10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended May 31, 2019

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 No. 0-5131

ART’S-WAY MANUFACTURING CO., INC.

(Exact name of registrant as specified in its charter)

DELAWARE	42-0920725
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5556 Highway 9

Armstrong, Iowa 50514

(Address of principal executive offices)

(712) 864-3131

(Registrant’s telephone number, including area code)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock $.01 par value	ARTW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [x]   No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  

Yes [x] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [x]	Smaller reporting company [x]
	Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Yes [ ] No [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  

Yes [ ] No [x]

Number of common shares outstanding as of July 3, 2019: 4,291,712

Art’s-Way Manufacturing Co., Inc.

Index

Page No.

PART I – FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets May 31, 2019 and November 30, 2018	1
	Condensed Consolidated Statements of Operations Three-month and six-month periods ended May 31, 2019 and May 31, 2018	2
	Condensed Consolidated Statements of Comprehensive Income Three-month and six-month periods ended May 31, 2019 and May 31, 2018	3
	Condensed Consolidated Statements of Stockholders’ Equity Three-month and six-month periods ended May 31, 2019 and May 31, 2018	4
	Condensed Consolidated Statements of Cash Flows Six-month periods ended May 31, 2019 and May 31, 2018	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
PART II – OTHER INFORMATION		26
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	26
	SIGNATURES	27

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Balance Sheets

	(Unaudited)
	May 31, 2019			November 30, 2018
Assets
Current assets:
Cash	$	4,401		$	3,512
Accounts receivable-customers, net of allowance for doubtful accounts of $29,153 and $25,100 in 2019 and 2018, respectively		2,667,764			1,537,113
Inventories, net		10,105,263			10,257,102
Cost and profit in excess of billings		32,527			99,287
Net investment in sales-type leases, current		145,799			123,055
Other current assets		266,107			125,089
Total current assets		13,221,861			12,145,158
Property, plant, and equipment, net		5,468,238			5,647,485
Assets held for lease, net		805,498			1,870,125
Deferred income taxes		1,711,958			1,432,422
Net investment in sales-type leases, long-term		77,607			153,787
Other assets		73,843			76,497
Total assets	$	21,359,005		$	21,325,474
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	936,036		$	802,062
Customer deposits		512,286			145,632
Billings in excess of cost and profit		851,206			185,014
Income taxes payable		3,855			6,400
Accrued expenses		795,615			893,284
Line of credit		3,599,530			3,505,530
Current portion of long-term debt		83,250			227,459
Total current liabilities		6,781,778			5,765,381
Long-term liabilities
Long-term debt, excluding current portion		2,393,502			2,523,018
Total liabilities		9,175,280			8,288,399
Commitments and Contingencies (Notes 9 and 10)
Stockholders’ equity:
Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares in 2019 and 2018; issued 0 shares in 2019 and 2018.		-			-
Common stock – $0.01 par value. Authorized 9,500,000 shares in 2019 and 2018; issued 4,309,587 in 2019 and 4,225,050 in 2018		43,096			42,250
Additional paid-in capital		3,174,230			3,055,632
Retained earnings		9,004,954			9,966,928
Treasury stock, at cost (14,779 in 2019 and 9,286 in 2018 shares)		(38,555	)		(27,735	)
Total stockholders’ equity		12,183,725			13,037,075
Total liabilities and stockholders’ equity	$	21,359,005		$	21,325,474

See accompanying notes to condensed consolidated financial statements.

- 1 -

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended						Six Months Ended
	May 31, 2019			May 31, 2018			May 31, 2019			May 31, 2018
Sales	$	5,747,256		$	5,294,464		$	9,871,482		$	10,660,000
Cost of goods sold		4,788,261			4,187,450			8,307,644			8,399,610
Gross profit		958,995			1,107,014			1,563,838			2,260,390
Expenses:
Engineering		116,773			127,539			263,986			256,602
Selling		397,270			487,991			740,617			972,522
General and administrative		814,465			949,598			1,651,371			1,798,101
Total expenses		1,328,508			1,565,128			2,655,974			3,027,225
Income (Loss) from operations		(369,513	)		(458,114	)		(1,092,136	)		(766,835	)
Other income (expense):
Interest expense		(100,402	)		(68,711	)		(185,441	)		(138,387	)
Other		11,092			(252,687	)		37,915			(180,115	)
Total other income (expense)		(89,310	)		(321,398	)		(147,526	)		(318,502	)
Income (Loss) from continuing operations before income taxes		(458,823	)		(779,512	)		(1,239,662	)		(1,085,337	)
Income tax expense (benefit)		(102,781	)		(125,533	)		(277,688	)		96,040
Income (Loss) from continuing operations		(356,042	)		(653,979	)		(961,974	)		(1,181,377	)
Discontinued Operations
Income (loss) from operations of discontinued segment		-			(15,587	)		-			(67,177	)
Income tax expense (benefit)		-			(3,788	)		-			(16,324	)
Income (Loss) on discontinued operations		-			(11,799	)		-			(50,853	)
Net Income (Loss)		(356,042	)		(665,778	)		(961,974	)		(1,232,230	)
Earnings (Loss) per share - Basic:
Continuing Operations	$	(0.08	)	$	(0.16	)	$	(0.23	)	$	(0.28	)
Discontinued Operations	$	-		$	-		$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.08	)	$	(0.16	)	$	(0.23	)	$	(0.29	)
Earnings (Loss) per share - Diluted:
Continuing Operations	$	(0.08	)	$	(0.16	)	$	(0.23	)	$	(0.28	)
Discontinued Operations	$	-		$	-		$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.08	)	$	(0.16	)	$	(0.23	)	$	(0.29	)
Weighted average outstanding shares used to compute basic net income per share		4,299,289			4,213,893			4,272,532			4,192,592
Weighted average outstanding shares used to compute diluted net income per share		4,299,289			4,213,893			4,272,532			4,192,592

See accompanying notes to condensed consolidated financial statements.

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ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended						Six Months Ended
	May 31, 2019			May 31, 2018			May 31, 2019			May 31, 2018
Net Income (Loss)	$	(356,042	)	$	(665,778	)	$	(961,974	)	$	(1,232,230	)
Other Comprehensive Income (Loss)
Foreign currency translation adjustments		-			10,528			-			3,830
Release of cumulative translation adjustment due to substantial liquidation of a foreign entity		-			253,180			-			253,180
Total Other Comprehensive Income (Loss)		-			263,708			-			257,010
Comprehensive (Loss)	$	(356,042	)	$	(402,070	)	$	(961,974	)	$	(975,220	)

See accompanying notes to condensed consolidated financial statements.

- 3 -

ART’S-WAY MANUFACTURING CO., INC.

Consolidated Statements of Stockholders' Equity

Six Months Ended May 31, 2019 and 2018

(Unaudited)

	Common Stock				Additional					Other			Treasury Stock
	Number of				paid-in		Retained			Comprensive			Number of
	shares		Par value		capital		earnings			Income (Loss)			shares		Amount			Total
Balance, November 30, 2017		4,158,752	$	41,587	$	2,859,052	$	13,353,830		$	(257,010	)		1,954	$	(6,425	)	$	15,991,034
Stock based compensation		49,481		495		110,941		-			-			7,332		(21,310	)		90,126
Foreign Currency Translation Adjustment		-		-		-		-			3,830			-		-			3,830
Release of cumulative translation adjustment due to substantial liquidation of a foreign entity		-		-		-		-			253,180			-		-			253,180
Net (loss)		-		-		-		(1,232,230	)		-			-		-			(1,232,230	)
Balance, May 31, 2018		4,208,233	$	42,082	$	2,969,993	$	12,121,600		$	-			9,286	$	(27,735	)	$	15,105,940

	Common Stock				Additional					Other		Treasury Stock
	Number of				paid-in		Retained			Comprensive		Number of
	shares		Par value		capital		earnings			Income (Loss)		shares		Amount			Total
Balance, November 30, 2018		4,225,050	$	42,250	$	3,055,632	$	9,966,928		$	-		9,286	$	(27,735	)	$	13,037,075
Stock based compensation		84,537		846		118,598		-			-		5,493		(10,820	)		108,624
Foreign Currency Translation Adjustment		-		-		-		-			-		-		-			-
Release of cumulative translation adjustment due to substantial liquidation of a foreign entity		-		-		-		-			-		-		-			-
Net (loss)		-		-		-		(961,974	)		-		-		-			(961,974	)
Balance, May 31, 2019		4,309,587	$	43,096	$	3,174,230	$	9,004,954		$	-		14,779	$	(38,555	)	$	12,183,725

See accompanying notes to condensed consolidated financial statements.

- 4 -

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended
	May 31, 2019			May 31, 2018
Cash flows from operations:
Net (loss) from continuing operations	$	(961,974	)	$	(1,181,377	)
Net (loss) from discontinued operations		-			(50,853	)
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:
Stock based compensation		119,444			111,436
Loss on release of cumulative translation adjustment		-			253,180
Unrealized foreign currency gain (loss)		-			3,830
(Gain)/Loss on disposal of property, plant, and equipment		(10,303	)		(12,084	)
Depreciation and amortization expense		549,333			408,757
Bad debt expense (recovery)		3,673			(9,044	)
Deferred income taxes		(279,536	)		80,432
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable		(1,134,324	)		(155,874	)
Inventories, net		151,839			437,307
Net investment in sales-type leases		53,436			(349,981	)
Other assets		(141,018	)		87,529
Increase (decrease) in:
Accounts payable		133,974			384,157
Contracts in progress, net		732,952			(252,146	)
Customer deposits		366,654			8,580
Income taxes payable		(2,545	)		400
Accrued expenses		(97,669	)		(149,197	)
Net cash (used in) operating activities - continuing operations		(516,064	)		(334,095	)
Net cash (used in) operating activities - discontinued operations		-			(89,697	)
Net cash (used in) operating activities		(516,064	)		(423,792	)
Cash flows from investing activities:
Purchases of property, plant, and equipment		(186,215	)		(164,874	)
Net proceeds from sale of assets		893,713			29,316
Net cash provided by (used in) investing activities - continuing operations		707,498			(135,558	)
Net cash provided by investing activities - discontinued operations		-			1,418,761
Net cash provided by investing activities		707,498			1,283,203
Cash flows from financing activities:
Net change in line of credit		94,000			(338,000	)
Repayment of term debt		(273,725	)		(109,295	)
Repurchases of common stock		(10,820	)		(21,310	)
Net cash (used in) financing activities - continuing operations		(190,545	)		(468,605	)
Net cash (used in) financing activities - discontinued operations		-			(599,584	)
Net cash (used in) financing activities		(190,545	)		(1,068,189	)
Net increase (decrease) in cash		889			(208,778	)
Cash at beginning of period		3,512			212,400
Cash at end of period	$	4,401		$	3,622
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	170,992		$	142,426
Income taxes	$	3,855		$	5,237
Supplemental disclosures of non-cash operating and investing activities:
Transfer of inventory to assets held for lease	$	-		$	800,343

See accompanying notes to condensed consolidated financial statements.

- 5 -

Notes to Unaudited Condensed Consolidated Financial Statements

1) Description of the Company

Unless otherwise specified, as used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “Art’s-Way,” and the “Company” refer to Art’s-Way Manufacturing Co., Inc., a Delaware corporation headquartered in Armstrong, Iowa, and its wholly-owned subsidiaries.

The Company began operations as a farm equipment manufacturer in 1956. Since that time, it has become a major worldwide manufacturer of agricultural equipment. Its principal manufacturing plant is located in Armstrong, Iowa.

The Company has organized its business into three operating segments. Management separately evaluates the financial results of each segment because each is a strategic business unit offering different products and requiring different technology and marketing strategies. The agricultural products segment manufactures and sells farm equipment and related replacement parts under the Art’s-Way Manufacturing label and private labels. The modular buildings segment manufactures and installs modular buildings for animal containment and various laboratory uses, and the tools segment manufactures steel cutting tools and inserts.

During the third quarter of fiscal 2016, the Company discontinued its pressurized vessels segment. For more information on discontinued operations, see Note 4 “Discontinued Operations.” For detailed financial information relating to segment reporting, see Note 17 “Segment Information.”

2) Summary of Significant Account Policies

Statement Presentation

The foregoing condensed consolidated financial statements of the Company are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position and operating results for the interim periods. The financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2018. The results of operations for the three and six months ended May 31, 2019 are not necessarily indicative of the results for the fiscal year ending November 30, 2019.

During the second quarter of fiscal 2018, the Company liquidated its investment in its Canadian subsidiary (“International”) by selling off remaining inventory and filing dissolution paperwork. Prior to that liquidation and dissolution, the financial books of the Company’s Canadian operations were kept in the functional currency of Canadian dollars and the financial statements were converted to U.S. Dollars for consolidation. When consolidating the financial results of the Company into U.S. Dollars for reporting purposes, the Company used the All-Current translation method. The All-Current translation method requires the balance sheet assets and liabilities to be translated to U.S. Dollars at the exchange rate as of quarter-end. Stockholders’ equity was translated at historical exchange rates and retained earnings were translated at an average exchange rate for the period. Additionally, revenue and expenses were translated at average exchange rates for the periods presented. The resulting cumulative translation adjustment was carried on the balance sheet and was recorded in stockholders’ equity. Following the liquidation and dissolution of International, the cumulative translation adjustment carried on the balance sheet was released into net income under other income (expense), and the financial statements will no longer need translation each period. Since no income tax benefit was received from liquidation and dissolution, the cumulative translation adjustment was not tax adjusted.

- 6 -

Lessor Accounting and Sales-Type Leases

Modular buildings held for short term lease by our modular buildings segment are recorded at cost. Amortization of each modular building is calculated over the useful life of the building. Estimated useful life is three to five years. Lease revenue is accounted for on a straight-line basis over the term of the related lease agreement. Lease income for modular buildings is included in sales on the consolidated statements of operations.

The Company accounts for leases of modular buildings to certain customers as sales-type leases. These leases have terms of up to 36 months and are collateralized by a security interest in the related modular building. The lessee has a bargain purchase option available at the end of the lease term. A minimum lease receivable is recorded net of unearned interest income and profit on sale at the time the Company’s obligation to the lessee is complete. Profit related to the sale of the building is recorded upon fulfillment of the Company’s obligation to the lessee.

Estimates

The preparation of 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the three and six months ended May 31, 2019. Actual results could differ from those estimates.

Revenue Recognition

Effective December 1, 2018 the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 606, Revenue from Contracts with Customers (“ASC 606”). The Company used the modified retrospective adoption of ASC 606. The adoption of ASC 606 had no impact on prior year or previously disclosed amounts. In accordance with ASC 606, revenue is measured based on consideration specified in a contract with a customer and recognized when the Company satisfies the performance obligation specified in each contract.

The Company’s revenues primarily result from contracts with customers. The major sources of revenue for the agricultural products and tools segments are farm equipment, service parts related to farm equipment and steel cutting tools and inserts. The agricultural products and tools segments generally execute short-term contracts that contain a single performance obligation – the delivery of product to the common carrier. The Company recognizes revenue for the production and sale of farm equipment, service parts and cutting tools upon shipment of the good(s). The agricultural products and tools segments each typically require payment in full 30 days after the ship date. To take advantage of program discounts, some customers pay deposits up front. Any deposits received increase contract liabilities. The modular buildings segment executes contracts with customers that can be short- or long-term in nature. These contracts can have multiple performance obligations and revenue from these can be recognized over time or at a point in time depending on the nature of the contracts. Payment terms for the modular buildings segment vary by contract, but typically utilize money down and progress payments throughout the life of the contract. The payment terms of our modular buildings segment have the most impact on our contract receivables, contract assets and contract liabilities. Project invoicing from the modular buildings segment increase contract receivables and have an effect on contract liabilities through billings in excess of costs and estimated gross profit and advanced payments. The balance of contract assets is typically made up of the balance of costs in and estimated gross profit in excess of billings. The major source of revenue for the modular buildings segment is modular building sales. Sales of modular buildings are generally recognized using input methods to measure progress towards the satisfaction of a performance obligation using the percentage of completion method. Stock modular building sales also occur and are recognized at a point in time when the performance obligation is fulfilled through substantial completion. Substantial completion is achieved through customer acceptance of the completed building.

- 7 -

The agricultural products segment offers variable consideration in the form of discounts depending on participation in yearly early order programs. This variable consideration is allocated to the transaction price of all products in a sales arrangement and is not contingent on future outcomes. The agricultural products segment does not offer rebates or credits. The tools segment offers quantity discounts that are allocated to the transaction price of each product once the quantity break is achieved. The tools segment does not offer rebates or credits. The modular buildings segment does not offer discounts, rebates or credits.

For information on product warranty as it applies to ASC 606, refer to Note 9 “Product Warranty.”

3) Revenue Recognition

The following table displays revenue by reportable segment from external customers, disaggregated by major source. The Company believes disaggregating by these categories depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

	Three Months Ended May 31, 2019
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	2,879,000	$	-	$	-	$	2,879,000
Farm equipment service parts		665,000		-		-		665,000
Steel cutting tools and inserts		-		-		544,000		544,000
Modular buildings		-		1,368,000		-		1,368,000
Modular building lease income		-		168,000				168,000
Other		93,000		22,000		8,000		123,000
	$	3,637,000	$	1,558,000	$	552,000	$	5,747,000

	Three Months Ended May 31, 2018
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	3,123,000	$	-	$	-	$	3,123,000
Farm equipment service parts		698,000		-		-		698,000
Steel cutting tools and inserts		-		-		516,000		516,000
Modular buildings		-		734,000		-		734,000
Modular building lease income		-		67,000		-		67,000
Other		116,000		33,000		7,000		156,000
	$	3,937,000	$	834,000	$	523,000	$	5,294,000

- 8 -

	Six Months Ended May 31, 2019
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	4,881,000	$	-	$	-	$	4,881,000
Farm equipment service parts		1,216,000		-		-		1,216,000
Steel cutting tools and inserts		-		-		1,028,000		1,028,000
Modular buildings		-		2,163,000		-		2,163,000
Modular building lease income		-		348,000				348,000
Other		150,000		69,000		16,000		235,000
	$	6,247,000	$	2,580,000	$	1,044,000	$	9,871,000

	Six Months Ended May 31, 2018
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	6,373,000	$	-	$	-	$	6,373,000
Farm equipment service parts		1,286,000		-		-		1,286,000
Steel cutting tools and inserts		-		-		1,203,000		1,203,000
Modular buildings		-		1,407,000		-		1,407,000
Modular building lease income		-		116,000		-		116,000
Other		207,000		50,000		18,000		275,000
	$	7,866,000	$	1,573,000	$	1,221,000	$	10,660,000

The following table provides information about contract receivables, contract assets, and contract liabilities from contracts with customers included on the Condensed Consolidated Balance Sheets.

