8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K/A

Amendment No. 1

Current Report Pursuant to Section 13 OR 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 10, 2012

ART’S-WAY MANUFACTURING CO., INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or other jurisdiction of incorporation)
000-05131	42-0920725
(Commission File Number)	(IRS 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)
Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

This Current Report on Form 8-K/A is filed by Art’s-Way Manufacturing Co., Inc. (the “Company”) as an amendment to the Current Report on Form 8-K dated May 10, 2012, as filed by the Company with the Securities and Exchange Commission on July 16, 2012 (the “Closing 8-K”), to announce the completion of the acquisition of the assets of Universal Harvester Co., Inc. by a wholly-owned subsidiary of the Company, Art’s-Way Acquisition, Inc. (n/k/a Universal Harvester by Art’s-Way, Inc.).

This Form 8-K/A amends Item 9.01 of the Closing 8-K to provide the financial statements and pro forma financial information related to the Universal Harvester Co., Inc. acquisition as required by Items 9.01(a) and 9.01(b) of Form 8-K. No additional amendments to the Closing 8-K are made by this Form 8-K/A.

Item 9.01     Financial Statements and Exhibits.

(a) Financial statements of businesses acquired:

The audited financial statements of Universal Harvester Co., Inc. as of December 31, 2011 and for the year then ended are attached as Exhibit 99.1 to this Form 8-K/A and incorporated by reference herein.

The unaudited financial statements of Universal Harvester Co., Inc. as of March 31, 2012 and March 31, 2011 and for the three months then ended are attached as Exhibit 99.2 to this Form 8-K/A and incorporated by reference herein.

(b) Pro forma financial information:

Unaudited pro forma condensed consolidated financial information for the Company, reflecting the acquisition of Universal Harvester Co., Inc., for the year ended November 30, 2011, as of February 29, 2012 and as of February 28, 2011 and for the three months then ended is attached as Exhibit 99.3 to this Form 8-K/A and incorporated by reference herein.

(c) Shell company transactions: None

(d) Exhibits:

10.1 Asset Purchase Agreement, by and among Art’s-Way Acquisition Co., Inc., Universal Harvester Co., Inc., Ardis A. Heidebrink and F. Murray Buchheit, dated May 10, 2012 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 16, 2012).

10.2 Installment or Single Payment Note between Art’s-Way Manufacturing Co., Inc. and U.S. Bank N.A., dated May 10, 2012 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 16, 2012).

23.1 Consent of Eide Bailly LLP *

99.1 Audited financial statements of Universal Harvester Co., Inc. as of December 31, 2011 and for the year then ended. *

99.2 Unaudited financial statements of Universal Harvester Co., Inc. as of March 31, 2012 and March 31, 2011 and for the three months then ended. *

99.3 Unaudited pro forma condensed consolidated financial information for the Company for the year ended November 30, 2011, as of February 29, 2012 and February 29, 2011, and for the three months then ended. *

*     filed herewith

SIGNATURE

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 hereunto duly authorized.

Dated: February 25, 2013

ART’S-WAY MANUFACTURING CO., INC.
By:	/s/ Carrie L. Majeski
	Carrie L. Majeski President, Chief Executive Officer and interim Chief Financial Officer

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

ART’S-WAY MANUFACTURING CO., INC.

EXHIBIT INDEX TO FORM 8-K/A

Date of Report:	Commission File No.:
May 10, 2012	000-05131

 

Exhibit No.	ITEM
10.1	Asset Purchase Agreement, by and among Art’s-Way Acquisition Co., Inc., Universal Harvester Co, Inc., Ardis A. Heidebrink and F. Murray Buchheit, dated May 10, 2012 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on July 16, 2012).

10.2 Installment or Single Payment Note between Art’s-Way Manufacturing Co., Inc. and U.S. Bank N.A., dated May 10, 2012 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on July 16, 2012).

23.1 Consent of Eide Bailly LLP *

99.1 Audited financial statements of Universal Harvester Co., Inc. as of December 31, 2011 and for the year then ended. *

99.2 Unaudited financial statements of Universal Harvester Co., Inc. as of March 31, 2012 and March 31, 2011 and for the three months then ended. *

99.3 Unaudited pro forma condensed consolidated financial information for the Company for the year ended November 30, 2011, as of February 29, 2012 and February 29, 2011, and for the three months then ended. *

*     filed herewith

EX-23

Exhibit 23.1

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-169972 and No. 333-173914) and Form S-3 (No. 333-170887) of Art’s-Way Manufacturing Co., Inc. of our report dated February 25, 2013, related to the financial statements of Universal Harvester Co., Inc. as of December 31, 2011 and for the fiscal year ended December 31, 2011, included in this Current Report of Art’s-Way Manufacturing Co., Inc. on Form 8-K/A filed February 25, 2013.

/s/ Eide Bailly LLP

Fargo, North Dakota

February 25, 2013

EX-99

Exhibit 99.1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Universal Harvester Co., Inc.

