10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended May 31, 2014

or

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ______ to ______

Commission File No. 0-5131

ART’S-WAY MANUFACTURING CO., INC.

(Exact name of registrant as specified in its charter)

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

5556 Highway 9

Armstrong, Iowa 50514

(Address of principal executive offices)

(712) 864-3131

(Registrant’s telephone number, including area code)

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

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

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

Large Accelerated filer ☐                                                                                  Accelerated filer ☐

Non-accelerated filer ☐ (Do not check if a smaller reporting company)     Smaller reporting company ☒

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

Number of common shares outstanding as of June 18, 2014: 4,048,552

Art’s-Way Manufacturing Co., Inc.

Index

Page No. 

PART I – FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets May 31, 2014 and November 30, 2013	1
	Condensed Consolidated Statements of Operations Three-month and six-month periods ended May 31, 2014 and May 31, 2013	2
	Condensed Consolidated Statements of Cash Flows Six-month periods ended May 31, 2014 and May 31, 2013	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3	Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.	Controls and Procedures	17
PART II – OTHER INFORMATION		18
Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3.	Defaults Upon Senior Securities	18
Item 4.	Mine Safety Disclosures	18
Item 5.	Other Information	18
Item 6.	Exhibits	19
	SIGNATURES	20
	Exhibit Index	21

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Balance Sheets

	(Unaudited)
Assets	May 31, 2014		November 30, 2013
Current assets:
Cash	$	250,392	$	207,950
Accounts receivable-customers, net of allowance for doubtful accounts of $46,412 and $35,474 in 2014 and 2013, respectively		3,277,554		2,999,903
Inventories, net		15,868,285		14,922,525
Deferred taxes		1,333,097		1,228,097
Cost and Profit in Excess of Billings		101,109		42,238
Income taxes receivable		377,682		108,513
Other current assets		613,884		242,146
Total current assets		21,822,003		19,751,372
Property, plant, and equipment, net		12,102,091		11,900,202
Assets held for lease, net		90,409		122,318
Goodwill		993,729		993,729
Total assets	$	35,008,232	$	32,767,621
Liabilities and Stockholders’ Equity
Current liabilities:
Line of credit	$	4,064,740	$	3,350,000
Current portion of term debt		1,265,596		1,228,964
Accounts payable		1,030,099		806,207
Customer deposits		1,055,716		147,505
Billings in Excess of Cost and Profit		68,217		17,721
Accrued expenses		1,584,885		1,718,475
Total current liabilities		9,069,253		7,268,872
Long-term liabilities
Deferred taxes		1,032,645		952,645
Long Term debt, excluding current portion		6,595,084		6,251,959
Total liabilities		16,696,982		14,473,476
Stockholders’ equity:
Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares in 2014 and 2013; issued and outstanding 0 shares in 2014 and 2013.		-		-
Common stock – $0.01 par value. Authorized 9,500,000 shares in 2014 and 2013; issued and outstanding 4,048,552 in 2014 and 4,046,552 in 2013		40,486		40,466
Additional paid-in capital		2,638,651		2,616,407
Retained earnings		15,632,113		15,637,272
Total stockholders’ equity		18,311,250		18,294,145
Total liabilities and stockholders’ equity	$	35,008,232	$	32,767,621

See accompanying notes to condensed consolidated financial statements.

1

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended						Six Months Ended
	May 31, 2014			May 31, 2013			May 31, 2014			May 31, 2013
Net sales	$	9,468,996		$	9,250,308		$	15,706,331		$	17,665,413
Cost of goods sold		7,141,227			6,685,890			12,038,146			12,731,827
Gross profit		2,327,769			2,564,418			3,668,185			4,933,586
Expenses:
Engineering		118,361			101,125			231,899			203,692
Selling		639,893			483,782			1,176,043			973,519
General and administrative		1,125,624			1,180,552			2,111,288			2,244,662
Total expenses		1,883,878			1,765,459			3,519,230			3,421,873
Income (loss) from operations		443,891			798,959			148,955			1,511,713
Other income (expense):
Interest expense		(121,222	)		(79,739	)		(175,162	)		(169,202	)
Other		11,431			(9,443	)		17,105			628,699
Total other income (expense)		(109,791	)		(89,182	)		(158,057	)		459,497
Income (loss) before income taxes		334,100			709,777			(9,102	)		1,971,210
Tax expense (benefit)		80,945			195,537			(3,943	)		637,710
Net income (loss)	$	253,155		$	514,240		$	(5,159	)	$	1,333,500
Net income per share:
Basic net income (loss) per share	$	0.06		$	0.13		$	(0.00	)	$	0.33
Diluted net income (loss) per share	$	0.06		$	0.13		$	(0.00	)	$	0.33
Weighted average outstanding shares used to compute basic net income per share		4,047,487			4,037,552			4,047,025			4,036,302
Weighted average outstanding shares used to compute diluted net income per share		4,053,747			4,051,692			4,047,025			4,049,480

See accompanying notes to condensed consolidated financial statements.

2

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited) 

	Year to Date
	May 31, 2014			May 31, 2013
Cash flows from operations:
Net income (loss)	$	(5,159	)	$	1,333,500
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Stock based compensation		14,504			29,812
(Gain) on disposal of property, plant, and equipment		(958	)		(604,245	)
Depreciation expense		441,230			370,084
Bad debt expense (recovery)		10,939			3,229
Deferred income taxes		(25,003	)		(97,147	)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable		(288,590	)		408,979
Inventories		(945,760	)		(492,088	)
Income taxes receivable		(269,169	)		-
Other current assets		(371,738	)		(28,120	)
Increase (decrease) in:
Accounts payable		223,896			208,415
Contracts in progress, net		(8,375	)		(995,529	)
Customer deposits		908,211			759,838
Income taxes payable		-			(622,085	)
Accrued expenses		(133,590	)		(279	)
Net cash provided by (used in) operating activities		(449,562	)		274,364
Cash flows from investing activities:
Purchases of property, plant, and equipment		(611,211	)		(210,269	)
Proceeds from sale of property		958			835,536
Net cash provided by (used in) investing activities		(610,253	)		625,267
Cash flows from financing activities:
Net change in line of credit		714,740			-
Proceeds from term debt		1,000,000			228,339
Repayment of term debt		(620,243	)		(551,307	)
Proceeds from the exercise of stock options		7,760			-
Net cash provided by (used in) financing activities		1,102,257			(322,968	)
Net increase in cash		42,442			576,663
Cash at beginning of period		207,950			1,546,609
Cash at end of period	$	250,392		$	2,123,272
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	176,564		$	169,202
Income taxes		291,822			1,356,942

See accompanying notes to condensed consolidated financial statements.

3

Notes to Unaudited Condensed Consolidated Financial Statements

1) Description of the Company

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

We began operations as a farm equipment manufacturer in 1956. Since that time, we have become a major worldwide manufacturer of agricultural equipment. Our principal manufacturing plant is located in Armstrong, Iowa.

We have organized our business into four operating segments. Management separately evaluates the financial results of each segment because each is a strategic business unit offering different products and requiring different technology and marketing strategies. Our agricultural products segment (“Manufacturing”) manufactures farm equipment under the Art’s-Way Manufacturing label and private labels. Our pressurized vessels segment (“Vessels”) manufactures pressurized vessels. Our modular buildings segment (“Scientific”) manufactures modular buildings for various uses, commonly animal containment and research laboratories and our tools segment (“Metals”) manufactures steel cutting tools and inserts. For detailed financial information relating to segment reporting, see Note 12, “Segment Information.”

On June 25, 2013, the Company acquired the fixed assets, raw material inventory, work-in-progress inventory and select finished goods inventory of Agro Trend, a division of Rojac Industries, Inc. of Clifford, Ontario, Canada. Agro Trend distributes agricultural equipment and manufactures commercial snow blowers and agricultural trailers. Most of the existing Agro Trend operational team was retained to continue the manufacture of snow blowers and trailers. The acquired assets and operations are reported with our agricultural products segment. For specific financial information related to the acquisition, see Note 10, “Acquisitions.”

On September 30, 2013, the Company acquired the assets of Ohio Metal Working Products Company in Canton, Ohio consisting of inventory, equipment, real property, and intangible assets. Ohio Metal Working Products Company is a domestic manufacturer and distributor of standard single point brazed carbide tipped tools as well as PCD (polycrystalline diamond) and CBN (cubic boron nitride) inserts and tools. The existing Ohio Metal Working Products Company operational team was retained to continue the manufacturing of the carbide, PCD, and CBN tipped tools and inserts. The acquired assets and operations are reported in our tools segment for financial reporting purposes. For specific financial information related to the acquisition, see Note 10, “Acquisitions.”

2) Summary of Significant Account Policies

Statement Presentation

The foregoing condensed consolidated financial statements of the Company are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2013. The results of operations for the three and six months ended May 31, 2014 are not necessarily indicative of the results for the fiscal year ending November 30, 2014.

4

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the three and six months ended May 31, 2014. Actual results could differ from those estimates.

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

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

Basic and diluted earnings (loss) per common share have been computed based on the following as of May 31, 2014 and May 31, 2013:

	For the three months ended
	May 31, 2014		May 31, 2013
Basic:
Numerator: net income	$	253,155	$	514,240
Denominator: average number of common shares outstanding		4,047,487		4,037,552
Basic earnings per common share	$	0.06	$	0.13
Diluted:
Numerator: net income	$	253,155	$	514,240
Average number of common shares outstanding		4,047,487		4,037,552
Effect of dilutive stock options		6,260		14,140
Denominator: dilutive average number of common shares outstanding		4,053,747		4,051,692
Diluted earnings per common share	$	0.06	$	0.13

	For the six months Ended
	May 31, 2014			May 31, 2013
Basic:
Numerator: net income (loss)	$	(5,159	)	$	1,333,500
Denominator: average number of common shares outstanding		4,047,025			4,036,302
Basic earnings (loss) per common share	$	(0.00	)	$	0.33
Diluted:
Numerator: net income (loss)	$	(5,159	)	$	1,333,500
Average number of common shares outstanding		4,047,025			4,036,302
Effect of dilutive stock options		0			13,178
Denominator: dilutive average number of common shares outstanding		4,047,025			4,049,480
Diluted earnings (loss) per common share	$	(0.00	)	$	0.33

5

4) Inventory

Major classes of inventory are:

	May 31, 2014			November 30, 2013
Raw materials	$	10,471,139		$	10,322,014
Work in process		478,117			511,016
Finished goods		8,346,187			7,305,301
	$	19,295,443		$	18,138,331
Less: Reserves		(3,427,158	)		(3,215,806	)
	$	15,868,285		$	14,922,525

5) Accrued Expenses

Major components of accrued expenses are:

		May 31, 2014		November 30, 2013
Salaries, wages, and commissions	$	747,568	$	836,200
Accrued warranty expense		229,400		220,719
Other		607,917		661,556
	$	1,584,885	$	1,718,475

6

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

Changes in the Company’s product warranty liability for the three and six months ended May 31, 2014 and May 31, 2013 are as follows:

		For the three months ended
		May 31, 2014			May 31, 2013
Balance, beginning	$	153,455		$	575,330
Settlements made in cash or in-kind		(43,493	)		(212,374	)
Warranties issued		119,438			164,025
Balance, ending	$	229,400		$	526,981

	For the six months ended
	May 31, 2014			May 31, 2013
Balance, beginning	$	220,719		$	578,864
Settlements made in cash or in-kind		(195,070	)		(381,063	)
Warranties issued		203,751			329,180
Balance, ending	$	229,400		$	526,981

7

7) Loan and Credit Agreements

On May 1, 2013, the Company began to move all banking arrangements previously held through West Bank to U.S. Bank. The relationship with U.S. Bank now includes an $8,000,000 revolving line of credit (the “Line of Credit”) which was renewed in 2014, and is now scheduled to mature on May 1, 2015. The Line of Credit is renewable annually with advances funding the Company’s working capital needs and is secured by real property and fixed asset collateral. The interest rate is U.S. Bank’s prime interest rate, adjusted each time that the Federal prime rate changes, with a minimum rate of 3.50%. As of May 31, 2014, the interest rate was the minimum of 3.50%. Monthly interest-only payments are required and the unpaid principal is due on the maturity date. As of May 31, 2014, the Company had a principal balance of $4,064,740 outstanding against the Line of Credit. The Line of Credit states that the borrowing base will be an amount equal to the sum of 75% of accounts receivable (discounted for aged accounts and customer balances exceeding 20% of aggregate receivables), plus 50% of inventory (this component cannot exceed $6,000,000 and only includes finished goods and raw materials deemed to be in good condition and not obsolete), less any outstanding loan balance of the Line of Credit, and less undrawn amounts of outstanding letters of credit issued by U.S. Bank or any affiliate. The Company’s obligations under the Line of Credit are evidenced by a Revolving Credit Note effective May 1, 2013, a Revolving Credit Agreement dated May 1, 2013 and certain other ancillary documents.   