	May 31, 2019		November 30, 2018
Receivables	$	1,024,000	$	159,000
Assets		33,000		99,000
Liabilities		1,220,000		185,000

The amount of revenue recognized in the first six months of fiscal 2019 that was included in a contract liability at November 30, 2018 was $185,014 compared to $93,264 in the same period of fiscal 2018. The significant change in contract receivables is due to a large milestone invoice from the modular buildings segment. This invoice also affected contract liabilities by increasing billings in excess of costs and estimated gross profit at May 31, 2019. Contract liabilities also increased due to equipment deposits received in the first quarter of fiscal 2019 from the 2019 beet program offering from the agricultural products segment. Swings in contract assets from November 30, 2018 are due to changes in costs and estimated gross profit in excess of billings from the modular buildings segment.

The Company will utilize the practical expedient exception for these contracts and will report only on performance obligations greater than one year. As of May 31, 2019, the Company has no performance obligations with an original expected duration greater than one year.

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4) Discontinued Operations

Effective October 31, 2016, the Company discontinued the operations of its Vessels segment in order to focus its efforts and resources on the business segments that have historically been more successful and that are expected to present greater opportunities for meaningful long-term shareholder returns. On March 29, 2018, the remaining assets of Vessels, consisting of real estate assets, were disposed of at a selling price of $1,500,000.

As Vessels was a unique business unit of the Company, its liquidation was a strategic shift. In accordance with ASC Topic 360, the Company has classified Vessels as discontinued operations for all periods presented.

Income (loss) from discontinued operations, before tax in the accompanying Condensed Consolidated Statements of Operations is comprised of the following:

	Three Months Ended
	May 31, 2018
Revenue from external customers	$	-
Gross Profit		-
Operating Expense		7,019
Income (loss) from operations		(7,019	)
Income (loss) before tax		(15,587	)

	Six Months Ended
	May 31, 2018
Revenue from external customers	$	-
Gross Profit		-
Operating Expense		51,133
Income (loss) from operations		(51,133	)
Income (loss) before tax		(67,177	)

There were no components of discontinued operations in the accompanying Condensed Consolidated Balance Sheets as of May 31, 2019 or November 30, 2018.

5) Net Income (Loss) Per Share of Common Stock

Basic net income (loss) per share of common stock has been computed on the basis of the weighted average number of common shares outstanding. Diluted net income (loss) per share has been computed on the basis of the weighted average number of common shares outstanding plus equivalent shares assuming exercise of stock options. Potential shares of common stock that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted net income (loss) per share.

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Basic and diluted net income (loss) per share have been computed based on the following as of May 31, 2019 and May 31, 2018:

	For the Three Months Ended
	May 31, 2019			May 31, 2018
Numerator for basic and diluted net income (loss) per share:
Net income (loss) from continuing operations	$	(356,042	)	$	(653,979	)
Net income (loss) from discontinued operations		-			(11,799	)
Net income (loss)	$	(356,042	)	$	(665,778	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,299,289			4,213,893
Effect of dilutive stock options		-			-
For diluted net income (loss) per share - weighted average common shares outstanding		4,299,289			4,213,893
Net Income (Loss) per share - Basic:
Continuing Operations	$	(0.08	)	$	(0.16	)
Discontinued Operations	$	-		$	-
Net Income (Loss) per share	$	(0.08	)	$	(0.16	)
Net Income (Loss) per share - Diluted:
Continuing Operations	$	(0.08	)	$	(0.16	)
Discontinued Operations	$	-		$	-
Net Income (Loss) per share	$	(0.08	)	$	(0.16	)

	For the Six Months ended
	May 31, 2019			May 31, 2018
Numerator for basic and diluted net income (loss) per share:
Net income (loss) from continuing operations	$	(961,974	)	$	(1,181,377	)
Net income (loss) from discontinued operations		-			(50,853	)
Net income (loss)	$	(961,974	)	$	(1,232,230	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,272,532			4,192,592
Effect of dilutive stock options		-			-
For diluted net income (loss) per share - weighted average common shares outstanding		4,272,532			4,192,592
Net Income (Loss) per share - Basic:
Continuing Operations	$	(0.23	)	$	(0.28	)
Discontinued Operations	$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.23	)	$	(0.29	)
Net Income (Loss) per share - Diluted:
Continuing Operations	$	(0.23	)	$	(0.28	)
Discontinued Operations	$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.23	)	$	(0.29	)

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6) Inventory

Major classes of inventory are:

	May 31, 2019			November 30, 2018
Raw materials	$	7,689,572		$	7,825,278
Work in process		433,171			272,302
Finished goods		4,778,690			5,051,330
Gross inventory	$	12,901,433		$	13,148,910
Less: Reserves		(2,796,170	)		(2,891,808	)
Net Inventory	$	10,105,263		$	10,257,102

7) Accrued Expenses

Major components of accrued expenses are:

	May 31, 2019		November 30, 2018
Salaries, wages, and commissions	$	422,752	$	448,737
Accrued warranty expense		89,637		96,786
Other		283,226		347,761
	$	795,615	$	893,284

8) Assets Held for Lease

Major components of assets held for lease are:

	May 31, 2019		November 30, 2018
West Union Facility	$	-	$	878,079
Modular Buildings		805,498		992,046
Net assets held for lease	$	805,498	$	1,870,125

Rents recognized from assets held for lease included in sales on the Consolidated Statements of Operations during the three and six months ended May 31, 2019 were $168,465 and $347,509, respectively, compared to $66,558 and $115,518 for the same respective periods in fiscal 2018. Rents recognized in sales were related to the leasing of modular buildings as a part of the normal course of business operations of the modular building segment. Rents recognized from assets held for lease included in other income (expense) on the Consolidated Statements of Operations during the three and six months ended May 31, 2019 were $0 and $2,500, respectively, compared to $0 and $38,180 for the same respective periods in fiscal 2018. Rents related to the West Union facility in the agricultural products segment were recognized in other income as such income was outside of the scope of this segment’s normal business operations. The West Union facility was sold on December 14, 2018 for $900,000.

Future minimum lease receipts from assets held for lease are as follows:

Future Minimum Leased Assets
Year Ending November 30,	Amount
2019	$	204,330
2020		90,411
Total	$	294,741

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9) Product Warranty

The Company offers warranties of various lengths to its customers depending on the specific product and terms of the customer purchase agreement. The average length of the warranty period is one year from the date of purchase. The Company’s warranties require it to repair or replace defective products during the warranty period at no cost to the customer. Product warranty is included in the price of the product and provides assurance that the product will function in accordance with agreed-upon specifications. It does not represent a separate performance obligation under ASC 606. The Company records a liability for estimated costs that may be incurred under its warranties. The costs are estimated based on historical experience and any specific warranty issues that have been identified. Although historical warranty costs have been within expectations, there can be no assurance that future warranty costs will not exceed historical amounts. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the balance as necessary. The accrued warranty balance is included in accrued expenses as shown in Note 7 “Accrued Expenses.” Changes in the Company’s product warranty liability for the three and six months ended May 31, 2019 and May 31, 2018 are as follows:

	For the Three Months Ended
	May 31, 2019			May 31, 2018
Balance, beginning	$	25,857		$	54,135
Settlements / adjustments		(62,640	)		(58,892	)
Warranties issued		126,420			75,973
Balance, ending	$	89,637		$	71,216

	For the Six Months Ended
	May 31, 2019			May 31, 2018
Balance, beginning	$	96,786		$	68,451
Settlements / adjustments		(194,938	)		(141,565	)
Warranties issued		187,789			144,330
Balance, ending	$	89,637		$	71,216

10) Loan and Credit Agreements

The Company maintains two revolving lines of credit and a term loan with Bank Midwest. The Company also previously maintained a term loan with The First National Bank of West Union.

Bank Midwest Revolving Lines of Credit and Term Loans

On September 28, 2017, the Company entered into a credit facility with Bank Midwest, which superseded and replaced in its entirety the Company’s previous credit facility with U.S. Bank. The Bank Midwest credit facility initially consisted of a $5,000,000 revolving line of credit (the “2017 Line of Credit”), a $2,600,000 term loan due October 1, 2037, and a $600,000 term loan due October 1, 2019. The 2017 Line of Credit is being used for working capital purposes. On March 29, 2018, the Company paid in full the $600,000 term loan due October 1, 2019 using proceeds from the sale of the Company’s Dubuque, Iowa property. The payment consisted of $596,563 in principal and $2,328 in interest.

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On May 31, 2019, the balance of the 2017 Line of Credit was $3,599,530 with $1,400,470 remaining available, as may be limited by the borrowing base calculation. The 2017 Line of Credit borrowing base is an amount equal to 75% of accounts receivable balances (discounted for aged receivables), plus 50% of inventory, less any outstanding loan balance on the 2017 Line of Credit. At May 31, 2019, the 2017 Line of Credit was not limited by the borrowing base calculation. Any unpaid principal amount borrowed on the 2017 Line of Credit accrues interest at a floating rate per annum equal to 1.00% above the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The interest rate floor is set at 4.25% per annum and the current interest rate is 6.50% per annum. The 2017 Line of Credit was most recently renewed on March 30, 2019. The 2017 Line of Credit is payable upon demand by Bank Midwest, and monthly interest-only payments are required. If no earlier demand is made, the unpaid principal and accrued interest is due on March 30, 2020.   

The $2,600,000 term loan accrues interest at a rate of 5.00% for the first sixty months. Thereafter, this loan will accrue interest at a floating rate per annum equal to 0.75% above the Wall Street Journal rate published the money rates section of the Wall Street Journal. The interest rate floor is set at 4.15% per annum and the interest rate may only be adjusted by Bank Midwest once every five years. Monthly payments of $17,271 for principal and interest are required. This loan is also guaranteed by the United States Department of Agriculture (“USDA”), which required an upfront guarantee fee of $62,400 and requires an annual fee of 0.5% of the unpaid balance. As part of the USDA guarantee requirements, shareholders owning more than 20% are required to personally guarantee a portion of the loan, in an amount equal to their stock ownership percentage. J. Ward McConnell Jr., the Vice Chairman of the Board of Directors and a shareholder owning more than 20% of the Company’s outstanding stock, is guaranteeing approximately 38% of this loan, for an annual fee of 2% of the personally guaranteed amount. The initial guarantee fee will be amortized over the life of the loan, and the annual fees and personally guaranteed amounts are expensed monthly.

On February 13, 2019, the Company opened a $4,000,000 revolving line of credit (the “2019 Line of Credit”) with Bank Midwest in connection with bonding obligations for the Company’s performance of a large modular laboratory construction project. Funds under the 2019 Line of Credit will be undisbursed to the Company and will be held by Bank Midwest in connection with an Irrevocable Letter of Credit issued by Bank Midwest for the project. The 2019 Line of Credit accrues interest at a floating rate per annum equal to 1.00% above the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The interest rate floor is set at 4.25% per annum and the current interest rate is 6.50% per annum. The 2019 Line of Credit is payable upon demand by Bank Midwest. If no earlier demand is made, the unpaid principal and accrued interest will be payable in one payment, due on February 13, 2020.    As of May 31, 2019, the funds on the 2019 Line of Credit remain undisbursed and are held by Bank Midwest.   

Each of the 2017 Line of Credit and the $2,600,000 term loan are governed by the terms of a separate Promissory Note, dated September 28, 2017, entered into between the Company and Bank Midwest. The 2019 Line of Credit is governed by the terms of a Promissory Note, dated February 13, 2019, entered into between the Company and Bank Midwest.

In connection with the 2017 Line of Credit, the Company, Art’s-Way Scientific Inc. and Ohio Metal Working Products/Art’s-Way Inc. each entered into a Commercial Security Agreement with Bank Midwest, dated September 28, 2017, pursuant to which each granted to Bank Midwest a first priority security interest in certain inventory, equipment, accounts, chattel paper, instruments, letters of credit and other assets to secure the obligations of the Company under the line of credit. Each of Art’s-Way Scientific Inc. and Ohio Metal Working Products/Art’s-Way Inc. also agreed to guarantee the obligations of the Company pursuant to the 2017 Line of Credit, as set forth in Commercial Guaranties, each dated September 28, 2017. The 2019 Line of Credit is also secured by these existing security documents.

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To further secure the 2017 Line of Credit, the Company granted Bank Midwest a second mortgage on its West Union, Iowa property and Ohio Metal Working Products/Art’s-Way Inc. granted Bank Midwest a mortgage on its property located in Canton, Ohio. The mortgage on the West Union property was released in conjunction with the sale of that property on December 14, 2018. The 2019 Line of Credit is also secured by the mortgage on the Canton, Ohio property. The $2,600,000 term loan is secured by a mortgage on the Company’s Armstrong, Iowa and Monona, Iowa properties. Each mortgage is governed by the terms of a separate Mortgage, dated September 28, 2017, and each property is also subject to a separate Assignment of Rents, dated September 28, 2017.

If the Company or its subsidiaries (as guarantors pursuant to the Commercial Guaranties) commits an event of default with respect to the promissory notes and fails or is unable to cure that default, Bank Midwest may immediately terminate its obligation, if any, to make additional loans to the Company and may accelerate the Company’s obligations under the promissory notes. Bank Midwest shall also have all other rights and remedies for default provided by the Uniform Commercial Code, as well as any other applicable law and the various loan agreements. In addition, in an event of default, Bank Midwest may foreclose on the mortgaged property.

Bank Midwest Loan Covenants

Compliance with Bank Midwest covenants is measured annually at November 30. The terms of the Bank Midwest loan agreements require the Company to maintain a minimum working capital ratio of 1.75, while maintaining a minimum of $5,100,000 of working capital. Additionally, a maximum debt to worth ratio of 1 to 1 must be maintained, with a minimum of 40% tangible balance sheet equity, with variations subject to mutual agreement. The Company is also required to maintain a minimum debt service coverage ratio of 1.25, with a 0.10 tolerance. The Company was in compliance with all covenants as of November 30, 2018 other than the debt service coverage ratio. Bank Midwest issued a waiver forgiving the noncompliance, and no event of default has occurred. The next measurement date is November 30, 2019.

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Iowa Finance Authority Term Loan

On May 1, 2010, the Company obtained a $1,300,000 loan to finance the purchase of an additional facility located in West Union, Iowa to be used as a distribution center, warehouse facility, and manufacturing plant for certain products under the Art’s-Way brand. The loan was secured by a mortgage on the Company’s West Union Facility, pursuant to a Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement dated May 1, 2010 between the Company and The First National Bank of West Union.

On December 14, 2018, the Company repaid this loan in full in connection with the sale of the West Union, Iowa facility.    

A summary of the Company’s term debt is as follows:

	May 31, 2019		November 30, 2018
Bank Midwest loan payable in monthly installments of $17,271 including interest at 5.00%, due October 1, 2037	$	2,476,752	$	2,517,510
Iowa Finance Authority loan payable in monthly installments of $12,500 including interest at 2.75%, due June 1, 2020		-		232,967
Total term debt	$	2,476,752	$	2,750,477
Less current portion of term debt		83,250		227,459
Term debt, excluding current portion	$	2,393,502	$	2,523,018

A summary of the minimum maturities of term debt follows for the years ending November 30:

Year	Amount
2019		40,761
2020		85,401
2021		90,179
2022		94,858
2023		99,781
2024 and thereafter		2,065,772
	$	2,476,752

11) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses.

On December 22, 2017, the Tax Cuts and Job Act of 2017 was enacted, which reduces the top corporate income tax rate from 35% to 21%. This law is generally effective for tax years beginning after December 31, 2017. The application of this new rate was recognized in the first quarter of fiscal 2018. Tax expense from continuing operations for the six months ended May 31, 2018 includes an adjustment of approximately $298,000 related to the revaluation of the Company’s net deferred tax asset at the new statutory rate.

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12) Related Party Transactions

From time to time, the Company purchases various supplies from related parties, which are companies owned by J. Ward McConnell, Jr., the Company’s Vice Chairman of the Board of Directors. Also, J. Ward McConnell, Jr. as a shareholder owning more than 20% of the Company’s outstanding stock, was required to guarantee a portion of the Company’s term debt in accordance with the USDA guarantee on the Company’s term loan. Mr. McConnell is paid a monthly fee for his guarantee. During the three and six months ended May 31, 2019, the Company recognized expenses of $6,501 and $14,649, respectively, for transactions with a related party, compared to $7,028 and $12,029 for the same respective periods in fiscal 2018. The accrued expenses balance as of May 31, 2019 contains $1,594 due to a related party, compared to $1,646 for the same period in fiscal 2018.

13) Sales-Type Leases

The components related to sales-type leases at May 31, 2019 and November 30, 2018 are as follows:

	May 31, 2019			November 30, 2018
Minimum lease receivable, current	$	174,000		$	159,500
Unearned interest income, current		(28,201	)	$	(36,445	)
Net investment in sales-type leases, current		145,799			123,055
Minimum lease receivable, long-term		81,276		$	168,277
Unearned interest income, long-term		(3,669	)	$	(14,490	)
Net investment in sales-type leases, long-term	$	77,607		$	153,787

Gross revenue recognized in sales from continuing operations on the Consolidated Statements of Operations from commencement of sales-type leases for the three and six months ended May 31, 2019 was $0 for both periods compared to $0 and $426,542 for the same periods in fiscal 2018.

