10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 2019
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 000-5131

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.)
P.O. Box 288
5556 Highway 9 Armstrong, Iowa 50514
(Address of principal executive offices)
(712) 864-3131
(Registrant’s telephone number, including area code)

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

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

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    

☒ Yes  ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No 

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

Large accelerated filer  ☐	Accelerated filer  ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of the last business day of the registrant’s most recently completed second fiscal quarter, based on the closing sale price on May 31, 2019 as reported on the Nasdaq Stock Market LLC ($2.00 per share), was approximately $4,145,522.

As of January 30, 2020, there were 4,349,642 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Proxy Statement for the Registrant’s 2020 Annual Meeting of Stockholders to be filed within 120 days of November 30, 2019 are incorporated by reference into Part III of this Form 10-K.

Art’s-Way Manufacturing Co., Inc.

Index to Annual Report on Form 10-K

		Page
Part I
	Item 1.  BUSINESS	4
	Item 1A. RISK FACTORS	9
	Item 1B. UNRESOLVED STAFF COMMENTS	9
	Item 2.  PROPERTIES	9
	Item 3.  LEGAL PROCEEDINGS	10
	Item 4.  MINE SAFETY DISCLOSURES	10
Part II
	Item 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	11
	Item 6.  SELECTED FINANCIAL DATA	11
	Item 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	11
	Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	17
	Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	18
	Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	41
	Item 9A.  CONTROLS AND PROCEDURES	41
	Item 9B.  OTHER INFORMATION	41
Part III
	Item 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	42
	Item 11.  EXECUTIVE COMPENSATION	42
	Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	42
	Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	42
	Item 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES	42
Part IV
	Item 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES	43

FORWARD LOOKING STATEMENTS

This report may contain forward-looking statements that reflect future events, future business, industry and other conditions, our future performance, and our plans and expectations for future operations and actions. In some cases forward-looking statements may be identified 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. Forward-looking statements in this report generally relate to: our expectations regarding our warranty costs and order backlog; our beliefs regarding the sufficiency of working capital and cash flows; our expectations regarding our continued ability to renew or obtain financing on reasonable terms when necessary; the impact of recently issued accounting pronouncements; our intentions and beliefs relating to our costs, product developments and business strategies; our expected operating and financial results; our expectations concerning our primary capital and cash flow needs; our beliefs regarding competitive factors and our competitive strengths; our expectations regarding our capabilities and demand for our products; our predictions regarding the impact of seasonality; our beliefs regarding the impact of the farming industry on our business; our beliefs regarding our internal controls over financial reporting; and our intentions for paying dividends. Many of these forward-looking statements are located in this report under “Item 1. BUSINESS” and “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,” but they may appear in other sections as well.

You should read this report thoroughly with the understanding that our actual results may differ materially from those set forth in the forward-looking statements for many reasons, including events beyond our control and assumptions that prove to be inaccurate or unfounded. We cannot provide any assurance with respect to our future performance or results. Our actual results or actions could and likely will differ materially from those anticipated in the forward-looking statements for many reasons, including, but not limited to, the impact of tightening credit markets on our ability to continue to obtain financing on reasonable terms; our ability to repay current debt, continue to meet debt obligations and comply with financial covenants; obstacles related to integration of acquired product lines and businesses; obstacles related to liquidation of product lines and segments; the effect of general economic conditions, including consumer and governmental spending, on the demand for our products and the cost of our supplies and materials; fluctuations in seasonal demand and our production cycle; the ability of our suppliers to meet our demands for raw materials and component parts; our original equipment manufacturer customers’ decisions regarding supply chain structure, inventory levels, and overall business conditions; fluctuations in the price of raw materials, especially steel; our ability to predict and meet the demands of each market in which our segments operate; the existence and outcome of product liability claims and other ordinary course litigation; changes in environmental, health and safety regulations and employment laws; our ability to retain our key employees; the cost of complying with laws, regulations, and standards relating to corporate governance and public disclosure, and the demand such compliance places on management’s time; and other factors described in this report and from time to time in our other reports filed with the Securities and Exchange Commission. We do not intend to update the forward-looking statements contained in this report other than as required by law. We caution investors not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. This report and the documents that we reference in this report and have filed as exhibits should be read 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.

PART I

Item 1. BUSINESS.

General

Art’s-Way Manufacturing Co., Inc., a Delaware corporation (“we,” “us,” “our,” and the “Company”), began operations as a farm equipment manufacturer in 1956. Since that time, we have become a worldwide manufacturer of agricultural equipment, specialized modular science buildings and steel cutting tools. Our principal manufacturing plant is located in Armstrong, Iowa.

We have organized our business into three operating segments. Management separately evaluates the financial results of each segment because each is a strategic business unit offering different products and requiring different technology and marketing strategies. Our Agricultural Products segment manufactures and distributes farm equipment under our own and private labels and previously included the operations of our wholly-owned subsidiary, Art’s-Way Manufacturing International LTD, a Canadian company (“International”). During the second quarter of the 2018 fiscal year, we liquidated our investment in our Canadian subsidiary by selling off remaining inventory and dissolving International. Our Modular Buildings segment manufactures modular buildings for various uses, commonly animal containment and research laboratories, through our wholly-owned subsidiary, Art’s-Way Scientific, Inc., an Iowa corporation. Our Tools segment manufactures standard single point brazed carbide tipped tools as well as PCD (polycrystalline diamond) and CBN (cubic boron nitride) inserts and tools through our wholly-owned subsidiary, Ohio Metal Working Products/Art’s Way, Inc., an Ohio corporation (“Ohio Metal”). For detailed financial information relating to segment reporting, see Note 18 “Segment Information” to our financial statements in “Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this report.

4

Information about Art’s-Way can be found on our website, http://www.artsway-mfg.com/. We are not including the information on our corporate website as a part of or incorporating it by reference into this report. We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Exchange Act requires us to file periodic reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC’s website at http://www.sec.gov.

Business of Our Segments

Agricultural Products

Our Agricultural Products segment, which accounted for 59.0% of our net revenue in the 2019 fiscal year and 72.7% of our net revenue in the 2018 fiscal year, is located primarily in our Armstrong, Iowa facility. This segment manufactures a variety of specialized farm machinery under our own label, including portable and stationary animal feed processing equipment and related attachments used to mill and mix feed grains into custom animal feed rations; a line of hay and forage equipment consisting of forage boxes, blowers, running gear, and dump boxes; a line of portable grain augers; a line of manure spreaders; sugar beet harvesting equipment; a line of land maintenance equipment; moldboard plows; and reels for combines and swathers. We also previously manufactured industrial grade snow blowers under the Agro Trend label, but we sold the Agro Trend product line to Metco, Inc. on December 15, 2017. The Agro Trend line under our Canadian subsidiary accounted for 2% of our sales from continuing operations on our statements of operations for the 2018 fiscal year. We sell our labeled products through independent farm equipment dealers throughout the United States and Canada. In addition, we manufacture and supply silage blowers and reels under original equipment manufacturer (“OEM”) agreements. Sales to our OEM customers accounted for 1% of our consolidated sales for the 2019 fiscal year and 5% of our consolidated sales for the 2018 fiscal year. We also provide after-market service parts that are available to keep our branded and OEM-produced equipment operating to the satisfaction of the end user of our products.

Modular Buildings

Our Modular Buildings segment, which accounted for 31.7% of our net revenue in the 2019 fiscal year and 15.8% of our net revenue in the 2018 fiscal year, is located in Monona, Iowa. This segment produces and sells modular buildings, which are custom-designed to meet the specific research needs of our customers. The buildings we commonly produce range from basic swine buildings to complex containment research laboratories. We plan to continue our focus on providing research facilities for academic research institutions, government research and diagnostic centers, public health institutions and private research and pharmaceutical companies, as those are our primary market sectors. We provide services from start to finish by designing, manufacturing, delivering and installing these facilities to meet customers’ critical requirements. In addition to selling these facilities, we also offer a lease option to customers in need of temporary facilities.

Tools

Our Tools segment, which is located in Canton, Ohio, accounted for 9.3% of our net revenue in the 2019 fiscal year and 11.5% of our net revenue in the 2018 fiscal year. This segment produces and sells standard single point brazed carbide tipped tools as well as PCD (polycrystalline diamond), CBN (cubic boron nitride) inserts and tools and OEM specialty tools. The tools are used by manufacturers in various industries to cut and shape various parts, pipes, and fittings. The marketing of the tools is primarily through independent distributors supplying manufacturers with industrial tools and supplies. We plan to continue our focus on providing cutting tools to industries such as automotive, aerospace, oil and gas piping, and appliances.

5

Our Principal Agricultural Products

From our beginnings as a producer of portable grinder mixers, our Agricultural Products segment has grown through developing several new products and with our acquisitions. In 2012, we acquired the assets of Universal Harvester Co., Inc. (“UHC”) in Ames, Iowa and began selling reels for combines and swathers as UHC by Art’s-Way. In 2013, we acquired the Agro Trend product line based in Clifford, Ontario and we sold Agro Trend industrial snow blowers and agricultural trailers through our Canadian subsidiary. On December 15, 2017, we sold the Agro Trend product line to Metco, Inc. Today, our Agricultural Products segment manufactures a wide array of products relating to feed processing, crop production, augers, manure spreaders, hay and forage, tillage and land management, and sugar beet harvesting equipment. We primarily manufacture products under the Art’s-Way, Miller Pro, Roda, M&W, Badger, and UHC by Art’s-Way brand names. Our Agricultural Products segment also maintains a small volume of OEM work for the industry’s leading manufacturers.

Grinder mixer line. The grinder mixer line represents our original product line. Our founder, Arthur Luscombe, designed the original power take-off unit (“PTO”) powered grinder-mixer prior to our inception. Grinder mixers are used to grind grain and mix in proteins for animal feed. They have several agricultural applications and are commonly used in livestock operations. Our grinder mixers have wide swing radiuses to allow users to reposition the discharge tube from one side of the tank to the other in one step. Our 6105 grinder mixer offers a 105-bushel tank with a 20-inch hammermill. Our 6140 grinder mixer is a medium sized product with a 140-bushel tank, a 20-inch hammermill, and an 8-inch discharge auger. Our 7165 grinder mixer has a large 165- bushel tank with a 26-inch hammermill featuring self-contained hydraulics and 10-inch discharge augers yielding the fastest unload times in the industry. During the 2019 fiscal year, we completed development of the 8215 grinder mixer featuring a 215-bushel tank, which is now the largest in the industry. Our Cattle Maxx rollermill mixer products offer consistent feed grain rations for beef and dairy operations and are available in 105-bushel, 140-bushel, and 165-bushel capacities. We also offer the JR50 and JR75 grinder mixer models for smaller operations featuring 50- and 75-bushel mixing tanks, respectively.

Stationary feed grain processing line. We offer stationary hammermills and rollermills. Harvesting leaves various amounts of extraneous materials that must be removed through processing the seeds. Hammermills are aggressive pre-cleaners that are designed to remove appendages, awns, and other chaff from seeds by vigorously scraping the seed over and through the screen. The screen has holes that are big enough to let the seed pass through undamaged but are small enough to catch and remove the appendages. Our rollermills roll the feed grain to minimize dust, and they fracture the outside hull to release the digestive juices more rapidly. Rolling feed provides more palatable and digestible feed for use in animal feeding operations.

Land management line. Land planes are used to ensure even distribution of rainfall or irrigation by eliminating water pockets, furrows, and implement scars in fields. Our land planes have a patented Art’s-Way floating hitch design. We offer pull-type graders to help our customers perform many tasks such as maintaining terraces and waterways, leveling ground, cleaning ditches, and removing snow. The pull-type graders follow close to the back of a tractor for leveling uneven areas or for turning in smaller spaces.

Moldboard plow line. The Art’s-Way moldboard plows offer conservation tillage choices to match each customer’s preference. Our moldboard plows are designed to slice and invert the soil to leave a rough surface exposed, and they are primarily used on clean-tilled cropland with high amounts of crop residue.

Sugar beet harvesting line. Our sugar beet defoliators and harvesters are innovative products in the industry due to our focus on continuous improvement, both in reaction to customer requests and in anticipation of our customers’ needs. Our machines can harvest six, eight, or twelve rows at one time. We were the first manufacturer to introduce a larger, 12-row harvester. We also manufacture a 692Z model, which is a smaller, more contained model, commonly used by smaller producers. Our sugar beet defoliators cut and remove the leaves of the sugar beets without damaging them, and the leaf particles are then incorporated back into the soil. In 2019, we introduced a sonar leveling axle to improve the harvesting capability of our beet equipment.

Hay and forage line. We offer highly productive hay and forage tools for the full range of producers. This product line includes high capacity forage boxes for transporting hay from the field with optional running gear to provide superior stability and tracking. With recent product line additions, we offer the highest capacity forage boxes on the market. High velocity, high volume forage blowers are able to fill the tallest silos with lower power requirements. Cam action rotary rakes will gently lift the crop, carry it to the windrow and release it, saving more leaves and forming a faster drying, fluffier windrow.

Manure spreaders line. Roda manure spreaders are a well-known name with a rich tradition in the West North Central region of the United States with the origin of the spreaders dating back to the 1950s. We offer vertical and horizontal beaters and rear discharge manure spreaders in both truck-mount and pull-type configurations. We also offer manure spreaders with flared sides for increased capacity and a guillotine slop gate for accurate metering. Our products are ideal for spreading livestock manure, compost, and lime. We offer a scale system and a scale system with GPS for proper nutrient placement. These spreaders boast a heavy-duty and rugged design with one of the best spread patterns in the industry, allowing for efficient and consistent nutrient and land management.

6

Reels line. In 2012 we purchased the assets of UHC and began selling reels for combines and swathers as UHC by Art’s-Way. These reels have a unique flip over action for self-cleaning in adverse conditions. They are manufactured with extruded aluminum creating a light-weight yet strong reel.

Product Distribution and Markets

We distribute goods for our Agricultural Products segment primarily through a network of approximately 1,100 U.S. and Canadian independent dealers, as well as overseas dealers in the United Kingdom and Australia, whose customers require specialized agricultural machinery. We have sales representation in 48 states and seven Canadian provinces; however, many dealers sell only service parts for our products. Our dealers sell our products to various agricultural and commercial customers. We also maintain a local sales force in our Armstrong, Iowa facility to provide oversight services for our distribution network, communicate with end users, and recruit and train dealers on the uses of our products. Our local service parts staff is available to help customers and dealers with their service parts needs. Our Modular Buildings segment typically sells products customized to the end-user’s requirements directly to the end-user. Our Tools segment distributes products through manufacturers’ representatives, direct sales, and OEM sales channels.

We currently export products to eleven foreign countries. We have been shipping grinder mixers abroad since 2006 and have exported portable rollermills and sugar beet harvesters as well. We continue to strengthen these relationships and intend to develop new international markets. Our international sales accounted for 5.0% of consolidated sales during the 2019 fiscal year.

Backlog. Our backlogs of orders vary on a daily basis. As of January 30, 2020, our Tools segment had approximately $285,000 of backlog, our Modular Buildings segment had approximately $5,106,000 of backlog, and our Agricultural Products segment had a net backlog of approximately $3,592,000. Our backlog is up across all three segments and up approximately 266% in total compared to this same time last year. We expect that our order backlogs will continue to fluctuate as orders are received, filled, or cancelled, and, due to dealer discount arrangements we may enter into from time to time, these figures are not necessarily indicative of future revenue.

Recent Product Developments

During the 2019 fiscal year, development in our Agricultural Products segment consisted of several products. We finalized design on the 8215 grinder mixer which incorporates the quality and traditional features of previous units with our largest capacity in a grinder mixer of 215 bushels. We introduced two new manure spreaders at the end of 2018, the X700 and X900. These units feature a guillotine slop gate for accurate metering and additional capacity due to flared sides. In 2019, we readied and put these units into mass production. We also developed a sonar leveling axle for our sugar beet harvesters in 2019 that tracks harvesting depth to maximize crop extraction. We continued development on our 40-foot commercial forage box, which features a rear unload, has an all-welded design for greater strength and features polished stainless-steel sides. The 40-foot forage box is also welded to a semi-trailer for straight from the field to over-the-road use. We also began the development of a hemp drying box in 2019.

    Our Tools and Modular Buildings segments complete projects based on customer specifications and did not engage in specific product development during the 2019 fiscal year.

Competition

In addition to the competitive strengths of each of our segments described below, we believe our diversified revenue base, sales presence and customer base drawn from these three segments helps to provide protection against competitive factors in any one industry.

Agricultural Products

Our Agricultural Products segment competes in a highly competitive agricultural equipment industry. We compete with larger manufacturers and suppliers that have broader product offerings and significant resources at their disposal; however, we believe that our competitive strengths allow us to compete effectively in our market.

7

Management believes that grain and livestock producers, as well as those who provide services to grain and livestock operations, are the primary purchasers of agricultural equipment. Many factors influence a buyer’s choice for agricultural equipment. Any one or all factors may be determinative, but they include brand loyalty, the relationship with dealers, product quality and performance, product innovation, product availability, parts and warranty programs, price, and customer service.

While our larger competitors may have resources greater than ours, we believe we compete effectively in the farm equipment industry by serving smaller markets in specific product areas rather than directly competing with larger competitors across an extensive range of products. Our Agricultural Products segment caters to niche markets in the agricultural industry. We do not have a direct competitor that has the same product offerings that we do. Instead, each of our product lines competes with similar products of many other manufacturers. Some of our product lines face greater competition than others, but we believe that our products are competitively priced with greater diversity than most competitor product lines. Other companies produce feed processing equipment, sugar beet harvesting and defoliating equipment, grinders, and other products similar to ours; therefore, we focus on providing the best product available at a reasonable price. Overall, we believe our products are competitively priced with above average quality and performance, in a market where price, product performance, and quality are principal elements.

In addition, in order to capitalize on brand recognition for our Agricultural Products segment, we have numerous product lines produced under our labels and private labels, and we have made strategic acquisitions to strengthen our dealer base. We also provide aftermarket service parts which are available to keep our branded and OEM-produced equipment operating to the satisfaction of the customer. We sell products to customers in the United States and eleven foreign countries through a network of approximately 1,100 independent dealers in the United States and Canada, as well as overseas dealers in the United Kingdom and Australia.

