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 February 28, 2018

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)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes [x] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or 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 [ ]	Smaller reporting company [x]
(Do not check if a smaller reporting company)	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 March 30, 2018: 4,200,466

Art’s-Way Manufacturing Co., Inc.

Index

Page No.

PART I – FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets February 28, 2018 and November 30, 2017	1
	Condensed Consolidated Statements of Operations Three-month periods ended February 28, 2018 and February 28, 2017	2
	Condensed Consolidated Statements of Comprehensive Income Three-month periods ended February 28, 2018 and February 28, 2017	3
	Condensed Consolidated Statements of Cash Flows Three-month periods ended February 28, 2018 and February 28, 2017	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	18
PART II – OTHER INFORMATION		19
Item 1.	Legal Proceedings	19
Item 1A.	Risk Factors	19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3.	Defaults Upon Senior Securities	19
Item 4.	Mine Safety Disclosures	19
Item 5.	Other Information	19
Item 6.	Exhibits	19
	SIGNATURES	20

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Balance Sheets

	(Unaudited)
	February 28, 2018			November 30,  2017
Assets
Current assets:
Cash	$	92,814		$	212,400
Accounts receivable-customers, net of allowance for doubtful accounts of $16,165 and $32,298 in 2018 and 2017, respectively		1,827,102			1,910,294
Inventories, net		11,068,505			11,966,722
Cost and profit in excess of billings		2,778			65,146
Net investment in sales-type leases, current		119,512			-
Assets of discontinued operations		4,855			2,454
Other current assets		425,263			275,755
Total current assets		13,540,829			14,432,771
Property, plant, and equipment, net		5,818,795			5,946,957
Assets held for lease, net		1,201,515			1,217,164
Deferred income taxes		693,751			901,396
Goodwill		375,000			375,000
Net investment in sales-type leases, long-term		255,943			-
Other assets of discontinued operations		1,425,000			1,425,000
Other assets		80,478			81,545
Total assets	$	23,391,311		$	24,379,833
Liabilities and Stockholders’ Equity
Current liabilities:
Line of credit	$	1,960,530		$	2,462,530
Current portion of long-term debt		222,475			221,230
Accounts payable		929,474			673,653
Customer deposits		622,597			600,325
Billings in Excess of Cost and Profit		11,908			48,211
Accrued expenses		864,289			981,558
Liabilites of discontinued operations		49,211			59,149
Income taxes payable		3,100			3,100
Total current liabilities		4,663,584			5,049,756
Long-term liabilities
Long-term liabilities of discontinued operations		587,989			590,366
Long-term debt, excluding current portion		2,693,606			2,748,677
Total liabilities		7,945,179			8,388,799
Commitments and Contingencies (Notes 8 and 9)
Stockholders’ equity:
Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares in 2018 and 2017; issued 0 shares in 2018 and 2017.		-			-
Common stock – $0.01 par value. Authorized 9,500,000 shares in 2018 and 2017; issued 4,209,752 in 2018 and 4,158,752 in 2017		42,097			41,587
Additional paid-in capital		2,908,100			2,859,052
Retained earnings		12,787,378			13,353,830
Accumulated other comprehensive expense		(263,708	)		(257,010	)
Treasury stock, at cost (9,286 in 2018 and 1,954 in 2017 shares)		(27,735	)		(6,425	)
Total stockholders’ equity		15,446,132			15,991,034
Total liabilities and stockholders’ equity	$	23,391,311		$	24,379,833

See accompanying notes to condensed consolidated financial statements.

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ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended
	February 28, 2018			February 28, 2017
Sales	$	5,365,536		$	4,421,168
Cost of goods sold		4,245,729			3,307,345
Gross profit		1,119,807			1,113,823
Expenses:
Engineering		129,064			132,640
Selling		450,961			485,380
General and administrative		848,503			848,236
Total expenses		1,428,528			1,466,256
Income (Loss) from operations		(308,721	)		(352,433	)
Other income (expense):
Interest expense		(69,676	)		(63,794	)
Other		72,572			51,674
Total other income (expense)		2,896			(12,120	)
Income (Loss) from continuing operations before income taxes		(305,825	)		(364,553	)
Income tax expense (benefit)		221,573			(110,911	)
Income (Loss) from continuing operations		(527,398	)		(253,642	)
Discontinued Operations
Income (loss) from operations of discontinued segment		(51,590	)		4,877
Income tax expense (benefit)		(12,536	)		1,264
Income (Loss) on discontinued operations		(39,054	)		3,613
Net Income (Loss)		(566,452	)		(250,029	)
Earnings (Loss) per share - Basic:
Continuing Operations	$	(0.13	)	$	(0.06	)
Discontinued Operations	$	(0.01	)	$	0.00
Net Income (Loss) per share	$	(0.14	)	$	(0.06	)
Earnings (Loss) per share - Diluted:
Continuing Operations	$	(0.13	)	$	(0.06	)
Discontinued Operations	$	(0.01	)	$	0.00
Net Income (Loss) per share	$	(0.14	)	$	(0.06	)
Weighted average outstanding shares used to compute basic net income per share		4,170,818			4,126,012
Weighted average outstanding shares used to compute diluted net income per share		4,170,818			4,126,012

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
	February 28, 2018			February 28, 2017
Net Income (Loss)	$	(566,452	)	$	(250,029	)
Other Comprehensive Income (Loss)
Foreign currency translation adjustsments		(6,698	)		11,022
Total Other Comprehensive Income (Loss)		(6,698	)		11,022
Comprehensive (Loss)	$	(573,150	)	$	(239,007	)

See accompanying notes to condensed consolidated financial statements.

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ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	February 28, 2018			February 28, 2017
Cash flows from operations:
Net (loss) from continuing operations	$	(527,398	)	$	(253,642	)
Net income (loss) from discontinued operations		(39,054	)		3,613
Adjustments to reconcile net (loss) to net cash provided by operating activities:
Stock based compensation		49,558			26,557
Unrealized foreign currency gain (loss)		(6,698	)		11,022
(Gain)/Loss on disposal of property, plant, and equipment		(8,896	)		2,463
Depreciation and amortization expense		189,654			170,789
Bad debt expense		(16,002	)		5,601
Deferred income taxes		207,645			(107,034	)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable		99,194			(44,089	)
Inventories		898,217			295,975
Income taxes receivable		-			(5,537	)
Net investment in sales-type leases		(375,455	)		-
Other assets		(150,301	)		(255,629	)
Increase (decrease) in:
Accounts payable		255,821			80,634
Contracts in progress, net		26,065			59,422
Customer deposits		22,272			503,702
Accrued expenses		(117,269	)		(166,649	)
Net cash provided by operating activities - continuing operations		546,407			323,585
Net cash (used in) operating activities - discontinued operations		(51,509	)		(22,039	)
Net cash provided by operating activities		494,898			301,546
Cash flows from investing activities:
Purchases of property, plant, and equipment		(64,401	)		(195,020	)
Net proceeds from sale of assets		29,316			12,190
Net cash (used in) investing activities - continuing operations		(35,085	)		(182,830	)
Net cash provided by investing activities - discontinued operations		-			38,736
Net cash (used in) investing activities		(35,085	)		(144,094	)
Cash flows from financing activities:
Net change in line of credit		(502,000	)		(250,000	)
Repayment of term debt		(53,827	)		(182,119	)
Repurchases of common stock		(21,310	)		(5,989	)
Net cash (used in) financing activities - continuing operations		(577,137	)		(438,108	)
Net cash (used in) financing activities - discontinued operations		(2,262	)		(32,281	)
Net cash (used in) financing activities		(579,399	)		(470,389	)
Net increase (decrease) in cash		(119,586	)		(312,937	)
Cash at beginning of period		212,400			1,063,716
Cash at end of period	$	92,814		$	750,779
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	48,506		$	71,338
Income taxes	$	838		$	3,125

See accompanying notes to condensed consolidated financial statements.

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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 (“Manufacturing”) manufactures farm equipment under the Art’s-Way Manufacturing label and private labels. The modular buildings segment (“Scientific”) manufactures modular buildings for various uses, commonly animal containment and research laboratories and the tools segment (“Metals”) manufactures steel cutting tools and inserts. During the third quarter of fiscal 2016, the Company discontinued its pressurized vessels segment (“Vessels”) that manufactured pressurized vessels. For more information on discontinued operations, see Note 3 “Discontinued Operations.” For detailed financial information relating to segment reporting, see Note 16 “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) which are, in the opinion of management, necessary for a fair presentation of the 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, 2017. The results of operations for the three months ended February 28, 2018 are not necessarily indicative of the results for the fiscal year ending November 30, 2018.

The financial books of the Company’s Canadian operation are kept in the functional currency of Canadian dollars and the financial statements are converted to U.S. Dollars for consolidation. When consolidating the financial results of the Company into U.S. Dollars for reporting purposes, the Company uses the All-Current translation method. The All-Current 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 is translated at historical exchange rates and retained earnings are translated at an average exchange rate for the period. Additionally, revenue and expenses are translated at average exchange rates for the periods presented. The resulting cumulative translation adjustment is carried on the balance sheet and is recorded in stockholders’ equity for 2018. Since no income tax benefit will be received from the foreign equity sale, the cumulative translation adjustment has not been tax adjusted.

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Sales-Type Leases

The Company leases modular buildings to certain customers and accounts for these transactions 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 building is available for occupancy.  Profit related to the sale of the building is recorded upon occupancy.

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 months ended February 28, 2018. Actual results could differ from those estimates.

3) 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. Its plan is to dispose of these assets over the next several quarters. At this time, the Company is working to dispose of the remaining assets, primarily the real estate.

In January 2018, the Company accepted an offer on the real estate assets for $1,500,000, which was below the carrying value at that time. Based on these facts the Company recorded an impairment of the real estate of approximately $289,000 in the fiscal year ended November 30, 2017, which reduced the value to $1,425,000, which is the value the Company expects to receive after commissions on the sale of this asset. On March 29, 2018 we disposed of the remaining assets 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 Accounting Standard Code Topic 360, the Company has classified Vessels as discontinued operations for all periods presented.

Income from discontinued operations, before income taxes in the accompanying Condensed Consolidated Statements of Operations is comprised of the following:

	Three Months Ended
	February 28, 2018			February 28, 2017
Revenue from external customers	$	-		$	-
Gross Profit		-			-
Operating Expense		43,458			32
Income (loss) from operations		(43,458	)		(32	)
Income (loss) before tax		(51,590	)		4,877

The components of discontinued operations in the accompanying Condensed Consolidated Balance Sheets are as follows:

	February 28, 2018		November 30, 2017
Cash	$	4,855	$	2,454
Property, plant, and equipment, net		1,425,000		1,425,000
Assets of discontinued operations	$	1,429,855	$	1,427,454
Accounts payable	$	655	$	-
Accrued expenses		39,222		49,931
Notes Payable		597,323		599,584
Liabilities of discontinued operations	$	637,200	$	649,515

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

Basic net income (loss) per common share 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 earnings (loss) per common share.

