Segregationinventory procedures by; strengthening segregation of duties to initiate purchase orders, receive inventory items, and make shipments, will be strengthened.

Purchasereviewing and approving all purchase orders and inventory receipts, will be reviewed, reviewing and approved by a purchasing manager.

Shipping records will be timely reviewed to verifyverifying that all shipments are being made to approved customers of the Company.

SystemCompany, and by strictly controlling system access and physical access to adjust inventory records will be more strictly controlled.physical inventory.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknessweaknesses in our internal control over financial reporting was a result of not designing and monitoring effective controls over purchasing and the access to physical inventory and certain inventory records. Management has concluded that the financial statements in this Annual Report on Form 10-K fairly present, in all material respects, the Company’s financial position, results of operations and cash flows for the fiscal years ended October 31, 2019 and 2018.

 

As part of a continuing effort to improve the Company’s business processes management will be taking steps described above to remedy these control deficiencies and is evaluating its internal controls and may update certain other controls to accommodate any modifications to its business processes or accounting procedures.

 

Internal Control over Financial Reporting

 

(a) Management’s Annual Report on Internal Control over Financial Reporting

 

The Company’s management is responsible for establishing and maintaining effective internal controls over financial reporting, as such terms is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).

 

Internal control over financial reporting is a process designed 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.

 

The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.

 

Management, with the participation of the Company’s principal executive and principal financial officer, assessed the effectiveness of the Company’s internal control over financial reporting as of October 31, 2019.2020. This assessment was performed using the criteria established under the Internal Control-Integrated Framework established by the Committee of Sponsoring Organization of the Treadway Commission (“COSO”). During the year it was determined that management did not obtain Board of Directors approval in accordance with Company by-laws, to apply for a Paycheck Protection Program (PPP) loan authorized by the CARES Act. Management acted quickly in order to secure the loan before the funds were allocated to other applicants, however management considered this to be a material weakness in the Company’s internal controls over financial reporting. Management has confirmed its requirement to obtain Board approval before incurring any debt.

 

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error or circumvention or overriding of internal control. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and reporting and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Based on the assessment performed using the criteria established by COSO, management has concluded that there was a material weakness surrounding the control of purchasing and access to certain Company inventory and inventory records and due to this material weakness the Company did not maintain effective internal control over financial reporting as of and for the years ended October 31, 2019 and 2018.2020. While the material weakness resulted in a loss due to theft, it did not result in any material misstatements to the Company’s financial statements or disclosures for any interim periods during, or for the fiscal year 2019 or 2018.2020. Management has implemented the actions mentioned above to ensure the Company has effective controls and procedures.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

 

(b) Changes in Internal Control over Financial Reporting

 

During the year ended October 31, 2019,2020, except as described above, there have not been any other changes in the Company’s internal controls that have materially affected or are reasonably likely to materially affect, the Company’s internal control over financial reporting. While there have been no changes, we have assessed our internal controls as being deficient and will be taking steps to remedy such deficiencies.

 

ITEM 9B. 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 estateThe Estate of Leland E. Boren is the largest shareholderstockholder of the Company.Company and owns more than 50% of the Company’s voting power.

 

 

PART III

 

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Identification of Directors and Officers

 

The executive officers and directors of the Company are as follows:

 

Name	Age		Age			Positions Held			Date of Initial Election or Designation
Victor W. Biazis		61		President and Chief Executive Officer	10/01/18
5400 Rio Grande Avenue Chief Executive Officer62
Jacksonville, FL 32254President, Chief Executive Officer and Class I Director			10/01/18
William E. Nielsen			73			Class III Director Chief Financial Officer			11/20/97 06/14/94
Lael E. Boren		51		Director	04/15/11
1909 S. Main Street52
Upland, IN 46989Class III Director				04/15/11
Ronald L. McDaniel		80		Director	5/16/06
Western-Cullen-Hayes, Inc.81				Class II Director Chairman of the Board
2700 West 36th Place
Chicago, IL 60632
William E. Nielsen		72		Director	11/20/97
5400 Rio Grande Ave.				Chief Financial Officer	06/14/94
Jacksonville, FL 32254				05/16/06
John J. Martorana		69		Director	1/5/09
5148 Hanover Lane70
Lakeland, FL 33817Class III Director				01/05/09
Martha R. Songer		63		Director	1/30/12
1909 S. Main Street64
Upland, IN 46989Class I Director				01/30/12

 

The Board of Directors is divided into three (3) classes of directors ("Class I", "Class II", and "Class III"), with each class having as nearly the same number of directors as practicable. Stockholders elect such class of directors, Class I, Class II, or Class III,Victor W. Biazis, has served as the case may be, to succeed such class directors whose terms are expiring, for a three (3) year term,President and such class of directors shall serve until the successors are elected and qualify. OfficersCEO of the Company serve at the pleasure ofsince Oct. 1, 2018 and was elected to the Board of Directors.

During fiscal 2019 the Board of Directors met four times.

There are no family relationships between executive officers or directors of the Company.

There is no understanding or arrangement between any director or any other persons pursuant to which such individual was or is to be selected as a director or nominee of the Company.

Background of Executive Officers and Directors

The following is a brief account of the experience, during the past five years, of each director and executive officer of the Company:

Victor W. Biazis is the President & CEO. He was appointed on Oct. 1, 2018.January 24, 2019. He has held various Senior Management and Executive roles in his career. He was with H.B. Fuller from 1981 to 2005, a Global Adhesive Supplier based in St. Paul, MN. From 2000 to 2005, he was a General Manager for the North America Packaging Adhesive Business Unit of H.B. Fuller. He then moved on and served as the President and Regional CEO for Wisdom Adhesives Global Group, based in Elgin, IL, from 2006 to 2011. Most recently, from 2011 to 2018, Mr. Biazis, was President and CEO of Coastal Industrial Products. Mr. Biazis received a Bachelor Degree in Political Science from Southeastern Louisiana University in 1981.

 

Ronald L. McDaniel has been president of Western-Cullen-Hayes, Inc. since 1980. He was Vice President and General Manager of Western-Cullen-Hayes from 1975 to 1980. From 1957 to 1975, Mr. McDaniel worked for Western-Cullen-Hayes and Burro Crane, an affiliated company, in various capacities including division controller. Mr. McDaniel has a bachelor’s degree from the University of Dayton and an MBA from the University of Chicago.

