10QSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

(Mark One)

x Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

 For the quarterly period ended May 31, 2008

o Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______ to ______  

Commission File No. 0-5131

ART'S-WAY MANUFACTURING CO., INC.

(Exact Name of Small Business Issuer as Specified in Its Charter)

DELAWARE	42-0920725
(State or Other Jurisdiction of Incorporation or Organization)	I.R.S. Employer Identification No.

5556 Highway 9, Armstrong, Iowa

50514

(Address of Principal Executive Offices)

(712) 864-3131

Issuer’s Telephone Number, Including Area Code

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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

Number of common shares outstanding as of June 4, 2008: 1,986,176

Transitional Small Business Disclosure Format (check one): Yes o No x

ART’S-WAY MANUFACTURING CO., INC.

Consolidated Balance Sheets

	(Unaudited)
	May		November
	2008		2007
Assets
Current assets:
Cash	$	1,229,140	$	612,201
Accounts receivable-customers, net of allowance for doubtful accounts of $212,723 and $148,636 in 2008 and 2007, respectively		3,770,351		3,087,781
Inventories, net		14,210,344		8,636,602
Deferred taxes		805,000		773,555
Cost and Profit in Excess of Billings		55,006		265,615
Other current assets		677,941		408,870
Total current assets		20,747,782		13,784,624
Property, plant, and equipment, net		6,408,051		5,497,200
Covenant not to Compete		270,000		300,000
Goodwill		375,000		375,000
Other Assets		8,795		9,771
Total assets	$	27,809,628	$	19,966,595
Liabilities and Stockholders’ Equity
Current liabilities:
Notes payable to bank	$	2,407,939	$	397,859
Current portion of term debt		415,616		250,027
Accounts payable		1,485,560		1,368,988
Customer deposits		3,249,616		53,196
Billings in Excess of Cost and Profit		634,002		7,675
Accrued expenses		1,252,417		1,323,008
Income taxes payable		61,516		146,905
Total current liabilities		9,506,666		3,547,658
Long-term liabilities
Deferred taxes		387,000		205,998
Term debt, excluding current portion		6,296,611		6,069,657
Total liabilities		16,190,277		9,823,313
Stockholders’ equity:
Common stock – $0.01 par value. Authorized 5,000,000 shares; issued 1,986,176 and 1,984,176 shares in 2008 and 2007		19,862		19,842
Additional paid-in capital		1,938,590		1,828,427
Retained earnings		9,660,899		8,295,013
Total stockholders’ equity		11,619,351		10,143,282
Total liabilities and stockholders’ equity	$	27,809,628	$	19,966,595

See accompanying notes to consolidated financial statements.

ART’S-WAY MANUFACTURING CO., INC.

Consolidated Statements of Operations

Condensed

	Three Months Ended						Year to Date
	May 31,			May 31,			May 31,			May 31,
	2008			2007			2008			2007
Net sales	$	7,686,553		$	5,699,168		$	14,435,067		$	10,974,205
Cost of goods sold		5,247,976			4,014,104			9,821,168			7,790,881
Gross profit		2,438,577			1,685,064			4,613,899			3,183,324
Expenses:
Engineering		74,208			135,021			149,676			214,109
Selling		424,916			220,704			877,730			453,051
General and administrative		900,258			591,076			1,733,373			1,270,902
Total expenses		1,399,382			946,801			2,760,779			1,938,062
Income from operations		1,039,195			738,263			1,853,120			1,245,262
Other income (expense):
Interest expense		(143,657	)		(72,240	)		(266,289	)		(178,211	)
Other		393,935			171,264			435,714			353,953
Total other income		250,278			99,024			169,425			175,742
Income before income taxes		1,289,473			837,287			2,022,545			1,421,004
Income tax		400,428			279,157			656,659			482,545
Net income	$	889,045		$	558,130		$	1,365,886		$	938,459
Net income per share:
Basic		0.45			0.28			0.69			0.47
Diluted		0.45			0.28			0.68			0.47

See accompanying notes to consolidated financial statements.

ART’S-WAY MANUFACTURING CO., INC.

Consolidated Statements of Cash Flows

Condensed

	Year To Date
	May			May
	2008			2007
Cash flows from operations:
Net income	$	1,365,886		$	938,459
Adjustments to reconcile net income to net cash provided by operating activities:
Stock based compensation		94,823			2,750
(Gain) Loss on disposal of property, plant, and equipment		(399,449	)		(698,884	)
Depreciation expense		250,222			169,594
Amortization expense		30,000			-
Deferred income taxes		149,557			122,341
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable		(682,570	)		33,884
Inventories		(5,573,742	)		(2,323,004	)
Other current assets		(118,494	)		(17,334	)
Other, net		977			15,802
Increase (decrease) in:
Accounts payable		116,572			420,748
Contracts in progress, net		836,936			(68,564	)
Customer deposits		3,196,420			1,687,206
Income taxes payable		(85,389	)		(119,570	)
Accrued expenses		(70,591	)		(240,506	)
Net cash (used in) operating activities		(888,842	)		(77,078	)
Cash flows from investing activities:
Purchases of property, plant, and equipment		(1,161,074	)		(163,793	)
Proceeds from insurance recoveries		248,872			499,999
Net cash provided by (used in) investing activities		(912,202	)		336,206
Cash flows from financing activities:
Net change in line of credit		2,010,080			93,531
Payments of notes payable to bank		(107,457	)		(90,760	)
Proceeds from term debt		500,000			-
Proceeds from the exercise of stock options		15,360			-
Net cash provided by financing activities		2,417,983			2,771
Net increase in cash		616,939			261,899
Cash at beginning of period		612,201			2,072,121
Cash at end of period	$	1,229,140		$	2,334,020
Supplemental disclosures of cash flow information:
Cash paid/(received) during the period for:
Interest	$	254,706		$	208,308
Income taxes		592,500			685,779
Supplemental disclosures of noncash investing activities:
Proceeds from insurance recoveries	$	-		$	499,999
Insurance recoveries receivable		399,449			982,506
Net book value of assets destroyed
Property, plant and equipment		-			(334,041	)
Cost incurred on contracts in progress		-			(379,375	)
Inventories		-			(70,205	)
Gain on insurance recovery	$	399,449		$	698,884

See accompanying notes to consolidated financial statements.