Basic and diluted earnings (loss) per common share have been computed based on the following as of February 28, 2018 and February 28, 2017:

	For the three months ended
	February 28, 2018			February 28, 2017
Numerator for basic and diluted (loss) earnings per common share:
Net (loss) income from continuing operations	$	(527,398	)	$	(253,642	)
Net (loss) income from discontinued operations		(39,054	)		3,613
Net (loss) income	$	(566,452	)	$	(250,029	)
Denominator:
For basic (loss) earnings per share - weighted average common shares outstanding		4,170,818			4,126,012
Effect of dilutive stock options		-			-
For diluted (loss) earnings per share - weighted average common shares outstanding		4,170,818			4,126,012
Earnings (Loss) per share - Basic:
Continuing Operations	$	(0.13	)	$	(0.06	)
Discontinued Operations	$	(0.01	)	$	0.00
Net Income (Loss) per share	$	(0.14	)	$	(0.06	)
Earnings (Loss) per share - Diluted:
Continuing Operations	$	(0.13	)	$	(0.06	)
Discontinued Operations	$	(0.01	)	$	0.00
Net Income (Loss) per share	$	(0.14	)	$	(0.06	)

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5) Inventory

Major classes of inventory are:

	February 28, 2018			November 30, 2017
Raw materials	$	8,275,782		$	8,731,985
Work in process		742,276			460,687
Finished goods		4,618,064			5,395,353
Gross inventory	$	13,636,122		$	14,588,025
Less: Reserves		(2,567,617	)		(2,621,303	)
Net Inventory	$	11,068,505		$	11,966,722

6) Accrued Expenses

Major components of accrued expenses are:

	February 28, 2018		November 30, 2017
Salaries, wages, and commissions	$	485,592	$	584,768
Accrued warranty expense		54,135		68,451
Other		324,562		328,339
	$	864,289	$	981,558

7) Assets Held for Lease

Major components of assets held for lease are:

	February 28, 2018		November 30, 2017
West Union Facility	$	1,111,946	$	1,118,330
Modular Buildings		89,569		98,834
Net assets held for lease	$	1,201,515	$	1,217,164

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8) 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. 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 6 “Accrued Expenses.” Changes in the Company’s product warranty liability for the three months ended February 28, 2018 and February 28, 2017 are as follows:

	For the three months ended
	February 28, 2018			February 28, 2017
Balance, beginning	$	68,451		$	134,373
Settlements / adjustments		(82,673	)		(72,949	)
Warranties issued		68,357			64,248
Balance, ending	$	54,135		$	125,672

9) Loan and Credit Agreements

The Company maintains a revolving line of credit and term loans with Bank Midwest as well as a term loan with The First National Bank of West Union.

Bank Midwest Revolving Line of Credit, Term Loans, and Covenants

On September 28, 2017, the Company entered into a credit facility with Bank Midwest, which supersedes and replaces in its entirety the Company’s previous credit facility with U.S. Bank. The Bank Midwest credit facility consists of a $5,000,000 revolving line of credit, a $2,600,000 term loan due October 1, 2037, and a $600,000 term loan due October 1, 2019. The proceeds of the new line of credit and the term loans were used to refinance all debt previously held by U.S. Bank in the amount of approximately $6,562,030, which consisted of $6,528,223 in unpaid principal and approximately $33,807 in accrued and unpaid interest and fees. The revolving line of credit is being used for working capital purposes.

On February 28, 2018, the balance of the line of credit was $1,960,530 with $3,039,470 remaining available, limited by the borrowing base calculation. The 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 line of credit. Any unpaid principal amount borrowed on the revolving line of credit accrues interest at a floating rate per annum equal to 1.000% above the Wall Street Journal rate published from time to time in the money rates section of the Wall Street Journal. The interest rate floor is set at 4.250% per annum and the current interest rate is 5.250% per annum. The revolving line of credit was renewed on March 30, 2018. 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, 2019.

The $2,600,000 term loan accrues interest at a rate of 5.000% for the first sixty months. Thereafter, this loan will accrue interest at a floating rate per annum equal to 0.750% above the Wall Street Journal rate published from time to time in the money rates section of the Wall Street Journal. The interest rate floor is set at 4.150% 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 requires an upfront guarantee fee of $62,400 and 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 as well, in an amount equal to their stock ownership percentage. J. Ward McConnell Jr. 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. The $600,000 term loan accrues interest at a rate of 5.000%, and monthly payments of $3,249 for principal and interest are required.

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Each of the revolving line of credit and the term loans are governed by the terms of a separate Promissory Note, dated September 28, 2017, entered into between the Company and Bank Midwest.

In connection with the revolving 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 revolving 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 revolving line of credit, as set forth in Commercial Guaranties, each dated September 28, 2017.

To further secure the line of credit, the Company has granted Bank Midwest a second mortgage on its West Union, Iowa property and Ohio Metal Working Products/Art’s-Way Inc. has granted Bank Midwest a mortgage on its property located in Canton, Ohio. The $2,600,000 term loan is secured by a mortgage on the Company’s Armstrong, Iowa and Monona, Iowa properties, and the $600,000 term loan is secured by a mortgage on the Company’s Dubuque, Iowa property. 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.

Compliance with Bank Midwest convenants 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, 2017 other than the debt service coverage ratio. Bank Midwest issued a waiver forgiving the noncompliance, and no event of default has occurred and the next measurement date is November 30, 2018.The Company is also required to provide audited financial statements within 120 days of its fiscal year end.

Iowa Finance Authority Term Loan and Covenants

On May 1, 2010, the Company obtained a 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 funds for this loan were made available by the Iowa Finance Authority by the issuance of tax exempt bonds. This loan had an original principal amount of $1,300,000, an interest rate of 3.5% per annum and a maturity date of June 1, 2020. On February 1, 2013, the interest rate was decreased to 2.75% per annum. The other terms of the loan remain unchanged.

- 10 -

This loan from the Iowa Finance Authority, which has been assigned to The First National Bank of West Union (n/k/a Bank 1st), is governed by a Manufacturing Facility Revenue Note dated May 28, 2010 as amended February 1, 2013 and a Loan Agreement dated May 1, 2010 and a First Amendment to Loan Agreement dated February 1, 2013 (collectively, “the IFA Loan Agreement”), which requires the Company to provide quarterly internally prepared financial reports and year-end audited financial statements and to maintain a minimum debt service coverage ratio of 1.5 to 1.0, which is measured at November 30 of each year. Among other covenants, the IFA Loan Agreement also requires the Company to maintain proper insurance on, and maintain in good repair, the West Union Facility, and continue to conduct business and remain duly qualified to do business in the State of Iowa. The loan is 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 (the “West Union Mortgage”).

If the Company commits an event of default under the IFA Loan Agreement or the West Union Mortgage and does not cure the event of default within the time specified by the IFA Loan Agreement, the lender may cause the entire amount of the loan to be immediately due and payable and take any other action that it is lawfully permitted to take or in equity to enforce the Company’s performance.

The Company was in compliance with all covenants except for the debt service coverage ratio covenant as measured on November 30, 2017. The First National Bank of West Union issued a waiver and the next measurement date is November 30, 2018.

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

	February 28, 2018		November 30, 2017
Bank Midwest loan payable in monthly installments of $17,271 including interest at 5.00%, due October 1, 2037	$	2,576,273	$	2,595,007
Bank Midwest loan payable in monthly installments of $3,249 including interest at 5.00%, due October 1, 2019		597,323		599,584
Iowa Finance Authority loan payable in monthly installments of $12,500 including interest at 2.75%, due June 1, 2020		339,808		374,900
Total term debt	$	3,513,404	$	3,569,491
Less current portion of term debt		222,475		221,230
Term debt of discontinued operations		597,323		599,584
Term debt, excluding current portion	$	2,693,606	$	2,748,677

10) 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.

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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 fiscal 2018.  Tax expense from continuing operations includes an adjustment of approximately $300,000 related to the revaluation of the company’s net deferred tax asset at the new statutory rate.

11) Related Party Transactions

During the first quarter of fiscal 2018, the Company recognized expenses of $5,001 for transactions with a related party, compared to $0 in the first quarter of fiscal 2017. The accrued expenses balance as of February 28, 2018 contains $1,663 due to a related party, compared to $0 for the same period 2017.

12) Sales-type leases

The components related to sales-type leases at February 28, 2018 and November 30, 2017 are as follows:

	February 28, 2018			November 30, 2017
Minimum lease receivable, current	$	176,925		$	-
Unearned interest income, current		(57,413	)		-
Net investment in sales-type leases, current		119,512			-
Minimum lease receivable, long-term		298,777			-
Unearned interest income, long-term		(42,834	)		-
Net investment in sales-type leases, long-term	$	255,943		$	-

The profit recognized in continuing operations on the condensed consolidated statements of operations from commencement of sales-type leases in the three months ended February 28, 2018 was $129,104 compared to $0 from the same period in 2017.

Future minimum lease receipts are as follows:

Year Ending November 30,	Amount
2018	$	133,425
2019		174,000
2020		162,425
2021		5,852
2022		-
Thereafter		-
Total	$	475,702

13) Recently Issued Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” which supersedes the guidance in “Revenue Recognition (Topic 605)” and 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 to in exchange for those goods or services. ASU 2014-09 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. The Company is evaluating the new standard, and at this time believes that its Scientific segment will be impacted most significantly by this standard. The Company believes that this segment will need to work to revise its standard contracts with customers to more clearly define the rights and considerations transferred at the various milestones identified in the contracts. The Company believes that the other segments already have the necessary tools to evaluate their revenues in a manner consistent with the application of this standard, and will have the ability to meet the disclosure requirements using current systems. The Company continues to research and assess the implications of the adoption of this standard on its consolidated financial statements.

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 the year ending November 30, 2020 including interim periods within that reporting period. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

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14) 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.

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 three months of fiscal 2018, restricted stock awards of 45,000 shares have been issued to various employees, directors, and consultants, which vest over the next three years, and restricted stock awards of 6,000 have been issued to directors as part of the compensation policy, which vested immediately upon grant.

Stock options granted prior to January 27, 2011 are governed by the applicable Prior Plan and the forms of agreement adopted thereunder.

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 three months ended February 28, 2018 or in the same respective period of fiscal 2017. The Company incurred a total of $49,558 of stock-based compensation expense for restricted stock awards during the three months ended February 28, 2018, compared to $26,557 of stock-based compensation expense for restricted stock awards for the same respective period of fiscal 2017.

15) 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 February 28, 2018, and November 30, 2017, the carrying amount approximated fair value for cash, accounts receivable, net investment in sale-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 approximate 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 approximate recorded value because the interest rates charged under the loan terms are not substantially different than current interest rates.

16) Segment Information

There are three reportable segments: agricultural products, modular buildings and tools. The agricultural products segment fabricates and sells farming products as well as related equipment and replacement parts for these products in the United States and worldwide. The modular buildings segment manufactures and installs modular buildings for animal containment and various laboratory uses. The tools segment manufactures steel cutting tools and inserts.

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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 3 “Discontinued Operations.”