In addition to the Line of Credit, on May 1, 2013, the Company refinanced all outstanding West Bank term loans with U.S. Bank. The West Bank long-term debt, which had outstanding principal balances of $4,342,000 at a fixed interest rate of 4.75% and $1,749,000 at a fixed interest rate of 4.50%, was paid off with four U.S. Bank loans totaling $6,319,000 at a fixed interest rate of 2.98% (the “2013 U.S. Bank Term Loans”). As detailed in the Company’s long-term debt summary below, monthly principal and interest payments in the aggregate amount of $93,850 are required, with final payments of principal and accrued interest on the four loans, in the aggregate amount of $1,372,000, due on May 1, 2018.

As a result of paying off the West Bank loans, the Company incurred $130,000 worth of prepayment penalties which were financed by the U.S. Bank loans. The penalties were booked to fixed costs on the income statement for the quarter ended May 31, 2013. Closing costs amounted to $9,000 and will be amortized over the life of the loans.

On May 29, 2014, the Company obtained $1,000,000 in long-term debt from U.S. Bank to partially pay down the line of credit draw from 2013 that we had used to finance the building and property of Ohio Metal Working Products Company in Canton, Ohio. The maturity date of this loan is May 25, 2017, with a final payment of principal and accrued interest in the amount of $890,000 due May 25, 2017. This loan is secured by a mortgage on the building and property acquired from Ohio Metal Working Products Company in Canton, Ohio pursuant to a Mortgage, Security Agreement and Assignment of Rents between the Company and U.S. Bank, dated May 29, 2014.

Except for the U.S. Bank UHC Loan (as defined below), each of the Company’s term loans from U.S. Bank is governed by a Term Note and a Term Loan Agreement. Each Term Loan Agreement and the Revolving Credit Agreement require the Company to provide monthly internally prepared financial reports, year-end audited financial statements, and a monthly aging of accounts receivable. The Company, as of the end of each fiscal quarter, must maintain a debt to tangible net worth ratio of not more than 1.5 to 1.0 and a fixed charge coverage ratio of at least 1.15 to 1.00. The loans are secured by a first position security interest on the assets of the Company and its subsidiaries, including but not limited to, inventories, machinery, equipment and real estate, in accordance with the Business Security Agreements entered into by the Company and its subsidiaries and the Pledge Agreements entered into by the subsidiaries. Additionally, the Company has mortgaged certain real property in favor of U.S. Bank as documented by mortgage agreements dated May 1, 2013 and May 29, 2014 (together, the “Mortgages”).

If the Company or its subsidiaries (as guarantors pursuant to continuing guaranties) commits an event of default under the Term Loan Agreements, Business Security Agreements, Pledge Agreements, Mortgages, or Revolving Credit Agreement and fails or is unable to cure that default, the interest rate on each of the loans and Line of Credit could increase by 5.0% per annum and U.S. Bank can immediately terminate its obligation, if any, to make additional loans to the Company. In addition, U.S. Bank may collect any and all money due or to become due and shall have all other rights and remedies for default provided by the Uniform Commercial Code, as well as any other applicable law and the various loan agreements, including, without limitation, the right to repossess, render unusable and/or dispose of the collateral without judicial process. In addition, in an event of default, U.S. Bank may foreclose on mortgaged property pursuant to the terms of the Mortgages.

The Company was in compliance with all covenants under the Term Loan Agreements and the Revolving Credit Agreement as measured on May 31, 2014, other than its covenant to maintain a fixed charge coverage ratio of at least 1.15 to 1.00. The fixed charge coverage ratio is based on a rolling 12 month calculation and measures the Company’s ability to cover fixed expenses such as loan payments, tax payments, rental payments, and dividends. The net loss in the first quarter of 2014 from operations was the main reason for the non-compliance result as of May 31, 2014. US Bank has issued a waiver forgiving the non-compliance for the first and second quarters and no event of default occurred. The next measurement date is August 31, 2014.

8

On May 10, 2012, the Company obtained $880,000 in long-term debt from U.S. Bank issued to acquire the building and property of Universal Harvester Co., Inc. located in Ames, Iowa (the “U.S. Bank UHC Loan”). The maturity date of this loan is May 10, 2017, with a final payment of principal and accrued interest in the amount of $283,500 due May 10, 2017. This loan is secured by a mortgage on the building and property acquired from Universal Harvester Co., Inc. in Ames, Iowa, pursuant to a Mortgage, Security Agreement and Assignment of Rents between the Company and U.S. Bank, dated May 10, 2012. On May 1, 2013, the U.S. Bank UHC Loan and the Mortgage were amended to extend the mortgage to secure the 2013 U.S. Bank Term Loans in addition to the U.S. Bank UHC Loan.

If the Company or its subsidiaries (as guarantors) commits an event of default under the agreement governing the U.S. Bank UHC Loan and fails or is unable to cure during any applicable cure periods, the lender may cause the entire amount of the loan to be immediately due and payable, may foreclose on the property, or may increase the interest rate to 5.00% per annum, plus the interest rate otherwise payable under the U.S. Bank UHC Loan.

On May 1, 2010, the Company obtained a loan to finance the purchase of an additional facility located in West Union, Iowa to be used as a distribution center, warehouse facility, and manufacturing plant for certain products under the Art’s-Way brand. The funds for this loan were made available by the Iowa Finance Authority by the issuance of tax exempt bonds. This loan had an original principal amount of $1,300,000 and an interest rate of 3.5%. On February 1, 2013, the interest rate was decreased to 2.75%. The other terms of the loan remain unchanged.

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

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

The Company was in compliance with all covenants under the IFA Loan Agreement as measured on November 30, 2013. The next measurement date is November 30, 2014.

9

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

	May 31, 2014		November 30, 2013
U.S. Bank loan payable in monthly installments of $42,500 including interest at 2.98%, due May 1, 2018	$	1,889,966	$	2,114,675
U.S. Bank loan payable in monthly installments of $11,000 including interest at 2.98%, due May 1, 2018		903,501		955,507
U.S. Bank loan payable in monthly installments of $12,550 including interest at 2.98%, due May 1, 2018		1,025,943		1,085,350
U.S. Bank loan payable in monthly installments of $27,800 including interest at 2.98%, due May 1, 2018		1,551.447		1,693,752
U.S. Bank loan payable in monthly installments of $11,700 including interest at 3.15%, due May 10, 2017		648,302		707,719
U.S. Bank loan payable in monthly installments of $5,556 including interest at 2.98%, due May 25, 2017		1,000,000		0
Iowa Finance Authority loan payable in monthly installments of $12,500 including interest at 2.75%, due June 1, 2020		841,521		904,662
IDED loan payable in monthly installments of $2,437 including interest at 6%, due June 1, 2014		0		14,375
IDED loan payable in monthly installments of $813 including interest at 0%, due June 1, 2014		0		4,883
Total term debt	$	7,860,680	$	7,480,923
Less current portion of term debt		1,265,596		1,228,964
Term debt, excluding current portion	$	6,595,084	$	6,251,959

8) Recently Issued Accounting Pronouncements

Presentation of an Unrecognized Tax Benefit

In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” that clarifies how an unrecognized tax benefit should be presented in the financial statements when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists; as a reduction to a deferred tax asset or as a liability. The amendments are meant to eliminate the diversity that exists in the financial statement presentation of the unrecognized tax benefits. The amendments in this ASU do not require new recurring disclosures and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. The effective date for the Company will be fiscal year beginning December 1, 2014. The Company currently has no unrecognized tax benefits that are impacted by the amendment and the Company does not expect this standard to have a material impact on our consolidated financial statements.

10

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” which supersedes the guidance in “Revenue Recognition (Topic 605)” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period and is to be applied retrospectively, with early application not permitted. We are evaluating the new standard, but do not at this time expect this standard to have a material impact on our consolidated financial statements.

9) Equity Incentive Plan and Stock Based Compensation

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

The 2011 Plan permits the plan administrator to award nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance awards, and stock appreciation rights to employees (including officers), directors, and consultants.  The Board of Directors has approved a director compensation policy pursuant to which non-employee directors are automatically granted non-qualified stock options to purchase 2,000 shares of common stock annually or initially upon their election to the Board, which are fully vested.

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

Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant vesting period. We estimate the fair value of each stock-based award on the measurement date using the Black-Scholes option valuation model which incorporates assumptions as to stock price volatility, the expected life of the options, risk-free interest rate, and dividend yield. Expected volatility is based on historical volatility of the Company’s stock and other factors. The Company uses historical option exercise and termination data to estimate the expected term the options are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is calculated using historical dividend amounts and the stock price at the option issuance date. We have incurred $14,504 of stock-based compensation expense during the six months ended May 31, 2014.

10) Acquisitions

On June 25, 2013, the Company acquired the fixed assets, raw material inventory, work-in-process inventory, and select finished good inventory of Agro Trend, a division of Rojac Industries, Inc. of Clifford, Ontario, Canada. A new entity was formed, Art's Way Manufacturing International, LTD (“International”), which is included in the agricultural products segment for financial reporting purposes. International leases the facility in Clifford, Ontario and is continuing manufacturing, marketing and sales from the Canadian location. The amount paid in U.S. dollars for the acquisition of assets totaled $311,000 ($88,000 in fixed assets and $223,000 in inventory). 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.

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The acquisition also includes a consignment arrangement regarding $600,000 of select finished good inventory. As part of the arrangement, International agreed to use reasonable efforts to sell the inventory including providing a sales and marketing plan with projections within 60 days of the closing date and meeting with the consignor quarterly to discuss progress. Once a month, International will pay the consignor an amount equal to the cost base of the inventory sold that month. As of May 31, 2014, International had sold $364,000 of the consigned inventory.

The financial books of the operation are kept in the functional currency of Canadian dollars and the financial statements are converted to U.S. Dollars for consolidation. When consolidating the financial results of the Company into U.S. Dollars for reporting purposes, the Company uses the All-Current translation method. The All-Current method requires the balance sheet assets and liabilities be translated to U.S. Dollars at the exchange rate as of quarter end. Owner’s equity is translated at historical exchange rates and retained earnings are translated at an average exchange rate for the period. Additionally, revenue and expenses are translated at average exchange rates for the periods presented. The resulting cumulative translation adjustment is carried on the balance sheet and distributed among various balance sheet accounts. The Company monitors the amount of the adjustment and considers it to be immaterial.