We have audited the accompanying balance sheet of Universal Harvester Co., Inc. as of December 31, 2011, and the related statements of operations, stockholders’ equity, and cash flows for the year then ended. Universal Harvester Co., Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Universal Harvester Co., Inc. as of December 31, 2011, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

As further discussed in Note 12 to the financial statements, on May 10, 2012 the Company sold all of its assets and all of its employees were hired by Universal Harvester by Art’s Way, Inc., a subsidiary of Art’s Way Manufacturing Co., Inc.

/s/ Eide Bailly LLP

Fargo, North Dakota

February 25, 2013

Universal Harvester Co., Inc.

Balance Sheet

	December 31, 2011
Assets
Current assets:
Cash	$	130,727
Accounts receivable-customers, net of allowance for doubtful accounts of $4,570		395,937
Inventories, net		937,791
Other current assets		7,498
Total current assets		1,471,953
Property, plant, and equipment, net		654,204
Total assets	$	2,126,157
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of term debt	$	63,783
Accounts payable		171,523
Loans from shareholders		180,000
Capital lease obligations		8,224
Accrued expenses		87,240
Total current liabilities		510,770
Long-term liabilities
Line of credit		430,000
Term debt, excluding current portion		957,696
Total liabilities		1,898,466
Stockholders’ equity:
Common stock – $0.01 par value. Authorized 2,500 shares; 36 shares issued and outstanding		3,600
Treasury stock		(362,490	)
Additional paid-in capital		1,836
Retained earnings		584,745
Total stockholders’ equity		227,691
Total liabilities and stockholders’ equity	$	2,126,157

See accompanying Report of Independent Registered Public Accounting Firm and notes to consolidated financial statements.

Universal Harvester Co., Inc.

Statement of Operations

Year Ended December 31, 2011

			Twelve Months Ended
			December 31, 2011
Net sales			$	4,431,456
Cost of goods sold				3,364,842
		Gross profit		1,066,614
Expenses:
	General, administrative, and selling			440,793
		Total expense		440,793
		Income from operations		625,821
	Other income (expense)
	Interest expense			(78,993	)
		Total other income (expense)		(78,993	)
		Net income	$	546,828
Net income per share:
	Basic net income per share		$	15,190
	Diluted net income per share		$	15,190
	Weighted average outstanding shares used to compute basic net income per share			36
	Weighted average outstanding shares used to compute diluted net income per share			36

 

See accompanying Report of Independent Registered Public Accounting Firm and notes to consolidated financial statements.

Universal Harvester CO., INC.

Statement of Cash Flow

 Year Ended December 31, 2011

							2011
Cash flows from operations:
	Net income						$	546,828
	Adjustments to reconcile net income to net cash provided by operating activities:
			Depreciation expense					74,256
			Changes in assets and liabilities:
				(Increase) decrease in:
					Accounts receivable			(201,109	)
					Inventories			(7,822	)
					Other current assets			6,815
				Increase (decrease) in:
					Accounts payable			115,058
					Accrued expenses			(20,164	)
						Net cash provided by operating activities		513,862
Cash flows from investing activities:
	Purchases of property, plant, and equipment							(21,127	)
						Net cash (used in) investing activities		(21,127	)
Cash flows from financing activities:
	Proceeds from line of credit borrowings							600,000
	Repayments of line of credit							(170,000	)
	Payments of notes payable to bank							(203,521	)
	Payments of notes payable to lender							(1,450,000	)
	Payments of capital leases							(8,481	)
	Proceeds from term debt							1,075,000
	Proceeds from stock holder debt							176,000
	Distributions to stock holders							(487,250	)
						Net cash (used in) provided by financing activities		(468,252	)
						Net increase (decrease) in cash		24,483
Cash at beginning of period								106,244
Cash at end of period							$	130,727
Supplemental disclosures of cash flow information:
	Cash paid/(received) during the period for:
		Interest					$	66,948
		Income taxes						-

See accompanying Report of Independent Registered Public Accounting Firm and notes to consolidated financial statements.

Universal Harvester Co., Inc.

Statement of Stockholders' Equity

Year Ended December 31, 2011 

	Common Stock Issued				Additional					Common Stock in Treasury
	Number of				paid-in		Retained			Treasury		Treasury
	shares		Par value		capital		earnings			Shares		Stock			Total
Balance, December 31, 2010		36	$	3,600	$	1,836	$	525,167			307	$	(362,490	)	$	168,113
Distributions		-		-		-		(487,250	)		-		-			(487,250	)
Net income		-		-		-		546,828			-		-			546,828
Balance, November 30, 2011		36	$	3,600	$	1,836	$	584,745			307	$	(362,490	)	$	227,691

 

See accompanying Report of Independent Registered Public Accounting Firm and notes to financial statements.

 

Universal Harvester Co., Inc.

Notes to Financial Statements

(1) Summary of Significant Accounting Policies

(a) Nature of Business

Universal Harvester Co., Inc. is engaged in the fabrication and sale of specialized farm machinery in the agricultural sector of the United States. The primary product offering are reels for combines and swathers. The Company also provides after-market service parts that are available to keep its equipment operating to the satisfaction of the end user of the Company’s products.

