10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended February 28, 2022

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. 000-05131

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) (Zip Code)

(712) 864-3131

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.          Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).          Yes ☒ No ☐

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	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.           ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).          Yes ☐ No ☒

Number of common shares outstanding as of April 4, 2022: 4,630,097

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, 2022 and November 30, 2021	1
	Condensed Consolidated Statements of Operations Three-month periods ended February 28, 2022 and February 28, 2021	2
	Condensed Consolidated Statements of Stockholders’ Equity Three-month periods ended February 28, 2022 and February 28, 2021	3
	Condensed Consolidated Statements of Cash Flows Three-month periods ended February 28, 2022 and February 28, 2021	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19
PART II – OTHER INFORMATION		20
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	20
Item 4.	Mine Safety Disclosures	20
Item 5.	Other Information	20
Item 6.	Exhibits	21
	SIGNATURES	22

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ART’S-WAY MANUFACTURING CO., INC.

Consolidated Balance Sheets

(Unaudited)

	February 28, 2022			November 30, 2021
Assets
Current assets:
Cash	$	3,461		$	2,658
Accounts receivable-customers, net of allowance for doubtful accounts of $26,748 and $38,188 at February 28, 2022 and November 30, 2021, respectively		1,582,564			2,663,030
Inventories, net		9,700,315			9,210,103
Cost and profit in excess of billings		145,640			177,284
Other current assets		627,464			121,170
Total current assets		12,059,444			12,174,245
Property, plant, and equipment, net		5,261,388			5,237,328
Assets held for lease, net		521,555			521,555
Deferred income taxes		2,730,925			2,621,886
Other assets		278,411			299,034
Total assets	$	20,851,723		$	20,854,048
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,553,729		$	1,737,091
Customer deposits		1,894,785			278,509
Billings in excess of cost and profit		368,514			280,761
Income taxes payable		5,000			5,500
Accrued expenses		1,018,558			1,210,964
Line of credit		3,150,530			4,074,530
Current portion of long-term debt		102,739			99,462
Total current liabilities		8,093,855			7,686,817
Long-term liabilities
Long-term portion of finance lease liabilities		129,864			142,386
Long-term portion of operating lease liabilities		31,612			34,931
Long-term debt, excluding current portion		2,613,375			2,635,467
Total liabilities		10,868,706			10,499,601
Commitments and Contingencies (Notes 8, 9, 10 and 13)
Stockholders’ equity:
Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares at February 28, 2022 and November 30, 2021; issued and outstanding 0 shares at February 28, 2022 and November 30,2021.		-			-
Common stock – $0.01 par value. Authorized 9,500,000 shares at February 28, 2022 and November 30, 2021; issued 4,674,671 at February 28, 2022 and 4,583,504 at November 30, 2021		46,747			45,835
Additional paid-in capital		3,829,701			3,760,649
Retained earnings		6,249,998			6,656,487
Treasury stock, at cost (54,938 shares at February 28, 2022 and 44,532 shares at November 30, 2021)		(143,429	)		(108,524	)
Total stockholders’ equity		9,983,017			10,354,447
Total liabilities and stockholders’ equity	$	20,851,723		$	20,854,048

See accompanying  notes to consolidated financial statements.

1

ART’S-WAY MANUFACTURING CO., INC.

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended
	February 28, 2022			February 28, 2021
Sales	$	5,613,066		$	5,400,572
Cost of goods sold		4,420,922			4,357,894
Gross profit		1,192,144			1,042,678
Expenses:
Engineering		134,071			121,391
Selling		487,156			472,974
General and administrative		1,007,793			816,836
Total expenses		1,629,020			1,411,201
Income (Loss) from operations		(436,876	)		(368,523	)
Other income (expense):
Interest expense		(76,704	)		(58,684	)
Other		(1,552	)		27,657
Total other income (expense)		(78,256	)		(31,027	)
Income (Loss) before income taxes		(515,132	)		(399,550	)
Income tax expense (benefit)		(108,643	)		(84,312	)
Net Income (Loss)		(406,489	)		(315,238	)

See accompanying  notes to consolidated financial statements.

2

ART’S-WAY MANUFACTURING CO., INC.

Consolidated Statements of Stockholders' Equity

Three Months Ended February 28, 2022 and February 28, 2021

(Unaudited)

	Common Stock				Additional					Treasury Stock
	Number of				paid-in		Retained			Number of
	shares		Par value		capital		earnings			shares		Amount			Total
Balance, November 30, 2020		4,470,004	$	44,700	$	3,496,243	$	6,443,856			35,097	$	(78,054	)	$	9,906,745
Stock based compensation		93,500		935		61,119		-			5,570		(18,296	)		43,758
Net (loss)		-		-		-		(315,238	)		-		-			(315,238	)
Balance, February 28, 2021		4,563,504		45,635		3,557,362		6,128,618			40,667		(96,350	)		9,635,265

	Common Stock				Additional					Treasury Stock
	Number of				paid-in		Retained			Number of
	shares		Par value		capital		earnings			shares		Amount			Total
Balance, November 30, 2021		4,583,504	$	45,835	$	3,760,649	$	6,656,487			44,532	$	(108,524	)	$	10,354,447
Stock based compensation		91,167		912		69,052		-			10,406		(34,905	)		35,059
Net (loss)		-		-		-		(406,489	)		-		-			(406,489	)
Balance, February 28, 2022		4,674,671		46,747		3,829,701		6,249,998			54,938		(143,429	)		9,983,017

See accompanying notes to condensed consolidated financial statements.

3

ART’S-WAY MANUFACTURING CO., INC.

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	February 28, 2022			February 28, 2021
Cash flows from operations:
Net income (loss)	$	(406,489	)	$	(315,238	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock based compensation		69,964			62,054
Increase (Decrease) in obsolete inventory reserves		(140,485	)		(216,795	)
Gain on disposal of property, plant, and equipment		-			(8,000	)
Depreciation and amortization expense		167,542			161,107
Accrued interest on deferred debt payments		4,213			4,161
Increase (decrease) in allowance for doubtful accounts		(11,440	)		25,201
Deferred income taxes		(109,039	)		(97,413	)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable		1,091,906			684,378
Inventories		(349,727	)		76,951
Net investment in sales-type leases		-			14,069
Other assets		(506,294	)		(225,977	)
Increase (decrease) in:
Accounts payable		(183,362	)		(187,110	)
Contracts in progress, net		119,397			(397,920	)
Customer deposits		1,616,276			1,179,196
Income taxes payable		(500	)		3,900
Accrued expenses		(193,146	)		(81,262	)
Net cash provided by operating activities		1,168,816			681,302
Cash flows from investing activities:
Purchases of property, plant, and equipment		(174,133	)		(163,927	)
Net proceeds from sale of assets		-			8,000
Net cash used in investing activities		(174,133	)		(155,927	)
Cash flows from financing activities:
Net change in line of credit		(924,000	)		(484,000	)
Principal payments on finance lease obligations		(11,946	)		-
Repayment of term debt		(23,029	)		(21,873	)
Repurchases of common stock		(34,905	)		(18,296	)
Net cash used in financing activities		(993,880	)		(524,169	)
Net decrease in cash		803			1,206
Cash at beginning of period		2,658			2,684
Cash at end of period	$	3,461		$	3,890
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	69,754		$	48,826
Income taxes		-			-

See accompanying  notes to consolidated financial statements.

4

Notes to Unaudited Condensed Consolidated Financial Statements

1) Description of the Company

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

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

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

2) Summary of Significant Accounting Policies

Statement Presentation

The foregoing condensed consolidated financial statements of the Company are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position and operating results for the interim periods. The financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2021. The results of operations for the three months ended February 28, 2022 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2022.

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, 2022. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 adds a current expected credit loss (“CECL”) impairment model to U.S. GAAP that is based on expected losses rather than incurred losses. Modified retrospective adoption is required with any cumulative-effect adjustment recorded to retained earnings as of the beginning of the period of adoption. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within the year of adoption. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company will adopt ASU 2016-13 in fiscal 2024. The Company does not expect the application of the CECL impairment model to have a significant impact on its allowance for uncollectible amounts for accounts receivable. 

5

 

3) Disaggregation of Revenue

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

	Three Months Ended February 28, 2022
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	3,515,000	$	-	$	-	$	3,515,000
Farm equipment service parts		558,000		-		-		558,000
Steel cutting tools and inserts		-		-		574,000		574,000
Modular buildings		-		851,000		-		851,000
Modular building lease income		-		-		-		-
Other		88,000		17,000		10,000		115,000
	$	4,161,000	$	868,000	$	584,000	$	5,613,000

	Three Months Ended February 28, 2021
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	2,777,000	$	-	$	-	$	2,777,000
Farm equipment service parts		620,000		-		-		620,000
Steel cutting tools and inserts		-		-		606,000		606,000
Modular buildings		-		1,141,000		-		1,141,000
Modular building lease income		-		-		-		-
Other		103,000		150,000		4,000		257,000
	$	3,500,000	$	1,291,000	$	610,000	$	5,401,000

4) Contract Receivables, Contract Assets and Contract Liabilities

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

	February 28, 2022		November 30, 2021
Receivables	$	1,583,000	$	2,663,000
Assets		146,000		177,000
Liabilities		2,263,000		559,000

The amount of revenue recognized in the first three months of fiscal 2022 that was included in a contract liability at November 30, 2021 was approximately $415,000 compared to $265,000 in the same period of fiscal 2021. The decrease in contract receivables on February 28, 2022 is due to normal collection cycle of receivables in the first quarter of fiscal 2022. Contract liabilities increased significantly during the three months ended February 28, 2022 as the Company received a large amount of deposits from our fall early order program.

The Company utilizes the practical expedient exception for these contracts and will report only on performance obligations greater than one year. As of February 28, 2022, the Company has no performance obligations with an original expected duration greater than one year.

6

 

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

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

Basic and diluted net income (loss) per share have been computed based on the following as of February 28, 2022 and February 28, 2021:

	For the Three Months Ended
	February 28, 2022			February 28, 2021
Numerator for basic and diluted net income (loss) per share:
Net income (loss)	$	(406,489	)	$	(315,238	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,569,720			4,475,279
Effect of dilutive stock options		-			-
For diluted net income (loss) per share - weighted average common shares outstanding		4,569,720			4,475,279
Net Income (Loss) per share - Basic:
Net Income (Loss) per share	$	(0.09	)	$	(0.07	)
Net Income (Loss) per share - Diluted:
Net Income (Loss) per share	$	(0.09	)	$	(0.07	)

6) Inventory

Major classes of inventory are:

	February 28, 2022			November 30, 2021
Raw materials	$	8,418,441		$	8,289,386
Work in process		545,922			357,721
Finished goods		2,934,401			3,088,739
Total Gross Inventory	$	11,898,764		$	11,735,846
Less: Reserves		(2,198,449	)		(2,525,743	)
Net Inventory	$	9,700,315		$	9,210,103

7

 

7) Accrued Expenses

Major components of accrued expenses are:

	February 28, 2022		November 30, 2021
Salaries, wages, and commissions	$	622,984	$	654,757
Accrued warranty expense		115,062		202,850
Other		280,512		353,357
	$	1,018,558	$	1,210,964

8) Assets Held for Lease

Major components of assets held for lease are:

	February 28, 2022		November 30, 2021
Modular Buildings	$	521,555	$	521,555
Total assets held for lease	$	521,555	$	521,555

There were no rents recognized from assets held for lease included in sales on the Condensed Consolidated Statements of Operations during the three months ended February 28, 2022 and February 28, 2021.

There were no future minimum lease receipts from assets held for lease as of February 28, 2022.

On March 14, 2022 a lease agreement was signed for the rental of one of the Company’s existing assets held for lease in the amount of $4,175 per month beginning on May 1, 2022.

9) Product Warranty

The Company offers warranties of various lengths to its customers depending on the specific product and terms of the customer purchase agreement. The average length of the warranty period is one year from the date of purchase. The Company’s warranties require it to repair or replace defective products during the warranty period at no cost to the customer. Product warranty is included in the price of the product and provides assurance that the product will function in accordance with agreed-upon specifications. It does not represent a separate performance obligation under ASC 606. The Company records a liability for estimated costs that may be incurred under its warranties. The costs are estimated based on historical experience and any specific warranty issues that have been identified. Although historical warranty costs have been within expectations, there can be no assurance that future warranty costs will not exceed historical amounts. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the balance as necessary. The accrued warranty balance is included in accrued expenses as shown in Note 7 “Accrued Expenses.” Changes in the Company’s product warranty liability for the three months ended February 28, 2022 and February 28, 2021 are as follows:

	For the Three Months Ended
	February 28, 2022			February 28, 2021
Balance, beginning	$	202,850		$	291,453
Settlements / adjustments		21,624			33,506
Warranties issued		(109,412	)		(29,378	)
Balance, ending	$	115,062		$	295,581

8

 

10) Loan and Credit Agreements

The Company maintains one revolving line of credit and one term loan with Bank Midwest. The Company also has three term loans with the U.S. Small Business Administration under the Economic Injury Disaster Loan program.