William E. Nielsen joinedhas served as the Company inCompany’s Chief Financial Officer since June 1994 as its Chief Financial Officer. Heand was elected a Director on November 20, 1997. He served as our President and Chief Executive Officer onfrom January 10, 2017.2017 through September 30, 2018. Prior to joining the Company, acted as a financial consultant to Fletcher Barnum Inc., a privately held manufacturing concern, from October 1993 through June 1994. From 1980 through July 1993, he was the Vice President, Administration and Finance at Unison Industries, Inc. Mr. Nielsen received a BBA in Finance and an M.B.A. at Western Illinois University in 1969 and 1970, respectively.

 

Lael E. Boren has served as a Director since April 2011. Mr. Boren is Vice President at Avis Industrial Corporation and has served in this role since December 2013. Mr. Boren has served as general manager and president of various organizations, including Badger Equipment Company and The Pierce Company. Prior to that, Mr. Boren owned an electronics business in Muncie and Marion, Indiana. He received a Bachelor’s of General Studies from Ball State University in 2014.

Ronald L. McDaniel joined the Company’s Board of Directors as its Chairman on May 16, 2006. Mr. McDaniel has been President of Western-Cullen-Hayes, Inc. since 1980. He has been serving on the Board of Directors of Avis Industrial since 2016 and served as the interim CEO from October 2018 until October 2020. He was Vice President and General Manager of Western-Cullen-Hayes from 1975 to 1980. From 1957 to 1975, Mr. McDaniel worked for Western-Cullen-Hayes and Burro Crane, an affiliated company, in various capacities including division controller. He served as the Mr. McDaniel has a bachelor’s degree from the University of Dayton and an MBA from the University of Chicago.

John J. Martorana joined the Company’s Board of Directors on January 5, 2009. Mr. Martorana has been the President of Iron Container, LLC since 2010 and has been a consultant to several divisions of Wastequip, Inc. since 2007. Mr. Martorana was the President of Wastequip of Florida from 1994 to 2007 after joining that company in 1991 as Vice President. From 1984 to 1991 he was responsible for sales and steel purchasing for Industrial Refuse Sales Inc., a family owned business which was sold to Wastequip, Inc. priorPrior to joining Industrial Refuse Sales, Mr. Martorana worked in the steel industry. He received a BS Degree in Education from Butler University in 1972.

 

 

Martha R. Songer has served as a Director since January 2012. Ms. Songer is the Executive Director of Avis Foundation, Inc. and has been in that role since January 2020. She also serves as a director of Avis Industrial Corporation and has held that position since 2012. From 2012-2019 she was Vice President and Assistant to the President at Avis Industrial Corporation in Upland, Indiana. Prior to that Ms. Songer was Alumni Director at Taylor University, also in Upland, Indiana. Ms. Songer received a Bachelor of Science from Taylor University in 1978 and a Master of Science in Management in 2002 from Indiana Wesleyan University. She has served as a director of Avis Industrial Corporation since 2012.

 

Involvement in Certain Legal ProceedingsBoard Classes

 

ToThe Board is divided into three (3) classes of directors (“Class I,” “Class II,” and “Class III”), which each class having as nearly the knowledgesame number of directors as practicable. Stockholders elect such class of directors, Class I, Class II, or Class III, as the case may be, to succeed such class directors whose terms are expiring, for a three (3) year terms, and such class of directors shall serve until the successors are elected and qualified. Officers of the Company serve at the pleasure of the Board of Directors. There is no understanding or arrangement between any director or any other person pursuant to which such individual was or is to be selected as a director or nominee of the Company.

During fiscal 2020 the Board of Directors met two times.

Family Relationships

There are no family relationships between executive officers or directors of the Company except that Lael Boren is the son of the late Leland E. Boren, a former controlling shareholder and a director of the Company, until his death on November 23, 2018. The Estate of Leland E. Boren owns more than 50% of the Company’s management, during the past five years, no director, person nominated to become a director or an executive officer of the Company:voting securities.

 

(1)

Filed a petition under the federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he or she was a general partner at or within two years before the time of such filing, or any corporation or business association of which he or she was an executive officer at or within two years before the time of such filing;

Delinquent Section 16 (a) Reports

(2)

Was convicted in a criminal proceeding or named subject of pending criminal proceeding (excluding traffic violations and other minor offenses);

(3)

Was the subject of any order, judgment, or decree not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from or otherwise limiting his or her involvement in any type of business, securities, or banking activities;

(4)

Was found by a court of competent jurisdiction in a civil action by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated any Federal or State Securities laws, and the judgment in such civil action of finding by the Securities and Exchange Commission has not been subsequently reversed, suspended, or vacated.

 

Section 16 (a) Beneficial Ownership Reporting Compliance

In fiscal 2019, none16(a) of the Security Exchange Act of 1934 requires the Company’s executive officers, directors and beneficial owners ofpersons who own more than ten percent10% of the Company’s common stock to file reports of ownership and changes in ownership with the SEC. Based solely on our review of the forms furnished to us and written representations from certain reporting persons, the Company believes that all filing requirements applicable to our executive officers, directors and persons who own more than 10% of our common stock were delinquentcompiled with in filing any of theirfiscal year 2020, except Mr. Boren, Mr. McDaniel and Ms. Songer each filed a late Form 3 and Mr. Boren and Ms. Songer each filed a late Form 4. These late Form 4 and 5 reports.filings did not involve any transactions in the Company’s common stock, but related to reporting receipt of a gift of 2,000 shares of the Company’s common stock.

 

Code of Ethics

 

The Company has adopted a code of business conduct and ethics for directors, officers (including the Company’s principal executive officer, principal financial officer and controller) and employees, known as the Standards of Business Conduct. The Standards of Business Conduct are available on the Company’s website athttp://www.intl-baler.com. The Company intends to disclose any Amendments to its Code of Ethics and any waiver from a provision of the Code of Ethics granted to the Company’s Chief Executive Officer, Chief Financial Officer, or other persons performing similar functions, on the Company’s website within fivefour business days following such amendment or waiver. Stockholders may request a free copy of the Standards of Business Conduct from:

the Company’s Corporate Secretary, at International Baler Corporation,

Attention: William E. Nielsen

5400 Rio Grande Avenue,

Jacksonville, Florida 32254,

(904)358-3812358-3812.

 

 

Committees

Independence of Directors

 

The Company’s securities are not listed on a national securities exchange or in an inter-dealer quotation system that requires that a majority of the Board be independent. However, for purposes of determining whether the Company’s directors are independent for purposes of 10-K, the Company is using the independence standards set forth in the rules of the NASDAQ Stock Market (“Nasdaq Rules”) to evaluate the independence of our Board. 