Notes to Consolidated Financial Statements

(1) Summary of Significant Account Policies

Statement Presentation

The financial statements are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's Annual Report on Form 10-KSB for the year ended November 30, 2007. The results of operations for the six months ended May 31, 2008 are not necessarily indicative of the results for the fiscal year ending November 30, 2008.

(2) Income Per Share

Basic net income per common share has been computed on the basis of the weighted average number of common shares outstanding. Diluted net income 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.

Basic and diluted earnings per common share have been computed based on the following as of May 31, 2008 and 2007:

	For the three months ended
	May 31, 2008		May 31, 2007
Basic:
Numerator, net income	$	889,045	$	558,130
Denominator: Average number of common shares outstanding		1,986,176		1,978,176
Basic earnings per common share	$	0.45	$	0.28
Diluted
Numerator, net income	$	889,045	$	558,130
Denominator: Average number of common shares outstanding		1,986,176		1,978,176
Effect of dilutive stock options		6,278		5,006
		1,992,454		1,983,182
Diluted earnings per common share	$	0.45	$	0.28

	For the six months ended
	May 31, 2008		May 31, 2007
Basic:
Numerator, net income	$	1,365,886	$	938,459
Denominator: Average number of common shares outstanding		1,985,619		1,978,176
Basic earnings per common share	$	0.69	$	0.47
Diluted
Numerator, net income	$	1,365,886	$	938,459
Denominator: Average number of common shares outstanding		1,985,619		1,978,176
Effect of dilutive stock options		9,436		4,438
		1,995,055		1,982,614
Diluted earnings per common share	$	0.68	$	0.47

(3) Inventories

Major classes of inventory are:

	May 31, 2008			November 30, 2007
Raw materials	$	10,390,195		$	4,468,920
Work in process		917,188			336,108
Finished goods		4,935,293			5,033,063
	$	16,242,676		$	9,838,091
Less: Reserves		(2,032,332	)		(1,201,489	)
	$	14,210,344		$	8,636,602

(4) Accrued Expenses

Major components of accrued expenses are:

	May 31, 2008		November 30, 2007
Salaries, wages, and commissions	$	608,919	$	562,806
Accrued warranty expense		240,141		262,665
Other		403,357		497,537
	$	1,252,417	$	1,323,008

(5) 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 1 year from the date of purchase. The Company’s warranties require it to repair or replace defective products during the warranty period at no cost to the customer. The Company records a liability for estimated costs that may be incurred under its warranties. The costs are estimated based on historical experience and any specific warranty issues that have been identified. Although historical warranty costs have been within expectations, there can be no assurance that future warranty costs will not exceed historical amounts. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the balance as necessary.

Changes in the Company’s product warranty liability for the three and six months ended May 31, 2008 and May 31, 2007 are as follows:

	Three Months Ended
	May 31, 2008			May 31, 2007
Balance, beginning	$	238,198		$	221,089
Settlements made in cash or in-kind		(85,718	)		(11,125	)
Warranties issued		87,661			43,889
Balance, ending	$	240,141		$	253,853

	Six Months Ended
	May 31, 2008			May 31, 2007
Balance, beginning	$	262,665		$	230,740
Settlements made in cash or in-kind		(262,478	)		(118,819	)
Warranties issued		239,954			141,932
Balance, ending	$	240,141		$	253,853

(6) Loan and Credit Agreements

The Company has a revolving line of credit for $3,500,000 with advances funding the working capital, letter of credit and corporate credit card needs that mature on April 30, 2009. The interest rate is West Bank’s prime interest rate, adjusted daily. Monthly interest only payments are required and the unpaid principal is due on the maturity date. Collateral consists of a first position on assets owned by the Company including, but not limited to inventories, accounts receivable, machinery and equipment. As of May 31, 2008 and November 30, 2007, the Company had borrowed $2,407,939 and $397,859 respectively, against the line of credit. The available amounts remaining on the line of credit were $1,092,061 and $3,102,141 on May 31, 2008 and November 30, 2007, respectively. Other terms and conditions of the debt with West Bank include providing monthly internally prepared financial reports including accounts receivable aging schedules and borrowing base certificates and year-end audited financial statements. The borrowing base shall limit advances from line of credit to 60% of accounts receivable less than 90 days, 60% of finished goods inventory, 50% of raw material inventory and 50% of work-in-process inventory plus 40% of appraisal value of machinery and equipment.

On June 7, 2007 the Company restructured its long-term debt with West Bank. The Company now has one loan for $4,100,000. The loan was written to mature on May 1, 2017 and bore interest at the U.S. daily 5-year treasury index plus 2.75 bps fixed for 5 years and was set to adjust to the prevailing same index and margin on the fifth anniversary of the loan for the balance of the term. On May 1, 2008, the terms of this loan were changed to modify the maturity date, interest rate, and payments. The loan, with a principal amount of $3,898,161, will now mature on May 1, 2013 and bears interest at 5.75%. Monthly principal and interest payments in the amount of $42,500 are required, with a final payment of principal and accrued interest due on May 1, 2013.

The Company obtained two additional loans in 2007. Both of these loans were to finance the construction of the new facilities in Monona and Dubuque. On October 9, 2007, the Company obtained a loan for $1,330,000 that bore interest at the U.S. daily 5-year treasury index plus 2.75 bps, fixed at 7% for 5 years and then adjusted to the prevailing same index and margin on the fifth anniversary for the balance of the term. On May 1, 2008 the terms of this loan were changed to modify the maturity date, interest rate, and payments. On May 1, 2008, the principal amount of the loan was $1,316,003. The new terms changed the maturity date to May 1, 2013 and the interest rate is now 5.75%. Monthly payments of $11,000 are required for principal and interest, with a final payment of accrued interest and principal due on May 1, 2013.

On November 30, 2007, the Company obtained a construction loan to finance the Dubuque, Iowa facility. This loan has a principal amount of $1,500,000. The loan bore interest at the U.S. daily 5-year treasury index plus 2.75 bps, fixed at 7.25% for 5 years and then was written to adjust to the prevailing same index and margin on the fifth anniversary for the balance of the term. On December 19, 2007, the additional $500,000 available was disbursed. On May 1, 2008 the terms of this loan were changed to modify the maturity date, interest rate, and payments. On May 1, 2008, the principal amount of the loan was $1,498,063. The new terms changed the maturity date to May 1, 2013 and the interest rate is now 5.75%. Payments of $12,550 are due monthly for principal and interest, with a final accrued interest and principal payment due on May 1, 2013. Both loans are secured by unlimited guarantees of Art’s Way Vessels, Inc. and Art’s Way Scientific, Inc.