Future minimum lease receipts from sales-type leases are as follows:

Year Ending November 30,	Amount
2019	$	87,000
2020		162,425
2021		5,851
Total	$	255,276

14) Recently Issued Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

Leases

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which requires a lessee to recognize a right-of-use asset and a lease liability on its balance sheet for all leases with terms of twelve months or greater. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. The Company will adopt this guidance for fiscal 2020, including interim periods within that reporting period. The Company has a moderate amount of leasing activity and is currently evaluating the impact of this guidance on its consolidated financial statements.

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15) Equity Incentive Plan and Stock Based Compensation

On January 27, 2011, the Board of Directors of the Company authorized and approved the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan (the “2011 Plan”).  The 2011 Plan was approved by the stockholders on April 28, 2011.  It replaced the Employee Stock Option Plan and the Directors’ Stock Option Plan (collectively, the “Prior Plans”), and no further stock options will be awarded under the Prior Plans.  Awards to directors and executive officers under the 2011 Plan are governed by the forms of agreement approved by the Board of Directors. Stock options granted prior to January 27, 2011 are governed by the applicable Prior Plan and the forms of agreement adopted thereunder.

The 2011 Plan permits the plan administrator to award nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance awards, and stock appreciation rights to employees (including officers), directors, and consultants.  The Board of Directors has approved a director compensation policy pursuant to which non-employee directors are automatically granted restricted stock awards of 1,000 shares of fully vested common stock annually or initially upon their election to the Board and another 1,000 shares of fully vested common stock on the last business day of each fiscal quarter. During the first six months of fiscal 2019, restricted stock awards of 69,937 shares were issued to various employees, directors, and consultants, which vest over the next three years, and restricted stock awards of 16,000 were issued to directors as part of the director compensation policy, which vested immediately upon grant. During the first six months of fiscal 2019, 1,400 shares of restricted stock were forfeited upon departure of certain employees.

Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant vesting period. The Company estimates the fair value of each stock-based option award on the measurement date using the Black-Scholes option valuation model which incorporates assumptions as to stock price volatility, the expected life of the options, risk-free interest rate, and dividend yield. Expected volatility is based on historical volatility of the Company’s stock and other factors. The Company uses historical option exercise and termination data to estimate the expected term the options are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is calculated using historical dividend amounts and the stock price at the option issuance date. No stock options were granted during the six months ended May 31, 2019 or in the same respective period of fiscal 2018. The Company incurred a total of $53,898 and $119,444 of stock-based compensation expense for restricted stock awards during the three and six months ended May 31, 2019, respectively, compared to $61,870 and $111,436 of stock-based compensation expense for restricted stock awards for the same respective periods of fiscal 2018.

16) Disclosures About the Fair Value of Financial Instruments

The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. At May 31, 2019 and November 30, 2018, the carrying amount approximated fair value for cash, accounts receivable, net investment in sales-type leases, accounts payable, notes payable to bank, and other current and long-term liabilities. The carrying amounts approximate fair value because of the short maturity of these instruments. The fair value of the net investment in sales-type leases also approximates recorded value as that is based on discounting future cash flows at rates implicit in the lease. The rates implicit in the lease do not materially differ from current market rates. The fair value of the Company’s installment term loans payable also approximates recorded value because the interest rates charged under the loan terms are not substantially different from current interest rates.

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17) Segment Information

The Company has three reportable segments: agricultural products, modular buildings and tools. The agricultural products segment manufactures and sells farm equipment and related replacement parts under the Art’s-Way Manufacturing label and private labels. The modular buildings segment manufactures and installs modular buildings for various uses, commonly animal containment and research laboratories. The tools segment manufactures steel cutting tools and inserts.

The accounting policies applied to determine the segment information are the same as those described in the summary of significant accounting policies. Management evaluates the performance of each segment based on profit or loss from operations before income taxes, exclusive of nonrecurring gains and losses.

Approximate financial information with respect to the reportable segments is as follows. The tables below exclude income and balance sheet data from discontinued operations. See Note 4 “Discontinued Operations.”

	Three Months Ended May 31, 2019
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	3,637,000		$	1,558,000		$	552,000		$	5,747,000
Income (loss) from operations		(297,000	)		(63,000	)		(10,000	)		(370,000	)
Income (loss) before tax		(382,000	)		(56,000	)		(21,000	)		(459,000	)
Total Assets		14,730,000			4,127,000			2,502,000			21,359,000
Capital expenditures		76,000			30,000			27,000			133,000
Depreciation & Amortization		124,000			104,000			32,000			260,000

	Three Months Ended May 31, 2018
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	3,937,000		$	834,000		$	523,000		$	5,294,000
Income (loss) from operations		(263,000	)		(146,000	)		(49,000	)		(458,000	)
Income (loss) before tax		(576,000	)		(141,000	)		(63,000	)		(780,000	)
Total Assets		16,686,000			3,485,000			2,419,000			22,590,000
Capital expenditures		42,000			859,000			-			901,000
Depreciation & Amortization		132,000			5,500			32,000			169,500

	Six Months Ended May 31, 2019
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	6,247,000		$	2,580,000		$	1,044,000		$	9,871,000
Income (loss) from operations		(898,000	)		(161,000	)		(33,000	)		(1,092,000	)
Income (loss) before tax		(1,031,000	)		(155,000	)		(54,000	)		(1,240,000	)
Total Assets		14,730,000			4,127,000			2,502,000			21,359,000
Capital expenditures		110,000			48,000			28,000			186,000
Depreciation & Amortization		249,000			236,000			64,000			549,000

	Six Months Ended May 31, 2018
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	7,866,000		$	1,573,000		$	1,221,000		$	10,660,000
Income (loss) from operations		(537,000	)		(206,000	)		(24,000	)		(767,000	)
Income (loss) before tax		(845,000	)		(194,000	)		(46,000	)		(1,085,000	)
Total Assets		16,686,000			3,485,000			2,419,000			22,590,000
Capital expenditures		71,000			894,000			-			965,000
Depreciation & Amortization		265,000			80,000			64,000			409,000

*The consolidated total in the table is a sum of segment figures and may not tie to actual figures in the condensed consolidated financial statements due to rounding.

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18) Subsequent Events

Management evaluated all other activity of the Company and concluded that no subsequent events have occurred that would require recognition in the condensed consolidated financial statements.

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q (this “report”) and the audited consolidated financial statements and related notes thereto included in Part II, Item 8 “Financial Statements and Supplementary Data,” as well as Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the fiscal year ended November 30, 2018. Some of the statements in this report may contain forward-looking statements that reflect our current view on future events, future business, industry and other conditions, our future performance, and our plans and expectations for future operations and actions. In some cases you can identify forward-looking statements by the use of words such as “may,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or the negative of these terms or other similar expressions. Many of these forward-looking statements are located in this report under Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” but they may appear in other sections as well. Forward-looking statements in this report generally relate to: (i) our warranty costs and order backlog; (ii) our beliefs regarding the sufficiency of working capital and cash flows; (iii) our expectation that we will continue to be able to renew or obtain financing on reasonable terms when necessary; (iv) the impact of recently issued accounting pronouncements; (v) our intentions and beliefs relating to our costs, business strategies, and future performance; (vi) our expected financial results; and (vii) our expectations concerning our primary capital and cash flow needs.

You should read this report thoroughly with the understanding that our actual results may differ materially from those set forth in the forward-looking statements for many reasons, including events beyond our control and assumptions that prove to be inaccurate or unfounded. We cannot provide any assurance with respect to our future performance or results. Our actual results or actions could and likely will differ materially from those anticipated in the forward-looking statements for many reasons, including but not limited to: (i) the impact of changing credit markets on our ability to continue to obtain financing on reasonable terms; (ii) our ability to repay current debt, continue to meet debt obligations and comply with financial covenants; (iii) the effect of general economic conditions, including consumer and governmental spending, on the demand for our products and the cost of our supplies and materials; (iv) fluctuations in seasonal demand and our production cycle; and (v) other factors described from time to time in our Securities and Exchange Commission filings. We do not intend to update the forward-looking statements contained in this report other than as required by law. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits completely and with the understanding that our actual future results may be materially different from what we currently expect. We qualify all of our forward-looking statements by these cautionary statements.

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Critical Accounting Policies

Our critical accounting policies involving the more significant judgments and assumptions used in the preparation of our financial statements as of May 31, 2019 remain unchanged from November 30, 2018 with the exception of the addition of a critical accounting policy regarding revenue recognition from contracts with customers, which is set forth below. Disclosure of these critical accounting policies is incorporated by reference from Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended November 30, 2018.

Revenue from Contracts with Customers

Effective December 1, 2018 we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 requires entities to recognize revenue in a way that depicts 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. ASC 606 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and is to be applied retrospectively, with early application not permitted. We adopted ASC 606 for fiscal 2019, including interim periods within that reporting period.

We have evaluated the new standard and applied the core principle to our contract revenue streams. To be consistent with this core principle, an entity is required to apply the following five-step approach:

1.     Identify the contract(s) with a customer;

2.     Identify each performance obligation in the contract;

3.     Determine the transaction price;

4.     Allocate the transaction price to each performance obligation; and

5.     Recognize revenue when or as each performance obligation is satisfied.

Our revenues primarily result from contracts with customers. The agricultural products and tools segments generally execute short-term contracts that contain a single performance obligation – the delivery of product to the common carrier. We recognize revenue for the production and sale of farm equipment, service parts, and cutting tools upon shipment of the good(s). The modular buildings segment executes contracts with customers that can be short or long-term in nature. These contracts can have multiple performance obligations and revenue from these can be recognized over time or at a point in time depending on the nature of the contracts. Payment terms generally are short-term and vary by customer and segment. Our implementation process for ASC 606 included modifications to the contracts of the modular buildings segment.

We use discounts as a form of variable consideration for our agricultural products and tools segments. The variable consideration is allocated to the transaction price at contract inception and is generally not contingent on future outcomes. The agricultural products and tools segments do not offer rebates or credits. The modular buildings segment does not offer discounts, credits or rebates.

Our product warranty is included in the price of the product and provides assurance that the product will function in accordance with agreed-upon specifications. Product warranty is expensed at the time of sale for the agricultural products and modular buildings segments. A small reserve is kept on the balance sheet as consideration for the tools segment warranty. This product warranty does not represent a separate performance obligation under ASC 606.

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We adopted ASC 606 using the modified retrospective method. We have determined that amounts reported under ASC 606 are not materially different than amounts reported under the previous revenue guidance of ASC 605 and therefore, we were not required to make an adjustment to retained earnings.

We, upon adoption of ASC 606, have increased the amount of required disclosures in the notes to our financial statements, including but not limited to:

● Disaggregation of revenue that depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors;

● The opening and closing balances of receivables, contract assets, and contract liabilities from contracts with customers, if not otherwise separately presented or disclosed;

● Revenue recognized in the reporting period that was included in the contract liability balance at the beginning of the period;

● Information about performance obligations in contracts with customers; and

● Judgments that significantly affect the determination of the amount and timing of revenue from contracts with customers, including the timing satisfaction of performance obligation, and the transaction price and the amounts allocated to performance obligations.

Results of Operations – Continuing Operations

Net Sales and Cost of Sales

Our consolidated corporate sales for continuing operations for the three- and six-month periods ended May 31, 2019 were $5,747,000 and $9,871,000, respectively, compared to $5,294,000 and $10,660,000 during the same respective periods in fiscal 2018, a $453,000 or 8.6%, increase for the three months and a $789,000, or 7.4%, decrease for the six months. The three month increase in revenue is due to an $8.4 million project at our modular buildings segment that began in the second quarter of fiscal 2019 and increased demand at our tools segment. Consolidated gross margin for the three-month period ended May 31, 2019 was 16.7% compared to 20.9% for the same period in fiscal 2018. Consolidated gross margin for the six-month period ended May 31, 2019 was 15.8% compared to 21.2% for the same period in fiscal 2018. This overall decreased gross margin is attributable to decreased gross margin in both our agricultural products and modular buildings segment, as discussed in further detail below.

Our second quarter sales in our agricultural products segment were $3,637,000 compared to $3,937,000 during the same period of fiscal 2018, a decrease of $300,000, or 7.6%. Our year-to-date agricultural product sales were $6,247,000 compared to $7,866,000 during the same period in fiscal 2018, a decrease of $1,619,000, or 20.6%. This decrease was driven by a difficult sales climate due to spring flooding across the United States, with many farmers planting on historically late dates and some concern that the crops may not be planted at all. Due to the uncertainty of 2019 crops, we saw decreased revenue on portable feed equipment and forage and receiver boxes. Additionally, the liquidation of our Canadian subsidiary accounted for a decrease of approximately $420,000 in sales in 2019. Moreover, our year-to-date fiscal 2018 revenue reflects liquidation of an old model of manure spreader, which was sold at a decreased margin, and OEM blower revenue of approximately $262,000 that was not repeated in fiscal 2019 as our OEM blower customer elected not to purchase any blowers from us in 2019 due to slow-moving inventory on their dealer lots relating to poor agricultural market conditions. Despite the overall sales decrease, we did see increased sales for the six months ended May 31, 2019 in land maintenance equipment, plows, beet equipment, reels and dump boxes compared to the same period in fiscal 2018. Gross margin for our agricultural products segment for the three-month period ended May 31, 2019 was 17.9% compared to 22.6% for the same period in fiscal 2018. Gross margin for our agricultural products segment for the six-month period ended May 31, 2019 was 15.8% compared to 21.9% for the same period in fiscal 2018. Our gross margin in fiscal 2019 reflects pressure from lower revenue available to cover our fixed overhead and decreased plant efficiency from a year ago due to new operations leadership diverting resources to implement changes that we believe will have long-term benefits. Some of these changes include warehouse reorganization to decrease material handling travel time and to improve inventory accuracy and a material review board to review parts before they are scrapped.

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Our second quarter sales in our modular buildings segment were $1,558,000 compared to $834,000 for the same period in fiscal 2018, an increase of $724,000, or 86.8%. Our year-to-date sales in our modular buildings segment were $2,580,000 compared to $1,573,000 for the same period in fiscal 2018, an increase of $1,007,000, or 64.0%. Our year-to-date increase in revenue is largely attributable to an $8.4 million project that began in the second quarter of fiscal 2019 and an increase in modular building lease revenue. Gross margin for the three- and six-month periods ended May 31, 2019 was 9.4% and 10.3%, respectively, compared to 10.0% and 12.7% for the same respective periods in fiscal 2018. The slight decrease in gross margin is due to increased costs associated with new production staff hired to fill large project needs coupled with an increase in depreciation on leased buildings put into service in fiscal 2018.

Our tools segment had sales of $552,000 and $1,044,000 during the three- and six-month periods ended May 31, 2019, respectively, compared to $523,000 and $1,221,000 for the same respective periods in fiscal 2018, a 5.5% increase and a 14.5% decrease, respectively. The year-to-date decrease is mainly due to the loss of a large volume customer at the end of the first quarter of fiscal 2018. Gross margin was 27.9% and 28.6% for the three- and six-month periods ended May 31, 2019, respectively, compared to 25.6% and 27.9% for the same respective periods in fiscal 2018. Our increased gross margin is due to improved efficiency by our workforce in 2019.

Expenses 

Our second quarter consolidated selling expenses were $397,000 compared to $488,000 for the same period in fiscal 2018. Our year-to-date selling expenses were $741,000 in fiscal 2019 compared to $973,000 for the same period in fiscal 2018. The decrease in selling expenses is due to lower commissions paid in our agricultural products and tools segments due to fewer sales, the shift of our advertising strategy from print to digital, attendance in fewer tradeshows in fiscal 2019 and cuts made to indirect labor in fiscal 2019. Selling expenses as a percentage of sales were 6.9% and 7.5% for the three- and six-month periods ended May 31, 2019, respectively, compared to 9.2% and 9.1% for the same respective periods in fiscal 2018.

Consolidated engineering expenses were $117,000 and $264,000 for the three- and six-month periods ended May 31, 2019, respectively, compared to $128,000 and $257,000 for the same respective periods in fiscal 2018. The decrease in engineering expenses for the three months ended May 31, 2019 is due to having one less engineer on staff in fiscal 2019. The increase in engineering expense year-to-date is due to research and development expenses related to our hammer blower and commercial forage box that were incurred in the first quarter of fiscal 2019. Engineering expenses as a percentage of sales were 2.0% and 2.7% for the three- and six-month periods ended May 31, 2019, respectively, compared to 2.4% and 2.4% for the same periods in fiscal 2018.

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Consolidated administrative expenses for the three- and six-month periods ended May 31, 2019 were $814,000 and $1,651,000, respectively, compared to $950,000 and $1,798,000 for the same respective periods in fiscal 2018. These decreases are largely due to cuts made to administrative staff at the start of fiscal 2019 and a decrease in temporary staffing at our tools segment location from a year ago. Administrative expenses as a percentage of sales were 14.2% and 16.7% for the three- and six-month periods ended May 31, 2019, respectively, compared to 17.9% and 16.9% for the same respective periods in fiscal 2018.

(Loss) from Continuing Operations

Consolidated net (loss) from continuing operations before income taxes was $(459,000) for the three-month period and $(1,240,000) for the six-month period ended May 31, 2019 compared to net (loss) from continuing operations before income taxes of $(780,000) and $(1,085,000) for the same respective periods in fiscal 2018. The decreased net (loss) from continuing operations before income taxes for the three months ended May 31, 2019 is due to increased revenue in our modular buildings segment related to our $8.4 million project, cuts made to our selling expenses and reduction of indirect labor in fiscal 2019. The increase in our net (loss) year-to-date is primarily related to a decrease in revenue from our agricultural products segment due to continued difficult agricultural market conditions. Looking forward, corn prices are starting to rise as uncertainty looms about crop yields in 2019 due to wet field conditions, and we are optimistic this will have a positive impact on the second half of fiscal 2019. We expect to continue to cut costs and solidify our processes in order to maximize our stockholder value during this time of rough agricultural outlook.