Rule 5605 (b) (1) of the Nasdaq Rules requires that a majority of the members of the Company’s Board of Directors consistsbe independent in that they are not officers or employees of six members, twothe Company and are free of whomany relationship that would interfere with the exercise of their independent judgment. The Board of Directors has affirmatively determined arethat one of the Company’s Directors, Mr. Martorana is independent Ronald McDaniel and John Martorana. under this Nasdaq Rule 5605.

The Company has sought and continuesqualifies as a "controlled company" under the NASDAQ corporate governance rules due to seek appropriate individuals to serve onthe ownership by the Estate of Leland E. Boren of more than 50% of the Company’s voting power. In accordance with a provision in the Nasdaq rules for controlled companies, the Company would be exempt from certain of the corporate governance rules of Nasdaq including the requirements that a (1) a majority of the Board of Directors who meet the requirements necessary to qualify asbeing composed of independent directors, to serve on(2) a nominating/corporate governance committee composed solely of independent directors and (3) a compensation committee composed solely of independent directors.

Committees

The Board has a standing Audit Committee and Compensation Committee. The full Board performs the functions of the Nominating Committee.

Audit Committee

Mr. McDaniel and Mr. Boren were members of the Company’s Audit Committee in fiscal 2020. Neither Mr. McDaniel nor Mr. Boren is an independent director under the NASDAQ or SEC rules for audit committee members The Board of Directors.

Ronald McDaniel and Lael Boren are members of Board’s Audit Committee.Directors has determined that Mr. McDaniel serveshas the attributes, education and experience as the audit committee’s “financial expert”an “audit committee financial expert,” as thatsuch term is defined by applicable Securities and Exchange Commission (“SEC”) regulations. Mr. McDaniel’s qualifications for this position are based upon his educational background and work experience as set forth above. The Company’s Audit Committee Charter is posted on the Company’s website.in Item 407) of Regulation S-K.

Nomination of Directors

 

The Company does not currently have a standing nominating committee or a formal nominating committee charter. However,As a “Controlled Company” as such term is defined by NASDAQ Listing Rule 5615 the Company is not required to have a Nominating Committee. Currently, the full Board of Directors performs the functions of a nominating committee.committee pursuant to procedures adopted by the Board. The Board identifies the candidates for Board membership. In identifying candidates, the Board will seek recommendations from existing Board members, executive officers of the Company and all persons who own more than five percent (5%) of the Company’s outstanding stock.securities. The Board has no stated specific minimum qualifications that must be met by a candidate for a position on the Board of Directors. The Board will considerWhile the Nominating Committee does not have a varietyformal policy on diversity, when considering the selection of factors in evaluatingdirector nominees, the qualifications of a candidate including the candidate’sNominating Committee considers individuals with diverse backgrounds, viewpoints, accomplishments, cultural background and professional experience, educational background, knowledge of the Company’s business and personal qualities.expertise, among other factors. The Board may, when appropriate, retain an executive search firm and other advisors to assist it in identifying candidates for the Board. In addition, the

The Board will consider anydirector candidates that may have been recommended by any of the Company’s stockholders who have made those recommendations in accordance withfollowed the procedures described below underin the heading “Stockholders’ Proposals.”Company’s Bylaws and will evaluate such director candidates in the same manner in which it evaluates candidates recommended by other sources, as described above. In addition, such stockholder recommendations must be accompanied by (1) such information about each prospective director nominee as would have been required to be included in a proxy statementProxy Statement filed pursuant to the rules of the Securities and Exchange CommissionSEC had the prospective director nominee been nominated by the Board of Directors and (2) that the prospective director nominee has consented to be named, if nominated, as a nominee and, if elected, to serve as a director.

 

ITEM 11. EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

The objective of the Company’s compensation program is to attract and retain qualified and talented professional individuals to perform the duties of the Company’s executive offices. The Company’s compensation program is designed to fairly reward the Company’s executive officers for their overall performance in the management of the affairs of the Company. The measurement of successful performance has significant elements of subjective judgment in view of the lack of any directly comparable single element or group of elements to which the Company and its performance may be readily compared from time to time.

 

The elements of compensation of the Company’s compensation programs include salary, health insurance, stock options, and in certain circumstances the award of a cash bonus. As of the present time, the Company compensation plan does not include any defined benefit retirement plan; any social club memberships or dues or any payments for housing, cars, boats, or other property of any kind to any person. The Company has not entered into any employment contracts with its executive officers nor any contracts for compensation to any person in the event of a change in control of the Company. The Company pays no other elements of compensation to its executive officers. The relatively small size of the Company in comparison to other entities presents the Company with additional risks in meeting its objectives of attracting and retaining qualified and talented professional individuals.

 

The salary component of the compensation is most important and the Company attempts to be competitive with what it believes to be the compensation of other companies of similar size and scope of operations. To date the Company has not engaged the services of a compensation review consultant or service in view of the cost of such services compared to the size and revenues of the Company. The award of a bonus upon review of Company performance provides an additional incentive. The Company determines the amount for each element to pay by reviewing annually the compensation levels of the Company’s executive officers and determining from the performance of the Company during that time since the last review what an appropriate compensation level may be during the upcoming annual period. The Company has no existing formula for determination of the salary, stock options, or bonus elements of compensation.

Executive Officer Compensation

 

The following table sets forth a summary of all compensation awarded to, earned by or paid to (i), the Company's Chief Executive Officer and (ii) Chief Financial Officer and each of the Company's executive officers whose compensation exceeded $100,000 per annum for services rendered in all capacities to the Company and its subsidiaries(“Named Executive Officers”) during fiscal years ended October 31, 2020 and 2019. No other executive officers received compensation which exceeded $100,000 during fiscal 2019 and 2018:

SUMMARY COMPENSATION TABLEor fiscal 2020.

 

SUMMARY COMPENSATION TABLE
Annual Compensation																					Long Term Awards
NAME AND PRINCIPAL POSITION			YEAR				SALARY ($)				BONUS ($)			OTHER ANNAL COMPENSATION STOCK AWARDS ($)			NUMBER OF OPTIONS			ALL OTHER COMPENSATION		OPTION AWARDS ($)		NONEQUITY INCENTIVE PLAN COMPENSATION ($)		ALL OTHER COMPENSATION ($)		TOTAL COMPENSATION
Victor W. Biazis President & CEO			2020 2019 2018				200,000 8,500200,000				-0- -0-			-0- -0-		-0- -0-		-0- -0-			-0- -0-		200,000 8,500200,000
William E Nielsen Chief Financial Officer			20192020 20182019				116,000113,000 120,000116,000				-0- -0-			-0- -0-			-0- -0-			-0- -0-		116,000-0- 120,000 -0-		113,000 116,000

 

Outstanding Equity Awards at Fiscal Year-End

Option Awards

Stock Awards

Name (a)

Number of Securities Underlying Unexercised Options (#) Exercisable (b)

Number of Securities Underlying Unexercised Options (#) Unexercisable

Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) (d)

Option Exercise Price ($) (e)

Option Expiration Date (f)

Number of Shares or Units of Stock That Have Not Vested (#) (g)

Market Value of Shares or Units of Stock That Have Not Vested (#) (h)

Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (i)

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#) (j)

None

Outstanding Equity Awards at Year End

 

None of theThe Company’s otherNamed Executive Officers earned compensation in fiscal 2019 and 2018 in excessdid not have any outstanding equity awards as of $100,000 for services rendered to the Company in any capacity.October 31, 2020.