Prior to the refinancing discussed above, J. Ward McConnell, Jr. was required to personally guarantee the debt on the old loans with West Bank on an unlimited and unconditional basis. The Company compensated Mr. McConnell for his personal guarantee at an annual percentage rate of 2% of the outstanding balance to be paid monthly. Guarantee fee payments to Mr. McConnell were approximately $30,000 for the six months ended May 31, 2007.

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

	May 31, 2008		November 30, 2007
West Bank loan payable in monthly installments of $42,500 including interest at 5.75% due May 1, 2013 (A)		3,898,161		3,989,684
West Bank loan payable in monthly installments of $11,000 including interest at 5.75% due May 1, 2013(A)		1,316,003		1,330,000
West Bank loan payable in monthly installments of $12,550 including interest at 5.75% due May 1, 2013 (A)		1,498,063		1,000,000
Total term debt		6,712,227		6,319,684
Less current portion of term debt		415,616		250,027
Term debt, excluding current portion	$	6,296,611	$	6,069,657

(A) Covenants include, but are not limited to, debt service coverage ratio and debt/tangible net worth ratio. These loans are secured by real estate and an unlimited guarantee of Art’s-Way Vessels, Inc. and Art’s-Way Scientific, Inc.

The Company was in compliance with all debt covenants as of May 31, 2008.

(7) Recently Issued Accounting Pronouncements

In June 2006, the FASB issued Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109 (Issued 6/06). This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. For the Company, the Statement is effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 has not had any material impact on the Company’s financial position, results of operations, or cash flows.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about fair value measurements. The statement does not require any new fair value measurements, but for some entities, the application of the statement will change current practice. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. FASB Staff Position FAS 157-1 and FAS 157-2 were issued in February 2008. FSP FAS 157-1 amends SFAS No. 157 to exclude pronouncements that address the fair value measurement for lease classifications from the scope of SFAS No. 157. FSP FAS 157-2 delays the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008. This delay does not include items that are recognized or disclosed at fair value in the financial statements on a recurring basis. The applicable elements of FAS 157 that are currently effective have been adopted by the Company without a material impact on the financial statements. The elements of FAS 157 that are not yet effective are not expected to have a material impact on the financial statements.

In December 2007, the FASB issued FASB Statement No. 141 (Revised 2007) “Business Combinations,” which requires the Company to record fair value estimates of contingent consideration and certain other potential liabilities during the original purchase price allocation, expense acquisistion costs as incurred and does not permit certain restructuring activities previously allowed to be recorded as a component of purchase accounting. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, except for the presentation and disclosure requirements, which shall be applied retrospectively for all periods presented. The Company has not determined the effect that the adoption of SFAS No. 141(R) will have on the financial results of the Company.

In December 2007, the FASB issued FASB Statement No. 160 “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51,” which causes noncontrolling interests in subsidiaries to be included in the equity section of the balance sheet. SFAS No. 160 applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, except for the presentation and disclosure requirements, which shall be applied retrospectively for all periods presented. The Company has not determined the effect that the adoptions of SFAS No. 160 will have on the financial results of the Company.

In December 2007, the SEC published SAB 110, Share-Based Payment. The interpretations in SAB 110 express the SEC staff's views regarding the acceptability of the use of a "simplified" method, as discussed in SAB 107, in developing an estimate of expected term of share options in accordance with FASB Statement No. 123 (Revised) Share-Based Payment. The use of the simplified method requires our option plan to be consistent with a "plain vanilla" plan and was originally permitted through December 31, 2007 under SAB 107. In December 2007, the SEC issued SAB 110, Share-Based Payment, to amend the SEC's views discussed in SAB 107 regarding the use of the simplified method in developing an estimate of expected life of share options in accordance with FAS No. 123(R). SAB 110 is effective for the Company beginning December 31, 2007. The Company will continue to use the simplified method until it has the historical data necessary to provide a reasonable estimate of expected life, in accordance with SAB 107, as amended by SAB 110.

In February 2007, the FASB issued SFAS No. 159, the Fair Value Option for Financial Assets and Financial Liabilities. SFAS 159 provides entities with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that select different measurement attributes. SFAS 159 is effective for fiscal years beginning after November 15, 2007. SFAS No. 159 has been adopted by the Company, and has had no material impact on its financial statements.

(8) Stock Option Plan

On January 25, 2007 the Board of Directors adopted the 2007 Non-Employee Directors’ Stock Option Plan, which was approved by the stockholders at the Annual Stockholders’ Meeting on April 24, 2008. Options will be granted to non-employee directors to purchase shares of common stock of the Company at a price not less than fair market value at the date the options are granted. Non-employee directors are automatically granted options to purchase 1,000 shares of common stock annually or initially upon their election to the Board, which are automatically vested. Options granted are nonqualified stock options.

On February 5, 2007 the Board of Directors adopted the 2007 Employee Stock Option Plan which was approved by the stockholders at the Annual Stockholders’ Meeting on April 26, 2007.

(9) 2007 Acquisition

Effective September 5, 2007, the Company acquired the product lines of Miller Pro, Victor and Badger from Miller-St. Nazianz, Inc. for a cash purchase price of approximately $2,338,000. The operating results of the acquired business are reflected in the Company’s consolidated statement of operations from the acquisition date forward. The acquisition was made to continue the Company’s growth strategy and diversify its product offerings inside the agricultural industry. The purchase price was determined based on an arms-length negotiated value. The transaction was accounted for under the purchase method of accounting, with the purchase price allocated to the individual assets acquired.

(10) Segment Information

There are three reportable segments: agricultural products, pressurized vessels and modular buildings. The agricultural products segment fabricates and sells farming products as well as replacement parts for these products in the United States and worldwide. The pressurized vessel segment produces pressurized tanks. The modular building segment produces modular buildings for animal containment and various laboratory uses.