We believe that our competitive pricing, product quality and performance, network of worldwide and domestic distributors, and strong market share for many of our products allow us to compete effectively in the agricultural products market.

Modular Buildings

We expect continued competition from our Modular Buildings segment’s existing competitors, which include conventional design/build firms, as well as competition from new entrants into the modular building market. To some extent, we believe barriers to entry in the modular building industry limit the competition we face in the industry. Barriers to entry in the market consist primarily of access to capital, access to a qualified labor pool, and the bidding process that accompanies many jobs in the health and education markets. Despite these barriers, manufacturers who have a skilled work force and adequate production facilities could adapt their manufacturing facilities to produce modular structures.

We believe the competitive strength of our Modular Buildings segment is our ability to design and produce high-tech modular buildings more quickly than conventional design/build firms. Conventional design/build construction may take two to five years, while our modular laboratories can be delivered in as little as six months. As one of the few companies in the industry to supply turnkey modular buildings and laboratories, we believe we provide high-quality buildings at reasonable prices that meet our customers’ time, flexibility, and security expectations.

Tools

We expect competition in our Tools segment from off shore products that have gained market share over the last twenty years. Our greatest threat continues to be emerging technologies that replace the need for brazed tools. These competitive threats are countered by our ability to offer the widest range of standard carbide tipped brazed tool inventories to be found in North America. These inventories are strategically located in four warehouses across the United States, enabling our customers to receive product quickly with minimal shipping costs. Our ability to produce special, engineered, value-added products in volume with short lead times sets us apart from our competitors. This is most evident in certain segments of the pipe processing industry, where we have been able to establish and maintain market share despite efforts from companies significantly larger than ourselves. In 2019 we expanded our tool offering by entering into an OEM agreement with a specialty tool manufacturer.

Raw Materials, Principal Suppliers, and Customers

Raw materials for our various segments are acquired from domestic and foreign sources and normally are readily available. Currently, we purchase the lifter wheels used to manufacture our sugar beet harvesters from a supplier located in China. We also purchase manure spreader beaters from a supplier in Italy. However, these suppliers are not principal suppliers and there are alternative sources for these materials.

8

We have an OEM supplier agreement with Case New Holland (“CNH”) for our Agricultural Products segment. Under the OEM agreement, we have agreed to supply CNH’s requirements for certain feed processing and service parts, primarily blowers, under CNH’s label. The agreement has no minimum requirements and can be cancelled upon certain conditions. The initial term of the agreement with CNH expired in September 2006, but the agreement continues in force until terminated or cancelled by either party. Neither party has terminated or cancelled the agreement as of November 30, 2019. We also sell reels to Honey Bee and Agco under an OEM agreement. For the 2019 fiscal year, sales to OEM customers were approximately 1% of consolidated sales compared to 5% in the 2018 fiscal year.

We do not typically rely on sales to one customer or a small group of customers. During the 2019 fiscal year, one customer accounted for more than 21% of consolidated revenues as the result of a large contract in our Modular Buildings segment. Our highest recurring customer accounted for just under 10% of our consolidated net revenues.

Intellectual Property

We maintain manufacturing rights on several products, which cover unique aspects of design. We also have trademarks covering product identification. We believe our trademarks and licenses help us to retain existing business and secure new relationships with customers. The duration of these rights ranges from 5 to 10 years, with options for renewal. We currently have no pending applications for intellectual property rights.

We pay royalties for our use of certain manufacturing rights. Under our OEM and supplier agreement with CNH, CNH sold us the license to manufacture, sell, and distribute certain plow products designed by CNH and their replacement and component parts. We pay semi-annual royalty payments based on the invoiced price of each licensed product and service part we sell. We have a licensing royalty agreement with Martin Harvesting, LLC to produce a commercial forage box in exchange for royalty payments in effect until August 2026. Our rights to manufacture and sell this product do not expire, but we will pay a royalty amount based on the sales price of each licensed product we sell. We also have a licensing and royalty agreement with Spreader, LLC to produce a loader mounted spreader in exchange for royalty payments until December 2027.

Government Relationships and Regulations; Environmental Compliance

Our Modular Buildings segment must design, manufacture, and install its modular buildings in accordance with state building codes, and we have been able to achieve the code standards in all instances. In addition, we are subject to various federal, state, and local laws and regulations pertaining to environmental protection and the discharge of materials into the environment. We do not expect that the cost of complying with these regulations will have a material impact on our consolidated results of operations, financial position, or cash flows.

Employees

As of November 30, 2019, we employed approximately 79 employees in our Agricultural Products segment, two of whom were employed on a part-time basis. As of the same date, we had 24 employees in our Tools segment, one of whom was employed on a part-time basis. The majority of the employees in our Tools segment are represented by a union and covered by a collective bargaining agreement. In addition, our Modular Buildings segment employed approximately 22 employees as of the same date, one of whom worked on a part-time basis. These numbers do not necessarily represent peak employment during the 2019 fiscal year.

Item 1A. RISK FACTORS.

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

Item 1B. UNRESOLVED STAFF COMMENTS.

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

Item 2. PROPERTIES.

Our executive offices, as well as the primary production and warehousing facilities for our Agricultural Products segment, are located in Armstrong, Iowa. These facilities were constructed after 1965 and remain in fair condition. The facilities in Armstrong contain approximately 249,000 square feet of usable space. We have engaged in several building improvement projects during the last several years and plan to complete a reroofing project over the next several years. In addition, we own approximately 127 acres of land west of Armstrong, on which the factory and inventory storage space is situated for our Agricultural Products segment.

9

We purchased an office, production, and warehousing facility for our Agricultural Products segment located in West Union, Iowa on approximately 29 acres in the 2010 fiscal year. The property contained approximately 190,000 square feet of usable space. A substantial portion of the facility was leased to third parties during the 2018 fiscal year. This property was sold on December 14, 2018 for $900,000. We recognized an impairment of approximately $216,000 on this property in the 2018 fiscal year.

In February 2008, we completed construction on a facility in Dubuque, Iowa, which was used for our discontinued Pressurized Vessels segment. The facility was 34,450 square feet, steel-framed, with a crane that ran the length of the building. A paint booth and a blast booth were installed in the first quarter of the 2009 fiscal year. On March 29, 2018, we sold this facility for $1,500,000.

We completed construction in November 2007 of our facility in Monona, Iowa, which houses the manufacturing for our Modular Buildings segment. The facility was custom-designed to meet our production needs. It has approximately 50,000 square feet of useable space and accommodates a sprinkler system and crane.

In connection with the acquisition of certain assets of Ohio Metal Working Products Company in September 2013, we also purchased the land and building used for manufacturing of the products sold by Ohio Metal Working Products Company, located in Canton, Ohio. The building contains approximately 39,000 square feet of usable space and is in good condition. The purchased land is approximately 4.50 acres and is used in connection with our Tools segment.

All of our owned real property is subject to mortgages granted to Bank Midwest as security for our long-term debt and our line of credit. See “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Liquidity and Capital Resources” for more information.

Item 3. LEGAL PROCEEDINGS.

From time to time in the ordinary course of business, we may be named as a defendant in legal proceedings incidental to the business, including without limitation, workers’ compensation claims, tort claims, or contractual disputes. We are not currently involved in any material legal proceedings, directly or indirectly, and we are not aware of any claims pending or threatened against us or any of the directors that could result in the commencement of material legal proceedings.

Item 4. MINE SAFETY DISCLOSURES.

Not applicable.

10

PART II

Item 5. Market for REGISTRANT’S Common Equity, Related Stockholder Matters AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our common stock trades on the Nasdaq Stock Market LLC under the symbol “ARTW.”

Stockholders

We have two classes of stock, undesignated preferred stock and $0.01 par value common stock. No shares of preferred stock have been issued or are outstanding. As of January 30, 2020, we had 83 common stock stockholders of record, which number does not include stockholders who hold our common stock in street name.

Dividends

We did not pay a dividend during the 2019 or 2018 fiscal years. We expect that the payment of and the amount of any future dividends will depend on our financial condition at that time.

Unregistered Sales of Equity Securities

None.

Purchases of Equity Securities by the Company

The following table presents the information with respect to purchases made by us for our common stock during the fourth fiscal quarter of 2019:

	Total Number of Shares Purchased (1)		Average Price Paid Per Share		Total Number of Shares Purchased as part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs
September 1 to September 30, 2019		-	$	-		N/A		N/A
October 1 to October 31, 2019		-	$	-		N/A		N/A
November 1 to November 30, 2019		967	$	1.99		N/A		N/A
		967	$	1.99

⁽¹⁾ Reflects shares withheld pursuant to the terms of restricted stock awards under our 2011 Plan to offset tax withholding obligations that occur upon vesting and release of shares. The value of the shares withheld is the closing price of our common stock on the date the relevant transaction occurs.

Equity Compensation Plans

For information on our equity compensation plans, refer to Item 12, “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.”

Item 6. SELECTED FINANCIAL DATA.

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

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This report contains forward-looking statements that involve significant risks and uncertainties. The following discussion, which focuses on our results of operations, contains forward-looking information and statements. Actual events or results may differ materially from those indicated or anticipated, as discussed in the section entitled “Forward Looking Statements.” The following discussion of our financial condition and results of operations should also be read in conjunction with our financial statements and notes to financial statements contained in “Item8 . FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” - of this report.

11

Financial Condition

Fiscal year 2019 proved to be another adverse year in the agricultural sector. We have now seen five consecutive years of decreased net sales for our Agricultural Products segment. At the end of the third fiscal quarter, we found ourselves down approximately 18% in net sales year on year in this segment. By end of the fourth fiscal quarter, we had closed this gap to only be a 6% decrease year on year. Our 2019 fourth fiscal quarter had increased agricultural product sales of 59% year on year and the highest fourth quarter total since our 2014 fiscal year. This strong fourth quarter provides us renewed optimism about the state of the agricultural market. In the 2019 fiscal year, we continued our continuous improvement projects including warehouse reorganization, improved product routings for efficiency and general cost cutting. These projects will improve our operational effectiveness and will allow us to thrive in periods of agricultural economic boom. Despite the struggles in our Agricultural Products segment, our diversification through different industries has helped us tremendously. Our Modular Building segment was profitable in the 2019 fiscal year mainly due a large contract that is approximately 55% complete. This segment carries a strong backlog into 2020 that will provide a great start to our 2020 fiscal year. Our Tools segment did not have a strong year financially but did sign an OEM agreement that has the potential to increase their sales in the 2020 fiscal year.

Our consolidated balance sheet indicates a stable financial position as of November 30, 2019. Despite showing a net loss from continuing operations of $(1,420,000) for the 2019 fiscal year we were able to decrease our total liabilities by $735,000 compared to the 2018 fiscal year. Our total borrowings were reduced by $1,241,000 in fiscal year 2019 compared to fiscal year 2018.

We expect to have access to capital as needed throughout 2020 through the sale of inventory and from the use our line of credit. At November 30, 2019 we had $2,421,470 available on our line of credit. Despite the continued losses, our banking relationship has remained positive through transparency and continued communication. Our working capital remained strong around $6,204,000 in the 2019 fiscal year with a current ratio of 2.19, up eight points from 2018. We continue to put emphasis on reducing our inventory to more manageable levels to decrease carrying costs, implement lean manufacturing practices and improve our inventory turnover. We do not foresee liquidity issues within the next twelve months.

Critical Accounting Policies

Our significant accounting policies are described in Note 1 “Summary of Significant Accounting Policies” to our financial statements in “Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this report. Critical accounting policies are those that we believe are both important to the portrayal of our financial condition and results and require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

We believe that the following represents the most critical accounting policies and estimates used in the preparation of our consolidated financial statements.

Inventories

Inventories are stated at the lower of cost or net realizable value, and cost is determined using the standard costing method. Management monitors the carrying value of inventories using inventory control and review processes that include, but are not limited to, sales forecast review, inventory status reports, and inventory reduction programs. We record inventory write downs to net realizable value based on expected usage information for raw materials and historical selling trends for finished goods. If the assumptions made by management do not occur, we may need to record additional write downs.

Revenue Recognition

Effective December 1, 2018 we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective adoption method. The adoption of ASC 606 had no impact on prior year or previously disclosed amounts. In accordance with ASC 606, revenue is measured based on consideration specified in a contract with a customer and recognized when we satisfy the performance obligation specified in each contract.

12

Our revenues primarily result from contracts with customers. The major sources of revenue for the Agricultural Products and Tools segments are farm equipment, service parts related to farm equipment and steel cutting tools and inserts. The Agricultural Products and Tools segments generally execute short-term contracts that contain a single performance obligation – the delivery of product to the common carrier. We recognize revenue for the production and sale of farm equipment, service parts and cutting tools upon shipment of the goods. Shipment of the goods is the point in time when risk of ownership and title pass to the buyer. All sales are made to authorized dealers whose application for dealer status has been approved and who have been informed of general sales policies. Any changes in our terms are documented in the most recently published price lists. Pricing is fixed and determinable according to our published equipment and parts price lists. Title to all equipment and parts sold pass to the buyer upon delivery to the carrier and is not subject to a customer acceptance provision. Proof of the passing of title is documented by the signing of the delivery receipt by a representative of the carrier. Post shipment obligations are limited to any claim with respect to the condition of the equipment or parts. The agricultural products and tools segments each typically require payment in full 30 days after the ship date. To take advantage of program discounts, some customers pay deposits up front. Any deposits received are considered unearned revenue and increase contract liabilities.

In certain circumstances, upon the customer’s written request, we may recognize revenue when production is complete, and the goods are ready for shipment. At the buyer’s request, we will bill the buyer upon completing all performance obligations, but before shipment. The buyer dictates that we ship the goods per their direction from our manufacturing facility, as is customary with this type of agreement, in order to minimize shipping costs. The written agreement with the customer specifies that the goods will be delivered on a schedule to be determined by the customer, with a final specified delivery date, and that we will segregate the goods from our inventory, such that they are not available to fill other orders. This agreement also specifies that the buyer is required to purchase all goods manufactured under this agreement. Title of the goods will pass to the buyer when the goods are complete and ready for shipment, per the customer agreement. At the transfer of title, all risks of ownership have passed to the buyer, and the buyer agrees to maintain insurance on the manufactured items that have not yet been shipped. We have operated using bill and hold agreements with certain customers for many years, with consistent satisfactory results for both buyer and seller. The credit terms on this agreement are consistent with the credit terms on all other sales. All risks of loss are shouldered by the buyer, and there are no exceptions to the buyer’s commitment to accept and pay for these manufactured goods. Revenues recognized at the completion of production in the 2019 and 2018 fiscal years were approximately $16,000 and $202,000, respectively.

Our Modular Buildings segment is in the construction industry with its major source of revenue arising from modular building sales. Sales of modular buildings are generally recognized using input methods to measure progress towards the satisfaction of a performance obligation using the percentage of completion method. Revenue and gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at completion. Contract costs consist of direct costs on contracts, including labor, materials, amounts payable to subcontractors and those indirect costs related to contract performance, such as equipment costs, insurance and employee benefits. Contract cost is recorded as incurred, and revisions in contract revenues and cost estimates are reflected in the accounting period when known. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Contract losses are recognized when current estimates of total contract revenue and contract cost indicate a loss. Estimated contract costs include any and all costs appropriately allocable to the contract. The provision for these contract losses will be the excess of estimated contract costs over estimated contract revenues. Changes in job performance, job conditions and estimated profitability, including those changes arising from contract change orders, penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. We use significant judgements in determining estimated contract costs and completion percentages throughout the life of the project. Stock modular building sales also occur and are recognized at a point in time when the performance obligation is fulfilled through substantial completion. Substantial completion is achieved through customer acceptance of the completed building. The Modular Buildings segment executes contracts with customers that can be short- or long-term in nature. These contracts can have multiple performance obligations and revenue from these can be recognized over time or at a point in time depending on the nature of the contracts. Payment terms for the Modular Buildings segment vary by contract, but typically utilize money down and progress payments throughout the life of the contract. The payment terms of the Modular Buildings segment have the most impact on our contract receivables, contract assets and contract liabilities. Project invoicing from the Modular Buildings segment increases contract receivables and has an effect on contract liabilities through billings in excess of costs and estimated gross profit and advanced payments. The balance of contract assets is typically made up of the balance of costs in and estimated gross profit in excess of billings. Costs and profit in excess of amounts billed are classified as current assets and billings in excess of cost and profit are classified as current liabilities.

13

We lease modular buildings to certain customers and account for these transactions as operating or sales-type leases. These leases have terms of up to 36 months and are collateralized by a security interest in the related modular building. On sales-type leases, the lessee has a bargain purchase option available at the end of the lease term. A minimum lease receivable is recorded net of unearned interest income and profit on sale at the time the building is substantially complete. Profit related to the sale of the building is recorded upon fulfillment of our obligation to the lessee. On operating leases, we recognize rent when the lessee has all the rights and benefits of ownership of the asset.

The Agricultural Products segment offers variable consideration in the form of discounts depending on participation in yearly early order programs. This variable consideration is allocated to the transaction price of all products in a sales arrangement and is not contingent on future outcomes. The Agricultural Products segment does not offer rebates or credits. The Tools segment offers quantity discounts that are allocated to the transaction price of each product once the quantity break is achieved. The Tools segment does not offer rebates or credits. The Modular Buildings segment does not offer discounts, rebates or credits.

Our returns policy allows for new and saleable parts to be returned, subject to inspection and a restocking charge, which is included in net sales. Whole goods are not returnable. Shipping costs charged to customers are included in net sales. Freight costs incurred are included in cost of goods sold. Customer deposits consist of advance payments from customers, in the form of cash, for revenue to be recognized in the following year.

For information on product warranty as it applies to ASC 606, refer to Note 9 “Product Warranty,” contained in our financial statements in “Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this report.