Income Tax Adjustment

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was enacted, which reduces the top corporate income tax rate from 35% to 21%. We have assessed the impact of the law on our reported assets, liabilities, and results of operations, and we believe that going forward, the overall rate reduction will have a positive impact on our net income in the long run. However, during the first quarter of fiscal 2018, we substantially reduced our net deferred tax asset using the new lower rates. Based on our recorded deferred tax asset at November 30, 2017, we reduced the deferred tax asset by approximately $298,000, which was recorded as an adjustment to our tax provision in the first quarter ended February 28, 2018.

Order Backlog

The consolidated order backlog net of discounts for continuing operations as of July 6, 2019 was $8,446,000 compared to $3,175,000 as of July 6, 2018. The agricultural products segment order backlog was $1,369,000 as of July 6, 2019 compared to $2,495,000 in fiscal 2018. The decrease in backlog is due to economic uncertainty from early spring flooding affecting 2019 planting and the early completion of our beet equipment that typically ships in the third quarter of each year. The backlog for the modular buildings segment was $6,914,000 as of July 6, 2019, compared to $465,000 in fiscal 2018. This increase in backlog is due to a modular research facility contracted at $8.4 million that is scheduled to be complete entirely in 2019. The backlog for the tools segment was $163,000 as of July 6, 2019 compared to $216,000 in fiscal 2018. Our order backlog is not necessarily indicative of future revenue to be generated from such orders due to the possibility of order cancellations and dealer discount arrangements we may enter into from time to time.

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Results of Operations – Discontinued Operations

During the third quarter of fiscal 2016, we made the decision to exit the pressurized vessels industry. On March 29, 2018 we disposed of the remaining assets of our pressurized vessels segment at a selling price of $1,500,000.

Liquidity and Capital Resources

Our primary source of funds for the six months ended May 31, 2019 was cash generated by investing activities, which includes the proceeds from the sale of our prior facility in West Union, Iowa. Under operating activities, our contracts in progress from our modular buildings segment provided a significant cash inflow by utilizing a favorable draw schedule on our $8.4 million project. Our fall beet pre-order program also was a significant source of operating funds as we incentivize down payments by offering a discount to purchase price. Operations was our primary use of cash for the first quarter of fiscal 2019. We expect our primary capital needs for the remainder of fiscal 2019 to relate to operating costs, primarily production and contract fulfilment, and retirement of debt.

We have a $5,000,000 revolving line of credit with Bank Midwest that, as of May 31, 2019, had an outstanding principal balance of $3,599,530. The line of credit is scheduled to mature on March 30, 2020 if no earlier demand is made.

We believe that our cash flows from operations and current financing arrangements will provide sufficient cash to finance operations and pay debt when due during the next twelve months. We expect to continue to be able to procure financing upon reasonable terms.

Off Balance Sheet Arrangements

None.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, we are not required to provide disclosure pursuant to this item.

Item 4.   Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The person serving as our principal executive officer and principal financial officer has evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e), as of the end of the period subject to this report. Based on this evaluation, the person serving as our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective and provide reasonable assurance that information required to be disclosed by us in the periodic and current reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the periods specified by the Securities and Exchange Commission’s rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II – OTHER INFORMATION

Item 1.   Legal Proceedings.

We are currently not a party to any material pending legal proceedings.

Item 1A. Risk Factors.

As a smaller reporting company, we are not required to provide disclosure pursuant to this item.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.   Defaults Upon Senior Securities.

None.

Item 4.   Mine Safety Disclosures.

Not applicable.

Item 5.   Other Information.

Effective March 30, 2019, we renewed our $5,000,000 revolving line of credit with Bank Midwest. The revolving line of credit is payable upon demand by Bank Midwest, and monthly interest-only payments are required. If no earlier demand is made, the unpaid principal and accrued interest is due on March 30, 2020. The updated Promissory Note with Bank Midwest is included as Exhibit 10.1 hereto and is incorporated herein by reference.

Item 6.   Exhibits.

Exhibit No.	Description
10.1	Promissory Note, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated March 30, 2019 – filed herewith.
31.1	Certificate of Chief Executive Officer and Interim Chief Financial Officer pursuant to 17 CFR 13a-14(a) – filed herewith.
32.1	Certificate of Chief Executive Officer and Interim Chief Financial Officer pursuant to 18 U.S.C. Section 1350 - filed herewith.
101	The following materials from this report, formatted in XBRL (Extensible Business Reporting Language) are filed herewith: (i) condensed consolidated balance sheets, (ii) condensed consolidated statement of operations, (iii) condensed consolidated statements of cash flows, and (iv) the notes to the condensed consolidated financial statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ART’S-WAY MANUFACTURING CO., INC.
Date: July 11, 2019		By: /s/ Carrie L. Gunnerson
		Carrie L. Gunnerson
		President, Chief Executive Officer and Interim Chief Financial Officer

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EX-10.1

Exhibit 10.1

PROMISSORY NOTE

Principal $5,000,000.00	Loan Date 03-30-2019	Maturity 03-20-2020	Loan No xxxxxxxxx129	Call / Coll RC-C 3 / 30	Account 720	Officer JJN	Initials
References in the boxes above are for Lenders use only and do not limit the applicability of this document to any particular loan or item. Any item above containing "***" has been omitted due to text length limitations.

Borrower:	Art's-Way Manufacturing Co., Inc.	Lender:	Bank Midwest
	PO Box 288		Armstrong Branch
	Armstrong, IA 50514-0288 United States		PO Box 136
			500 6th Street
			Armstrong, IA 50514

Principal Amount: $5,000,000.00 Date of Note: March 30, 2019                            

PROMISE TO PAY. Art's-Way Manufacturing Co., Inc. ("Borrower") promises to pay to Bank Midwest ("Lender"), or order, in lawful money of the United States of America, the principal amount of Five Million & 00/100 Dollars ($5,000,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance.

PAYMENT. Borrower will pay this loan in full immediately upon Lender’s demand. If no demand is made, Borrower will pay this loan in one payment of all outstanding   principal plus all accrued unpaid interest on March 30, 2020. In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning April 30, 2019, with all subsequent interest payments to be due on the same day of each month after that. Unless otherwise agreed or required by applicable law, payments will be applied first to any escrow or reserve account payments as required under any mortgage, deed of trust, or other security Instrument or security agreement securing this Note; then to any accrued unpaid interest; and then to principal. Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing. All payments must be made in U.S. dollars and must be received by Lender consistent with any written payment instructions provided by Lender. If a payment is made consistent with Lender’s payment instructions but received after 5:30 PM Central Time, Lender will credit Borrower's payment on the next business day.

VARIABLE INTEREST RATE. The Interest rate on this Note is subject to change from time to time based on changes in an independent Index which is the Wall Street Journal Rate as published in the Wall Street Journal Money Rates section (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Borrower's request. The interest rate change will not occur more often than each one (1) day. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 5.500% per annum. Interest on the unpaid principal balance of this Note will be calculated as described in the “INTEREST CALCULATION METHOD” paragraph using a rate of 1.000 percentage point over the Index, adjusted if necessary for any minimum and maximum   rate limitations described below, resulting in an initial rate of 6.500% per annum based on a year of 360 days. NOTICE: Under no circumstances will the interest rate on this Note be less than 4.250%per annum or more than the maximum rate allowed by applicable law.

INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360   days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. All interest payable under this Note is computed using this method.

PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments of accrued unpaid interest.   Rather, early payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked “paid in full", "without recourse", or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender’s rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes "payment in full” of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Bank Midwest, Armstrong Branch, PO Box136, 500 6th Street, Armstrong, LA   50514.

INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the total sum due under this Note will continue to accrue interest at the interest rate under this Note. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law.

DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note:

Payment Default. Borrower fails to make any payment when due under this Note.

Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.

False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.

Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part   of Borrower’s property, any assignment   for the benefit of creditors, any type of   creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.

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PROMISSORY NOTE

Loan No: xxxxxxxxx129  (Continued) Page 2

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing he loan. This includes a garnishment of any of Borrower's accounts, Including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is Ulu basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.

Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note.

Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.

Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of this Note is impaired.

Insecurity. Lender in good faith believes itself insecure.

LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance under this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount.

ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender’s attorneys' fees and Lender’s legal expenses, whether there is a lawsuit, including without limitation all attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law.

GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Iowa without regard to Its conflicts of law provisions. This Note has been accepted by Lender in the State of Iowa.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against all such accounts.

COLLATERAL. Borrower acknowledges this Note is secured by all security documents, including, but not limited to, all Security Agreements, Supplemental Security Agreements, all Guaranties, Real Estate Mortgages and Assignment of Rents including Real Estate Mortgage dated 9/28/2017 and Modification of Mortgage dated 3/30/2018.

LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note may be requested either orally or in writing by Borrower or as provided in this paragraph. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to Lender’s office shown above. The following person or persons are authorized to request advances and authorize payments under the line of credit until Lender receives from Borrower, at Lender's address shown above, written notice of revocation of such authority: Carrie Gunnerson, CEO/Secretary of Art's-Way Manufacturing Co., Inc.; and Michael Woods, VP of Finance of Art’s-Way Manufacturing Co., Inc. Borrower agrees to be liable for all sums either: (A) advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower’s accounts with Lender. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender’s internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Note if: (A) Borrower or any guarantor is in default under the terms of this Note or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Note; (B) Borrower or any guarantor ceases doing business or is insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor's guarantee of this Note or any other loan with Lender; (D) Borrower has applied funds provided pursuant to this Note for purposes other than those authorized by Lender; or (E) Lender in good faith believes itself insecure.

PURPOSE OF LOAN. The specific purpose of this loan is: 2019 Operating. PRIOR NOTE. Renewal of Loan #40010024450.

SUCCESSOR INTERESTS.    The terms of this Note shall be binding upon Borrower, and upon Borrower’s heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.

GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific default provisions or rights of Lender shall not preclude Lender's right to declare payment of this Note on its demand. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released frown liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender’s security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE.

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PROMISSORY NOTE

Loan No: xxxxxxxxx129 (Continued) Page 3

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE AND ALL OTHER DOCUMENTS RELATING TO THIS DEBT.

BORROWER:

ART’S-WAY MANUFACTURING CO., INC.

By: /s/ Carrie Gunnerson                     Carrie Gunnerson, CEO/Secretary of Art’s-Way Manufacturing Co., Inc. by:  /s/ Michael Woods                Michael Woods, VP of Finance of Art’s-Way Manufacturing Co., Inc.

LENDER:

BANK MIDWEST

By: /s/ Jeffrey J. Newlin               

Jeffrey J. Newlin, SVP Market President

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO 17 CFR 240.13(a)-14(a)

(SECTION 302 CERTIFICATION)

I, Carrie L. Gunnerson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Art’s-Way Manufacturing Co., Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

		ART’S-WAY MANUFACTURING CO., INC.
Date:	July 11, 2019	/s/ Carrie L. Gunnerson
		Carrie L. Gunnerson
		President, Chief Executive Officer and Interim Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Art’s-Way Manufacturing Co., Inc. (the “Company”) for the fiscal quarter ended May 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Carrie L. Gunnerson, as the President, Chief Executive Officer and Interim Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

		ART’S-WAY MANUFACTURING CO., INC.
Date:	July 11, 2019	/s/ Carrie L. Gunnerson
		Carrie L. Gunnerson
		President, Chief Executive Officer and Interim Chief Financial Officer

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Document And Entity Information - shares	6 Months Ended
	May 31, 2019	Jul. 03, 2019
Document Information [Line Items]
Entity Registrant Name	ARTS WAY MANUFACTURING CO INC
Entity Central Index Key	0000007623
Trading Symbol	artw
Current Fiscal Year End Date	--11-30
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		4,291,712
Document Type	10-Q
Document Period End Date	May 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Shell Company	false

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Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	May 31, 2019	Nov. 30, 2018
Current assets:
Cash	$ 4,401	$ 3,512
Accounts receivable-customers, net of allowance for doubtful accounts of $29,153 and $25,100 in 2019 and 2018, respectively	2,667,764	1,537,113
Inventories, net	10,105,263	10,257,102
Cost and profit in excess of billings	32,527	99,287
Net investment in sales-type leases, current	145,799	123,055
Other current assets	266,107	125,089
Total current assets	13,221,861	12,145,158
Property, plant, and equipment, net	5,468,238	5,647,485
Assets held for lease, net	805,498	1,870,125
Deferred income taxes	1,711,958	1,432,422
Net investment in sales-type leases, long-term	77,607	153,787
Other assets	73,843	76,497
Total assets	21,359,005	21,325,474
Current liabilities:
Accounts payable	936,036	802,062
Customer deposits	512,286	145,632
Billings in excess of cost and profit	851,206	185,014
Income taxes payable	3,855	6,400
Accrued expenses	795,615	893,284
Line of credit	3,599,530	3,505,530
Current portion of long-term debt	83,250	227,459
Total current liabilities	6,781,778	5,765,381
Long-term liabilities
Long-term debt, excluding current portion	2,393,502	2,523,018
Total liabilities	9,175,280	8,288,399
Commitments and Contingencies (Notes 9 and 10)
Stockholders’ equity:
Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares in 2019 and 2018; issued 0 shares in 2019 and 2018.
Common stock – $0.01 par value. Authorized 9,500,000 shares in 2019 and 2018; issued 4,309,587 in 2019 and 4,225,050 in 2018	43,096	42,250
Additional paid-in capital	3,174,230	3,055,632
Retained earnings	9,004,954	9,966,928
Treasury stock, at cost (14,779 in 2019 and 9,286 in 2018 shares)	(38,555)	(27,735)
Total stockholders’ equity	12,183,725	13,037,075
Total liabilities and stockholders’ equity	$ 21,359,005	$ 21,325,474

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Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	May 31, 2019	Nov. 30, 2018
Allowance for doubtful accounts	$ 29,153	$ 25,100
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized (in shares)	500,000	500,000
Preferred stock, issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized (in shares)	9,500,000	9,500,000
Common stock, issued (in shares)	4,309,587	4,225,050
Treasury stock (in shares)	14,779	9,286

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	May 31, 2019	May 31, 2018	May 31, 2019	May 31, 2018
Sales	$ 5,747,256	$ 5,294,464	$ 9,871,482	$ 10,660,000
Cost of goods sold	4,788,261	4,187,450	8,307,644	8,399,610
Gross profit	958,995	1,107,014	1,563,838	2,260,390
Expenses:
Engineering	116,773	127,539	263,986	256,602
Selling	397,270	487,991	740,617	972,522
General and administrative	814,465	949,598	1,651,371	1,798,101
Total expenses	1,328,508	1,565,128	2,655,974	3,027,225
Income (Loss) from operations	(369,513)	(458,114)	(1,092,136)	(766,835)
Other income (expense):
Interest expense	(100,402)	(68,711)	(185,441)	(138,387)
Other	11,092	(252,687)	37,915	(180,115)
Total other income (expense)	(89,310)	(321,398)	(147,526)	(318,502)
Income (Loss) from continuing operations before income taxes	(458,823)	(779,512)	(1,239,662)	(1,085,337)
Income tax expense (benefit)	(102,781)	(125,533)	(277,688)	96,040
Income (Loss) from continuing operations	(356,042)	(653,979)	(961,974)	(1,181,377)
Discontinued Operations
Income (loss) from operations of discontinued segment		(15,587)		(67,177)
Income tax expense (benefit)		3,788		16,324
Income (Loss) on discontinued operations		11,799		50,853
Net Income (Loss)	$ (356,042)	$ (665,778)	$ (961,974)	$ (1,232,230)
Net Income (Loss) per share - Basic:
Continuing Operations (in dollars per share)	$ (0.08)	$ (0.16)	$ (0.23)	$ (0.28)
Discontinued Operations (in dollars per share)				(0.01)
Net Income (Loss) per share (in dollars per share)	(0.08)	(0.16)	(0.23)	(0.29)
Net Income (Loss) per share - Diluted:
Continuing Operations (in dollars per share)	(0.08)	(0.16)	(0.23)	(0.28)
Discontinued Operations (in dollars per share)				(0.01)
Net Income (Loss) per share (in dollars per share)	$ (0.08)	$ (0.16)	$ (0.23)	$ (0.29)
Weighted average outstanding shares used to compute basic net income per share (in shares)	4,299,289	4,213,893	4,272,532	4,192,592
Weighted average outstanding shares used to compute diluted net income per share (in shares)	4,299,289	4,213,893	4,272,532	4,192,592

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	May 31, 2019	May 31, 2018	May 31, 2019	May 31, 2018
Net Income (Loss)	$ (356,042)	$ (665,778)	$ (961,974)	$ (1,232,230)
Other Comprehensive Income (Loss)
Foreign currency translation adjustments		10,528		3,830
Release of cumulative translation adjustment due to substantial liquidation of a foreign entity		253,180		253,180
Total Other Comprehensive Income (Loss)		263,708		257,010
Comprehensive (Loss)	$ (356,042)	$ (402,070)	$ (961,974)	$ (975,220)

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Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Treasury Stock [Member]	Total
Balance (in shares) at Nov. 30, 2017	4,158,752				1,954
Balance at Nov. 30, 2017	$ 41,587	$ 2,859,052	$ 13,353,830	$ (257,010)	$ (6,425)	$ 15,991,034
Stock based compensation (in shares)	49,481				7,332
Stock based compensation	$ 495	110,941			$ (21,310)	90,126
Foreign Currency Translation Adjustment				3,830		3,830
Release of cumulative translation adjustment due to substantial liquidation of a foreign entity				253,180		253,180
Net Income (Loss)			(1,232,230)			(1,232,230)
Balance (in shares) at May. 31, 2018	4,208,233				9,286
Balance at May. 31, 2018	$ 42,082	2,969,993	12,121,600		$ (27,735)	15,105,940
Balance (in shares) at Nov. 30, 2018	4,225,050				9,286
Balance at Nov. 30, 2018	$ 42,250	3,055,632	9,966,928		$ (27,735)	13,037,075
Stock based compensation (in shares)	84,537				5,493
Stock based compensation	$ 846	118,598			$ (10,820)	108,624
Foreign Currency Translation Adjustment
Release of cumulative translation adjustment due to substantial liquidation of a foreign entity
Net Income (Loss)			(961,974)			(961,974)
Balance (in shares) at May. 31, 2019	4,309,587				14,779
Balance at May. 31, 2019	$ 43,096	$ 3,174,230	$ 9,004,954		$ (38,555)	$ 12,183,725