On September 30, 2013, the Company acquired the assets of Ohio Metal Working Products Company in Canton, Ohio consisting of inventory, equipment, real property, and intangible assets. A new entity was formed, Ohio Metal Working Products/Art’s-Way, Inc (“Metals”). A new segment called Tools was created for financial reporting purposes. Ohio Metal Working Products/Art’s-Way, Inc. is a domestic manufacturer and distributor of standard single point brazed carbide tipped tools as well as PCD (polycrystalline diamond) and CBN (cubic boron nitride) inserts and tools. The amount paid for the acquisition totaled approximately $3,172,000 ($1,142,000 in inventory, $1,200,000 in land and building, $868,000 in fixed assets, and a reduction for assumed vacation liability of $38,000). The acquisition was financed by accessing the line of credit available through U.S. Bank, and on May 29, 2014 we obtained a mortgage for the property and buildings in the amount of $1,000,000 which was used to pay down on the line of credit. The operating results of the acquired business are reflected in the Company’s consolidated statements of operations from the acquisition date forward. The acquisition was made to continue the Company’s growth strategy and diversify its product offerings.

11) Disclosures About the Fair Value of Financial Instruments

The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. At May 31, 2014, and November 30, 2013, the carrying amount approximated fair value for cash, accounts receivable, accounts payable, notes payable to bank, and other current and long-term liabilities. The carrying amounts approximate fair value because of the short maturity of these instruments. The fair value of the 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.

12) Segment Information

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

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

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

Three Months Ended May 31, 2014

	Agricultural Products		Pressurized Vessels			Modular Buildings			Tools			Consolidated
Net Sales from external customers	$	7,562,000	$	475,000		$	537,000		$	895,000		$	9,469,000
Income (loss) from operations		600,000		(78,000	)		(114,000	)		36,000			444,000
Income (loss) before taxes		541,000		(85,000	)		(120,000	)		(2,000	)		334,000
Total Assets		26,147,000		2,715,000			2,708,000			3,438,000			35,008,000
Capital expenditures		162,000		16,000			0			1,000			179,000
Depreciation & Amortization		136,000		27,000			37,000			28,000			228,000

Three Months Ended May 31, 2013

	Agricultural Products		Pressurized Vessels			Modular Buildings		Tools		Consolidated
Revenue from external customers	$	7,716,000	$	642,000		$	892,000	$	0	$	9,250,000
Income (loss) from operations		568,000		(12,000	)		243,000		0		799,000
Income (loss) before tax		517,000		(38,000	)		231,000		0		710,000
Total Assets		25,531,000		2,891,000			3,024,000		0		31,446,000
Capital expenditures		58,000		5,000			3,000		0		66,000
Depreciation & Amortization		96,000		26,000			49,000		0		171,000

Six Months Ended May 31, 2014

	Agricultural Products		Pressurized Vessels			Modular Buildings			Tools		Consolidated
Revenue from external customers	$	12,004,000	$	898,000		$	998,000		$	1,806,000	$	15,706,000
Income (loss) from operations		396,000		(109,000	)		(240,000	)		102,000		149,000
Income (loss) before tax		301,000		(125,000	)		(249,000	)		64,000		(9,000	)
Total Assets		26,147,000		2,715,000			2,708,000			3,438,000		35,008,000
Capital expenditures		574,000		27,000			0			10,000		611,000
Depreciation & Amortization		256,000		54,000			74,000			57,000		441,000

Six Months Ended May 31, 2013

	Agricultural Products		Pressurized Vessels			Modular Buildings		Tools		Consolidated
Revenue from external customers	$	14,720,000	$	1,036,000		$	1,909,000	$	0	$	17,665,000
Income (loss) from operations		1,129,000		(135,000	)		518,000		0		1,512,000
Income (loss) before tax		1,693,000		(214,000	)		492,000		0		1,971,000
Total Assets		25,531,000		2,891,000			3,024,000		0		31,446,000
Capital expenditures		197,000		9,000			4,000		0		210,000
Depreciation & Amortization		247,000		52,000			71,000		0		370,000

13) Subsequent Event

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

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

Forward-Looking Statements

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes thereto included in Item 1 of Part I of this report and the audited consolidated financial statements and related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended November 30, 2013. Some of the statements in this report may contain forward-looking statements that reflect our current view on future events, future business, industry and other conditions, our future performance, and our plans and expectations for future operations and actions. In some cases you can identify forward-looking statements by the use of words such as “may,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or the negative of these terms or other similar expressions. Many of these forward-looking statements are located in this report under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” but they may appear in other sections as well. Forward-looking statements in this report generally relate to: (i) our order backlog; (ii) our beliefs regarding the sufficiency of working capital and our continued ability to renew or obtain financing on reasonable terms when necessary; (iii) the impact of recently issued accounting pronouncements; (iv) our expectations concerning our primary capital needs; and (v) the cyclical nature of the agricultural market and our expectations regarding the strength of certain agricultural markets.

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

Critical Accounting Policies

Our critical accounting policies involving the more significant judgments and assumptions used in the preparation of the financial statements as of May 31, 2014 have remained unchanged from November 30, 2013. These policies include revenue recognition, inventory valuation, and income taxes. Disclosure of these critical accounting policies is incorporated by reference from Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended November 30, 2013.

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Results of Operations

Net Sales and Cost of Sales

Our consolidated corporate sales for the three- and six-month periods ended May 31, 2014 were $9,469,000 and $15,706,000, respectively, compared to $9,250,000 and $17,665,000 during the same respective periods in 2013, a $219,000 or 2.4%, increase for the quarter but a $1,959,000 or 11.1% decrease year-to-date. Consolidated gross profit margin for the three- and six-month periods ending May 31, 2014 of 2014 was 24.6% and 23.4% compared to 27.7% and 27.9% during the same periods of 2013.

Our second quarter sales at Manufacturing were $7,562,000, compared to $7,716,000 during the same period of 2013, a decrease of $154,000, or 2.0%. The six-month sales for 2014 at Manufacturing were $12,004,000, compared to $14,720,000 for the same period in 2013, an 18.5% decrease. The decrease in revenue in the second quarter was primarily due to the decrease in sales of sugar beet harvester revenue as compared to the second quarter of 2013, but was offset somewhat by sales in the second quarter of 2014 from our International acquisition. Also, the colder than average winter during our first fiscal quarter of 2014 delayed production runs of some specific products which would typically be sold during the second quarter, but were not yet completed as of May 31, 2014. Manufacturing’s gross margin for the quarter ended May 31, 2014 was 26.3%, compared to 26.0% for the same period in 2013. For the year to date period ending May 31, 2014 gross margin was 24.6% as compared to 26.9% in the same period for 2013. This reduction is largely due to labor inefficiencies from interrupted production schedules and increased fixed costs related to the colder than average winter during the first fiscal quarter.

Our three- and six-months sales at Vessels were $475,000 and $898,000, respectively, compared to $642,000 and $1,036,000 for the same periods in 2013, a decrease of $167,000, or 26.0% and $138,000, or 13.3%. Gross margin for the quarter ended May 31, 2014 was 3.8% compared to 17.6% for the same period in 2013. The main factor in the decreased gross margin for the quarter was labor overruns for a specific project. Gross margin for the six-months ended May 31, 2014 was 6.0% as compared to 6.2% for the first six-months of fiscal 2013.

Our second fiscal quarter and year-to-date sales at Scientific were $537,000 and $998,000, respectively, compared to $892,000 and $1,909,000 for the same periods in fiscal 2013, a decrease of $355,000, or 39.8% and $910,000, or 47.7%, respectively. The decrease was primarily attributable to the 2013 first quarter finalization of an approximately $7 million fabrication and delivery contract executed in January 2012 and an approximately $1.7 million installation contract executed in April 2012. Scientific was hired to design, fabricate, and install twenty-four modular units over the course of approximately one year for one of the world’s leading research and teaching institutions. Scientific uses the percentage of completion accounting method to calculate revenue and gross margins for all contracts. Gross margin for the quarter ended May 31, 2014 was 10.3% compared to 50.3% for the same period in 2013, while gross margin for the six-month period ended May 31, 2014 was 11.7% as compared to 47.4% for the same period in 2013. The margins reported in first two quarters of 2013 were a result of the finalization of costs as compared to estimates on the major projects described above and did not reflect normal operating margin for the business. The lower margin for 2014 is primarily attributable to the lower revenue relative to steady overhead costs.

Metals had sales of $895,000 and $1,806,000 for the three- and six-months ended May 31, 2014, respectively. Gross margin at Metals was 29.5% for the second fiscal quarter, and 30.1% for the six months ended May 31, 2014.

Expenses 

Our second fiscal quarter consolidated selling expenses were $640,000 compared to $484,000 for the same period in 2013. Year to date selling expenses for fiscal 2014 were $1,176,000 compared to $974,000 for the same period in fiscal 2013. These increases are primarily due to the incremental expenses associated with the Ohio Metals acquisition. Selling expenses as a percentage of sales were 6.8% and 7.5% for the three- and six-month periods ended May 31, 2014, compared to 5.2% and 5.5% for the same respective periods in 2013.

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Consolidated engineering expenses were $118,000 and $232,000 for the three and six months ended May 31, 2014, compared to $101,000 and $204,000 for the same periods in 2013. The increase was primarily due to the hiring of engineering staff at the Armstrong, Iowa facility. Engineering expenses as a percentage of sales were 1.2% and 1.5% for the three- and six-month period ended May 31, 2014, compared to 1.1% and 1.2% for the same respective periods in 2013.

Consolidated administrative expenses for the three and six months ended May 31, 2014 were $1,126,000 and $2,111,000 compared to $1,181,000 and $2,245,000 for the same periods in 2013. The decrease is primarily due to the reduction of bonus accruals offset by the incremental expenses associated with the Ohio Metals acquisition. Administrative expenses as a percentage of sales were 11.9% and 13.4% for the three- and six-month periods ended May 31, 2014, compared to 12.8% and 12.7% for the same respective periods in 2013.

Gain/Loss-Asset Disposal 

The Company had been leasing approximately 88 acres of excess land to third parties for farming. In December of 2012, we sold this excess land as 3 separate tracts. Tract 1 was farmland northwest of the Armstrong Manufacturing plant located at 5556 Highway 9 in Armstrong, Iowa. Tract 2 was farmland north of railroad tracks that run on the north side of the Armstrong Manufacturing plant located at 5556 Highway 9 in Armstrong, Iowa. Tract 3 was pasture land east of the Armstrong Manufacturing plant located at 5556 Highway 9 in Armstrong, Iowa. The net gain on the sale of the three parcels totaled $639,000 and was recognized during the first quarter of fiscal year 2013.

To better utilize our production facilities, our auger production was moved from our Salem, South Dakota facility to our West Union, Iowa production facility in July 2011. The Salem, South Dakota facility was sold in December 2012. An impairment of $95,000 was recognized in fiscal year 2012 on the production facility due to the Company’s carrying value exceeding the bid price. A net loss of $9,000 was recognized in December 2012, which consisted of the closing costs associated with the sale.

The net gain on the sale of the Salem, South Dakota facility and the three tracts of land in Iowa totaled $630,000. The gain was recognized in the six-month period ended May 31, 2013.

Income

Consolidated net income was $253,000 for the three-month period ended May 31, 2014, compared to a net income of $514,000 for the same respective period in 2013. While operating income at our Manufacturing segment increased $24,000 or 4.6%, both Vessels and Scientific had decreased operating income that more than offset the gains at Manufacturing. Another factor in the decreased income was the gross margin pressures experienced during the first and second quarters. Our consolidated net loss for the six-month period ended May 31, 2014 was ($5,000) as compared to net income of $1,334,000 for the same period in 2013. The sale of land described previously and the 2014 year-to-date decrease in revenue at Scientific, Vessels and Manufacturing account for the majority of this reduction, but were partially offset by incremental revenues at our new Metals entity.