Results of Operations – Continuing Operations

Fiscal Year Ended November 30, 2019 Compared to Fiscal Year Ended November 30, 2018

Our consolidated net sales for continuing operations totaled $22,889,000 for the 2019 fiscal year, which represents a 16.0% increase from our consolidated net sales of $19,727,000 for the 2018 fiscal year. The increase in revenue is due to a 133.5% increase in sales in our Modular Buildings segment due to the progress on a large contract. We experienced approximately a 6% and 7% decrease in sales in our Agricultural Products and Tools segments, respectively, for the 2019 fiscal year. Our consolidated gross profit as a percentage of net sales remained fairly steady at 17.2% in the 2019 fiscal year when compared to 17.8% of net sales in the 2018 fiscal year. We saw an increased gross profit percentage in our Modular Buildings segment while we had slight decreases in gross profit percentage in our Agricultural Products and Tools segments. Our consolidated operating expenses from continuing operations decreased by 17.9%, from $6,607,000 in the 2018 fiscal year to $5,424,000 in the 2019 fiscal year. Because the majority of our corporate general and administrative expenses are borne by our Agricultural Products segment, that segment represented $3,796,000 of our total consolidated operating expenses, while our Modular Buildings segment represented $962,000 and our Tools segment represented $666,000.

Our consolidated operating loss from continuing operations for the 2019 fiscal year was $(1,497,000) compared to $(3,095,000) for the 2018 fiscal year. Our Agricultural Products segment had an operating loss of $(1,599,000), our Modular Buildings segment had operating income of $208,000, and our Tools segment had an operating loss of $(106,000).

Consolidated net loss for the 2019 fiscal year was $(1,420,000) for continuing operations compared to net loss of $(3,336,000) in the 2018 fiscal year for continuing operations, a decrease in loss of $1,916,000. The decreased loss is due to several factors. In the first quarter of the 2018 fiscal year we recognized a loss of approximately $298,000 from the revaluation of our deferred tax asset at the new income tax rates. We also recognized a loss of approximately $253,000 from the liquidation of our Canadian subsidiary related to the cumulative translation adjustment in the second quarter of the 2018 fiscal year. We recognized an impairment of approximately $216,000 on our West Union facility during the third and fourth quarters of the 2018 fiscal year which was equal to the expected loss on the sale of the property. This facility required mold remediation of $235,000 and scrapping of $67,000 of inventory, which was captured in the third quarter of the 2018 fiscal year. We also impaired our goodwill on our Miller Pro product line in the amount of $375,000 in the fourth quarter of the 2018 fiscal year. Moreover, in the fourth quarter of the 2018 fiscal year, management decided to place increased reserves on inventory resulting in expense of approximately $543,000. The revaluation of our deferred tax asset, release of our current translation adjustment, impairment of assets and inventory reserve revaluation were all one-time non-cash expenses that greatly impacted our bottom line in the 2018 fiscal year. We also did not recognize a net loss from our discontinued Pressurized Vessels segment in 2019 compared to $(51,000) in the 2018 fiscal year.

Our effective tax rate for continuing operations for the 2019 and 2018 fiscal years was 19.7% and 13.3%, respectively. The increase in the effective tax rate is due to a onetime adjustment to our deferred tax asset in 2018 from the Tax Cuts and Job Act of 2017 as discussed in Note 1, “Summary of Significant Accounting Policies” to our financial statements in “Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this report.

14

Agricultural Products. Our Agricultural Products segment’s sales revenue for the 2019 fiscal year was $13,508,000 compared to $14,344,000 during the 2018 fiscal year, a decrease of $836,000, or 5.8%. We saw decreased demand for our portable feed equipment in 2019, which resulted in decreased sales year on year of $1,329,000. Continued struggles in the dairy market, coupled with market shifts to large cattle operations from the traditional small cattle farmer also contributed to this decrease. Additionally, we also saw a decrease in sales of approximately $451,000 in our UHC reels year on year due to a loss of our primary reel customer after a strategic decision to not offer such customer discounted prices at unfavorable margins to us. Moreover, OEM blower revenue of approximately $262,000 in the 2018 fiscal year was not repeated in the 2019 fiscal year as our OEM blower customer elected not to purchase any blowers from us in fiscal 2019 due to slow-moving inventory on their dealer lots relating to poor agricultural market conditions. While we saw decreased demand in the above product lines, we saw increased demand in dump boxes, land maintenance equipment, bale processors and beet equipment for a combined $1,500,000 increase in sales. At the end of our third fiscal quarter of 2019 our year to date sales were down 18.4% in this segment. Our strongest fourth quarter since the 2014 fiscal year brought us to within approximately 6% of the 2018 fiscal year’s total.   Gross profit percentage for the 2019 fiscal year was 16.3% compared to 17.4% for the 2018 fiscal year. Our decreased gross profit percentage is due largely to a decrease in workforce efficiency. With the absence of steady demand for portable feed equipment, our most efficient equipment to build, we have struggled to gain operational efficiencies that are generally gained by continued production of a single product. Our efficiency has also been affected by the diversion of direct labor for operational changes that will have long-term benefits. We have partially completed warehouse reorganization, which we expect will improve inventory accuracy and decrease travel time for material handlers and machine operators. We have also implemented a material review board to decrease scrap and eliminate production errors. We believe our continued operational improvement projects will put us in a position to meet increased demand in an improved agriculture economy.

Our Agricultural Products segment’s operating expenses for the 2019 fiscal year were $3,796,000 compared to $4,959,000 for the 2018 fiscal year, a decrease of $1,163,000, or 23.5%. In the 2018 fiscal year, operating expenses included one-time non-cash expenses of $216,000 for the impairment of our West Union facility and $375,000 for the impairment of goodwill related to our Miller Pro product line. These expenses were not repeated in the 2019 fiscal year. We also saw decreased selling expense in the 2019 fiscal year due to decreased commissions as a result of lower sales along with refocused marketing techniques. Our new marketing efforts include a shift to social media from more expensive print advertisements along with less participation in trade shows in the 2019 fiscal year. This segment’s operating expenses for the 2019 fiscal year were 28.1% of sales compared to 34.6% of sales for the 2018 fiscal year. Total loss from operations for our Agricultural Products segment during the 2019 fiscal year was $(1,599,000) compared to an operating loss of $(2,462,000) for the 2018 fiscal year, a decrease in loss of $863,000.

Modular Buildings. Our Modular Buildings segment’s net sales for the 2019 fiscal year were $7,260,000 compared to $3,109,000 for the 2018 fiscal year, an increase of $4,151,000, or 133.5%. The increase in sales was attributable to increased operating lease activity in 2019 and progress on a $8.5 million project. Gross profit for the 2019 fiscal year was 16.1% compared to 12.0% during the 2018 fiscal year. The increase in gross profit was largely due to increased revenue providing more variable margin to cover fixed costs. Operating expenses for the 2019 fiscal year were 13.3% of sales compared to 30.2% for the 2018 fiscal year. Total income from operations from our Modular Buildings segment during the 2019 fiscal year was $208,000 compared to an operating loss of $(566,000) in the 2018 fiscal year, a decrease in loss of $774,000.

Tools. Our Tools segment’s net sales for the 2019 fiscal year were $2,121,000 compared to $2,274,000 for the 2018 fiscal year, a decrease of $153,000, or 6.7%. The decrease is primarily due to the loss of a large volume customer near the end of the first fiscal quarter of 2018. This segment began integration of an OEM product line at the end of the fourth fiscal quarter of 2019 that is expected to more than make up for the loss of this customer. Gross profit for the 2019 fiscal year was 26.4% compared to 28.2% for the 2018 fiscal year. Our decreased gross margin for the twelve months is largely due to lower revenues with less variable margin to absorb fixed costs. Operating expenses were $666,000 for the 2019 fiscal year compared to $709,000 for the 2018 fiscal year, a decrease of $43,000, or 6.1%. This decrease is largely related to reduction of commission expense as the result of lower sales levels.

Results of Operations – Discontinued Operations

During the third quarter of the 2016 fiscal year, we made the decision to exit the pressure vessels industry. On March 29, 2018 we disposed of the remaining assets for $1,500,000. We did not have net sales from our Pressurized Vessels segment in the 2019 or 2018 fiscal year. We continued to incur expenses during the 2018 fiscal year due to holding the facility in Dubuque, Iowa. Our pretax loss in the 2018 fiscal year was $(67,000).

15

Trends and Uncertainties

We are subject to a number of trends and uncertainties that may affect our short-term or long-term liquidity, sales revenues, and operations. Similar to other farm equipment manufacturers, we are affected by items unique to the farm industry, including fluctuations in farm income resulting from the change in commodity prices, crop damage caused by weather and insects, government farm programs, interest rate fluctuations, and other unpredictable variables. Other uncertainties include our OEM customers and the decisions they make regarding their current supply chain structure, inventory levels, and overall business conditions. Management believes that our business is dependent on the farming industry for the bulk of our sales revenues. As such, our business tends to reap the benefits of increases in farm net income, as farmers tend to purchase equipment in lucrative times and forgo purchases in less profitable years. Direct government payments are declining and costs of agricultural production are increasing; therefore, we anticipate that further increases in the value of production will benefit our business, while any future decreases in the value of production will decrease farm net income and may harm our financial results.

As with other farm equipment manufacturers, we depend on our network of dealers to influence customers’ decisions, and dealer influence is often more persuasive than a manufacturer’s reputation or the price of the product.

Seasonality

Sales of our agricultural products are seasonal; however, we have tried to decrease the impact of this seasonality through the development of beet harvesting machinery coupled with private labeled products, as the peak periods for these different products occur at different times.

We believe that our tool sales are not seasonal. Our modular building sales are somewhat seasonal, and we believe that this is due to the budgeting and funding cycles of the universities that commonly purchase our modular buildings. We believe that this cycle can be offset by building backlogs of inventory and by increasing sales to other public and private sectors.

Liquidity and Capital Resources

Our main source of funds during the 2019 fiscal year was cash generated by operating activities, which was primarily from the sale and reduction of inventory. We did have substantial positive cash flow from investing activities related to the sale of our West Union facility as well. We used approximately $447,000 of cash to update facilities and equipment which includes software and hardware related to information technology advances, transportation equipment, and manufacturing equipment.

We have a Bank Midwest credit facility consisting of a $5,000,000 revolving line of credit, pursuant to which we had borrowed $2,578,530, with $2,421,470 remaining, as of November 30, 2019, and one term loan, which had an outstanding principal balance of $2,435,993 as of November 30, 2019. The revolving line of credit is being used for working capital purposes.

We also had a loan relating to our production facility in West Union, Iowa, from the Iowa Finance Authority, which was paid in full in connection with the sale of the West Union facility on December 14, 2018.

Our loans require us to comply with various covenants, including maintaining certain financial ratios and obtaining prior written consent from Bank Midwest for any investment in, acquisition of, or guaranty relating to another business or entity. We were in compliance with all covenants in place under the Bank Midwest loans as of November 30, 2019 except for the debt service coverage ratio as measured on November 30, 2019. Bank Midwest has issued a waiver forgiving the noncompliance as of November 30, 2019, and no event of default has occurred.

For additional information about our financing activities, please refer to Note 10 “Loan and Credit Agreements” to our financial statements in “Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this report.

16

The following table represents our working capital and current ratio for the past two fiscal years:

	Fiscal Year Ended
	November 30, 2019		November 30, 2018
Current Assets	$	11,407,230	$	12,145,158
Current Liabilities		5,202,764		5,765,381
Working Capital	$	6,204,466	$	6,379,777
Current Ratio		2.19		2.11

We believe that our current cash and financing arrangements provide sufficient cash to finance operations for the next 12 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

17

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Art's-Way Manufacturing Co., Inc.

Armstrong, Iowa

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Art's-Way Manufacturing Co., Inc. and Subsidiaries (the Company) as of November 30, 2019 and 2018, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2019 and 2018, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risk of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Eide Bailly LLP

We have served as the Company’s auditor since 2006.

Minneapolis, Minnesota

February 6, 2020

18

ART’S-WAY MANUFACTURING CO., INC.

Consolidated Balance Sheets

	November 30, 2019			November 30, 2018
Assets
Current assets:
Cash	$	3,145		$	3,512
Accounts receivable-customers, net of allowance for doubtful accounts of $22,925 and $25,100 in 2019 and 2018, respectively		1,679,975			1,537,113
Inventories, net		8,778,507			10,257,102
Cost and profit in excess of billings		726,667			99,287
Net investment in sales-type leases, current		148,005			123,055
Other current assets		70,931			125,089
Total current assets		11,407,230			12,145,158
Property, plant, and equipment, net		5,362,907			5,647,485
Assets held for lease, net		713,782			1,870,125
Deferred income taxes		1,786,048			1,432,422
Net investment in sales-type leases, long-term		5,782			153,787
Other assets		71,189			76,497
Total assets	$	19,346,938		$	21,325,474
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,205,313		$	802,062
Customer deposits		105,363			145,632
Billings in excess of cost and profit		88,931			185,014
Income taxes payable		6,400			6,400
Accrued expenses		1,132,826			893,284
Line of credit		2,578,530			3,505,530
Current portion of long-term debt		85,401			227,459
Total current liabilities		5,202,764			5,765,381
Long-term liabilities
Long-term debt, excluding current portion		2,350,592			2,523,018
Total liabilities		7,553,356			8,288,399
Commitments and Contingencies (Notes 9, 10 and 17)
Stockholders’ equity:
Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares in 2019 and 2018; issued and outstanding 0 shares in 2019 and 2018.		-			-
Common stock – $0.01 par value. Authorized 9,500,000 shares in 2019 and 2018; issued 4,321,087 in 2019 and 4,225,050 in 2018		43,211			42,250
Additional paid-in capital		3,250,087			3,055,632
Retained earnings		8,547,342			9,966,928
Treasury stock, at cost (18,842 in 2019 and 9,286 in 2018 shares)		(47,058	)		(27,735	)
Total stockholders’ equity		11,793,582			13,037,075
Total liabilities and stockholders’ equity	$	19,346,938		$	21,325,474

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

19

ART’S-WAY MANUFACTURING CO., INC.

Consolidated Statements of Operations

	Years Ended
	November 30, 2019			November 30, 2018
Sales	$	22,889,173		$	19,726,793
Cost of goods sold		18,961,260			16,215,237
Gross profit		3,927,913			3,511,556
Expenses:
Engineering		479,345			640,430
Selling		1,602,006			1,936,147
General and administrative		3,343,443			3,438,981
Impairment of assets		-			591,268
Total expenses		5,424,794			6,606,826
(Loss) from operations		(1,496,881	)		(3,095,270	)
Other income (expense):
Interest expense		(358,174	)		(304,566	)
Other		86,235			(446,629	)
Total other income (expense)		(271,939	)		(751,195	)
Income (Loss)		(1,768,820	)		(3,846,465	)
Income tax (benefit)		(349,234	)		(510,416	)
(Loss) from continuing operations		(1,419,586	)		(3,336,049	)
Discontinued Operations
Loss from operations of discontinued segment		-			(67,177	)
Income tax benefit		-			(16,324	)
Loss on discontinued operations		-			(50,853	)
Net (Loss)		(1,419,586	)		(3,386,902	)
(Loss) per share - Basic:
Continuing Operations	$	(0.33	)	$	(0.80	)
Discontinued Operations	$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.33	)	$	(0.81	)
(Loss) per share - Diluted:
Continuing Operations	$	(0.33	)	$	(0.80	)
Discontinued Operations	$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.33	)	$	(0.81	)
Weighted average outstanding shares used to compute basic net loss per share		4,277,375			4,202,836
Weighted average outstanding shares used to compute diluted net loss per share		4,277,375			4,202,836

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

20

ART’S-WAY MANUFACTURING CO., INC.

Consolidated Statements of Comprehensive Income

	Years Ended
	November 30, 2019			November 30, 2018
Net (Loss)	$	(1,419,586	)	$	(3,386,902	)
Other Comprehensive Income (Loss)
Foreign currency translation adjustsments		-			3,830
Release of cumulative translation adjustment due to substantial liquidation of a foreign entity		-			253,180
Total Other Comprehensive Income (Loss)		-			257,010
Comprehensive (Loss)	$	(1,419,586	)	$	(3,129,892	)

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

21

ART’S-WAY MANUFACTURING CO., INC.

Consolidated Statements of Stockholders' Equity

Years Ended November 30, 2019 and 2018

	Common Stock				Additional					Other			Treasury Stock
	Number of				paid-in		Retained			Comprensive			Number of
	shares		Par value		capital		earnings			Income (Loss)			shares		Amount			Total
Balance, November 30, 2017		4,158,752	$	41,587	$	2,859,052	$	13,353,830		$	(257,010	)	$	1,954	$	(6,425	)	$	15,991,034
Stock based compensation		66,298		663		196,580		-			-			7,332		(21,310	)		175,933
Foreign Currency Translation Adjustment		-		-		-		-			3,830			-		-			3,830
Release of cumulative translation adjustment due to substantial liquidation of a foreign entity		-		-		-		-			253,180			-		-			253,180
Net (loss)		-		-		-		(3,386,902	)		-			-		-			(3,386,902	)
Balance, November 30, 2018		4,225,050	$	42,250	$	3,055,632	$	9,966,928		$	-			9,286	$	(27,735	)	$	13,037,075
Stock based compensation		96,037		961		194,455		-			-			9,556		(19,323	)		176,093
Net (loss)		-		-		-		(1,419,586	)		-			-		-			(1,419,586	)
Balance, November 30, 2019		4,321,087		43,211		3,250,087		8,547,342			-			18,842		(47,058	)		11,793,582

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

22

ART’S-WAY MANUFACTURING CO., INC.