	Three Months Ended February 28, 2018
	Agricultural Products			Modular Buildings			Tools		Consolidated
Revenue from external customers	$	3,929,000		$	739,000		$	697,000	$	5,365,000
Income (loss) from operations		(275,000	)		(60,000	)		26,000	$	(309,000	)
Income (loss) before tax		(270,000	)		(52,000	)		16,000	$	(306,000	)
Total Assets		16,246,000			3,154,000			2,561,000	$	21,961,000
Capital expenditures		29,000			35,000			-	$	64,000
Depreciation & Amortization		133,000			25,000			32,000	$	190,000

	Three Months Ended February 28, 2017
	Agricultural Products			Modular Buildings			Tools		Consolidated
Revenue from external customers	$	3,368,000		$	388,000		$	665,000	$	4,421,000
Income (loss) from operations		(220,000	)		(154,000	)		21,000	$	(353,000	)
Income (loss) before tax		(217,000	)		(158,000	)		11,000	$	(364,000	)
Total Assets		19,063,000			2,849,000			2,657,000	$	24,569,000
Capital expenditures		129,000			-			66,000	$	195,000
Depreciation & Amortization		125,000			15,000			31,000	$	171,000

*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.

17) Subsequent Event

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 other than those previously described in Note 3 “Discontinued Operations” and the line of credit extension described in Note 9 “Loan and Credit Agreements.”

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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 Item 1 of Part I of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended November 30, 2017. 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 “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 expectations regarding our plan to dispose of the assets of our Vessels segment; (ii) our warranty costs and order backlog; (iii) our beliefs regarding the sufficiency of working capital and cash flows, and our continued ability to renew or obtain financing on reasonable terms when necessary; (iv) the impact of recently issued accounting pronouncements and changes to tax laws; (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 tightening 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) obstacles related to integration of acquired product lines and businesses; (iv) obstacles related to liquidation of product lines and segments (v) 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; (vi) fluctuations in seasonal demand and our production cycle; and (vii) other factors described from time to time in our reports to the Securities and Exchange Commission. 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.

Critical Accounting Policies

Our critical accounting policies involving the more significant judgments and assumptions used in the preparation of the financial statements as of February 28, 2018 remain unchanged from November 30, 2017, with the exception of the addition of a critical accounting policy regarding sales-type lease activity. Other than this new policy regarding sales-type lease activity, which is set forth below, disclosure of these critical accounting policies is incorporated by reference from Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended November 30, 2017.

Sales-Type Lease Activity

We lease modular buildings to certain customers and account for these transactions 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 building is available for occupancy.  Profit related to the sale of the building is recorded upon occupancy.

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Results of Operations – Continuing Operations

Net Sales and Cost of Sales

Our consolidated corporate sales for continuing operations for the three-month period ended February 28, 2018 were $5,366,000 compared to $4,421,000 during the same period in fiscal 2017, an increase of $945,000, or 21.4%. The increase in consolidated revenue is primarily due to increased demand for our agricultural products and increased revenues in our modular buildings segment. Consolidated gross margin for the three-month period ended February 28, 2018 was 20.9% compared to 25.2% for the same period in fiscal 2017.

Our first quarter sales at Manufacturing were $3,929,000 compared to $3,368,000 for the same period in fiscal 2017, an increase of $561,000, or 16.7%.  The revenue increase is due to increased demand across several of our agricultural products.  Gross margin for the three-month period ended February 28, 2018 was 20.3% compared to 25.1% for the same period in fiscal 2017.  Our decreased gross margin is partially related to selling older inventory at a reduced margin in order to reduce aged inventory, along with the sale of our snow blower product line at cost. We have launched lean initiatives to improve manufacturing efficiencies and ultimately our gross profit margin.  Through the first quarter, we have seen positive results related to our initiative towards increased manufacturing efficiency. 

Our first quarter sales at Scientific were $739,000 compared to $388,000 for the same period in fiscal 2017, an increase of $351,000, or 90.5%. Our increase in revenue is due to sales-type capital leases that were executed in the first quarter. Gross margin for the three-month period ended February 28, 2018 was 15.7% compared to 8.0% for the same period in fiscal 2017. The swings in gross margin are largely attributable to the changes in the timing of our revenues, which affects our variable gross margin available to cover fixed costs such as property taxes, depreciation, and management salaries.

Metals had sales of $697,000 during the first quarter, compared to $665,000 for the same period in fiscal 2017, a 4.8% increase. The increase is due to the slight improvement in the energy industry. Gross margin was 29.7% for the three-month period ended February 28, 2018 compared to 35.3% for the same period in fiscal 2017. Our decreased gross margin was largely due to a decrease in scrap sales from the prior year.

Expenses

Our first quarter consolidated selling expenses were $451,000 compared to $485,000 for the same period in fiscal 2017. The decrease in selling expenses is due to decreased advertising, salary and travel expense compared to the prior year period as we decreased our sales force in the tools segment. Selling expenses as a percentage of sales were 8.4% for the three-month period ended February 28, 2018 compared to 11.0% for the same period in fiscal 2017.

Consolidated engineering expenses were $129,000 for the three-month period ended February 28, 2018 compared to $133,000 from the same period in fiscal 2017. Engineering expenses as a percentage of sales were 2.4% for the three-month period ended February 28, 2018 compared to 3.0% for the same period in fiscal 2017.

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Consolidated administrative expenses for the three-month period ended February 28, 2018 were $849,000 compared to $848,000 for the same period in fiscal 2017. Administrative expenses as a percentage of sales were 15.8% for the three-month period ended February 28, 2018 compared to 19.2% for the same period in fiscal 2017.

(Loss) from Continuing Operations

Consolidated net (loss) from continuing operations was $(527,000) for the three-month period ended February 28, 2018 compared to net (loss) from continuing operations of $(254,000) for the same period in fiscal 2017. The increased net (loss) from continuing operations was largely due to the revaluing of our deferred tax asset at the new income tax rates for the 2018 tax year.

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, we believe that going forward, the overall rate reduction will have a positive impact on our net earnings in the long run. However, during the first quarter of the 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 $300,000, 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 March 29, 2018 was $4,472,000 compared to $5,578,000 as of March 29, 2017.  The agricultural products segment order backlog was $3,747,000 as of March 29, 2018 compared to $4,065,000 in fiscal 2017.  The decrease in backlog is due to the presence of around $1.2 million of passthrough self- propelled equipment in last year’s backlog that is not present in 2018.  Overall, the backlog for ag products we manufacture has increased.  The backlog for the modular buildings segment was $638,000 as of March 29, 2018, compared to $1,390,000 in fiscal 2017. This decrease in backlog is primarily due to the use of leasing transactions in the first quarter, whereas these revenues are not included in backlog calculations. The backlog for the tools segment was $87,000 as of March 29, 2018, compared to $123,000 in fiscal 2017.  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.

Results of Operations – Discontinued Operations

During the third quarter of fiscal 2016, we made the decision to exit the pressurized vessels industry and are currently working to liquidate the remaining assets of our Vessels segment.  We did not have any sales of such assets during the first quarter of fiscal 2018 nor in the first quarter of fiscal 2017.  In January 2018, we accepted an offer on the remaining assets for $1,500,000.  On March 29, 2018 we disposed of the remaining assets at a selling price of $1,500,000.

Liquidity and Capital Resources

Our primary source of funds for the three months ended February 28, 2018 was cash generated by operating activities. Our primary use of cash was payment on our line of credit and term debt.  We expect our primary capital needs for the remainder of the fiscal year to relate to costs of operation, including production.

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We have a $5,000,000 revolving line of credit with Bank Midwest that, as of February 28, 2018, had an outstanding principal balance of $1,960,530. The line of credit was renewed on March 30, 2018 and is scheduled to mature on March 30, 2019.

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 persons serving as our principal executive officer and principal financial officer have 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 persons 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.

  None.

Item 6.     Exhibits.

Exhibit No.	Description
10.1	Promissory Note, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated March 30, 2018 – filed herewith.
10.2	Modification of Mortgage (3620 Progress Street NE, Canton, OH 44705), by Ohio Metal Working Products/Art’s-Way Inc., dated March 30, 2018 – filed herewith.
10.3	Modification of Mortgage (800 Highway 150 South, West Union, IA 52175), by Art’s-Way Manufacturing Co., Inc., dated March 30, 2018 – filed herewith.
10.4	Director Compensation Policy, dated February 1, 2018 – filed herewith.
31.1	Certificate of Chief Executive Officer pursuant to 17 CFR 13a-14(a) – filed herewith.
31.2	Certificate of Chief Financial Officer pursuant to 17 CFR 13a-14(a) – filed herewith.
32.1	Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 - filed herewith.
32.2	Certificate of 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: April 2, 2018	By: /s/ Carrie L. Gunnerson
	Carrie L. Gunnerson
	President and Chief Executive Officer
Date: April 2, 2018	By: /s/ Amber J. Murra
	Amber J. Murra
	Chief Financial Officer

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EX-10.1

Exhibit 10.1

PROMISSORY NOTE

Principal $5,000,000.00	Loan Date 03-30-2018	Maturity 03-30-2019	Loan No xxxxxxxxx450	Call / Coll RC-C 4a / 43	Account 720	Officer 1...**	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. PO Box 288 Armstrong, IA 50514-0288 United States Lender: Bank Midwest
Armstrong Branch PO Box 136
500 6th Street Armstrong, IA 50514

Principal Amount: $5,000,000.00 Date of Note: March 30, 2018      

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, 2019. In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning April 30, 2018, 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 4.500% 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 5.500% 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 Lenders 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 Box 136, 600 6th Street, Armstrong, IA 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.

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 the 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 the 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.

PROMISSORY NOTE

Loan No: xxxxxxxxx450 (Continued) Page 2 

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 or not 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 Borrowers 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 any and all such accounts.

COLLATERAL. Borrower acknowledges this Note is secured by any and 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 Mortgages dated 9/28/2017 and 9/28/2017 and Modifications dated 3/30/2018 and 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 Amber J Murra, CFO/Treasurer 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 Borrowers 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: Operating.
PRIOR NOTE. Renewal of Loan #xxxxxxxx678.

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 from 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.

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	By:	/s/ Amber J Murra
Carrie Gunnerson, CEO/Secretary of Art’s-Way			Amber J Murra, Treasurer of Art’s-Way
Manufacturing Co., Inc.			Manufacturing Co., Inc.

PROMISSORY NOTE

Loan No: xxxxxxxxx450  (Continued) Page 3 

LENDER:

BANK MIDWEST

By: /s/ Jeffrey J. Newlin                                  

Jeffrey J. Newlin, Market President

EX-10.2

Exhibit 10.2

MODIFICATION OF MORTGAGE

THIS MODIFICATION OF MORTGAGE dated March 30, 2018, is made and executed between Ohio Metal Working Products/Art's-Way Inc., an Ohio Corporation, whose address is 5556 Highway 9, Armstrong, IA 50514-7566 (referred to below as "Grantor") and Bank Midwest, whose address is PO Box 136, 500 6th Street, Armstrong, IA 50514 (referred to below as "Lender").

MORTGAGE. Lender and Grantor have entered into a Mortgage dated March 30, 2018 (the "Mortgage") which has been recorded in Stark County, State of Ohio, as follows:

Original mortgage was dated September 28, 2017 and filed for record on October 3, 2017 as document number 201710030041763 in Stark County, Ohio.