Bank Midwest Revolving Line of Credit and Term Loan

The Company maintains a credit facility with Bank Midwest consisting of a $5,000,000 revolving line of credit (the “Line of Credit”) used for working capital purposes, and a $2,600,000 term loan due October 1, 2037 (the “Term Loan”). On February 28, 2022, the balance of the Line of Credit was $3,150,530 with $1,849,470 remaining available, as may be 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 net inventory, less any outstanding loan balance on the Line of Credit. On February 28, 2022, the Line of Credit was not limited by the borrowing base calculation. Any unpaid principal amount borrowed on the Line of Credit accrues interest at a floating rate per annum equal to 1.50% above the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The interest rate floor is set at 4.25% per annum and the current interest rate is 5.00% per annum following an increase in March 2022. The Line of Credit was most recently renewed on March 28, 2022. The Line of Credit matures on March 30, 2023 and requires monthly interest-only payments.

The Term Loan accrues interest at a rate of 5.00% for the first sixty months, which will end on September 28, 2022. Thereafter, the Term Loan will accrue interest at a floating rate per annum equal to 0.75% above the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The interest rate floor is set at 4.15% per annum and the interest rate may only be adjusted by Bank Midwest once every five years. Monthly payments of $17,271 for principal and interest are required. The Term Loan is also guaranteed by the United States Department of Agriculture (“USDA”), which required an upfront guarantee fee of $62,400 and requires an annual fee of 0.5% of the unpaid balance. As part of the USDA guarantee requirements, shareholders owning more than 20% are required to personally guarantee a portion of the Term Loan, in an amount equal to their stock ownership percentage. The J. Ward McConnell Jr. Living Trust, the estate of the former Vice Chairman of the Board of Directors and a shareholder owning more than 20% of the Company’s outstanding stock, is guaranteeing approximately 38% of the Term Loan, for an annual fee of 2% of the personally guaranteed amount. The initial guarantee fee will be amortized over the life of the Term Loan, and the annual fees and personally guaranteed amounts are expensed monthly.

The Term Loan is governed by the terms of a Promissory Note, dated September 28, 2017, entered into between the Company and Bank Midwest. The Line of Credit is governed by the terms of a Promissory Note, dated February 11, 2021, entered into between the Company and Bank Midwest.

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

9

 

To further secure the Line of Credit, the Company granted Bank Midwest a mortgage on its Canton, Ohio property held by Ohio Metal Working Products/Art’s-Way Inc. The Term Loan is secured by a mortgage on the Company’s Armstrong, Iowa and Monona, Iowa properties. Each mortgage is governed by the terms of a separate Mortgage, dated September 28, 2017, and each property is also subject to a separate Assignment of Rents, dated September 28, 2017.

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

Compliance with the following Bank Midwest covenants is measured annually at November 30. 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 also must receive bank approval for purchases or sales of equipment over $100,000 annually and maintain reasonable salaries and owner compensation. The Company received the necessary approvals for purchases of equipment over $100,000 for the three months ended February 28, 2022. On March 28, 2022, the Company and Bank agreed to remove the covenant related to purchases and sale of equipment over $100,000 annually. This covenant was replaced with purchases or sale of individual equipment will be limited to $50,000. Any purchases beyond the $50,000 limit will be mutually agreed upon. The Company was out of compliance with its debt to worth ratio covenant in place under the Bank Midwest loan agreements as of November 30, 2021. Bank Midwest issued a waiver forgiving the noncompliance, and in turn waived the event of default. The next measurement date is November 30, 2022.

The Company also has a minimum working capital requirement of $4,000,000 that is measured monthly. The $4,000,000 working capital level serves as a trigger point for Bank Midwest and the Company to continue discussion of capital raising strategies to support additional capital injection. As of February 28, 2022, the Company was short of its working capital requirement by approximately $34,000. If the Company fails to get back in compliance, a meeting will be conducted to review the Company’s strategy to get back into compliance with the covenant. The Company will be considered in default if the plan is not accepted by Bank Midwest or the Company is unable to remedy in the time granted by Bank Midwest. The Company expects normal operations in Q2 of fiscal 2022 to put the Company back in compliance with the working capital requirement.

SBA Economic Injury Disaster Loans

On June 18, 2020, and again on June 24, 2020 the Company executed the standard loan documents required for securing loans offered by the U.S. Small Business Administration under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. Two loans were executed on June 18, 2020 with principal amounts of $150,000 each, with a third loan executed on June 24, 2020 with a principal amount of $150,000. Proceeds from these EIDLs are being used for working capital purposes. Interest accrues at the rate of 3.75% per annum and will accrue from the date of inception. Installment payments, including principal and interest, are due monthly, twenty-four months from the date of the EIDLs, in the amount of $731 per EIDL. The balance of principal and interest is payable 30 years from the date of the EIDL. The EIDLs are secured by a security interest on all of the Company’s assets. Each EIDL is governed by the terms of a separate Promissory Note, dated either June 18, 2020 or June 24, 2020, as applicable, entered into by the Company or the applicable subsidiary.

10

 

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

	February 28, 2022		November 30, 2021
Bank Midwest loan payable in monthly installments of $17,271 including interest at 5.00%, due October 1, 2037	$	2,237,384	$	2,260,412
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning June 18, 2022, due June 18, 2050		159,555		158,168
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning June 24, 2022, due June 24, 2050		159,620		158,181
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning June 18, 2022, due June 18, 2050		159,555		158,168
Total term debt	$	2,716,114	$	2,734,929
Less current portion of term debt		102,739		99,462
Term debt, excluding current portion	$	2,613,375	$	2,635,467

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

Year	Amount
2022	$	101,362
2023		108,284
2024		113,444
2025		119,552
2026		125,630
2027 and thereafter		2,147,842
	$	2,716,114

On March 22, 2022, the SBA announced a six-month extension on the first payment due date for the EIDL program. The above information reflects EIDL maturities as they existed on the February 28, 2022 balance sheet date.

11) Income Taxes

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

11

 

12) Related Party Transactions

During the three months ended February 28, 2022 and February 28, 2021, the Company did not recognize any revenues from transactions with a related party, and no amounts in accounts receivable balances were due from a related party. From time to time, the Company purchases various supplies from related parties, which are companies previously owned by the late J. Ward McConnell, Jr., the former Vice Chairman of the Company’s Board of Directors and currently owned by his son, Marc McConnell, the Chairman of the Company’s Board of Directors, who also serves as President of these companies. J. Ward McConnell, Jr. as a shareholder owning more than 20% of the Company’s outstanding stock, was required to guarantee a portion of the Company’s term debt in accordance with the USDA guarantee on the Company’s term loan. J. Ward McConnell Jr.’s estate, the J. Ward McConnell, Jr. Living Trust, is paid a monthly fee for the guarantee. In the three months ended February 28, 2022, the Company recognized $9,349 of expense for transactions with related parties, compared to $4,669 for the three months ended February 28, 2021. As of February 28, 2022, accrued expenses contained a balance of $1,299 owed to a related party compared to $1,353 on February 28, 2021.

13) Leases

The Company determines if an arrangement is a lease at inception of a contract. The nature of the Company’s leases at this time is shop machinery and office equipment, mainly copiers, with terms of 12 to 60 months. Operating and finance leases are included in other assets as lease right-of-use (“ROU”) assets on the Consolidated Balance Sheets while current lease liabilities are included as accrued expenses. The long-term portions of lease liabilities are shown as long-term liabilities on the Consolidated Balance Sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the present value payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense for lease payments is recognized on a straight-line basis over the lease term while finance lease ROU assets are amortized on a straight line basis and interest expense is recorded over the lease term.

The Company has copier lease agreements with lease and non-lease components and has elected the practical expedient not to separate lease and non-lease components for this asset class. The Company has also elected not to recognize lease liabilities and ROU assets for leases with an initial term of twelve months or less. The Company recognizes variable costs that depend on usage in profit or loss as they are incurred.

The components of operating leases on the Condensed Consolidated Balance Sheets at February 28, 2022 and November 30, 2021 were as follows:

	February 28, 2022		November 30, 2021
Operating lease right-of-use assets (in other assets)	$	44,639		47,794
Current portion of operating lease liabilities (in accrued expenses)	$	13,027		12,863
Long-term portion of operating lease liabilities		31,612		34,931
Total operating lease liabilities	$	44,639		47,794

The Company recorded $4,843 of operating lease costs in the three months ended February 28, 2022, which included variable costs tied to usage, compared to $6,080 for the three months ended February 28, 2021. The Company’s operating leases carry a weighted average lease term of 46 months and have a weighted average discount rate of 4.88%

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Future maturities of operating lease liabilities are as follows:

Years Ending November 30,
2022	11,186
2023	12,345
2024	11,162
2025	9,532
2026	4,764
Total lease payments	48,989
Less imputed interest	(4,350	)
Total operating lease liabilities	44,639

The components of finance leases on the Consolidated Balance Sheets on February 28, 2022 and November 30, 2021 were as follows:

	February 28, 2022		November 30, 2021
Finance lease right-of-use assets (net of amortization in other assets)	$	174,526	$	190,667
Current portion of finance lease liabilities (accrued expenses)	$	49,169	$	48,591
Long-term portion of finance lease liabilities		129,864		142,386
Total finance lease liabilities	$	179,033	$	190,977

Future maturities of finance lease liabilities as of November 30, 2022 are as follows:

Year Ending November 30,
2022	$	42,485
2023		56,646
2024		68,029
2025		14,203
2026		12,619
Total lease payments		193,982
Less imputed interest		(14,949	)
Total finance lease liabilities	$	179,033

The weighted average lease term of the Company’s finance leases are 39 months while the weighted average rate of finance leases is 4.77%. The Company incurred $16,142 of amortization expense from ROU assets related to finance leases in the first three months ending February 28, 2022 compared to $0 for the same period in 2021.

On March 3, 2022, the Company entered into a finance lease agreement for the lease of three robotic weld systems. The terms of the lease agreement are payments of approximately $5,068 per month for 60 months with a bargain purchase option of $30,590 at the end of the lease.

The Company expects delivery of a Lift King lift truck in April of fiscal 2022, with monthly payments beginning upon receipt of approximately $1,627 for 60 months with a $1.0 bargain purchase option at the end of the lease.

14) Equity Incentive Plan and Stock Based Compensation

On February 25, 2020, the Board of Directors of the Company (the “Board”) authorized and approved the Art’s-Way Manufacturing Co., Inc. 2020 Equity Incentive Plan (the “2020 Plan”). The 2020 Plan was approved by the stockholders on April 30, 2020. The 2020 Plan replaced the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan (the “2011 Plan”) and prior plans. The 2020 Plan added an additional 500,000 shares to the number of shares reserved for issuance pursuant to equity awards. No further awards will be made under the 2011 Plan or other prior plans. Awards to directors and executive officers under the 2020 Plan are governed by the forms of agreement approved by the Board of Directors. Stock options or other awards granted prior to February 25, 2020 are governed by the applicable prior plan and the forms of agreement adopted thereunder.

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The 2020 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 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.

	For the Three Months Ended
	February 28, 2022			February 28, 2021
Shares issued to directors (immediate vesting)		5,000			5,000
Shares issued to directors, employees, and consultants (three-year vesting)		94,500			88,500
Unvested shares forfeit upon termination		(8,333	)		-
Total shares issued		91,167			93,500

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, 2022 or in the same respective period of fiscal 2021.

	For the Three Months Ended
	February 28, 2022			February 28, 2021
Stock-based compensation expense		69,964			62,054
Treasury share repurchase expense		(34,905	)		(18,296	)
Stock-based compensation expense net of treasury repurchases		35,059			42,758

15) Common Stock Purchase Agreement

On March 29, 2022, Art’s-Way Manufacturing Co., Inc. (the “Company”) entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Alumni Capital LP, a Delaware limited partnership (“Alumni Capital”), pursuant to which the Company agreed to sell, and Alumni Capital agreed to purchase, upon request of the Company in one or more transactions, a number of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) providing aggregate gross proceeds to the Company of up to $3,000,000 (the “Maximum”). The Purchase Agreement expires upon the earlier of the aggregate gross proceeds from the sale of shares meeting the Maximum or June 30, 2023.

Among other limitations, unless otherwise agreed upon by Alumni Capital, each sale of shares will be limited to 50,000 shares and further limited to no more than the number of shares that would result in the beneficial ownership by Alumni Capital and its affiliates, at any single point in time, of more than 9.99% of the then-outstanding shares of Common Stock. Alumni Capital will purchase the shares of Common Stock under the Agreement at a discount ranging from 3-5% of the lowest traded price of the Common Stock in the five business days preceding the Company delivering notice of the required purchase of shares to Alumni Capital.