Order Backlog

The consolidated order backlog net of discounts as of June 17, 2014 was $7,028,000 compared to $4,933,000 as of June 17, 2013. The increase is primarily due to the demand attributable to the Tools segment and increased demand for our grinder mixer and hay and forage equipment. This increased demand is somewhat offset, however, by lower demand in sugar beet harvesters, pressurized vessels, and modular buildings. The agricultural products segment order backlog was $5,945,000 as of June 17, 2014, compared to $4,136,000 in fiscal 2013. The backlog for the pressurized vessels segment was $283,000 as of June 17, 2014, compared to $500,000 in fiscal 2013. The backlog for the modular buildings segment was $200,000 as of June 17, 2014, compared to $297,000 in fiscal 2013. The backlog for the tools segment was $601,000 as of June 17, 2014. Our order backlog is not necessarily indicative of future revenue to be generated from such orders due to the possibility of order cancellations and dealer discount arrangements we may enter into from time to time.

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Liquidity and Capital Resources

Our primary sources of funds for the three and six months ended May 31, 2014 were proceeds from the U.S. Bank Line of Credit, customer deposits, and the U.S. Bank note dated May 29, 2014; we expect our primary capital needs to relate to costs of production. We have an $8,000,000 revolving Line of Credit with U.S. Bank, which, as of May 31, 2014, had an outstanding principal balance of $4,064,740. The Line of Credit is renewable annually and is scheduled to mature on May 1, 2015.

For additional information about our financing activities, please refer to Note 9 to the audited consolidated financial statements and to the discussion entitled “Liquidity and Capital Resources,” each contained in our Annual Report on Form 10-K for the fiscal year ended November 30, 2013, as well as Note 7 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report.

We believe that our current financing arrangements provide sufficient cash to finance operations for the next twelve months. We expect to continue to rely on cash from financing activities to supplement our cash flows from operations in order to meet our liquidity and capital expenditure needs in the near future. We expect to continue to be able to procure financing upon reasonable terms.

Off Balance Sheet Arrangements

None.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4.   Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

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Changes in Internal Control over Financial Reporting

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

PART II – OTHER INFORMATION

Item 1.   Legal Proceedings.

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

Item 1A. Risk Factors.

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

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

None.

Item 3.   Defaults Upon Senior Securities.

None.

Item 4.   Mine Safety Disclosures.

Not applicable.

Item 5.   Other Information.

On May 29, 2014, the Company entered into a Term Note (the “Ohio Note”) and Term Loan Agreement (the “Ohio Agreement”) in the amount of $1,000,000 with U.S. Bank to partially pay down the line of credit draw in 2013 that we had used to finance the building and property of Ohio Metal Working Products Company in Canton, Ohio. Pursuant to the terms of the Ohio Note, interest accrues at an annual rate of 2.98% and principal and interest are payable in monthly installments of $5,556.31 each, beginning June 25, 2014, with a final payment of all unpaid principal and accrued interest on May 25, 2017, the maturity date. Upon any default, U.S. Bank may increase the interest rate and accelerate payment of the Ohio Note or increase the required periodic payments under the Ohio Note. The terms of the Ohio Agreement correspond to the terms of the other Term Loan Agreements between the Company and U.S. Bank as further described in Note 7, Part I of this quarterly report, and such description is incorporated herein by reference.

The Ohio Note is secured by a mortgage on the building and property acquired from Ohio Metal Working Products Company in Canton, Ohio pursuant to an Open-End Mortgage, Security Agreement and Assignment of Rents and Leases from Ohio Metal Working Products/Art’s-Way Inc., in favor of U.S. Bank National Association, dated May 29, 2014 (the “Ohio Mortgage”). The Ohio Mortgage secures all of the Company’s debts, liabilities, obligations, covenants, warranties, and duties to U.S. Bank. Ohio Metal Working Products/Art’s-Way Inc. further entered into a Pledge Agreement with U.S. Bank National Association, dated in June of 2014 (the “Ohio Pledge”), and each of the Company’s subsidiaries entered into a Reaffirmation of Guaranty with U.S. Bank National Association, each dated May 29, 2014 (together, the “Guaranties”).

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In connection with entry into the foregoing documents, the Company also entered into an Amendment to Loan Agreement with U.S. Bank National Association in June 2014, which effects a series of amendments to the financing agreements executed between the Company and U.S. Bank prior to the execution of the Ohio Note (together, the “Amendments”). The Amendments modify the definition of “fixed charge coverage ratio” contained in the Company’s Loan Agreements and Revolving Credit Agreement. The Company entered into a separate amendment to effect the same change to the definition of “fix charge coverage ratio” contained in the Ohio Agreement (the “Ohio Agreement Amendment”).

On June 1, 2014, the Company renewed its $8,000,000 revolving line of credit      with U.S. Bank by entry of an Amendment to Loan Agreement and Note. The agreement was amended to extend the maturity date to May 1, 2015, to effect corresponding changes to the payment schedule, and to reaffirm the default interest rate of an additional 5% per year. All other aspects of the agreement were unaffected by the renewal.

The foregoing summaries do not purport to be complete and are qualified in their entirety by reference to the text of the Ohio Note, Ohio Agreement, Ohio Mortgage, Ohio Pledge, Guaranties, Amendments, Ohio Agreement Amendment, and Amendment to Loan Agreement and Note, copies of which are attached hereto as Exhibits 10.1-10.11 and incorporated herein by reference.

Item 6.   Exhibits.

See “Exhibit Index” on page 21 of this report.

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SIGNATURES

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

ART’S-WAY MANUFACTURING CO., INC.

Date: June 27, 2014	By: /s/ Carrie L. Majeski
	Carrie L. Majeski
	President, Chief Executive Officer and interim Chief Financial Officer

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Art’s-Way Manufacturing Co., Inc.

Exhibit Index

Form 10-Q for the Quarterly Period Ended May 31, 2014

Exhibit No.	Description
10.1	Term Note for loan in the amount of $1,000,000, between Art’s-Way Manufacturing Co., Inc. and U.S. Bank National Association, dated May 29, 2014 – filed herewith.
10.2	Term Loan Agreement for loan in the amount of $1,000,000, between Art’s-Way Manufacturing Co., Inc. and U.S. Bank National Association, dated May 29, 2014 – filed herewith.
10.3	Open-End Mortgage, Security Agreement and Assignment of Rents and Leases, between Ohio Metal Working Products/Art’s-Way, Inc. and U.S. Bank National Association, dated May 29, 2014.
10.4	Amendment to Loan Agreements, between Art’s-Way Manufacturing Co., Inc. and U.S. Bank National Association, dated June, 2014 – filed herewith.
10.5	Amendment to Loan Agreement, between Art's-Way Manufacturing Co., Inc. and U.S. Bank National Association, regarding Ohio Term Note and Loan Agreement, dated June, 2014 – filed herewith.
10.6	Pledge Agreement, by Ohio Metal Working Products/Art’s-Way, Inc., dated June, 2014 – filed herewith.
10.7	Reaffirmation of Guaranty, by Ohio Metal Working Products/Art’s-Way, Inc., dated May 29, 2014 – filed herewith.
10.8	Reaffirmation of Guaranty, by Art’s-Way Vessels, Inc., dated May 29, 2014 – filed herewith.
10.9	Reaffirmation of Guaranty, by Art’s-Way Scientific, Inc., dated May 29, 2014 – filed herewith.
10.10	Reaffirmation of Guaranty, by Universal Harvester by Art’s-Way, Inc., dated May 29, 2014 – filed herewith.
10.11	Amendment to Loan Agreement and Note, between Art’s-Way Manufacturing Co., Inc. and U.S. Bank National Association, dated June 1, 2014 – filed herewith.
31.1	Certificate of Chief Executive Officer and interim Chief Financial Officer pursuant to 17 CFR 13a-14(a) – filed herewith.
32.1	Certificate of Chief Executive Officer and interim Chief Financial Officer pursuant to 18 U.S.C. Section 1350 - filed herewith.
101	The following materials from this report, formatted in XBRL (Extensible Business Reporting Language) are filed herewith: (i) condensed consolidated balance sheets, (ii) condensed consolidated statement of operations, (iii) condensed consolidated statements of cash flows, and (iv) the notes to the condensed consolidated financial statements.

21 

EX-10

Exhibit 10.1

EX-10

Exhibit 10.2

EX-10

Exhibit 10.3

EX-10

Exhibit 10.4

EX-10

Exhibit 10.5

EX-10

Exhibit 10.6 

EX-10

Exhibit 10.7

EX-10

Exhibit 10.8

EX-10

Exhibit 10.9

EX-10

Exhibit 10.10

EX-10

Exhibit 10.11

EX-31

Exhibit 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-Q of Art’s-Way Manufacturing Co., Inc.;

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

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

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

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

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

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

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

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

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

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

		ART’S-WAY MANUFACTURING CO., INC.
Date:	June 27, 2014	/s/ Carrie L. Majeski
		Carrie L. Majeski
		President, Chief Executive Officer and interim Chief Financial Officer

EX-32

Exhibit 32.1

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

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

In connection with the quarterly report on Form 10-Q of Art’s-Way Manufacturing Co., Inc. (the “Company”) for the fiscal quarter ended May 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Carrie L. Majeski, as the President, Chief Executive Officer and interim Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

		ART’S-WAY MANUFACTURING CO., INC.
Date:	June 27, 2014	/s/ Carrie L. Majeski
		Carrie L. Majeski
		President, Chief Executive Officer and interim Chief Financial Officer

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Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt (USD $)	May 31, 2014	Nov. 30, 2013
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt [Line Items]
Term debt	$ 7,860,680	$ 7,480,923
Less current portion of term debt	1,265,596	1,228,964
Term debt, excluding current portion	6,595,084	6,251,959
US Bank Loan 1 [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt [Line Items]
Term debt	1,889,966	2,114,675
US Bank Loan 2 [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt [Line Items]
Term debt	903,501	955,507
US Bank Loan 3 [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt [Line Items]
Term debt	1,025,943	1,085,350
US Bank Loan 4 [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt [Line Items]
Term debt	1,551.447	1,693,752
US Bank Loan 5 [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt [Line Items]
Term debt	648,302	707,719
US Bank Loan 6 [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt [Line Items]
Term debt	1,000,000	0
Iowa Finance Authority [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt [Line Items]
Term debt	841,521	904,662
IDED Note 1 [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt [Line Items]
Term debt	0	14,375
IDED Note 2 [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt [Line Items]
Term debt	$ 0	$ 4,883

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Note 12 - Segment Information (Tables)

6 Months Ended

May 31, 2014

Segment Reporting [Abstract]

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

	Agricultural Products		Pressurized Vessels			Modular Buildings			Tools			Consolidated
Net Sales from external customers	$	7,562,000	$	475,000		$	537,000		$	895,000		$	9,469,000
Income (loss) from operations		600,000		(78,000	)		(114,000	)		36,000			444,000
Income (loss) before taxes		541,000		(85,000	)		(120,000	)		(2,000	)		334,000
Total Assets		26,147,000		2,715,000			2,708,000			3,438,000			35,008,000
Capital expenditures		162,000		16,000			0			1,000			179,000
Depreciation & Amortization		136,000		27,000			37,000			28,000			228,000