On May 10, 2012, the Company’s assets were purchased by a wholly-owned subsidiary of Art’s Way Manufacturing Co, Inc. These financial statements are presented on a historical basis without any effect of the purchase transaction.

(b) Cash Concentration

The Company maintains several different accounts at one bank, and balances in these accounts are periodically in excess of federally insured limits. However, management believes risk of loss to be low.

(c) Customer Concentration

Two of the Company’s customers accounted for approximately 66.7% of revenues for the year ended December 31, 2011.

(d) Accounts Receivable

Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Accounts receivable are written-off when deemed uncollectible. Recoveries of accounts receivable previously written-off are recorded when received. Accounts receivable are generally considered past due 60 days past invoice date, with the exception of international sales which primarily are sold with a letter of credit for 120 day terms.

Trade receivables due from customers are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Trade receivables are stated at the amount billed to the customer. The Company charges interest on overdue customer account balances at a rate of 1.5% per month. Payments of trade receivables are allocated to the specific invoices identified on the customer's remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

(e) Inventories

Inventories are stated at the lower of cost or market, and cost is determined using the average costing method. Management monitors the carrying value of inventories using inventory control and review processes that include, but are not limited to, sales forecast review, inventory status reports, and inventory reduction programs. The Company records inventory write downs to market based on expected usage information for raw materials and historical selling trends for finished goods. Additional write downs may be necessary if the assumptions made by management do not occur.

(f) Property, Plant, and Equipment

Property, plant, and equipment are recorded at cost. Depreciation of plant and equipment is provided using the straight-line method, based on the estimated useful lives of the assets which range from three to forty years.

(g) Income Taxes

Universal Harvester Co., Inc. is not subject to Federal and State Income Taxes. Universal Harvester Co. Inc. is an S Corporation which passes income directly to shareholders whom report the income directly on their personal income tax returns. The Company adopted the provision of FASB ASC Topic 740-10, Income Taxes, specifically guidance relating to uncertain tax positions. The implementation of this standard had no impact on the consolidated financial statements. As of December 31, 2011, the unrecognized tax benefit accrual was zero. The Company will recognize future accrued interest and penalties related to unrecognized tax benefits in income tax expense if incurred. The Company is not subject to Federal tax examination by authorities for years before 2009 and state examinations for years before 2009. Therefore, no provision or liability for income taxes has been included in the financial statements.

(h) Revenue Recognition

Revenue is recognized when risk of ownership and title pass to the buyer upon the shipment of the product. All sales are made to authorized resellers and dealers whose application for dealer status has been approved and who have been informed of general sales policies. Any changes in Company terms are documented in the most recently published price lists. Pricing is fixed and determinable according to the Company’s published equipment and parts price lists. Title to all equipment and parts sold shall pass to the buyer upon delivery to the carrier and is not subject to a customer acceptance provision. Proof of the passing of title is documented by the signing of the delivery receipt by a representative of the carrier. Post shipment obligations are limited to any claim with respect to the condition of the equipment or parts. Applicable sales taxes imposed on our revenues are presented on a net basis on the consolidated statements of operations and therefore do not impact net revenues or cost of goods sold. A provision for warranty expenses, based on sales volume, is included in the financial statements. The Company’s return policy allows for new and saleable parts to be returned, subject to inspection and a restocking charge which is included in net sales. Whole goods are not returnable. Shipping costs charged to customers are included in net sales. Freight costs incurred are included in cost of goods sold.

(i) Research and Development

Research and development costs are expensed when incurred. The Company did not incur any research and development costs during the year ended December 31, 2011.

(j) Advertising

Advertising costs are expensed when incurred. Such costs approximated $3,916 for the year ended December 31, 2011.

(k) 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.

There are no reconciliation items between basic and dilutive shares.

(l) Use of Estimates

Management of the Company has made a number of estimates and assumptions related to the reported amount of assets and liabilities, reported amount of revenues and expenses, and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. These estimates include the valuation of the Company’s accounts receivable and inventories. Actual results could differ from those estimates.

(2) Allowance for Doubtful Accounts

A summary of the Company’s activity in the allowance for doubtful accounts is as follows:

	2011
Balance, beginning	$	476
Provision charged to expense		5,608
Less amounts charged-off		(1,514	)
Balance, ending	$	4,570

 

(3) Inventories

Major classes of inventory are:

	2011
Raw materials	$	998,848
Work in process		-
Finished goods		-
	$	998,848
Less: Reserves		(61,057	)
	$	937,791

(4) Property, Plant, and Equipment

Major classes of property, plant, and equipment are:

	2011
Land	$	35,000
Buildings and improvements		783,858
Manufacturing machinery and equipment		591,799
Trucks and automobiles		9,800
Furniture and fixtures		40,493
		1,460,950
Less accumulated depreciation		(806,746	)
Property, plant and equipment	$	654,204

Depreciation expense totaled $74,256 for the fiscal year ended December 31, 2011.

(5) Accrued Expenses

Major components of accrued expenses are:

 

	2011
Accrued Propery Taxes	$	31,926
Accrued Warranty Costs		22,143
Salaries, wages, and related costs		25,300
Other		7,870
	$	87,239

(6) 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 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.