In exchange for Alumni Capital entering into the Purchase Agreement, the Company issued 20,000 shares of Common Stock to Alumni Capital upon execution of the Purchase Agreement (the “Initial Commitment Shares”) and will issue another 20,000 shares in connection with the first closing under the Purchase Agreement (with the Initial Commitment Shares, the “Commitment Shares”). Alumni Capital represented to the Company, among other things, that it was an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”)). The Company shares of Common Stock, including the Commitment Shares, are being offered and sold under the Purchase Agreement in reliance upon an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. The securities sold may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

The Purchase Agreement provides that the Company will file a registration statement under the Securities Act covering the resale of the shares issued to Alumni Capital. Alumni Capital’s obligation to purchase shares of Common Stock under the Purchase Agreement is conditioned upon, among other things, the registration statement having been declared effective by the Securities and Exchange Commission.

16) Disclosures About the Fair Value of Financial Instruments

The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. At February 28, 2022 and November 30, 2021, the carrying amount approximated fair value for cash, accounts receivable, accounts payable, notes payable to bank, finance lease liabilities and other current and long-term liabilities. The carrying amounts of current assets and liabilities approximate fair value because of the short maturity of these instruments. The fair value of the finance lease liabilities 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 term loans payable also approximates recorded value because the interest rates charged under the loan terms are not substantially different from current interest rates.

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17) Segment Information

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

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

Approximate financial information with respect to the reportable segments is as follows.

	Three Months Ended February 28, 2022
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	4,161,000		$	868,000		$	584,000		$	5,613,000
Income (loss) from operations	$	(129,000	)	$	(223,000	)	$	(85,000	)	$	(437,000	)
Income (loss) before tax	$	(186,000	)	$	(230,000	)	$	(99,000	)	$	(515,000	)
Total Assets	$	15,784,000		$	2,695,000		$	2,373,000		$	20,852,000
Capital expenditures	$	153,000		$	14,000		$	7,000		$	174,000
Depreciation & Amortization	$	101,000		$	34,000		$	33,000		$	168,000

	Three Months Ended February 28, 2021
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	3,500,000		$	1,291,000		$	610,000		$	5,401,000
Income (loss) from operations	$	(198,000	)	$	(165,000	)	$	(6,000	)	$	(369,000	)
Income (loss) before tax	$	(212,000	)	$	(172,000	)	$	(16,000	)	$	(400,000	)
Total Assets	$	12,990,000		$	3,171,000		$	2,621,000		$	18,782,000
Capital expenditures	$	155,000		$	9,000		$	-		$	164,000
Depreciation & Amortization	$	99,000		$	29,000		$	33,000		$	161,000

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

18) Subsequent Events

Management evaluated all other activity of the Company and concluded that no subsequent events have occurred that would require recognition in the condensed consolidated financial statements, other than the asset held for lease rental agreement that occurred on March 14^th in note 8, the extension of the EIDL first payment due date, the line of credit renewal and covenant update as mentioned in Note 10, the robotic weld cell and lift truck leasing activity in note 13 and the Stock Purchase Agreement mentioned in Note 15 and the Liquidity and Capital Resources section of Item 2 Management’s Discussion and Analysis.

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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 Part I, Item 1 of this Quarterly Report on Form 10-Q (this “report”) and the audited consolidated financial statements and related notes thereto included in Part II, Item 8, “Financial Statements and Supplementary Data,” as well as Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the fiscal year ended November 30, 2021. Some of the statements in this report may be forward-looking statements that reflect our current view on future events, future business, industry and other conditions, our future performance, and our plans and expectations for future operations and actions. In some cases you can identify forward-looking statements by the use of words such as “may,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or the negative of these terms or other similar expressions. Many of these forward-looking statements are located in this report under Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but they may appear in other sections as well. Forward-looking statements in this report generally relate to: (i) our warranty costs and order backlog; (ii) our beliefs regarding the sufficiency of working capital and cash flows; (iii) our expectation that we will continue to be able to renew or obtain financing on reasonable terms when necessary as well as our continued positive relationship with our creditors and lenders; (iv) the impact of recently issued accounting pronouncements; (v) our intentions and beliefs relating to our costs, business strategies, and future performance; (vi) our beliefs concerning our ability to attract and maintain an adequate workforce in a competitive labor market (vii) our expected financial results; (viii) our expectations concerning our primary capital and cash flow needs; and (viix) our expectations regarding the impact of COVID-19 on our business condition and results of operations.

You should read this report thoroughly with the understanding that our actual results may differ materially from those set forth in the forward-looking statements for many reasons, including events beyond our control and assumptions that prove to be inaccurate or unfounded. We cannot provide any assurance with respect to our future performance or results. Our actual results or actions could and likely will differ materially from those anticipated in the forward-looking statements for many reasons, including but not limited to: (i) the impact of changing credit markets on our ability to continue to obtain financing on reasonable terms; (ii) our ability to repay current debt, continue to meet debt obligations and comply with financial covenants; (iii) the effect of general economic conditions, including consumer and governmental spending, on the demand for our products and the cost of our supplies and materials; (iv) the ongoing COVID-19 pandemic; (v) fluctuations in seasonal demand and our production cycle; (vi) the ability of our suppliers to meet our demands for raw materials and component parts; (vii) fluctuations in the price of raw materials, especially steel; (viii) our ability to predict and meet the demands of each market in which our segments operate; and (ix) other factors described from time to time in our Securities and Exchange Commission filings. We do not intend to update the forward-looking statements contained in this report other than as required by law. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits completely and with the understanding that our actual future results may be materially different from what we currently expect. We qualify all of our forward-looking statements by these cautionary statements.

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Critical Accounting Policies

Our critical accounting policies involving the more significant judgments and assumptions used in the preparation of our financial statements as of February 28, 2022 remain unchanged from November 30, 2021. Disclosure of these critical accounting policies is incorporated by reference from Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended November 30, 2021.

Results of Operations

Net Sales and Cost of Sales

Our consolidated corporate sales for the three-month period ended February 28, 2022 were $5,613,000 compared to $5,401,000 during the same period in fiscal 2021, an increase of $212,000, or 3.9%. The increase in consolidated revenue is due to increased sales in our Agricultural Products segment. Consolidated gross margin for the three-month period ended February 28, 2022 was 21.2% compared to 19.3% for the same period in fiscal 2021.

Our first quarter sales in our Agricultural Products segment were $4,161,000 compared to $3,500,000 for the same period in fiscal 2021, an increase of $661,000, or 18.9%. The increase in revenue is due to increased demand for our grinder mixers, beet equipment and manure spreaders. For the second year in a row, we have experienced historic early order program success and are carrying record backlog numbers. Strong commodity prices have created demand that is struggling to be met within the agriculture industry because of labor and supply chain shortages, which has in turn increased the number of early orders we are seeing. Gross margin for the three-month period ended February 28, 2022 was 25.9% compared to 25.2% for the same period in fiscal 2021. Price increases in fiscal 2021 helped us maintain margin moving into fiscal 2022. While we have seen the price of steel start to drop in Q1 of fiscal 2022, component prices and freight costs have continued to rise. We anticipate we will need to take action to mitigate margin erosion from these rising input costs in fiscal 2022.

Our first quarter sales in our Modular Buildings segment were $868,000 compared to $1,291,000 for the same period in fiscal 2021, a decrease of $423,000, or 32.8%. Our decrease in revenue is due largely to the progress on a large construction contract that neared completion at the end of the first quarter of fiscal 2021. We continue to see strong demand for business in this segment despite the slow start to fiscal 2022. Gross margin for the three-month period ended February 28, 2022 was 4.8% compared to 2.9% for the same period in fiscal 2021. We saw margin improvement in fiscal 2022 because of the completion of a large construction project in 2021 that carried a low gross margin. While we did see margin improvement year to date, our sales level wasn’t high enough to absorb our operating expenses and provide a margin we typically expect.

Our Tools segment had sales of $584,000 during the first quarter compared to $610,000 for the same period in fiscal 2021, a decrease of $26,000, or 4.3%. The Tools segment struggled with labor shortages in the first month of fiscal 2022, which led to a disappointing level of December sales. While employee turnover continued through the first quarter of fiscal 2022, production remained steady in the 2^nd and 3^rd months of fiscal 2022 to mitigate further losses. Since the labor market continues to be highly competitive in Canton, OH, we are working on automated solutions to solve workforce issues in Q2 of fiscal 2022. Demand has grown in this segment in fiscal 2022 and we are currently carrying the largest backlog on record. Gross margin was 12.5% for the three-month period ended February 28, 2022 compared to 20.2% for the same period in fiscal 2021. The decrease in margin is due to the decrease in sales year on year along with wage and benefit improvements we made in Q3 of fiscal 2021 to try to stabilize our workforce. We are expecting margin improvement as we get further into fiscal 2022 from price increases enacted in February of 2022.

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Expenses

Our first quarter consolidated selling expenses were $487,000 compared to $473,000 for the same period in fiscal 2021. The increase in selling expenses is due to increased commission expense as a result of the 18.9% increase in sales in our Agricultural Products segment. Selling expenses as a percentage of sales were 8.7% for the three-month period ended February 28, 2022 compared to 8.8% for the same period in fiscal 2021.

Consolidated engineering expenses were $134,000 for the three-month period ended February 28, 2022 compared to $121,000 from the same period in fiscal 2021. The increase is due to wage and benefit improvements made for fiscal 2022. Engineering expenses as a percentage of sales were 2.4% for the three-month period ended February 28, 2022 compared to 2.2% for the same period in fiscal 2021.

Consolidated administrative expenses for the three-month period ended February 28, 2022 were $1,008,000 compared to $817,000 for the same period in fiscal 2021. The increase in administrative expenses for Q1 of fiscal 2022 is due to the rising wages and benefit improvements. Administrative expenses as a percentage of sales were 18.0% for the three-month period ended February 28, 2022 compared to 15.1% for the same period in fiscal 2021.

Net Loss

Consolidated net loss was $(406,000) for the three-month period ended February 28, 2022 compared to net loss of $(315,000) for the same period in fiscal 2021. Our Agricultural Products segment showed improvement in the first fiscal quarter of 2022, but our Modular Buildings and Tools showed increased losses year over year. The first quarter of our fiscal year is typically our worst performing quarter of the year because of the timing of orders and production in our Agricultural Products segment. Our production increases in the spring and summer months in this segment and slows down again in the winter months. Our Tools segment is carrying the backlog to be successful for the remainder of the fiscal year as we work through labor shortages with automation. The Modular Buildings segment will be working on closing additional contracts to stabilize revenues for the remainder of the year.

Order Backlog

The consolidated order backlog net of discounts as of April 8, 2022 was $11,173,000 compared to $6,483,000 as of April 8, 2021, a 42% increase. The Agricultural Products segment order backlog was $9,038,000 as of April 8, 2022 compared to $5,408,000 in fiscal 2021. The backlog for the Modular Buildings segment was $1,463,000 as of April 8, 2022, compared to $717,000 in fiscal 2021. The backlog for the Tools segment was $671,000 as of April 8, 2022 compared to $358,000 in fiscal 2021. Our backlog numbers are up significantly in all three segments while we are carrying historic backlog numbers in our Agricultural Products and Tools segments. We will be battling supply chain challenges and workforce shortages in fiscal 2022 as we work through our open orders. Our order backlog is not necessarily indicative of future revenue to be generated from such orders due to the possibility of order cancellations and dealer discount arrangements we may enter into from time to time.

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Liquidity and Capital Resources

Our primary source of funds for the three months ended February 28, 2022 was cash generated by operating activities. The collection of accounts receivables and customer deposits related to our fall early order program provided approximately $2.7 million in cash in the first three months of fiscal 2022. Our primary uses of cash were related to the retirement of debt and rising inventory costs. We expect our primary capital needs for the remainder of fiscal 2022 to relate to operating costs, primarily production costs, fulfillment of customer deposits, and the retirement of debt. We also expect to use cash on capital expenditures that improve work force efficiency and maximize shop output over the next two years as part of Iowa Economic Development Authority’s Manufacturing 4.0 program. The Company will be receiving a $500,000 grant to use on capital equipment, which requires a 25% match by the Company.

We have a $5,000,000 revolving line of credit with Bank Midwest that, as of February 28, 2022, had an outstanding principal balance of $3,150,530. This line of credit is scheduled to mature on March 30, 2023.

The Company continues to seek additional funding up to $2 million under the SBA’s Economic Injury Disaster Loan program.

On March 29, 2022, the Company entered into a Common Stock Purchase Agreement with Alumni Capital LP to provide aggregate gross proceeds to the Company of up to $3,000,000 in exchange for the Company’s common stock. The Company expects to fully utilize the $3,000,000 in funding under this Stock Purchase Agreement over the next twelve months for capital improvements that improve plant efficiency, production output and new product development.

We believe our 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.

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 Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), 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 as of February 28, 2022. Our management has concluded that the consolidated financial statements included in this report present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

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.