 

Option Grants and Exercises in Last Fiscal Year

 

No options were granted during fiscal 20192020 to the Company's ChiefNamed Executive Officer or any of the Company's most highly compensated executive officers whose compensation exceeded $100,000 for fiscal 2019.Officers.

Compensation of Directors

The Board of Directors of the Company compensated non-employee directors $500 per month, together with direct out-of-pocket expenses incurred to attend meetings.

Members of the Board of Directors may also be requested to perform consulting or other professional services for the Company from time to time. The Board of Directors has reserved to itself the right to review all directors' claims for compensation on an ad hoc basis.

Directors who are on the Company’s Audit, Compensation, and Nominating Committees do not receive any consulting, advisory or compensatory fees from the Company. However, such Board members may receive fees from the Company for their services on those committees.

Director Compensation for Fiscal 2019
Name		Fees Earned or Paid in Cash ($)				Stock Awards ($)				Option Awards ($)				Non Equity Incentive Plan Compensation ($)				Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)				All Other Compensation ($)				Total ($)
Ronald L. McDaniel			6,000				-0-				-0-				-0-				-0-				-0-				6,000
Lael E. Boren			6,000				-0-				-0-				-0-				-0-				-0-				6,000
John J. Martorana			6,000				-0-				-0-				-0-				-0-				-0-				6,000
Martha R. Songer			6,000				-0-				-0-				-0-				-0-				-0-				6,000

 

Employment Contracts

 

The Company does not have employment contracts, termination, severance or change of control agreements with the Chiefits Named Executive OfficerOfficers or any other member of management.executives.

 

Director Compensation Committee Interlocks and Insider Participation

There are no interlocking relationships between any member of the Company's Compensation Committee and any member of the compensation committee of any other company, nor has any such interlocking relationship existed in the past. No member of the Compensation Committee is or was formerly an officer or an employee of the Company.

Compensation Committee Report

 

The Compensation Committee reviewsCompany pays each non-employee director an annual retainer of $6,000, together with management the Compensation Discussion & Analysis section of the Company’s 2018 Form 10-K, Item 11, and Proxy Statement. Based on its review and discussions with management the Compensation Committee recommendsreimbursement for out-of-pocket expenses incurred to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement for 2019 and in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2019.attend meetings.

 

The Compensation Committee

Ronald L. McDaniel

John J. Martorana

Lael E. Boren

Director Compensation for Fiscal 2020
Name		Fees Earned or Paid in Cash ($)				Stock Awards ($)				Option Awards ($)				Non-Equity Incentive Plan Compensation ($)				Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)				All Other Compensation ($)				Total ($)
Ronald L. McDaniel			6,000				0				0				0				0				0				6,000
Lael E. Boren			6,000				0				0				0				0				0				6,000
John J. Martorana			6,000				0				0				0				0				0				6,000
Martha R. Songer			6,000				0				0				0				0				0				6,000

 

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth certain information with respect to the ownership of the Company's Common Stock as of December 31, 20192020 by (i) those persons known by the Company to be the beneficial owners of more than 5% of the total number of outstanding shares of Common Stock, (ii) each director and executive officer, and (iii) all officers and directors as a groupgroup. Except as otherwise indicated, we believe that the beneficial owners of common stock listed below, based on information furnished by such owners, have sole voting and investment power with respect to such share, subject to applicable community property laws and the address for each person is c/o International Baler Corporation, 5400 Rio Grande Avenue, Jacksonville, Florida 32254. As of December 31, 2019 with these computations based on2020 we had 5,183,895 shares of common stock being outstanding at that time.outstanding.

 

NAME AND ADDRESS OF BENEFICIAL OWNER	TITLE HELD	AMOUNT OF BENEFICIAL OWNERSHIP1	APPROXIMATE PERCENT OF CLASS
Victor W. Biazis	President and Chief Executive Officer	None		0
5400 Rio Grande Avenue
Jacksonville, Florida 32254
Estate of Leland E. Boren		4,205,1582		81.10	%
1909 S. Main Street
Upland, IN 46989
John Martorana	Director	20,000		0.40	%
5148 Hanover Lane
Lakeland, FL  33817
Ronald L. McDaniel	Director	None		-0-
Western-Cullen-Hayes, Inc.
2700 W. 36th Place
Chicago, IL 60632
William E. Nielsen	Director	None		-0-
5400 Rio Grande Avenue	Chief Financial Officer
Jacksonville, FL 32254
Lael E. Boren	Director	2,000		0.00	%
1909 S Main Street
Upland, IN 46989
Martha R. Songer	Director	2,000		0.00	%
1909 S. Main Street
Upland, IN  46989
Angela M. Darlington	Secretary	2,000		0.00	%
1909 S. Main Street
Upland, IN  46989
International Baler Corporation	Stockholder	118,3013		2.30	%
Profit Sharing Trust
5400 Rio Grande Avenue
Jacksonville, FL 32254
All Officers and Directorsas a Group (4 persons)		4,349,4594		83.90	%

Name		Number of Shares Beneficially Owned				Percent of Class
Directors and Named Executive Officers
Victor W. Biazis			—				—
John J. Martorana			20,000				0.4	%
Ronald L. McDaniel			—				—
William E. Nielsen(1)			118,301				2.3	%
Lael E. Boren			2,000				0.0	%
Martha R. Songer			2,000				0.0	%
All Directors and Executive Officers
as a Group (6 persons)			142,301				2.7	%
5% or Greater Stockholders
Estate of Leland E. Boren(2)			4,205,158				81.1	%

 

¹Unless otherwise stated, all shares of common stock are directly held with sole voting power and dispositive power.

² Consists of 2,633,896 shares held by the Estate of Leland E. Boren and 1,571,262 shares owned by Avis Industrial Corporation.

³Employees’ Profit Sharing Trust of which William Nielsen is Trustee.