Consolidated Statements of Cash Flows

	Twelve Months Ended
	November 30, 2019			November 30, 2018
Cash flows from operations:
Net (loss) from continuing operations	$	(1,419,586	)	$	(3,336,049	)
Net (loss) from discontinued operations		-			(50,853	)
Adjustments to reconcile net (loss) to net cash provided by operating activities:
Stock based compensation		195,416			197,243
Loss on release of cumulative translation adjustment		-			253,180
Realized foreign currency loss		-			3,830
Impairment of Assets		-			591,268
Gain on disposal of property, plant, and equipment		(9,999	)		(4,837	)
Depreciation and amortization expense		1,003,541			960,606
Change in allowance for doubtful accounts		(2,175	)		(7,198	)
Deferred income taxes		(353,626	)		(531,026	)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable		(140,687	)		380,379
Inventories		1,478,595			900,854
Net investment in sales-type leases		123,055			(276,842	)
Other assets		54,158			150,666
Increase (decrease) in:
Accounts payable		403,251			128,409
Contracts in progress, net		(723,463	)		102,662
Customer deposits		(40,269	)		(454,693	)
Income taxes payable		-			3,300
Accrued expenses		239,542			(88,274	)
Net cash provided by (used in) operating activities - continuing operations		807,753			(1,026,522	)
Net cash (used in) operating activities - discontinued operations		-			(92,090	)
Net cash provided by (used in) operating activities		807,753			(1,118,612	)
Cash flows from investing activities:
Purchases of property, plant, and equipment		(447,025	)		(434,505	)
Additions to assets held for lease		-			(329,815	)
Net proceeds from sale of assets		899,713			52,606
Net cash provided by (used in) investing activities - continuing operations		452,688			(711,714	)
Net cash provided by investing activities - discontinued operations		-			1,418,761
Net cash provided by investing activities		452,688			707,047
Cash flows from financing activities:
Net change in line of credit		(927,000	)		1,043,000
Repayment of term debt		(314,485	)		(219,429	)
Repurchases of common stock		(19,323	)		(21,310	)
Net cash provided by (used in) financing activities - continuing operations		(1,260,808	)		802,261
Net cash (used in) financing activities - discontinued operations		-			(599,584	)
Net cash provided by (used in) financing activities		(1,260,808	)		202,677
Net (decrease) in cash		(367	)		(208,888	)
Cash at beginning of period		3,512			212,400
Cash at end of period	$	3,145		$	3,512
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	329,356		$	286,070
Income taxes		3,855			5,237
Supplemental disclosures of non-cash operating and investing activities:
Transfer of inventory to assets held for lease	$	-		$	808,766

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

23

Art’s-Way Manufacturing Co., Inc.

Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies

(a) Nature of Business

Art’s-Way Manufacturing Co., Inc. (the “Company”) is primarily engaged in the fabrication and sale of specialized farm machinery in the agricultural sector of the United States. Primary product offerings include portable and stationary animal feed processing equipment; hay and forage equipment; sugar beet harvesting equipment; land maintenance equipment; manure spreaders; moldboard plows; potato harvesters; and reels. The Company sells its labeled products through independent farm equipment dealers throughout the United States. In addition, the Company manufactures and supplies hay blowers pursuant to OEM agreements. The Company also provides after-market service parts that are available to keep its branded and OEM-produced equipment operating to the satisfaction of the end user of the Company’s products.

The Company’s Modular Buildings segment is primarily engaged in the construction of modular laboratories and animal housing facilities through the Company’s wholly-owned subsidiary, Art’s-Way Scientific, Inc. Buildings commonly produced range from basic swine buildings to complex containment research laboratories. This segment also provides services relating to the design, manufacturing, delivering, installation, and renting of the building units that it produces.

The Company’s Tools segment 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 through the Company’s wholly-owned subsidiary, Ohio Metal Working Company/Art’s Way, Inc.

The Company’s discontinued Pressurized Vessels segment was primarily engaged in the fabrication and sale of pressurized vessels and tanks through the Company’s wholly-owned subsidiary, Art’s-Way Vessels, Inc. On August 11, 2016, the Company announced its plan to discontinue the operations of its Pressurized Vessels segment in order to focus its efforts and resources on the business segments that have historically been more successful and that are expected to present greater opportunities for meaningful long-term shareholder returns. The operations of Art’s-Way Vessels, Inc. were discontinued in the third quarter of the 2016 fiscal year, and Art’s-Way Vessels, Inc. was merged into the Company effective October 31, 2016. On March 29, 2018, the remaining assets of the Pressurized Vessels segment, consisting of primarily real estate, were disposed of at a selling price of $1,500,000.

(b) Principles of Consolidation

The consolidated financial statements include the accounts of Art’s-Way Manufacturing Co., Inc. and its wholly-owned subsidiaries for the 2019 fiscal year, which includes Art’s-Way Scientific, Inc., and Ohio Metal Working Products/Art’s-Way, Inc. All material inter-company accounts and transactions are eliminated in consolidation.

During the second quarter of the 2018 fiscal year, the Company liquidated its investment in its Canadian subsidiary, Art’s-Way Manufacturing International LTD, (“International”), by selling off remaining inventory and filing dissolution paperwork for International. Prior to that liquidation and dissolution, the financial books of the Company’s Canadian operations were kept in the functional currency of Canadian dollars and the financial statements were converted to U.S. Dollars for consolidation. When consolidating the financial results of the Company into U.S. Dollars for reporting purposes, the Company used the All-Current translation method. The All-Current method requires the balance sheet assets and liabilities to be translated to U.S. Dollars at the exchange rate as of quarter end. Stockholders’ equity was translated at historical exchange rates and retained earnings were translated at an average exchange rate for the period. Additionally, revenue and expenses were translated at average exchange rates for the periods presented. The resulting cumulative translation adjustment was carried on the balance sheet and was recorded in stockholders’ equity. Following the liquidation and dissolution of International, the cumulative translation adjustment carried on the balance sheet was released into net income under other income (expense) and the financial statements will no longer need translation each period. Since no income tax benefit will be received from the foreign equity sale, the cumulative translation adjustment has not been tax adjusted.

24

(c) Cash Concentration

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

(d) Customer Concentration

During the 2018 fiscal year, no one customer accounted for more than 6% of consolidated revenues for continuing operations. During the 2019 fiscal year, one customer accounted for more than 21% of consolidated revenues as the result of a large contract in the Modular Buildings segment. The Company’s highest recurring customer accounted for just under 10% of consolidated net revenues.

(e) Accounts Receivable

Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Accounts receivable are written-off when deemed uncollectible. Recoveries of accounts receivable previously written-off are recorded when received. Accounts receivable are generally considered past due 60 days past invoice date, with the exception of international sales which primarily are sold with a letter of credit for 180 day terms.

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

(f) Inventories

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

(g) Property, Plant, and Equipment

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

(h) Lessor Accounting and Sales-Type Leases

Modular buildings held for short term lease by the Modular Buildings segment are recorded at cost. Amortization of the property is calculated over the useful life of the building. Estimated useful life is three to five years. Lease revenue is accounted for on a straight-line basis over the term of the related lease agreement. Lease income for modular buildings is included in sales on the consolidated statements of operations.

The Company leases modular buildings to certain customers and accounts for these transactions as sales-type leases. These leases have terms of up to 36 months and are collateralized by a security interest in the related modular building. The lessee has a bargain purchase option available at the end of the lease term. A minimum lease receivable is recorded net of unearned interest income and profit on sale at the time the Company’s obligation to the lessee is complete. Profit related to the sale of the building is recorded upon fulfillment of the Company’s obligation to the lessee.

25

(i) Goodwill and Impairment

Goodwill represents costs in excess of the fair value of net tangible and identifiable net intangible assets acquired in business combinations. The Company performs an annual test for impairment of goodwill during the fourth quarter, unless factors determine an earlier test is necessary. The Company did not record an impairment in the 2019 fiscal year compared to a $375,000 write down for the 2018 fiscal year. This amount represents the entire balance of goodwill carried by the Company related to the Miller Pro product line. There is no goodwill reported on the consolidated balance sheets as of November 30, 2019 and 2018.

(j) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is entirely dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

The Company classifies interest and penalties to be paid on an underpayment of taxes as income tax expense. The Company files income tax returns in the U.S. federal jurisdiction and various states and previously in Canada. The Company is no longer subject to Canadian, U.S. federal or state income tax examinations by tax authorities for years ended before November 30, 2016.

On December 22, 2017, the Tax Cuts and Job Act of 2017 was enacted, which reduced the top corporate income tax rate from 35% to 21%. The application of this new rate was recognized in the first quarter of the 2018 fiscal year. Tax expense from continuing operations for the 2018 fiscal year includes an adjustment of approximately $298,000 related to the revaluation of the Company’s net deferred tax asset at the new statutory rate.

(k) Revenue Recognition

The Company’s revenues primarily result from contracts with customers. The major sources of revenue for the Agricultural Products and Tools segments are farm equipment, service parts related to farm equipment and steel cutting tools and inserts. The Agricultural Products and Tools segments generally execute short-term contracts that contain a single performance obligation – the delivery of product to the common carrier. The Company recognizes revenue for the production and sale of farm equipment, service parts and cutting tools upon shipment of the goods. Risk of ownership and title pass to the buyer upon shipment of the goods. All sales are made to authorized dealers whose application for dealer status has been approved and who have been informed of general sales policies. Any changes in the Company’s terms are documented in the most recently published price lists. Pricing is fixed and determinable according to the Company’s published equipment and parts price lists. Title to all equipment and parts sold passes to the buyer upon delivery to the carrier and is not subject to a customer acceptance provision. Proof of the passing of title is documented and retained by the Company. Post shipment obligations are limited to any claim with respect to the condition of the equipment or parts. The Agricultural Products and Tools segments each typically require payment in full 30 days after the ship date. To take advantage of program discounts, some customers pay deposits up front. Any deposits received increase contract liabilities.

In certain circumstances, upon the customer’s written request, the Company may recognize revenue when production is complete, and the goods are ready for shipment. At the buyer’s request, the Company will bill the buyer upon completing all performance obligations, but before shipment. The buyer dictates that the Company ship the goods per their direction from the Company’s manufacturing facility, as is customary with this type of agreement, in order to minimize shipping costs. The written agreement with the customer specifies that the goods will be delivered on a schedule to be determined by the customer, with a final specified delivery date, and that the Company will segregate the goods from inventory, such that they are not available to fill other orders. This agreement also specifies that the buyer is required to purchase all goods manufactured under this agreement. Title of the goods will pass to the buyer when the goods are complete and ready for shipment, per the customer agreement. At the transfer of title, all risks of ownership have passed to the buyer, and the buyer agrees to maintain insurance on the manufactured items that have not yet been shipped. The Company has operated using bill and hold agreements with certain customers for many years, with consistent satisfactory results for both buyer and seller. The credit terms on these agreements are consistent with the credit terms on all other sales. All risks of loss are shouldered by the buyer, and there are no exceptions to the buyer’s commitment to accept and pay for these manufactured goods. Revenues recognized at the completion of production in the 2019 and 2018 fiscal years were approximately $16,000 and $202,000, respectively.

26

The Modular Buildings segment is in the construction industry with its major source of revenue arising from modular building sales. Sales of modular buildings are generally recognized using input methods to measure progress towards the satisfaction of a performance obligation using the percentage of completion method. Revenue and gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at completion. Contract costs consist of direct costs on contracts, including labor, materials, amounts payable to subcontractors and those indirect costs related to contract performance, such as equipment costs, insurance and employee benefits. Contract cost is recorded as incurred, and revisions in contract revenues and cost estimates are reflected in the accounting period when known. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Contract losses are recognized when current estimates of total contract revenue and contract cost indicate a loss. Estimated contract costs include any and all costs appropriately allocable to the contract. The provision for these contract losses will be the excess of estimated contract costs over estimated contract revenues. Changes in job performance, job conditions and estimated profitability, including those changes arising from contract change orders, penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined. The Company uses significant judgments in determining estimated contract costs and estimated completion throughout the life of the project. Stock modular building sales also occur and are recognized at a point in time when the performance obligation is fulfilled through substantial completion. Substantial completion is achieved through customer acceptance of the completed building. The Modular Buildings segment executes contracts with customers that can be short- or long-term in nature. These contracts can have multiple performance obligations and revenue from these can be recognized over time or at a point in time depending on the nature of the contracts. Payment terms for the Modular Buildings segment vary by contract, but typically utilize money down and progress payments throughout the life of the contract. The payment terms of the Modular Buildings segment have the most impact on the Company’s contract receivables, contract assets and contract liabilities. Project invoicing from the Modular Buildings segment increases contract receivables and has an effect on contract liabilities through billings in excess of costs and estimated gross profit and advanced payments. The balance of contract assets is typically made up of the balance of costs in and estimated gross profit in excess of billings. Costs and profit in excess of amounts billed are classified as current assets and billings in excess of cost and profit are classified as current liabilities.

The Company leases modular buildings to certain customers and accounts for these transactions as operating or sales-type leases. These leases have terms of up to 36 months and are collateralized by a security interest in the related modular building. On sales-type leases, the lessee has a bargain purchase option available at the end of the lease term. A minimum lease receivable is recorded net of unearned interest income and profit on sale at the time the building is substantially complete. Profit related to the sale of the building is recorded upon fulfillment of the Company’s obligation to the lessee. On operating leases, the Company recognizes rent when the lessee has all the rights and benefits of ownership of the asset.

The Agricultural Products segment offers variable consideration in the form of discounts depending on participation in yearly early order programs. This variable consideration is allocated to the transaction price of all products in a sales arrangement and is not contingent on future outcomes. The Agricultural Products segment does not offer rebates or credits. The Tools segment offers quantity discounts that are allocated to the transaction price of each product once the quantity break is achieved. The Tools segment does not offer rebates or credits. The Modular Buildings segment does not offer discounts, rebates or credits.

The Company’s returns policy allows for new and saleable parts to be returned, subject to inspection and a restocking charge, which is included in net sales. Whole goods are not returnable. Shipping costs charged to customers are included in net sales. Freight costs incurred are included in cost of goods sold. Customer deposits consist of advance payments from customers, in the form of cash, for revenue to be recognized in the following year.

For information on product warranty as it applies to ASC 606, refer to Note 9 “Product Warranty.”

27

(l) Disaggregation of Revenue

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

	Twelve Months Ended November 30, 2019
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	10,435,000	$	-	$	-	$	10,435,000
Farm equipment service parts		2,638,000		-		-		2,638,000
Steel cutting tools and inserts		-		-		2,086,000		2,086,000
Modular buildings		-		6,460,000		-		6,460,000
Modular building lease income		-		674,000		-		674,000
Other		435,000		126,000		35,000		596,000
	$	13,508,000	$	7,260,000	$	2,121,000	$	22,889,000

	Twelve Months Ended November 30, 2018
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	11,149,000	$	-	$	-	$	11,149,000
Farm equipment service parts		2,735,000		-		-		2,735,000
Steel cutting tools and inserts		-		-		2,239,000		2,239,000
Modular buildings		-		2,271,000		-		2,271,000
Modular building lease income		-		373,000		-		373,000
Revenue from sales-type leases		-		427,000		-		427,000
Other		460,000		38,000		35,000		533,000
	$	14,344,000	$	3,109,000	$	2,274,000	$	19,727,000

(m) Contract Receivables, Contract Assets and Contract Liabilities

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

	November 30, 2019		November 30, 2018
Receivables	$	115,000	$	159,000
Assets		727,000		99,000
Liabilities		89,000		185,000

The amount of revenue recognized in fiscal year 2019 that was included in a contract liability at November 30, 2018 was approximately $185,000. The change in contract receivables reflected above results from collections and progress billings from the Modular Buildings segment. The increase in contract assets from November 30, 2018 is due to estimated revenue earned in excess of contract billings from the Modular Buildings segment. The decrease in contract liabilities is due to decreases in customer deposits and decreases in excess billing over estimated revenue earned.

The Company will utilize the practical expedient exception for these contracts and will report only on performance obligations greater than one year. As of November 30, 2019, the Company has no performance obligations with an original expected duration greater than one year.

(n) Research and Development

Research and development costs are expensed when incurred. Such costs approximated $149,000 and $178,000 for the 2019 and 2018 fiscal years, respectively.

(o) Advertising

Advertising costs are expensed when incurred. Such costs approximated $198,000 and $312,000 for the 2019 and 2018 fiscal years, respectively. The Company has made a concerted effort to reduce trade show participation that was not providing the level of product exposure it expected.

28

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

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

Basic and diluted (loss) per common share have been computed based on the following as of November 30, 2019 and 2018:

	Twelve Months Ended
	November 30, 2019			November 30, 2018
Numerator for basic and diluted net income (loss) per share:
Net income (loss) from continuing operations	$	(1,419,586	)	$	(3,336,049	)
Net income (loss) from discontinued operations		-			(50,853	)
Net income (loss)	$	(1,419,586	)	$	(3,386,902	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,277,375			4,202,836
Effect of dilutive stock options		-			-
For diluted net income (loss) per share - weighted average common shares outstanding		4,277,375			4,202,836
Net Income (Loss) per share - Basic:
Continuing Operations	$	(0.33	)	$	(0.80	)
Discontinued Operations	$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.33	)	$	(0.81	)
Net Income (Loss) per share - Diluted:
Continuing Operations	$	(0.33	)	$	(0.80	)
Discontinued Operations	$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.33	)	$	(0.81	)

(q) Stock Based Compensation

Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant vesting period. The Company estimates the fair value of each stock-based 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. Restricted stock is valued at market value at the day of grant.

(r) Use of Estimates

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

29

(s) Recently Issued Accounting Pronouncements

Adopted Accounting Pronouncements

Effective December 1, 2018 the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 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 in exchange for those goods or services. ASC 606 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and is to be applied retrospectively, with early application not permitted. The Company adopted ASC 606 for the 2019 fiscal year, including interim periods within that reporting period.

The Company has evaluated the new standard and applied the core principle to its contract revenue streams. To be consistent with this core principle, an entity is required to apply the following five-step approach:

1.     Identify the contract(s) with a customer;

2.     Identify each performance obligation in the contract;

3.     Determine the transaction price;

4.     Allocate the transaction price to each performance obligation; and

5.     Recognize revenue when or as each performance obligation is satisfied.

The Company’s revenues primarily result from contracts with customers. The Agricultural Products and Tools segments generally execute short-term contracts that contain a single performance obligation – the delivery of product to the common carrier. The Company recognizes revenue for the production and sale of farm equipment, service parts, and cutting tools upon shipment of the goods. The Modular Buildings segment executes contracts with customers that can be short or long-term in nature. These contracts can have multiple performance obligations and revenue from these can be recognized over time or at a point in time depending on the nature of the contracts. Payment terms generally are short-term and vary by customer and segment. The Company’s implementation process for ASC 606 included modifications to the contracts of the Modular Buildings segment.