	Agricultural Products		Pressurized Vessels			Modular Buildings		Tools		Consolidated
Revenue from external customers	$	7,716,000	$	642,000		$	892,000	$	0	$	9,250,000
Income (loss) from operations		568,000		(12,000	)		243,000		0		799,000
Income (loss) before tax		517,000		(38,000	)		231,000		0		710,000
Total Assets		25,531,000		2,891,000			3,024,000		0		31,446,000
Capital expenditures		58,000		5,000			3,000		0		66,000
Depreciation & Amortization		96,000		26,000			49,000		0		171,000

	Agricultural Products		Pressurized Vessels			Modular Buildings			Tools		Consolidated
Revenue from external customers	$	12,004,000	$	898,000		$	998,000		$	1,806,000	$	15,706,000
Income (loss) from operations		396,000		(109,000	)		(240,000	)		102,000		149,000
Income (loss) before tax		301,000		(125,000	)		(249,000	)		64,000		(9,000	)
Total Assets		26,147,000		2,715,000			2,708,000			3,438,000		35,008,000
Capital expenditures		574,000		27,000			0			10,000		611,000
Depreciation & Amortization		256,000		54,000			74,000			57,000		441,000

	Agricultural Products		Pressurized Vessels			Modular Buildings		Tools		Consolidated
Revenue from external customers	$	14,720,000	$	1,036,000		$	1,909,000	$	0	$	17,665,000
Income (loss) from operations		1,129,000		(135,000	)		518,000		0		1,512,000
Income (loss) before tax		1,693,000		(214,000	)		492,000		0		1,971,000
Total Assets		25,531,000		2,891,000			3,024,000		0		31,446,000
Capital expenditures		197,000		9,000			4,000		0		210,000
Depreciation & Amortization		247,000		52,000			71,000		0		370,000

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Note 12 - Segment Information (Details)	6 Months Ended
	May 31, 2014
Segment Reporting [Abstract]
Number of Reportable Segments	4

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Note 4 - Inventory

6 Months Ended

May 31, 2014

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

4) Inventory

Major classes of inventory are:

	May 31, 2014			November 30, 2013
Raw materials	$	10,471,139		$	10,322,014
Work in process		478,117			511,016
Finished goods		8,346,187			7,305,301
	$	19,295,443		$	18,138,331
Less: Reserves		(3,427,158	)		(3,215,806	)
	$	15,868,285		$	14,922,525

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Note 5 - Accrued Expenses (Details) - Major Components of Accrued Expenses (USD $)	May 31, 2014	Nov. 30, 2013
Major Components of Accrued Expenses [Abstract]
Salaries, wages, and commissions	$ 747,568	$ 836,200
Accrued warranty expense	229,400	220,719
Other	607,917	661,556
	$ 1,584,885	$ 1,718,475

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Note 4 - Inventory (Details) - Major Classes of Inventory (USD $)	May 31, 2014	Nov. 30, 2013
Major Classes of Inventory [Abstract]
Raw materials	$ 10,471,139	$ 10,322,014
Work in process	478,117	511,016
Finished goods	8,346,187	7,305,301
	19,295,443	18,138,331
Less: Reserves	(3,427,158)	(3,215,806)
	$ 15,868,285	$ 14,922,525

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Note 6 - Product Warranty (Details)	6 Months Ended
	May 31, 2014
Product Warranties Disclosures [Abstract]
Standard Product Warranty Term	1 year

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Note 6 - Product Warranty (Details) - Changes in Product Warranty Liability (USD $)	3 Months Ended		6 Months Ended
	May 31, 2014	May 31, 2013	May 31, 2014	May 31, 2013
Changes in Product Warranty Liability [Abstract]
Balance, beginning	$ 153,455	$ 575,330	$ 220,719	$ 578,864
Balance, ending	229,400	526,981	229,400	526,981
Settlements made in cash or in-kind	(43,493)	(212,374)	(195,070)	(381,063)
Warranties issued	$ 119,438	$ 164,025	$ 203,751	$ 329,180

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Note 3 - Net Income (Loss) Per Share of Common Stock

6 Months Ended

May 31, 2014

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

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

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

Basic and diluted earnings (loss) per common share have been computed based on the following as of May 31, 2014 and May 31, 2013:

	For the three months ended
	May 31, 2014		May 31, 2013
Basic:
Numerator: net income	$	253,155	$	514,240
Denominator: average number of common shares outstanding		4,047,487		4,037,552
Basic earnings per common share	$	0.06	$	0.13
Diluted:
Numerator: net income	$	253,155	$	514,240
Average number of common shares outstanding		4,047,487		4,037,552
Effect of dilutive stock options		6,260		14,140
Denominator: dilutive average number of common shares outstanding		4,053,747		4,051,692
Diluted earnings per common share	$	0.06	$	0.13

	For the six months Ended
	May 31, 2014			May 31, 2013
Basic:
Numerator: net income (loss)	$	(5,159	)	$	1,333,500
Denominator: average number of common shares outstanding		4,047,025			4,036,302
Basic earnings (loss) per common share	$	(0.00	)	$	0.33
Diluted:
Numerator: net income (loss)	$	(5,159	)	$	1,333,500
Average number of common shares outstanding		4,047,025			4,036,302
Effect of dilutive stock options		0			13,178
Denominator: dilutive average number of common shares outstanding		4,047,025			4,049,480
Diluted earnings (loss) per common share	$	(0.00	)	$	0.33

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Note 7 - Loan and Credit Agreements (Details) (USD $)	6 Months Ended				1 Months Ended	6 Months Ended					6 Months Ended	12 Months Ended			6 Months Ended
	May 31, 2014	Nov. 30, 2013	May 31, 2014 West Bank Loan 1 [Member]	May 31, 2014 West Bank Loan 2 [Member]	May 31, 2013 US Bank, New Loans [Member]	May 31, 2014 US Bank, New Loans [Member]	May 31, 2013 West Bank [Member]	May 29, 2014 US Bank [Member]	Nov. 30, 2013 US Bank [Member]	May 10, 2012 US Bank [Member]	May 31, 2014 Iowa Finance Authority [Member]	Nov. 30, 2013 Iowa Finance Authority [Member]	Feb. 28, 2013 Iowa Finance Authority [Member]	May 01, 2010 Iowa Finance Authority [Member]	May 31, 2014 Line of Credit [Member]
Note 7 - Loan and Credit Agreements (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 8,000,000
Debt Instrument, Interest Rate, Stated Percentage Rate Range, Minimum															3.50%
Line of Credit Facility, Interest Rate at Period End	3.50%
Line of Credit Facility, Amount Outstanding	4,064,740
Line of Credit Facility, Borrowing Capacity, Description	The Line of Credit states that the borrowing base will be an amount equal to the sum of 75% of accounts receivable (discounted for aged accounts and customer balances exceeding 20% of aggregate receivables), plus 50% of inventory (this component cannot exceed $6,000,000 and only includes finished goods and raw materials deemed to be in good condition and not obsolete), less any outstanding loan balance of the Line of Credit, and less undrawn amounts of outstanding letters of credit issued by U.S. Bank or any affiliate.
Line of Credit Facility, Borrowing Capacity, Borrowing Base, Percentage of Accounts Receivable	75.00%
Line of Credit Facility, Borrowing Capacity, Borrowing Base, Minimum Percentage of Aggregate Receivables	20.00%
Line of Credit Facility, Borrowing Capacity, Borrowing Base, Percentage of Inventory	50.00%
Line of Credit Facility, Borrowing Capacity, Borrowing Base, Maximum Inventory Amount	6,000,000
Long-term Debt	7,860,680	7,480,923	4,342,000	1,749,000							841,521	904,662
Debt Instrument, Interest Rate, Stated Percentage			4.75%	4.50%		2.98%					2.75%	2.75%	2.75%	3.50%
Debt Instrument, Face Amount						6,319,000		1,000,000		880,000				1,300,000
Debt Instrument, Periodic Payment						93,850					12,500	12,500
Term Loan Final Payment						1,372,000		890,000		283,500
Debt Instrument, Fee Amount							130,000
Debt Issuance Cost					$ 9,000
Debt Instrument, Covenant, Debt to Tangible Net Worth Ratio						1.5
Debt Instrument, Covenant, Fixed Charge Coverage Ratio						1.15
Debt Instrument, Covenant, Interest Rate Increase in Event of Default						5.00%			5.00%
Debt Instrument, Covenant, Debt Service Coverage Ratio													1.5

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Condensed Consolidated Balance Sheets (Current Period Unaudited) (USD $)	May 31, 2014	Nov. 30, 2013
Current assets:
Cash	$ 250,392	$ 207,950
Accounts receivable-customers, net of allowance for doubtful accounts of $46,412 and $35,474 in 2014 and 2013, respectively	3,277,554	2,999,903
Inventories, net	15,868,285	14,922,525
Deferred taxes	1,333,097	1,228,097
Cost and Profit in Excess of Billings	101,109	42,238
Income taxes receivable	377,682	108,513
Other current assets	613,884	242,146
Total current assets	21,822,003	19,751,372
Property, plant, and equipment, net	12,102,091	11,900,202
Assets held for lease, net	90,409	122,318
Goodwill	993,729	993,729
Total assets	35,008,232	32,767,621
Current liabilities:
Line of credit	4,064,740	3,350,000
Current portion of term debt	1,265,596	1,228,964
Accounts payable	1,030,099	806,207
Customer deposits	1,055,716	147,505
Billings in Excess of Cost and Profit	68,217	17,721
Accrued expenses	1,584,885	1,718,475
Total current liabilities	9,069,253	7,268,872
Deferred taxes	1,032,645	952,645
Long Term debt, excluding current portion	6,595,084	6,251,959
Total liabilities	16,696,982	14,473,476
Stockholders’ equity:
Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares in 2014 and 2013; issued and outstanding 0 shares in 2014 and 2013.	0	0
Common stock – $0.01 par value. Authorized 9,500,000 shares in 2014 and 2013; issued and outstanding 4,048,552 in 2014 and 4,046,552 in 2013	40,486	40,466
Additional paid-in capital	2,638,651	2,616,407
Retained earnings	15,632,113	15,637,272
Total stockholders’ equity	18,311,250	18,294,145
Total liabilities and stockholders’ equity	$ 35,008,232	$ 32,767,621

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Note 1 - Description of the Company

6 Months Ended

May 31, 2014

Disclosure Text Block [Abstract]

Nature of Operations [Text Block]

1) Description of the Company

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

We began operations as a farm equipment manufacturer in 1956. Since that time, we have become a major worldwide manufacturer of agricultural equipment. Our principal manufacturing plant is located in Armstrong, Iowa.

We have organized our business into four operating segments. Management separately evaluates the financial results of each segment because each is a strategic business unit offering different products and requiring different technology and marketing strategies. Our agricultural products segment (“Manufacturing”) manufactures farm equipment under the Art’s-Way Manufacturing label and private labels. Our pressurized vessels segment (“Vessels”) manufactures pressurized vessels. Our modular buildings segment (“Scientific”) manufactures modular buildings for various uses, commonly animal containment and research laboratories and our tools segment (“Metals”) manufactures steel cutting tools and inserts. For detailed financial information relating to segment reporting, see Note 12, “Segment Information.”

On June 25, 2013, the Company acquired the fixed assets, raw material inventory, work-in-progress inventory and select finished goods inventory of Agro Trend, a division of Rojac Industries, Inc. of Clifford, Ontario, Canada. Agro Trend distributes agricultural equipment and manufactures commercial snow blowers and agricultural trailers. Most of the existing Agro Trend operational team was retained to continue the manufacture of snow blowers and trailers. The acquired assets and operations are reported with our agricultural products segment. For specific financial information related to the acquisition, see Note 10, “Acquisitions.”