Changes in the Company’s product warranty liability for the years ended December 31, 2011 is as follows:

	2011
Balance, beginning	$	24,313
Settlements made in cash or in-kind		16,783
Warranties issued		(18,953	)
Balance, ending	$	22,143

 

(7) Loan and Credit Agreements

The Company has a $725,000 revolving line of credit with US Bank (the “Line of Credit”) which is scheduled to mature on January 31, 2014.  Effective January 31, 2011, the Company executed the Line of Credit with US Bank.  The Line of Credit is renewable with advances funding the Company’s working capital and letter of credit needs.  The interest rate is .25% plus US Bank’s prime interest rate, adjusted daily, with a minimum rate of 4.00%.  As of December 31, 2011, the interest rate was the minimum of 4.0%. Monthly interest-only payments are required and the unpaid principal is due on the maturity date.  As of December 31, 2011 the Company had borrowed $430,000 against the Line of Credit.  The available amounts remaining on the Line of Credit was $295,000 on December 31, 2011.  The borrowing base limits advances to the lessor of the “Reducing loan amounts” as provided below or the current Borrowing Base. The Borrowing Base limits advances to 80% of the face amount of accounts receivable less than 60 days and 50% of borrowers cost of inventory. The Company’s obligations under the Line of Credit are evidenced by a Revolving Credit Agreement (Agreement) effective January 31, 2011 and certain other ancillary documents.

Line of Credit Reducing Loan Amounts
Amount		Dates
$	725,000	January 31, 2011 thru January 24, 2012
$	625,000	January 25, 2012 thru January 24, 2013
$	525,000	January 25, 2014 thru January 24, 2014
$	425,000	January 25, 2014 thru January 31, 2014

On January 31, 2011, the Company obtained a term loan from US Bank in the amount of $876,000 (the “Term Loan 1”). The loan had an outstanding principal balance of $856,000 as of December 31, 2011. This note matures on January 10, 2016 and bears fixed interest at 5.36 %. Monthly principal and interest payments in the amount of $6,003 are required, with final payment of principal and accrued interest in the amount of $745,672 due on January 10, 2016. This note is collateralized by the building and real estate as defined by the loan agreements and personal guaranties by the shareholders.

On January 5, 2011, the Company obtained a term loan from US Bank in the amount of $199,000 (the “Term Loan A”). The loan had an outstanding principal balance of $166,000 as of December 31, 2011. This note matures on December 25, 2015 and bears fixed interest at 4.55%. Monthly principal and interest payments in the amount of $3,717 are required, with final payment of principal and accrued interest in the amount of $7,289 due on December 25, 2015. This note is collateralized by inventory, equipment, and other tangible and intangible assets. The Company’s obligations under the term loan are evidenced by a Business Security Agreement effective January 31, 2011 and certain other ancillary documents.

The Line of Credit, Term Loan 1, and Term Loan A were obtained to pay off principal and interest amounts for outstanding loans to Ames Community Bank of $150,000 and W.R. Tout Trust of $1,450,000.

Each of the Company’s loans from US Bank are governed by an agreement which requires the Company to comply with certain financial and reporting covenants. The Company must provide internally prepared quarterly and annual financial statements, tax returns, and agings of accounts receivable. The Company must also maintain a Cash Flow Coverage Ratio of 1.5 to 1 at the end of each calendar month.

If the Company (as guarantors) commits an event of default under the any Loan Agreement and fails or is unable to cure that default, the interest rates would increase by 5.0%.

As of December 31, 2011 the Company had loans from shareholders totaling $180,000 (the “Shareholder Loans”). The total balance of shareholder loans totaled $180,000 and are payable to each shareholder during the 2012 fiscal year and each loan bears a fixed interest rate of 6%.

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

	December 31, 2011
Us Bank Loan Payable in monthly installments of $6,003 including interest at 5.36%, due January 10, 2016	$	855,868
Us Bank Loan Payable in monthly installments of $3,717 including interest at 4.55%, due December 25, 2015		165,610
Ardis Heidebrink Shareholder Loan Payable $90,000 including interest at 6%, due December 31, 2012		90,000
Francis Murray Buchheit Shareholder Loan Payable of $90,000 including interest at 6%, due December 31, 2012		90,000
Total term debt		1,201,478
Current Portion		(63,783	)
Current Portion Loan to Shareholder		(180,000	)
Term debt, excluding current portion	$	957,695

A summary of the minimum maturities of term debt follows for the years ending December 31:

Year:	Amount
2012	$	243,783
2013		67,165
2014		70,568
2015		77,716
2016 and thereafter		742,246
	$	1,201,478

(8) Employee Benefit Plans

The Company sponsors a defined contribution 401(k) savings plan which covers substantially all full-time employees who meet eligibility requirements. Participating employees may contribute as salary reductions any amount of their compensation up to the limit prescribed by the Internal Revenue Code. The Company contributed a fixed dollar amount of $8,000 for all employees during the year ended December 31, 2011. The fixed amount was allocated to each employee based on wages earned and tenure with the company. The allocation was completed so that the Company was in compliance with applicable governing benefit regulations.