⁴Consists of 4,229,158 shares held directly and 118,301 shares held by International Baler Corporation Employee Profit Sharing Trust.

Changes In Control

 

To the knowledge of the Company’s management, there are no present arrangements or pledges of the Company’s securities which may result in a change in control of the Company.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

Transactions with Management and Others

 

The Estate of Leland E. Boren is the ownerowns 99% of Avis Industrial Corporation (Avis). The Estate of Mr. Boren controls over 50% 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 fiscal years ended October 31, 20192020 and 2018.The2019. The Company had no sales to The American Baler Company in fiscal years ended October 31, 20192020 and 2018.The2019. The Company sold five closed door horizontal balers and one conveyorhad no equipment sales to Harris Waste Management for $295,032 in fiscal 20182020 and sold two closed door horizontal balers for $122,950 in the fiscal year ended October 31, 2019.

 

Indebtedness of Management

 

No officer, director or security holder known to the Company to own of record or beneficially more than 5% of the Company's common stock or any member of the immediate family of any of the foregoing persons is indebted to the Company.

 

Parent of the Issuer

The Company has no parent.

Independence of Directors

 

Rule 4350 (c) (1)See Item 10. Directors and Executive Officers; Corporate Governance – Independence of The Nasdaq Stock Market rules requires that a majority of the members of the Company’s Board of Directors be independent in that they are not officers or employees of the Company and are free of any relationship that would interfere with the exercise of their independent judgment.Directors.

 

The Board of Directors has determined that two of the Company’s six Directors, Ronald L. McDaniel, and John Martorana are independent as defined by the listing standards of the Nasdaq Stock Market Rules, Section 10A(m)(3) of the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission.

However, Rule 4350(c) (5) provides an exemption from the requirement that a majority of the Company’s Directors be independent if the Company is considered a “controlled company”. A controlled company is defined as a company of which more than 50% of the voting power is held by an individual, a group, the Company’s independent registered public accounting firm, or another company. As the Estate of Leland E. Boren, owns more than 50% of the Company’s common stock, the Company is considered a “controlled company” under the applicable rules of The Nasdaq Stock Market and as such is exempt from certain of the corporate governance rules of The Nasdaq Stock Market, such as the requirement that the board of directors consist of a majority of independent directors.

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

The following table presents the fees for professional services rendered by The Griggs GroupPivot CPAs, PA (dba( Pivot CPAs) for

the audit of the Company’s annual financial statements for the years ended October 31, 20192020 and 2018:2019:

 

 

“Audit feesFees” include fees related to the services rendered in connection with the annual audit of the Company’s financial statements, the quarterly reviews of the Company’s quarterly reports on Form 10-Q and the reviews of and other services related to registration statements and other offering memoranda.

 

Audit-related fees“Audit-Related Fees” are for assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of the Company’s financial statements.

 

“Tax FeesFees” include (i) tax compliance, (ii) tax advice, (iii) tax planning and (iv) tax reporting.

 

“All Other FeesFees” includes fees for all other services provided by the principal accountants not covered in the other categories.

 

All of the 20192020 services described above were approved by the Audit Committee in accordance with the SEC rule that requires audit committee pre-approval of audit and non-audit services provided by the Company’s independent registered public accounting firm. The Audit Committee has considered whether the provisions of such services, including non-audit services, by Pivot CPAs is compatible with maintaining Pivot CPAs’ independence and has concluded that it is.

 

 

ITEM 15. EXHIBITS

 

The Following Documentsfollowing documents are filed as Part of this Report

 

1. Financial Statements:

Reports of Independent Registered Public Accounting Firms

Balance Sheets

Statements of Operations

Statements of Stockholders' Equity

Statements of Cash Flows

Notes to Financial Statements

1. Financial Statements:

Reports of Independent Registered Public Accounting Firms

Balance Sheets

Statements of Operations

Statements of Stockholders' Equity

Statements of Cash Flows

Notes to Financial Statements

 

2. Exhibits

 

The following exhibits are filed with, or incorporated by reference into this report.

 