REAL PROPERTY DESCRIPTION. The Mortgage covers the following described real property located in Stark County, State of Ohio:

See Exhibit "A", which is attached to this Modification and made a part of this Modification as if fully set forth herein.

The Real Property or its address is commonly known as 3620 Progress Street NE, Canton, OH 44705.

MODIFICATION OF MORTGAGE

(Continued) Page 2 

MODIFICATION. Lender and Grantor hereby modify the Mortgage as follows:

Promissory note dated March 30, 2018, executed by Art's-Way Manufacturing Co., Inc., in the amount of $5,000,000.00, maturing on March 30, 2019. Mortgage is now being modified to extend the maturity date. No new money is being added and the mortgage will remain at $1,000,000.00. .

CONTINUING VALIDITY. Except as expressly modified above, the terms of the original Mortgage shall remain unchanged and in full force and effect and are legally valid, binding, and enforceable in accordance with their respective terms. Consent by Lender to this Modification does not waive Lender's right to require strict performance of the Mortgage as changed above nor obligate Lender to make any future modifications. Nothing in this Modification shall constitute a satisfaction of the promissory note or other credit agreement secured by the Mortgage (the "Note"). It is the intention of Lender to retain as liable all parties to the Mortgage and all parties, makers and endorsers to the Note, including accommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, shall not be released by virtue of this Modification. If any person who signed the original Mortgage does not sign this Modification, then all persons signing below acknowledge that this Modification is given conditionally, based on the representation to Lender that the non-signing person consents to the changes and provisions of this Modification or otherwise will not be released by it. This waiver applies not only to any initial extension or modification, but also to all such subsequent actions.

GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS MODIFICATION OF MORTGAGE AND GRANTOR AGREES TO ITS TERMS. THIS MODIFICATION OF MORTGAGE IS DATED MARCH 30, 2018.

GRANTOR ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS MODIFICATION OF MORTGAGE AND ALL OTHER DOCUMENTS RELATING TO THIS DEBT.

GRANTOR:

OHIO METAL WORKING PRODUCTS/ART’S-WAY INC.

By: /s/ Carrie Gunnerson                                                    

Carrie Gunnerson, CEO/Secretary of Ohio Metal

Working Products/Art’s Way Inc.

By: /s/ Amber J Murra                                           

Amber J Murra, Treasurer of Ohio Metal Working

Products/Art’s Way Inc.

MODIFICATION OF MORTGAGE

(Continued) Page 3 

LENDER:

BANK MIDWEST

By: /s/ Jeffrey J. Newlin                                   

Jeffrey J. Newlin, Market President

EX-10.3

Exhibit 10.3

MODIFICATION OF MORTGAGE

The names of all Grantors (sometimes "Grantor") can be found on page 1 of this Modification. The names of all Grantees (sometimes "Lender) can be found on page 1 of this Modification. The property address can be found on page 2 of this Modification. The legal description can be found on page 2 of this Modification. The related document or instrument number can be found on page 1 of this Modification.

THIS MODIFICATION OF MORTGAGE dated March 30, 2018, is made and executed between Art's-Way Manufacturing Co., Inc., a Delaware Corporation, whose address is 5556 Highway 9, Armstrong, IA 50514-7566 (referred to below as "Grantor") and Bank Midwest, whose address is PO Box 136, 500 6th Street, Armstrong, IA 50514 (referred to below as "Lender").

MORTGAGE. Lender and Grantor have entered into a Mortgage dated March 14, 2018 (the "Mortgage") which has been recorded in Fayette County, State of Iowa, as follows:

Original mortgage was dated September 28, 2017 and filed for record on October 3, 2017 as document number 2017 2685 in Fayette County, Iowa.

MODIFICATION OF MORTGAGE

(Continued) Page 2 

REAL PROPERTY DESCRIPTION. The Mortgage covers the following described real property located in Fayette County, State of Iowa:

Commencing at the South Quarter Corner of Section 17, Township 94 North, Range 8 West of the Fifth P.M., thence South 75.2 feet, thence South 89 degrees 14 minutes West 76.00 feet to point of beginning, thence continuing South 89 degrees 14 minutes West 299.5 feet, thence North 0 degrees 59 minutes West 360.0 feet, thence South 88 degrees 41 minutes West 169.1 feet, thence South 56 degrees 53 minutes West 212.8 feet, thence South 46 degrees 39 minutes West 349.1 feet, thence South 0 degrees 07 minutes West 1244.1 feet, thence North 88 degrees 58 minutes East 919.55 feet, thence North 6 degrees 26 minutes West 89.7 feet, thence North 0 degrees 00 minutes East 1142.2 feet to the point of beginning, in the Southeast Quarter of the Southwest Quarter of Section 17, and in the Northeast Quarter of the Northwest Quarter of Section 20, all in Township 94 North, Range 8 West of the Fifth P.M., Fayette County, Iowa.

The Real Property or its address is commonly known as 800 Highway 150 South, West Union, IA 52175.

MODIFICATION. Lender and Grantor hereby modify the Mortgage as follows:

Promissory note dated March 30, 2018, executed by Art's-Way Manufacturing Co., Inc., in the amount of $5,000,000.00, maturing on March 30, 2019. Mortgage is now being modified to extend the maturity date. No new money is being added and the mortgage will remain at $500,000.00.

CONTINUING VALIDITY. Except as expressly modified above, the terms of the original Mortgage shall remain unchanged and in full force and effect and are legally valid, binding, and enforceable in accordance with their respective terms. Consent by Lender to this Modification does not waive Lender's right to require strict performance of the Mortgage as changed above nor obligate Lender to make any future modifications. Nothing in this Modification shall constitute a satisfaction of the promissory note or other credit agreement secured by the Mortgage (the "Note"). It is the intention of Lender to retain as liable all parties to the Mortgage and all parties, makers and endorsers to the Note, including accommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, shall not be released by virtue of this Modification. If any person who signed the original Mortgage does not sign this Modification, then all persons signing below acknowledge that this Modification is given conditionally, based on the representation to Lender that the non-signing person consents to the changes and provisions of this Modification or otherwise will not be released by it. This waiver applies not only to any initial extension or modification, but also to all such subsequent actions.

MODIFICATION OF MORTGAGE

(Continued) Page 3 

GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS MODIFICATION OF MORTGAGE AND GRANTOR AGREES TO ITS TERMS. THIS MODIFICATION OF MORTGAGE IS DATED MARCH 30, 2018.

GRANTOR ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS MODIFICATION OF MORTGAGE AND ALL OTHER DOCUMENTS RELATING TO THIS DEBT.

GRANTOR:

ART’S-WAY MANUFACTURING CO., INC.

By: /s/ Carrie Gunnerson                                 

Carrie Gunnerson, CEO/Secretary of Art’s-Way

Manufacturing Co., Inc.

By: /s/ Amber J Murra                                      

Amber J. Murra, CFO/Treasurer of Art’s-Way Manufacturing

Co., Inc.

LENDER:

By: /s/ Jeffrey J Newlin                                      

Jeffrey J Newlin, Market President

EX-10.4

Exhibit 10.4

Summary of Compensation Arrangements with Directors

As of February 1, 2018

With the exception of the Chair of the Board and the Vice Chair of the Board, each of the Company’s directors shall receive a base cash retainer of $24,000 per fiscal year as compensation for services rendered during the fiscal year. The retainer shall be paid quarterly in $6,000 installments. The Chairperson of each of the Audit Committee and the Compensation Committee shall receive an additional cash retainer of $4,000 per fiscal year, resulting in a total quarterly payment of $7,000

The Chair of the Board and Vice Chair of the Board shall receive a base cash retainer in an amount determined by the Board following a recommendation by the Compensation Committee. The retainer shall be paid in equal quarterly installments.

Directors may, in accordance with certain timing parameters determined by the Board, elect to receive fully-vested restricted common stock in lieu of the aforementioned cash retainers. Any such restricted stock awards shall be granted on the first day of the month in which cash retainer fees would otherwise be paid, and the number of shares subject to such awards shall be calculated by dividing the cash retainer fee otherwise due to the director by the closing price of Company common stock on the trading day preceding the date of grant, with the number of shares rounded to the nearest 10 shares. Any such stock shall be issued under the Company’s 2011 Equity Incentive Plan or, if determined by the Board, an applicable successor plan approved by the Company’s stockholders.

In addition, each director (including the Chair and Vice Chair) will be granted (a) 1,000 shares of fully-vested restricted shares of Company common stock on the last day of each of the Company’s fiscal quarters, commencing February 28, 2018, and (b) 1,000 shares of fully-vested restricted shares of Company common stock on the date of each such Annual Meeting, following his or her election to the Board. Such restricted stock awards shall be issued pursuant to, and in accordance with the terms of, the Company’s 2011 Equity Incentive Plan or, if determined by the Board, an applicable successor plan approved by the Company’s stockholders.

In addition to the base cash retainers and the restricted stock awards above, both the Chair of the Board and Vice Chair of the Board are eligible to receive discretionary cash incentive payments based on their leadership and consulting contributions and actual Company performance (operationally and fiscally) during the applicable fiscal year. The cash incentives, if any, shall be payable in accordance with the amounts and terms recommended by the Compensation Committee and established by the Board.

The Company shall also reimburse all directors for out-of-pocket expenses related to their attendance at board meetings and performance of other services as Board members.

If any individual ceases to serve as director for any reason during the fiscal year, or if a new director is elected after the fiscal year has commenced, his or her applicable cash retainer shall be pro-rated accordingly.