(9) 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 December 31, 2011 the carrying amount approximates fair value for cash, accounts receivable, accounts payable, notes payable to bank, and other current liabilities. The carrying amounts approximate fair value because of the short maturity of these instruments. The fair value of the Company’s installment term loans payable also approximate recorded value because the interest rates charged under the loan terms are not substantially different than current interest rates.

(10) Litigation and Contingencies

The company does not have any pending legal actions or claims against the Company.

(11) Related Party Transactions

The financial statements of Universal Harvester, Inc. include loans made by the following shareholders to the company: Ardis Heidebrink $90,000 and Francis Murray Buchheit $90,000. These loans bear interest at a rate of 6% annually and are due and payable on December 31, 2012.

(12) Subsequent Events

On May 10, 2012, the company sold all of its assets and all of its employees were hired by Universal Harvester by Art’s Way, Inc., a subsidiary of Art’s Way Manufacturing Co., Inc.

EX-99

Exhibit 99.2

Unaudited Financial Statements of Universal Harvester Co., Inc.

Universal Harvester Co., Inc.

Balance Sheet

Unaudited

			March 31, 2012			March 31, 2011
Assets
Current assets:
	Cash		$	5,672		$	21,101
	Accounts receivable-customers, net of allowance for doubtful accounts of $4,570 and $1,500 in 2012 and 2011, respectively			595,937			546,464
	Inventories, net			1,035,016			1,083,333
	Other current assets			20,595			27,597
		Total current assets		1,657,221			1,678,494
Property, plant, and equipment, net				646,499			688,769
		Total assets	$	2,303,720		$	2,367,263
Liabilities and Stockholders’ Equity
Current liabilities:
	Current portion of term debt		$	65,914		$	52,048
	Accounts payable			115,620			311,855
	Loans from shareholders			180,000			220,556
	Capital lease obligations			5,915			14,642
	Accrued expenses			79,260			93,834
		Total current liabilities		446,708			692,934
Long-term liabilities
	Line of credit			415,000			525,000
	Term debt, excluding current portion			934,079			1,005,169
		Total liabilities		1,795,787			2,233,103
Stockholders’ equity:
	Common stock – $100.00 par value. Authorized 2,500 shares; 36 shares issued and outstanding			3,598			3,598
	Treasury stock			(362,490	)		(362,490	)
	Additional paid-in capital			1,838			1,838
	Retained earnings			864,987			491,214
		Total stockholders’ equity		507,933			134,160
		Total liabilities and stockholders’ equity	$	2,303,720		$	2,367,263

Please see notes to financial statements.

Universal Harvester Co., Inc.

Statement of Operations

Three Months Ended March 31, 2012 and March 31, 2011

Unaudited

			Three Months Ended			Three Months Ended
			March 31,			March 31,
			2011			2011
Net sales			$	1,300,287		$	940,039
Cost of goods sold				918,005			652,580
		Gross profit		382,283			287,459
Expenses:
	General, administrative, and selling			84,048			94,518
		Total expense		84,048			94,518
		Income from operations		298,234			192,941
	Interest expense			(17,993	)		(10,339	)
		Total other income (expense)		(17,993	)		(10,339	)
		Net income	$	280,241		$	182,602
Net income per share:
	Basic net income per share		$	7,784		$	5,072
	Diluted net income per share		$	7,784		$	5,072
	Weighted average outstanding shares used to compute basic net income per share			36			36
	Weighted average outstanding shares used to compute diluted net income per share			36			36

 Please see notes to financial statements.

Universal Harvester Co., Inc.

Statement of Cash Flow

Three Months Ended March 31, 2012 and March 31, 2011

Unaudited

							March 31,			March 31,
							2012			2011
Cash flows from operations:
	Net income						$	280,241		$	182,602
	Adjustments to reconcile net income to net cash provided by operating activities:
			Depreciation expense					19,645			18,564
			Changes in assets and liabilities:
				(Increase) decrease in:
					Accounts receivable			(200,000	)		(351,635	)
					Inventories			(97,225	)		(153,364	)
					Other current assets			(13,097	)		(13,283	)
				Increase (decrease) in:
					Accounts payable			(55,903	)		255,389
					Accrued expenses			(7,980	)		(13,570	)
						Net cash provided by operating activities		(74,319	)		(75,297	)
Cash flows from investing activities:
	Purchases of property, plant, and equipment							(11,940	)		-
						Net cash (used in) investing activities		(11,940	)		-
Cash flows from financing activities:
	Proceeds from line of credit borrowings							-			525,000
	Repayments of line of credit							(15,000	)		(2,800	)
	Payments of notes payable to bank							(21,486	)		(155,428	)
	Payments of notes payable to lender							-			(1,450,000	)
	Payments of capital leases							(2,310	)		(2,063	)
	Proceeds from term debt							-			1,075,000
	Proceeds from stock holder debt							-			217,000
	Distributions to stock holders							-			(216,555	)
						Net cash (used in) provided by financing activities		(38,796	)		(9,846	)
						Net increase (decrease) in cash		(125,055	)		(85,143	)
Cash at beginning of period								130,727			106,244
Cash at end of period							$	5,672		$	21,101
Supplemental disclosures of cash flow information:
	Cash paid/(received) during the period for:
		Interest					$	50,211		$	16,737
		Income taxes						-			-

 

Please see notes to financial statements.