The Company uses discounts as a form of variable consideration for the Agricultural Products and Tools segments. The variable consideration is allocated to the transaction price at contract inception and is generally not contingent on future outcomes. The Agricultural Products and Tools segments do not offer rebates or credits. The Modular Buildings segment does not offer discounts, credits or rebates.

The Company’s product warranty is included in the price of the product and provides assurance that the product will function in accordance with agreed-upon specifications. Product warranty is expensed at the time of sale for the Agricultural Products and Modular Buildings segments. A small reserve is kept on the balance sheet as consideration for the Tools segment warranty. This product warranty does not represent a separate performance obligation under ASC 606.

The Company adopted ASC 606 using the modified retrospective method. The Company has determined that amounts reported under ASC 606 are not materially different than amounts reported under the previous revenue guidance of ASC 605 and therefore, the Company was not required to make an adjustment to retained earnings.

The Company, upon adoption of ASC 606, has increased the amount of required disclosures in the notes to its financial statements, including but not limited to:

•     Disaggregation of revenue that depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors;

•     The opening and closing balances of receivables, contract assets, and contract liabilities from contracts with customers, if not otherwise separately presented or disclosed;

•     Revenue recognized in the reporting period that was included in the contract liability balance at the beginning of the period;

•     Information about performance obligations in contracts with customers; and

•     Judgments that significantly affect the determination of the amount and timing of revenue from contracts with customers, including the timing satisfaction of performance obligation, and the transaction price and the amounts allocated to performance obligations.

30

Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which requires a lessee to recognize a right-of-use asset and a lease liability on its balance sheet for all leases with terms of twelve months or greater. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. The Company will adopt this guidance for the 2020 fiscal year using the modified retrospective approach, including interim periods within that reporting period. Under the modified retrospective approach, the Company will not adjust prior comparative periods. The Company has a moderate amount of leasing activity mainly as the lessee of office equipment and as the lessor of modular rental buildings. The Company expects to recognize a right-of-use asset and lease liability on the balance sheet for office equipment it leases. The Company does not expect a material impact for the addition of lessee activity to its consolidated balance sheets. The Company’s activity as a lessor will remain mostly unaffected by this guidance. The Company expects additional disclosures including but not limited to:

•    Nature of its leases

•    Significant assumptions and judgements used

•    Information about leases that have not yet commenced

•    Related-party lease transactions

•    Accounting policy election regarding short-term leases

•    Finance, operating, short-term and variable lease costs

•    Maturity analysis of operating lease payments, lease receivables and lease obligations

•    Tabular disclosure of lease-related income

•    Components of the net investment in a lease

•    Information on the management of risk associated with residual asset

(2) Discontinued Operations

Effective October 31, 2016, the Company discontinued the operations of its Pressurized Vessels segment in order to focus its efforts and resources on the business segments that have historically been more successful and that are expected to present greater opportunities for meaningful long-term shareholder returns.

In January 2018, the Company accepted an offer on the real estate assets of its Pressurized Vessels segment for $1,500,000, which was below the carrying value of the real estate assets at that time. Based on these facts the Company recorded an impairment of the real estate assets of approximately $289,000 for the 2017 fiscal year, which reduced the value to $1,425,000, which is the value the Company expected to receive after commissions on the sale of these real estate assets. On March 29, 2018, the remaining assets of the Pressurized Vessels segment, consisting of these real estate assets, were disposed of at a selling price of $1,500,000.

As the Pressurized Vessels segment was a unique business unit of the Company, its liquidation was a strategic shift. In accordance with ASC Topic 360, the Company has classified the Pressurized Vessels segment as discontinued operations for all periods presented.

Income from discontinued operations, before income taxes, in the accompanying consolidated statements of operations is comprised of the following:

	Twelve Months Ended
	November 30, 2018
Revenue from external customers	$	-
Gross Profit		-
Asset Impairment		-
Total Operating Expense		51,133
Income (loss) from operations		(51,133	)
Income (loss) before tax		(67,177	)

There are no components of discontinued operations reflected in the accompanying consolidated balance sheets.

31

(3) Allowance for Doubtful Accounts

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

	Twelve Months Ended
	November 30, 2019			November 30, 2018
Balance, beginning	$	25,100		$	32,298
Provision charged to expense		(1,602	)		2,242
Less amounts charged-off		(573	)		(9,440	)
Balance, ending	$	22,925		$	25,100

(4) Inventories

Major classes of inventory are:

	November 30, 2019			November 30, 2018
Raw materials	$	7,156,001		$	7,825,278
Work in process		492,125			272,302
Finished goods		3,905,373			5,051,330
Total Gross Inventory	$	11,553,499		$	13,148,910
Less: Reserves		(2,774,992	)		(2,891,808	)
Net Inventory	$	8,778,507		$	10,257,102

(5) Contracts in Progress

Amounts included in the consolidated financial statements related to uncompleted contracts are as follows:

	Cost and Profit in			Billings in Excess of
	Excess of Billings			Costs and Profit
November 30, 2019
Costs	$	3,805,906		$	629,501
Estimated earnings		1,044,612			155,790
		4,850,518			785,291
Less: amounts billed		(4,123,851	)		(874,222	)
	$	726,667		$	(88,931	)
November 30, 2018
Costs	$	190,861		$	99,782
Estimated earnings		54,721			121,115
		245,582			220,897
Less: amounts billed		(146,295	)		(405,911	)
	$	99,287		$	(185,014	)

The amounts billed on these long-term contracts are due 30 days from invoice date. All amounts billed are expected to be collected within the next 12 months. Retainage was $0 and $8,405 as of November 30, 2019 and 2018, respectively.

32

(6) Property, Plant, and Equipment

Major classes of property, plant, and equipment used in continuing operations are:

	November 30, 2019			November 30, 2018
Land	$	220,503		$	220,503
Buildings and improvements		7,035,144			6,985,273
Construction in Progress		82,366			35,669
Manufacturing machinery and equipment		11,036,192			11,062,856
Trucks and automobiles		507,575			491,822
Furniture and fixtures		120,833			121,646
		19,002,613			18,917,769
Less accumulated depreciation		(13,639,706	)		(13,270,284	)
Property, plant and equipment	$	5,362,907		$	5,647,485

Depreciation and amortization expense for continuing operations totaled $1,003,541 and $960,606 for the 2019 and 2018 fiscal years, respectively.

(7) Assets Held for Lease

Major components of assets held for lease are:

Assets Held for Lease
	November 30, 2019		November 30, 2018
West Union Facility	$	-	$	878,079
Modular Buildings		713,782		992,046
	$	713,782	$	1,870,125

On December 14, 2018, the West Union facility and remaining assets were sold for $900,000. The Company recognized approximately $216,000 related to the impairment of this asset in the 2018 fiscal year, which was attributable to the selling price less commissions. The Company also incurred $235,000 of mold remediation expense and scrapped $67,000 worth of inventory due to mold contamination in the 2018 fiscal year. Both the remediation cost and inventory scrap have been included in other income (expense) on the consolidated statements of operations.

The Company’s Modular Buildings segment enters into leasing arrangements with customers from time-to-time. The Company had five small leased buildings at November 30, 2019 compared to seven at November 30, 2018.

Rents recognized in sales were related to the leasing of modular buildings as a part of the normal course of business operations of the Modular Buildings segment. Rents recognized from assets held for lease included in sales on the consolidated statements of operations during the 2019 fiscal year were $674,000 compared to $373,000 in the 2018 fiscal year. Rents related to the West Union facility in the Agricultural Products segment were recognized in other income as such income was outside of the scope of this segment’s normal business operations. Rents recognized from assets held for lease included in other income (expense) on the consolidated statements of operations during the 2019 fiscal year were $2,500 compared to $44,000 in the 2018 fiscal year.

Future minimum lease receipts from assets held for lease are as follows:

Year Ending November 30,	Amount
2020	$	283,989

(8) Accrued Expenses

Major components of accrued expenses are:

	November 30, 2019		November 30, 2018
Salaries, wages, and commissions	$	555,201	$	448,737
Accrued warranty expense		203,185		96,786
Other		374,440		347,761
	$	1,132,826	$	893,284

33

(9) Product Warranty

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

Changes in the Company’s product warranty liability included in “accrued expenses” for the 2019 and 2018 fiscal years are as follows:

	Twelve Months Ended
	November 30, 2019			November 30, 2018
Balance, beginning	$	96,786		$	68,451
Settlements / adjustments		(279,992	)		(233,316	)
Warranties issued		386,391			261,651
Balance, ending	$	203,185		$	96,786

(10) Loan and Credit Agreements

The Company maintains two revolving lines of credit and a term loan with Bank Midwest. The Company previously maintained a term loan with The First National Bank of West Union, and a second term loan with Bank Midwest.

Bank Midwest Revolving Line of Credit and Term Loans

On September 28, 2017, the Company entered into a credit facility with Bank Midwest, which superseded and replaced in its entirety the Company’s previous credit facility with U.S. Bank. The Bank Midwest credit facility initially consisted of a $5,000,000 revolving line of credit (the “2017 Line of Credit”), a $2,600,000 term loan due October 1, 2037, and a $600,000 term loan due October 1, 2019. The 2017 Line of Credit is being used for working capital purposes. On March 29, 2018, the Company paid in full the $600,000 term loan due October 1, 2019 using proceeds from the sale of the Company’s Dubuque, Iowa property. The payment consisted of $596,563 in principal and $2,328 in interest.

On November 30, 2019, the balance of the 2017 Line of Credit was $2,578,530 with $2,421,470 remaining available, as may be limited by the borrowing base calculation. The 2017 Line of Credit borrowing base is an amount equal to 75% of accounts receivable balances (discounted for aged receivables), plus 50% of inventory, less any outstanding loan balance on the 2017 Line of Credit. At November 30, 2019, the 2017 Line of Credit was not limited by the borrowing base calculation. Any unpaid principal amount borrowed on the 2017 Line of Credit accrues interest at a floating rate per annum equal to 1.00% above the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The interest rate floor is set at 4.25% per annum and the current interest rate is 6.00% per annum. The 2017 Line of Credit was most recently renewed on March 30, 2019. The 2017 Line of Credit is payable upon demand by Bank Midwest, and monthly interest-only payments are required. If no earlier demand is made, the unpaid principal and accrued interest is due on March 30, 2020. The Company expects to renew the 2017 Line of Credit prior to the current maturity date.   

The $2,600,000 term loan accrues interest at a rate of 5.00% for the first sixty months. Thereafter, this loan will accrue interest at a floating rate per annum equal to 0.75% above the Wall Street Journal rate published the money rates section of the Wall Street Journal. The interest rate floor is set at 4.15% per annum and the interest rate may only be adjusted by Bank Midwest once every five years. Monthly payments of $17,271 for principal and interest are required. This loan is also guaranteed by the United States Department of Agriculture (“USDA”), which required an upfront guarantee fee of $62,400 and requires an annual fee of 0.5% of the unpaid balance. As part of the USDA guarantee requirements, shareholders owning more than 20% are required to personally guarantee a portion of the loan, in an amount equal to their stock ownership percentage. J. Ward McConnell Jr., the Vice Chairman of the Board of Directors and a shareholder owning more than 20% of the Company’s outstanding stock, is guaranteeing approximately 38% of this loan, for an annual fee of 2% of the personally guaranteed amount. The initial guarantee fee will be amortized over the life of the loan, and the annual fees and personally guaranteed amounts are expensed monthly.

34

On February 13, 2019, the Company opened a $4,000,000 revolving line of credit (the “2019 Line of Credit”) with Bank Midwest in connection with bonding obligations for the Company’s performance of a large modular laboratory construction project. Funds under the 2019 Line of Credit will be undisbursed to the Company and will be held by Bank Midwest in connection with an Irrevocable Letter of Credit issued by Bank Midwest for the project. The 2019 Line of Credit accrues interest at a floating rate per annum equal to 1.00% above the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The interest rate floor is set at 4.25% per annum and the current interest rate is 5.75% per annum. The 2019 Line of Credit is payable upon demand by Bank Midwest. If no earlier demand is made, the unpaid principal and accrued interest will be payable in one payment, due on February 13, 2020. As of November 30, 2019, the funds on the 2019 Line of Credit remain undisbursed and are held by Bank Midwest. The Company expects to renew the 2019 Line of Credit prior to the current maturity date.

Each of the 2017 Line of Credit and the $2,600,000 term loan are governed by the terms of a separate Promissory Note, dated March 30, 2019 and September 28, 2017, respectively, entered into between the Company and Bank Midwest. The 2019 Line of Credit is governed by the terms of a Promissory Note, dated February 13, 2019, entered into between the Company and Bank Midwest.

In connection with the 2017 Line of Credit, the Company, Art’s-Way Scientific Inc. and Ohio Metal Working Products/Art’s-Way Inc. each entered into a Commercial Security Agreement with Bank Midwest, dated September 28, 2017, pursuant to which each granted to Bank Midwest a first priority security interest in certain inventory, equipment, accounts, chattel paper, instruments, letters of credit and other assets to secure the obligations of the Company under the line of credit. Each of Art’s-Way Scientific Inc. and Ohio Metal Working Products/Art’s-Way Inc. also agreed to guarantee the obligations of the Company pursuant to the 2017 Line of Credit, as set forth in Commercial Guaranties, each dated September 28, 2017. The 2019 Line of Credit is also secured by these existing security documents.

To further secure the line of credit, the Company granted Bank Midwest a second mortgage on its West Union, Iowa property and Ohio Metal Working Products/Art’s-Way Inc. granted Bank Midwest a mortgage on its property located in Canton, Ohio. The mortgage on the West Union property was released in conjunction with the sale of that property in December 2018. The $2,600,000 term loan is secured by a mortgage on the Company’s Armstrong, Iowa and Monona, Iowa properties, and the $600,000 term loan was secured by a mortgage on the Company’s Dubuque, Iowa property. The mortgage on the Dubuque property was released in conjunction with the sale of that property in March 2018. Each mortgage is governed by the terms of a separate Mortgage, dated September 28, 2017, and each property is also subject to a separate Assignment of Rents, dated September 28, 2017.

To further secure the 2017 Line of Credit, the Company granted Bank Midwest a second mortgage on its West Union, Iowa property and Ohio Metal Working Products/Art’s-Way Inc. granted Bank Midwest a mortgage on its property located in Canton, Ohio. The mortgage on the West Union property was released in conjunction with the sale of that property on December 14, 2018. The 2019 Line of Credit is also secured by the mortgage on the Canton, Ohio property. The $2,600,000 term loan is secured by a mortgage on the Company’s Armstrong, Iowa and Monona, Iowa properties. Each mortgage is governed by the terms of a separate Mortgage, dated September 28, 2017, and each property is also subject to a separate Assignment of Rents, dated September 28, 2017.

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

Compliance with Bank Midwest covenants is measured annually at November 30. The terms of the Bank Midwest loan agreements require the Company to maintain a minimum working capital ratio of 1.75, while maintaining a minimum of $5,100,000 of working capital. Additionally, a maximum debt to worth ratio of 1 to 1 must be maintained, with a minimum of 40% tangible balance sheet equity, with variations subject to mutual agreement. The Company is also required to maintain a minimum debt service coverage ratio of 1.25, with a 0.10 tolerance. The Company also must receive bank approval for purchases or sales of equipment over $100,000 annually and maintain reasonable salaries and owner compensation. The Company was in compliance with all covenants as of November 30, 2019 other than the debt service coverage ratio. Bank Midwest issued a waiver forgiving the noncompliance, and no event of default has occurred. The next measurement date is November 30, 2020.

35

First National Bank of West Union Term Loan

On May 1, 2010, the Company obtained a $1,300,000 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 loan was 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.

On December 14, 2018, the Company repaid this loan in full in connection with the sale of the West Union, Iowa facility.

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

	November 30, 2019		November 30, 2018
Bank Midwest loan payable in monthly installments of $17,271 including interest at 5.00%, due October 1, 2037	$	2,435,993	$	2,517,510
First National Bank of West Union loan payable in monthly installments of $12,500 including interest at 2.75%, due June 1, 2020		-		232,967
Total term debt	$	2,435,993	$	2,750,477
Less current portion of term debt		85,401		227,459
Term debt, excluding current portion	$	2,350,592	$	2,523,018

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

Year:	Amount
2020	$	85,401
2021		90,179
2022		94,858
2023		99,781
2024		104,665
2025 and thereafter		1,961,109
Total term debt	$	2,435,993

(11) Related Party Transactions

During the 2019 and 2018 fiscal years, the Company did not recognize any revenues from transactions with a related party, and no amounts in accounts receivable balances were due from a related party. From time to time, the Company purchases various supplies from related parties, which are companies owned by J. Ward McConnell, Jr., the Vice Chairman of the Company’s Board of Directors. Marc McConnell, the Chairman of the Company’s Board of Directors also serves as President of these companies. J. Ward McConnell, Jr. as a shareholder owning more than 20% of the Company’s outstanding stock, was required to guarantee a portion of the Company’s term debt in accordance with the USDA guarantee on the Company’s term loan. J. Ward McConnell, Jr. is paid a monthly fee for his guarantee. In the 2019 fiscal year, the Company recognized $26,506 of expense for transactions with related parties, compared to $25,773 in 2018. As of November 30, 2019, accrued expenses contained a balance of $1,517 owed to a related party compared to $1,568 on November 30, 2018.

(12) Sales-Type Leases

The components related to sales-type leases at November 30, 2019 and 2018 are as follows:

	November 30, 2019			November 30, 2018
Minimum lease receivable, current	$	162,425		$	159,500
Unearned interest income, current		(14,420	)		(36,445	)
Net investment in sales-type leases, current	$	148,005		$	123,055
Minimum lease receivable, long-term	$	5,851		$	168,277
Unearned interest income, long-term		(69	)		(14,490	)
Net investment in sales-type leases, long-term	$	5,782		$	153,787

36

Gross revenue recognized in sales from continuing operations on the consolidated statements of operations from commencement of sales-type leases for the 2018 fiscal year was $426,542. There was no sales activity related to sales-type leases for the 2019 fiscal year.