On September 30, 2013, the Company acquired the assets of Ohio Metal Working Products Company in Canton, Ohio consisting of inventory, equipment, real property, and intangible assets. Ohio Metal Working Products Company is a domestic manufacturer and distributor of standard single point brazed carbide tipped tools as well as PCD (polycrystalline diamond) and CBN (cubic boron nitride) inserts and tools. The existing Ohio Metal Working Products Company operational team was retained to continue the manufacturing of the carbide, PCD, and CBN tipped tools and inserts. The acquired assets and operations are reported in our tools segment for financial reporting purposes. For specific financial information related to the acquisition, see Note 10, “Acquisitions.”

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Note 9 - Equity Incentive Plan and Stock Based Compensation (Details) (USD $)	6 Months Ended
	May 31, 2014
Note 9 - Equity Incentive Plan and Stock Based Compensation (Details) [Line Items]
Allocated Share-based Compensation Expense	$ 14,504
Non-Qualified Options to Each Director Annually or Upon Election [Member]
Note 9 - Equity Incentive Plan and Stock Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	2,000

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Note 5 - Accrued Expenses (Tables)

6 Months Ended

May 31, 2014

Payables and Accruals [Abstract]

Schedule of Accrued Liabilities [Table Text Block]

		May 31, 2014		November 30, 2013
Salaries, wages, and commissions	$	747,568	$	836,200
Accrued warranty expense		229,400		220,719
Other		607,917		661,556
	$	1,584,885	$	1,718,475

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Note 10 - Acquisitions (Details) (USD $)	6 Months Ended		5 Months Ended		0 Months Ended	1 Months Ended
	May 31, 2014	May 31, 2013	Nov. 30, 2013 Agricultural Products [Member] Consigned Inventory [Member] Agro Trend [Member]	Jun. 25, 2013 Agricultural Products [Member] Consigned Inventory [Member] Agro Trend [Member]	Jun. 25, 2013 Agro Trend [Member]	Sep. 30, 2013 Ohio Metal Working Products Company [Member]	May 29, 2014 US Bank [Member]	May 10, 2012 US Bank [Member]
Note 10 - Acquisitions (Details) [Line Items]
Payments to Acquire Businesses, Gross					$ 311,000	$ 3,172,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Property, Plant, and Equipment					88,000	868,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Inventory					223,000	1,142,000
Other Inventory, Materials, Supplies and Merchandise under Consignment, Gross				600,000
Increase (Decrease) in Inventories	945,760	492,088	(364,000)
Business Combination Recognized Identifiable Assets Acquired And Liabilities Assumed Land And Building						1,200,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities, Accounts Payable						38,000
Debt Instrument, Face Amount							$ 1,000,000	$ 880,000

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Note 7 - Loan and Credit Agreements (Tables)

6 Months Ended

May 31, 2014

Debt Disclosure [Abstract]

Schedule of Debt [Table Text Block]

	May 31, 2014		November 30, 2013
U.S. Bank loan payable in monthly installments of $42,500 including interest at 2.98%, due May 1, 2018	$	1,889,966	$	2,114,675
U.S. Bank loan payable in monthly installments of $11,000 including interest at 2.98%, due May 1, 2018		903,501		955,507
U.S. Bank loan payable in monthly installments of $12,550 including interest at 2.98%, due May 1, 2018		1,025,943		1,085,350
U.S. Bank loan payable in monthly installments of $27,800 including interest at 2.98%, due May 1, 2018		1,551.447		1,693,752
U.S. Bank loan payable in monthly installments of $11,700 including interest at 3.15%, due May 10, 2017		648,302		707,719
U.S. Bank loan payable in monthly installments of $5,556 including interest at 2.98%, due May 25, 2017		1,000,000		0
Iowa Finance Authority loan payable in monthly installments of $12,500 including interest at 2.75%, due June 1, 2020		841,521		904,662
IDED loan payable in monthly installments of $2,437 including interest at 6%, due June 1, 2014		0		14,375
IDED loan payable in monthly installments of $813 including interest at 0%, due June 1, 2014		0		4,883
Total term debt	$	7,860,680	$	7,480,923
Less current portion of term debt		1,265,596		1,228,964
Term debt, excluding current portion	$	6,595,084	$	6,251,959

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Note 2 - Summary of Significant Account Policies

6 Months Ended

May 31, 2014

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

2) Summary of Significant Account Policies

Statement Presentation

The foregoing condensed consolidated financial statements of the Company are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2013. The results of operations for the three and six months ended May 31, 2014 are not necessarily indicative of the results for the fiscal year ending November 30, 2014.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the three and six months ended May 31, 2014. Actual results could differ from those estimates.

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Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) (USD $)	May 31, 2014	Nov. 30, 2013
Allowance for doubtful accounts (in Dollars)	$ 46,412	$ 35,474
Undesignated preferred stock - par value (in Dollars per share)	$ 0.01	$ 0.01
Undesignated preferred stock - authorized shares	500,000	500,000
Undesignated preferred stock - issued shares	0	0
Undesignated preferred stock - outstanding shares	0	0
Common stock – par value (in Dollars per share)	$ 0.01	$ 0.01
Common stock – authorized shares	9,500,000	9,500,000
Common stock – issued shares	4,048,552	4,046,552
Common stock – outstanding shares	4,048,552	4,046,552

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Note 12 - Segment Information

6 Months Ended

May 31, 2014

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

12) Segment Information

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

The accounting policies applied to determine the segment information are the same as those described in the summary of 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, 2014

	Agricultural Products		Pressurized Vessels			Modular Buildings			Tools			Consolidated
Net Sales from external customers	$	7,562,000	$	475,000		$	537,000		$	895,000		$	9,469,000
Income (loss) from operations		600,000		(78,000	)		(114,000	)		36,000			444,000
Income (loss) before taxes		541,000		(85,000	)		(120,000	)		(2,000	)		334,000
Total Assets		26,147,000		2,715,000			2,708,000			3,438,000			35,008,000
Capital expenditures		162,000		16,000			0			1,000			179,000
Depreciation & Amortization		136,000		27,000			37,000			28,000			228,000

Three Months Ended May 31, 2013

	Agricultural Products		Pressurized Vessels			Modular Buildings		Tools		Consolidated
Revenue from external customers	$	7,716,000	$	642,000		$	892,000	$	0	$	9,250,000
Income (loss) from operations		568,000		(12,000	)		243,000		0		799,000
Income (loss) before tax		517,000		(38,000	)		231,000		0		710,000
Total Assets		25,531,000		2,891,000			3,024,000		0		31,446,000
Capital expenditures		58,000		5,000			3,000		0		66,000
Depreciation & Amortization		96,000		26,000			49,000		0		171,000

Six Months Ended May 31, 2014

	Agricultural Products		Pressurized Vessels			Modular Buildings			Tools		Consolidated
Revenue from external customers	$	12,004,000	$	898,000		$	998,000		$	1,806,000	$	15,706,000
Income (loss) from operations		396,000		(109,000	)		(240,000	)		102,000		149,000
Income (loss) before tax		301,000		(125,000	)		(249,000	)		64,000		(9,000	)
Total Assets		26,147,000		2,715,000			2,708,000			3,438,000		35,008,000
Capital expenditures		574,000		27,000			0			10,000		611,000
Depreciation & Amortization		256,000		54,000			74,000			57,000		441,000

Six Months Ended May 31, 2013

	Agricultural Products		Pressurized Vessels			Modular Buildings		Tools		Consolidated
Revenue from external customers	$	14,720,000	$	1,036,000		$	1,909,000	$	0	$	17,665,000
Income (loss) from operations		1,129,000		(135,000	)		518,000		0		1,512,000
Income (loss) before tax		1,693,000		(214,000	)		492,000		0		1,971,000
Total Assets		25,531,000		2,891,000			3,024,000		0		31,446,000
Capital expenditures		197,000		9,000			4,000		0		210,000
Depreciation & Amortization		247,000		52,000			71,000		0		370,000

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Document And Entity Information	6 Months Ended
	May 31, 2014	Jun. 18, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	ARTS WAY MANUFACTURING CO INC
Document Type	10-Q
Current Fiscal Year End Date	--11-30
Entity Common Stock, Shares Outstanding		4,048,552
Amendment Flag	false
Entity Central Index Key	0000007623
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	May 31, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

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Note 13 - Subsequent Event

6 Months Ended

May 31, 2014

Subsequent Events [Abstract]

Subsequent Events [Text Block]

13) Subsequent Event

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

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Condensed Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	May 31, 2014	May 31, 2013	May 31, 2014	May 31, 2013
Net sales	$ 9,468,996	$ 9,250,308	$ 15,706,331	$ 17,665,413
Cost of goods sold	7,141,227	6,685,890	12,038,146	12,731,827
Gross profit	2,327,769	2,564,418	3,668,185	4,933,586
Expenses:
Engineering	118,361	101,125	231,899	203,692
Selling	639,893	483,782	1,176,043	973,519
General and administrative	1,125,624	1,180,552	2,111,288	2,244,662
Total expenses	1,883,878	1,765,459	3,519,230	3,421,873
Income (loss) from operations	443,891	798,959	148,955	1,511,713
Other income (expense):
Interest expense	(121,222)	(79,739)	(175,162)	(169,202)
Other	11,431	(9,443)	17,105	628,699
Total other income (expense)	(109,791)	(89,182)	(158,057)	459,497
Income (loss) before income taxes	334,100	709,777	(9,102)	1,971,210
Tax expense (benefit)	80,945	195,537	(3,943)	637,710
Net income (loss)	$ 253,155	$ 514,240	$ (5,159)	$ 1,333,500
Net income per share:
Basic net income (loss) per share (in Dollars per share)	$ 0.06	$ 0.13	$ 0.00	$ 0.33
Diluted net income (loss) per share (in Dollars per share)	$ 0.06	$ 0.13	$ 0.00	$ 0.33
Weighted average outstanding shares used to compute basic net income per share (in Shares)	4,047,487	4,037,552	4,047,025	4,036,302
Weighted average outstanding shares used to compute diluted net income per share (in Shares)	4,053,747	4,051,692	4,047,025	4,049,480

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Note 7 - Loan and Credit Agreements

6 Months Ended

May 31, 2014

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

7) Loan and Credit Agreements

On May 1, 2013, the Company began to move all banking arrangements previously held through West Bank to U.S. Bank. The relationship with U.S. Bank now includes an $8,000,000 revolving line of credit (the “Line of Credit”) which was renewed in 2014, and is now scheduled to mature on May 1, 2015. The Line of Credit is renewable annually with advances funding the Company’s working capital needs and is secured by real property and fixed asset collateral. The interest rate is U.S. Bank’s prime interest rate, adjusted each time that the Federal prime rate changes, with a minimum rate of 3.50%. As of May 31, 2014, the interest rate was the minimum of 3.50%. Monthly interest-only payments are required and the unpaid principal is due on the maturity date. As of May 31, 2014, the Company had a principal balance of $4,064,740 outstanding against the Line of Credit. The Line of Credit states that the borrowing base will be an amount equal to the sum of 75% of accounts receivable (discounted for aged accounts and customer balances exceeding 20% of aggregate receivables), plus 50% of inventory (this component cannot exceed $6,000,000 and only includes finished goods and raw materials deemed to be in good condition and not obsolete), less any outstanding loan balance of the Line of Credit, and less undrawn amounts of outstanding letters of credit issued by U.S. Bank or any affiliate. The Company’s obligations under the Line of Credit are evidenced by a Revolving Credit Note effective May 1, 2013, a Revolving Credit Agreement dated May 1, 2013 and certain other ancillary documents.   

