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, prospective business opportunities 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 material, 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, 2021, 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 January 31, 2022 ("first quarter of fiscal 2022") compared to the three months ended January 31, 2021 ("first quarter of fiscal 2021")

In the first quarter ended January 31, 2022, the Company had net sales of $2,039,605 compared to net sales of $2,349,905 in the first quarter of fiscal 2021, a decrease of 13.2%. The sales by product were as follows:



                           January 31, 2022      January 31, 2021
General Purpose Balers    $         983,644     $       1,500,330
Rubber Balers                       103,865                    -
Specialty Balers                    129,572                63,891
Parts and Service Sales             822,524               785,684
Total                     $       2,039,605     $       2,349,905

The lower sales in the first quarter of fiscal 2022 were the result of general economic conditions. Parts and service sales were higher in the first quarter of fiscal 2022 by 4.7%.

In the first quarter ended January 31, 2022, gross profit increased to $258,318, 12.7% of net sales compared to $199,719, 8.5% of net sales in the prior-year first quarter. The higher gross profit was the result of the Company increasing prices and reducing operating costs.

The Company had a loss from operations of $133,110 in the first quarter of fiscal 2021 compared to a loss from operations of $174,018 in the first quarter of fiscal 2021.



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In the first quarter of fiscal 2021, the Company recorded income of $626,466 from the Paycheck Protection Program (PPP) loan which was forgiven. For the first quarter of fiscal 2021, the Company had pre-tax income of $453,339 compared to a pre-tax loss of $130,148 in the first quarter of fiscal 2022. The Company had an income tax benefit of $29,000 in the first quarter of fiscal 2022 compared to an income tax benefit of $36,000 in the first quarter of fiscal 2021. Income from the forgiven PPP loan is not taxable.

The sales order backlog was approximately $3,840,000 at January 31, 2022 and $2,700,000 at January 31, 2021.

Financial Condition and Liquidity:

Net working capital at January 31, 2022 was $6,746,576 as compared to $6,854,047 at October 31, 2021. 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 three months of fiscal 2022 were 31.8 days, as compared to 25.3 days in the first three months of fiscal 2021. DSO is calculated by dividing the total of the month-end net accounts receivable balances for the period by three, and dividing that result by the average day's sales for the period (period sales ÷ 91.25).

During the three months ended January 31, 2022 and 2021, the Company made additions to property, plant and equipment of $34,023 and $35,808 respectively.

The Company has a $1,000,000 line of credit agreement with First Merchants Bank of Muncie, Indiana which was renewed for an additional year 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 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 in writing. The line of credit had no outstanding balance at January 31, 2022 and at October 31, 2021.

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 $2,705,046 and $2,512,020 above the FDIC insured limit of $250,000 per bank at January 31, 2022 and October 31, 2021, respectively.

Off-Balance Sheet Arrangements:

As of January 31, 2022, 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, 2021.

Recent Accounting Pronouncements:

See Note 3(f) to our Financial Statements for a discussion of recent accounting pronouncements.

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