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 May 31, 2008

	Agricultural  Products		Pressurized  Vessels			Modular Buildings		Consolidated
Revenue from external customers	$	5,066,000	$	90,000		$	2,531,000	$	7,687,000
Income from operations		760,000		(224,000	)		503,000		1,039,000
Income before tax		685,000		(273,000	)		877,000		1,289,000
Total Assets		20,622,000		2,633,000			4,555,000		27,810,000
Capital expenditures		300,000		187,000			41,000		528,000
Depreciation & Amortization		108,000		10,000			22,000		140,000

Three Months Ended May 31, 2007

	Agricultural Products		Pressurized Vessels		Modular Buildings		Consolidated
Revenue from external customers	$	3,102,000	$	1,203,000	$	1,394,000	$	5,699,000
Income from operations		98,000		320,000		320,000		738,000
Income before tax		93,000		298,000		446,000		837,000
Total Assets		13,031,000		2,098,000		2,677,000		17,806,000
Capital expenditures		71,000		11,000		11,000		93,000
Depreciation & Amortization		69,000		13,000		12,000		94,000

Six Months Ended May 31, 2008

	Agricultural Products		Pressurized Vessels			Modular Buildings		Consolidated
Revenue from external customers	$	9,193,000	$	203,000		$	5,039,000	$	14,435,000
Income from operations		1,291,000		(460,000	)		1,022,000		1,853,000
Income before tax		1,198,000		(536,000	)		1,360,000		2,022,000
Total Assets		20,622,000		2,633,000			4,555,000		27,810,000
Capital expenditures		332,000		710,000			119,000		1,161,000
Depreciation & Amortization		219,000		20,000			41,000		280,000

Six Months Ended May 31, 2007

	Agricultural Products		Pressurized Vessels		Modular Buildings		Consolidated
Revenue from external customers	$	6,374,000	$	2,254,000	$	2,346,000	$	10,974,000
Income from operations		386,000		530,000		329,000		1,245,000
Income before tax		329,000		486,000		606,000		1,421,000
Total Assets		13,031,000		2,098,000		2,677,000		17,806,000
Capital expenditures		116,000		17,000		31,000		164,000
Depreciation & Amortization		129,000		25,000		16,000		170,000

(11) Subsequent Events

The Board of Directors announced a two-for-one stock split with a record date of July 23, 2008. The stock begins trading on the split-adjusted basis on July 30, 2008. The Board of Directors has also approved a $0.06 per share dividend for all stockholders of record on November 15, 2008, which will be paid on or before November 30, 2008.

Item 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report. Some of the statements in this report may contain forward-looking statements that reflect our current view on future events, future business, industry and other conditions, our future performance, and our plans and expectations for future operations and actions. In some cases you can identify forward-looking statements by the use of words such as “may,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or the negative of these terms or other similar expressions. Many of these forward-looking statements are located in this report under “Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION,” but they may appear in other sections as well.

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 the reasons described in this report. We are not under any duty to update the forward-looking statements contained in this report. We cannot guarantee future results, levels of activity, performance or achievements. 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.

(a) Management’s Discussion and Analysis of Financial Condition and Results of Operations

(i) Critical Accounting Policies

Our critical accounting policies involving the more significant judgments and assumptions used in the preparation of the financial statements as of May 31, 2008 have remained unchanged from November 30, 2007. These policies involve revenue recognition, inventory valuation and income taxes. Disclosure of these critical accounting policies is incorporated by reference under Note 1 of the financial statements in our Annual Report on Form 10-KSB for the year ended November 30, 2007.

(ii) Results of Operations

Net Sales

Our consolidated net sales for the six months ended were $14,435,000, representing a 31.5% increase compared to the same period one year ago. Net sales for the quarter ended May 31, 2008 increased by $1,987,000 over the same period in 2007, representing a 34.9% increase. We believe a majority of this increase for the six month period was due to the increased sales of Art’s-Way Scientific, Inc. by 114.8% and Art’s-Way Manufacturing’s sales increase of 44.2%. These two increases, however, were offset by Art’s-Way Vessels’ decrease in net sales of 91.0%. Art’s-Way Manufacturing had revenues totaling $9,193,000 for the six months just ended, compared to $6,374,000 for the same period in 2007. The increase in sales for Art’s-Way Manufacturing was largely due to the $1,440,000 year-to-date sales from the Miller Pro product line. Art’s-Way Vessels had revenues totaling $203,000 for the six months just ended, compared to $2,254,000 for the same period in 2007. Construction of the facility in Dubuque was recently completed. Installation of key equipment is nearly complete, and Art’s-Way Vessels is beginning to resume normal operations. Art’s-Way Vessels has also been manufacturing trailers for Art’s-Way Scientific and is preparing to manufacture graders for Art’s-Way Manufacturing. Art’s Way Scientific has revenues totaling $5,039,000 for the six months just ended, compared to $2,346,000 for the same period in 2007. On January 16, 2007, Art’s-Way Scientific suffered the loss of the Monona manufacturing facility to fire. The growth in revenues at Art’s-Way Scientific is primarily due to resuming full operations in our newly constructed manufacturing facility. Consolidated year-to-date gross profit increased to 32.0% compared to 29.0% in 2007.

Expenses

Consolidated operating expenses for the six months just ended increased $823,000 compared to 2007. As a percent of sales, operating expenses increased by 1.4% for the six months just ended, up from 17.7% in 2007 to19.1% in 2008. Art’s-Way Manufacturing’s year-to-date operating expenses as a percentage of sales were 22.5%, Art’s-Way Vessels’ were 126.7% and Art’s-Way Scientific’s were 8.8%.

General and administrative expenses for the quarter increased $309,000 as compared to the same period in 2007. Much of this increase is due to the addition of administrative staff. Year-to-date general and administrative expenses as a percentage of sales were 12.0% compared to 11.6% in 2007.

Engineering expenses are down $64,000 for the six months ended, and $61,000 for the three months ended, compared to the same period in 2007. As a percent of sales, year to date engineering expenses are down from 1.9% in 2007 to 1.0% in 2008.

Selling expenses are up for the six months ended by $425,000 compared to the same period in 2007. Of this increase, $204,000 is due to the second quarter alone. As a percent of sales, year-to-date selling expenses increased from 4.1% in 2007 to 6.1% in 2008. The majority of the increase is due to additional sales staff and trade show expenses for the Miller Pro product line.