The following table presents the information with respect to purchases made by us of our common stock during the first quarter of fiscal 2022:

	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs
December 1 to December 31, 2021		-	$	-		N/A		N/A
January 1 to January 31, 2022		-	$	-		N/A		N/A
February 1 to February 28, 2022		10,406	$	3.35		N/A		N/A
Total		10,406	$	3.35

⁽¹⁾ Reflects shares withheld pursuant to the terms of restricted stock awards under our 2020 Plan to offset tax withholding obligations that occur upon vesting and release of shares. The value of the shares withheld is the closing price of our common stock on the date the relevant transaction occurs.

Item 3.  Defaults Upon Senior Securities.

None.

Item 4.  Mine Safety Disclosures.

Not applicable.

Item 5.  Other Information.

Line of Credit Renewals

Effective March 28, 2022, we renewed our $5,000,000 revolving line of credit with Bank Midwest. The revolving line of credit matures on March 30, 2023 and requires monthly interest-only payments. The updated Promissory Note with Bank Midwest is included as Exhibit 10.1 hereto and is incorporated herein.

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Item 6.  Exhibits.

Exhibit No.	Description
10.1	Promissory Note, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated March 28, 2022 – filed herewith.
10.2	Common Stock Purchase Agreement, dated March 29, 2022, by and between Art's-Way Manufacturing Co., Inc. and Alumni Capital LP. – incorporated by reference to form 8-K filed April 4, 2022.
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 iXBRL (Inline 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.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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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 14, 2022	By: /s/ David A. King
	David A. King
	President and Chief Executive Officer
Date: April 14, 2022	By: /s/ Michael W. Woods
	Michael W. Woods
	Chief Financial Officer

22

EX-10.1

Exhibit 10.1

*0339+0000720+040010106019*

PROMISSORY NOTE

Principal $5,000,000.00	Loan Date 03-28-2022	Maturity 03-30-2023	Loan No 040010106019	Call / Coll RC-C 4a / 43	Account 720	Officer NRS	Initials
References in the boxes above are for Lender's 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.

5556 Highway 9; PO Box 288

Armstrong, IA 50514-7566

Lender:         Bank Midwest Armstrong Branch PO Box 136

500 6th Street

Armstrong, IA 50514

Principal Amount: $5,000,000.00   Date of Note: March 28, 2022

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 one payment of all outstanding principal plus all accrued unpaid interest on March 30, 2023. 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; then to principal; and then to any late charges. 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 Prime 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. 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 3.250% 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 1.500 percentage points over the Index (the "Margin"), adjusted if necessary for any minimum and maximum rate limitations described below, resulting in an initial rate of 4.750% per annum based on a year of 360 days. If Lender determines, in its sole discretion, that the Index has become unavailable or unreliable, either temporarily, indefinitely, or permanently, during the term of this Note, Lender may amend this Note by designating a substantially similar substitute index. Lender may also amend and adjust the Margin to accompany the substitute index. The change to the Margin may be a positive or negative value, or zero. In making these amendments, Lender may take into consideration any then-prevailing market convention for selecting a substitute index and margin for the specific Index that is unavailable or unreliable. Such an amendment to the terms of this Note will become effective and bind Borrower 10 business days after Lender gives written notice to Borrower without any action or consent of the Borrower. 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. Rather, early payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked "paid in full", "without recourse", or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Bank Midwest, Armstrong Branch, PO Box 136, 500 6th Street, Armstrong, IA 50514.

LATE CHARGE. If a payment is 30 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment or $8.50, whichever is greater.

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.

Loan No: 040010106019 PROMISSORY NOTE (Continued) Page 2

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.

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

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: Michael Woods, CFO of Art's-Way Manufacturing Co., Inc.; and David King, CEO of Art's-Way Manufacturing Co., Inc. Borrower agrees to be liable for all sums either: (A) advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower's accounts with Lender. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Note if: (A) Borrower or any guarantor is in default under the terms of this Note or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Note; (B) Borrower or any guarantor ceases doing business or is insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor's guarantee of this Note or any other loan with Lender; (D) Borrower has applied funds provided pursuant to this Note for purposes other than those authorized by Lender; or (E) Lender in good faith believes itself insecure.

PURPOSE OF LOAN. The specific purpose of this loan is: 2022 Operating Line of Credit.

PRIOR NOTE. Renewal of Loan #40010079777.

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.

SHARING CUSTOMER INFORMATION WITH AFFILIATES. Borrower acknowledges and agrees that Lender may share Borrower's financial information with any affiliate of Bank Midwest. Lender agrees that it will require those affiliates to maintain the privacy of such information.

GENERAL PROVISIONS. 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.

Loan No: 040010106019 PROMISSORY NOTE (Continued) Page 3

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/ Michael W. Woods          Michael Woods, CFO of Art's-Way Manufacturing Co., Inc.

Loan No: 040010106019 PROMISSORY NOTE (Continued) Page 4

By:         /s/ David A. King          David King, CEO of Art's-Way Manufacturing Co., Inc.

LENDER:

BANK MIDWEST

X         /s/ Nicole Simpson          Nicole Simpson, Market Leader/VP Ag-Comm Lender

EX-31.1

Exhibit 31.1

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

(SECTION 302 CERTIFICATION)

I, David A. King, 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 control over financial reporting.

		ART’S-WAY MANUFACTURING CO., INC.
Date:	April 14, 2022	/s/ David A. King
		David A. King
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

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

(SECTION 302 CERTIFICATION)

I, Michael W. Woods, 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 control over financial reporting.

		ART’S-WAY MANUFACTURING CO., INC.
Date:	April 14, 2022	/s/ Michael W. Woods
		Michael W. Woods
		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, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David A. King, 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.

Date:	April 14, 2022	/s/ David A. King
		David A. King
		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, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael W. Woods, 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:

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

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

Date:	April 14, 2022	/s/ Michael W. Woods
		Michael W. Woods
		Chief Financial Officer

XML

Document And Entity Information - shares	3 Months Ended
	Feb. 28, 2022	Apr. 04, 2022
Document Information [Line Items]
Entity Central Index Key	0000007623
Entity Registrant Name	ARTS WAY MANUFACTURING CO INC
Amendment Flag	false
Current Fiscal Year End Date	--11-30
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2022
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Feb. 28, 2022
Document Transition Report	false
Entity File Number	000-05131
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	42-0920725
Entity Address, Address Line One	5556 Highway 9
Entity Address, City or Town	Armstrong
Entity Address, State or Province	IA
Entity Address, Postal Zip Code	50514
City Area Code	712
Local Phone Number	864-3131
Title of 12(b) Security	Common stock $.01 par value
Trading Symbol	ARTW
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		4,630,097

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Feb. 28, 2022	Nov. 30, 2021
Current assets:
Cash	$ 3,461	$ 2,658
Accounts receivable-customers, net of allowance for doubtful accounts of $26,748 and $38,188 at February 28, 2022 and November 30, 2021, respectively	1,582,564	2,663,030
Inventories, net	9,700,315	9,210,103
Cost and profit in excess of billings	145,640	177,284
Other current assets	627,464	121,170
Total current assets	12,059,444	12,174,245
Property, plant, and equipment, net	5,261,388	5,237,328
Assets held for lease, net	521,555	521,555
Deferred income taxes	2,730,925	2,621,886
Other assets	278,411	299,034
Total assets	20,851,723	20,854,048
Current liabilities:
Accounts payable	1,553,729	1,737,091
Customer deposits	1,894,785	278,509
Billings in excess of cost and profit	368,514	280,761
Income taxes payable	5,000	5,500
Accrued expenses	1,018,558	1,210,964
Line of credit	3,150,530	4,074,530
Current portion of long-term debt	102,739	99,462
Total current liabilities	8,093,855	7,686,817
Long-term liabilities
Long-term portion of finance lease liabilities	129,864	142,386
Long-term portion of operating lease liabilities	31,612	34,931
Long-term debt, excluding current portion	2,613,375	2,635,467
Total liabilities	10,868,706	10,499,601
Commitments and Contingencies (Notes 8, 9, 10 and 13)
Stockholders’ equity:
Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares at February 28, 2022 and November 30, 2021; issued and outstanding 0 shares at February 28, 2022 and November 30,2021.	0	0
Common stock – $0.01 par value. Authorized 9,500,000 shares at February 28, 2022 and November 30, 2021; issued 4,674,671 at February 28, 2022 and 4,583,504 at November 30, 2021	46,747	45,835
Additional paid-in capital	3,829,701	3,760,649
Retained earnings	6,249,998	6,656,487
Treasury stock, at cost (54,938 shares at February 28, 2022 and 44,532 shares at November 30, 2021)	(143,429)	(108,524)
Total stockholders’ equity	9,983,017	10,354,447
Total liabilities and stockholders’ equity	$ 20,851,723	$ 20,854,048

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Feb. 28, 2022	Nov. 30, 2021
Allowance for doubtful accounts	$ 26,748	$ 38,188
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)	4,674,671	4,583,504
Treasury stock (in shares)	54,938	44,532

XML

Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended
	Feb. 28, 2022	Feb. 28, 2021
Sales	$ 5,613,066	$ 5,400,572
Cost of goods sold	4,420,922	4,357,894
Gross profit	1,192,144	1,042,678
Expenses:
Engineering	134,071	121,391
Selling	487,156	472,974
General and administrative	1,007,793	816,836
Total expenses	1,629,020	1,411,201
Income (Loss) from operations	(436,876)	(368,523)
Other income (expense):
Interest expense	(76,704)	(58,684)
Other	(1,552)	27,657
Total other income (expense)	(78,256)	(31,027)
Income (Loss) before income taxes	(515,132)	(399,550)
Income tax expense (benefit)	(108,643)	(84,312)
Net Income (Loss)	$ (406,489)	$ (315,238)

XML

Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Total
Balance (in shares) at Nov. 30, 2020	4,470,004			35,097
Balance at Nov. 30, 2020	$ 44,700	$ 3,496,243	$ 6,443,856	$ (78,054)	$ 9,906,745
Stock based compensation (in shares)	93,500			5,570
Stock based compensation	$ 935	61,119	0	$ (18,296)	43,758
Net (loss)	$ 0	0	(315,238)	$ 0	(315,238)
Balance (in shares) at Feb. 28, 2021	4,563,504			40,667
Balance at Feb. 28, 2021	$ 45,635	3,557,362	6,128,618	$ (96,350)	9,635,265
Balance (in shares) at Nov. 30, 2021	4,583,504			44,532
Balance at Nov. 30, 2021	$ 45,835	3,760,649	6,656,487	$ (108,524)	10,354,447
Stock based compensation (in shares)	91,167			10,406
Stock based compensation	$ 912	69,052	0	$ (34,905)	35,059
Net (loss)	$ 0	0	(406,489)	$ 0	(406,489)
Balance (in shares) at Feb. 28, 2022	4,674,671			54,938
Balance at Feb. 28, 2022	$ 46,747	$ 3,829,701	$ 6,249,998	$ (143,429)	$ 9,983,017

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Feb. 28, 2022	Feb. 28, 2021
Cash flows from operations:
Net income (loss)	$ (406,489)	$ (315,238)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock based compensation	69,964	62,054
Increase (Decrease) in obsolete inventory reserves	(140,485)	(216,795)
Gain on disposal of property, plant, and equipment	0	(8,000)
Depreciation and amortization expense	167,542	161,107
Accrued interest on deferred debt payments	4,213	4,161
Increase (decrease) in allowance for doubtful accounts	(11,440)	25,201
Deferred income taxes	(109,039)	(97,413)
Changes in assets and liabilities:
Accounts receivable	1,091,906	684,378
Inventories	(349,727)	76,951
Net investment in sales-type leases	0	14,069
Other assets	(506,294)	(225,977)
Accounts payable	(183,362)	(187,110)
Contracts in progress, net	119,397	(397,920)
Customer deposits	1,616,276	1,179,196
Income taxes payable	(500)	3,900
Accrued expenses	(193,146)	(81,262)
Net cash provided by operating activities	1,168,816	681,302
Cash flows from investing activities:
Purchases of property, plant, and equipment	(174,133)	(163,927)
Net proceeds from sale of assets	0	8,000
Net cash used in investing activities	(174,133)	(155,927)
Cash flows from financing activities:
Net change in line of credit	924,000	484,000
Principal payments on finance lease obligations	(11,946)	0
Repayment of term debt	(23,029)	(21,873)
Repurchases of common stock	(34,905)	(18,296)
Net cash used in financing activities	(993,880)	(524,169)
Net decrease in cash	803	1,206
Cash at beginning of period	2,658	2,684
Cash at end of period	3,461	3,890
Supplemental disclosures of cash flow information:
Interest	69,754	48,826
Income taxes	$ 0	$ 0

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Note 1 - Description of the Company

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

Nature of Operations [Text Block]

1) Description of the Company

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

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

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

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Note 2 - Summary of Significant Accounting Policies

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

Significant Accounting Policies [Text Block]

2) Summary of Significant Accounting Policies

Statement Presentation

The foregoing condensed consolidated financial statements of the Company are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position and operating results for the interim periods. The financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2021. The results of operations for the three months ended February 28, 2022 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2022.