Exhibit Number	Description
2.1	Agreement of Merger between International Baler Corporation and IBC Merger Corporation dated June 24, 1997 (Incorporated by reference to Exhibit 10.39 to Company’s Current Report on Form 8-K, Date of Report June 27, 1997[“Report on Form 8-K June 27, 1997”]).
2.2 2.3	Certificate of Merger of International Baler Corporation into IBC Merger Corporation (Incorporated by reference to Exhibit 10.39.1 to Report on Form 8-K June 27, 1997).
2.3	Certificate of Merger merging Consolidated Baling Machine Company, Inc. and Florida Waste Systems, Inc. Into International Baler Corporation filed July 30, 2004.
3.1	Articles of Incorporation and by-laws of Waste Technology Corp. and amendments (Incorporated by reference to the Company’s Registration Statement on Form S-18 filed in April, 1985, Registration No. 2-97045[the “Statement on Form S-18"])
3.2	Certificate of Incorporation of International Baler Corporation, f/k/a National Compactor & Technology Systems, Inc. and all amendments thereto (Incorporated by reference to Exhibit 3.3 to Form 8 Amendment No.1 to the Company’s Annual Report on Form 10-K for the year ended October 31, 1989[“Amendment No. 1 to 1989 Form 10-K”]).as amended*
3.3 3.2	By-laws Revised and Restated Bylaws of International Baler Corporation (Incorporated by reference to Exhibit 3.4 to Amendment No. 1 to 1989 Form 10-K).
3.4	Certificate of Incorporation of Consolidated Baling Machine Co., Inc. f/k/a Solid Waste Recovery Test Center, Inc. and all amendments thereto (Incorporated by reference to Exhibit 3.5 to Amendment No. 1 to 1989 Form 10-K).
3.5	By-laws of Consolidated Baling Machine Co., Inc. (Incorporated by reference to Exhibit 3.6 to Amendment No. 1 to 1989 Form 10-K).
3.7	Certificate of Amendment to Certificate of Incorporation of Waste Technology Corp. Filed on November 4, 1991(Incorporated by reference to Exhibit 3.1.1 to Company’s Annual Report on Form 10-K for the year ended October 31, 1991[the “1991 Form 10-K”]
3.8	Certificate of Amendment to Certificate of Incorporation of Waste Technology Corp. Filed on November 21 1991(Incorporated by reference to Exhibit 3.1.2 to Company’s 1991 Form 10-K).
3.9	Revised and restated by-laws of Waste Technology Corp. (Incorporated by reference to Exhibit 3.2 to Company’s 1991 Form 10-K).
3.10	Amendment to revised and restated by-laws of Waste Technology Corp. (Incorporated by reference to Exhibit 3.2.1 to Company’s 1991 Form 10-K).
3.11	Certificate of Incorporation of Waste Tech Real Estate Corp. (Incorporated by reference to Exhibit 3.7 to Company’s Annual Report on Form 10-K for year ended October 31, 1990).
4.1	1995 Stock Option Plan (Incorporated by reference to Exhibit 4.1 to Annual Report on Form 10-K for the year ended October 31, 1995).*
10.1 4.1	Agreement between the Company and International Baler Corp. dated September 8, 1986, relating to acquisitionDescription of assets and stock (Incorporated by reference to Exhibit 10.1 to Statement on Form S-18). Common Stock*
10.2	Agreement dated February 3, 1987, between the Company and N. J. Cavagnaro & Sons and Machine Corp., Nicholas J. Cavagnaro Jr., George L. Cavagnaro, and Pauline L. Cavagnaro together with the exhibits annexed thereto for the acquisition of N. J. Cavagnaro & Sons Machine Corp. (Incorporated by reference to Exhibit 10.2 to Company’s Annual Report on Form 10-K for the year ended October 31, 1987 [the “1987 Form 10-K”]).
10.3	Waste Technology Corp. Profit Sharing Plan including Agreement of Trust (Incorporated by reference to Exhibit 10.7 to Report on Form 8-K June 1, 1989).
10.4	Form of Deferred Compensation Agreement for Ted C. Flood (Incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10K for the year ended October 31, 1991).
10.5	Agreement between International Baler Corporation and Ted C. Flood dated as December 29, 1995 (Incorporated by reference to Exhibit 10.38 to the Company’s Annual report on Form 10-KSB for the year ended October 31, 1996 [the “1996 Form 10-KSB”]).
10.6	Promissory Note made by Ted C. Flood to the order of International Baler Corporation dated December 29, 1995 (Incorporated by reference to Exhibit 10.38.1 to the 1996 Form 10-KSB).
10.7	Promissory Note made by Ted C. Flood to the order of Waste Technology Corp. dated April 5, 1996 (Incorporated by reference to Exhibit 10.38.2 to the 1996 Form 10-KSB).
10.8	Promissory Note made by Ted C. Flood to the order of Waste Technology Corp. dated October 5, 1996(Incorporated by reference to Exhibit 10.38.3 to the 1996 Form 10-KSB).
14	Code of Ethics (Incorporated by reference to Exhibit 14 to the Company’s Annual Report on Form 10-KSB for the year ended October 31, 2003).
31* 31.1*	Certification of Chief Executive Officer andpursuant to Rule 13a-14(a)/15d-14(a)
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)
32* 32.1*	Certification of Chief Executive Officer and Chief Financial 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 Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Exhibit filed with this Report.

 

 

SIGNATURES

 

In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

		INTERNATIONAL BALER CORPORATION
(Registrant)
	By:	/s/ Victor W. Biazis
Chief Executive Officer
Dated: January 29, 2021	Date:	January 28, 2020

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in their capacities and on the dates indicated.

 

Signature	Title	Date
/s/ Ronald L. McDaniel	Director	January 28, 202029, 2021
RonalsRonald L. McDaniel	Chairman of the Board
/s/ Lael E. Boren	Director	January 28, 202029, 2021
Lael E. Boren
/s/ William E. Nielsen	Director	January 28, 202029, 2021
William E. Nielsen	Chief Financial Officer
/s/ John J. Martorana	Director	January 28, 202029, 2021
John J. Martorana
/s/ Martha R. Songer	Director	January 28, 202029, 2021
Martha R. Songer

 

 

 

INTERNATIONAL BALER CORPORATION

 

FINANCIAL STATEMENTS

 

OCTOBER 31, 20192020 AND 20182019

 

(With Report of Independent Registered Public Accounting Firm Thereon)

 

 

 

 

Report of Independent Registered Public Accounting Firm

 

 

Board of Directors and Stockholders

International Baler Corporation

Jacksonville, Florida

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of International Baler Corporation (the “Company”) as of October 31, 20192020 and 20182019 and the related statements of income, stockholders’ equity, and cash flows for the years then ended and the related notes to the financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 20192020 and 20182019 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ Pivot CPAs

 

We have served as the Company's auditor since 2011

Ponte Vedra Beach, Florida

January 28, 202029, 2021

 

 

 

 

 

 

INTERNATIONAL BALER CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 2019 AND 2018
			Common Stock																Treasury Stock
			NUMBER OF SHARES ISSUED				PAR VALUE				ADDITIONAL PAID-IN CAPITAL				RETAINED EARNINGS (DEFICIT)				NUMBER OF SHARES				COST				TOTAL STOCKHOLDERS’ EQUITY
Balance at November 1, 2017			6,429,875			$	64,299			$	6,419,687			$	3,070,613				1,245,980			$	(681,410	)		$	8,873,189
Net Income			—				—				—				310,229				—				—				310,229
Balance at October 31, 2018			6,429,875				64,299				6,419,687				3,380,842				1,245,980				(681,410	)			9,183,418
Net Income			—				—				—				(323,614	)			—				—				(323,614	)
Balance at October 31, 2019			6,429,875			$	64,299			$	6,419,687			$	3,057,228				1,245,980			$	(681,410	)		$	8,859,804
See accompanying notes to financial statements.

INTERNATIONAL BALER CORPORATION
STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED OCTOBER 31, 2020 AND 2019
			Common Stock																Treasury Stock
			NUMBER OF SHARES ISSUED				PAR VALUE				ADDITIONAL PAID-IN CAPITAL				RETAINED EARNINGS (DEFICIT)				NUMBER OF SHARES				COST				TOTAL STOCKHOLDERS’ EQUITY
Balance at November 1, 2018			6,429,875			$	64,299			$	6,419,687			$	3,380,842				1,245,980			$	(681,410	)		$	9,183,418
Net loss			—				—				—				(323,614	)			—				—				(323,614	)
Balance at October 31, 2019			6,429,875				64,299				6,419,687				3,057,228				1,245,980				(681,410	)			8,859,804
Net loss			—				—				—				(408,415	)			—				—				(408,415	)
Balance at October 31, 2020			6,429,875			$	64,299			$	6,419,687			$	2,648,813				1,245,980			$	(681,410	)		$	8,451,389
See accompanying notes to financial statements.

 

 

 

(1) Nature of Business

 

International Baler Corporation (the “Company”) is a manufacturer of baling equipment which utilizes technical, hydraulic and electrical mechanisms 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 to meet specific customer requirements.

The Company’s customers include recycling facilities, paper mills, textile mills, and the companies which generate the materials for baling and recycling.

