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 April 30,July 31, 2021

or

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 balerBALER CORPORATION

(Exact name of registrant as specified in its charter)

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

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

None

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.

YESYes ☒  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).

YESYes ☒  NO ☐  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.

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 June 11,September 9, 2021, there were 5,183,894 shares of common stock of the registrant outstanding.

INTERNATIONAL BALER CORPORATION

TABLE OF CONTENTS

INTERNATIONAL BALER CORPORATION

CONDENSED BALANCE SHEETS       

INTERNATIONAL BALER CORPORATION

CONDENSED STATEMENTS OF INCOME

FOR THE THREE MONTHS AND NINE MONTHS ENDED JULY 31, 2021 AND 2020

UNAUDITED

INTERNATIONAL BALER CORPORATION

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE MONTHS AND NINE MONTHS ENDED JULY 31, 2021 AND 2020

UNAUDITED

INTERNATIONAL BALER CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED JULY 31, 2021 AND 2020

UNAUDITED

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

1. Nature of Business: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: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 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 April 30,July 31, 2021 are not necessarily indicative of the results that may be expected for the year ending October 31, 2021. The accompanying balance sheet as of October 31, 2020 was derived from the audited financial statements as of October 31, 2020.

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, 2020.

The Company is closely monitoring ongoing developments in connection with the COVID-19 global pandemic, which has had an adverse impact on sales as many customers are holding off purchasing new equipment.

As of date of this report, the COVID-19 pandemic has not materially adversely impacted our capital and financial resources. Due to the economic uncertainty that has resulted from the pandemic, and the potential impact of such to our stakeholders, we are unable to predict with certainty any potential impacts to our business. Additionally, because we are unable to determine the ultimate severity or duration of the outbreak or its long-term effects on, among other things, the global, national or local economies, the capital and credit markets, our workforce, our customers or our suppliers, at this time we are unable to predict the adverse extent that the COVID-19 crisis will have on our business, financial condition, liquidity and results of operations.

3. Summary of Significant Accounting Policies:Policies:

(a) Accounts Receivable & Allowance for Doubtful Accounts: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:

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:Service:

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

Following is a tabular reconciliation of the changes in the warranty accrual for the six-monthnine-month period ended April 30:July 31:

(d) Fair Value of Financial Instruments: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 $70,981$108,235 and $59,973$96,885 for the sixnine months ended April 30,July 31, 2021 and 2020, respectively, and are included in selling expense on the accompanying Condensed Statements of Income.

(f) Recent Accounting Pronouncements:Pronouncements:

Recently Adopted Accounting Pronouncements:

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (ASUs) to the FASB Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs and any not listed below were assessed and determined to be applicable or are expected to have a minimal impact on the Company’s condensed financial statements.

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 are required to be recorded on the balance sheet with the exception of short-term leases. This 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.

4. Revenue from Contracts with Customers:Customers:

a) Overview

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. Revenue from service plans is recognized over time based on the 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 with 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.

In the first sixnine months ended on April 30,July 31, 2021 deferred revenue of $382,557$382,557 from the fiscal year ended October 31, 2020 was recognized.

b) Disaggregation of Revenue

Disaggregated revenue is by primary geographic market is as follows:

5. Related Party Transactions:Transactions:

Avis Industrial Corporation (Avis) controls over 80%80% of the outstanding shares of the Company. Avis owns 100%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 halfnine months of fiscal 2021 and in the fiscal year ending October 31, 2020. The Company had no0 sales to The American Baler Company in the first half of fiscal 2021 and in the fiscal year ended October 31, 2020. The Company had no sales toor Harris Waste Management in the first halfnine months of fiscal 2021 or in the fiscal year ended October 31,and 2020.

6. Inventories:Inventories:

Inventories consisted of the following:

7. Debt:Debt:

The Company has a $1,000,000$1,000,000 line of credit agreement with First Merchants Bank of Muncie, Indiana which was renewed on May 15, 2021. 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, 2022. The line of credit had no0 outstanding balance at April 30,July 31, 2021 and at October 31, 2020.