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	May 31, 2019	May 31, 2018
Cash flows from operations:
Net (loss) from continuing operations	$ (961,974)	$ (1,181,377)
Net (loss) from discontinued operations		(50,853)
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:
Stock based compensation	119,444	111,436
Loss on release of cumulative translation adjustment		253,180
Unrealized foreign currency gain (loss)		3,830
(Gain)/Loss on disposal of property, plant, and equipment	(10,303)	(12,084)
Depreciation and amortization expense	549,333	408,757
Bad debt expense (recovery)	3,673	(9,044)
Deferred income taxes	(279,536)	80,432
Changes in assets and liabilities:
Accounts receivable	(1,134,324)	(155,874)
Inventories, net	151,839	437,307
Net investment in sales-type leases	53,436	(349,981)
Other assets	(141,018)	87,529
Accounts payable	133,974	384,157
Contracts in progress, net	732,952	(252,146)
Customer deposits	366,654	8,580
Income taxes payable	(2,545)	400
Accrued expenses	(97,669)	(149,197)
Net cash (used in) operating activities - continuing operations	(516,064)	(334,095)
Net cash (used in) operating activities - discontinued operations		(89,697)
Net cash (used in) operating activities	(516,064)	(423,792)
Cash flows from investing activities:
Purchases of property, plant, and equipment	(186,215)	(164,874)
Net proceeds from sale of assets	893,713	29,316
Net cash provided by (used in) investing activities - continuing operations	707,498	(135,558)
Net cash provided by investing activities - discontinued operations		1,418,761
Net cash provided by investing activities	707,498	1,283,203
Cash flows from financing activities:
Net change in line of credit	(94,000)	338,000
Repayment of term debt	(273,725)	(109,295)
Repurchases of common stock	(10,820)	(21,310)
Net cash (used in) financing activities - continuing operations	(190,545)	(468,605)
Net cash (used in) financing activities - discontinued operations		(599,584)
Net cash (used in) financing activities	(190,545)	(1,068,189)
Net increase (decrease) in cash	889	(208,778)
Cash at beginning of period	3,512	212,400
Cash at end of period	4,401	3,622
Supplemental disclosures of cash flow information:
Interest	170,992	142,426
Income taxes	3,855	5,237
Supplemental disclosures of non-cash operating and investing activities:
Transfer of inventory to assets held for lease		$ 800,343

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Note 1 - Description of the Company

6 Months Ended

May 31, 2019

Notes to Financial Statements

Nature of Operations [Text Block]

1 ) Description of the Company

Unless otherwise specified, as used in this Quarterly Report on Form

10

-Q, the terms “we,” “us,” “our,” “Art’s-Way,” and the “Company” refer to Art’s-Way Manufacturing Co., Inc., a Delaware corporation headquartered in Armstrong, Iowa, and its wholly-owned subsidiaries.

The Company began operations as a farm equipment manufacturer in

1956.

Since that time, it has become a major worldwide manufacturer of agricultural equipment. Its principal manufacturing plant is located in Armstrong, Iowa.

The Company has organized its business into

three

operating segments. Management separately evaluates the financial results of each segment because each is a strategic business unit offering different products and requiring different technology and marketing strategies. The agricultural products segment manufactures and sells farm equipment and related replacement parts under the Art’s-Way Manufacturing label and private labels. The modular buildings segment manufactures and installs modular buildings for animal containment and various laboratory uses, and the tools segment manufactures steel cutting tools and inserts.

During the

third

quarter of fiscal

2016,

the Company discontinued its pressurized vessels segment. For more information on discontinued operations, see Note

4

“Discontinued Operations.” For detailed financial information relating to segment reporting, see Note

17

“Segment Information.”

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Note 2 - Summary of Significant Account Policies

6 Months Ended

May 31, 2019

Notes to Financial Statements

Significant Accounting Policies [Text Block]

2 ) Summary of Significant Account Policies

Statement Presentation

The foregoing condensed consolidated financial statements of the Company are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position and operating results for the interim periods. The financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form

10

-K for the fiscal year ended

November 30, 2018.

The results of operations for the

three

and

six

months ended

May 31, 2019

are

not

necessarily indicative of the results for the fiscal year ending

November 30, 2019.

During the

second

quarter of fiscal

2018,

the Company liquidated its investment in its Canadian subsidiary (“International”) by selling off remaining inventory and filing dissolution paperwork. Prior to that liquidation and dissolution, the financial books of the Company’s Canadian operations were kept in the functional currency of Canadian dollars and the financial statements were converted to U.S. Dollars for consolidation. When consolidating the financial results of the Company into U.S. Dollars for reporting purposes, the Company used the All-Current translation method. The All-Current translation method requires the balance sheet assets and liabilities to be translated to U.S. Dollars at the exchange rate as of quarter-end. Stockholders’ equity was translated at historical exchange rates and retained earnings were translated at an average exchange rate for the period. Additionally, revenue and expenses were translated at average exchange rates for the periods presented. The resulting cumulative translation adjustment was carried on the balance sheet and was recorded in stockholders’ equity. Following the liquidation and dissolution of International, the cumulative translation adjustment carried on the balance sheet was released into net income under other income (expense), and the financial statements will

no

longer need translation each period. Since

no

income tax benefit was received from liquidation and dissolution, the cumulative translation adjustment was

not

tax adjusted.

Lessor Accounting and

Sales-Type Leases

Modular buildings held for short term lease by our modular buildings segment are recorded at cost. Amortization of each modular building is calculated over the useful life of the building. Estimated useful life is

three

to

five

years. Lease revenue is accounted for on a straight-line basis over the term of the related lease agreement. Lease income for modular buildings is included in sales on the consolidated statements of operations.

The Company accounts for leases of modular buildings to certain customers as sales-type leases. These leases have terms of up to

36

months and are collateralized by a security interest in the related modular building. The lessee has a bargain purchase option available at the end of the lease term. A minimum lease receivable is recorded net of unearned interest income and profit on sale at the time the Company’s obligation to the lessee is complete. Profit related to the sale of the building is recorded upon fulfillment of the Company’s obligation to the lessee.

Estimates

The preparation of 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the

three

and

six

months ended

May 31, 2019.

Actual results could differ from those estimates.

Revenue Recognition

Effective

December 1, 2018

the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic

606,

Revenue from Contracts with Customers (“ASC

606”

). The Company used the modified retrospective adoption of ASC

606.

The adoption of ASC

606

had

no

impact on prior year or previously disclosed amounts. In accordance with ASC

606,

revenue is measured based on consideration specified in a contract with a customer and recognized when the Company satisfies the performance obligation specified in each contract.

The Company’s revenues primarily result from contracts with customers. The major sources of revenue for the agricultural products and tools segments are farm equipment, service parts related to farm equipment and steel cutting tools and inserts. The agricultural products and tools segments generally execute short-term contracts that contain a single performance obligation – the delivery of product to the common carrier. The Company recognizes revenue for the production and sale of farm equipment, service parts and cutting tools upon shipment of the good(s). The agricultural products and tools segments each typically require payment in full

30

days after the ship date. To take advantage of program discounts, some customers pay deposits up front. Any deposits received increase contract liabilities. The modular buildings segment executes contracts with customers that can be short- or long-term in nature. These contracts can have multiple performance obligations and revenue from these can be recognized over time or at a point in time depending on the nature of the contracts. Payment terms for the modular buildings segment vary by contract, but typically utilize money down and progress payments throughout the life of the contract. The payment terms of our modular buildings segment have the most impact on our contract receivables, contract assets and contract liabilities. Project invoicing from the modular buildings segment increase contract receivables and have an effect on contract liabilities through billings in excess of costs and estimated gross profit and advanced payments. The balance of contract assets is typically made up of the balance of costs in and estimated gross profit in excess of billings. The major source of revenue for the modular buildings segment is modular building sales. Sales of modular buildings are generally recognized using input methods to measure progress towards the satisfaction of a performance obligation using the percentage of completion method. Stock modular building sales also occur and are recognized at a point in time when the performance obligation is fulfilled through substantial completion. Substantial completion is achieved through customer acceptance of the completed building.

The agricultural products segment offers variable consideration in the form of discounts depending on participation in yearly early order programs. This variable consideration is allocated to the transaction price of all products in a sales arrangement and is

not

contingent on future outcomes. The agricultural products segment does

not

offer rebates or credits. The tools segment offers quantity discounts that are allocated to the transaction price of each product once the quantity break is achieved. The tools segment does

not

offer rebates or credits. The modular buildings segment does

not

offer discounts, rebates or credits.

For information on product warranty as it applies to ASC

606,

refer to Note

9

“Product Warranty.”

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Note 3 - Revenue Recognition

6 Months Ended

May 31, 2019

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

3 ) Revenue Recognition

The following table displays revenue by reportable segment from external customers, disaggregated by major source. The Company believes disaggregating by these categories depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

	Three Months Ended May 31, 2019
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	2,879,000	$	-	$	-	$	2,879,000
Farm equipment service parts		665,000		-		-		665,000
Steel cutting tools and inserts		-		-		544,000		544,000
Modular buildings		-		1,368,000		-		1,368,000
Modular building lease income		-		168,000				168,000
Other		93,000		22,000		8,000		123,000
	$	3,637,000	$	1,558,000	$	552,000	$	5,747,000

	Three Months Ended May 31, 2018
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	3,123,000	$	-	$	-	$	3,123,000
Farm equipment service parts		698,000		-		-		698,000
Steel cutting tools and inserts		-		-		516,000		516,000
Modular buildings		-		734,000		-		734,000
Modular building lease income		-		67,000		-		67,000
Other		116,000		33,000		7,000		156,000
	$	3,937,000	$	834,000	$	523,000	$	5,294,000

	Six Months Ended May 31, 2019
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	4,881,000	$	-	$	-	$	4,881,000
Farm equipment service parts		1,216,000		-		-		1,216,000
Steel cutting tools and inserts		-		-		1,028,000		1,028,000
Modular buildings		-		2,163,000		-		2,163,000
Modular building lease income		-		348,000				348,000
Other		150,000		69,000		16,000		235,000
	$	6,247,000	$	2,580,000	$	1,044,000	$	9,871,000

	Six Months Ended May 31, 2018
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	6,373,000	$	-	$	-	$	6,373,000
Farm equipment service parts		1,286,000		-		-		1,286,000
Steel cutting tools and inserts		-		-		1,203,000		1,203,000
Modular buildings		-		1,407,000		-		1,407,000
Modular building lease income		-		116,000		-		116,000
Other		207,000		50,000		18,000		275,000
	$	7,866,000	$	1,573,000	$	1,221,000	$	10,660,000

The following table provides information about contract receivables, contract assets, and contract liabilities from contracts with customers included on the Condensed Consolidated Balance Sheets.

	May 31, 2019		November 30, 2018
Receivables	$	1,024,000	$	159,000
Assets		33,000		99,000
Liabilities		1,220,000		185,000

The amount of revenue recognized in the

first

six

months of fiscal

2019

that was included in a contract liability at

November 30, 2018

was

$185,014

compared to

$93,264

in the same period of fiscal

2018.

The significant change in contract receivables is due to a large milestone invoice from the modular buildings segment. This invoice also affected contract liabilities by increasing billings in excess of costs and estimated gross profit at

May 31, 2019.

Contract liabilities also increased due to equipment deposits received in the

first

quarter of fiscal

2019

from the

2019

beet program offering from the agricultural products segment. Swings in contract assets from

November 30, 2018

are due to changes in costs and estimated gross profit in excess of billings from the modular buildings segment.

The Company will utilize the practical expedient exception for these contracts and will report only on performance obligations greater than

one

year. As of

May 31, 2019,

the Company has

no

performance obligations with an original expected duration greater than

one

year.

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Note 4 - Discontinued Operations

6 Months Ended

May 31, 2019

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

4 ) Discontinued Operations

Effective

October 31, 2016,

the Company discontinued the operations of its Vessels segment in order to focus its efforts and resources on the business segments that have historically been more successful and that are expected to present greater opportunities for meaningful long-term shareholder returns. On

March 29, 2018,

the remaining assets of Vessels, consisting of real estate assets, were disposed of at a selling price of

$1,500,000.

As Vessels was a unique business unit of the Company, its liquidation was a strategic shift. In accordance with ASC Topic

360,

the Company has classified Vessels as discontinued operations for all periods presented.

Income (loss) from discontinued operations, before tax in the accompanying Condensed Consolidated Statements of Operations is comprised of the following:

	Three Months Ended
	May 31, 2018
Revenue from external customers	$	-
Gross Profit		-
Operating Expense		7,019
Income (loss) from operations		(7,019	)
Income (loss) before tax		(15,587	)

	Six Months Ended
	May 31, 2018
Revenue from external customers	$	-
Gross Profit		-
Operating Expense		51,133
Income (loss) from operations		(51,133	)
Income (loss) before tax		(67,177	)

There were

no

components of discontinued operations in the accompanying Condensed Consolidated Balance Sheets as of

May 31, 2019

or

November 30, 2018.

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Note 5 - Net Income (Loss) Per Share of Common Stock

6 Months Ended

May 31, 2019

Notes to Financial Statements

Earnings Per Share [Text Block]

5 ) Net Income (Loss) Per Share of Common Stock

Basic net income (loss) per share of common stock has been computed on the basis of the weighted average number of common shares outstanding. Diluted net income (loss) per share has been computed on the basis of the weighted average number of common shares outstanding plus equivalent shares assuming exercise of stock options. Potential shares of common stock that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted net income (loss) per share.

Basic and diluted net income (loss) per share have been computed based on the following as of

May 31, 2019

and

May 31, 2018:

	For the Three Months Ended
	May 31, 2019			May 31, 2018
Numerator for basic and diluted net income (loss) per share:
Net income (loss) from continuing operations	$	(356,042	)	$	(653,979	)
Net income (loss) from discontinued operations		-			(11,799	)
Net income (loss)	$	(356,042	)	$	(665,778	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,299,289			4,213,893
Effect of dilutive stock options		-			-
For diluted net income (loss) per share - weighted average common shares outstanding		4,299,289			4,213,893
Net Income (Loss) per share - Basic:
Continuing Operations	$	(0.08	)	$	(0.16	)
Discontinued Operations	$	-		$	-
Net Income (Loss) per share	$	(0.08	)	$	(0.16	)
Net Income (Loss) per share - Diluted:
Continuing Operations	$	(0.08	)	$	(0.16	)
Discontinued Operations	$	-		$	-
Net Income (Loss) per share	$	(0.08	)	$	(0.16	)

	For the Six Months ended
	May 31, 2019			May 31, 2018
Numerator for basic and diluted net income (loss) per share:
Net income (loss) from continuing operations	$	(961,974	)	$	(1,181,377	)
Net income (loss) from discontinued operations		-			(50,853	)
Net income (loss)	$	(961,974	)	$	(1,232,230	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,272,532			4,192,592
Effect of dilutive stock options		-			-
For diluted net income (loss) per share - weighted average common shares outstanding		4,272,532			4,192,592
Net Income (Loss) per share - Basic:
Continuing Operations	$	(0.23	)	$	(0.28	)
Discontinued Operations	$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.23	)	$	(0.29	)
Net Income (Loss) per share - Diluted:
Continuing Operations	$	(0.23	)	$	(0.28	)
Discontinued Operations	$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.23	)	$	(0.29	)

XML

Note 6 - Inventory

6 Months Ended

May 31, 2019

Notes to Financial Statements

Inventory Disclosure [Text Block]

6 ) Inventory

Major classes of inventory are:

	May 31, 2019			November 30, 2018
Raw materials	$	7,689,572		$	7,825,278
Work in process		433,171			272,302
Finished goods		4,778,690			5,051,330
Gross inventory	$	12,901,433		$	13,148,910
Less: Reserves		(2,796,170	)		(2,891,808	)
Net Inventory	$	10,105,263		$	10,257,102

XML

Note 7 - Accrued Expenses

6 Months Ended

May 31, 2019

Notes to Financial Statements

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

7 ) Accrued Expenses

Major components of accrued expenses are:

	May 31, 2019		November 30, 2018
Salaries, wages, and commissions	$	422,752	$	448,737
Accrued warranty expense		89,637		96,786
Other		283,226		347,761
	$	795,615	$	893,284

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Note 8 - Assets Held for Lease

6 Months Ended

May 31, 2019

Notes to Financial Statements

Disclosure of Assets Available for Sale, Not Part of Discontinued Operations [Text Block]

8 ) Assets Held for Lease

Major components of assets held for lease are:

	May 31, 2019		November 30, 2018
West Union Facility	$	-	$	878,079
Modular Buildings		805,498		992,046
Net assets held for lease	$	805,498	$	1,870,125

Rents recognized from assets held for lease included in sales on the Consolidated Statements of Operations during the

three

and

six

months ended

May 31, 2019

were

$168,465

and

$347,509,

respectively, compared to

$66,558

and

$115,518

for the same respective periods in fiscal

2018.

Rents recognized in sales were related to the leasing of modular buildings as a part of the normal course of business operations of the modular building segment. Rents recognized from assets held for lease included in other income (expense) on the Consolidated Statements of Operations during the

three

and

six

months ended

May 31, 2019

were

$0

and

$2,500,

respectively, compared to

$0

and

$38,180

for the same respective periods in fiscal

2018.

Rents related to the West Union facility in the agricultural products segment were recognized in other income as such income was outside of the scope of this segment’s normal business operations. The West Union facility was sold on

December 14, 2018

for

$900,000.