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. The registrant’s other certifying officer and I are 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 our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us 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 our 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 our 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. The registrant’s other certifying officer and I have disclosed, based on our 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:	April 2, 2018	/s/ Carrie L. Gunnerson
		Carrie L. Gunnerson
		President and Chief Executive Officer

EX-31.2

Exhibiit 31.2

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

(SECTION 302 CERTIFICATION)

I, Amber J. Murra, 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. The registrant’s other certifying officer and I are 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 our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us 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 our 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 our 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. The registrant’s other certifying officer and I have disclosed, based on our 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:	April 2, 2018	/s/ Amber J. Murra
		Amber J. Murra
		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 February 28, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Carrie L. Gunnerson, as the President and Chief Executive 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:	April 2, 2018	/s/ Carrie L. Gunnerson
		Carrie L. Gunnerson
		President and Chief Executive Officer

EX-32.2

Exhibit 32.2

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 February 28, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Amber J. Murra, as the 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:	April 2, 2018	/s/ Amber J. Murra
		Amber J. Murra
		Chief Financial Officer

XML

Document And Entity Information - shares	3 Months Ended
	Feb. 28, 2018	Mar. 30, 2018
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	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		4,200,466
Document Type	10-Q
Document Period End Date	Feb. 28, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Feb. 28, 2018	Nov. 30, 2017
Current assets:
Cash	$ 92,814	$ 212,400
Accounts receivable-customers, net of allowance for doubtful accounts of $16,165 and $32,298 in 2018 and 2017, respectively	1,827,102	1,910,294
Inventories, net	11,068,505	11,966,722
Cost and profit in excess of billings	2,778	65,146
Net investment in sales-type leases, current	119,512
Assets of discontinued operations	4,855	2,454
Other current assets	425,263	275,755
Total current assets	13,540,829	14,432,771
Property, plant, and equipment, net	5,818,795	5,946,957
Assets held for lease, net	1,201,515	1,217,164
Deferred income taxes	693,751	901,396
Goodwill	375,000	375,000
Net investment in sales-type leases, long-term	255,943
Other assets of discontinued operations	1,425,000	1,425,000
Other assets	80,478	81,545
Total assets	23,391,311	24,379,833
Current liabilities:
Line of credit	1,960,530	2,462,530
Current portion of long-term debt	222,475	221,230
Accounts payable	929,474	673,653
Customer deposits	622,597	600,325
Billings in Excess of Cost and Profit	11,908	48,211
Accrued expenses	864,289	981,558
Liabilites of discontinued operations	49,211	59,149
Income taxes payable	3,100	3,100
Total current liabilities	4,663,584	5,049,756
Long-term liabilities
Long-term liabilities of discontinued operations	587,989	590,366
Long-term debt, excluding current portion	2,693,606	2,748,677
Total liabilities	7,945,179	8,388,799
Commitments and Contingencies (Notes 8 and 9)
Stockholders’ equity:
Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares in 2018 and 2017; issued 0 shares in 2018 and 2017.
Common stock – $0.01 par value. Authorized 9,500,000 shares in 2018 and 2017; issued 4,209,752 in 2018 and 4,158,752 in 2017	42,097	41,587
Additional paid-in capital	2,908,100	2,859,052
Retained earnings	12,787,378	13,353,830
Accumulated other comprehensive expense	(263,708)	(257,010)
Treasury stock, at cost (9,286 in 2018 and 1,954 in 2017 shares)	(27,735)	(6,425)
Total stockholders’ equity	15,446,132	15,991,034
Total liabilities and stockholders’ equity	$ 23,391,311	$ 24,379,833

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Feb. 28, 2018	Nov. 30, 2017
Allowance for doubtful accounts	$ 16,165	$ 32,298
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)	4,209,752	4,158,752
Treasury stock (in shares)	9,286	1,954

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended
	Feb. 28, 2018	Feb. 28, 2017
Sales	$ 5,365,536	$ 4,421,168
Cost of goods sold	4,245,729	3,307,345
Gross profit	1,119,807	1,113,823
Expenses:
Engineering	129,064	132,640
Selling	450,961	485,380
General and administrative	848,503	848,236
Total expenses	1,428,528	1,466,256
Income (Loss) from operations	(308,721)	(352,433)
Other income (expense):
Interest expense	(69,676)	(63,794)
Other	72,572	51,674
Total other income (expense)	2,896	(12,120)
Income (Loss) from continuing operations before income taxes	(305,825)	(364,553)
Income tax expense (benefit)	221,573	(110,911)
Income (Loss) from continuing operations	(527,398)	(253,642)
Discontinued Operations
Income (loss) from operations of discontinued segment	(51,590)	4,877
Income tax expense (benefit)	(12,536)	1,264
Income (Loss) on discontinued operations	(39,054)	3,613
Net Income (Loss)	$ (566,452)	$ (250,029)
Earnings (Loss) per share - Basic:
Continuing Operations (in dollars per share)	$ (0.13)	$ (0.06)
Discontinued Operations (in dollars per share)	(0.01)	0
Net Income (Loss) per share (in dollars per share)	(0.14)	(0.06)
Earnings (Loss) per share - Diluted:
Continuing Operations (in dollars per share)	(0.13)	(0.06)
Discontinued Operations (in dollars per share)	(0.01)	0
Net Income (Loss) per share (in dollars per share)	$ (0.14)	$ (0.06)
Weighted average outstanding shares used to compute basic net income per share (in shares)	4,170,818	4,126,012
Weighted average outstanding shares used to compute diluted net income per share (in shares)	4,170,818	4,126,012

XML

Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)	3 Months Ended
	Feb. 28, 2018	Feb. 28, 2017
Net Income (Loss)	$ (566,452)	$ (250,029)
Other Comprehensive Income (Loss)
Foreign currency translation adjustsments	(6,698)	11,022
Total Other Comprehensive Income (Loss)	(6,698)	11,022
Comprehensive (Loss)	$ (573,150)	$ (239,007)

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Feb. 28, 2018	Feb. 28, 2017
Cash flows from operations:
Net (loss) from continuing operations	$ (527,398)	$ (253,642)
Net income (loss) from discontinued operations	(39,054)	3,613
Adjustments to reconcile net (loss) to net cash provided by operating activities:
Stock based compensation	49,558	26,557
Unrealized foreign currency gain (loss)	(6,698)	11,022
(Gain)/Loss on disposal of property, plant, and equipment	(8,896)	2,463
Depreciation and amortization expense	189,654	170,789
Bad debt expense	(16,002)	5,601
Deferred income taxes	207,645	(107,034)
Changes in assets and liabilities:
Accounts receivable	99,194	(44,089)
Inventories	898,217	295,975
Income taxes receivable		(5,537)
Net investment in sales-type leases	(375,455)
Other assets	(150,301)	(255,629)
Accounts payable	255,821	80,634
Contracts in progress, net	26,065	59,422
Customer deposits	22,272	503,702
Accrued expenses	(117,269)	(166,649)
Net cash provided by operating activities - continuing operations	546,407	323,585
Net cash (used in) operating activities - discontinued operations	(51,509)	(22,039)
Net cash provided by operating activities	494,898	301,546
Cash flows from investing activities:
Purchases of property, plant, and equipment	(64,401)	(195,020)
Net proceeds from sale of assets	29,316	12,190
Net cash (used in) investing activities - continuing operations	(35,085)	(182,830)
Net cash provided by investing activities - discontinued operations		38,736
Net cash (used in) investing activities	(35,085)	(144,094)
Cash flows from financing activities:
Net change in line of credit	502,000	250,000
Repayment of term debt	(53,827)	(182,119)
Repurchases of common stock	(21,310)	(5,989)
Net cash (used in) financing activities - continuing operations	(577,137)	(438,108)
Net cash (used in) financing activities - discontinued operations	(2,262)	(32,281)
Net cash (used in) financing activities	(579,399)	(470,389)
Net increase (decrease) in cash	(119,586)	(312,937)
Cash at beginning of period	212,400	1,063,716
Cash at end of period	92,814	750,779
Supplemental disclosures of cash flow information:
Interest	48,506	71,338
Income taxes	$ 838	$ 3,125

XML

Note 1 - Description of the Company

3 Months Ended

Feb. 28, 2018

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 (“Manufacturing”) manufactures farm equipment under the Art’s-Way Manufacturing label and private labels. The modular buildings segment (“Scientific”) manufactures modular buildings for various uses, commonly animal containment and research laboratories and the tools segment (“Metals”) manufactures steel cutting tools and inserts. During the

third

quarter of fiscal

2016,

the Company discontinued its pressurized vessels segment (“Vessels”) that manufactured pressurized vessels. For more information on discontinued operations, see Note

3

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

16

“Segment Information.”

XML

Note 2 - Summary of Significant Account Policies

3 Months Ended

Feb. 28, 2018

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) which are, in the opinion of management, necessary for a fair presentation of the 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, 2017

. The results of operations for the

three

months ended

February 28, 2018

are

not

necessarily indicative of the results for the fiscal year ending

November 30, 2018

.

The financial books of

the Company’s Canadian operation are kept in the functional currency of Canadian dollars and the financial statements are converted to U.S. Dollars for consolidation. When consolidating the financial results of the Company into U.S. Dollars for reporting purposes, the Company uses the All-Current translation method. The All-Current 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 is translated at historical exchange rates and retained earnings are translated at an average exchange rate for the period. Additionally, revenue and expenses are translated at average exchange rates for the periods presented. The resulting cumulative translation adjustment is carried on the balance sheet and is recorded in stockholders’ equity for

2018.

Since

no

income tax benefit will be received from the foreign equity sale, the cumulative translation adjustment has

not

been tax adjusted.

Sales-Type Leases

The Company leases modular buildings to certain customers and accounts for these transactions 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 building is available for occupancy.  Profit related to the sale of the building is recorded upon occupancy.

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 disclo

sure of contingent assets and liabilities and the reported amounts of revenue and expenses during the

three

months ended

February 28, 2018.

Actual results could differ from those estimates.

XML

Note 3 - Discontinued Operations

3 Months Ended

Feb. 28, 2018

Notes to Financial Statements

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

3 ) 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. Its plan is to dispose of these assets over the next several quarters. At this time, the Company is working to dispose of the remaining assets, primarily the real estate

.

In

January 2018,

the Company accepted an offer on the real estate assets for

$1,500,000,

which was below the carrying value at that time. Based on these facts the Company recorded an impairment of the real estate of approximately

$289,000

in the fiscal year ended

November 30, 2017,

which reduced the value to

$1,425,000,

which is the value the Company expects to receive after commissions on the sale of this asset. On March

29,

2018

we disposed of the remaining assets 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 Accounting Standard Code Topic

360,

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

Income from discontinued operations, before income taxes in the accompanying Condensed Consolidated Statements of Operations is comprised of the following:

	Three Months Ended
	February 28, 2018			February 28, 2017
Revenue from external customers	$	-		$	-
Gross Profit		-			-
Operating Expense		43,458			32
Income (loss) from operations		(43,458	)		(32	)
Income (loss) before tax		(51,590	)		4,877

The components of discontinued operations in the accompanying

Condensed Consolidated Balance Sheets are as follows:

	February 28, 2018		November 30, 2017
Cash	$	4,855	$	2,454
Property, plant, and equipment, net		1,425,000		1,425,000
Assets of discontinued operations	$	1,429,855	$	1,427,454
Accounts payable	$	655	$	-
Accrued expenses		39,222		49,931
Notes Payable		597,323		599,584
Liabilities of discontinued operations	$	637,200	$	649,515

XML

Note 4 - Net Income (Loss) Per Share of Common Stock

3 Months Ended

Feb. 28, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

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

Basic net income

(loss) per common share 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 earnings (loss) per common share

.