Interest expense for the six months ended increased by $88,000 due to the addition of a $1,500,000 loan and a $1,330,000 loan in the fourth quarter of 2007.

Other income increased by $82,000 in the six months ended May 31, 2008 compared to the same period in 2007. The increase is primarily due to the gains recognized for the fire in Monona in 2007 and 2008, which was included under the caption “Other” on the Consolidated Statement of Operations. The accounting for fire recoveries increased the modular buildings segment and consolidated results by $399,000 in 2008. As of May 31, 2008, portions of the insurance settlement for the fire are still pending.

Order Backlog

The consolidated order backlog as of June 2008 is $20,531,000 compared to $12,105,000 one year ago. Art’s-Way Manufacturing’s order backlog as of June 2008 is $13,785,000 compared to $4,325,000 in 2007. Art’s-Way Vessels backlog is $33,000 in 2008 compared to $1,682,000 in 2007. Our lease for our Dubuque facility for Art’s-Way Vessels expired on October 4, 2007, and we moved into our newly constructed facility in February 2008. We are currently preparing to manufacture graders for Art’s-Way Manufacturing, and anticipate resuming full vessel production in August 2008. Art’s-Way Scientific’s backlog is $6,713,000 as of June 2008 compared to $6,097,000 in 2007. In 2007, the backlog at Art’s-Way Scientific included orders that had been destroyed by fire during production.

Seasonality

Customer deposits are typically high during the first two quarters, as we offer discounts to customers who make down payments on their orders from our beet product lines. Inventory is also high during these quarters due to the purchasing of raw materials for our beet equipment.

Trends and Uncertainties

The price of steel influences our cost of goods sold for Art’s-Way Manufacturing and Art’s-Way Vessels. In 2005, we experienced challenges due to a sharp increase in the price of steel. Although we are not currently seeing any adverse effects due to the price of steel, continued increases may have a negative impact on our cost of goods sold.

Similar to other farm equipment manufacturers, we are affected by items unique to the farm industry, including items such as fluctuations in farm income resulting from the change in commodity prices, crop damage caused by weather and insects, government farm programs, interest rates, and other unpredictable variables.

(iii) Liquidity and Capital Resources

Our main source of funds year-to-date came from customer deposits which increased by $3,200,000 over our 2007 year end. This is a traditional increase for us, as our beet programs run in the first quarter and we offer discounts to our customers for making down payments on their orders. Art’s-Way Scientific is working on two large projects that have provided cash as the result of customer advance payments on contracts in progress. The majority of the cash used by operations was due to the increased purchasing for Miller Pro inventory items, as well as the early purchase of steel for production of beet harvesting equipment. Another significant use of cash was the expenditures for plant and equipment, primarily due to the construction of the manufacturing facility in Dubuque, and the purchase of a plasma cutting machine in Armstrong.

See note 6 of the notes to the consolidated condensed financial statements for a discussion of our credit facilities, as such facilities provided additional cash to finance the above mentioned items.

(b) Off Balance Sheet Arrangements.

None.

Item 3

CONTROLS AND PROCEDURES

Senior management, including the Chief Executive Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (a) accumulated and communicated to our management, including our Chief Executive Officer, as appropriate to allow timely decisions regarding required disclosure; and (b) recorded, processed, summarized and reported, within the time specified in the SEC’s rules and forms. Since that evaluation process was completed, there have been no significant changes in our disclosure controls or in other factors that could significantly affect these controls.

There were no changes in our internal control over financial reporting, identified in connection with this evaluation that occurred during the period covered by this report that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II - Other Information

ITEM 1. Legal Proceedings

During the period covered by this report, we were not a party to any legal action or claim which was other than routine litigation incidental to our business.

ITEM 2. Unregistered Sales of Equity Securities

None.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Submission of Matters to a Vote of Security Holders

At our annual meeting of stockholders held April 24, 2008, the following individuals were elected to our Board of Directors to hold office until the next annual meeting or until their successors are elected and qualified, with the following votes in favor of election:

	FOR	WITHHELD
Thomas E. Buffamante	1,833,313	15,904
David R. Castle	1,833,313	15,904
Fred W. Krahmer	1,833,284	15,923
James Lynch	1,833,313	15,904
Douglas McClellan	1,833,313	15,904
J. Ward McConnell, Jr.	1,814,450	34,757
Marc H. McConnell	1,817,881	31,326

The stockholders approved the Art’s-Way Manufacturing Co., Inc.’s 2007 Non-Employee Director’s Stock Option plan.

Total number of shares voted in favor:	1,233,691
Total number of shares voted against:	44,011
Total number of abstentions:	10,197
Total number of broker non-votes:	561,308

The stockholders ratified the selection of Eide Bailly, LLP as independent public accountants for the year ending November 30, 2008.

Total number of shares voted in favor:	1,821,659
Total number of shares voted against:	15,453
Total number of abstentions:	12,095
Total number of broker non-votes:	0

ITEM 5. Other Information

None.

ITEM 6. Exhibits

See Exhibit Index on page 19 of this report.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ART'S-WAY MANUFACTURING CO., INC.

By:	/s/ Carrie L. Majeski
	Carrie L.Majeski
	Chief Executive Officer/President (principal executive and financial officer)

Date: July 15, 2008

Exhibits Index

Exhibit  No.	Description	Method of Filing
3.1	Articles of Incorporation of Art’s-Way Manufacturing Co., Inc.	1
3.2	Bylaws of Art’s-Way Manufacturing Co., Inc.	1
10.1	Change in Terms Agreement dated May 1, 2008.	*
10.2	Change in Terms Agreement dated May 1, 2008.	*
10.3	Change in Terms Agreement dated May 1, 2008.	*
31.1	Certificate pursuant to 17 CFR 240 13(a)-14(a)	*
32.1	Certificate pursuant to 18 U.S.C. Section 1350	*

(1) Incorporated by reference to the exhibit of the same number on our annual report on Form 10-K for the fiscal year ended May 27, 1989.

(*) Filed herewith.