Future minimum lease receipts from assets held for lease are as follows:

Future Minimum Leased Assets
Year Ending November 30,	Amount
2019	$	204,330
2020		90,411
Total	$	294,741

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Note 9 - Product Warranty

6 Months Ended

May 31, 2019

Notes to Financial Statements

Product Warranty Disclosure [Text Block]

9 ) Product Warranty

The Company offers warranties of various lengths to its customers depending on the specific product and terms of the customer purchase agreement. The average length of the warranty period is

one

year from the date of purchase. The Company’s warranties require it to repair or replace defective products during the warranty period at

no

cost to the customer. Product warranty is included in the price of the product and provides assurance that the product will function in accordance with agreed-upon specifications. It does

not

represent a separate performance obligation under ASC

606.

The Company records a liability for estimated costs that

may

be incurred under its warranties. The costs are estimated based on historical experience and any specific warranty issues that have been identified. Although historical warranty costs have been within expectations, there can be

no

assurance that future warranty costs will

not

exceed historical amounts. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the balance as necessary. The accrued warranty balance is included in accrued expenses as shown in Note

7

“Accrued Expenses.” Changes in the Company’s product warranty liability for the

three

and

six

months ended

May 31, 2019

and

May 31, 2018

are as follows:

	For the Three Months Ended
	May 31, 2019			May 31, 2018
Balance, beginning	$	25,857		$	54,135
Settlements / adjustments		(62,640	)		(58,892	)
Warranties issued		126,420			75,973
Balance, ending	$	89,637		$	71,216

	For the Six Months Ended
	May 31, 2019			May 31, 2018
Balance, beginning	$	96,786		$	68,451
Settlements / adjustments		(194,938	)		(141,565	)
Warranties issued		187,789			144,330
Balance, ending	$	89,637		$	71,216

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Note 10 - Loan and Credit Agreements

6 Months Ended

May 31, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

10 ) Loan and Credit Agreements

The Company maintains

two

revolving lines of credit and a term loan with Bank Midwest. The Company also previously maintained a term loan with The First National Bank of West Union.

Bank Midwest Revolving Line

s

of Credit and Term Loans

On

September 28, 2017,

the Company entered into a credit facility with Bank Midwest, which superseded and replaced in its entirety the Company’s previous credit facility with U.S. Bank. The Bank Midwest credit facility initially consisted of a

$5,000,000

revolving line of credit (the

“2017

Line of Credit”), a

$2,600,000

term loan due

October 1, 2037,

and a

$600,000

term loan due

October 1, 2019.

The

2017

Line of Credit is being used for working capital purposes. On

March 29, 2018,

the Company paid in full the

$600,000

term loan due

October 1, 2019

using proceeds from the sale of the Company’s Dubuque, Iowa property. The payment consisted of

$596,563

in principal and

$2,328

in interest.

On

May 31, 2019,

the balance of the

2017

Line of Credit was

$3,599,530

with

$1,400,470

remaining available, as

may

be limited by the borrowing base calculation. The

2017

Line of Credit borrowing base is an amount equal to

75%

of accounts receivable balances (discounted for aged receivables), plus

50%

of inventory, less any outstanding loan balance on the

2017

Line of Credit. At

May 31, 2019,

the

2017

Line of Credit was

not

limited by the borrowing base calculation. Any unpaid principal amount borrowed on the

2017

Line of Credit accrues interest at a floating rate per annum equal to

1.00%

above the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The interest rate floor is set at

4.25%

per annum and the current interest rate is

6.50%

per annum. The

2017

Line of Credit was most recently renewed on

March 30, 2019.

The

2017

Line of Credit is payable upon demand by Bank Midwest, and monthly interest-only payments are required. If

no

earlier demand is made, the unpaid principal and accrued interest is due on

March 30, 2020.   

The

$2,600,000

term loan accrues interest at a rate of

5.00%

for the

first

sixty

months. Thereafter, this loan will accrue interest at a floating rate per annum equal to

0.75%

above the Wall Street Journal rate published the money rates section of the Wall Street Journal. The interest rate floor is set at

4.15%

per annum and the interest rate

may

only be adjusted by Bank Midwest once every

five

years. Monthly payments of

$17,271

for principal and interest are required. This loan is also guaranteed by the United States Department of Agriculture (“USDA”), which required an upfront guarantee fee of

$62,400

and requires an annual fee of

0.5%

of the unpaid balance. As part of the USDA guarantee requirements, shareholders owning more than

20%

are required to personally guarantee a portion of the loan, in an amount equal to their stock ownership percentage. J. Ward McConnell Jr., the Vice Chairman of the Board of Directors and a shareholder owning more than

20%

of the Company’s outstanding stock, is guaranteeing approximately

38%

of this loan, for an annual fee of

2%

of the personally guaranteed amount. The initial guarantee fee will be amortized over the life of the loan, and the annual fees and personally guaranteed amounts are expensed monthly.

On

February 13, 2019,

the Company opened a

$4,000,000

revolving line of credit (the

“2019

Line of Credit”) with Bank Midwest in connection with bonding obligations for the Company’s performance of a large modular laboratory construction project. Funds under the

2019

Line of Credit will be undisbursed to the Company and will be held by Bank Midwest in connection with an Irrevocable Letter of Credit issued by Bank Midwest for the project. The

2019

Line of Credit accrues interest at a floating rate per annum equal to

1.00%

above the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The interest rate floor is set at

4.25%

per annum and the current interest rate is

6.50%

per annum. The

2019

Line of Credit is payable upon demand by Bank Midwest. If

no

earlier demand is made, the unpaid principal and accrued interest will be payable in

one

payment, due on

February 13, 2020.    

As of

May 31, 2019,

the funds on the

2019

Line of Credit remain undisbursed and are held by Bank Midwest.   

Each of the

2017

Line of Credit and the

$2,600,000

term loan are governed by the terms of a separate Promissory Note, dated

September 28, 2017,

entered into between the Company and Bank Midwest. The

2019

Line of Credit is governed by the terms of a Promissory Note, dated

February 13, 2019,

entered into between the Company and Bank Midwest.

In connection with the

2017

Line of Credit, the Company, Art’s-Way Scientific Inc. and Ohio Metal Working Products/Art’s-Way Inc. each entered into a Commercial Security Agreement with Bank Midwest, dated

September 28, 2017,

pursuant to which each granted to Bank Midwest a

first

priority security interest in certain inventory, equipment, accounts, chattel paper, instruments, letters of credit and other assets to secure the obligations of the Company under the line of credit. Each of Art’s-Way Scientific Inc. and Ohio Metal Working Products/Art’s-Way Inc. also agreed to guarantee the obligations of the Company pursuant to the

2017

Line of Credit, as set forth in Commercial Guaranties, each dated

September 28, 2017.

The

2019

Line of Credit is also secured by these existing security documents.

To further secure the

2017

Line of Credit, the Company granted Bank Midwest a

second

mortgage on its West Union, Iowa property and Ohio Metal Working Products/Art’s-Way Inc. granted Bank Midwest a mortgage on its property located in Canton, Ohio. The mortgage on the West Union property was released in conjunction with the sale of that property on

December 14, 2018.

The

2019

Line of Credit is also secured by the mortgage on the Canton, Ohio property. The

$2,600,000

term loan is secured by a mortgage on the Company’s Armstrong, Iowa and Monona, Iowa properties. Each mortgage is governed by the terms of a separate Mortgage, dated

September 28, 2017,

and each property is also subject to a separate Assignment of Rents, dated

September 28, 2017.

If the Company or its subsidiaries (as guarantors pursuant to the Commercial Guaranties) commits an event of default with respect to the promissory notes and fails or is unable to cure that default, Bank Midwest

may

immediately terminate its obligation, if any, to make additional loans to the Company and

may

accelerate the Company’s obligations under the promissory notes. Bank Midwest shall also have all other rights and remedies for default provided by the Uniform Commercial Code, as well as any other applicable law and the various loan agreements. In addition, in an event of default, Bank Midwest

may

foreclose on the mortgaged property.

Bank Midwest Loan Covenants

Compliance with Bank Midwest covenants is measured annually at

November 30.

The terms of the Bank Midwest loan agreements require the Company to maintain a minimum working capital ratio of

1.75,

while maintaining a minimum of

$5,100,000

of working capital. Additionally, a maximum debt to worth ratio of

1

to

1

must be maintained, with a minimum of

40%

tangible balance sheet equity, with variations subject to mutual agreement. The Company is also required to maintain a minimum debt service coverage ratio of

1.25,

with a

0.10

tolerance. The Company was in compliance with all covenants as of

November 30, 2018

other than the debt service coverage ratio. Bank Midwest issued a waiver forgiving the noncompliance, and

no

event of default has occurred. The next measurement date is

November 30, 2019.

Iowa Finance Authority Term Loan

On

May 1, 2010,

the Company obtained a

$1,300,000

loan to finance the purchase of an additional facility located in West Union, Iowa to be used as a distribution center, warehouse facility, and manufacturing plant for certain products under the Art’s-Way brand. The loan was secured by a mortgage on the Company’s West Union Facility, pursuant to a Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement dated

May 1, 2010

between the Company and The First National Bank of West Union.

On

December 14, 2018,

the Company repaid this loan in full in connection with the sale of the West Union, Iowa facility.    

A summary of the Company’s term debt is as follows:

	May 31, 2019		November 30, 2018
Bank Midwest loan payable in monthly installments of $17,271 including interest at 5.00%, due October 1, 2037	$	2,476,752	$	2,517,510
Iowa Finance Authority loan payable in monthly installments of $12,500 including interest at 2.75%, due June 1, 2020		-		232,967
Total term debt	$	2,476,752	$	2,750,477
Less current portion of term debt		83,250		227,459
Term debt, excluding current portion	$	2,393,502	$	2,523,018

A summary of the minimum maturities of term debt follows for the years ending

November 30:

Year	Amount
2019		40,761
2020		85,401
2021		90,179
2022		94,858
2023		99,781
2024 and thereafter		2,065,772
	$	2,476,752

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Note 11 - Income Taxes

6 Months Ended

May 31, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

11 ) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses.

On

December 22, 2017,

the Tax Cuts and Job Act of

2017

was enacted, which reduces the top corporate income tax rate from

35%

to

21%.

This law is generally effective for tax years beginning after

December 31, 2017.

The application of this new rate was recognized in the

first

quarter of fiscal

2018.

Tax expense from continuing operations for the

six

months ended

May 31, 2018

includes an adjustment of approximately

$298,000

related to the revaluation of the Company’s net deferred tax asset at the new statutory rate.

XML

Note 12 - Related Party Transactions

6 Months Ended

May 31, 2019

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

12 ) Related Party Transactions

From time to time, the Company purchases various supplies from related parties, which are companies owned by J. Ward McConnell, Jr., the Company’s Vice Chairman of the Board of Directors. Also, J. Ward McConnell, Jr. as a shareholder owning more than

20%

of the Company’s outstanding stock, was required to guarantee a portion of the Company’s term debt in accordance with the USDA guarantee on the Company’s term loan. Mr. McConnell is paid a monthly fee for his guarantee. During the

three

and

six

months ended

May 31, 2019,

the Company recognized expenses of

$6,501

and

$14,649,

respectively, for transactions with a related party, compared to

$7,028

and

$12,029

for the same respective periods in fiscal

2018.

The accrued expenses balance as of

May 31, 2019

contains

$1,594

due to a related party, compared to

$1,646

for the same period in fiscal

2018.

XML

Note 13 - Sales-type Leases

6 Months Ended

May 31, 2019

Notes to Financial Statements

Capital Leases in Financial Statements of Lessor Disclosure [Text Block]

13 ) Sales-Type Leases

The components related to sales-type leases at

May 31, 2019

and

November 30, 2018

are as follows:

	May 31, 2019			November 30, 2018
Minimum lease receivable, current	$	174,000		$	159,500
Unearned interest income, current		(28,201	)	$	(36,445	)
Net investment in sales-type leases, current		145,799			123,055
Minimum lease receivable, long-term		81,276		$	168,277
Unearned interest income, long-term		(3,669	)	$	(14,490	)
Net investment in sales-type leases, long-term	$	77,607		$	153,787

Gross revenue recognized in sales from continuing operations on the Consolidated Statements of Operations from commencement of sales-type leases for the

three

and

six

months ended

May 31, 2019

was

$0

for both periods compared to

$0

and

$426,542

for the same periods in fiscal

2018.

Future minimum lease receipts from sales-type leases are as follows:

Year Ending November 30,	Amount
2019	$	87,000
2020		162,425
2021		5,851
Total	$	255,276

XML

Note 14 - Recently Issued Accounting Pronouncements

6 Months Ended

May 31, 2019

Notes to Financial Statements

Description of New Accounting Pronouncements Not yet Adopted [Text Block]

14 ) Recently Issued Accounting Pronouncements

Accounting Pronouncements

Not

Yet Adopted

Leases

In

February 2016,

the FASB issued ASU

2016

-

02,

“Leases (Topic

842

),” which requires a lessee to recognize a right-of-use asset and a lease liability on its balance sheet for all leases with terms of

twelve

months or greater. This guidance is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those years. The Company will adopt this guidance for fiscal

2020,

including interim periods within that reporting period. The Company has a moderate amount of leasing activity and is currently evaluating the impact of this guidance on its consolidated financial statements.

XML

Note 15 - Equity Incentive Plan and Stock Based Compensation

6 Months Ended

May 31, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

15 ) Equity Incentive Plan and Stock Based Compensation

On

January 27, 2011,

the Board of Directors of the Company authorized and approved the Art’s-Way Manufacturing Co., Inc.

2011

Equity Incentive Plan (the

“2011

Plan”).  The

2011

Plan was approved by the stockholders on

April 28, 2011. 

It replaced the Employee Stock Option Plan and the Directors’ Stock Option Plan (collectively, the “Prior Plans”), and

no

further stock options will be awarded under the Prior Plans.  Awards to directors and executive officers under the

2011

Plan are governed by the forms of agreement approved by the Board of Directors. Stock options granted prior to

January 27, 2011

are governed by the applicable Prior Plan and the forms of agreement adopted thereunder.

The

2011

Plan permits the plan administrator to award nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance awards, and stock appreciation rights to employees (including officers), directors, and consultants.  The Board of Directors has approved a director compensation policy pursuant to which non-employee directors are automatically granted restricted stock awards of

1,000

shares of fully vested common stock annually or initially upon their election to the Board and another

1,000

shares of fully vested common stock on the last business day of each fiscal quarter. During the

first

six

months of fiscal

2019,

restricted stock awards of

69,937

shares were issued to various employees, directors, and consultants, which vest over the next

three

years, and restricted stock awards of

16,000

were issued to directors as part of the director compensation policy, which vested immediately upon grant. During the

first

six

months of fiscal

2019,

1,400

shares of restricted stock were forfeited upon departure of certain employees.

Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant vesting period. The Company estimates the fair value of each stock-based option award on the measurement date using the Black-Scholes option valuation model which incorporates assumptions as to stock price volatility, the expected life of the options, risk-free interest rate, and dividend yield. Expected volatility is based on historical volatility of the Company’s stock and other factors. The Company uses historical option exercise and termination data to estimate the expected term the options are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is calculated using historical dividend amounts and the stock price at the option issuance date.

No

stock options were granted during the

six

months ended

May 31, 2019

or in the same respective period of fiscal

2018.

The Company incurred a total of

$53,898

and

$119,444

of stock-based compensation expense for restricted stock awards during the

three

and

six

months ended

May 31, 2019,

respectively, compared to

$61,870

and

$111,436

of stock-based compensation expense for restricted stock awards for the same respective periods of fiscal

2018.

XML

Note 16 - Disclosures About the Fair Value of Financial Instruments

6 Months Ended

May 31, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

16 ) Disclosures About the Fair Value of Financial Instruments

The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. At

May 31, 2019

and

November 30, 2018,

the carrying amount approximated fair value for cash, accounts receivable, net investment in sales-type leases, accounts payable, notes payable to bank, and other current and long-term liabilities. The carrying amounts approximate fair value because of the short maturity of these instruments. The fair value of the net investment in sales-type leases also approximates recorded value as that is based on discounting future cash flows at rates implicit in the lease. The rates implicit in the lease do

not

materially differ from current market rates. The fair value of the Company’s installment term loans payable also approximates recorded value because the interest rates charged under the loan terms are

not

substantially different from current interest rates.

XML

Note 17 - Segment Information

6 Months Ended

May 31, 2019

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

17 ) Segment Information

The Company has

three

reportable segments: agricultural products, modular buildings and tools. The agricultural products segment manufactures and sells farm equipment and related replacement parts under the Art’s-Way Manufacturing label and private labels. The modular buildings segment manufactures and installs modular buildings for various uses, commonly animal containment and research laboratories. The tools segment manufactures steel cutting tools and inserts.

The accounting policies applied to determine the segment information are the same as those described in the summary of significant accounting policies. Management evaluates the performance of each segment based on profit or loss from operations before income taxes, exclusive of nonrecurring gains and losses.

Approximate financial information with respect to the reportable segments is as follows. The tables below exclude income and balance sheet data from discontinued operations. See Note

4

“Discontinued Operations.”