Future minimum lease receipts from sales-type leases are as follows:

Year Ending November 30,	Amount
2020		162,425
2021		5,851
Total	$	168,276

(13) Employee Benefit Plans

The Company sponsors a defined contribution 401(k) savings plan which covers substantially all full-time employees who meet eligibility requirements. Participating employees may contribute as salary reductions any amount of their compensation up to the limit prescribed by the Internal Revenue Code. The Company makes a 25% matching contribution to employees contributing a minimum of 4% of their compensation, up to 1% of eligible compensation. The Company recognized an expense of $36,253 and $31,980 related to this plan during the 2019 and 2018 fiscal years, respectively.

(14) Equity Incentive Plan

On November 30, 2019, the Company had one equity incentive plan, the 2011 Plan, which is described below. The compensation cost charged against income was $195,416 and $197,243 for the 2019 and 2018 fiscal years, respectively, for all awards granted under the 2011 Plan during such years. The total income tax deductions for share-based compensation arrangements were $122,022 and $157,529 for the 2019 and 2018 fiscal years, respectively. No compensation cost was capitalized as part of inventory or fixed assets.

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”), subject to approval by the stockholders on or before January 27, 2012. The 2011 Plan was approved by the stockholders on April 28, 2011. It replaced the Employee Stock Option Plan and the Directors’ Stock Option Plan (collectively, the “Prior Plans”), and no further stock options will be awarded under the Prior Plans. Awards to directors and executive officers under the 2011 Plan are governed by the forms of agreement approved by the Board of Directors.

The 2011 Plan permits the plan administrator to award nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance awards, and stock appreciation rights to employees (including officers), directors, and consultants. The Board of Directors has approved a director compensation policy pursuant to which non-employee directors are automatically granted restricted stock awards of 1,000 shares of fully-vested common stock annually upon their election to the Board and another 1,000 shares of fully-vested common stock on the last business day of each fiscal quarter. Additionally, directors can elect to receive their board compensation as restricted stock. During the 2019 fiscal year, restricted stock awards of 56,750 shares were issued to various employees, directors, and consultants, which vest over the next three years, restricted stock awards of 9,000 shares were issued to various employees, which vested immediately upon grant, and restricted stock awards of 31,687 shares were issued to directors as part of the compensation policy, which vested immediately upon grant. During 2019 fiscal year, 32,600 shares of restricted stock became unrestricted, 1,400 shares of restricted stock were forfeited, and the Company bought 9,556 shares back as treasury stock from employees to pay payroll tax on vested shares. During the 2018 fiscal year, the Company issued 88,298 shares of restricted stock, 33,150 shares of restricted stock became unrestricted, 22,000 shares of restricted stock were forfeited, and the Company bought 7,332 shares back as treasury stock from employees to pay payroll tax on vested shares

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

37

The fair value of each option award is estimated on the date of grant using the Black Scholes option-pricing model. 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.

	2019		2018
Expected Volatility		-		-
Expected Dividend Yield		-		-
Expected Term (in years)		-		-
Risk-Free Rate		-		-

The following is a summary of activity under the plans as of November 30, 2019 and 2018, and changes during the years then ended:

2019 Option Activity
Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Options O/S at beginning of period		59,000	$	6.07
Granted		-	$	-
Exercised		-	$	-				-
Options Expired or Forfeited		-	$	-
Options O/S at end of period		59,000	$	6.07		2.86		-
Options Exercisable at end of the period		59,000	$	6.07		2.86		-

2018 Option Activity
Options	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Options O/S at beginning of period		96,000		$	7.77
Granted		-		$	-
Exercised		-		$	-				-
Options Expired or Forfeited		(37,000	)	$	10.37
Options O/S at end of period		59,000		$	6.07		3.86		-
Options Exercisable at end of the period		59,000		$	6.07		3.86		-

No options were granted during the 2019 or 2018 fiscal years. As of both November 30, 2019 and November 30, 2018, there were no non-vested options. As of November 30, 2019, there was no unrecognized compensation cost related to non-vested share-based compensation arrangements under the plan related to stock options.

No options vested during the 2019 or 2018 fiscal years.

The Company received no cash from the exercise of options during the 2019 or 2018 fiscal years.

(15) Income Taxes

Total income tax expense (benefit) for the 2019 and 2018 fiscal years consists of the following:

	November 30, 2019			November 30, 2018
Current Expense (benefit)	$	4,392		$	127,673
Deferred expense (benefit)		(353,626	)		(654,413	)
	$	(349,234	)	$	(526,740	)

38

The reconciliation of the statutory Federal income tax rate is as follows:

	November 30, 2019			November 30, 2018
Statutory federal income tax rate		21.0	%		21.0	%
Valuation allowance on foreign net operating loss		-			(1.4	)
Revaluation of deferred tax asset		-			(7.6	)
Permanent Differences and Other		(1.3	)		1.5
		19.7	%		13.5	%

Tax effects of temporary differences that give rise to significant portions of the deferred tax assets (liabilities) at November 30, 2019 and 2018 are presented as approximate amounts below:

	November 30
	2018			2018
Current deferred tax assets (liabilities):
Accrued expenses	$	100,000		$	59,000
Inventory capitalization		21,000			73,000
NOL and tax credit carryforward		1,182,000			826,000
Asset reserves		621,000			609,000
Total current deferred tax assets	$	1,924,000		$	1,567,000
Non-current deferred tax assets
Property, plant, and equipment	$	(138,000	)	$	(135,000	)
Total non-current deferred tax assets (liabilities)	$	(138,000	)	$	(135,000	)
Net deferred taxes	$	1,786,000		$	1,432,000

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company’s net operating loss amounting to approximately $5,033,000 and tax credit carryforward amounting to approximately $109,000 for its U.S. operations expire on November 30, 2036, 2037, 2038 and 2039. Management believes that the Company will be able to utilize the U.S. net operating losses and credits before their expiration.

On December 22, 2017, the Tax Cuts and Job Act of 2017 was enacted, which reduced the top corporate income tax rate from 35% to 21%. The application of this new rate was recognized in the first quarter of the 2018 fiscal year. Tax expense from continuing operations includes an adjustment of approximately $298,000 related to the revaluation of the Company’s net deferred tax asset at the new statutory rate.

(16) Disclosures About the Fair Value of Financial Instruments

The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. At November 30, 2019, and November 30, 2018, the carrying amount approximated fair value for cash, accounts receivable, net investment in sales-type leases, accounts payable, notes payable to bank, and other current and long-term liabilities. The carrying amounts of current assets and liabilities approximate fair value because of the short maturity of these instruments. The fair value of the net investment in sales-type leases also approximates recorded value as that is based on discounting future cash flows at rates implicit in the lease. The rates implicit in the lease do not materially differ from current market rates. The fair value of the Company’s installment term loans payable also approximates recorded value because the interest rates charged under the loan terms are not substantially different from current interest rates.

(17) Litigation and Contingencies

Various legal actions and claims that arise in the normal course of business are pending against the Company. In the opinion of management adequate provisions have been made in the accompanying financial statements for all pending legal actions and other claims.

39

(18) Segment Information

There are three reportable segments: Agricultural Products, Modular Buildings, and Tools. The Agricultural Products segment fabricates and sells farming products as well as replacement parts for these products in the United States and worldwide. The Modular Buildings segment produces 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.

Approximate financial information with respect to the reportable segments is as follows. The tables below exclude income and balance sheet data from discontinued operations. See Note 2 above, “Discontinued Operations.”

	Twelve Months Ended November 30, 2019
	Agricultural Products			Modular Buildings		Tools			Consolidated
Revenue from external customers	$	13,508,000		$	7,260,000	$	2,121,000		$	22,889,000
Income (loss) from operations	$	(1,599,000	)	$	208,000	$	(106,000	)	$	(1,497,000	)
Income (loss) before tax	$	(1,843,000	)	$	220,000	$	(146,000	)	$	(1,769,000	)
Total Assets	$	13,169,000		$	3,584,000	$	2,594,000		$	19,347,000
Capital expenditures	$	257,000		$	147,000	$	43,000		$	447,000
Depreciation & Amortization	$	503,000		$	372,000	$	129,000		$	1,004,000

	Twelve Months Ended November 30, 2018
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	14,344,000		$	3,109,000		$	2,274,000		$	19,727,000
Income (loss) from operations	$	(2,462,000	)	$	(566,000	)	$	(67,000	)	$	(3,095,000	)
Income (loss) before tax	$	(3,206,000	)	$	(530,000	)	$	(111,000	)	$	(3,847,000	)
Total Assets	$	15,458,000		$	3,401,000		$	2,466,000		$	21,325,000
Capital expenditures	$	321,000		$	4,000		$	110,000		$	435,000
Depreciation & Amortization	$	516,000		$	317,000		$	128,000		$	961,000

(19) Subsequent Events

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

40

Item 9.Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The persons serving as our principal executive officer and principal financial officer have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period subject to this report. Based on this evaluation, the persons serving as our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of November 30, 2019, due to the material weakness described below. Notwithstanding the material weakness discussed below, our management has concluded that the consolidated financial statements included in this Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act. Internal control over financial reporting is a process designed 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. Under the supervision and with the participation of management, including the persons serving as our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation, management has concluded that our internal control over financial reporting was not effective as of November 30, 2019, due to the material weakness described below.

A material weakness in internal control over financial reporting is a control deficiency, or combination of control deficiencies, that results in a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected.

Upon assessment of our internal control over financial reporting, management identified that a material weakness exists in the estimation of completed subcontract work on modular building contracts. While pulling audit samples, management uncovered an error in the estimated completion of subcontract work that our internal controls did not detect. Management recognizes that estimates are a necessary part of financial reporting; however, proper controls did not exist to review the accuracy of these estimates at the time of the transactions. Because we recorded an adjustment to the financial statements, this control deficiency did not result in a material misstatement to our consolidated financial statements for the year ended November 30, 2019.

This report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this report.

Remediation of Material Weakness

In response to the material weakness described above, management is currently evaluating our policies and procedures related to the review of estimated completion amounts of subcontract work. Management’s remediation will include controls to ensure completion estimates are properly authorized, reviewed and accounted for.

Limitations on Controls

Our management, including the persons serving as our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. In addition, the design of any system of controls is based in part on certain assumptions about the likelihood of future events, and controls may become inadequate if conditions change. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes to Internal Control Over Financial Reporting

There were no changes in our internal control 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 control over financial reporting.

Item 9B. OTHER INFORMATION.

None.

41

PART III

Item 10. Directors, Executive Officers and corporate governance.

The information required by Item 10 is incorporated by reference to the sections entitled “Questions and Answers about the 2020 Annual Meeting and Voting,” “Election of Directors,” “Delinquent Section 16(a) Reports,” “Corporate Governance,” and “Executive Officers” in our definitive proxy statement relating to our 2020 Annual Meeting of Stockholders.

Item 11. Executive Compensation.

The information required by Item 11 is incorporated by reference to the sections entitled “Executive Compensation” and “Director Compensation” in our definitive proxy statement relating to our 2020 Annual Meeting of Stockholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by Item 12 is incorporated by reference to the sections entitled “Security Ownership of Principal Stockholders,” “Security Ownership of Directors and Management” and “Equity Compensation Plan Information” in our definitive proxy statement relating to our 2020 Annual Meeting of Stockholders.

Item 13. Certain Relationships and Related Transactions, and director independence.

The information required by Item 13 is incorporated by reference to the sections entitled “Corporate Governance” and “Certain Transactions and Business Relationships” in our definitive proxy statement relating to our 2020 Annual Meeting of Stockholders.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by Item 14 is incorporated by reference to the section entitled “Independent Registered Public Accountant Firm” in our definitive proxy statement relating to our 2020 Annual Meeting of Stockholders.

42

PART IV

Item 15.  Exhibits, FINANCIAL STATEMENT SCHEDULES.

(A) Financial Statements. The following financial statements are included in Part II, Item 8 of this Annual Report on Form 10-K:

Report of Eide Bailly, LLP on Consolidated Financial Statements as of November 30, 2019 and 2018

Consolidated Balance Sheets as of November 30, 2019 and 2018

Consolidated Statements of Operations for each of the years ended November 30, 2019 and 2018

Consolidated Statements of Comprehensive Income for each of the years ended November 30, 2019 and 2018

Consolidated Statements of Stockholders’ Equity for each of the years ended November 30, 2019 and 2018

Consolidated Statements of Cash Flows for each of the years ended November 30, 2019 and 2018

Notes to Consolidated Financial Statements

(B) Financial Statement Schedules.

Not applicable.

(C) Exhibits.

Exhibit No.	Description
3.1	Certificate of Incorporation of Art’s-Way Manufacturing Co., Inc.– incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter year ended May 31, 2012.
3.2	Certificate of Amendment to the Certificate of Incorporation of Art’s-Way Manufacturing Co., Inc. – incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-K for the quarter ended May 31, 2012.
3.3	Bylaws of Art’s-Way Manufacturing Co., Inc.– incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2008.
3.4	Amendments to Bylaws of Art’s-Way Manufacturing Co., Inc. – incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-QSB for the quarter ended May 31, 2004.
4.1	Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 – filed herewith.
10.1*	Art’s-Way Manufacturing Co., Inc. 2007 Non-Employee Directors Stock Option Plan – incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-QSB for the quarter ended February 28, 2007.
10.2*	Art’s-Way Manufacturing Co., Inc. 2007 Employee Stock Option Plan – incorporated by reference to Exhibit 10.3 of the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2009.
10.3*	Form of Non-Qualified Option Agreement under 2007 Non-Employee Directors’ Stock Option Plan and 2007 Employee Stock Option Plan – incorporated by reference to Exhibit 10.8 of the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2009.
10.4*	Director Compensation Policy – incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2018.

43

10.5*	Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan – incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 3, 2011.
10.6*	Form of Incentive Stock Option Agreement under the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan – incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed May 3, 2011.
10.7*	Form of Nonqualified Stock Option Agreement under the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan – incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed May 3, 2011.
10.8*	Form of Restricted Stock Agreement under the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan – incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed May 3, 2011.
10.9*	Form of Restricted Stock Unit Agreement under the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan – incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed May 3, 2011.
10.10*	Employment Agreement, by and between the Company and Carrie L. Gunnerson, dated December 20, 2011 – incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 21, 2011.
10.11*	Amendment to Employment Agreement, by and between the Company and Carrie L. Gunnerson, dated January 26, 2012 – incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarter ended February 29, 2012.
10.12*	Promissory Note, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-k filed September 29, 2017.
10.13	Promissory Note, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed September 29, 2017.
10.14	Promissory Note, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed September 29, 2017.
10.15	Promissory Note, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated March 30, 2018 – incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2018.
10.16	Promissory Note, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated February 13, 2019 – incorporated by reference to Exhibit 10.1 to the Company’ Quarterly Report on Form 10-Q for the quarter ended February 28, 2019.
10.17	Promissory Note, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated March 30, 2019 – incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2019.
10.18	Commercial Guaranty, by Ohio Metal Working Products/Art’s-Way Inc., dated September 28, 2017 - incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed September 29, 2017
10.19	Commercial Guaranty, by Art’s-Way Scientific Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed September 29, 2017.
10.20	Commercial Security Agreement, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed September 29, 2017.
10.21	Commercial Security Agreement, between Bank Midwest and Ohio Metal Working Products/Art’s-Way Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed September 29, 2017.
10.22	Commercial Security Agreement, between Bank Midwest and Art’s-Way Scientific Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed September 29, 2017.

44

10.23	Open-End Mortgage (3620 Progress Street ND, Canton, OH 44705), by Ohio Metal Working Products/Art’s-Way Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed September 29, 2017.
10.24	Mortgage (556 Highway 9 and 203 West Oak Street, Armstrong & Monona, Iowa, 50514/55215), by Art’s-Way Manufacturing Co., Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed September 29, 2017.
10.25	Modification of Mortgage (3620 Progress Street ND, Canton, OH 44705), by Ohio Metal Working Products/Art’s-Way Inc., dated March 30, 2018 – incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2018.
10.26	Assignment of Rents (3620 Progress Street ND, Canton, OH 44705), by Ohio Metal Working Products/Art’s-Way Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed September 29, 2017.
10.27	Assignment of Rents (556 Highway 9 and 203 West Oak Street, Armstrong & Monona, Iowa, 50514/55215), by Art’s-Way Manufacturing Co., Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.15 to the Company’s Current Report on Form 8-K filed September 29, 2017.
21.1	List of Subsidiaries – filed herewith.
23.1	Consent of independent registered public accounting firm – filed herewith.
24.1	Power of Attorney (included on the “Signatures” page of this Annual Report on Form 10-K).
31.1	Certificate pursuant to 17 CFR 240 13(a)-14(a) – filed herewith.
31.2	Certificate pursuant to 17 CFR 240 13(a)-14(a) – filed herewith.
32.1	Certificate pursuant to 18 U.S.C. Section 1350 – filed herewith.
32.2	Certificate pursuant to 18 U.S.C. Section 1350 – filed herewith.
101	The following financial statements from the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2019, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Stockholders’ Equity, and (vi) Notes to the Consolidated Financial Statements.

(*) Indicates a management contract or compensatory plan or arrangement.

Item 16.  FORM 10-K SUMMARY.

Not applicable.

45

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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:	February 6, 2020	/s/ Carrie L. Gunnerson
		Carrie L. Gunnerson, President and Chief Executive Officer

POWER OF ATTORNEY 

Each person whose signature appears below appoints CARRIE L. GUNNERSON his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all said attorney-in-fact and agent, or her substitute or substitutes, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: February 6, 2020	/s/ Carrie L. Gunnerson
	Carrie L. Gunnerson, President and Chief Executive Officer
Date: February 6, 2020	/s/ Michael W. Woods
	Michael W. Woods, Chief Financial Officer
Date: February 6, 2020	/s/ Marc H. McConnell
	Marc H. McConnell, Chairman, Director
Date: February 6, 2020	/s/ J. Ward McConnell, Jr.
	J. Ward McConnell, Jr., Vice Chairman, Director
Date: February 6, 2020	/s/ Thomas E. Buffamante
	Thomas E. Buffamante, Director
Date: February 6, 2020	/s/ David R. Castle
	David R. Castle, Director
Date: February 6, 2020	/s/ David A. White
	David A. White, Director

46

EX-4.1

Exhibit 4.1

DESCRIPTION OF THE REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE

SECURITIES EXCHANGE ACT OF 1934

As of December 31, 2019, Art’s-Way Manufacturing Co., Inc. (the “Company”) had one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”): Common Stock.