Basic and diluted earnings

(loss) per common share have been computed based on the following as of

February 28, 2018

and

February 28, 2017:

	For the three months ended
	February 28, 2018			February 28, 2017
Numerator for basic and diluted (loss) earnings per common share:
Net (loss) income from continuing operations	$	(527,398	)	$	(253,642	)
Net (loss) income from discontinued operations		(39,054	)		3,613
Net (loss) income	$	(566,452	)	$	(250,029	)
Denominator:
For basic (loss) earnings per share - weighted average common shares outstanding		4,170,818			4,126,012
Effect of dilutive stock options		-			-
For diluted (loss) earnings per share - weighted average common shares outstanding		4,170,818			4,126,012
Earnings (Loss) per share - Basic:
Continuing Operations	$	(0.13	)	$	(0.06	)
Discontinued Operations	$	(0.01	)	$	0.00
Net Income (Loss) per share	$	(0.14	)	$	(0.06	)
Earnings (Loss) per share - Diluted:
Continuing Operations	$	(0.13	)	$	(0.06	)
Discontinued Operations	$	(0.01	)	$	0.00
Net Income (Loss) per share	$	(0.14	)	$	(0.06	)

XML

Note 5 - Inventory

3 Months Ended

Feb. 28, 2018

Notes to Financial Statements

Inventory Disclosure [Text Block]

5 ) Inventory

Major classes of inventory are:

	February 28, 2018			November 30, 2017
Raw materials	$	8,275,782		$	8,731,985
Work in process		742,276			460,687
Finished goods		4,618,064			5,395,353
Gross inventory	$	13,636,122		$	14,588,025
Less: Reserves		(2,567,617	)		(2,621,303	)
Net Inventory	$	11,068,505		$	11,966,722

XML

Note 6 - Accrued Expenses

3 Months Ended

Feb. 28, 2018

Notes to Financial Statements

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

6 ) Accrued Expenses

Major components of accrued expenses are:

	February 28, 2018		November 30, 2017
Salaries, wages, and commissions	$	485,592	$	584,768
Accrued warranty expense		54,135		68,451
Other		324,562		328,339
	$	864,289	$	981,558

XML

Note 7 - Assets Held for Lease

3 Months Ended

Feb. 28, 2018

Notes to Financial Statements

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

7 ) Assets Held for Lease

Major components of assets held for lease are:

	February 28, 2018		November 30, 2017
West Union Facility	$	1,111,946	$	1,118,330
Modular Buildings		89,569		98,834
Net assets held for lease	$	1,201,515	$	1,217,164

XML

Note 8 - Product Warranty

3 Months Ended

Feb. 28, 2018

Notes to Financial Statements

Product Warranty Disclosure [Text Block]

8 ) Product Warranty

The Company offers warranties of various lengths to its customers depending on the specific product and terms of th

e 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. 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

6

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

three

months ended

February 28, 2018

and

February 28, 2017

are as follows:

	For the three months ended
	February 28, 2018			February 28, 2017
Balance, beginning	$	68,451		$	134,373
Settlements / adjustments		(82,673	)		(72,949	)
Warranties issued		68,357			64,248
Balance, ending	$	54,135		$	125,672

XML

Note 9 - Loan and Credit Agreements

3 Months Ended

Feb. 28, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

9 ) Loan and Credit Agreements

The Company maintains a revolving line of credit and term loans with Bank Midwest as well as a term loan with The First National Bank of West Union.

Bank Midwest Revolving Line o

f Credit,

Term Loans

,

and

Covenants

On

September 28, 2017,

the Company entered into a credit facility with Bank Midwest, which supersedes and replaces in its entirety the Company

’s previous credit facility with U.S. Bank. The Bank Midwest credit facility consists of a

$5,000,000

revolving line of credit, a

$2,600,000

term loan due

October 1, 2037,

and a

$600,000

term loan due

October 1, 2019.

The proceeds of the new line of credit and the term loans were used to refinance all debt previously held by U.S. Bank in the amount of approximately

$6,562,030,

which consisted of

$6,528,223

in unpaid principal and approximately

$33,807

in accrued and unpaid interest and fees. The revolving line of credit is being used for working capital purposes

.

On

February 28, 2018,

the balance of the line of credit was

$1,960,530

with

$3,039,470

remaining available, limited by the borrowing base calculation. The 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 line of credit. Any unpaid principal amount borrowed on the revolving line of credit accrues interest at a floating rate per annum equal to

1.000%

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

4.250%

per annum and the current interest rate is

5.250%

per annum. The revolving line of credit was renewed on

March 30, 2018.

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, 2019.

The

$2,600,000

term loan accrues interest at a rate of

5.000%

for the

first

sixty

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

0.750%

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

4.150%

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 requires an upfront guarantee fee of

$62,400

and 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 as well, in an amount equal to their stock ownership percentage. J. Ward McConnell Jr. 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. The

$600,000

term loan accrues interest at a rate of

5.000%,

and monthly payments of

$3,249

for principal and interest are required.

Each of the revolving line of credit and the term loans are governed by the terms of a separate Promissory Note, dated

September 28, 2017,

entered into between the Company and Bank Midwest.

In connection with the revolving 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 revolving 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 revolving line of credit, as set forth in Commercial Guaranties, each dated

September 28, 2017.

To further secure the line of credit, the Company has granted Bank Midwest a

second

mortgage on its West Union, Iowa property and Ohio Metal Working Products/Art

’s-Way Inc. has granted Bank Midwest a mortgage on its property located in Canton, Ohio. The

$2,600,000

term loan is secured by a mortgage on the Company’s Armstrong, Iowa and Monona, Iowa properties, and the

$600,000

term loan is secured by a mortgage on the Company’s Dubuque, Iowa property. 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.

Compliance with Bank Midwest convenants 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, 2017

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

no

event of default has occurred and the next measurement date is

November 30, 2018.

The Company is also required to provide audited financial statements within

120

days of its fiscal year end.

Iowa Finance Authority Term Loan and Covenants

On

May 1, 2010,

the Company obtained a 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 funds for this loan were made available by the Iowa Finance Authority by the issuance of tax exempt bonds. This loan had an original principal amount of

$1,300,000,

an interest rate of

3.5%

per annum and a maturity date of

June 1, 2020.

On

February 1, 2013,

the interest rate was decreased to

2.75%

per annum. The other terms of the loan remain unchanged.

This loan from the Iowa Finance Authority, which has been assigned to The First National Bank of West Union (n/k/a Bank

1st

), is governed by a Manufacturing Facility Revenue Note dated

May 28, 2010

as amended

February 1, 2013

and a Loan Agreement dated

May 1, 2010

and a First Amendment to Loan Agreement dated

February 1, 2013 (

collectively, “the IFA Loan Agreement”), which requires the Company to provide quarterly internally prepared financial reports and year-end audited financial statements and to maintain a minimum debt service coverage ratio of

1.5

to

1.0,

which is measured at

November 30

of each year. Among other covenants, the IFA Loan Agreement also requires the Company to maintain proper insurance on, and maintain in good repair, the West Union Facility, and continue to conduct business and remain duly qualified to do business in the State of Iowa. The loan is 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 (the “West Union Mortgage”).

If the Company commits an event of default under the IFA Loan Agreement or the West Union Mortgage and does

not

cure the event of default within the time specified by the IFA Loan Agreement, the lender

may

cause the entire amount of the loan to be immediately due and payable and take any other action that it is lawfully permitted to take or in equity to enforce the Company

’s performance.

The Company was in compliance with all covenants except for the debt service coverage ratio covenant as measured on

November 30, 2017.

The First National Bank of West Union issued a waiver and the next measurement date is

November 30, 2018.

A summary of the Company

’s term debt is as follows:

	February 28, 2018		November 30, 2017
Bank Midwest loan payable in monthly installments of $17,271 including interest at 5.00%, due October 1, 2037	$	2,576,273	$	2,595,007
Bank Midwest loan payable in monthly installments of $3,249 including interest at 5.00%, due October 1, 2019		597,323		599,584
Iowa Finance Authority loan payable in monthly installments of $12,500 including interest at 2.75%, due June 1, 2020		339,808		374,900
Total term debt	$	3,513,404	$	3,569,491
Less current portion of term debt		222,475		221,230
Term debt of discontinued operations		597,323		599,584
Term debt, excluding current portion	$	2,693,606	$	2,748,677

XML

Note 10 - Income Taxes

3 Months Ended

Feb. 28, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

10 ) 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 fiscal

2018.

  Tax expense from continuing operations includes an adjustment of approximately

$300,000

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

XML

Note 11 - Related Party Transactions

3 Months Ended

Feb. 28, 2018

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

11 ) Related Party Transactions

During the

first

quarter of fiscal

201

8,

the Company recognized expenses of

$5,001

for transactions with a related party, compared to

$0

in the

first

quarter of fiscal

2017

. The accrued expenses balance as of

February 28, 2018

contains

$1,663

due to a related party, compared to

$0

for the same period

2017

.

XML

Note 12 - Sales-type Leases

3 Months Ended

Feb. 28, 2018

Notes to Financial Statements

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

12 ) Sales-type leases

The components related to sales-type leases at

February 28, 2018

and

November 30, 2017

are as follows:

	February 28, 2018			November 30, 2017
Minimum lease receivable, current	$	176,925		$	-
Unearned interest income, current		(57,413	)		-
Net investment in sales-type leases, current		119,512			-
Minimum lease receivable, long-term		298,777			-
Unearned interest income, long-term		(42,834	)		-
Net investment in sales-type leases, long-term	$	255,943		$	-

The profit recognized in continuing operations on the condensed consolidated statements of operations from commencement of sales-type leases in the

three

months ended

February 28, 2018

was

$129,104

compared to

$0

from the same period in

2017.

Future minimum lease receipts are as follows:

Year Ending November 30,	Amount
2018	$	133,425
2019		174,000
2020		162,425
2021		5,852
2022		-
Thereafter		-
Total	$	475,702

XML

Note 13 - Recently Issued Accounting Pronouncements

3 Months Ended

Feb. 28, 2018

Notes to Financial Statements

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

13 ) Recently Issued Accounting Pronouncements

Accounting Pronouncements

Not

Yet Adopted

Revenue from Contracts with Customers

In

May 2014,

t

he FASB issued ASU

No.

2014

-

09,

“Revenue from Contracts with Customers” which supersedes the guidance in “Revenue Recognition (Topic

605

)” and 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 to in exchange for those goods or services. ASU

2014

-

09

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. The Company is evaluating the new standard, and at this time believes that its Scientific segment will be impacted most significantly by this standard. The Company believes that this segment will need to work to revise its standard contracts with customers to more clearly define the rights and considerations transferred at the various milestones identified in the contracts. The Company believes that the other segments already have the necessary tools to evaluate their revenues in a manner consistent with the application of this standard, and will have the ability to meet the disclosure requirements using current systems. The Company continues to research and assess the implications of the adoption of this standard on its consolidated financial statements.

Leases

In

February 2016,

the FAS

B 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 the year ending

November 30, 2020

including interim periods within that reporting period. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

XML

Note 14 - Equity Incentive Plan and Stock Based Compensation

3 Months Ended

Feb. 28, 2018

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

14 ) 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.

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

three

months of fiscal

2018,

restricted stock awards of

45,000

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

three

years, and restricted stock awards of

6,000

have been issued to directors as part of the compensation policy, which vested immediately upon grant.

Stock options granted prior to

January 27, 2011

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

Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized ov

er 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

three

months ended

February 28, 2018

or in the same respective period of fiscal

2017.

The Company incurred a total of

$49,558

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

three

months ended

February 28, 2018,

compared to

$26,557

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

2017

.

XML

Note 15 - Disclosures About the Fair Value of Financial Instruments

3 Months Ended

Feb. 28, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

15 ) 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 e

xchanged in a current transaction between willing parties. At

February 28, 2018,

and

November 30, 2017,

the carrying amount approximated fair value for cash, accounts receivable, net investment in sale-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 approximate 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 approximate recorded value because the interest rates charged under the loan terms are

not

substantially different than current interest rates.