 Universal Harvester Co., Inc.

Notes to Financial Statements

(1) Summary of Significant Accounting Policies

Statement Presentation

The foregoing financial statements of the Company are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods.

(2) Allowance for Doubtful Accounts

A summary of the Company’s activity in the allowance for doubtful accounts is as follows for the three months ended March 31, 2012 and March 31, 2011:

	March 31, 2012		March 31, 2011
Balance, beginning	$	4,570	$	476
Provision charged to expense		-		1,403
Less amounts charged-off		-		(379	)
Balance, ending	$	4,570	$	1,500

(3) Inventories

As of March 31, 2012 and March 31, 2011 our major classes of inventory are:

	March 31, 2012			March 31, 2011
Raw materials	$	1,096,073		$	1,144,390
Work in process		-			-
Finished goods		-			-
	$	1,096,073		$	1,144,390
Less: Reserves		(61,057	)		(61,057	)
	$	1,035,016		$	1,083,333

(4) Property, Plant, and Equipment

As of March 31, 2012 and March 31, 2011 our major classes of property, plant, and equipment are:

	March 31, 2012			March 31, 2011
Land	$	35,000		$	35,000
Buildings and improvements		783,858			783,858
Manufacturing machinery and equipment		591,799			591,799
Trucks and automobiles		21,740			9,800
Furniture and fixtures		40,493			40,493
		1,472,890			1,460,950
Less accumulated depreciation		(826,391	)		(772,181	)
Property, plant and equipment	$	646,499		$	688,769

Depreciation expense totaled $19,645 for the fiscal quarter ended March 31, 2012 and $18,564 for the fiscal quarter ended March 31, 2011.

(5)     Accrued Expenses

As of March 31, 2012 and March 31, 2011 our major components of accrued expenses are:

	March 31, 2012		March 31, 2011
Accrued Property Taxes	$	31,926	$	32,027
Accrued Warranty Costs		22,143		23,770
Salaries, wages, and related costs		17,770		31,957
Other		7,421		6,080
	$	79,260	$	93,834

(6) 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 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.

Changes in the Company’s product warranty liability for the quarters ended March 31, 2012 and March 31, 2011 are as follows:

	March 31, 2012		March 31, 2011
Balance, beginning	$	22,143	$	24,313
Settlements made in cash or in-kind		-		16,783
Warranties issued		-		(17,326	)
Balance, ending	$	22,143	$	23,770

(7) Loan and Credit Agreements

The Company has a $725,000 revolving line of credit with US Bank (the “Line of Credit”) which is scheduled to mature on January 31, 2014.  Effective January 31, 2011, the Company executed the Line of Credit with US Bank.  The Line of Credit is renewable with advances funding the Company’s working capital and letter of credit needs.  The interest rate is .25% plus US Bank’s prime interest rate, adjusted daily, with a minimum rate of 4.00%.  As of March 31, 2012 and March 31, 2011, the interest rate was the minimum of 4.0%. Monthly interest-only payments are required and the unpaid principal is due on the maturity date.  As of March 31, 2012 and March 31, 2011, the Company had borrowed $415,000 and $525,000, respectively, against the Line of Credit.  The available amounts remaining on the Line of Credit was $310,000 on March 31, 2012.  The borrowing base limits advances to the lesser of the “Reducing loan amounts” as provided below or the current Borrowing Base. The Borrowing Base limits advances to 80% of the face amount of accounts receivable less than 60 days and 50% of borrowers cost of inventory. The Company’s obligations under the Line of Credit are evidenced by a Revolving Credit Agreement (Agreement) effective January 31, 2011 and certain other ancillary documents.

Line of Credit Reducing Loan Amounts
Amount	Dates
$725,000	January 31, 2011 thru January 24, 2012
$625,000	January 25, 2012 thru January 24, 2013
$525,000	January 25, 2014 thru January 24, 2014
$425,000	January 25, 2014 thru January 31, 2014

On January 31, 2011, the Company obtained a term loan from US Bank in the amount of $876,000 (the “Term Loan 1”). The loan had an outstanding principal balance of $847,000 as of March 31, 2012 and of $874,000 as of March 31, 2011. This note matures on January 10, 2016 and bears fixed interest at 5.36%. Monthly principal and interest payments in the amount of $6,003 are required, with final payment of principal and accrued interest in the amount of $745,672 due on January 10, 2016. This note is collateralized by the building and real estate as defined by the loan agreements and personal guaranties by the shareholders.

On January 5, 2011, the Company obtained a term loan from US Bank in the amount of $199,000 (the “Term Loan A”). The loan had an outstanding principal balance of $152,993 as of March 31, 2012 and of $183,217 as of March 31, 2011. This note matures on December 25, 2015 and bears fixed interest at 4.55%. Monthly principal and interest payments in the amount of $3,717 are required, with final payment of principal and accrued interest in the amount of $7,289 due on December 25, 2015. This note is collateralized by inventory, equipment, and other tangible and intangible assets. The Company’s obligations under the term loan are evidenced by a Business Security Agreement effective January 31, 2011 and certain other ancillary documents.