In addition to the Line of Credit, on May 1, 2013, the Company refinanced all outstanding West Bank term loans with U.S. Bank. The West Bank long-term debt, which had outstanding principal balances of $4,342,000 at a fixed interest rate of 4.75% and $1,749,000 at a fixed interest rate of 4.50%, was paid off with four U.S. Bank loans totaling $6,319,000 at a fixed interest rate of 2.98% (the “2013 U.S. Bank Term Loans”). As detailed in the Company’s long-term debt summary below, monthly principal and interest payments in the aggregate amount of $93,850 are required, with final payments of principal and accrued interest on the four loans, in the aggregate amount of $1,372,000, due on May 1, 2018.

As a result of paying off the West Bank loans, the Company incurred $130,000 worth of prepayment penalties which were financed by the U.S. Bank loans. The penalties were booked to fixed costs on the income statement for the quarter ended May 31, 2013. Closing costs amounted to $9,000 and will be amortized over the life of the loans.

On May 29, 2014, the Company obtained $1,000,000 in long-term debt from U.S. Bank to partially pay down the line of credit draw from 2013 that we had used to finance the building and property of Ohio Metal Working Products Company in Canton, Ohio. The maturity date of this loan is May 25, 2017, with a final payment of principal and accrued interest in the amount of $890,000 due May 25, 2017. This loan is secured by a mortgage on the building and property acquired from Ohio Metal Working Products Company in Canton, Ohio pursuant to a Mortgage, Security Agreement and Assignment of Rents between the Company and U.S. Bank, dated May 29, 2014.

Except for the U.S. Bank UHC Loan (as defined below), each of the Company’s term loans from U.S. Bank is governed by a Term Note and a Term Loan Agreement. Each Term Loan Agreement and the Revolving Credit Agreement require the Company to provide monthly internally prepared financial reports, year-end audited financial statements, and a monthly aging of accounts receivable. The Company, as of the end of each fiscal quarter, must maintain a debt to tangible net worth ratio of not more than 1.5 to 1.0 and a fixed charge coverage ratio of at least 1.15 to 1.00. The loans are secured by a first position security interest on the assets of the Company and its subsidiaries, including but not limited to, inventories, machinery, equipment and real estate, in accordance with the Business Security Agreements entered into by the Company and its subsidiaries and the Pledge Agreements entered into by the subsidiaries. Additionally, the Company has mortgaged certain real property in favor of U.S. Bank as documented by mortgage agreements dated May 1, 2013 and May 29, 2014 (together, the “Mortgages”).

If the Company or its subsidiaries (as guarantors pursuant to continuing guaranties) commits an event of default under the Term Loan Agreements, Business Security Agreements, Pledge Agreements, Mortgages, or Revolving Credit Agreement and fails or is unable to cure that default, the interest rate on each of the loans and Line of Credit could increase by 5.0% per annum and U.S. Bank can immediately terminate its obligation, if any, to make additional loans to the Company. In addition, U.S. Bank may collect any and all money due or to become due and shall have all other rights and remedies for default provided by the Uniform Commercial Code, as well as any other applicable law and the various loan agreements, including, without limitation, the right to repossess, render unusable and/or dispose of the collateral without judicial process. In addition, in an event of default, U.S. Bank may foreclose on mortgaged property pursuant to the terms of the Mortgages.

The Company was in compliance with all covenants under the Term Loan Agreements and the Revolving Credit Agreement as measured on May 31, 2014, other than its covenant to maintain a fixed charge coverage ratio of at least 1.15 to 1.00. The fixed charge coverage ratio is based on a rolling 12 month calculation and measures the Company’s ability to cover fixed expenses such as loan payments, tax payments, rental payments, and dividends. The net loss in the first quarter of 2014 from operations was the main reason for the non-compliance result as of May 31, 2014. US Bank has issued a waiver forgiving the non-compliance for the first and second quarters and no event of default occurred. The next measurement date is August 31, 2014.

On May 10, 2012, the Company obtained $880,000 in long-term debt from U.S. Bank issued to acquire the building and property of Universal Harvester Co., Inc. located in Ames, Iowa (the “U.S. Bank UHC Loan”). The maturity date of this loan is May 10, 2017, with a final payment of principal and accrued interest in the amount of $283,500 due May 10, 2017. This loan is secured by a mortgage on the building and property acquired from Universal Harvester Co., Inc. in Ames, Iowa, pursuant to a Mortgage, Security Agreement and Assignment of Rents between the Company and U.S. Bank, dated May 10, 2012. On May 1, 2013, the U.S. Bank UHC Loan and the Mortgage were amended to extend the mortgage to secure the 2013 U.S. Bank Term Loans in addition to the U.S. Bank UHC Loan.

If the Company or its subsidiaries (as guarantors) commits an event of default under the agreement governing the U.S. Bank UHC Loan and fails or is unable to cure during any applicable cure periods, the lender may cause the entire amount of the loan to be immediately due and payable, may foreclose on the property, or may increase the interest rate to 5.00% per annum, plus the interest rate otherwise payable under the U.S. Bank UHC Loan.

On May 1, 2010, the Company obtained a loan to finance the purchase of an additional facility located in West Union, Iowa to be used as a distribution center, warehouse facility, and manufacturing plant for certain products under the Art’s-Way brand. The funds for this loan were made available by the Iowa Finance Authority by the issuance of tax exempt bonds. This loan had an original principal amount of $1,300,000 and an interest rate of 3.5%. On February 1, 2013, the interest rate was decreased to 2.75%. The other terms of the loan remain unchanged.

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

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

The Company was in compliance with all covenants under the IFA Loan Agreement as measured on November 30, 2013. The next measurement date is November 30, 2014.

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

	May 31, 2014		November 30, 2013
U.S. Bank loan payable in monthly installments of $42,500 including interest at 2.98%, due May 1, 2018	$	1,889,966	$	2,114,675
U.S. Bank loan payable in monthly installments of $11,000 including interest at 2.98%, due May 1, 2018		903,501		955,507
U.S. Bank loan payable in monthly installments of $12,550 including interest at 2.98%, due May 1, 2018		1,025,943		1,085,350
U.S. Bank loan payable in monthly installments of $27,800 including interest at 2.98%, due May 1, 2018		1,551.447		1,693,752
U.S. Bank loan payable in monthly installments of $11,700 including interest at 3.15%, due May 10, 2017		648,302		707,719
U.S. Bank loan payable in monthly installments of $5,556 including interest at 2.98%, due May 25, 2017		1,000,000		0
Iowa Finance Authority loan payable in monthly installments of $12,500 including interest at 2.75%, due June 1, 2020		841,521		904,662
IDED loan payable in monthly installments of $2,437 including interest at 6%, due June 1, 2014		0		14,375
IDED loan payable in monthly installments of $813 including interest at 0%, due June 1, 2014		0		4,883
Total term debt	$	7,860,680	$	7,480,923
Less current portion of term debt		1,265,596		1,228,964
Term debt, excluding current portion	$	6,595,084	$	6,251,959

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Note 6 - Product Warranty

6 Months Ended

May 31, 2014

Product Warranties Disclosures [Abstract]

Product Warranty Disclosure [Text Block]

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

Changes in the Company’s product warranty liability for the three and six months ended May 31, 2014 and May 31, 2013 are as follows:

		For the three months ended
		May 31, 2014			May 31, 2013
Balance, beginning	$	153,455		$	575,330
Settlements made in cash or in-kind		(43,493	)		(212,374	)
Warranties issued		119,438			164,025
Balance, ending	$	229,400		$	526,981

	For the six months ended
	May 31, 2014			May 31, 2013
Balance, beginning	$	220,719		$	578,864
Settlements made in cash or in-kind		(195,070	)		(381,063	)
Warranties issued		203,751			329,180
Balance, ending	$	229,400		$	526,981

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Note 6 - Product Warranty (Tables)

6 Months Ended

May 31, 2014

Product Warranties Disclosures [Abstract]

Schedule of Product Warranty Liability [Table Text Block]

		For the three months ended
		May 31, 2014			May 31, 2013
Balance, beginning	$	153,455		$	575,330
Settlements made in cash or in-kind		(43,493	)		(212,374	)
Warranties issued		119,438			164,025
Balance, ending	$	229,400		$	526,981

	For the six months ended
	May 31, 2014			May 31, 2013
Balance, beginning	$	220,719		$	578,864
Settlements made in cash or in-kind		(195,070	)		(381,063	)
Warranties issued		203,751			329,180
Balance, ending	$	229,400		$	526,981

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Accounting Policies, by Policy (Policies)

6 Months Ended

May 31, 2014

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Statement Presentation

The foregoing condensed consolidated financial statements of the Company are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2013. The results of operations for the three and six months ended May 31, 2014 are not necessarily indicative of the results for the fiscal year ending November 30, 2014.

Use of Estimates, Policy [Policy Text Block]

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the three and six months ended May 31, 2014. Actual results could differ from those estimates.

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Note 10 - Acquisitions

6 Months Ended

May 31, 2014

Disclosure Text Block Supplement [Abstract]

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

10) Acquisitions

On June 25, 2013, the Company acquired the fixed assets, raw material inventory, work-in-process inventory, and select finished good inventory of Agro Trend, a division of Rojac Industries, Inc. of Clifford, Ontario, Canada. A new entity was formed, Art's Way Manufacturing International, LTD (“International”), which is included in the agricultural products segment for financial reporting purposes. International leases the facility in Clifford, Ontario and is continuing manufacturing, marketing and sales from the Canadian location. The amount paid in U.S. dollars for the acquisition of assets totaled $311,000 ($88,000 in fixed assets and $223,000 in inventory). 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 acquisition also includes a consignment arrangement regarding $600,000 of select finished good inventory. As part of the arrangement, International agreed to use reasonable efforts to sell the inventory including providing a sales and marketing plan with projections within 60 days of the closing date and meeting with the consignor quarterly to discuss progress. Once a month, International will pay the consignor an amount equal to the cost base of the inventory sold that month. As of May 31, 2014, International had sold $364,000 of the consigned inventory.

The financial books of the operation are kept in the functional currency of Canadian dollars and the financial statements are converted to U.S. Dollars for consolidation. When consolidating the financial results of the Company into U.S. Dollars for reporting purposes, the Company uses the All-Current translation method. The All-Current method requires the balance sheet assets and liabilities be translated to U.S. Dollars at the exchange rate as of quarter end. Owner’s equity is translated at historical exchange rates and retained earnings are translated at an average exchange rate for the period. Additionally, revenue and expenses are translated at average exchange rates for the periods presented. The resulting cumulative translation adjustment is carried on the balance sheet and distributed among various balance sheet accounts. The Company monitors the amount of the adjustment and considers it to be immaterial.

On September 30, 2013, the Company acquired the assets of Ohio Metal Working Products Company in Canton, Ohio consisting of inventory, equipment, real property, and intangible assets. A new entity was formed, Ohio Metal Working Products/Art’s-Way, Inc (“Metals”). A new segment called Tools was created for financial reporting purposes. Ohio Metal Working Products/Art’s-Way, Inc. is a domestic manufacturer and distributor of standard single point brazed carbide tipped tools as well as PCD (polycrystalline diamond) and CBN (cubic boron nitride) inserts and tools. The amount paid for the acquisition totaled approximately $3,172,000 ($1,142,000 in inventory, $1,200,000 in land and building, $868,000 in fixed assets, and a reduction for assumed vacation liability of $38,000). The acquisition was financed by accessing the line of credit available through U.S. Bank, and on May 29, 2014 we obtained a mortgage for the property and buildings in the amount of $1,000,000 which was used to pay down on the line of credit. The operating results of the acquired business are reflected in the Company’s consolidated statements of operations from the acquisition date forward. The acquisition was made to continue the Company’s growth strategy and diversify its product offerings.