EX-10.1

CHANGE IN TERMS AGREEMENT

Principal $1,316,002.37	Loan Date 05-01-2008	Maturity 05-01-2013	Loan No 81289	Call / Coll	Account 0000128524-01	Officer 322	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. (TIN:	Lender:	WEST BANK
	42-0920725)		MAIN BANK
	5556 HIGHWAY 9 WEST, PO BOX 288		1601 22ND STREET
	ARMSTRONG, IA 50514		WEST DES MOINES, IA 50265
		(515) 222-2300

Principal Amount: $1,316,002.37Interest Rate: 5.750%Date of Agreement: May 1, 2008

DESCRIPTION OF EXISTING INDEBTEDNESS. LOAN #81289 IN THE ORIGINAL AMOUNT OF $1,330,000.00 DATED 10/09/07 WITH A MATURITY DATE OF 05/01/17.

DESCRIPTION OF COLLATERAL. UNLIMITED SECURED GUARANTEES OF ARTS-WAY SCIENTIFIC, INC, AND ARTS-WAY VESSELS, INC.; SECURITY AGREEMENTS DATED 04/25/03 AND 04/20/07; REAL ESTATE MORTGAGES DATED 04/25/03, 10/09/07, AND 11/30/07.

DESCRIPTION OF CHANGE IN TERMS. MODIFY MATURITY DATE, INTEREST RATE AND PAYMENTS.

PROMISE TO PAY. ART’S-WAY MANUFACTURING CO., IN. (“Borrower”) promises to pay to WEST BANK (“Lender”), or order, in lawful money of the United States of America, the principal amount of One Million Three Hundred Sixteen Thousand Two & 37/100 Dollars ($1,316,002.37), together with interest at the rate of 5.750% per annum on the unpaid principal balance from May 1, 2008, until paid in full. The interest rate may change under the terms and conditions of the “INTEREST AFTER DEFAULT” section.

PAYMENT. Borrower will pay this loan in 59 regular payments of $11,000.00 each and one irregular last payment estimated at $1,007,294.07. Borrower’s first payment is due June 1, 2008, and all subsequent payments are due on the same day of each month after that. Borrower’s final payment will be due on May 1, 2013, and will be for all principal and all accrued interest not yet paid. Payments include principal and interest. Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest; then to principal; then to any unpaid collection costs; and then to any late charges. Interest on this loan is computed on a 365/360 simple interest basis; that is, by applying the ratio of the annual 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. Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing.

MAXIMUM INTEREST RATE. Under no circumstances will the interest rate on this loan exceed (except for any higher default rate shown below) the lesser of 7.500% per annum or the maximum rate allowed by applicable law.

PREPAYMENT PENALTY; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of this Agreement, Borrower understands that Lender is entitled to a minimum interest charge of $7.50. Upon prepayment of this Agreement, Lender is entitled to the following prepayment penalty: 3% IF REFINANCED ELSEWHERE. Other than Borrower’s obligation to pay any minimum interest charge and prepayment penalty, Borrower may pay 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 under the payment schedule. Rather, early payments will reduce the principal balance due and may result in Borrower’s making fewer payments. 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 Agreement, 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: WEST BANK, MAIN BANK, 1601 22^ND STREET, WEST DES MOINES, IA 50265.

LATE CHARGE. If a payment is 11 days or more late, Borrower will be charged $15.00.

INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the interest rate on this loan shall be increased by 2.000 percentage points. 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 under this Agreement:

Payment Default. Borrower fails to make any payment when due under the Indebtedness.

Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement 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.

Default in Favor of Third Parties. Borrower defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s property or ability to perform Borrower’s obligations under this Agreement or any of the Related Documents.

False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Agreement 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 Foreiture Preceedings. 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 Indebtedness. 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 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, of 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 Borrowers financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired.

Insecurity. Lender in good faith believes itself insecure.

Cure Provisions. If any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the same provision of this Agreement within the preceding twelve (12) months, it may be cured if Borrower, after receiving written notice from Lender demanding cure of such default; (1) cures the default within twenty (20) days; or (2) if the cure requires more than twenty (20 ) days, immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

LENDER’S RIGHTS Upon default, Lender may declare the entire unpaid principal balance under this Agreement 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 Agreement 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 Lenders’ 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 Agreement 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 Agreement has been accepted by Lender in the State of Iowa.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of POLK County, 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, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.

COLLATERAL. Borrower acknowledges this Agreement is secured by UNLIMITED SECURED GUARANTEES OF ARTS-WAY SCIENTIFIC, INC, AND ARTS-WAY VESSELS, INC.; SECURITY AGREEMENTS DATED 04/25/03 AND 04/20/07; REAL ESTATE MORTGAGES DATED 04/25/03, 10/09/07, AND 11/30/07.

CONTINUING VALIIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreements evidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right to strict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute a satisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), including accommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not be released by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing below acknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisions of this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all such subsequent actions.

SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Agreement on transfer of Borrower’s interest, this Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than Borrower, Lender, without notice to Borrower, may deal with Borrower’s successors with reference to this Agreement and the Indebtedness by way of forbearance or extension without releasing Borrower from the obligations of this Agreement or liability under the Indebtedness.

MISCELLANEOUS PROVISIONS. If any part of this Agreement cannot be enforced, this fact will not affect the rest of the Agreement. Lender may delay or forgo enforcing any of its rights or remedies under this Agreement without losing them. Borrower and any other person who signs, guarantees or endorses this Agreement, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Agreement, and unless otherwise expressly stated in writing, no party who signs this Agreement, 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 Agreement are joint and several.

PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT. BORROWER AGREES TO THE TERMS OF THE AGREEMENT.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS CHANGE IN TERMS AGREEMENT AND ALL OTHER DOCUMENTS RELATING TO THIS DEBT.

BORROWER:

ART’S-WAY MANUFACTURING CO., INC.

BY:	/S/ CARRIE MAJESKI
	CARRIE L. MAJESKI, President of ART’S-WAY MANUFACTURING CO., INC.

EX-10.2

CHANGE IN TERMS AGREEMENT

Principal $1,498,062.50	Loan Date 05-01-2008	Maturity 05-01-2013	Loan No 81290	Call / Coll	Account 0000128524	Officer 322	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. (TIN:	Lender:	WEST BANK
	42-0920725)		MAIN BANK
	5556 HIGHWAY 9 WEST, PO BOX 288		1601 22ND STREET
	ARMSTRONG, IA 50514		WEST DES MOINES, IA 50265
			(515) 222-2300

Principal Amount: $1,498,062.50Interest Rate: 5.750%Date of Agreement: May 1, 2008

DESCRIPTION OF EXISTING INDEBTEDNESS. LOAN #81290 IN THE ORIGINAL AMOUNT OF $1,500,000 DATED 06/07/07 WITH A MATURITY DATE OF 05/01/17.