On April 16, 2020 the Company received a $626,466$626,466 loan made pursuant to the terms of the Paycheck Protection Program (PPP) authorized by the CARES Act. The loan has a two 2 year term and accrues simple interest at a fixed annual rate of 1.00%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 guidelines that have been set for forgiveness. On December 7, 2020 the Company was notified by its bank that the SBA has stated that this loan was forgiven. The Company reversed this liability during the quarter ended January 31, 2021 and the resulting gain was recognized as other income in the accompanying condensed statements of income.

8. 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 include historical results of operations, volatility of the economic conditions and projected earnings based on current operations. Based on this evidence, it is more likely than not that the deferred tax assets would be realized. Accordingly, there is no valuation allowance as of April 30,July 31, 2021 and at October 31, 2020. However, if it is determined that all or part of the deferred tax assets will not be used in the future, an adjustment to the deferred tax assets would be charged against net income in the period such determination is made. As of April 30,July 31, 2021 and October 31, 2020, net deferred tax assets were $77,890.$77,890.

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

9. Commitments and Contingencies: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 settled this claim in March 2020. The Company’s liability on this settlement of the claim was $20,645$20,645 which has been paid.

On March 22, 2021, the Company was served with a complaint related to an injury to an employee working at a Stericycle facility in North Little Rock, Arkansas. The employee was working on a baler manufactured by the Company in 2003. The employee suffered an injury to his left hand on April 10, 2018. The plaintiff is Scott Tinsley, the injured employee. The Company’s insurance policy related to this complaint has a deductible of $20,000$20,000 and the Company has recorded a reserve for this amount.

On July 27, 2021, the Company was served with a complaint related to an injury to an employee working at Mackay Mitchell Envelope Company in Mount Pleasant, Iowa. On August 10, 2019, the employee, Xaisavath Phanthouvong, was working on a baler manufactured by the Company in 1996. The employee suffered a serious injury to his left hand. The Company’s insurance policy related to this complaint has no deductible and the Company does not expect to incur any significant expenses related to this claim.

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, 2020, 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

Three Months Ended April 30,months ended July 31, 2021 (“secondthird quarter of fiscal 2021”) compared to the three months ended April 30,July 31, 2020 (“secondthird quarter of fiscal 2020”)

In the secondthird quarter ended April 30,July 31, 2021, the Company had net sales of $2,638,010$2,723,772 compared to net sales of $2,014,943$2,665,238 in the secondthird quarter of fiscal 2020, an increase of 30.9%2.2%. Equipment sales included twenty-eighttwenty balers and conveyers at an average price of $58,965$91,896 in the secondthird quarter of fiscal 2021 while in the same quarter of fiscal 2020, the Company sold twenty-onefifteen balers and conveyers at an average price of $60,340.$129,128. Parts and service sales in the current quarter were, $986,987,$885,858, compared to $747,802,$727,267, an increase of 32.7%. The higher salesBaler shipments were negatively impacted by the delayed arrival of purchased components.

Gross profit decreased to $114,304 in the second quarter of Fiscal 2021 were the result of improved market conditions as the COVID-19 pandemic affected the results of the second quarter of fiscal 2020.

Gross profit increased to $411,539 in the secondthird quarter of fiscal 2021, compared to $252,168$379,758 in the secondthird quarter of fiscal 2020. The lower gross profit was the result of lower gross margin equipment sales in the third quarter of 2021 compared to higher gross profit is primarily the result of higher baler sales and parts and serviceequipment sales in the secondthird quarter in fiscal 2021. Parts and service sales have higher grossof the prior year. Gross profit margins than equipment sales gross profit margins.were adversely affected by higher costs for components and steel.