The Line of Credit, Term Loan 1, and Term Loan A were obtained to pay off principal and interest amounts for outstanding loans to Ames Community Bank of $150,000 and W.R. Tout Trust of $1,450,000.

Each of the Company’s loans from US Bank are governed by an agreement which requires the Company to comply with certain financial and reporting covenants. The Company must provide internally prepared quarterly and annual financial statements, tax returns, and agings of accounts receivable. The Company must also maintain a Cash Flow Coverage Ratio of 1.5 to 1 at the end of each calendar month.

If the Company (as guarantors) commits an event of default under the any Loan Agreement and fails or is unable to cure that default, the interest rates would increase by 5.0%.

On March 3, 2011 the Company obtained loans from shareholders in the aggregate principal amount of $216,556, which was added to a then-outstanding aggregate loan balance of $4,000 from the shareholders, for a total aggregate principal loan amount of $220,556 (the "Shareholder Loans"). The Company repaid $40,556 of the Shareholder Loans on May 3, 2011. As of December 31, 2011, the total outstanding balance of the Shareholder Loans was $180,000, which was payable to each shareholder during the 2012 fiscal year. Each loan accrued interest at a fixed rate of 6%.

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

	March 31, 2012			March 31, 2011
US Bank Loan Payable in monthly installments of $6,003 including interest at 5.36%, due January 10, 2016	$	847,000		$	874,000
US Bank Loan Payable in monthly installments of $3,717 including interest at 4.55%, due December 25, 2015		152,993			183,217
Ardis Heidebrink Shareholder Loan Payable, including interest at 6%, due December 31, 2012		90,000			110,278
Francis Murray Buchheit Shareholder Loan Payable, including interest at 6%, due December 31, 2012		90,000			110,278
Total term debt		1,179,993			1,277,773
Current Portion		(65,914	)		(52,048	)
Current Portion Loan to Shareholder		(180,000	)		(220,556	)
Term debt, excluding current portion		934,079			1,005,169

(8) 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 March 31, 2012 and March 31, 2011, the carrying amount approximates fair value for cash, accounts receivable, accounts payable, notes payable to bank, and other current liabilities. The carrying amounts approximate fair value because of the short maturity of these instruments. The fair value of the Company’s installment term loans payable also approximate recorded value because the interest rates charged under the loan terms are not substantially different than current interest rates.

(9) Subsequent Events 

On May 10, 2012, the Company sold all of its assets and all of its employees were hired by Universal Harvester by Art’s Way, Inc., a subsidiary of Art’s Way Manufacturing Co., Inc.

EX-99

Exhibit 99.3

ART’S WAY MANUFACTURING CO., INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements have been prepared by Art’s Way Manufacturing Co., Inc. (“Art’s Way”) to reflect Art’s Way’s acquisition of Universal Harvester Co., Inc. (“UHC”), which was effective on May 10, 2012. The transaction is more fully described in Item 2.01 of the Current Report on Form 8-K dated May 10, 2012 that Art’s Way filed with the Securities and Exchange Commission on July 16, 2012.

Based in Ames, Iowa, UHC manufactured pickup reels for combines and swathers. The existing Universal Harvester Co., Inc. operational team was hired on May 11, 2012 to continue the manufacturing of pickup reels.

The aggregate purchase price totaled $3,066,000, consisting of $3,030,450 of current and future cash to be paid and $35,550 of common stock. Under the terms of the purchase agreement, cash in the amount $3,003,565 was paid on May 11, 2012 and $27,427 of cash will be paid on real estate taxes accrued but due on the land and building in future periods.

The unaudited pro forma condensed combined statements of income for the fiscal year ended November 30, 2011 and the three month periods ended February 29, 2012 and February 28, 2011 are based on the historical financial statements of Art’s Way Manufacturing Co., Inc. and Universal Harvester Co., Inc. after giving effect to the acquisition and applying the assumptions and pro forma adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined statements of income for the year ended November 30, 2011 and for the three month periods ended February 29, 2012 and February 28, 2011 combine the results of operations of Art’s Way and UHC as if the acquisition of UHC had occurred on December 1, 2010.

Art’s Way’s acquisition of UHC has been accounted for in accordance with the Financial Accounting Standards Board Accounting Standards Codification 805, Business Combinations (ASC805). Pursuant to this guidance, Art’s Way used the acquisition method to account for this transaction whereby the purchase price was allocated to the fair values of the tangible and intangible assets acquired and liabilities assumed. The excess of the purchase price over the net tangible and identifiable intangible assets acquired was recorded as goodwill. FASB’s guidance provides that intangible assets with finite lives be amortized over their estimated remaining useful lives, while goodwill and other intangible assets with indefinite lives will not be amortized, but rather tested for impairment on at least an annual basis.