DESCRIPTION OF COLLATERAL. UNLIMITED SECURED GUARANTEES OF ARTS-WAY SCIENTIFIC, INC, AND ARTS-WAY VESSELS, INC.; SECURITY AGREEMENTS DATED 04/25/03 AND 04/20/07; REAL ESTATE MORTGAGES DATED 04/25/03, 10/09/07, AND 11/30/07.

DESCRIPTION OF CHANGE IN TERMS. MODIFY MATURITY DATE, INTEREST RATE AND PAYMENTS.

PROMISE TO PAY. ART’S-WAY MANUFACTURING CO., IN. (“Borrower”) promises to pay to WEST BANK (“Lender”), or order, in lawful money of the United States of America, the principal amount of One Million Four Hundred Ninety-eight Thousand Sixty-two & 50/100 Dollars ($1,498,062.50), together with interest at the rate of 5.750% per annum on the unpaid principal balance from May 1, 2008, until paid in full. The interest rate may change under the terms and conditions of the “INTEREST AFTER DEFAULT” section.

PAYMENT. Borrower will pay this loan in 59 regular payments of $12,550.00 each and one irregular last payment estimated at $1,144,714.20. Borrower’s first payment is due June 1, 2008, and all subsequent payments are due on the same day of each month after that. Borrower’s final payment will be due on May 1, 2013, and will be for all principal and all accrued interest not yet paid. Payments include principal and interest. Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest; then to principal; then to any unpaid collection costs; and then to any late charges. Interest on this loan is computed on a 365/360 simple interest basis; that is, by applying the ratio of the annual 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. Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing.

MAXIMUM INTEREST RATE. Under no circumstances will the interest rate on this loan exceed (except for any higher default rate shown below) the lesser of 7.500% per annum or the maximum rate allowed by applicable law.

PREPAYMENT PENALTY; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of this Agreement, Borrower understands that Lender is entitled to a minimum interest charge of $7.50. Upon prepayment of this Agreement, Lender is entitled to the following prepayment penalty: 3% IF REFINANCED ELSEWHERE. Other than Borrower’s obligation to pay any minimum interest charge and prepayment penalty, Borrower may pay 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 under the payment schedule. Rather, early payments will reduce the principal balance due and may result in Borrower’s making fewer payments. 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 Agreement, 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: WEST BANK, MAIN BANK, 1601 22^ND STREET, WEST DES MOINES, IA 50265.

LATE CHARGE. If a payment is 11 days or more late, Borrower will be charged $15.00.

INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the interest rate on this loan shall be increased by 2.000 percentage points. 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 under this Agreement:

Payment Default. Borrower fails to make any payment when due under the Indebtedness.

Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement 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.

Default in Favor of Third Parties. Borrower defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s property or ability to perform Borrower’s obligations under this Agreement or any of the Related Documents.

False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Agreement 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 Foreiture Preceedings. 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 Indebtedness. 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 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, of 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 Borrowers financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired.

Insecurity. Lender in good faith believes itself insecure.

Cure Provisions. If any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the same provision of this Agreement within the preceding twelve (12) months, it may be cured if Borrower, after receiving written notice from Lender demanding cure of such default; (1) cures the default within twenty (20) days; or (2) if the cure requires more than twenty (20 ) days, immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

LENDER’S RIGHTS Upon default, Lender may declare the entire unpaid principal balance under this Agreement 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 Agreement 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 Lenders’ 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 Agreement 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 Agreement has been accepted by Lender in the State of Iowa.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of POLK County, 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, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.

COLLATERAL. Borrower acknowledges this Agreement is secured by UNLIMITED SECURED GUARANTEES OF ARTS-WAY SCIENTIFIC, INC, AND ARTS-WAY VESSELS, INC.; SECURITY AGREEMENTS DATED 04/25/03 AND 04/20/07; REAL ESTATE MORTGAGES DATED 04/25/03, 10/09/07, AND 11/30/07.

CONTINUING VALIIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreements evidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right to strict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute a satisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), including accommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not be released by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing below acknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisions of this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all such subsequent actions.

SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Agreement on transfer of Borrower’s interest, this Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than Borrower, Lender, without notice to Borrower, may deal with Borrower’s successors with reference to this Agreement and the Indebtedness by way of forbearance or extension without releasing Borrower from the obligations of this Agreement or liability under the Indebtedness.

MISCELLANEOUS PROVISIONS. If any part of this Agreement cannot be enforced, this fact will not affect the rest of the Agreement. Lender may delay or forgo enforcing any of its rights or remedies under this Agreement without losing them. Borrower and any other person who signs, guarantees or endorses this Agreement, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Agreement, and unless otherwise expressly stated in writing, no party who signs this Agreement, 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 Agreement are joint and several.

PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT. BORROWER AGREES TO THE TERMS OF THE AGREEMENT.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS CHANGE IN TERMS AGREEMENT AND ALL OTHER DOCUMENTS RELATING TO THIS DEBT.

BORROWER:

ART’S-WAY MANUFACTURING CO., INC.

BY:	/S/ CARRIE MAJESKI
	CARRIE L. MAJESKI, President of ART’S-WAY MANUFACTURING CO., INC.

EX-10.3

CHANGE IN TERMS AGREEMENT

Principal $3,898,161.13	Loan Date 05-01-2008	Maturity 05-01-2013	Loan No 1260080536	Call / Coll	Account 0000128524	Officer 322	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. (TIN:	Lender:	WEST BANK
	42-0920725)		MAIN BANK
	5556 HIGHWAY 9 WEST, PO BOX 288		1601 22ND STREET
	ARMSTRONG, IA 50514		WEST DES MOINES, IA 50265
			(515) 222-2300

Principal Amount: $3,898,161.13Interest Rate: 5.750%Date of Agreement: May 1, 2008

DESCRIPTION OF EXISTING INDEBTEDNESS. LOAN #1260080536 IN THE ORIGINAL AMOUNT OF $4,100,000.00 DATED 06/07/07 WITH A MATURITY DATE OF 05/01/17.