Total operating expense, consisting of selling and administrative expense, increased by 22.1%25.0% to $416,485$567,172 in the secondthird quarter of fiscal 2021 compared to $341,102$453,728 in the secondthird quarter of fiscal 2020. The higher selling and administrative expense wereSelling expenses included an increase in the resultallowance for doubtful accounts of higher advertising$60,000. Administrative expenses legal expenses, andincluded approximately $125,000 in professional service charges related to a fair value opinion of the reserve for the deductible on the products liability claim ($20,000).Company’s common stock.

The Company had a pre-tax loss of $4,046$451,204 in the secondthird quarter of fiscal 2021 compared to a pre-tax loss of $83,590$61,594 in the same quarter of fiscal 2020. The Company did not layoff or furlough any employees as alarger pre-tax loss was the result of lower gross profit and the COVID-19 pandemic.higher selling and administrative expenses mentioned above.

Results of Operations: SixNine Month Comparison

Six Months Ended April 30,Nine months ended July 31, 2021 (“second half of fiscal 2021) compared to the sixnine months ended April 30, 2020 (“second half of fiscal 2020”).July 31, 2020.

The Company had net sales of $4,987,915$7,711,687 in the first sixnine months of fiscal 2021, compared to net sales of $4,025,204$6,690,442 in the same period of fiscal 2020. The higher net sales in the first halfnine months of fiscal 2021 was the result of improved market conditions, particularly related to the COVID-19 pandemic in the second quarterfirst nine months of fiscal 2020. Equipment sales included forty-eightsixty-eight balers and conveyors in the first halfnine months of fiscal 2021 versus equipment sales of thirty-eightfifty-two balers and conveyors in the same period of 2020. Parts and service sales were $457,589$616,180 higher in the first halfnine months of fiscal 2021 compared to the first halfnine months of fiscal 2020. This increase was due to improved market conditions.

Gross profit increased to $611,256$725,560 in the first sixnine months of fiscal 2021 compared to $329,635$709,393 in the first sixnine months of fiscal 2020. The higher gross profit was the result of the higher net sales.

Selling and administrative expenses increased from $666,900$1,120,628 in fiscal 2020 to $790,220$1,357,392 in fiscal 2021, an increase of 18.5%14.5%. The largest increasesvariance in costthese expenses from fiscal 2020 to fiscal 2021 were legal expenses,higher sales salaries, advertising,the increase in the allowance for doubtful accounts, higher legal and the reserve for the products liability claim.other professional service expenses in 2021, partially offset by higher sales commissions in 2020.

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The Company recorded income of $626,466 from the Paycheck Protection Program (PPP) loan which was forgiven in the first quarter of fiscal 2021. In the first halfnine months of fiscal 2021, the Company had a pre-tax incomeloss of $449,293.$1,911. For the first sixnine months of fiscal 2021, the Company had an operating loss of $178,964$631,832 compared to an operating loss of $337,265$411,235 in the same period in fiscal 2020.

The sales order backlog was approximately $2,310,000$3,690,000 at April 30,July 31, 2021 and $3,040,000$1,525,000 at April 30,July 31, 2020.

Financial Condition and Liquidity:

Net working capital at April 30,July 31, 2021 was $7,631,639$7,168,105 as compared to $7,721,268 at October 31, 2020. The Company currently believes that it will have sufficient cash flow to be able to fund operating activities for the next twelve months.

Average days sales outstanding (DSO) in the first sixnine months of fiscal 2021 were 29.331.9 days, as compared to 39.332.5 days in the first sixnine months of fiscal 2020. Days sales outstanding was negatively impacted in fiscal 2020 as the Company sold a prototype baler for $546,000 without receiving a customer deposit on this equipment. DSO is calculated by dividing the total of the month-end net accounts receivable balances for the period by three,nine, and dividing that result by the average day’s sales for the period (period sales ÷ 181)273).

During the sixnine months ended April 30,July 31, 2021 and 2020, the Company made additions to property, plant and equipment of $60,656$93,686 and $76,623$179,666 respectively.