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, 2022. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 adds a current expected credit loss (“CECL”) impairment model to U.S. GAAP that is based on expected losses rather than incurred losses. Modified retrospective adoption is required with any cumulative-effect adjustment recorded to retained earnings as of the beginning of the period of adoption. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within the year of adoption. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company will adopt ASU 2016-13 in fiscal 2024. The Company does not expect the application of the CECL impairment model to have a significant impact on its allowance for uncollectible amounts for accounts receivable. 

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Note 3 - Disaggregation of Revenue

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

3) Disaggregation of Revenue

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

	Three Months Ended February 28, 2022
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	3,515,000	$	-	$	-	$	3,515,000
Farm equipment service parts		558,000		-		-		558,000
Steel cutting tools and inserts		-		-		574,000		574,000
Modular buildings		-		851,000		-		851,000
Modular building lease income		-		-		-		-
Other		88,000		17,000		10,000		115,000
	$	4,161,000	$	868,000	$	584,000	$	5,613,000

	Three Months Ended February 28, 2021
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	2,777,000	$	-	$	-	$	2,777,000
Farm equipment service parts		620,000		-		-		620,000
Steel cutting tools and inserts		-		-		606,000		606,000
Modular buildings		-		1,141,000		-		1,141,000
Modular building lease income		-		-		-		-
Other		103,000		150,000		4,000		257,000
	$	3,500,000	$	1,291,000	$	610,000	$	5,401,000

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Note 4 - Contract Receivables, Contract Assets and Contract Liabilities

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

Contract Receivable, Contract Assets, and Contract Liabilities [Text Block]

4) Contract Receivables, Contract Assets and Contract Liabilities

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

	February 28, 2022		November 30, 2021
Receivables	$	1,583,000	$	2,663,000
Assets		146,000		177,000
Liabilities		2,263,000		559,000

The amount of revenue recognized in the first three months of fiscal 2022 that was included in a contract liability at November 30, 2021 was approximately $415,000 compared to $265,000 in the same period of fiscal 2021. The decrease in contract receivables on February 28, 2022 is due to normal collection cycle of receivables in the first quarter of fiscal 2022. Contract liabilities increased significantly during the three months ended February 28, 2022 as the Company received a large amount of deposits from our fall early order program.

The Company utilizes the practical expedient exception for these contracts and will report only on performance obligations greater than one year. As of February 28, 2022, the Company has no performance obligations with an original expected duration greater than one year.

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

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

Earnings Per Share [Text Block]

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

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

Basic and diluted net income (loss) per share have been computed based on the following as of February 28, 2022 and February 28, 2021:

	For the Three Months Ended
	February 28, 2022			February 28, 2021
Numerator for basic and diluted net income (loss) per share:
Net income (loss)	$	(406,489	)	$	(315,238	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,569,720			4,475,279
Effect of dilutive stock options		-			-
For diluted net income (loss) per share - weighted average common shares outstanding		4,569,720			4,475,279
Net Income (Loss) per share - Basic:
Net Income (Loss) per share	$	(0.09	)	$	(0.07	)
Net Income (Loss) per share - Diluted:
Net Income (Loss) per share	$	(0.09	)	$	(0.07	)

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Note 6 - Inventory

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

Inventory Disclosure [Text Block]

6) Inventory

Major classes of inventory are:

	February 28, 2022			November 30, 2021
Raw materials	$	8,418,441		$	8,289,386
Work in process		545,922			357,721
Finished goods		2,934,401			3,088,739
Total Gross Inventory	$	11,898,764		$	11,735,846
Less: Reserves		(2,198,449	)		(2,525,743	)
Net Inventory	$	9,700,315		$	9,210,103

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Note 7 - Accrued Expenses

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

7) Accrued Expenses

Major components of accrued expenses are:

	February 28, 2022		November 30, 2021
Salaries, wages, and commissions	$	622,984	$	654,757
Accrued warranty expense		115,062		202,850
Other		280,512		353,357
	$	1,018,558	$	1,210,964

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Note 8 - Assets Held for Lease

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

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

8) Assets Held for Lease

Major components of assets held for lease are:

	February 28, 2022		November 30, 2021
Modular Buildings	$	521,555	$	521,555
Total assets held for lease	$	521,555	$	521,555

There were no rents recognized from assets held for lease included in sales on the Condensed Consolidated Statements of Operations during the three months ended February 28, 2022 and February 28, 2021.

There were no future minimum lease receipts from assets held for lease as of February 28, 2022.

On March 14, 2022 a lease agreement was signed for the rental of one of the Company’s existing assets held for lease in the amount of $4,175 per month beginning on May 1, 2022.

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Note 9 - Product Warranty

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

Product Warranty Disclosure [Text Block]

9) Product Warranty

The Company offers warranties of various lengths to its customers depending on the specific product and terms of the customer purchase agreement. The average length of the warranty period is one year from the date of purchase. The Company’s warranties require it to repair or replace defective products during the warranty period at no cost to the customer. Product warranty is included in the price of the product and provides assurance that the product will function in accordance with agreed-upon specifications. It does not represent a separate performance obligation under ASC 606. The Company records a liability for estimated costs that may be incurred under its warranties. The costs are estimated based on historical experience and any specific warranty issues that have been identified. Although historical warranty costs have been within expectations, there can be no assurance that future warranty costs will not exceed historical amounts. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the balance as necessary. The accrued warranty balance is included in accrued expenses as shown in Note 7 “Accrued Expenses.” Changes in the Company’s product warranty liability for the three months ended February 28, 2022 and February 28, 2021 are as follows:

	For the Three Months Ended
	February 28, 2022			February 28, 2021
Balance, beginning	$	202,850		$	291,453
Settlements / adjustments		21,624			33,506
Warranties issued		(109,412	)		(29,378	)
Balance, ending	$	115,062		$	295,581

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Note 10 - Loan and Credit Agreements

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

Debt Disclosure [Text Block]

10) Loan and Credit Agreements

The Company maintains one revolving line of credit and one term loan with Bank Midwest. The Company also has three term loans with the U.S. Small Business Administration under the Economic Injury Disaster Loan program.

Bank Midwest Revolving Line of Credit and Term Loan

The Company maintains a credit facility with Bank Midwest consisting of a $5,000,000 revolving line of credit (the “Line of Credit”) used for working capital purposes, and a $2,600,000 term loan due October 1, 2037 (the “Term Loan”). On February 28, 2022, the balance of the Line of Credit was $3,150,530 with $1,849,470 remaining available, as may be 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 net inventory, less any outstanding loan balance on the Line of Credit. On February 28, 2022, the Line of Credit was not limited by the borrowing base calculation. Any unpaid principal amount borrowed on the Line of Credit accrues interest at a floating rate per annum equal to 1.50% above the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The interest rate floor is set at 4.25% per annum and the current interest rate is 5.00% per annum following an increase in March 2022. The Line of Credit was most recently renewed on March 28, 2022. The Line of Credit matures on March 30, 2023 and requires monthly interest-only payments.

The Term Loan accrues interest at a rate of 5.00% for the first sixty months, which will end on September 28, 2022. Thereafter, the Term Loan will accrue interest at a floating rate per annum equal to 0.75% above the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The interest rate floor is set at 4.15% per annum and the interest rate may only be adjusted by Bank Midwest once every five years. Monthly payments of $17,271 for principal and interest are required. The Term Loan is also guaranteed by the United States Department of Agriculture (“USDA”), which required an upfront guarantee fee of $62,400 and requires an annual fee of 0.5% of the unpaid balance. As part of the USDA guarantee requirements, shareholders owning more than 20% are required to personally guarantee a portion of the Term Loan, in an amount equal to their stock ownership percentage. The J. Ward McConnell Jr. Living Trust, the estate of the former Vice Chairman of the Board of Directors and a shareholder owning more than 20% of the Company’s outstanding stock, is guaranteeing approximately 38% of the Term Loan, for an annual fee of 2% of the personally guaranteed amount. The initial guarantee fee will be amortized over the life of the Term Loan, and the annual fees and personally guaranteed amounts are expensed monthly.

The Term Loan is governed by the terms of a Promissory Note, dated September 28, 2017, entered into between the Company and Bank Midwest. The Line of Credit is governed by the terms of a Promissory Note, dated February 11, 2021, entered into between the Company and Bank Midwest.

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

To further secure the Line of Credit, the Company granted Bank Midwest a mortgage on its Canton, Ohio property held by Ohio Metal Working Products/Art’s-Way Inc. The Term Loan is secured by a mortgage on the Company’s Armstrong, Iowa and Monona, Iowa properties. Each mortgage is governed by the terms of a separate Mortgage, dated September 28, 2017, and each property is also subject to a separate Assignment of Rents, dated September 28, 2017.

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

Compliance with the following Bank Midwest covenants is measured annually at November 30. 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 also must receive bank approval for purchases or sales of equipment over $100,000 annually and maintain reasonable salaries and owner compensation. The Company received the necessary approvals for purchases of equipment over $100,000 for the three months ended February 28, 2022. On March 28, 2022, the Company and Bank agreed to remove the covenant related to purchases and sale of equipment over $100,000 annually. This covenant was replaced with purchases or sale of individual equipment will be limited to $50,000. Any purchases beyond the $50,000 limit will be mutually agreed upon. The Company was out of compliance with its debt to worth ratio covenant in place under the Bank Midwest loan agreements as of November 30, 2021. Bank Midwest issued a waiver forgiving the noncompliance, and in turn waived the event of default. The next measurement date is November 30, 2022.

The Company also has a minimum working capital requirement of $4,000,000 that is measured monthly. The $4,000,000 working capital level serves as a trigger point for Bank Midwest and the Company to continue discussion of capital raising strategies to support additional capital injection. As of February 28, 2022, the Company was short of its working capital requirement by approximately $34,000. If the Company fails to get back in compliance, a meeting will be conducted to review the Company’s strategy to get back into compliance with the covenant. The Company will be considered in default if the plan is not accepted by Bank Midwest or the Company is unable to remedy in the time granted by Bank Midwest. The Company expects normal operations in Q2 of fiscal 2022 to put the Company back in compliance with the working capital requirement.

SBA Economic Injury Disaster Loans

On June 18, 2020, and again on June 24, 2020 the Company executed the standard loan documents required for securing loans offered by the U.S. Small Business Administration under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. Two loans were executed on June 18, 2020 with principal amounts of $150,000 each, with a third loan executed on June 24, 2020 with a principal amount of $150,000. Proceeds from these EIDLs are being used for working capital purposes. Interest accrues at the rate of 3.75% per annum and will accrue from the date of inception. Installment payments, including principal and interest, are due monthly, twenty-four months from the date of the EIDLs, in the amount of $731 per EIDL. The balance of principal and interest is payable 30 years from the date of the EIDL. The EIDLs are secured by a security interest on all of the Company’s assets. Each EIDL is governed by the terms of a separate Promissory Note, dated either June 18, 2020 or June 24, 2020, as applicable, entered into by the Company or the applicable subsidiary.

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

	February 28, 2022		November 30, 2021
Bank Midwest loan payable in monthly installments of $17,271 including interest at 5.00%, due October 1, 2037	$	2,237,384	$	2,260,412
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning June 18, 2022, due June 18, 2050		159,555		158,168
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning June 24, 2022, due June 24, 2050		159,620		158,181
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning June 18, 2022, due June 18, 2050		159,555		158,168
Total term debt	$	2,716,114	$	2,734,929
Less current portion of term debt		102,739		99,462
Term debt, excluding current portion	$	2,613,375	$	2,635,467

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

Year	Amount
2022	$	101,362
2023		108,284
2024		113,444
2025		119,552
2026		125,630
2027 and thereafter		2,147,842
	$	2,716,114

On March 22, 2022, the SBA announced a six-month extension on the first payment due date for the EIDL program. The above information reflects EIDL maturities as they existed on the February 28, 2022 balance sheet date.

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Note 11 - Income Taxes

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

11) Income Taxes

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

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Note 12 - Related Party Transactions

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

12) Related Party Transactions

During the three months ended February 28, 2022 and February 28, 2021, the Company did not recognize any revenues from transactions with a related party, and no amounts in accounts receivable balances were due from a related party. From time to time, the Company purchases various supplies from related parties, which are companies previously owned by the late J. Ward McConnell, Jr., the former Vice Chairman of the Company’s Board of Directors and currently owned by his son, Marc McConnell, the Chairman of the Company’s Board of Directors, who also serves as President of these companies. J. Ward McConnell, Jr. as a shareholder owning more than 20% of the Company’s outstanding stock, was required to guarantee a portion of the Company’s term debt in accordance with the USDA guarantee on the Company’s term loan. J. Ward McConnell Jr.’s estate, the J. Ward McConnell, Jr. Living Trust, is paid a monthly fee for the guarantee. In the three months ended February 28, 2022, the Company recognized $9,349 of expense for transactions with related parties, compared to $4,669 for the three months ended February 28, 2021. As of February 28, 2022, accrued expenses contained a balance of $1,299 owed to a related party compared to $1,353 on February 28, 2021.