DESCRIPTION OF COLLATERAL. UNLIMITED SECURED GUARANTEES OF ARTS-WAY SCIENTIFIC, INC, AND ARTS-WAY VESSELS, INC.; SECURITY AGREEMENTS DATED 04/25/03 AND 04/20/07; REAL ESTATE MORTGAGES DATED 04/25/03, 10/09/07, AND 11/30/07.

DESCRIPTION OF CHANGE IN TERMS. MODIFY MATURITY DATE, INTEREST RATE AND PAYMENTS.

PROMISE TO PAY. ART’S-WAY MANUFACTURING CO., IN. (“Borrower”) promises to pay to WEST BANK (“Lender”), or order, in lawful money of the United States of America, the principal amount of Three Million Eight Hundred Ninety-eight Thousand One Hundred Sixty-one & 13/100 Dollars ($3,898,161.13), together with interest at the rate of 5.750% per annum on the unpaid principal balance from May 1, 2008, until paid in full. The interest rate may change under the terms and conditions of the “INTEREST AFTER DEFAULT” section.

PAYMENT. Borrower will pay this loan in 59 regular payments of $42,500.00 each and one irregular last payment estimated at $2,304,789.08. Borrower’s first payment is due June 1, 2008, and all subsequent payments are due on the same day of each month after that. Borrower’s final payment will be due on May 1, 2013, and will be for all principal and all accrued interest not yet paid. Payments include principal and interest. Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest; then to principal; then to any unpaid collection costs; and then to any late charges. Interest on this loan is computed on a 365/360 simple interest basis; that is, by applying the ratio of the annual 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. Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing.

MAXIMUM INTEREST RATE. Under no circumstances will the interest rate on this loan exceed (except for any higher default rate shown below) the lesser of 7.500% per annum or the maximum rate allowed by applicable law.

PREPAYMENT PENALTY; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of this Agreement, Borrower understands that Lender is entitled to a minimum interest charge of $7.50. Upon prepayment of this Agreement, Lender is entitled to the following prepayment penalty: 3% IF REFINANCED ELSEWHERE. Other than Borrower’s obligation to pay any minimum interest charge and prepayment penalty, Borrower may pay 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 under the payment schedule. Rather, early payments will reduce the principal balance due and may result in Borrower’s making fewer payments. 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 Agreement, 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: WEST BANK, MAIN BANK, 1601 22^ND STREET, WEST DES MOINES, IA 50265.

LATE CHARGE. If a payment is 11 days or more late, Borrower will be charged $15.00.

INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the interest rate on this loan shall be increased by 2.000 percentage points. 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 under this Agreement:

Payment Default. Borrower fails to make any payment when due under the Indebtedness.

Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement 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.

Default in Favor of Third Parties. Borrower defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s property or ability to perform Borrower’s obligations under this Agreement or any of the Related Documents.

False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Agreement 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 Foreiture Preceedings. 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 Indebtedness. 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 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, of 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 Borrowers financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired.

Insecurity. Lender in good faith believes itself insecure.

Cure Provisions. If any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the same provision of this Agreement within the preceding twelve (12) months, it may be cured if Borrower, after receiving written notice from Lender demanding cure of such default; (1) cures the default within twenty (20) days; or (2) if the cure requires more than twenty (20 ) days, immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

LENDER’S RIGHTS Upon default, Lender may declare the entire unpaid principal balance under this Agreement 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 Agreement 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 Lenders’ 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 Agreement 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 Agreement has been accepted by Lender in the State of Iowa.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of POLK County, 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, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.

COLLATERAL. Borrower acknowledges this Agreement is secured by UNLIMITED SECURED GUARANTEES OF ARTS-WAY SCIENTIFIC, INC, AND ARTS-WAY VESSELS, INC.; SECURITY AGREEMENTS DATED 04/25/03 AND 04/20/07; REAL ESTATE MORTGAGES DATED 04/25/03, 10/09/07, AND 11/30/07.

CONTINUING VALIIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreements evidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right to strict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute a satisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), including accommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not be released by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing below acknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisions of this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all such subsequent actions.

SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Agreement on transfer of Borrower’s interest, this Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than Borrower, Lender, without notice to Borrower, may deal with Borrower’s successors with reference to this Agreement and the Indebtedness by way of forbearance or extension without releasing Borrower from the obligations of this Agreement or liability under the Indebtedness.

MISCELLANEOUS PROVISIONS. If any part of this Agreement cannot be enforced, this fact will not affect the rest of the Agreement. Lender may delay or forgo enforcing any of its rights or remedies under this Agreement without losing them. Borrower and any other person who signs, guarantees or endorses this Agreement, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Agreement, and unless otherwise expressly stated in writing, no party who signs this Agreement, 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 Agreement are joint and several.

PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT. BORROWER AGREES TO THE TERMS OF THE AGREEMENT.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS CHANGE IN TERMS AGREEMENT AND ALL OTHER DOCUMENTS RELATING TO THIS DEBT.

BORROWER:

ART’S-WAY MANUFACTURING CO., INC.

BY:	/S/ CARRIE MAJESKI
	CARRIE L. MAJESKI, President of ART’S-WAY MANUFACTURING CO., INC.

EX-31.1

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

(SECTION 302 CERTIFICATION)

I, Carrie L. Majeski, certify that:

1. I have reviewed this quarterly report on Form 10-QSB 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 small business issuer, as of, and for, the periods presented in this report;

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

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

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

c) Evaluated the effectiveness of the small business issuer’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 small business issuer’s internal control over financial reporting that occurred during the small business issuer’s second fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’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 small business issuer’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 small business issuer’s internal controls over financial reporting.

Date:	July 15, 2008	/s/ Carrie L. Majeski
		Carrie L. Majeski, President, Chief Executive Officer (principal executive and financial officer)

EX-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-QSB of Art’s Way Manufacturing Co., Inc. (the “Company”) for the quarter ended May 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Carrie L. Majeski, 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.

/s/ Carrie L. Majeski

Carrie L. Majeski, President, Chief Executive Officer

(principal executive and financial officer)

Dated: July 15, 2008