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Note 8 - Recently Issued Accounting Pronouncements

6 Months Ended

May 31, 2014

Disclosure Text Block [Abstract]

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

8) Recently Issued Accounting Pronouncements

Presentation of an Unrecognized Tax Benefit

In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” that clarifies how an unrecognized tax benefit should be presented in the financial statements when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists; as a reduction to a deferred tax asset or as a liability. The amendments are meant to eliminate the diversity that exists in the financial statement presentation of the unrecognized tax benefits. The amendments in this ASU do not require new recurring disclosures and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. The effective date for the Company will be fiscal year beginning December 1, 2014. The Company currently has no unrecognized tax benefits that are impacted by the amendment and the Company does not expect this standard to have a material impact on our consolidated financial statements.

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” which supersedes the guidance in “Revenue Recognition (Topic 605)” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period and is to be applied retrospectively, with early application not permitted. We are evaluating the new standard, but do not at this time expect this standard to have a material impact on our consolidated financial statements.

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Note 9 - Equity Incentive Plan and Stock Based Compensation

6 Months Ended

May 31, 2014

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

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

9) Equity Incentive Plan and Stock Based Compensation

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

The 2011 Plan permits the plan administrator to award nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance awards, and stock appreciation rights to employees (including officers), directors, and consultants.  The Board of Directors has approved a director compensation policy pursuant to which non-employee directors are automatically granted non-qualified stock options to purchase 2,000 shares of common stock annually or initially upon their election to the Board, which are fully vested.

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

Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant vesting period. We estimate the fair value of each stock-based award on the measurement date using the Black-Scholes option valuation model which incorporates assumptions as to stock price volatility, the expected life of the options, risk-free interest rate, and dividend yield. Expected volatility is based on historical volatility of the Company’s stock and other factors. The Company uses historical option exercise and termination data to estimate the expected term the options are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is calculated using historical dividend amounts and the stock price at the option issuance date. We have incurred $14,504 of stock-based compensation expense during the six months ended May 31, 2014.

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Note 11 - Disclosures About the Fair Value of Financial Instruments

6 Months Ended

May 31, 2014

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

11) Disclosures About the Fair Value of Financial Instruments

The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. At May 31, 2014, and November 30, 2013, the carrying amount approximated fair value for cash, accounts receivable, accounts payable, notes payable to bank, and other current and long-term liabilities. The carrying amounts approximate fair value because of the short maturity of these instruments. The fair value of the 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.

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Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt (Parentheticals) (USD $)	6 Months Ended	12 Months Ended
	May 31, 2014	Nov. 30, 2013	Feb. 28, 2013	May 01, 2010
US Bank Loan 1 [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt (Parentheticals) [Line Items]
Installments	$ 42,500	$ 42,500
Interest	2.98%	2.98%
US Bank Loan 2 [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt (Parentheticals) [Line Items]
Installments	11,000	11,000
Interest	2.98%	2.98%
US Bank Loan 3 [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt (Parentheticals) [Line Items]
Installments	12,550	12,550
Interest	2.98%	2.98%
US Bank Loan 4 [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt (Parentheticals) [Line Items]
Installments	27,800	27,800
Interest	2.98%	2.98%
US Bank Loan 5 [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt (Parentheticals) [Line Items]
Installments	11,700	11,700
Interest	3.15%	3.15%
US Bank Loan 6 [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt (Parentheticals) [Line Items]
Installments	5,556	5,556
Interest	2.98%	2.98%
Iowa Finance Authority [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt (Parentheticals) [Line Items]
Installments	12,500	12,500
Interest	2.75%	2.75%	2.75%	3.50%
IDED Note 1 [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt (Parentheticals) [Line Items]
Installments	2,437	2,437
Interest	6.00%	6.00%
IDED Note 2 [Member]
Note 7 - Loan and Credit Agreements (Details) - Summary of Term Debt (Parentheticals) [Line Items]
Installments	$ 813	$ 813
Interest	0.00%	0.00%

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Note 4 - Inventory (Tables)

6 Months Ended

May 31, 2014

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

	May 31, 2014			November 30, 2013
Raw materials	$	10,471,139		$	10,322,014
Work in process		478,117			511,016
Finished goods		8,346,187			7,305,301
	$	19,295,443		$	18,138,331
Less: Reserves		(3,427,158	)		(3,215,806	)
	$	15,868,285		$	14,922,525

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Note 1 - Description of the Company (Details)	6 Months Ended
	May 31, 2014
Disclosure Text Block [Abstract]
Number of Operating Segments	4

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended
	May 31, 2014	May 31, 2013
Cash flows from operations:
Net income (loss)	$ (5,159)	$ 1,333,500
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Stock based compensation	14,504	29,812
(Gain) on disposal of property, plant, and equipment	(958)	(604,245)
Depreciation expense	441,230	370,084
Bad debt expense (recovery)	10,939	3,229
Deferred income taxes	(25,003)	(97,147)
(Increase) decrease in:
Accounts receivable	(288,590)	408,979
Inventories	(945,760)	(492,088)
Income taxes receivable	(269,169)
Other current assets	(371,738)	(28,120)
Increase (decrease) in:
Accounts payable	223,896	208,415
Contracts in progress, net	(8,375)	(995,529)
Customer deposits	908,211	759,838
Income taxes payable		(622,085)
Accrued expenses	(133,590)	(279)
Net cash provided by (used in) operating activities	(449,562)	274,364
Cash flows from investing activities:
Purchases of property, plant, and equipment	(611,211)	(210,269)
Proceeds from sale of property	958	835,536
Net cash provided by (used in) investing activities	(610,253)	625,267
Cash flows from financing activities:
Net change in line of credit	714,740
Proceeds from term debt	1,000,000	228,339
Repayment of term debt	(620,243)	(551,307)
Proceeds from the exercise of stock options	7,760
Net cash provided by (used in) financing activities	1,102,257	(322,968)
Net increase in cash	42,442	576,663
Cash at beginning of period	207,950	1,546,609
Cash at end of period	250,392	2,123,272
Cash paid during the period for:
Interest	176,564	169,202
Income taxes	$ 291,822	$ 1,356,942

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Note 5 - Accrued Expenses

6 Months Ended

May 31, 2014

Payables and Accruals [Abstract]

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

5) Accrued Expenses

Major components of accrued expenses are:

		May 31, 2014		November 30, 2013
Salaries, wages, and commissions	$	747,568	$	836,200
Accrued warranty expense		229,400		220,719
Other		607,917		661,556
	$	1,584,885	$	1,718,475

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Note 3 - Net Income (Loss) Per Share of Common Stock (Details) - Computation of Basic and Diluted Earnings (Loss) Per Common Share (USD $)	3 Months Ended		6 Months Ended
	May 31, 2014	May 31, 2013	May 31, 2014	May 31, 2013
Basic:
Numerator: net income (loss) (in Dollars)	$ 253,155	$ 514,240	$ (5,159)	$ 1,333,500
Average number of common shares outstanding	4,047,487	4,037,552	4,047,025	4,036,302
Effect of dilutive stock options	6,260	14,140	0	13,178
Denominator: dilutive average number of common shares outstanding	4,053,747	4,051,692	4,047,025	4,049,480
Diluted earnings per common share (in Dollars per share)	$ 0.06	$ 0.13	$ 0.00	$ 0.33
Basic earnings per common share (in Dollars per share)	$ 0.06	$ 0.13	$ 0.00	$ 0.33

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Note 12 - Segment Information (Details) - Segment Reporting Information (USD $)	3 Months Ended		6 Months Ended
	May 31, 2014	May 31, 2013	May 31, 2014	May 31, 2013	Nov. 30, 2013
Segment Reporting Information [Line Items]
Revenue from external customers	$ 9,468,996	$ 9,250,308	$ 15,706,331	$ 17,665,413
Income (loss) from operations	443,891	798,959	148,955	1,511,713
Income (loss) before tax	334,100	709,777	(9,102)	1,971,210
Total Assets	35,008,232		35,008,232		32,767,621
Capital expenditures			611,211	210,269
Depreciation & Amortization			441,230	370,084
Agricultural Products [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Revenue from external customers	7,562,000	7,716,000	12,004,000	14,720,000
Income (loss) from operations	600,000	568,000	396,000	1,129,000
Income (loss) before tax	541,000	517,000	301,000	1,693,000
Total Assets	26,147,000	25,531,000	26,147,000	25,531,000
Capital expenditures	162,000	58,000	574,000	197,000
Depreciation & Amortization	136,000	96,000	256,000	247,000
Pressurized Vessels [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Revenue from external customers	475,000	642,000	898,000	1,036,000
Income (loss) from operations	(78,000)	(12,000)	(109,000)	(135,000)
Income (loss) before tax	(85,000)	(38,000)	(125,000)	(214,000)
Total Assets	2,715,000	2,891,000	2,715,000	2,891,000
Capital expenditures	16,000	5,000	27,000	9,000
Depreciation & Amortization	27,000	26,000	54,000	52,000
Modular Buildings [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Revenue from external customers	537,000	892,000	998,000	1,909,000
Income (loss) from operations	(114,000)	243,000	(240,000)	518,000
Income (loss) before tax	(120,000)	231,000	(249,000)	492,000
Total Assets	2,708,000	3,024,000	2,708,000	3,024,000
Capital expenditures	0	3,000	0	4,000
Depreciation & Amortization	37,000	49,000	74,000	71,000
Tools [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Revenue from external customers	895,000	0	1,806,000	0
Income (loss) from operations	36,000	0	102,000	0
Income (loss) before tax	(2,000)	0	64,000	0
Total Assets	3,438,000	0	3,438,000	0
Capital expenditures	1,000	0	10,000	0
Depreciation & Amortization	28,000	0	57,000	0
Operating Segments [Member]
Segment Reporting Information [Line Items]
Revenue from external customers	9,469,000	9,250,000	15,706,000	17,665,000
Income (loss) from operations	444,000	799,000	149,000	1,512,000
Income (loss) before tax	334,000	710,000	(9,000)	1,971,000
Total Assets	35,008,000	31,446,000	35,008,000	31,446,000
Capital expenditures	179,000	66,000	611,000	210,000
Depreciation & Amortization	$ 228,000	$ 171,000	$ 441,000	$ 370,000

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Note 3 - Net Income (Loss) Per Share of Common Stock (Tables)

6 Months Ended

May 31, 2014

Earnings Per Share [Abstract]

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

	For the three months ended
	May 31, 2014		May 31, 2013
Basic:
Numerator: net income	$	253,155	$	514,240
Denominator: average number of common shares outstanding		4,047,487		4,037,552
Basic earnings per common share	$	0.06	$	0.13
Diluted:
Numerator: net income	$	253,155	$	514,240
Average number of common shares outstanding		4,047,487		4,037,552
Effect of dilutive stock options		6,260		14,140
Denominator: dilutive average number of common shares outstanding		4,053,747		4,051,692
Diluted earnings per common share	$	0.06	$	0.13

	For the six months Ended
	May 31, 2014			May 31, 2013
Basic:
Numerator: net income (loss)	$	(5,159	)	$	1,333,500
Denominator: average number of common shares outstanding		4,047,025			4,036,302
Basic earnings (loss) per common share	$	(0.00	)	$	0.33
Diluted:
Numerator: net income (loss)	$	(5,159	)	$	1,333,500
Average number of common shares outstanding		4,047,025			4,036,302
Effect of dilutive stock options		0			13,178
Denominator: dilutive average number of common shares outstanding		4,047,025			4,049,480
Diluted earnings (loss) per common share	$	(0.00	)	$	0.33