Cautionary Statement Concerning Forward-Looking Statements

This "Management's Discussion and Analysis" contains forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended. These forward-looking statements represent the Company's present expectations or beliefs concerning future events on certain assumptions which are subject to risks and uncertainties, including, but not limited to, changes in general economic conditions, variations in timing and amount of customers, changing product demand and industry capacity, increased competition and pricing pressure, as well as other factors, many or all of which may be beyond the Company's control and could cause actual results to differ materially from those indicated. Our forward-looking statements included in this 10-K speak only as of the date of this filing, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. Given these many risks and uncertainties, readers of this 10-K are cautioned not to place undue reliance on our forward-looking statements.

Results of Operations



For the fiscal year ended October 31, 2021, net sales were $10,002,443 compared
to $8,986,024 in fiscal 2020, an increase of 11.3%. The sales by product were as
follows:

                               2021            2020
General Purpose Balers       5,489,341       5,342,958
Rubber Balers                  100,200         626,000
Specialty Balers               592,179         155,934
Parts and Service Sales      3,820,723       2,861,132
Total                       10,002,443       8,986,024

The higher sales were the result of the improved economic conditions in fiscal 2021. The activity in the rubber baler market continued to remain slow in the past four years.

Gross profit was $1,222,856 in fiscal year 2021 compared to $853,633 in fiscal 2020. Gross profit as a percentage of net sales increased to 12.2% in 2021 compared to 9.5% in 2020. The higher gross profit margin percentage in fiscal 2021 was primarily the result of lower material costs as a percent of sales in fiscal 2021. The lower material costs were the result of higher parts and services sales in fiscal 2021 as these sales have higher margins than most equipment sales which have higher gross margin than baler sales.

The Company had a loss from operations of $919,836 in the fiscal year ended October 31, 2021 compared to a loss from operations of $600,051 in the prior fiscal year. Selling expenses were higher in fiscal 2021 by $11,632 while administrative expenses were higher by $677,376. The higher selling expense was the result of higher salaries (one additional sales person), higher advertising, conventions and shows, and travel expenses, partially offset by higher commission expense in fiscal 2020. The higher administrative expenses were the result of higher expenses relating to the Company retaining a financial advisor to prepare a fairness opinion on the value of the Company's common stock and related legal expenses.

The Company had a pre-tax loss of $287,137 in fiscal year ended October 31, 2021 compared to a pre-tax loss of $575,180 in the prior fiscal year. In the first quarter of fiscal year 2021 the Company recorded income of $626,466 from the Paycheck Protection Program (PPP) loan which was forgiven in the first quarter of fiscal 2021.



8

Liquidity and Capital Resources

The Company's net working capital at October 31, 2021 was $6,854,047 as compared to $7,721,268 at October 31, 2020.

Average Days Sales Outstanding (DSO) in fiscal 2021 was 35.4 days as compared to 32.2 days in fiscal 2020. DSO is calculated by dividing the total of the month-end net accounts receivable balances for the period by twelve, and dividing that result by the average day's sales for the period (period sales ÷ 365).

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 greater of 3% or Wall Street Journal prime rate minus 0.25% per the line of credit agreement, adjusting daily. The line of credit is secured by all assets of the Company and expires on May 15, 2022, unless extended or otherwise modified by the parties in writing. The line of credit had no outstanding balance at October 31, 2021 and at October 31, 2020.

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 had a two-year term and accrued 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 ("SBA") 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 its bank that the SBA has stated that the entire amount of the loan was forgiven. The Company reversed this liability in the quarter ended January 31, 2021 and the resulting gain was recognized as other income.

In fiscal 2021 the Company made additions of $279,289 to its buildings and manufacturing equipment, compared to additions of $183,000 in fiscal 2020. There are no unusual or infrequent events or transactions or significant economic changes which materially affect the amount of reported income. The Company believes that its cash, line of credit, and results of operations are sufficient to fund future operations.

Impact of the COVID-19 Pandemic

We are 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 the 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. The Company has experienced delayed deliveries of many components which have negatively affected shipments in the fiscal year ended October 31, 2021. 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.

Off Balance Sheet Arrangements

The Company has no off balance sheet arrangements.

Inflation

The costs of the Company are subject to the general inflationary trends existing in the general economy. The Company believes that expected pricing for its equipment will be able to include sufficient increases to offset any increase in costs due to inflation.



9

Critical Accounting Policies and Estimates

This discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as related disclosures of contingent assets and liabilities. We evaluate our estimates on an ongoing basis and we base our estimates on historical experience and various other assumptions we deem reasonable to the situation. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Changes in our estimates could materially impact our results of operations and financial condition in any particular period.

We consider our critical accounting policies and estimates to be as follows based on the high degree of judgment or complexity in their application:

Revenue Recognition

The Company recognizes revenue when finished products and/or parts are shipped and the customer takes ownership and assumes the risk of loss. Baler revenues are based on established prices by type and model. Revenue from installation services is recognized on completion of the service. The Company recognizes revenue from repair services in the period in which the service is provided. Standard service fee prices are established depending on baler classification and estimated time. The timing of shipments and installation services have an impact on the recording of revenue in a period.

Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses on trade receivables resulting from the inability to collect outstanding accounts due from its customers. The allowances include specific amounts for disputed, troubled and aged accounts using current knowledge of particular customer creditworthiness and general allowances based on historical collection experience, current economic trends, creditworthiness of customers and changes in customer payment terms.

Management believes the estimates used in determining the allowance for doubtful accounts are critical accounting estimates because changes in creditworthiness and economic conditions, including bankruptcies, could have a material impact on operating results.

The Company reviews its allowance for doubtful accounts monthly. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Inventory Allowance

The Company analyzes inventory for excess or slow-moving inventory. The Company reviews inventory for obsolescence on a regular basis. The allowance is estimated based on factors such as historical trends, current market conditions and management's assessment of when the inventory would likely be sold and the quantities and prices at which the inventory would likely be sold in the normal course of business. Changes in product specifications, customer product preferences or the loss of a customer could result in unanticipated impairment in net realizable value that may have a material impact on cost of goods sold, gross margin and net income. Obsolete or damaged inventory is disposed of or written down to estimated net realizable value on a quarterly basis.

Management analyzes the value of labor and overhead allocated to work in progress inventory on a monthly basis. Additional adjustments, if necessary, are made based on management's specific review of inventory on-hand. Management believes the estimates used in determining the allowance for excess and slow-moving inventory are critical accounting estimates as changes in the estimates could have a material impact on net income and the estimates involve a high degree of judgment.



10





Warranty Allowance

The Company warranties 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 a service plan for other required repairs and maintenance. The Company maintains an accrued liability for expected warranty claims. The warranty allowance considers warranty costs and requires management estimates of baler performance based on the quantity and type of balers currently under warranty and known potential warranty issues for these balers. Changes in the warranty estimate could impact operating results.

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. There were no valuation allowances on the deferred tax assets at October 31, 2021 and 2020 as management believes it will fully utilize them. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. There were no accruals for uncertain tax positions at October 31, 2021 or 2020.

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