(2) Summary of Significant Accounting Policies

 

(a)Use of Estimates

 

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant items subject to such estimates and assumptions include allowances for doubtful accounts, valuation of deferred tax assets, valuation of inventory, and estimates for warranty claims. Actual results could differ from those estimates.

 

(b) Cash and Cash Equivalents

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

(c) Accounts Receivable and 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. In addition, past due balances are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

(d) 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. The Company reviews inventory for obsolescence on a regular basis.

(e) Property, Plant, and Equipment

Property, plant and equipment are stated at cost net of accumulated depreciation. The cost of property, plant, and equipment is depreciated over the estimated useful lives of the related assets. Depreciation is computed primarily using the straight-line method over the estimated lives of 5-20 years for machinery and equipment and 31-40 years for buildings.

 

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the assets. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value less costs to sell, and depreciation ceases.

(f) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit. The second step is to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the amounts rely upon the determination of the probability of various possible outcomes. The Company reevaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law and expiration of statutes of limitations, effectively settled issues under audit, and audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.

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

(g) Revenue Recognition

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 of days of the delivery of the equipment. Warranty revenue is recognized over the contract period. Revenue from service plans is recognized over time based on term of the service agreement.

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 thewith payment terms of thirty days after shipment. 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.

(h) Disaggregation of Revenue

Disaggregated revenue is by primary geographic market is as follows:

Revenue by Geographic Area		Twelve Months Ended October 31, 2019
United States		$	8,199,936
International			1,326,639
Total		$	9,526,575

Revenue by Geographic Area		Twelve Months Ended October 31, 2020				Twelve Months Ended October 31, 2019
United States		$	8,101,360			$	8,199,936
International			884,664				1,326,639
Total		$	8,986,024			$	9,526,575

 

(i) Contract Assets and Liabilities

When the Company has delivered the baler, parts or service and has earned the right to bill a customer, accounts receivable is recorded as an unconditional right to payment exists.

Contract liabilities arise when payment is received before the Company transfers products to a customer and are reported as Customer Deposits on the accompanying balance sheet. The change in contract liabilities is due to the timing of customer deposits for baler orders offset by customer deposits of $566,300 and $876,900 which were recognized as revenue during the period.fiscal years ended October 31, 2020 and 2019, respectively.

 

Contract Costs

 

The Company expenses incremental costs of obtaining or fulfilling a contract.

(j) 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 type of balers currently under warranty, and known warranty issues.

Following is a tabular reconciliation of the changes in the warranty accrual:

		2019				2018
Beginning balance		$	80,000			$	70,000
Warranty service provided			(152,977	)			(102,359	)
New product warranties			132,257				80,817
Changes to pre-existing warranty accruals			720				31,542
Ending balance		$	60,000			$	80,000

		2020				2019
Beginning balance		$	60,000			$	80,000
Warranty service provided			(120,069	)			(152,977	)
New product warranties			122,498				132,257
Changes to pre-existing warranty accruals			(22,429	)			720
Ending balance		$	40,000			$	60,000

 

(k) Advertising

Advertising costs are expensed as incurred. Advertising expense was $124,719 and $199,808 for the fiscal years ended October 31, 2020 and 2019, respectively.

(l) Leases

The Company records short-term lease cost on a straight-line basis over the lease term. During fiscal years ended October 31, 2020 and 2019, all leases had a term of one month or less.

(m) Earnings Per Share

Basic earnings per share are calculated using the weighted average number of common shares outstanding during each year. Diluted earnings per share include the net number of shares that would be issued upon the exercise of stock options using the treasury stock method. Options are not considered in loss years as they would be anti-dilutive. There were no stock options outstanding for the years ended October 31, 20192020 and 2018,2019, respectively.

(l)(n) Business Reporting Segments

The Company operates in one segment based on the information monitored by the Company’s operating decision makers to manage the business.

(m)(o) 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.

(n)(p) 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 we have 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 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 of 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 beare required to be recorded on the balance sheet with the exception of short-term leases. Early application is permitted. TheThis standard was adopted by the Company on November 1, 2019. Prior to adoption the Company determined that all its lease agreements qualify as short term leases, having a lease term of twelve months or less and no purchase option, and has elected to recognize its lease payments in profit or loss on a straight-line basis over the lease term. Accordingly the Company did not record a transition adjustment.

Recently Issued Accounting Standards Not Yet Adopted

In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivative and Hedging (Topic 815, and Leases (Topic 841). This new guidance mustwill be adopted using a modified retrospective transition method. ASU 2016-02 is effective for financial statements issued for annual reporting periods beginning after December 15, 2018, and2019, including interim periods within those annual reporting periods. While the Company is continuing to assess the potential impacts of 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 do2019-10, it does not expect itASU 2019-10 to behave a material as we are not party to a significant number of leases. effect on its financial statements.

(q) Reclassification

The Company has not yet selected a transition method.  reclassified income taxes receivable of $85,286 from accrued liabilities on the accompanying balance sheet as of October 31, 2019 to conform with the current year presentation.

(3) Related Party Transactions

The Estate of Leland E. Boren is a shareholder of the Company and is the owner of Avis Industrial Corporation (Avis). The Estate of Mr. Boren 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., 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 independent of each other. The Company had no purchases from these companies in the fiscal years ended October 31, 20192020 and 2018.2019. The Company had no sales to The American Baler Company in the fiscal years ended October 31, 20192020 and 2018.2019. The Company sold five closed door horizontal balers and one conveyorhad no equipment sales to Harris Waste Management for $295,032 in fiscal 20182020 and sold two closed door horizontal balers for $122,950 in the fiscal year ended October 31, 2019.

 

(4) Inventories

Inventories consisted of the following:		2019				2018
Raw materials		$	2,035,612			$	1,901,707
Work in process			1,239,961				2,166,663
Finished goods			843,584				188,715
		$	4,119,057			$	4,257,085

 

Inventories consisted of the following:		2020				2019
Raw materials		$	2,155,664			$	2,035,612
Work in process			1,725,596				1,239,861
Finished goods			373,620				843,584
		$	4,254,880			$	4,119,057

 

(5) Property, Plant, and Equipment

 

The following is a summary of property, plant, and equipment, at cost, less accumulated depreciation and amortization:

		2019				2018
Land		$	82,304			$	82,304
Building and improvements			1,320,710				1,300,282
Machinery and equipment			2,570,981				2,528,540
Vehicles			326,499				174,764
Construction In progress			36,239				6,263
			4,336,733				4,092,153
Less accumulated depreciation			3,026,513				2,821,448
		$	1,310,220			$	1,270,705

		2020				2019
Land		$	82,304			$	82,304
Building and improvements			1,353,097				1,320,710
Machinery and equipment			2,623,089				2,570,981
Vehicles			317,136				326,499
Construction In progress			64,935				36,239
			4,440,561				4,336,733
Less accumulated depreciation			3,161,864				3,026,513
		$	1,278,697			$	1,310,220

 

Depreciation expense was $205,065$214,523 and $183,630$205,065 during the years ended October 31, 20192020 and 2018,2019, respectively.