Description of Common Stock

The following description of the Company’s Common Stock is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to the Company’s Certificate of Incorporation, as amended, and Bylaws, as amended, each of which is incorporated by reference as an exhibit to the Annual Report on Form 10-K to which this description is also an exhibit.

Authorized Capital Stock

The Company’s Certificate of Incorporation authorizes the Company to issue 9,500,000 shares of common stock, par value $0.01 per share (the “Common Stock”) and 500,000 shares of preferred stock, par value $0.01 per share (the “Preferred Stock”). The outstanding shares of Common Stock are fully paid and nonassessable.

Voting Rights

The holders of Common Stock are entitled to one vote for each share on all matters voted on by Company stockholders, including elections of directors, and, except as otherwise required by law or provided in any resolution adopted by the Company’s Board of Directors with respect to any series of Preferred Stock, the holders of such shares possess all voting power. The Company’s Certificate of Incorporation does not provide for cumulative voting in the election of directors.

Dividend Rights

Subject to the rights of holders of outstanding shares of Preferred Stock, if any, the holders of Common Stock are entitled to receive dividends, if any, as may be declared from time to time by the Company’s Board of Directors in its discretion out of funds legally available for the payment of dividends.

Other Rights and Preferences

Subject to any preferential rights of outstanding shares of Preferred Stock, holders of Common Stock will share ratably in all assets legally available for distribution to the Company’s stockholders in the event of dissolution. The Common Stock has no sinking fund or redemption provisions or preemptive, conversion or exchange rights.

The rights, preferences and privileges of holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of Preferred Stock that the Company’s Board of Directors may designate and issue in the future.

Transfer Agent and Registrar

The transfer agent and registrar for the Common Stock is American Stock Transfer & Trust Company.

Listing

The Common Stock is listed on the Nasdaq Capital Market under the symbol “ARTW.”

Anti-Takeover Effect of Delaware Law and Certain Charter and Bylaw Provisions

The Company’s Certificate of Incorporation and Bylaws contain provisions that could have the effect of discouraging potential acquisition proposals or tender offers or delaying or preventing a change of control of the Company. These provisions are as follows:

• special meetings of stockholders may be called only by the President, by a majority of the Board of Directors, or by stockholders owning a majority in amount of the entire capital stock of the Company issued and outstanding and entitled to vote;

• the Company may issue, without stockholder approval, up to 500,000 shares of preferred stock that could adversely affect the rights and powers of the holders of our common stock.

The Company is subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware, an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. For purposes of Section 203, a “business combination” includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder, and an “interested stockholder” is a person who owns 15% or more of the voting stock of a corporation, or any affiliate or associate of a corporation who, within three years prior, did own 15% or more of the voting stock of that corporation.

EX-21.1

Exhibit 21.1

Art’s-Way Manufacturing Co., Inc. and Subsidiaries

As of November 30, 2019

Company	Jurisdiction of Formation
Art’s-Way Scientific, Inc.	Iowa
Ohio Metal Working Products/Art’s Way, Inc.	Ohio

All Art’s-Way Manufacturing Co., Inc. subsidiaries are wholly-owned.

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Art's-Way Manufacturing Co., Inc.

Armstrong, Iowa

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-169972 and No. 333-173914) of Art's-Way Manufacturing Co., Inc. of our report dated February 6, 2020, relating to the consolidated financial statements for the years ended November 30, 2019 and 2018, which appears in the Art's-Way Manufacturing Co., Inc.’s annual report on Form 10-K for the fiscal year ended November 30, 2019.

/s/ Eide Bailly LLP

Minneapolis, Minnesota

February 6, 2020

EX-31.1

Exhibit 31.1

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

(SECTION 302 CERTIFICATION)

I, Carrie L. Gunnerson, certify that:

1. I have reviewed this annual report on Form 10-K of Art’s-Way Manufacturing Co., Inc.;

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

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

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

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

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

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

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

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

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

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

		ART’S-WAY MANUFACTURING CO., INC.
Date:	February 6, 2020	/s/ Carrie L. Gunnerson
		Carrie L. Gunnerson
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

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

(SECTION 302 CERTIFICATION)

I, Michael W. Woods, certify that:

1. I have reviewed this annual report on Form 10-K of Art’s-Way Manufacturing Co., Inc.;

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

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

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

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

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

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

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

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

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

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

		ART’S-WAY MANUFACTURING CO., INC.
Date:	February 6, 2020	/s/ Michael W. Woods
		Michael W. Woods
		Chief Financial Officer

EX-32.1

Exhibit 32.1

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

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

In connection with the annual report on Form 10-K of Art’s-Way Manufacturing Co., Inc. (the “Company”) for the fiscal year ended November 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Carrie L. Gunnerson, as the President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Date:	February 6, 2020	/s/ Carrie L. Gunnerson
		Carrie L. Gunnerson
		President and Chief Executive Officer

EX-32.2

Exhibit 32.2

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

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

In connection with the annual report on Form 10-K of Art’s-Way Manufacturing Co., Inc. (the “Company”) for the fiscal year ended November 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael W. Woods, as the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Date:	February 6, 2020	/s/ Michael W. Woods
		Michael W. Woods
		Chief Financial Officer

XML

Note 3 - Allowance for Doubtful Accounts

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Allowance for Credit Losses [Text Block]

( 3 ) Allowance for Doubtful Accounts

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

	Twelve Months Ended
	November 30, 2019			November 30, 2018
Balance, beginning	$	25,100		$	32,298
Provision charged to expense		(1,602	)		2,242
Less amounts charged-off		(573	)		(9,440	)
Balance, ending	$	22,925		$	25,100

XML

Note 7 - Assets Held for Lease

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

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

( 7 ) Assets Held for Lease

Major components of assets held for lease are:

Assets Held for Lease
	November 30, 2019		November 30, 2018
West Union Facility	$	-	$	878,079
Modular Buildings		713,782		992,046
	$	713,782	$	1,870,125

On

December 14, 2018,

the West Union facility and remaining assets were sold for

$900,000.

The Company recognized approximately

$216,000

related to the impairment of this asset in the

2018

fiscal year, which was attributable to the selling price less commissions. The Company also incurred

$235,000

of mold remediation expense and scrapped

$67,000

worth of inventory due to mold contamination in the

2018

fiscal year. Both the remediation cost and inventory scrap have been included in other income (expense) on the consolidated statements of operations.

The Company’s Modular Buildings segment enters into leasing arrangements with customers from time-to-time. The Company had

five

small leased buildings at

November 30, 2019

compared to

seven

at

November 30, 2018.

Rents recognized in sales were related to the leasing of modular buildings as a part of the normal course of business operations of the Modular Buildings segment. Rents recognized from assets held for lease included in sales on the consolidated statements of operations during the

2019

fiscal year were

$674,000

compared to

$373,000

in the

2018

fiscal year. Rents related to the West Union facility in the Agricultural Products segment were recognized in other income as such income was outside of the scope of this segment’s normal business operations. Rents recognized from assets held for lease included in other income (expense) on the consolidated statements of operations during the

2019

fiscal year were

$2,500

compared to

$44,000

in the

2018

fiscal year.

Future minimum lease receipts from assets held for lease are as follows:

Year Ending November 30,	Amount
2020	$	283,989

XML

Note 11 - Related Party Transactions

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

( 11 ) Related Party Transactions

During the

2019

and

2018

fiscal years, the Company did

not

recognize any revenues from transactions with a related party, and

no

amounts in accounts receivable balances were due from a related party. From time to time, the Company purchases various supplies from related parties, which are companies owned by J. Ward McConnell, Jr., the Vice Chairman of the Company’s Board of Directors. Marc McConnell, the Chairman of the Company’s Board of Directors also serves as President of these companies. J. Ward McConnell, Jr. as a shareholder owning more than

20%

of the Company’s outstanding stock, was required to guarantee a portion of the Company’s term debt in accordance with the USDA guarantee on the Company’s term loan. J. Ward McConnell, Jr. is paid a monthly fee for his guarantee. In the

2019

fiscal year, the Company recognized

$26,506

of expense for transactions with related parties, compared to

$25,773

in

2018.

As of

November 30, 2019,

accrued expenses contained a balance of

$1,517

owed to a related party compared to

$1,568

on

November 30, 2018.

XML

Note 10 - Loan and Credit Agreements (Tables)

12 Months Ended

Nov. 30, 2019

Notes Tables

Schedule of Debt [Table Text Block]

	November 30, 2019		November 30, 2018
Bank Midwest loan payable in monthly installments of $17,271 including interest at 5.00%, due October 1, 2037	$	2,435,993	$	2,517,510
First National Bank of West Union loan payable in monthly installments of $12,500 including interest at 2.75%, due June 1, 2020		-		232,967
Total term debt	$	2,435,993	$	2,750,477
Less current portion of term debt		85,401		227,459
Term debt, excluding current portion	$	2,350,592	$	2,523,018

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

Year:	Amount
2020	$	85,401
2021		90,179
2022		94,858
2023		99,781
2024		104,665
2025 and thereafter		1,961,109
Total term debt	$	2,435,993

XML

Note 6 - Property, Plant, and Equipment (Tables)

12 Months Ended

Nov. 30, 2019

Notes Tables

Property, Plant and Equipment [Table Text Block]

	November 30, 2019			November 30, 2018
Land	$	220,503		$	220,503
Buildings and improvements		7,035,144			6,985,273
Construction in Progress		82,366			35,669
Manufacturing machinery and equipment		11,036,192			11,062,856
Trucks and automobiles		507,575			491,822
Furniture and fixtures		120,833			121,646
		19,002,613			18,917,769
Less accumulated depreciation		(13,639,706	)		(13,270,284	)
Property, plant and equipment	$	5,362,907		$	5,647,485

XML

Note 6 - Property, Plant, and Equipment (Details Textual) - USD ($)	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Depreciation, Total	$ 1,003,541	$ 960,606

XML

Note 7 - Assets Held for Lease - Future Minimum Lease Receipts From Assets Held for Lease (Details)	Nov. 30, 2019 USD ($)
2020	$ 283,989

XML

Note 15 - Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($)	Nov. 30, 2019	Nov. 30, 2018
Accrued expenses	$ 100,000	$ 59,000
Inventory capitalization	21,000	73,000
NOL and tax credit carryforward	1,182,000	826,000
Asset reserves	621,000	609,000
Total current deferred tax assets	1,924,000	1,567,000
Property, plant, and equipment	(138,000)	(135,000)
Total non-current deferred tax assets (liabilities)	(138,000)	(135,000)
Net deferred taxes	$ 1,786,000	$ 1,432,000

XML

Note 14 - Equity Incentive Plan - Option Activity (Details) - $ / shares	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018	Nov. 30, 2019	Nov. 30, 2018
Options O/S at beginning of period (in shares)	59,000	96,000
Options O/S at beginning of period, Weighted Average Exercise Price (in dollars per share)	$ 6.07	$ 7.77
Granted, Shares (in shares)	0	0
Granted, Weighted Average Exercise Price (in dollars per share)
Exercised, Shares (in shares)
Exercised, Weighted Average Exercise Price (in dollars per share)
Options Expired or Forfeited, Shares (in shares)		(37,000)
Options Expired or Forfeited, Weighted Average Exercise Price (in dollars per share)		$ 10.37
Options O/S at end of period (in shares)	59,000	96,000	59,000	59,000
Options O/S at end of period, Weighted Average Exercise Price (in dollars per share)	$ 6.07	$ 6.07
Options Outstanding at the End of the Period, Weighted Average Remaining Contractual Term (Year)	2 years 313 days	3 years 313 days
Options Exercisable at end of the period (in shares)	59,000	59,000
Options Exercisable, Weighted Average Exercise Price (in dollars per share)			$ 6.07	$ 6.07
Options Exercisable at the End of the Period, Weighted Average Remaining Contractual Term (Year)	2 years 313 days	3 years 313 days

XML

Note 2 - Discontinued Operations - Income From Discontinued Operations Before Income Taxes (Details) - USD ($)	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Income (loss) before tax		$ (67,177)
Discontinued Operations, Held-for-sale [Member] | Vessels Segment [Member]
Revenue from external customers
Gross Profit
Asset Impairment
Total Operating Expense	51,133
Income (loss) from operations	(51,133)
Income (loss) before tax	$ (67,177)

XML

Note 1 - Summary of Significant Accounting Policies - Disaggregated Revenue From External Customer (Details) - USD ($)	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Revenue	$ 22,889,000	$ 19,727,000
Farm Equipment [Member]
Revenue	10,435,000	11,149,000
Farm Equipment Service Parts [Member]
Revenue	2,638,000	2,735,000
Steel Cutting Tools and Inserts [Member]
Revenue	2,086,000	2,239,000
Modular Buildings [Member]
Revenue	6,460,000	2,271,000
Modular Buildings Lease Income [Member]
Revenue	674,000	373,000
Product and Service, Other [Member]
Revenue	596,000	533,000
Sales-type Leases [Member]
Revenue		427,000
Agricultural Products [Member]
Revenue	13,508,000	14,344,000
Agricultural Products [Member] | Farm Equipment [Member]
Revenue	10,435,000	11,149,000
Agricultural Products [Member] | Farm Equipment Service Parts [Member]
Revenue	2,638,000	2,735,000
Agricultural Products [Member] | Steel Cutting Tools and Inserts [Member]
Revenue
Agricultural Products [Member] | Modular Buildings [Member]
Revenue
Agricultural Products [Member] | Modular Buildings Lease Income [Member]
Revenue
Agricultural Products [Member] | Product and Service, Other [Member]
Revenue	435,000	460,000
Agricultural Products [Member] | Sales-type Leases [Member]
Revenue
Modular Buildings [Member]
Revenue	7,260,000	3,109,000
Modular Buildings [Member] | Farm Equipment [Member]
Revenue
Modular Buildings [Member] | Farm Equipment Service Parts [Member]
Revenue
Modular Buildings [Member] | Steel Cutting Tools and Inserts [Member]
Revenue
Modular Buildings [Member] | Modular Buildings [Member]
Revenue	6,460,000	2,271,000
Modular Buildings [Member] | Modular Buildings Lease Income [Member]
Revenue	674,000	373,000
Modular Buildings [Member] | Product and Service, Other [Member]
Revenue	126,000	38,000
Modular Buildings [Member] | Sales-type Leases [Member]
Revenue		427,000
Tools [Member]
Revenue	2,121,000	2,274,000
Tools [Member] | Farm Equipment [Member]
Revenue
Tools [Member] | Farm Equipment Service Parts [Member]
Revenue
Tools [Member] | Steel Cutting Tools and Inserts [Member]
Revenue	2,086,000	2,239,000
Tools [Member] | Modular Buildings [Member]
Revenue
Tools [Member] | Modular Buildings Lease Income [Member]
Revenue
Tools [Member] | Product and Service, Other [Member]
Revenue	$ 35,000	35,000
Tools [Member] | Sales-type Leases [Member]
Revenue

XML

Note 10 - Loan and Credit Agreements (Details Textual)				12 Months Ended
	Feb. 13, 2019 USD ($)	Mar. 29, 2018 USD ($)	Sep. 28, 2017 USD ($)	Nov. 30, 2019 USD ($)	Nov. 30, 2018 USD ($)	May 01, 2010 USD ($)
Long-term Debt, Total				$ 2,435,993	$ 2,750,477
Repayments of Long-term Debt, Total				314,485	219,429
Term Loan Due October 2037 [Member]
Long-term Debt, Total				$ 2,435,993	$ 2,517,510
Debt Instrument, Interest Rate, Stated Percentage				5.00%	5.00%
Debt Instrument, Periodic Payment, Total				$ 17,271	$ 17,271
Bank Midwest [Member]
Long-term Line of Credit, Total				2,578,530
Line of Credit Facility, Remaining Borrowing Capacity				$ 2,421,470
Line of Credit, Borrowing Base, Accounts Receivable				75.00%
Line of Credit, Borrowing Base, Inventory				50.00%
Debt Instrument, Covenant, Minimum Working Capital Ratio			1.75
Debt Instrument, Covenant, Minimum Working Capital			$ 5,100,000
Debt Instrument, Covenant, Maximum Debt to Worth Ratio			1
Debt Instrument, Covenant, Minimum Tangible Balance Sheet Equity, Percentage			40.00%
Debt Instrument, Covenant, Minimum Debt Service Coverage Ratio			1.25
Debt Instrument, Covenant, Minimum Debt Service Coverage Ratio, Tolerance			0.1
Debt Instrument, Covenant, Annual Purchases or Sales Price of Equipment Before Requiring Bank Approval			$ 100,000
Bank Midwest [Member] | Term Loan Due October 2037 [Member]
Long-term Debt, Total			2,600,000
Debt Instrument, Periodic Payment, Total				$ 17,271
Bank Midwest [Member] | Term Loan Due October 2037 [Member] | United States Department of Agriculture [Member]
Upfront Guarantee Fee				$ 62,400
Guarantee Fee, Annual Fee, Percentage				0.50%
Guarantee Requirement, Personally Guarantee, Shareholders Ownership Percentage				20.00%
Bank Midwest [Member] | Term Loan Due October 2037 [Member] | J. Ward McConnell Jr. [Member]
Personally Guaranteed, Percentage of Loan				38.00%
Personally Guaranteed, Fee, Percentage of Guaranteed Amount				2.00%
Bank Midwest [Member] | Term Loan Due October 2019 [Member]
Long-term Debt, Total			600,000
Repayments of Long-term Debt, Total		$ 600,000
Repayments of Long-term Debt, Principal		596,563
Repayments of Long-term Debt, Interest		$ 2,328
Bank Midwest [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity			$ 5,000,000
Debt Instrument, Basis Spread on Variable Rate	1.00%
Line of Credit Facility, Interest Rate During Period				6.00%
Debt Instrument, Interest Rate, Effective Percentage	4.25%
Bank Midwest [Member] | Revolving Credit Facility [Member] | Wall Street Journal Rate [Member]
Long-term Line of Credit, Total	$ 4,000,000
Debt Instrument, Basis Spread on Variable Rate				1.00%
Line of Credit Facility, Interest Rate During Period				4.25%
Debt Instrument, Interest Rate, Effective Percentage	5.75%
Bank Midwest [Member] | Term Loan Due October 2037 [Member]
Debt Instrument, Interest Rate, Stated Percentage				5.00%
Bank Midwest [Member] | Term Loan Due October 2037 [Member] | Minimum [Member]
Debt Instrument, Interest Rate, Effective Percentage				4.15%
Bank Midwest [Member] | Term Loan Due October 2037 [Member] | Wall Street Journal Rate [Member]
Debt Instrument, Basis Spread on Variable Rate				0.75%
The First National Bank of West Union [Member] | Iowa Finance Authority Term Loan [Member]
Debt Instrument, Face Amount						$ 1,300,000

XML

Note 11 - Related Party Transactions (Details Textual) - USD ($)	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Revenue from Related Parties	$ 0	$ 0
Due from Related Parties, Total	0	0
Related Party Transaction, Expenses from Transactions with Related Party	26,506	25,773
Due to Related Parties, Total	$ 1,517	$ 1,568
J. Ward McConnell Jr. [Member]
Related Party, Ownership Percentage		20.00%

XML

Note 1 - Summary of Significant Accounting Policies

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Significant Accounting Policies [Text Block]

( 1 ) Summary of Significant Accounting Policies

(a) Nature of Business

Art’s-Way Manufacturing Co., Inc. (the “Company”) is primarily engaged in the fabrication and sale of specialized farm machinery in the agricultural sector of the United States. Primary product offerings include portable and stationary animal feed processing equipment; hay and forage equipment; sugar beet harvesting equipment; land maintenance equipment; manure spreaders; moldboard plows; potato harvesters; and reels. The Company sells its labeled products through independent farm equipment dealers throughout the United States. In addition, the Company manufactures and supplies hay blowers pursuant to OEM agreements. The Company also provides after-market service parts that are available to keep its branded and OEM-produced equipment operating to the satisfaction of the end user of the Company’s products.