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Note 13 - Leases

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

Leases [Text Block]

13) Leases

The Company determines if an arrangement is a lease at inception of a contract. The nature of the Company’s leases at this time is shop machinery and office equipment, mainly copiers, with terms of 12 to 60 months. Operating and finance leases are included in other assets as lease right-of-use (“ROU”) assets on the Consolidated Balance Sheets while current lease liabilities are included as accrued expenses. The long-term portions of lease liabilities are shown as long-term liabilities on the Consolidated Balance Sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the present value payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense for lease payments is recognized on a straight-line basis over the lease term while finance lease ROU assets are amortized on a straight line basis and interest expense is recorded over the lease term.

The Company has copier lease agreements with lease and non-lease components and has elected the practical expedient not to separate lease and non-lease components for this asset class. The Company has also elected not to recognize lease liabilities and ROU assets for leases with an initial term of twelve months or less. The Company recognizes variable costs that depend on usage in profit or loss as they are incurred.

The components of operating leases on the Condensed Consolidated Balance Sheets at February 28, 2022 and November 30, 2021 were as follows:

	February 28, 2022		November 30, 2021
Operating lease right-of-use assets (in other assets)	$	44,639		47,794
Current portion of operating lease liabilities (in accrued expenses)	$	13,027		12,863
Long-term portion of operating lease liabilities		31,612		34,931
Total operating lease liabilities	$	44,639		47,794

The Company recorded $4,843 of operating lease costs in the three months ended February 28, 2022, which included variable costs tied to usage, compared to $6,080 for the three months ended February 28, 2021. The Company’s operating leases carry a weighted average lease term of 46 months and have a weighted average discount rate of 4.88%

Future maturities of operating lease liabilities are as follows:

Years Ending November 30,
2022	11,186
2023	12,345
2024	11,162
2025	9,532
2026	4,764
Total lease payments	48,989
Less imputed interest	(4,350	)
Total operating lease liabilities	44,639

The components of finance leases on the Consolidated Balance Sheets on February 28, 2022 and November 30, 2021 were as follows:

	February 28, 2022		November 30, 2021
Finance lease right-of-use assets (net of amortization in other assets)	$	174,526	$	190,667
Current portion of finance lease liabilities (accrued expenses)	$	49,169	$	48,591
Long-term portion of finance lease liabilities		129,864		142,386
Total finance lease liabilities	$	179,033	$	190,977

Future maturities of finance lease liabilities as of November 30, 2022 are as follows:

Year Ending November 30,
2022	$	42,485
2023		56,646
2024		68,029
2025		14,203
2026		12,619
Total lease payments		193,982
Less imputed interest		(14,949	)
Total finance lease liabilities	$	179,033

The weighted average lease term of the Company’s finance leases are 39 months while the weighted average rate of finance leases is 4.77%. The Company incurred $16,142 of amortization expense from ROU assets related to finance leases in the first three months ending February 28, 2022 compared to $0 for the same period in 2021.

On March 3, 2022, the Company entered into a finance lease agreement for the lease of three robotic weld systems. The terms of the lease agreement are payments of approximately $5,068 per month for 60 months with a bargain purchase option of $30,590 at the end of the lease.

The Company expects delivery of a Lift King lift truck in April of fiscal 2022, with monthly payments beginning upon receipt of approximately $1,627 for 60 months with a $1.0 bargain purchase option at the end of the lease.

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Note 14 - Equity Incentive Plan and Stock Based Compensation

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

14) Equity Incentive Plan and Stock Based Compensation

On February 25, 2020, the Board of Directors of the Company (the “Board”) authorized and approved the Art’s-Way Manufacturing Co., Inc. 2020 Equity Incentive Plan (the “2020 Plan”). The 2020 Plan was approved by the stockholders on April 30, 2020. The 2020 Plan replaced the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan (the “2011 Plan”) and prior plans. The 2020 Plan added an additional 500,000 shares to the number of shares reserved for issuance pursuant to equity awards. No further awards will be made under the 2011 Plan or other prior plans. Awards to directors and executive officers under the 2020 Plan are governed by the forms of agreement approved by the Board of Directors. Stock options or other awards granted prior to February 25, 2020 are governed by the applicable prior plan and the forms of agreement adopted thereunder.

The 2020 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 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.

	For the Three Months Ended
	February 28, 2022			February 28, 2021
Shares issued to directors (immediate vesting)		5,000			5,000
Shares issued to directors, employees, and consultants (three-year vesting)		94,500			88,500
Unvested shares forfeit upon termination		(8,333	)		-
Total shares issued		91,167			93,500

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, 2022 or in the same respective period of fiscal 2021.

	For the Three Months Ended
	February 28, 2022			February 28, 2021
Stock-based compensation expense		69,964			62,054
Treasury share repurchase expense		(34,905	)		(18,296	)
Stock-based compensation expense net of treasury repurchases		35,059			42,758

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Note 15 - Common Stock Purchase Agreement

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

15) Common Stock Purchase Agreement

On March 29, 2022, Art’s-Way Manufacturing Co., Inc. (the “Company”) entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Alumni Capital LP, a Delaware limited partnership (“Alumni Capital”), pursuant to which the Company agreed to sell, and Alumni Capital agreed to purchase, upon request of the Company in one or more transactions, a number of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) providing aggregate gross proceeds to the Company of up to $3,000,000 (the “Maximum”). The Purchase Agreement expires upon the earlier of the aggregate gross proceeds from the sale of shares meeting the Maximum or June 30, 2023.

Among other limitations, unless otherwise agreed upon by Alumni Capital, each sale of shares will be limited to 50,000 shares and further limited to no more than the number of shares that would result in the beneficial ownership by Alumni Capital and its affiliates, at any single point in time, of more than 9.99% of the then-outstanding shares of Common Stock. Alumni Capital will purchase the shares of Common Stock under the Agreement at a discount ranging from 3-5% of the lowest traded price of the Common Stock in the five business days preceding the Company delivering notice of the required purchase of shares to Alumni Capital.

In exchange for Alumni Capital entering into the Purchase Agreement, the Company issued 20,000 shares of Common Stock to Alumni Capital upon execution of the Purchase Agreement (the “Initial Commitment Shares”) and will issue another 20,000 shares in connection with the first closing under the Purchase Agreement (with the Initial Commitment Shares, the “Commitment Shares”). Alumni Capital represented to the Company, among other things, that it was an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”)). The Company shares of Common Stock, including the Commitment Shares, are being offered and sold under the Purchase Agreement in reliance upon an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. The securities sold may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

The Purchase Agreement provides that the Company will file a registration statement under the Securities Act covering the resale of the shares issued to Alumni Capital. Alumni Capital’s obligation to purchase shares of Common Stock under the Purchase Agreement is conditioned upon, among other things, the registration statement having been declared effective by the Securities and Exchange Commission.

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Note 16 - Disclosures About the Fair Value of Financial Instruments

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

Fair Value Disclosures [Text Block]

16) Disclosures About the Fair Value of Financial Instruments

The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. At February 28, 2022 and November 30, 2021, the carrying amount approximated fair value for cash, accounts receivable, accounts payable, notes payable to bank, finance lease liabilities and other current and long-term liabilities. The carrying amounts of current assets and liabilities approximate fair value because of the short maturity of these instruments. The fair value of the finance lease liabilities 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 term loans payable also approximates recorded value because the interest rates charged under the loan terms are not substantially different from current interest rates.

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Note 17 - Segment Information

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

17) Segment Information

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

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

Approximate financial information with respect to the reportable segments is as follows.

	Three Months Ended February 28, 2022
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	4,161,000		$	868,000		$	584,000		$	5,613,000
Income (loss) from operations	$	(129,000	)	$	(223,000	)	$	(85,000	)	$	(437,000	)
Income (loss) before tax	$	(186,000	)	$	(230,000	)	$	(99,000	)	$	(515,000	)
Total Assets	$	15,784,000		$	2,695,000		$	2,373,000		$	20,852,000
Capital expenditures	$	153,000		$	14,000		$	7,000		$	174,000
Depreciation & Amortization	$	101,000		$	34,000		$	33,000		$	168,000

	Three Months Ended February 28, 2021
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	3,500,000		$	1,291,000		$	610,000		$	5,401,000
Income (loss) from operations	$	(198,000	)	$	(165,000	)	$	(6,000	)	$	(369,000	)
Income (loss) before tax	$	(212,000	)	$	(172,000	)	$	(16,000	)	$	(400,000	)
Total Assets	$	12,990,000		$	3,171,000		$	2,621,000		$	18,782,000
Capital expenditures	$	155,000		$	9,000		$	-		$	164,000
Depreciation & Amortization	$	99,000		$	29,000		$	33,000		$	161,000

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

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Note 18 - Subsequent Events

3 Months Ended

Feb. 28, 2022

Notes to Financial Statements

Subsequent Events [Text Block]

18) Subsequent Events

Management evaluated all other activity of the Company and concluded that no subsequent events have occurred that would require recognition in the condensed consolidated financial statements, other than the asset held for lease rental agreement that occurred on March 14^th in note 8, the extension of the EIDL first payment due date, the line of credit renewal and covenant update as mentioned in Note 10, the robotic weld cell and lift truck leasing activity in note 13 and the Stock Purchase Agreement mentioned in Note 15 and the Liquidity and Capital Resources section of Item 2 Management’s Discussion and Analysis.

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Significant Accounting Policies (Policies)

3 Months Ended

Feb. 28, 2022

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Statement Presentation

The foregoing condensed consolidated financial statements of the Company are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position and operating results for the interim periods. The financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2021. The results of operations for the three months ended February 28, 2022 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2022.

Use of Estimates, Policy [Policy Text Block]

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the three months ended February 28, 2022. Actual results could differ from those estimates.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 adds a current expected credit loss (“CECL”) impairment model to U.S. GAAP that is based on expected losses rather than incurred losses. Modified retrospective adoption is required with any cumulative-effect adjustment recorded to retained earnings as of the beginning of the period of adoption. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within the year of adoption. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company will adopt ASU 2016-13 in fiscal 2024. The Company does not expect the application of the CECL impairment model to have a significant impact on its allowance for uncollectible amounts for accounts receivable. 

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Note 3 - Disaggregation of Revenue (Tables)

3 Months Ended

Feb. 28, 2022

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three Months Ended February 28, 2022
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	3,515,000	$	-	$	-	$	3,515,000
Farm equipment service parts		558,000		-		-		558,000
Steel cutting tools and inserts		-		-		574,000		574,000
Modular buildings		-		851,000		-		851,000
Modular building lease income		-		-		-		-
Other		88,000		17,000		10,000		115,000
	$	4,161,000	$	868,000	$	584,000	$	5,613,000

	Three Months Ended February 28, 2021
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	2,777,000	$	-	$	-	$	2,777,000
Farm equipment service parts		620,000		-		-		620,000
Steel cutting tools and inserts		-		-		606,000		606,000
Modular buildings		-		1,141,000		-		1,141,000
Modular building lease income		-		-		-		-
Other		103,000		150,000		4,000		257,000
	$	3,500,000	$	1,291,000	$	610,000	$	5,401,000

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Note 4 - Contract Receivables, Contract Assets and Contract Liabilities (Tables)

3 Months Ended

Feb. 28, 2022

Notes Tables

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

	February 28, 2022		November 30, 2021
Receivables	$	1,583,000	$	2,663,000
Assets		146,000		177,000
Liabilities		2,263,000		559,000

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

3 Months Ended

Feb. 28, 2022

Notes Tables

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

	For the Three Months Ended
	February 28, 2022			February 28, 2021
Numerator for basic and diluted net income (loss) per share:
Net income (loss)	$	(406,489	)	$	(315,238	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,569,720			4,475,279
Effect of dilutive stock options		-			-
For diluted net income (loss) per share - weighted average common shares outstanding		4,569,720			4,475,279
Net Income (Loss) per share - Basic:
Net Income (Loss) per share	$	(0.09	)	$	(0.07	)
Net Income (Loss) per share - Diluted:
Net Income (Loss) per share	$	(0.09	)	$	(0.07	)

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Note 6 - Inventory (Tables)

3 Months Ended

Feb. 28, 2022

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	February 28, 2022			November 30, 2021
Raw materials	$	8,418,441		$	8,289,386
Work in process		545,922			357,721
Finished goods		2,934,401			3,088,739
Total Gross Inventory	$	11,898,764		$	11,735,846
Less: Reserves		(2,198,449	)		(2,525,743	)
Net Inventory	$	9,700,315		$	9,210,103

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Note 7 - Accrued Expenses (Tables)

3 Months Ended

Feb. 28, 2022

Notes Tables

Schedule of Accrued Liabilities [Table Text Block]

	February 28, 2022		November 30, 2021
Salaries, wages, and commissions	$	622,984	$	654,757
Accrued warranty expense		115,062		202,850
Other		280,512		353,357
	$	1,018,558	$	1,210,964