	Three Months Ended May 31, 2019
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	3,637,000		$	1,558,000		$	552,000		$	5,747,000
Income (loss) from operations		(297,000	)		(63,000	)		(10,000	)		(370,000	)
Income (loss) before tax		(382,000	)		(56,000	)		(21,000	)		(459,000	)
Total Assets		14,730,000			4,127,000			2,502,000			21,359,000
Capital expenditures		76,000			30,000			27,000			133,000
Depreciation & Amortization		124,000			104,000			32,000			260,000

	Three Months Ended May 31, 2018
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	3,937,000		$	834,000		$	523,000		$	5,294,000
Income (loss) from operations		(263,000	)		(146,000	)		(49,000	)		(458,000	)
Income (loss) before tax		(576,000	)		(141,000	)		(63,000	)		(780,000	)
Total Assets		16,686,000			3,485,000			2,419,000			22,590,000
Capital expenditures		42,000			859,000			-			901,000
Depreciation & Amortization		132,000			5,500			32,000			169,500

	Six Months Ended May 31, 2019
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	6,247,000		$	2,580,000		$	1,044,000		$	9,871,000
Income (loss) from operations		(898,000	)		(161,000	)		(33,000	)		(1,092,000	)
Income (loss) before tax		(1,031,000	)		(155,000	)		(54,000	)		(1,240,000	)
Total Assets		14,730,000			4,127,000			2,502,000			21,359,000
Capital expenditures		110,000			48,000			28,000			186,000
Depreciation & Amortization		249,000			236,000			64,000			549,000

	Six Months Ended May 31, 2018
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	7,866,000		$	1,573,000		$	1,221,000		$	10,660,000
Income (loss) from operations		(537,000	)		(206,000	)		(24,000	)		(767,000	)
Income (loss) before tax		(845,000	)		(194,000	)		(46,000	)		(1,085,000	)
Total Assets		16,686,000			3,485,000			2,419,000			22,590,000
Capital expenditures		71,000			894,000			-			965,000
Depreciation & Amortization		265,000			80,000			64,000			409,000

*The consolidated total in the table is a sum of segment figures and

may

not

tie to actual figures in the condensed consolidated financial statements due to rounding.

XML

Note 18 - Subsequent Events

6 Months Ended

May 31, 2019

Notes to Financial Statements

Subsequent Events [Text Block]

18 ) Subsequent Events

Management evaluated all other activity of the Company and concluded that

no

subsequent events have occurred that would require recognition in the condensed consolidated financial statements.

XML

Significant Accounting Policies (Policies)

6 Months Ended

May 31, 2019

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Statement Presentation

The foregoing condensed consolidated financial statements of the Company are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position and operating results for the interim periods. The financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form

10

-K for the fiscal year ended

November 30, 2018.

The results of operations for the

three

and

six

months ended

May 31, 2019

are

not

necessarily indicative of the results for the fiscal year ending

November 30, 2019.

During the

second

quarter of fiscal

2018,

the Company liquidated its investment in its Canadian subsidiary (“International”) by selling off remaining inventory and filing dissolution paperwork. Prior to that liquidation and dissolution, the financial books of the Company’s Canadian operations were kept in the functional currency of Canadian dollars and the financial statements were converted to U.S. Dollars for consolidation. When consolidating the financial results of the Company into U.S. Dollars for reporting purposes, the Company used the All-Current translation method. The All-Current translation method requires the balance sheet assets and liabilities to be translated to U.S. Dollars at the exchange rate as of quarter-end. Stockholders’ equity was translated at historical exchange rates and retained earnings were translated at an average exchange rate for the period. Additionally, revenue and expenses were translated at average exchange rates for the periods presented. The resulting cumulative translation adjustment was carried on the balance sheet and was recorded in stockholders’ equity. Following the liquidation and dissolution of International, the cumulative translation adjustment carried on the balance sheet was released into net income under other income (expense), and the financial statements will

no

longer need translation each period. Since

no

income tax benefit was received from liquidation and dissolution, the cumulative translation adjustment was

not

tax adjusted.

Lessor, Leases [Policy Text Block]

Lessor Accounting and

Sales-Type Leases

Modular buildings held for short term lease by our modular buildings segment are recorded at cost. Amortization of each modular building is calculated over the useful life of the building. Estimated useful life is

three

to

five

years. Lease revenue is accounted for on a straight-line basis over the term of the related lease agreement. Lease income for modular buildings is included in sales on the consolidated statements of operations.

The Company accounts for leases of modular buildings to certain customers as sales-type leases. These leases have terms of up to

36

months and are collateralized by a security interest in the related modular building. The lessee has a bargain purchase option available at the end of the lease term. A minimum lease receivable is recorded net of unearned interest income and profit on sale at the time the Company’s obligation to the lessee is complete. Profit related to the sale of the building is recorded upon fulfillment of the Company’s obligation to the lessee.

Use of Estimates, Policy [Policy Text Block]

Estimates

The preparation of 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the

three

and

six

months ended

May 31, 2019.

Actual results could differ from those estimates.

Revenue from Contract with Customer [Policy Text Block]

Revenue Recognition

Effective

December 1, 2018

the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic

606,

Revenue from Contracts with Customers (“ASC

606”

). The Company used the modified retrospective adoption of ASC

606.

The adoption of ASC

606

had

no

impact on prior year or previously disclosed amounts. In accordance with ASC

606,

revenue is measured based on consideration specified in a contract with a customer and recognized when the Company satisfies the performance obligation specified in each contract.

The Company’s revenues primarily result from contracts with customers. The major sources of revenue for the agricultural products and tools segments are farm equipment, service parts related to farm equipment and steel cutting tools and inserts. The agricultural products and tools segments generally execute short-term contracts that contain a single performance obligation – the delivery of product to the common carrier. The Company recognizes revenue for the production and sale of farm equipment, service parts and cutting tools upon shipment of the good(s). The agricultural products and tools segments each typically require payment in full

30

days after the ship date. To take advantage of program discounts, some customers pay deposits up front. Any deposits received increase contract liabilities. The modular buildings segment executes contracts with customers that can be short- or long-term in nature. These contracts can have multiple performance obligations and revenue from these can be recognized over time or at a point in time depending on the nature of the contracts. Payment terms for the modular buildings segment vary by contract, but typically utilize money down and progress payments throughout the life of the contract. The payment terms of our modular buildings segment have the most impact on our contract receivables, contract assets and contract liabilities. Project invoicing from the modular buildings segment increase contract receivables and have an effect on contract liabilities through billings in excess of costs and estimated gross profit and advanced payments. The balance of contract assets is typically made up of the balance of costs in and estimated gross profit in excess of billings. The major source of revenue for the modular buildings segment is modular building sales. Sales of modular buildings are generally recognized using input methods to measure progress towards the satisfaction of a performance obligation using the percentage of completion method. Stock modular building sales also occur and are recognized at a point in time when the performance obligation is fulfilled through substantial completion. Substantial completion is achieved through customer acceptance of the completed building.

The agricultural products segment offers variable consideration in the form of discounts depending on participation in yearly early order programs. This variable consideration is allocated to the transaction price of all products in a sales arrangement and is

not

contingent on future outcomes. The agricultural products segment does

not

offer rebates or credits. The tools segment offers quantity discounts that are allocated to the transaction price of each product once the quantity break is achieved. The tools segment does

not

offer rebates or credits. The modular buildings segment does

not

offer discounts, rebates or credits.

For information on product warranty as it applies to ASC

606,

refer to Note

9

“Product Warranty.”

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Note 3 - Revenue Recognition (Tables)

6 Months Ended

May 31, 2019

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three Months Ended May 31, 2019
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	2,879,000	$	-	$	-	$	2,879,000
Farm equipment service parts		665,000		-		-		665,000
Steel cutting tools and inserts		-		-		544,000		544,000
Modular buildings		-		1,368,000		-		1,368,000
Modular building lease income		-		168,000				168,000
Other		93,000		22,000		8,000		123,000
	$	3,637,000	$	1,558,000	$	552,000	$	5,747,000

	Three Months Ended May 31, 2018
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	3,123,000	$	-	$	-	$	3,123,000
Farm equipment service parts		698,000		-		-		698,000
Steel cutting tools and inserts		-		-		516,000		516,000
Modular buildings		-		734,000		-		734,000
Modular building lease income		-		67,000		-		67,000
Other		116,000		33,000		7,000		156,000
	$	3,937,000	$	834,000	$	523,000	$	5,294,000

	Six Months Ended May 31, 2019
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	4,881,000	$	-	$	-	$	4,881,000
Farm equipment service parts		1,216,000		-		-		1,216,000
Steel cutting tools and inserts		-		-		1,028,000		1,028,000
Modular buildings		-		2,163,000		-		2,163,000
Modular building lease income		-		348,000				348,000
Other		150,000		69,000		16,000		235,000
	$	6,247,000	$	2,580,000	$	1,044,000	$	9,871,000

	Six Months Ended May 31, 2018
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	6,373,000	$	-	$	-	$	6,373,000
Farm equipment service parts		1,286,000		-		-		1,286,000
Steel cutting tools and inserts		-		-		1,203,000		1,203,000
Modular buildings		-		1,407,000		-		1,407,000
Modular building lease income		-		116,000		-		116,000
Other		207,000		50,000		18,000		275,000
	$	7,866,000	$	1,573,000	$	1,221,000	$	10,660,000

Contract with Customer, Asset and Liability [Table Text Block]

	May 31, 2019		November 30, 2018
Receivables	$	1,024,000	$	159,000
Assets		33,000		99,000
Liabilities		1,220,000		185,000

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Note 4 - Discontinued Operations (Tables)

6 Months Ended

May 31, 2019

Notes Tables

Schedule of Disposal Groups, Including Discontinued Operations, Income Statement [Table Text Block]

	Three Months Ended
	May 31, 2018
Revenue from external customers	$	-
Gross Profit		-
Operating Expense		7,019
Income (loss) from operations		(7,019	)
Income (loss) before tax		(15,587	)

	Six Months Ended
	May 31, 2018
Revenue from external customers	$	-
Gross Profit		-
Operating Expense		51,133
Income (loss) from operations		(51,133	)
Income (loss) before tax		(67,177	)

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Note 5 - Net Income (Loss) Per Share of Common Stock (Tables)

6 Months Ended

May 31, 2019

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	For the Three Months Ended
	May 31, 2019			May 31, 2018
Numerator for basic and diluted net income (loss) per share:
Net income (loss) from continuing operations	$	(356,042	)	$	(653,979	)
Net income (loss) from discontinued operations		-			(11,799	)
Net income (loss)	$	(356,042	)	$	(665,778	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,299,289			4,213,893
Effect of dilutive stock options		-			-
For diluted net income (loss) per share - weighted average common shares outstanding		4,299,289			4,213,893
Net Income (Loss) per share - Basic:
Continuing Operations	$	(0.08	)	$	(0.16	)
Discontinued Operations	$	-		$	-
Net Income (Loss) per share	$	(0.08	)	$	(0.16	)
Net Income (Loss) per share - Diluted:
Continuing Operations	$	(0.08	)	$	(0.16	)
Discontinued Operations	$	-		$	-
Net Income (Loss) per share	$	(0.08	)	$	(0.16	)

	For the Six Months ended
	May 31, 2019			May 31, 2018
Numerator for basic and diluted net income (loss) per share:
Net income (loss) from continuing operations	$	(961,974	)	$	(1,181,377	)
Net income (loss) from discontinued operations		-			(50,853	)
Net income (loss)	$	(961,974	)	$	(1,232,230	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,272,532			4,192,592
Effect of dilutive stock options		-			-
For diluted net income (loss) per share - weighted average common shares outstanding		4,272,532			4,192,592
Net Income (Loss) per share - Basic:
Continuing Operations	$	(0.23	)	$	(0.28	)
Discontinued Operations	$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.23	)	$	(0.29	)
Net Income (Loss) per share - Diluted:
Continuing Operations	$	(0.23	)	$	(0.28	)
Discontinued Operations	$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.23	)	$	(0.29	)

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Note 6 - Inventory (Tables)

6 Months Ended

May 31, 2019

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	May 31, 2019			November 30, 2018
Raw materials	$	7,689,572		$	7,825,278
Work in process		433,171			272,302
Finished goods		4,778,690			5,051,330
Gross inventory	$	12,901,433		$	13,148,910
Less: Reserves		(2,796,170	)		(2,891,808	)
Net Inventory	$	10,105,263		$	10,257,102

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Note 7 - Accrued Expenses (Tables)

6 Months Ended

May 31, 2019

Notes Tables

Schedule of Accrued Liabilities [Table Text Block]

	May 31, 2019		November 30, 2018
Salaries, wages, and commissions	$	422,752	$	448,737
Accrued warranty expense		89,637		96,786
Other		283,226		347,761
	$	795,615	$	893,284

XML

Note 8 - Assets Held for Lease (Tables)

6 Months Ended

May 31, 2019

Notes Tables

Schedule of Property Subject to or Available for Operating Lease [Table Text Block]

	May 31, 2019		November 30, 2018
West Union Facility	$	-	$	878,079
Modular Buildings		805,498		992,046
Net assets held for lease	$	805,498	$	1,870,125

Schedule of Future Minimum Payments Receivable for Operating Leases [Table Text Block]

Future Minimum Leased Assets
Year Ending November 30,	Amount
2019	$	204,330
2020		90,411
Total	$	294,741

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Note 9 - Product Warranty (Tables)

6 Months Ended

May 31, 2019

Notes Tables

Schedule of Product Warranty Liability [Table Text Block]

	For the Three Months Ended
	May 31, 2019			May 31, 2018
Balance, beginning	$	25,857		$	54,135
Settlements / adjustments		(62,640	)		(58,892	)
Warranties issued		126,420			75,973
Balance, ending	$	89,637		$	71,216

	For the Six Months Ended
	May 31, 2019			May 31, 2018
Balance, beginning	$	96,786		$	68,451
Settlements / adjustments		(194,938	)		(141,565	)
Warranties issued		187,789			144,330
Balance, ending	$	89,637		$	71,216

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Note 10 - Loan and Credit Agreements (Tables)

6 Months Ended

May 31, 2019

Notes Tables

Schedule of Debt [Table Text Block]

	May 31, 2019		November 30, 2018
Bank Midwest loan payable in monthly installments of $17,271 including interest at 5.00%, due October 1, 2037	$	2,476,752	$	2,517,510
Iowa Finance Authority loan payable in monthly installments of $12,500 including interest at 2.75%, due June 1, 2020		-		232,967
Total term debt	$	2,476,752	$	2,750,477
Less current portion of term debt		83,250		227,459
Term debt, excluding current portion	$	2,393,502	$	2,523,018

Schedule of Maturities of Long-term Debt [Table Text Block]

Year	Amount
2019		40,761
2020		85,401
2021		90,179
2022		94,858
2023		99,781
2024 and thereafter		2,065,772
	$	2,476,752

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Note 13 - Sales-type Leases (Tables)

6 Months Ended

May 31, 2019

Notes Tables

Schedule of Sales-type Leases [Table Text Block]

	May 31, 2019			November 30, 2018
Minimum lease receivable, current	$	174,000		$	159,500
Unearned interest income, current		(28,201	)	$	(36,445	)
Net investment in sales-type leases, current		145,799			123,055
Minimum lease receivable, long-term		81,276		$	168,277
Unearned interest income, long-term		(3,669	)	$	(14,490	)
Net investment in sales-type leases, long-term	$	77,607		$	153,787

Sales-type Leases, Lease Receivable Maturity [Table Text Block]

Year Ending November 30,	Amount
2019	$	87,000
2020		162,425
2021		5,851
Total	$	255,276

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Note 17 - Segment Information (Tables)

6 Months Ended

May 31, 2019

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three Months Ended May 31, 2019
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	3,637,000		$	1,558,000		$	552,000		$	5,747,000
Income (loss) from operations		(297,000	)		(63,000	)		(10,000	)		(370,000	)
Income (loss) before tax		(382,000	)		(56,000	)		(21,000	)		(459,000	)
Total Assets		14,730,000			4,127,000			2,502,000			21,359,000
Capital expenditures		76,000			30,000			27,000			133,000
Depreciation & Amortization		124,000			104,000			32,000			260,000

	Three Months Ended May 31, 2018
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	3,937,000		$	834,000		$	523,000		$	5,294,000
Income (loss) from operations		(263,000	)		(146,000	)		(49,000	)		(458,000	)
Income (loss) before tax		(576,000	)		(141,000	)		(63,000	)		(780,000	)
Total Assets		16,686,000			3,485,000			2,419,000			22,590,000
Capital expenditures		42,000			859,000			-			901,000
Depreciation & Amortization		132,000			5,500			32,000			169,500

	Six Months Ended May 31, 2019
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	6,247,000		$	2,580,000		$	1,044,000		$	9,871,000
Income (loss) from operations		(898,000	)		(161,000	)		(33,000	)		(1,092,000	)
Income (loss) before tax		(1,031,000	)		(155,000	)		(54,000	)		(1,240,000	)
Total Assets		14,730,000			4,127,000			2,502,000			21,359,000
Capital expenditures		110,000			48,000			28,000			186,000
Depreciation & Amortization		249,000			236,000			64,000			549,000

	Six Months Ended May 31, 2018
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	7,866,000		$	1,573,000		$	1,221,000		$	10,660,000
Income (loss) from operations		(537,000	)		(206,000	)		(24,000	)		(767,000	)
Income (loss) before tax		(845,000	)		(194,000	)		(46,000	)		(1,085,000	)
Total Assets		16,686,000			3,485,000			2,419,000			22,590,000
Capital expenditures		71,000			894,000			-			965,000
Depreciation & Amortization		265,000			80,000			64,000			409,000

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Note 1 - Description of the Company (Details Textual)	6 Months Ended
	May 31, 2019
Number of Operating Segments	3

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Note 2 - Summary of Significant Account Policies (Details Textual)	6 Months Ended
	May 31, 2019
Minimum [Member] | Assets Leased to Others [Member]
Property, Plant and Equipment, Useful Life	3 years
Maximum [Member]
Lessor, Capital Lease, Term of Contract	3 years
Maximum [Member] | Assets Leased to Others [Member]
Property, Plant and Equipment, Useful Life	5 years

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Note 3 - Revenue Recognition (Details Textual) - USD ($)	6 Months Ended
	May 31, 2019	May 31, 2018
Contract with Customer, Liability, Revenue Recognized	$ 185,014	$ 93,264