Art’s Way has prepared the unaudited pro forma condensed combined financial statements for illustrative purposes only and they are not intended to represent or be indicative of the combined financial position or combined results of operations that would actually have been realized had Art’s Way and UHC been a combined company during the respective periods presented or of the results that may be achieved in future periods. In addition, these pro forma financial statements do not reflect the realization of any cost savings that may have been achieved from operating efficiencies, synergies or other activities that may result from the acquisition.

Unaudited Pro Forma Condensed Combined Statement of Income
Twelve Month Period Ended November 30, 2011
	Art's Way Manufacturing Co., Inc.			Universal Harvester Co.			Pro forma Adjustments			Note		Pro forma Art's Way Manufacturing Co., Inc.
Net sales	$	27,619,760		$	4,400,550		$	-				$	32,020,310
Cost of goods sold		20,612,750			3,571,907			-					24,184,657
Gross profit		7,007,010			828,643			-					7,835,653
Operating expenses:
Selling, engineering and administrative expenses		5,077,246			440,055			-					5,517,301
Total operating expenses		5,077,246			440,055			-					5,517,301
Income from operations		1,929,764			388,588			-					2,318,352
Other income (expense)		(348,830	)		(111,600	)		-					(460,430	)
Income before income tax		1,580,934			276,988			-					1,857,922
Income tax expense		332,039			-			94,176			1		426,215
Net income	$	1,248,895		$	276,988		$	(94,176	)			$	1,431,707
Income per common share:
Basic	$	0.31										$	0.36
Diluted	$	0.31										$	0.35
Weighted average common shares outstanding:
Basic		4,018,196						5,000			2		4,023,196
Diluted		4,049,268						5,000					4,054,268

Unaudited Pro Forma Condensed Combined Statement of Income

Three Month Period Ended February 29, 2012

	Art's Way Manufacturing Co., Inc.			Universal Harvester Co.			Pro forma Adjustments			Note		Pro forma Art's Way Manufacturing Co., Inc.
Net sales	$	6,312,216		$	904,632		$	-				$	7,216,848
Cost of goods sold		4,835,995			741,799			-					5,577,794
Gross profit		1,476,221			162,833			-					1,639,054
Operating expenses:
Selling, engineering and administrative expenses		1,113,968			90,463			-					1,204,431
Total operating expenses		1,113,968			90,463			-					1,204,431
Income from operations		362,253			72,370			-					434,623
Other income (expense)		(73,175	)		(27,900	)		-					(101,075	)
Income before income tax		289,078			44,470			-					333,548
Income tax expense		95,580			-			15,120			1		110,700
Net income	$	193,498		$	44,470		$	(15,120	)			$	222,848
Income per common share:
Basic	$	0.05										$	0.06
Diluted	$	0.05										$	0.06
Weighted average common shares outstanding:
Basic		4,028,193						5,000			2		4,033,193
Diluted		4,046,125						5,000					4,051,125

Unaudited Pro Forma Condensed Combined Statement of Income
Three Month Period Ended February 28, 2011
	Art's Way Manufacturing Co., Inc.			Universal Harvester Co.			Pro forma Adjustments			Note		Pro forma Art's Way Manufacturing Co., Inc.
Net sales	$	4,664,338		$	746,143		$	-				$	5,410,481
Cost of goods sold		4,188,503			611,837			-					4,800,340
Gross profit		475,835			134,306			-					610,141
Operating expenses:
Selling, engineering and administrative expenses		1,134,791			74,614			-					1,209,405
Total operating expenses		1,134,791			74,614			-					1,209,405
Income (loss) from operations		(658,956	)		59,692			-					(599,264	)
Other income (expense)		(70,133	)		(27,900	)		-					(98,033	)
Income before income tax (benefit)		(729,089	)		31,792			-					(697,297	)
Income tax expense		(244,512	)		-			10,809			1		(233,703	)
Net income (loss)	$	(484,577	)	$	31,792		$	(10,809	)			$	(463,594	)
Income (loss) per common share:
Basic	$	(0.12	)									$	(0.11	)
Diluted	$	(0.12	)									$	(0.11	)
Weighted average common shares outstanding:
Basic		4,028,193						5,000			2		4,033,193
Diluted		4,046,125						5,000					4,051,125

PRO FORMA ADJUSTMENTS

The pro forma condensed combined financial statements are based upon the historical consolidated financial statements of Art’s Way Manufacturing Co., Inc. and Universal Harvester Co., Inc. and certain adjustments which Art’s Way believes are reasonable to give effect to the UHC acquisition. These adjustments are based upon currently available information and certain assumptions, and therefore the actual adjustments will likely differ from the pro forma adjustments.

The pro forma adjustments included in the Unaudited Pro Forma Condensed Combined Financial Statements are as follows:

(1) Recognition of corporate income tax expense. UHC was a S Corporation not subject to income tax at the corporate level

(2) Addition of issued and outstanding shares as a result of the purchase. 5,000 shares were issued along with cash payment.

The pro forma unaudited results do not purport to be indicative of the results which would have been obtained had the acquisition been completed as of the beginning of the earliest period presented. In addition, they do not include any benefits that may result from the acquisition due to synergies that may be derived.