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Note 8 - Assets Held for Lease (Tables)

3 Months Ended

Feb. 28, 2022

Notes Tables

Property, Plant, and Equipment, Lessor Asset under Operating Lease [Table Text Block]

	February 28, 2022		November 30, 2021
Modular Buildings	$	521,555	$	521,555
Total assets held for lease	$	521,555	$	521,555

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Note 9 - Product Warranty (Tables)

3 Months Ended

Feb. 28, 2022

Notes Tables

Schedule of Product Warranty Liability [Table Text Block]

	For the Three Months Ended
	February 28, 2022			February 28, 2021
Balance, beginning	$	202,850		$	291,453
Settlements / adjustments		21,624			33,506
Warranties issued		(109,412	)		(29,378	)
Balance, ending	$	115,062		$	295,581

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Note 10 - Loan and Credit Agreements (Tables)

3 Months Ended

Feb. 28, 2022

Notes Tables

Schedule of Debt [Table Text Block]

	February 28, 2022		November 30, 2021
Bank Midwest loan payable in monthly installments of $17,271 including interest at 5.00%, due October 1, 2037	$	2,237,384	$	2,260,412
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning June 18, 2022, due June 18, 2050		159,555		158,168
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning June 24, 2022, due June 24, 2050		159,620		158,181
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning June 18, 2022, due June 18, 2050		159,555		158,168
Total term debt	$	2,716,114	$	2,734,929
Less current portion of term debt		102,739		99,462
Term debt, excluding current portion	$	2,613,375	$	2,635,467

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

Year	Amount
2022	$	101,362
2023		108,284
2024		113,444
2025		119,552
2026		125,630
2027 and thereafter		2,147,842
	$	2,716,114

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Note 13 - Leases (Tables)

3 Months Ended

Feb. 28, 2022

Notes Tables

Lessee, Operating Leases, Assets and Liabilities [Table Text Block]

	February 28, 2022		November 30, 2021
Operating lease right-of-use assets (in other assets)	$	44,639		47,794
Current portion of operating lease liabilities (in accrued expenses)	$	13,027		12,863
Long-term portion of operating lease liabilities		31,612		34,931
Total operating lease liabilities	$	44,639		47,794

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

Years Ending November 30,
2022	11,186
2023	12,345
2024	11,162
2025	9,532
2026	4,764
Total lease payments	48,989
Less imputed interest	(4,350	)
Total operating lease liabilities	44,639

Lessee, Finance Leases, Assets and Liabilities [Table Text Block]

	February 28, 2022		November 30, 2021
Finance lease right-of-use assets (net of amortization in other assets)	$	174,526	$	190,667
Current portion of finance lease liabilities (accrued expenses)	$	49,169	$	48,591
Long-term portion of finance lease liabilities		129,864		142,386
Total finance lease liabilities	$	179,033	$	190,977

Finance Lease, Liability, Fiscal Year Maturity [Table Text Block]

Year Ending November 30,
2022	$	42,485
2023		56,646
2024		68,029
2025		14,203
2026		12,619
Total lease payments		193,982
Less imputed interest		(14,949	)
Total finance lease liabilities	$	179,033

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Note 14 - Equity Incentive Plan and Stock Based Compensation (Tables)

3 Months Ended

Feb. 28, 2022

Notes Tables

Share-based Payment Arrangement, Activity [Table Text Block]

	For the Three Months Ended
	February 28, 2022			February 28, 2021
Shares issued to directors (immediate vesting)		5,000			5,000
Shares issued to directors, employees, and consultants (three-year vesting)		94,500			88,500
Unvested shares forfeit upon termination		(8,333	)		-
Total shares issued		91,167			93,500

Share-based Payment Arrangement, Expensed and Capitalized, Amount [Table Text Block]

	For the Three Months Ended
	February 28, 2022			February 28, 2021
Stock-based compensation expense		69,964			62,054
Treasury share repurchase expense		(34,905	)		(18,296	)
Stock-based compensation expense net of treasury repurchases		35,059			42,758

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Note 17 - Segment Information (Tables)

3 Months Ended

Feb. 28, 2022

Notes Tables

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

	Three Months Ended February 28, 2022
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	4,161,000		$	868,000		$	584,000		$	5,613,000
Income (loss) from operations	$	(129,000	)	$	(223,000	)	$	(85,000	)	$	(437,000	)
Income (loss) before tax	$	(186,000	)	$	(230,000	)	$	(99,000	)	$	(515,000	)
Total Assets	$	15,784,000		$	2,695,000		$	2,373,000		$	20,852,000
Capital expenditures	$	153,000		$	14,000		$	7,000		$	174,000
Depreciation & Amortization	$	101,000		$	34,000		$	33,000		$	168,000

	Three Months Ended February 28, 2021
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	3,500,000		$	1,291,000		$	610,000		$	5,401,000
Income (loss) from operations	$	(198,000	)	$	(165,000	)	$	(6,000	)	$	(369,000	)
Income (loss) before tax	$	(212,000	)	$	(172,000	)	$	(16,000	)	$	(400,000	)
Total Assets	$	12,990,000		$	3,171,000		$	2,621,000		$	18,782,000
Capital expenditures	$	155,000		$	9,000		$	-		$	164,000
Depreciation & Amortization	$	99,000		$	29,000		$	33,000		$	161,000

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Note 1 - Description of the Company (Details Textual)	3 Months Ended
	Feb. 28, 2022
Number of Operating Segments	3

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Note 3 - Disaggregation of Revenue - Disaggregated Revenue From External Customer (Details) - USD ($)	3 Months Ended
	Feb. 28, 2022	Feb. 28, 2021
Revenue	$ 5,613,000	$ 5,401,000
Farm Equipment [Member]
Revenue	3,515,000	2,777,000
Farm Equipment Service Parts [Member]
Revenue	558,000	620,000
Steel Cutting Tools and Inserts [Member]
Revenue	574,000	606,000
Modular Buildings [Member]
Revenue	851,000	1,141,000
Modular Buildings Lease Income [Member]
Revenue	0	0
Product and Service, Other [Member]
Revenue	115,000	257,000
Agricultural Products [Member]
Revenue	4,161,000	3,500,000
Agricultural Products [Member] | Farm Equipment [Member]
Revenue	3,515,000	2,777,000
Agricultural Products [Member] | Farm Equipment Service Parts [Member]
Revenue	558,000	620,000
Agricultural Products [Member] | Steel Cutting Tools and Inserts [Member]
Revenue	0	0
Agricultural Products [Member] | Modular Buildings [Member]
Revenue	0	0
Agricultural Products [Member] | Modular Buildings Lease Income [Member]
Revenue	0	0
Agricultural Products [Member] | Product and Service, Other [Member]
Revenue	88,000	103,000
Modular Buildings [Member]
Revenue	868,000	1,291,000
Modular Buildings [Member] | Farm Equipment [Member]
Revenue	0	0
Modular Buildings [Member] | Farm Equipment Service Parts [Member]
Revenue	0	0
Modular Buildings [Member] | Steel Cutting Tools and Inserts [Member]
Revenue	0	0
Modular Buildings [Member] | Modular Buildings [Member]
Revenue	851,000	1,141,000
Modular Buildings [Member] | Modular Buildings Lease Income [Member]
Revenue	0	0
Modular Buildings [Member] | Product and Service, Other [Member]
Revenue	17,000	150,000
Tools [Member]
Revenue	584,000	610,000
Tools [Member] | Farm Equipment [Member]
Revenue	0	0
Tools [Member] | Farm Equipment Service Parts [Member]
Revenue	0	0
Tools [Member] | Steel Cutting Tools and Inserts [Member]
Revenue	574,000	606,000
Tools [Member] | Modular Buildings [Member]
Revenue	0	0
Tools [Member] | Modular Buildings Lease Income [Member]
Revenue	0	0
Tools [Member] | Product and Service, Other [Member]
Revenue	$ 10,000	$ 4,000

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Note 4 - Contract Receivables, Contract Assets and Contract Liabilities (Details Textual) - USD ($)	3 Months Ended
	Feb. 28, 2022	Feb. 28, 2021
Contract with Customer, Liability, Revenue Recognized During Period	$ 415,000	$ 265,000
Revenue, Remaining Performance Obligation, Amount	$ 0
Minimum [Member]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Year)	1 year

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Note 4 - Contract Receivables, Contract Assets and Contract Liabilities - Contract With Customers (Details) - USD ($)	Feb. 28, 2022	Nov. 30, 2021
Receivables	$ 1,583,000	$ 2,663,000
Assets	146,000	177,000
Liabilities	$ 2,263,000	$ 559,000

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Note 5 - Net Income (Loss) Per Share of Common Stock - Basic and Diluted Earnings Per Common Share (Details) - USD ($)	3 Months Ended
	Feb. 28, 2022	Feb. 28, 2021
Numerator for basic and diluted net income (loss) per share:
Net income (loss)	$ (406,489)	$ (315,238)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding (in shares)	4,569,720	4,475,279
Effect of dilutive stock options (in shares)	0	0
For diluted net income (loss) per share - weighted average common shares outstanding (in shares)	4,569,720	4,475,279
Net Income (Loss) per share - Basic:
Net Income (Loss) per share (in dollars per share)	$ (0.09)	$ (0.07)
Net Income (Loss) per share - Diluted:
Net Income (Loss) per share (in dollars per share)	$ (0.09)	$ (0.07)

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Note 6 - Inventory - Major Classes of Inventory (Details) - USD ($)	Feb. 28, 2022	Nov. 30, 2021
Raw materials	$ 8,418,441	$ 8,289,386
Work in process	545,922	357,721
Finished goods	2,934,401	3,088,739
Total Gross Inventory	11,898,764	11,735,846
Less: Reserves	(2,198,449)	(2,525,743)
Net Inventory	$ 9,700,315	$ 9,210,103

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Note 7 - Accrued Expenses - Major Components of Accrued Expenses (Details) - USD ($)	Feb. 28, 2022	Nov. 30, 2021
Salaries, wages, and commissions	$ 622,984	$ 654,757
Accrued warranty expense	115,062	202,850
Other	280,512	353,357
Total accrued liabilities, current	$ 1,018,558	$ 1,210,964

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Note 8 - Assets Held for Lease (Details Textual) - USD ($)		3 Months Ended
	Mar. 14, 2022	Feb. 28, 2022	Feb. 28, 2021
Lessor, Operating Lease, Payments to be Received, Total		$ 0
Subsequent Event [Member]
Operating Lease, Monthly Lease Income	$ 4,175
Sales [Member]
Operating Lease, Lease Income, Total		$ 0	$ 0

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Note 8 - Assets Held for Lease - Summary of Assets Held for Lease (Details) - USD ($)	Feb. 28, 2022	Nov. 30, 2021
Assets held for lease	$ 521,555	$ 521,555
Modular Buildings [Member]
Assets held for lease	$ 521,555	$ 521,555

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Note 9 - Product Warranty (Details Textual)	3 Months Ended
	Feb. 28, 2022
Standard Product Warrant Term (Year)	1 year

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Note 9 - Product Warranty - Changes in Product Warranty Liability (Details) - USD ($)	3 Months Ended
	Feb. 28, 2022	Feb. 28, 2021
Balance, beginning	$ 202,850	$ 291,453
Settlements / adjustments	21,624	33,506
Warranties issued	(109,412)	(29,378)
Balance, ending	$ 115,062	$ 295,581