(6) Debt

The Company hashad a $1,650,000 line of credit agreement with First Merchants Bank of Muncie, Indiana which was renewed on May 15, 2019.2020 with a $1,000,000 line of credit limit. 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, 2020.2021. The line of credit had no outstanding balance at October 31, 20192020 and at October 31, 2018.2019.

On April 16, 2020 the Company received a $626,466 loan made pursuant to the terms of the Paycheck Protection Program authorized by the CARES Act. The loan has a two-year term and accrues simple interest at a fixed rate of 1.00%. Under the terms of the CARES Act guidelines, a portion of the loan up to 100% may be forgiven by the U.S. Small Business Administration if the amount spent is within the timeframe and under the guidelines that have been set for forgiveness. On December 9, 2020 the Company was notified by our bank that the SBA has stated that the entire amount of this loan will be forgiven. The Company anticipates that the income from this loan forgiveness will be recognized in the first quarter of fiscal year ending October 31, 2021.

(7) Commitments and Contingencies

The Company in the ordinary course of business is subject to claims and from time to time is named as a defendant in legal proceedings relating to the operations of its business, including the sale 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.settled this claim in March 2020. The Company believes its exposure is $25,000, the amountCompany’s liability on this settlement of the Company’s deductible on its insurance policy. Accordingly, the Company accrued $25,000 during the fiscal year ended October 31, 2018.claim was $20,645 which has been paid.

 

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 were 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. I nIn 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.

(8) Income Taxes

Income tax provision attributable to income from continuing operations consists of:

 

The differences between income taxes as provided at the federal statutory tax rate of 34% and 21% and the Company’s actual income taxes are as follows:

		2019				2018
Expected federal income tax expense at Statutory rate			(110,196	)		$	96,582
State income tax expense, net of federal income tax effect			(12,306	)			9,981
Non-deductible items and perm. differences			3,292				9,511
Credits utilized and other adjustments			(81,918	)			(12,494	)
Income tax provision		$	(201,128	)		$	103,580

		2020				2019
Expected federal income tax expense at Statutory rate		$	(120,788	)			(110,196	)
State income tax expense, net of federal income tax effect			(13,202	)			(12,306	)
Non-deductible items and perm. differences			6,101				3,292
Credits utilized and other adjustments			(38,876	)			(81,918	)
Income tax benefit		$	(166,765	)		$	(201,128	)

 

Tax assets include federal netThe Company has state operating loss carryforwards (NOLs) of approximately $504,000 and approximately $295,000 at October 31, 2020 and 2019 respectively, which generally do not expire. Due to changes in the tax laws enacted in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, cumulative federal NOLs of approximately $1 million at October 31, 2020 were carried back to prior years resulting in income tax refunds of approximately $330,000 at October 31, 2020. The Company had federal NOLs of approximately $712,000 at October 31, 2019. These NOLs can be carried forward and utilized indefinitely. TaxDeferred tax assets are recognized in the balance sheet if it is more likely than not that they will be realized on future tax returns. As of October 31, 2019 and 2018, the net deferred tax assets were $161,122 and $61,494 respectively. The realization of deferred tax assets will depend on the Company’s ability to continue to generate taxable income in the future and the Company determined it is more likely than not that the results of future operations will generate sufficient taxable income to realize these deferred tax assets and no valuation allowance is deemed necessary.

 

The significant components of the net deferred income taxes at October 31, 20192020 and 20182019 are as follows:

		2019				2018
Deferred tax assets
Inventory reserve		$	38,639			$	69,081
Other reserves and allowances			36,904				65,534
Capitalized inventory costs			52,817				49,777
NOL Carryforward			166,879				—
Total deferred tax assets			295,239				184,392
Deferred tax liabilities
Property, plant and equipment			134,117				122,898
Net deferred income taxes		$	161,122			$	61,494

		2020				2019
Deferred tax assets
Inventory reserve		$	53,860			$	38,639
Other reserves and allowances			36,509				36,904
Capitalized inventory costs			67,701				52,817
NOL Carryforward			28,447				166,879
Total deferred tax assets			186,517				295,239
Deferred tax liabilities
Property, plant and equipment			108,627				134,117
Net deferred income taxes		$	77,890			$	161,122

 

For the years ended October 31, 20192020 and 2018,2019, the Company did not have any unrecognized tax benefits or obligations as a result of tax positions taken during a prior period or during the current period. No interest or penalties have been recorded as a result of tax uncertainties. Our evaluation was performed for the tax years ended October 31, 20152018 through October 31, 2019,2020, the tax years which remain subject to examination by tax jurisdictions as of October 31, 2019.2020.

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, the Company recorded a reduction of net deferred income tax assets of approximately $10,000 during the first quarter of our fiscal year ending October 31, 2018. 

(9) Employee Benefit Plan

The Company has a defined contribution plan and profit sharing program for its employees. The Company made no contributions to the planthese plans during the years ended October 31, 20192020 and 2018.2019.

(10) Business and Credit Concentrations

Export sales were approximately 14%10% and 6%14% of net sales for the years ended October 31, 20192020 and 2018,2019, respectively. The principal international markets served by the Company, include Canada, China, Mexico, United Kingdom, India, Korea, Japan, Russia, Saudi Arabia, Singapore, and Brazil. In fiscal 2020, three customers accounted for 20.0%, 16.5% and 7.0% of net sales, respectively, while in fiscal 2019, three customers accounted for 17.8%, 6.5% and 4.7% of net sales, respectively, while in fiscal 2018, three customers accounted for 11.8%, 11.2% and 9.0% of net sales, respectively. Three customers accounted for 24.8%22.0%, 14.3%14.1%, and 13.3%13.2% respectively, of the Company’s accounts receivable at October 31, 20192020 and three customers accounted for 30.0%24.8%, 15.6%14.3%, and 7.5%13.3%, respectively, of the Company accounts receivable at October 31, 2018.2019.

The Company had cash deposits in banks of $3,411,825$3,275,135 and $4,239,625$3,411,825 above the FDIC insured limit of $250,000 per bank at October 31, 20192020 and October 31, 20182019 respectively.