates of deposit	(3,389)
Net cash used in investing activities	(14,426)	(146,778)
Net decrease in cash and cash equivalents	(51,627)	(478,636)
Cash and cash equivalents at beginning of year	2,714,764	4,733,510
Cash and cash equivalents at end of year	$ 2,663,137	$ 4,254,874

XML

Summary of Significant Accounting Policies (Policies)

3 Months Ended

Jan. 31, 2020

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 three-month period ended January 31:

	2020			2019
Beginning balance	$	60,000		$	80,000
Warranty service provided		(22,606	)		(39,946	)
New product warranties		14,430			16,592
Changes to pre-existing warranty accruals		8,176			13,354
Ending balance	$	60,000		$	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.

Advertising Expenses

(e) Advertising Expenses

Advertising costs are expensed as incurred. Advertising expense was $27,546 and $20,927 for quarters ended January 31, 2020 and 2019, respectively, and are included in selling expense on the accompanying Condensed Statements of Income.

Recent Accounting Pronouncements

(f) 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.

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 was adopted in our fiscal year beginning November 1, 2019. The Company has concluded that ASU 2016-02 had no effect on our financial statements and related disclosures as we are not party to a significant number of leases.

XML

Summary of Significant Accounting Policies - Warranty Accrual (Details) - USD ($)	3 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Accounting Policies [Abstract]
Beginning balance	$ 60,000	$ 80,000
Warranty service provided	(22,606)	(39,946)
New product warranties	14,430	16,592
Changes to pre-existing warranty accruals	8,176	13,354
Ending balance	$ 60,000	$ 70,000

XML

Related Party Transactions (Details Narrative) - USD ($)	3 Months Ended	12 Months Ended
	Jan. 31, 2020	Oct. 31, 2019	Oct. 31, 2016
Sales	$ 1,442,981
Leland E. Boren
Ownership of Avis			80.00%
Avis Industrial Corp.
Ownership of The American Baler			100.00%
Harris Waste Management
Sales		$ 122,950

XML

Commitment and Contingencies (Details Narrative) - USD ($)	3 Months Ended	12 Months Ended
	Jan. 31, 2018	Oct. 31, 2018	May 31, 2019
Loss Contingency, Information about Litigation Matters [Abstract]
Lawsuit exposure		$ 25,000
Theft	$ 200,000
Reimbursement from insurance claim			$ 175,841

XML

Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Accounting Policies [Abstract]
Advertising expense	$ 20,927	$ 27,546

XML

Inventories - Inventories (Details) - USD ($)	Jan. 31, 2020	Oct. 31, 2019
Inventory Disclosure [Abstract]
Raw materials	$ 2,296,135	$ 2,035,612
Work in process	1,417,361	1,239,861
Finished goods	128,584	843,584
Inventories	$ 3,842,080	$ 4,119,057

XML

Condensed Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Jan. 31, 2020	Oct. 31, 2019
Current Assets:
Accounts receivable, net of allowance for doubtful accounts	$ 6,000	$ 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	$ 0.01	$ .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

Debt

3 Months Ended

Jan. 31, 2020

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, 2019. The line of credit had no outstanding balance at January 31, 2020 and at October 31, 2019.

XML

Summary of Significant Accounting Policies (Tables)

3 Months Ended

Jan. 31, 2020

Accounting Policies [Abstract]

Warranty Accrual

	2020			2019
Beginning balance	$	60,000		$	80,000
Warranty service provided		(22,606	)		(39,946	)
New product warranties		14,430			16,592
Changes to pre-existing warranty accruals		8,176			13,354
Ending balance	$	60,000		$	70,000

XML

Nature of Business

3 Months Ended

Jan. 31, 2020

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%.