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Note 10 - Loan and Credit Agreements (Details Textual)							3 Months Ended	12 Months Ended
	Mar. 28, 2022 USD ($)	Mar. 22, 2022	Jan. 12, 2021 USD ($)	Jun. 24, 2020 USD ($)	Jun. 18, 2020 USD ($)	Sep. 28, 2017 USD ($)	Feb. 28, 2022 USD ($)	Nov. 30, 2021 USD ($)
Long-term Debt, Total							$ 2,716,114	$ 2,734,929
Term Loan Due October 2037 [Member]
Long-term Debt, Total							$ 2,237,384	$ 2,260,412
Debt Instrument, Interest Rate, Stated Percentage							5.00%	5.00%
Debt Instrument, Periodic Payment, Total							$ 17,271	$ 17,271
EIDL Assistance Program, Loan One [Member]
Proceeds from Issuance of Debt					$ 150,000
EIDL Assistance Program, Loan Three [Member]
Proceeds from Issuance of Debt				$ 150,000
Economic Injury Distaster Loan Assistance Program [Member]
Debt Instrument, Interest Rate, Stated Percentage				3.75%
Debt Instrument, Term (Year)				30 years
Economic Injury Distaster Loan Assistance Program [Member] | Subsequent Event [Member]
Debt Instrument, Payment, Extension Term (Month)		6 months
EIDL Assistance Program, Loan Two [Member]
Debt Instrument, Periodic Payment, Total				$ 731
Bank Midwest [Member]
Long-term Line of Credit, Total							3,150,530
Line of Credit Facility, Remaining Borrowing Capacity							$ 1,849,470
Line of Credit, Borrowing Base, Accounts Receivable							75.00%
Line of Credit, Borrowing Base, Inventory							50.00%
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						0.10
Bank Midwest [Member] | Minimum [Member]
Debt Instrument, Covenant, Annual Purchases or Sales Price of Equipment Before Requiring Bank Approval						$ 100,000
Debt Instrument, Covenant, Annual Purchases or Sales Price of Equipment							$ 100,000
Bank Midwest [Member] | Minimum [Member] | Subsequent Event [Member]
Debt Instrument, Covenant, Annual Purchases or Sales Price of Equipment	$ 50,000
Debt Instrument, Cancelled Covenant, Annual Purchases or Sales Price of Equipment Before Requiring Bank Approval	100,000
Bank Midwest [Member] | Maximum [Member] | Subsequent Event [Member]
Debt Instrument, Covenant, Annual Purchases or Sales Price of Equipment	$ 50,000
Bank Midwest [Member] | Term Loan Due October 2037 [Member]
Long-term Debt, Total							2,600,000
Debt Instrument, Periodic Payment, Total							17,271
Bank Midwest [Member] | Term Loan Due October 2037 [Member] | United States Department of Agriculture [Member]
Upfront Guarantee Fee							$ 62,400
Guarantee Fee, Annual Fee, Percentage							0.50%
Guarantee Requirement, Personally Guarantee, Shareholders Ownership Percentage							20.00%
Bank Midwest [Member] | Term Loan Due October 2037 [Member] | J. Ward McConnell Jr. [Member]
Personally Guaranteed, Percentage of Loan							38.00%
Personally Guaranteed, Fee, Percentage of Guaranteed Amount							2.00%
Bank Midwest [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity							$ 5,000,000
Line of Credit Facility, Wall Street Journal Rate Floor							4.25%
Line of Credit Facility, Interest Rate During Period							5.00%
Bank Midwest [Member] | Revolving Credit Facility [Member] | Wall Street Journal Rate [Member]
Debt Instrument, Basis Spread on Variable Rate							1.50%
Bank Midwest [Member] | Term Loan Due October 2037 [Member]
Debt Instrument, Interest Rate, Stated Percentage							5.00%
Bank Midwest [Member] | Term Loan Due October 2037 [Member] | Minimum [Member]
Debt Instrument, Interest Rate, Effective Percentage							4.15%
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, New Amended Covenant [Member]
Debt Instrument, Covenant, Minimum Working Capital			$ 4,000,000
Debt Instrument, Working Capital Covenant, Out of Compliance, Amount							$ 34,000

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Note 10 - Loan and Credit Agreements - Summary of Term Debt (Details) - USD ($)	Feb. 28, 2022	Nov. 30, 2021
Long-term Debt, Total	$ 2,716,114	$ 2,734,929
Less current portion of term debt	102,739	99,462
Term debt, excluding current portion	2,613,375	2,635,467
Term Loan Due October 2037 [Member]
Long-term Debt, Total	2,237,384	2,260,412
SBA Loan One [Member]
Long-term Debt, Total	159,555	158,168
SBA Loan Two [Member]
Long-term Debt, Total	159,620	158,181
SBA Loan Three [Member]
Long-term Debt, Total	$ 159,555	$ 158,168

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Note 10 - Loan and Credit Agreements - Summary of Term Debt (Details) (Parentheticals) - USD ($)	3 Months Ended	12 Months Ended
	Feb. 28, 2022	Nov. 30, 2021
Term Loan Due October 2037 [Member]
Debt Instrument, Periodic Payment, Total	$ 17,271	$ 17,271
Debt Instrument, Interest Rate, Stated Percentage	5.00%	5.00%
Debt instrument, maturity date	Oct. 01, 2037	Oct. 01, 2037
SBA Loan One [Member]
Debt Instrument, Periodic Payment, Total	$ 731	$ 731
Debt Instrument, Interest Rate, Stated Percentage	3.75%	3.75%
Debt instrument, maturity date	Jun. 18, 2050	Jun. 18, 2050
SBA Loan Two [Member]
Debt Instrument, Periodic Payment, Total	$ 731	$ 731
Debt Instrument, Interest Rate, Stated Percentage	3.75%	3.75%
Debt instrument, maturity date	Jun. 24, 2050	Jun. 24, 2050
SBA Loan Three [Member]
Debt Instrument, Periodic Payment, Total	$ 731	$ 731
Debt Instrument, Interest Rate, Stated Percentage	3.75%	3.75%
Debt instrument, maturity date	Jun. 18, 2050	Jun. 18, 2050

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Note 10 - Loan and Credit Agreements - Summary of Minimum Maturities of Term Debt (Details) - USD ($)	Feb. 28, 2022	Nov. 30, 2021
2022	$ 101,362
2023	108,284
2024	113,444
2025	119,552
2026	125,630
2027 and thereafter	2,147,842
Long-term Debt, Total	$ 2,716,114	$ 2,734,929

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Note 12 - Related Party Transactions (Details Textual) - USD ($)	3 Months Ended
	Feb. 28, 2022	Feb. 28, 2021
Revenue from Related Parties	$ 0	$ 0
Due from Related Parties, Total	0	0
Related Party Transaction, Expenses from Transactions with Related Party	9,349	4,669
Due to Related Parties, Total	$ 1,299	$ 1,353
J. Ward McConnell Jr. [Member]
Related Party, Ownership Percentage	20.00%

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Note 13 - Leases (Details Textual)	3 Months Ended
	Feb. 28, 2022 USD ($)	Feb. 28, 2021 USD ($)	Apr. 14, 2022 USD ($)	Mar. 03, 2022 USD ($)
Lease, Cost, Total	$ 4,843	$ 6,080
Operating Lease, Weighted Average Remaining Lease Term (Month)	46 months
Operating Lease, Weighted Average Discount Rate, Percent	4.88%
Lessee, Finance Lease, Term of Contract (Month)	39 months
Finance Lease, Weighted Average Discount Rate, Percent	4.77%
Finance Lease, Right-of-Use Asset, Amortization	$ 16,142	$ 0
Robotic Weld Systems [Member] | Subsequent Event [Member]
Lessee, Finance Lease, Not yet Commenced, Right-of-Use Assets, Number of Units				3
Lessee, Finance Lease, Not yet Commenced, Monthly Payment, Amount				$ 5,068
Lessee, Finance Lease, Lease Not yet Commenced, Term of Contract (Month)				60 months
Lessee, Finance Lease, Not yet Commenced, Bargain Purchased Option, Amount				$ 30,590
Lift King Lift Truck [Member] | Subsequent Event [Member]
Lessee, Finance Lease, Not yet Commenced, Monthly Payment, Amount			$ 1,627
Lessee, Finance Lease, Lease Not yet Commenced, Term of Contract (Month)			60 months
Lessee, Finance Lease, Not yet Commenced, Bargain Purchased Option, Amount			$ 1.0
Minimum [Member]
Lessee, Operating Lease, Term of Contract (Month)	12 months
Maximum [Member]
Lessee, Operating Lease, Term of Contract (Month)	60 months

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Note 13 - Leases - Components of Operating Leases (Details) - USD ($)	Feb. 28, 2022	Nov. 30, 2021
Operating lease right-of-use assets (in other assets)	$ 44,639	$ 47,794
Current portion of operating lease liabilities (in accrued expenses)	13,027	12,863
Long-term portion of operating lease liabilities	31,612	34,931
Total operating lease liabilities	$ 44,639	$ 47,794

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Note 13 - Leases - Maturities of Operating Lease Liabilities (Details) - USD ($)	Feb. 28, 2022	Nov. 30, 2021
2022	$ 11,186
2023	12,345
2024	11,162
2025	9,532
2026	4,764
Total lease payments	48,989
Less imputed interest	(4,350)
Total operating lease liabilities	$ 44,639	$ 47,794

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Note 13 - Leases - Components of Finance Leases (Details) - USD ($)	Feb. 28, 2022	Nov. 30, 2021
Finance lease right-of-use assets (net of amortization in other assets)	$ 174,526	$ 190,667
Current portion of finance lease liabilities (accrued expenses)	49,169	48,591
Long-term portion of finance lease liabilities	129,864	142,386
Total finance lease liabilities	$ 179,033	$ 190,977

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Note 13 - Leases - Maturities of Finance Lease Liabilities (Details) - USD ($)	Feb. 28, 2022	Nov. 30, 2021
2022	$ 42,485
2023	56,646
2024	68,029
2025	14,203
2026	12,619
Total lease payments	193,982
Less imputed interest	(14,949)
Total finance lease liabilities	$ 179,033	$ 190,977

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Note 14 - Equity Incentive Plan and Stock Based Compensation (Details Textual) - shares		3 Months Ended
	Feb. 25, 2020	Feb. 28, 2022	Feb. 28, 2021
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares)	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures, Total (in shares)		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 (in shares)	1,000
Non-qualified Stock Units to Non-employee Directors, Quarterly [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized (in shares)	1,000
The 2020 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized (in shares)	500,000

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Note 14 - Equity Incentive Plan and Stock Based Compensation - Summary of Shares Issued (Details) - shares	3 Months Ended
	Feb. 28, 2022	Feb. 28, 2021
Shares issued (in shares)	91,167	93,500
Unvested shares forfeit upon termination (in shares)	(8,333)	0
Director [Member] | Vesting Immediately [Member]
Shares issued (in shares)	5,000	5,000
Employees, Directors, and Consultants [Member] | Awards with Three-year Vesting [Member]
Shares issued (in shares)	94,500	88,500

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Note 14 - Equity Incentive Plan and Stock Based Compensation - Summary of Stock-based Compensation Expense (Details) - USD ($)	3 Months Ended
	Feb. 28, 2022	Feb. 28, 2021
Stock-based compensation expense	$ 69,964	$ 62,054
Treasury share repurchase expense	(34,905)	(18,296)
Stock-based compensation expense net of treasury repurchases	$ 35,059	$ 42,758

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Note 15 - Common Stock Purchase Agreement (Details Textual) - USD ($)	Mar. 29, 2022	Feb. 28, 2022	Nov. 30, 2021
Common Stock, Par or Stated Value Per Share (in dollars per share)		$ 0.01	$ 0.01
Alumni Capital [Member] | Subsequent Event [Member]
Common Stock Purchase Agreement, Maximum Gross Proceeds from Issuance or Sale of Equity	$ 3,000,000
Common Stock Purchase Agreement, Maximum Shares Authorized to be Issued (in shares)	50,000
Common Stock Purchase Agreement, Percentage of Common Shares Outstanding	9.99%
Stock Issued During Period, Shares, New Issues (in shares)	20,000
Common Stock Purchase Agreement, Shares to be Issued (in shares)	20,000
Alumni Capital [Member] | Subsequent Event [Member] | Minimum [Member]
Common Stock Purchase Agreement, Discount on Shares, Percent	3.00%
Alumni Capital [Member] | Subsequent Event [Member] | Maximum [Member]
Common Stock Purchase Agreement, Discount on Shares, Percent	5.00%

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Note 17 - Segment Information (Details Textual)	3 Months Ended
	Feb. 28, 2022
Number of Reportable Segments	3

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Note 17 - Segment Information - Segment Reporting Information (Details) - USD ($)	3 Months Ended
	Feb. 28, 2022	Feb. 28, 2021	Nov. 30, 2021
Revenue from external customers	$ 5,613,066	$ 5,400,572
Income (loss) from operations	(436,876)	(368,523)
Total Assets	20,851,723		$ 20,854,048
Capital expenditures	174,133	163,927
Depreciation & Amortization	167,542	161,107
Operating Segments [Member]
Revenue from external customers	5,613,000	5,401,000
Income (loss) from operations	(437,000)	(369,000)
Income (loss) before tax	(515,000)	(400,000)
Total Assets	20,852,000	18,782,000
Capital expenditures	174,000	164,000
Depreciation & Amortization	168,000	161,000
Operating Segments [Member] | Agricultural Products [Member]
Revenue from external customers	4,161,000	3,500,000
Income (loss) from operations	(129,000)	(198,000)
Income (loss) before tax	(186,000)	(212,000)
Total Assets	15,784,000	12,990,000
Capital expenditures	153,000	155,000
Depreciation & Amortization	101,000	99,000
Operating Segments [Member] | Modular Buildings [Member]
Revenue from external customers	868,000	1,291,000
Income (loss) from operations	(223,000)	(165,000)
Income (loss) before tax	(230,000)	(172,000)
Total Assets	2,695,000	3,171,000
Capital expenditures	14,000	9,000
Depreciation & Amortization	34,000	29,000
Operating Segments [Member] | Tools [Member]
Revenue from external customers	584,000	610,000
Income (loss) from operations	(85,000)	(6,000)
Income (loss) before tax	(99,000)	(16,000)
Total Assets	2,373,000	2,621,000
Capital expenditures	7,000	0
Depreciation & Amortization	$ 33,000	$ 33,000