XML

Note 16 - Segment Information

3 Months Ended

Feb. 28, 2018

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

16 ) Segment Information

There are

three

reportable segments: agricultural products

, modular buildings and tools. The agricultural products segment fabricates and sells farming products as well as related equipment and replacement parts for these products in the United States and worldwide. The modular buildings segment manufactures and installs modular buildings for animal containment and various laboratory uses. 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 si

gnificant 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 rep

ortable segments is as follows. The tables below exclude income and balance sheet data from discontinued operations. See Note

3

“Discontinued Operations.”

	Three Months Ended February 28, 2018
	Agricultural Products			Modular Buildings			Tools		Consolidated
Revenue from external customers	$	3,929,000		$	739,000		$	697,000	$	5,365,000
Income (loss) from operations		(275,000	)		(60,000	)		26,000	$	(309,000	)
Income (loss) before tax		(270,000	)		(52,000	)		16,000	$	(306,000	)
Total Assets		16,246,000			3,154,000			2,561,000	$	21,961,000
Capital expenditures		29,000			35,000			-	$	64,000
Depreciation & Amortization		133,000			25,000			32,000	$	190,000

	Three Months Ended February 28, 2017
	Agricultural Products			Modular Buildings			Tools		Consolidated
Revenue from external customers	$	3,368,000		$	388,000		$	665,000	$	4,421,000
Income (loss) from operations		(220,000	)		(154,000	)		21,000	$	(353,000	)
Income (loss) before tax		(217,000	)		(158,000	)		11,000	$	(364,000	)
Total Assets		19,063,000			2,849,000			2,657,000	$	24,569,000
Capital expenditures		129,000			-			66,000	$	195,000
Depreciation & Amortization		125,000			15,000			31,000	$	171,000

*

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 17 - Subsequent Event

3 Months Ended

Feb. 28, 2018

Notes to Financial Statements

Subsequent Events [Text Block]

17 ) Subsequent Event

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 other than those previously described in Note

3

“Discontinued Operations” and the line of credit extension described in Note

9

“Loan and Credit Agreements.”

XML

Significant Accounting Policies (Policies)

3 Months Ended

Feb. 28, 2018

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) which are, in the opinion of management, necessary for a fair presentation of the 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, 2017

. The results of operations for the

three

months ended

February 28, 2018

are

not

necessarily indicative of the results for the fiscal year ending

November 30, 2018

.

The financial books of

the Company’s Canadian operation are kept in the functional currency of Canadian dollars and the financial statements are converted to U.S. Dollars for consolidation. When consolidating the financial results of the Company into U.S. Dollars for reporting purposes, the Company uses the All-Current translation method. The All-Current 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 is translated at historical exchange rates and retained earnings are translated at an average exchange rate for the period. Additionally, revenue and expenses are translated at average exchange rates for the periods presented. The resulting cumulative translation adjustment is carried on the balance sheet and is recorded in stockholders’ equity for

2018.

Since

no

income tax benefit will be received from the foreign equity sale, the cumulative translation adjustment has

not

been tax adjusted.

Lessor, Leases [Policy Text Block]

Sales-Type Leases

The Company leases modular buildings to certain customers and accounts for these transactions 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 building is available for occupancy.  Profit related to the sale of the building is recorded upon occupancy.

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 disclo

sure of contingent assets and liabilities and the reported amounts of revenue and expenses during the

three

months ended

February 28, 2018.

Actual results could differ from those estimates.

XML

Note 3 - Discontinued Operations (Tables)

3 Months Ended

Feb. 28, 2018

Notes Tables

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

	Three Months Ended
	February 28, 2018			February 28, 2017
Revenue from external customers	$	-		$	-
Gross Profit		-			-
Operating Expense		43,458			32
Income (loss) from operations		(43,458	)		(32	)
Income (loss) before tax		(51,590	)		4,877

Disposal Groups, Including Discontinued Operations [Table Text Block]

	February 28, 2018		November 30, 2017
Cash	$	4,855	$	2,454
Property, plant, and equipment, net		1,425,000		1,425,000
Assets of discontinued operations	$	1,429,855	$	1,427,454
Accounts payable	$	655	$	-
Accrued expenses		39,222		49,931
Notes Payable		597,323		599,584
Liabilities of discontinued operations	$	637,200	$	649,515

XML

Note 4 - Net Income (Loss) Per Share of Common Stock (Tables)

3 Months Ended

Feb. 28, 2018

Notes Tables

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

	For the three months ended
	February 28, 2018			February 28, 2017
Numerator for basic and diluted (loss) earnings per common share:
Net (loss) income from continuing operations	$	(527,398	)	$	(253,642	)
Net (loss) income from discontinued operations		(39,054	)		3,613
Net (loss) income	$	(566,452	)	$	(250,029	)
Denominator:
For basic (loss) earnings per share - weighted average common shares outstanding		4,170,818			4,126,012
Effect of dilutive stock options		-			-
For diluted (loss) earnings per share - weighted average common shares outstanding		4,170,818			4,126,012
Earnings (Loss) per share - Basic:
Continuing Operations	$	(0.13	)	$	(0.06	)
Discontinued Operations	$	(0.01	)	$	0.00
Net Income (Loss) per share	$	(0.14	)	$	(0.06	)
Earnings (Loss) per share - Diluted:
Continuing Operations	$	(0.13	)	$	(0.06	)
Discontinued Operations	$	(0.01	)	$	0.00
Net Income (Loss) per share	$	(0.14	)	$	(0.06	)

XML

Note 5 - Inventory (Tables)

3 Months Ended

Feb. 28, 2018

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	February 28, 2018			November 30, 2017
Raw materials	$	8,275,782		$	8,731,985
Work in process		742,276			460,687
Finished goods		4,618,064			5,395,353
Gross inventory	$	13,636,122		$	14,588,025
Less: Reserves		(2,567,617	)		(2,621,303	)
Net Inventory	$	11,068,505		$	11,966,722

XML

Note 6 - Accrued Expenses (Tables)

3 Months Ended

Feb. 28, 2018

Notes Tables

Schedule of Accrued Liabilities [Table Text Block]

	February 28, 2018		November 30, 2017
Salaries, wages, and commissions	$	485,592	$	584,768
Accrued warranty expense		54,135		68,451
Other		324,562		328,339
	$	864,289	$	981,558

XML

Note 7 - Assets Held for Lease (Tables)

3 Months Ended

Feb. 28, 2018

Notes Tables

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

	February 28, 2018		November 30, 2017
West Union Facility	$	1,111,946	$	1,118,330
Modular Buildings		89,569		98,834
Net assets held for lease	$	1,201,515	$	1,217,164

XML

Note 8 - Product Warranty (Tables)

3 Months Ended

Feb. 28, 2018

Notes Tables

Schedule of Product Warranty Liability [Table Text Block]

	For the three months ended
	February 28, 2018			February 28, 2017
Balance, beginning	$	68,451		$	134,373
Settlements / adjustments		(82,673	)		(72,949	)
Warranties issued		68,357			64,248
Balance, ending	$	54,135		$	125,672

XML

Note 9 - Loan and Credit Agreements (Tables)

3 Months Ended

Feb. 28, 2018

Notes Tables

Schedule of Debt [Table Text Block]

	February 28, 2018		November 30, 2017
Bank Midwest loan payable in monthly installments of $17,271 including interest at 5.00%, due October 1, 2037	$	2,576,273	$	2,595,007
Bank Midwest loan payable in monthly installments of $3,249 including interest at 5.00%, due October 1, 2019		597,323		599,584
Iowa Finance Authority loan payable in monthly installments of $12,500 including interest at 2.75%, due June 1, 2020		339,808		374,900
Total term debt	$	3,513,404	$	3,569,491
Less current portion of term debt		222,475		221,230
Term debt of discontinued operations		597,323		599,584
Term debt, excluding current portion	$	2,693,606	$	2,748,677

XML

Note 12 - Sales-type Leases (Tables)

3 Months Ended

Feb. 28, 2018

Notes Tables

Schedule of Sales-type Leases [Table Text Block]

	February 28, 2018			November 30, 2017
Minimum lease receivable, current	$	176,925		$	-
Unearned interest income, current		(57,413	)		-
Net investment in sales-type leases, current		119,512			-
Minimum lease receivable, long-term		298,777			-
Unearned interest income, long-term		(42,834	)		-
Net investment in sales-type leases, long-term	$	255,943		$	-

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

Year Ending November 30,	Amount
2018	$	133,425
2019		174,000
2020		162,425
2021		5,852
2022		-
Thereafter		-
Total	$	475,702

XML

Note 16 - Segment Information (Tables)

3 Months Ended

Feb. 28, 2018

Notes Tables

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

	Three Months Ended February 28, 2018
	Agricultural Products			Modular Buildings			Tools		Consolidated
Revenue from external customers	$	3,929,000		$	739,000		$	697,000	$	5,365,000
Income (loss) from operations		(275,000	)		(60,000	)		26,000	$	(309,000	)
Income (loss) before tax		(270,000	)		(52,000	)		16,000	$	(306,000	)
Total Assets		16,246,000			3,154,000			2,561,000	$	21,961,000
Capital expenditures		29,000			35,000			-	$	64,000
Depreciation & Amortization		133,000			25,000			32,000	$	190,000

	Three Months Ended February 28, 2017
	Agricultural Products			Modular Buildings			Tools		Consolidated
Revenue from external customers	$	3,368,000		$	388,000		$	665,000	$	4,421,000
Income (loss) from operations		(220,000	)		(154,000	)		21,000	$	(353,000	)
Income (loss) before tax		(217,000	)		(158,000	)		11,000	$	(364,000	)
Total Assets		19,063,000			2,849,000			2,657,000	$	24,569,000
Capital expenditures		129,000			-			66,000	$	195,000
Depreciation & Amortization		125,000			15,000			31,000	$	171,000

XML

Note 1 - Description of the Company (Details Textual)	3 Months Ended
	Feb. 28, 2018
Number of Operating Segments	3

XML

Note 2 - Summary of Significant Account Policies (Details Textual)	3 Months Ended
	Feb. 28, 2018
Maximum [Member]
Lessor, Capital Lease, Term of Contract	3 years

XML

Note 3 - Discontinued Operations (Details Textual)	1 Months Ended
	Jan. 31, 2018 USD ($)
Real Estate Held for Sale, Sale Price Offer	$ 1,500,000
Impairment of Real Estate	289,000
Real Estate Held for Sale, Expected Proceeds	$ 1,425,000

XML

Note 3 - Discontinued Operations - Income From Discontinued Operations Before Income Taxes (Details) - USD ($)	3 Months Ended
	Feb. 28, 2018	Feb. 28, 2017
Income (loss) before tax	$ (51,590)	$ 4,877
Discontinued Operations, Held-for-sale [Member] | Vessels Segment [Member]
Revenue from external customers
Gross Profit
Operating Expense	43,458	32
Income (loss) from operations	(43,458)	(32)
Income (loss) before tax	$ (51,590)	$ 4,877