The Company has a $1,000,000 line of credit agreement with First Merchants Bank of Muncie, Indiana which was renewed on May 15, 2021. 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, 2021. The line of credit had no outstanding balance at April 30,July 31, 2021 and at October 31, 2020.

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 $2,969,208$3,409,843 and $3,275,135 above the FDIC insured limit of $250,000 per bank at April 30,July 31, 2021 and October 31, 2020, respectively.

Off-Balance Sheet Arrangements

As of April 30,July 31, 2021, 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, 2020.

Recent Accounting Pronouncements

See Note 3(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

Evaluation of Disclosure 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.

As of April 30,July 31, 2021, the end of the period covered by this Quarterly Report on Form 10-Q, and under the supervision and with the participation of 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.

Changes in Internal Control over Financial Reporting

As previously disclosed in Item 4 of our 10-Q for the quarter ended January 31, 2021, management concluded that there was a material weakness in internal controls related to management’s failure to obtain Board approval prior to obtaining a PPE loan.

To address the material weakness described above the Company engaged its outside law firm to conduct a training seminar for its management team regarding corporate governance procedures and requirements under Delaware law and the Company’s charter documents. The law firm prepared a memo which summarizes the Company’s charter documents and Delaware law. In addition, the Company has developed a monitoring control to ensure that the proper corporate governance practices are followed.

The Company believes the actions described above will be sufficient to remediate the identified material weakness and strengthen the internal control over financial reporting.

Except as noted in the preceding paragraphs, there has been no change in internal controls over financial reporting that occurred during the most recent quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On December 1, 2017In the Company was served with a complaint relatedordinary course of conducting our business, we have in the past and may in the future become involved in various legal actions and other claims. These legal proceedings may be subject to an injury to an employee working at Integrated Coatingmany uncertainties 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 settled this claim in March 2020. The Company’s liability on this settlementthere can be no assurance of the claim was $20,645outcome of any individual proceedings. We do not presently anticipate any material legal proceedings that, if determined adversely to us, would have a material adverse effect on our financial position, results of operations or cash flows. See Note 9, Commitments and Contingencies, to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for information regarding certain legal proceedings in which has been paid.we are involved. 

On March 22, 2021, the Company was served with a complaint related to an injury to an employee working at a Stericycle facility in North Little Rock, Arkansas. The employee was working on a baler manufactured by the company in 2003. The employee suffered an injury to his left hand on April 10, 2018. The plaintiff is Scott Tinsley, the injured employee. The Company’s insurance policy related to this complaint has a deductible of $20,000 and the Company has recorded a reserve for this amount.

ITEM 5. OTHER INFORMATION

On May 15, 2021, the Company renewed its line of credit agreement with First Merchants Bank of Muncie, Indiana for $1,000,000. 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, 2022. The line of credit had no outstanding balance at July 31, 2021 and at October 31, 2020

NoneOn April 1, 2021, the Board of Directors of the Company established a special committee of independent and disinterested directors (the “Special Committee”) to evaluate the principal terms of a proposal by Avis Industrial Corporation, an Indiana corporation (“Avis”), to acquire all of the outstanding shares of the Company’s common stock not already owned by it. Avis currently owns approximately 81.1% of the Company’s outstanding shares. The Special Committee commenced negotiations with Avis. On June 10, 2021, the Special Committee hired a financial advisor to assist it in evaluating the proposal received from Avis. With the parties having not been able to reach a definitive agreement on acceptable terms, on September 2, 2021, Avis notified the Company that it would no longer continue negotiations with respect to the proposed acquisition.

ITEM 6. EXHIBITS

The following exhibits are submitted herewith:filed as part of this Quarterly Report.

*Furnished herewith

SIGNATURES

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.

Dated: Septem D Dated: June 11,September 9, 2021

INTERNATIONAL BALER CORPORATION

BY: /s/Victor W. Biazis

Victor W. Biazis

Chief Executive Officer

BY:/s/William E. Nielsen

William E. Nielsen

Chief Financial Officer