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Note 3 - Revenue Recognition - Disaggregated Revenue From External Customer (Details) - USD ($)	3 Months Ended		6 Months Ended
	May 31, 2019	May 31, 2018	May 31, 2019	May 31, 2018
Revenue	$ 5,747,000	$ 5,294,000	$ 9,871,000	$ 10,660,000
Farm Equipment [Member]
Revenue	2,879,000	3,123,000	4,881,000	6,373,000
Farm Equipment Service Parts [Member]
Revenue	665,000	698,000	1,216,000	1,286,000
Steel Cutting Tools and Inserts [Member]
Revenue	544,000	516,000	1,028,000	1,203,000
Modular Buildings [Member]
Revenue	1,368,000	734,000	2,163,000	1,407,000
Modular Buildings Lease Income [Member]
Revenue	168,000	67,000	348,000	116,000
Product and Service, Other [Member]
Revenue	123,000	156,000	235,000	275,000
Agricultural Products [Member]
Revenue	3,637,000	3,937,000	6,247,000	7,866,000
Agricultural Products [Member] | Farm Equipment [Member]
Revenue	2,879,000	3,123,000	4,881,000	6,373,000
Agricultural Products [Member] | Farm Equipment Service Parts [Member]
Revenue	665,000	698,000	1,216,000	1,286,000
Agricultural Products [Member] | Steel Cutting Tools and Inserts [Member]
Revenue
Agricultural Products [Member] | Modular Buildings [Member]
Revenue
Agricultural Products [Member] | Modular Buildings Lease Income [Member]
Revenue
Agricultural Products [Member] | Product and Service, Other [Member]
Revenue	93,000	116,000	150,000	207,000
Modular Buildings [Member]
Revenue	1,558,000	834,000	2,580,000	1,573,000
Modular Buildings [Member] | Farm Equipment [Member]
Revenue
Modular Buildings [Member] | Farm Equipment Service Parts [Member]
Revenue
Modular Buildings [Member] | Steel Cutting Tools and Inserts [Member]
Revenue
Modular Buildings [Member] | Modular Buildings [Member]
Revenue	1,368,000	734,000	2,163,000	1,407,000
Modular Buildings [Member] | Modular Buildings Lease Income [Member]
Revenue	168,000	67,000	348,000	116,000
Modular Buildings [Member] | Product and Service, Other [Member]
Revenue	22,000	33,000	69,000	50,000
Tools [Member]
Revenue	552,000	523,000	1,044,000	1,221,000
Tools [Member] | Farm Equipment [Member]
Revenue
Tools [Member] | Farm Equipment Service Parts [Member]
Revenue
Tools [Member] | Steel Cutting Tools and Inserts [Member]
Revenue	544,000	516,000	1,028,000	1,203,000
Tools [Member] | Modular Buildings [Member]
Revenue
Tools [Member] | Modular Buildings Lease Income [Member]
Revenue
Tools [Member] | Product and Service, Other [Member]
Revenue	$ 8,000	$ 7,000	$ 16,000	$ 18,000

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Note 3 - Revenue Recognition - Contract With Customers (Details) - USD ($)	May 31, 2019	Nov. 30, 2018
Receivables	$ 1,024,000	$ 159,000
Assets	33,000	99,000
Liabilities	$ 1,220,000	$ 185,000

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Note 4 - Discontinued Operations (Details Textual)	Mar. 29, 2018 USD ($)
Real Estate Held for Sale, Sale Price Offer	$ 1,500,000

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Note 4 - Discontinued Operations - Income From Discontinued Operations Before Income Taxes (Details) - USD ($)	3 Months Ended		6 Months Ended
	May 31, 2019	May 31, 2018	May 31, 2019	May 31, 2018
Income (loss) before tax		$ (15,587)		$ (67,177)
Discontinued Operations, Held-for-sale [Member] | Vessels Segment [Member]
Revenue from external customers
Gross Profit
Operating Expense		7,019		51,133
Income (loss) from operations		(7,019)		(51,133)
Income (loss) before tax		$ (15,587)		$ (67,177)

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Note 5 - Net Income (Loss) Per Share of Common Stock - Basic and Diluted Earnings Per Common Share (Details) - USD ($)	3 Months Ended		6 Months Ended
	May 31, 2019	May 31, 2018	May 31, 2019	May 31, 2018
Numerator for basic and diluted net income (loss) per share:
Net (loss) from continuing operations	$ (356,042)	$ (653,979)	$ (961,974)	$ (1,181,377)
Net (loss) from discontinued operations		(11,799)		(50,853)
Net income (loss)	$ (356,042)	$ (665,778)	$ (961,974)	$ (1,232,230)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding (in shares)	4,299,289	4,213,893	4,272,532	4,192,592
Effect of dilutive stock options (in shares)
For diluted net income (loss) per share - weighted average common shares outstanding (in shares)	4,299,289	4,213,893	4,272,532	4,192,592
Net Income (Loss) per share - Basic:
Continuing Operations (in dollars per share)	$ (0.08)	$ (0.16)	$ (0.23)	$ (0.28)
Discontinued Operations (in dollars per share)				(0.01)
Net Income (Loss) per share (in dollars per share)	(0.08)	(0.16)	(0.23)	(0.29)
Net Income (Loss) per share - Diluted:
Continuing Operations (in dollars per share)	(0.08)	(0.16)	(0.23)	(0.28)
Discontinued Operations (in dollars per share)				(0.01)
Net Income (Loss) per share (in dollars per share)	$ (0.08)	$ (0.16)	$ (0.23)	$ (0.29)

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Note 6 - Inventories - Major Classes of Inventory (Details) - USD ($)	May 31, 2019	Nov. 30, 2018
Raw materials	$ 7,689,572	$ 7,825,278
Work in process	433,171	272,302
Finished goods	4,778,690	5,051,330
Gross inventory	12,901,433	13,148,910
Less: Reserves	(2,796,170)	(2,891,808)
Net Inventory	$ 10,105,263	$ 10,257,102

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Note 7 - Accrued Expenses - Major Components Of Accrued Expenses (Details) - USD ($)	May 31, 2019	Nov. 30, 2018
Salaries, wages, and commissions	$ 422,752	$ 448,737
Accrued warranty expense	89,637	96,786
Other	283,226	347,761
Total accrued liabilities, current	$ 795,615	$ 893,284

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Note 8 - Assets Held for Lease (Details Textual) - USD ($)		3 Months Ended		6 Months Ended
	Dec. 14, 2018	May 31, 2019	May 31, 2018	May 31, 2019	May 31, 2018
West Union Facility [Member]
Proceeds from Sale of Productive Assets, Total	$ 900,000
Sales [Member]
Operating Leases, Income Statement, Lease Revenue, Total		$ 168,465	$ 66,558	$ 347,509	$ 115,518
Other Nonoperating Income (Expense) [Member]
Operating Leases, Income Statement, Lease Revenue, Total		$ 0	$ 0	$ 2,500	$ 38,180

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Note 8 - Assets Held for Lease - Summary of Assets Held for Lease (Details) - USD ($)	May 31, 2019	Nov. 30, 2018
Net assets held for lease	$ 805,498	$ 1,870,125
West Union Facility [Member]
Net assets held for lease		878,079
Modular Buildings [Member]
Net assets held for lease	$ 805,498	$ 992,046

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Note 8 - Assets Held for Lease - Future Minimum Lease Receipts From Assets Held for Lease (Details)	Nov. 30, 2018 USD ($)
2019	$ 204,330
2020	90,411
Total	$ 294,741

XML

Note 9 - Product Warranty (Details Textual)	6 Months Ended
	May 31, 2019
Standard Product Warrant Term	1 year

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Note 9 - Product Warranty - Changes in Product Warranty Liability (Details) - USD ($)	3 Months Ended		6 Months Ended
	May 31, 2019	May 31, 2018	May 31, 2019	May 31, 2018
Balance, beginning	$ 25,857	$ 54,135	$ 96,786	$ 68,451
Settlements / adjustments	(62,640)	(58,892)	(194,938)	(141,565)
Warranties issued	126,420	75,973	187,789	144,330
Balance, ending	$ 89,637	$ 71,216	$ 89,637	$ 71,216

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Note 10 - Loan and Credit Agreements (Details Textual)					6 Months Ended		12 Months Ended
	May 31, 2019 USD ($)	Feb. 13, 2019 USD ($)	Mar. 29, 2018 USD ($)	Sep. 28, 2017 USD ($)	May 31, 2019 USD ($)	May 31, 2018 USD ($)	Nov. 30, 2018 USD ($)	Feb. 28, 2019	May 01, 2010 USD ($)
Long-term Debt, Total	$ 2,476,752				$ 2,476,752		$ 2,750,477
Repayments of Long-term Debt, Total					273,725	$ 109,295
Term Loan Due October 2037 [Member]
Long-term Debt, Total	$ 2,476,752				$ 2,476,752		$ 2,517,510
Debt Instrument, Interest Rate, Stated Percentage	5.00%				5.00%		5.00%
Debt Instrument, Periodic Payment, Total					$ 17,271		$ 17,271
Iowa Finance Authority Term Loan [Member]
Long-term Debt, Total							$ 232,967
Debt Instrument, Interest Rate, Stated Percentage	2.75%				2.75%		2.75%
Debt Instrument, Periodic Payment, Total					$ 12,500		$ 12,500
Bank Midwest [Member]
Long-term Line of Credit, Total	$ 3,599,530				3,599,530
Line of Credit Facility, Remaining Borrowing Capacity	$ 1,400,470				$ 1,400,470
Line of Credit, Borrowing Base, Accounts Receivable	75.00%				75.00%
Line of Credit, Borrowing Base, Inventory	50.00%				50.00%
Debt Instrument, Covenant, Minimum Working Capital Ratio				1.75
Debt Instrument, Covenant, Minimum Working Capital				$ 5,100,000
Debt Instrument, Covenant, Maximum Debt to Worth Ratio				1
Debt Instrument, Covenant, Minimum Tangible Balance Sheet Equity, Percentage				40.00%
Debt Instrument, Covenant, Minimum Debt Service Coverage Ratio				1.25
Debt Instrument, Covenant, Minimum Debt Service Coverage Ratio, Tolerance				0.1
Bank Midwest [Member] | Term Loan Due October 2037 [Member]
Long-term Debt, Total				$ 2,600,000
Debt Instrument, Periodic Payment, Total	$ 17,271
Bank Midwest [Member] | Term Loan Due October 2037 [Member] | United States Department of Agriculture [Member]
Upfront Guarantee Fee	$ 62,400
Guarantee Fee, Annual Fee, Percentage	0.50%
Guarantee Requirement, Personally Guarantee, Shareholders Ownership Percentage	20.00%
Bank Midwest [Member] | Term Loan Due October 2037 [Member] | J. Ward McConnell Jr. [Member]
Personally Guaranteed, Percentage of Loan	38.00%
Personally Guaranteed, Fee, Percentage of Guaranteed Amount	2.00%
Bank Midwest [Member] | Term Loan Due October 2019 [Member]
Long-term Debt, Total				600,000
Repayments of Long-term Debt, Total			$ 600,000
Repayments of Long-term Debt, Principal			596,563
Repayments of Long-term Debt, Interest			$ 2,328
Bank Midwest [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity				$ 5,000,000
Debt Instrument, Basis Spread on Variable Rate		1.00%
Line of Credit Facility, Interest Rate During Period	6.50%
Debt Instrument, Interest Rate, Effective Percentage		4.25%
Bank Midwest [Member] | Revolving Credit Facility [Member] | Wall Street Journal Rate [Member]
Long-term Line of Credit, Total		$ 4,000,000
Debt Instrument, Basis Spread on Variable Rate	1.00%
Line of Credit Facility, Interest Rate During Period	4.25%
Debt Instrument, Interest Rate, Effective Percentage		6.50%
Bank Midwest [Member] | Term Loan Due October 2037 [Member]
Debt Instrument, Interest Rate, Stated Percentage								5.00%
Bank Midwest [Member] | Term Loan Due October 2037 [Member] | Minimum [Member]
Debt Instrument, Interest Rate, Effective Percentage	4.15%				4.15%
Bank Midwest [Member] | Term Loan Due October 2037 [Member] | Wall Street Journal Rate [Member]
Debt Instrument, Basis Spread on Variable Rate	0.75%
The First National Bank of West Union [Member] | Iowa Finance Authority Term Loan [Member]
Debt Instrument, Face Amount									$ 1,300,000

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Note 10 - Loan and Credit Agreements - Summary of Term Debt (Details) - USD ($)	May 31, 2019	Nov. 30, 2018
Term debt	$ 2,476,752	$ 2,750,477
Less current portion of term debt	83,250	227,459
Term debt, excluding current portion	2,393,502	2,523,018
Term Loan Due October 2037 [Member]
Term debt	2,476,752	2,517,510
Iowa Finance Authority Term Loan [Member]
Term debt		$ 232,967

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Note 10 - Loan and Credit Agreements - Summary of Term Debt (Details) (Parentheticals) - USD ($)	6 Months Ended	12 Months Ended
	May 31, 2019	Nov. 30, 2018
Term Loan Due October 2037 [Member]
Debt instrument, periodic payment	$ 17,271	$ 17,271
Debt instrument, interest rate, stated percentage	5.00%	5.00%
Iowa Finance Authority Term Loan [Member]
Debt instrument, periodic payment	$ 12,500	$ 12,500
Debt instrument, interest rate, stated percentage	2.75%	2.75%

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Note 10 - Loan and Credit Agreements - Summary of Minimum Maturities of Term Debt (Details) - USD ($)	May 31, 2019	Nov. 30, 2018
2019	$ 40,761
2020	85,401
2021	90,179
2022	94,858
2023	99,781
2024 and thereafter	2,065,772
	$ 2,476,752	$ 2,750,477

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Note 11 - Income Taxes (Details Textual) - USD ($)	6 Months Ended		12 Months Ended
	May 31, 2019	May 31, 2018	Nov. 30, 2018
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%		35.00%
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability		$ 298,000

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Note 12 - Related Party Transactions (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	May 31, 2019	May 31, 2018	May 31, 2019	May 31, 2018
Related Party Transaction, Expenses from Transactions with Related Party	$ 6,501	$ 7,028	$ 14,649	$ 12,029
Due to Related Parties, Total	$ 1,594	$ 1,646	$ 1,594	$ 1,646

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Note 13 - Sales-type Leases (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	May 31, 2019	May 31, 2018	May 31, 2019	May 31, 2018
Capital Leases, Income Statement, Sales Type Lease Revenue	$ 0	$ 0	$ 0	$ 426,542

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Note 13 - Sales-type Leases - Components Related to Sales-type Leases (Details) - USD ($)	May 31, 2019	Nov. 30, 2018
Minimum lease receivable, current	$ 174,000	$ 159,500
Unearned interest income, current	(28,201)	(36,445)
Net investment in sales-type leases, current	145,799	123,055
Minimum lease receivable, long-term	81,276	168,277
Unearned interest income, long-term	(3,669)	(14,490)
Net investment in sales-type leases, long-term	$ 77,607	$ 153,787

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Note 13 - Sales-type Leases - Future Minimum Lease Receipts (Details)	Nov. 30, 2018 USD ($)
2019	$ 87,000
2020	162,425
2021	5,851
Total	$ 255,276

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Note 15 - Equity Incentive Plan and Stock Based Compensation (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	May 31, 2019	May 31, 2018	May 31, 2019	May 31, 2018	Nov. 30, 2018	Jan. 27, 2011
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant					0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			0	0
Share-based Payment Arrangement, Expense	$ 53,898	$ 61,870	$ 119,444	$ 111,436
Non-qualified Stock Units to Non-employee Directors Annually or Upon Election [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized					1,000	1,000
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			16,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period			1,400
Restricted Stock [Member] | Employees, Directors, and Consultants [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			69,937

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Note 17 - Segment Information (Details Textual)	6 Months Ended
	May 31, 2019
Number of Reportable Segments	3

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Note 17 - Segment Information - Segment Reporting Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	May 31, 2019	May 31, 2018	May 31, 2019	May 31, 2018	Nov. 30, 2018
Revenue from external customers	$ 5,747,256	$ 5,294,464	$ 9,871,482	$ 10,660,000
Income (loss) from operations	(369,513)	(458,114)	(1,092,136)	(766,835)
Total Assets	21,359,005		21,359,005		$ 21,325,474
Capital expenditures			186,215	164,874
Depreciation & Amortization			549,333	408,757
Operating Segments [Member]
Revenue from external customers	5,747,000	5,294,000	9,871,000	10,660,000
Income (loss) from operations	(370,000)	(458,000)	(1,092,000)	(767,000)
Income (loss) before tax	(459,000)	(780,000)	(1,240,000)	(1,085,000)
Total Assets	21,359,000	22,590,000	21,359,000	22,590,000
Capital expenditures	133,000	901,000	186,000	965,000
Depreciation & Amortization	260,000	169,500	549,000	409,000
Operating Segments [Member] | Agricultural Products [Member]
Revenue from external customers	3,637,000	3,937,000	6,247,000	7,866,000
Income (loss) from operations	(297,000)	(263,000)	(898,000)	(537,000)
Income (loss) before tax	(382,000)	(576,000)	(1,031,000)	(845,000)
Total Assets	14,730,000	16,686,000	14,730,000	16,686,000
Capital expenditures	76,000	42,000	110,000	71,000
Depreciation & Amortization	124,000	132,000	249,000	265,000
Operating Segments [Member] | Modular Buildings [Member]
Revenue from external customers	1,558,000	834,000	2,580,000	1,573,000
Income (loss) from operations	(63,000)	(146,000)	(161,000)	(206,000)
Income (loss) before tax	(56,000)	(141,000)	(155,000)	(194,000)
Total Assets	4,127,000	3,485,000	4,127,000	3,485,000
Capital expenditures	30,000	859,000	48,000	894,000
Depreciation & Amortization	104,000	5,500	236,000	80,000
Operating Segments [Member] | Tools [Member]
Revenue from external customers	552,000	523,000	1,044,000	1,221,000
Income (loss) from operations	(10,000)	(49,000)	(33,000)	(24,000)
Income (loss) before tax	(21,000)	(63,000)	(54,000)	(46,000)
Total Assets	2,502,000	2,419,000	2,502,000	2,419,000
Capital expenditures	27,000		28,000
Depreciation & Amortization	$ 32,000	$ 32,000	$ 64,000	$ 64,000