XML

Note 3 - Discontinued Operations - Components of Discontinued Operations (Details) - USD ($)	Feb. 28, 2018	Nov. 30, 2017
Notes Payable	$ 597,323	$ 599,584
Discontinued Operations, Held-for-sale [Member] | Vessels Segment [Member]
Cash	4,855	2,454
Property, plant, and equipment, net	1,425,000	1,425,000
Assets of discontinued operations	1,429,855	1,427,454
Accounts payable	655
Accrued expenses	39,222	49,931
Notes Payable	597,323	599,584
Liabilities of discontinued operations	$ 637,200	$ 649,515

XML

Note 4 - Net Income (Loss) Per Share of Common Stock - Basic and Diluted Earnings Per Common Share (Details) - USD ($)	3 Months Ended
	Feb. 28, 2018	Feb. 28, 2017
Numerator for basic and diluted (loss) earnings per common share:
Net (loss) income from continuing operations	$ (527,398)	$ (253,642)
Net (loss) income from discontinued operations	(39,054)	3,613
Net (loss) income	$ (566,452)	$ (250,029)
Denominator:
For basic (loss) earnings per share - weighted average common shares outstanding (in shares)	4,170,818	4,126,012
Effect of dilutive stock options (in shares)
For diluted (loss) earnings per share - weighted average common shares outstanding (in shares)	4,170,818	4,126,012
Earnings (Loss) per share - Basic:
Continuing Operations (in dollars per share)	$ (0.13)	$ (0.06)
Discontinued Operations (in dollars per share)	(0.01)	0
Net Income (Loss) per share (in dollars per share)	(0.14)	(0.06)
Earnings (Loss) per share - Diluted:
Continuing Operations (in dollars per share)	(0.13)	(0.06)
Discontinued Operations (in dollars per share)	(0.01)	0
Net Income (Loss) per share (in dollars per share)	$ (0.14)	$ (0.06)

XML

Note 5 - Inventory - Major Classes of Inventory (Details) - USD ($)	Feb. 28, 2018	Nov. 30, 2017
Raw materials	$ 8,275,782	$ 8,731,985
Work in process	742,276	460,687
Finished goods	4,618,064	5,395,353
Gross inventory	13,636,122	14,588,025
Less: Reserves	(2,567,617)	(2,621,303)
Net Inventory	$ 11,068,505	$ 11,966,722

XML

Note 6 - Accrued Expenses - Major Components Of Accrued Expenses (Details) - USD ($)	Feb. 28, 2018	Nov. 30, 2017
Salaries, wages, and commissions	$ 485,592	$ 584,768
Accrued warranty expense	54,135	68,451
Other	324,562	328,339
Total accrued liabilities, current	$ 864,289	$ 981,558

XML

Note 7 - Assets Held for Lease - Summary of Assets Held for Lease (Details) - USD ($)	Feb. 28, 2018	Nov. 30, 2017
Assets held for lease	$ 1,201,515	$ 1,217,164
West Union Facility [Member]
Assets held for lease	1,111,946	1,118,330
Modular Buildings [Member]
Assets held for lease	$ 89,569	$ 98,834

XML

Note 8 - Product Warranty (Details Textual)	3 Months Ended
	Feb. 28, 2018
Standard Product Warrant Term	1 year

XML

Note 8 - Product Warranty - Changes In Product Warranty Liability (Details) - USD ($)	3 Months Ended
	Feb. 28, 2018	Feb. 28, 2017
Balance, beginning	$ 68,451	$ 134,373
Settlements / adjustments	(82,673)	(72,949)
Warranties issued	68,357	64,248
Balance, ending	$ 54,135	$ 125,672

XML

Note 9 - Loan and Credit Agreements (Details Textual)		3 Months Ended	12 Months Ended
	Sep. 28, 2017 USD ($)	Feb. 28, 2018 USD ($)	Nov. 30, 2017 USD ($)	Feb. 01, 2013	May 01, 2010 USD ($)
Long-term Debt		$ 3,513,404	$ 3,569,491
Term Loan Due October 2037 [Member]
Long-term Debt		2,576,273	2,595,007
Term Loan Due October 2019 [Member]
Long-term Debt		$ 597,323	$ 599,584
Debt Instrument, Interest Rate, Stated Percentage		5.00%
Debt Instrument, Periodic Payment		$ 3,249
Iowa Finance Authority Term Loan [Member]
Long-term Debt		$ 339,808	$ 374,900
Debt Instrument, Interest Rate, Stated Percentage		2.75%	2.75%
Debt Instrument, Periodic Payment		$ 12,500	$ 12,500
Bank Midwest [Member]
Long-term Line of Credit		1,960,530
Line of Credit Facility, Remaining Borrowing Capacity		$ 3,039,470
Line of Credit, Borrowing Base, Accounts Receivable		75.00%
Line of Credit, Borrowing Base, Inventory		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	$ 2,600,000
Debt Instrument, Interest Rate, Stated Percentage	5.00%
Debt Instrument, Periodic Payment	$ 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 2037 [Member] | Minimum [Member]
Debt Instrument, Interest Rate, Effective Percentage	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%
Bank Midwest [Member] | Term Loan Due October 2019 [Member]
Long-term Debt	$ 600,000
Debt Instrument, Interest Rate, Stated Percentage	5.00%
Debt Instrument, Periodic Payment	$ 3,249
Bank Midwest [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 5,000,000
Line of Credit Facility, Interest Rate During Period	5.25%
Bank Midwest [Member] | Revolving Credit Facility [Member] | Minimum [Member]
Line of Credit Facility, Interest Rate During Period	4.25%
Bank Midwest [Member] | Revolving Credit Facility [Member] | Wall Street Journal Rate [Member]
Debt Instrument, Basis Spread on Variable Rate	1.00%
US Bank [Member]
Repayments of Lines of Credit	$ 6,562,030
Repayments of Lines of Credit, Unpaid Principal	6,528,223
Repayments of Lines of Credit, Accrued and Unpaid Interest and Fees	$ 33,807
The First National Bank of West Union [Member] | Iowa Finance Authority Term Loan [Member]
Debt Instrument, Interest Rate, Stated Percentage				2.75%	3.50%
Debt Instrument, Face Amount					$ 1,300,000
Debt Instrument, Covenant Debt Service Coverage Ratio			1.5

XML

Note 9 - Loan and Credit Agreements - Summary of Term Debt (Details) - USD ($)	Feb. 28, 2018	Nov. 30, 2017
Term debt	$ 3,513,404	$ 3,569,491
Less current portion of term debt	222,475	221,230
Term debt of discontinued operations	597,323	599,584
Term debt, excluding current portion	2,693,606	2,748,677
Term Loan Due October 2037 [Member]
Term debt	2,576,273	2,595,007
Term Loan Due October 2019 [Member]
Term debt	597,323	599,584
Iowa Finance Authority Term Loan [Member]
Term debt	$ 339,808	$ 374,900

XML

Note 9 - Loan and Credit Agreements - Summary of Term Debt (Details) (Parentheticals) - USD ($)	3 Months Ended	12 Months Ended
	Feb. 28, 2018	Nov. 30, 2017
Term Loan Due October 2019 [Member]
Debt instrument, periodic payment	$ 3,249
Debt instrument, interest rate, stated percentage	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%

XML

Note 10 - Income Taxes (Details Textual) - USD ($)	1 Months Ended	3 Months Ended	11 Months Ended
	Dec. 31, 2017	Feb. 28, 2018	Nov. 30, 2018
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	35.00%
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability		$ 300,000
Scenario, Forecast [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent			21.00%

XML

Note 11 - Related Party Transactions (Details Textual) - USD ($)	3 Months Ended
	Feb. 28, 2018	Feb. 28, 2017
Related Party Transaction, Expenses from Transactions with Related Party	$ 5,001	$ 0
Due to Related Parties	$ 1,663	$ 0

XML

Note 12 - Sales-type Leases (Details Textual) - USD ($)	3 Months Ended
	Feb. 28, 2018	Feb. 28, 2017
Capital Leases, Income Statement, Sales Type Lease Revenue	$ 129,104	$ 0

XML

Note 12 - Sales-type Leases - Components Related to Sales-type Leases (Details) - USD ($)	Feb. 28, 2018	Nov. 30, 2017
Minimum lease receivable, current	$ 176,925
Unearned interest income, current	(57,413)
Net investment in sales-type leases, current	119,512
Minimum lease receivable, long-term	298,777
Unearned interest income, long-term	(42,834)
Net investment in sales-type leases, long-term	$ 255,943

XML

Note 12 - Sales-type Leases - Future Minimum Lease Receipts (Details)	Feb. 28, 2018 USD ($)
2018	$ 133,425
2019	174,000
2020	162,425
2021	5,852
2022
Thereafter
Total	$ 475,702

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Note 14 - Equity Incentive Plan and Stock Based Compensation (Details Textual) - USD ($)	3 Months Ended		15 Months Ended
	Feb. 28, 2018	Feb. 28, 2017	Feb. 28, 2018	Jan. 27, 2011
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	0	0
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	1,000
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Allocated Share-based Compensation Expense	$ 49,558		$ 26,557
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	45,000
Restricted Stock [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	6,000

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Note 16 - Segment Information (Details Textual)	3 Months Ended
	Feb. 28, 2018
Number of Reportable Segments	3

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Note 16 - Segment Information - Segment Reporting Information (Details) - USD ($)		3 Months Ended
		Feb. 28, 2018	Feb. 28, 2017	Nov. 30, 2017
Revenue from external customers		$ 5,365,536	$ 4,421,168
Income (loss) from operations		(308,721)	(352,433)
Total Assets		23,391,311		$ 24,379,833
Capital expenditures		64,401	195,020
Depreciation & Amortization		189,654	170,789
Operating Segments [Member]
Revenue from external customers	[1]	5,365,000	4,421,000
Income (loss) from operations	[1]	(309,000)	(353,000)
Income (loss) before tax	[1]	(306,000)	(364,000)
Total Assets	[1]	21,961,000	24,569,000
Capital expenditures	[1]	64,000	195,000
Depreciation & Amortization	[1]	190,000	171,000
Operating Segments [Member] | Agricultural Products [Member]
Revenue from external customers		3,929,000	3,368,000
Income (loss) from operations		(275,000)	(220,000)
Income (loss) before tax		(270,000)	(217,000)
Total Assets		16,246,000	19,063,000
Capital expenditures		29,000	129,000
Depreciation & Amortization		133,000	125,000
Operating Segments [Member] | Modular Buildings [Member]
Revenue from external customers		739,000	388,000
Income (loss) from operations		(60,000)	(154,000)
Income (loss) before tax		(52,000)	(158,000)
Total Assets		3,154,000	2,849,000
Capital expenditures		35,000
Depreciation & Amortization		25,000	15,000
Operating Segments [Member] | Tools [Member]
Revenue from external customers		697,000	665,000
Income (loss) from operations		26,000	21,000
Income (loss) before tax		16,000	11,000
Total Assets		2,561,000	2,657,000
Capital expenditures			66,000
Depreciation & Amortization		$ 32,000	$ 31,000

[1] 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.