The Company’s Modular Buildings segment is primarily engaged in the construction of modular laboratories and animal housing facilities through the Company’s wholly-owned subsidiary, Art’s-Way Scientific, Inc. Buildings commonly produced range from basic swine buildings to complex containment research laboratories. This segment also provides services relating to the design, manufacturing, delivering, installation, and renting of the building units that it produces.

The Company’s Tools segment 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 through the Company’s wholly-owned subsidiary, Ohio Metal Working Company/Art’s Way, Inc.

The Company’s discontinued Pressurized Vessels segment was primarily engaged in the fabrication and sale of pressurized vessels and tanks through the Company’s wholly-owned subsidiary, Art’s-Way Vessels, Inc. On

August 11, 2016,

the Company announced its plan to discontinue the operations of its Pressurized Vessels segment in order to focus its efforts and resources on the business segments that have historically been more successful and that are expected to present greater opportunities for meaningful long-term shareholder returns. The operations of Art’s-Way Vessels, Inc. were discontinued in the

third

quarter of the

2016

fiscal year, and Art’s-Way Vessels, Inc. was merged into the Company effective

October 31, 2016.

On

March 29, 2018,

the remaining assets of the Pressurized Vessels segment, consisting of primarily real estate, were disposed of at a selling price of

$1,500,000.

(b) Principles of Consolidation

The consolidated financial statements include the accounts of Art’s-Way Manufacturing Co., Inc. and its wholly-owned subsidiaries for the

2019

fiscal year, which includes Art’s-Way Scientific, Inc., and Ohio Metal Working Products/Art’s-Way, Inc. All material inter-company accounts and transactions are eliminated in consolidation.

During the

second

quarter of the

2018

fiscal year, the Company liquidated its investment in its Canadian subsidiary, Art’s-Way Manufacturing International LTD, (“International”), by selling off remaining inventory and filing dissolution paperwork for International. Prior to that liquidation and dissolution, the financial books of the Company’s Canadian operations were kept in the functional currency of Canadian dollars and the financial statements were converted to U.S. Dollars for consolidation. When consolidating the financial results of the Company into U.S. Dollars for reporting purposes, the Company used the All-Current translation method. The All-Current method requires the balance sheet assets and liabilities to be translated to U.S. Dollars at the exchange rate as of quarter end. Stockholders’ equity was translated at historical exchange rates and retained earnings were translated at an average exchange rate for the period. Additionally, revenue and expenses were translated at average exchange rates for the periods presented. The resulting cumulative translation adjustment was carried on the balance sheet and was recorded in stockholders’ equity. Following the liquidation and dissolution of International, the cumulative translation adjustment carried on the balance sheet was released into net income under other income (expense) and the financial statements will

no

longer need translation each period. Since

no

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

not

been tax adjusted.

(c) Cash Concentration

The Company maintains several different accounts at

one

bank, and balances in these accounts could periodically exceed the federally insured limits. However, management believes the risk of loss to be low.

(d) Customer Concentration

During the

2018

fiscal year,

no

one

customer accounted for more than

6%

of consolidated revenues for continuing operations. During the

2019

fiscal year,

one

customer accounted for more than

21%

of consolidated revenues as the result of a large contract in the Modular Buildings segment. The Company’s highest recurring customer accounted for just under

10%

of consolidated net revenues.

(e) Accounts Receivable

Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Accounts receivable are written-off when deemed uncollectible. Recoveries of accounts receivable previously written-off are recorded when received. Accounts receivable are generally considered past due

60

days past invoice date, with the exception of international sales which primarily are sold with a letter of credit for

180

day terms.

Trade receivables due from customers are uncollateralized customer obligations due under normal trade terms requiring payment within

30

days from the invoice date. Trade receivables are stated at the amount billed to the customer. The Company charges interest on overdue customer account balances at a rate of

1.5%

per month. Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

(f) Inventories

Inventories are stated at the lower of cost or net realizable value, and cost is determined using the standard costing method. Management monitors the carrying value of inventories using inventory control and review processes that include, but are

not

limited to, sales forecast review, inventory status reports, and inventory reduction programs. The Company records inventory write downs to net realizable value based on expected usage information for raw materials and historical selling trends for finished goods. Additional write downs

may

be necessary if the assumptions made by management do

not

occur.

(g) Property, Plant, and Equipment

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

three

to

forty

years.

(h) Lessor Accounting and Sales-Type Leases

Modular buildings held for short term lease by the Modular Buildings segment are recorded at cost. Amortization of the property is calculated over the useful life of the building. Estimated useful life is

three

to

five

years. Lease revenue is accounted for on a straight-line basis over the term of the related lease agreement. Lease income for modular buildings is included in sales on the consolidated statements of operations.

The Company leases modular buildings to certain customers and accounts for these transactions as sales-type leases. These leases have terms of up to

36

months and are collateralized by a security interest in the related modular building. The lessee has a bargain purchase option available at the end of the lease term. A minimum lease receivable is recorded net of unearned interest income and profit on sale at the time the Company’s obligation to the lessee is complete. Profit related to the sale of the building is recorded upon fulfillment of the Company’s obligation to the lessee.

(i) Goodwill and Impairment

Goodwill represents costs in excess of the fair value of net tangible and identifiable net intangible assets acquired in business combinations. The Company performs an annual test for impairment of goodwill during the

fourth

quarter, unless factors determine an earlier test is necessary. The Company did

not

record an impairment in the

2019

fiscal year compared to a

$375,000

write down for the

2018

fiscal year. This amount represents the entire balance of goodwill carried by the Company related to the Miller Pro product line. There is

no

goodwill reported on the consolidated balance sheets as of

November 30, 2019

and

2018.

(j) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred tax assets, management considers whether it is more likely than

not

that some portion or all of the deferred tax assets will

not

be realized. The ultimate realization of deferred tax assets is entirely dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

The Company classifies interest and penalties to be paid on an underpayment of taxes as income tax expense. The Company files income tax returns in the U.S. federal jurisdiction and various states and previously in Canada. The Company is

no

longer subject to Canadian, U.S. federal or state income tax examinations by tax authorities for years ended before

November 30, 2016.

On

December 22, 2017,

the Tax Cuts and Job Act of

2017

was enacted, which reduced the top corporate income tax rate from

35%

to

21%.

The application of this new rate was recognized in the

first

quarter of the

2018

fiscal year. Tax expense from continuing operations for the

2018

fiscal year includes an adjustment of approximately

$298,000

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

(k) Revenue Recognition

The Company’s revenues primarily result from contracts with customers. The major sources of revenue for the Agricultural Products and Tools segments are farm equipment, service parts related to farm equipment and steel cutting tools and inserts. The Agricultural Products and Tools segments generally execute short-term contracts that contain a single performance obligation – the delivery of product to the common carrier. The Company recognizes revenue for the production and sale of farm equipment, service parts and cutting tools upon shipment of the goods. Risk of ownership and title pass to the buyer upon shipment of the goods. All sales are made to authorized dealers whose application for dealer status has been approved and who have been informed of general sales policies. Any changes in the Company’s terms are documented in the most recently published price lists. Pricing is fixed and determinable according to the Company’s published equipment and parts price lists. Title to all equipment and parts sold passes to the buyer upon delivery to the carrier and is

not

subject to a customer acceptance provision. Proof of the passing of title is documented and retained by the Company. Post shipment obligations are limited to any claim with respect to the condition of the equipment or parts. The Agricultural Products and Tools segments each typically require payment in full

30

days after the ship date. To take advantage of program discounts, some customers pay deposits up front. Any deposits received increase contract liabilities.

In certain circumstances, upon the customer’s written request, the Company

may

recognize revenue when production is complete, and the goods are ready for shipment. At the buyer’s request, the Company will bill the buyer upon completing all performance obligations, but before shipment. The buyer dictates that the Company ship the goods per their direction from the Company’s manufacturing facility, as is customary with this type of agreement, in order to minimize shipping costs. The written agreement with the customer specifies that the goods will be delivered on a schedule to be determined by the customer, with a final specified delivery date, and that the Company will segregate the goods from inventory, such that they are

not

available to fill other orders. This agreement also specifies that the buyer is required to purchase all goods manufactured under this agreement. Title of the goods will pass to the buyer when the goods are complete and ready for shipment, per the customer agreement. At the transfer of title, all risks of ownership have passed to the buyer, and the buyer agrees to maintain insurance on the manufactured items that have

not

yet been shipped. The Company has operated using bill and hold agreements with certain customers for many years, with consistent satisfactory results for both buyer and seller. The credit terms on these agreements are consistent with the credit terms on all other sales. All risks of loss are shouldered by the buyer, and there are

no

exceptions to the buyer’s commitment to accept and pay for these manufactured goods. Revenues recognized at the completion of production in the

2019

and

2018

fiscal years were approximately

$16,000

and

$202,000,

respectively.

The Modular Buildings segment is in the construction industry with its major source of revenue arising from modular building sales. Sales of modular buildings are generally recognized using input methods to measure progress towards the satisfaction of a performance obligation using the percentage of completion method. Revenue and gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at completion. Contract costs consist of direct costs on contracts, including labor, materials, amounts payable to subcontractors and those indirect costs related to contract performance, such as equipment costs, insurance and employee benefits. Contract cost is recorded as incurred, and revisions in contract revenues and cost estimates are reflected in the accounting period when known. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Contract losses are recognized when current estimates of total contract revenue and contract cost indicate a loss. Estimated contract costs include any and all costs appropriately allocable to the contract. The provision for these contract losses will be the excess of estimated contract costs over estimated contract revenues. Changes in job performance, job conditions and estimated profitability, including those changes arising from contract change orders, penalty provisions and final contract settlements

may

result in revisions to costs and income and are recognized in the period in which the revisions are determined. The Company uses significant judgments in determining estimated contract costs and estimated completion throughout the life of the project. Stock modular building sales also occur and are recognized at a point in time when the performance obligation is fulfilled through substantial completion. Substantial completion is achieved through customer acceptance of the completed building. The Modular Buildings segment executes contracts with customers that can be short- or long-term in nature. These contracts can have multiple performance obligations and revenue from these can be recognized over time or at a point in time depending on the nature of the contracts. Payment terms for the Modular Buildings segment vary by contract, but typically utilize money down and progress payments throughout the life of the contract. The payment terms of the Modular Buildings segment have the most impact on the Company’s contract receivables, contract assets and contract liabilities. Project invoicing from the Modular Buildings segment increases contract receivables and has an effect on contract liabilities through billings in excess of costs and estimated gross profit and advanced payments. The balance of contract assets is typically made up of the balance of costs in and estimated gross profit in excess of billings. Costs and profit in excess of amounts billed are classified as current assets and billings in excess of cost and profit are classified as current liabilities.

The Company leases modular buildings to certain customers and accounts for these transactions as operating or sales-type leases. These leases have terms of up to

36

months and are collateralized by a security interest in the related modular building. On sales-type leases, the lessee has a bargain purchase option available at the end of the lease term. A minimum lease receivable is recorded net of unearned interest income and profit on sale at the time the building is substantially complete. Profit related to the sale of the building is recorded upon fulfillment of the Company’s obligation to the lessee. On operating leases, the Company recognizes rent when the lessee has all the rights and benefits of ownership of the asset.

The Agricultural Products segment offers variable consideration in the form of discounts depending on participation in yearly early order programs. This variable consideration is allocated to the transaction price of all products in a sales arrangement and is

not

contingent on future outcomes. The Agricultural Products segment does

not

offer rebates or credits. The Tools segment offers quantity discounts that are allocated to the transaction price of each product once the quantity break is achieved. The Tools segment does

not

offer rebates or credits. The Modular Buildings segment does

not

offer discounts, rebates or credits.

The Company’s returns policy allows for new and saleable parts to be returned, subject to inspection and a restocking charge, which is included in net sales. Whole goods are

not

returnable. Shipping costs charged to customers are included in net sales. Freight costs incurred are included in cost of goods sold. Customer deposits consist of advance payments from customers, in the form of cash, for revenue to be recognized in the following year.

For information on product warranty as it applies to ASC

606,

refer to Note

9

“Product Warranty.”

(l) Disaggregation of Revenue

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

	Twelve Months Ended November 30, 2019
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	10,435,000	$	-	$	-	$	10,435,000
Farm equipment service parts		2,638,000		-		-		2,638,000
Steel cutting tools and inserts		-		-		2,086,000		2,086,000
Modular buildings		-		6,460,000		-		6,460,000
Modular building lease income		-		674,000		-		674,000
Other		435,000		126,000		35,000		596,000
	$	13,508,000	$	7,260,000	$	2,121,000	$	22,889,000

	Twelve Months Ended November 30, 2018
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	11,149,000	$	-	$	-	$	11,149,000
Farm equipment service parts		2,735,000		-		-		2,735,000
Steel cutting tools and inserts		-		-		2,239,000		2,239,000
Modular buildings		-		2,271,000		-		2,271,000
Modular building lease income		-		373,000		-		373,000
Revenue from sales-type leases		-		427,000		-		427,000
Other		460,000		38,000		35,000		533,000
	$	14,344,000	$	3,109,000	$	2,274,000	$	19,727,000

(m) Contract Receivables, Contract Assets and Contract Liabilities

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

	November 30, 2019		November 30, 2018
Receivables	$	115,000	$	159,000
Assets		727,000		99,000
Liabilities		89,000		185,000

The amount of revenue recognized in fiscal year

2019

that was included in a contract liability at

November 30, 2018

was approximately

$185,000.

The change in contract receivables reflected above results from collections and progress billings from the Modular Buildings segment. The increase in contract assets from

November 30, 2018

is due to estimated revenue earned in excess of contract billings from the Modular Buildings segment. The decrease in contract liabilities is due to decreases in customer deposits and decreases in excess billing over estimated revenue earned.

The Company will utilize the practical expedient exception for these contracts and will report only on performance obligations greater than

one

year. As of

November 30, 2019,

the Company has

no

performance obligations with an original expected duration greater than

one

year.

(n) Research and Development

Research and development costs are expensed when incurred. Such costs approximated

$149,000

and

$178,000

for the

2019

and

2018

fiscal years, respectively.

( o ) Advertising

Advertising costs are expensed when incurred. Such costs approximated

$198,000

and

$312,000

for the

2019

and

2018

fiscal years, respectively. The Company has made a concerted effort to reduce trade show participation that was

not

providing the level of product exposure it expected.

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

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

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

November 30, 2019

and

2018:

	Twelve Months Ended
	November 30, 2019			November 30, 2018
Numerator for basic and diluted net income (loss) per share:
Net income (loss) from continuing operations	$	(1,419,586	)	$	(3,336,049	)
Net income (loss) from discontinued operations		-			(50,853	)
Net income (loss)	$	(1,419,586	)	$	(3,386,902	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,277,375			4,202,836
Effect of dilutive stock options		-			-
For diluted net income (loss) per share - weighted average common shares outstanding		4,277,375			4,202,836
Net Income (Loss) per share - Basic:
Continuing Operations	$	(0.33	)	$	(0.80	)
Discontinued Operations	$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.33	)	$	(0.81	)
Net Income (Loss) per share - Diluted:
Continuing Operations	$	(0.33	)	$	(0.80	)
Discontinued Operations	$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.33	)	$	(0.81	)

(q) Stock Based Compensation

Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant vesting period. The Company estimates the fair value of each stock-based 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. Restricted stock is valued at market value at the day of grant.

(r) Use of Estimates

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

(s) Recently Issued Accounting Pronouncements

Adopted Accounting Pronouncements

Effective

December 1, 2018

the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic

606,

Revenue from Contracts with Customers (“ASC

606”

). The core principle of ASC

606

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 in exchange for those goods or services. ASC

606

is effective for annual reporting periods beginning after

December 15, 2017,

including interim periods within that reporting period, and is to be applied retrospectively, with early application

not

permitted. The Company adopted ASC

606

for the

2019

fiscal year, including interim periods within that reporting period.

The Company has evaluated the new standard and applied the core principle to its contract revenue streams. To be consistent with this core principle, an entity is required to apply the following

five

-step approach:

1.

     Identify the contract(s) with a customer;

2.

     Identify each performance obligation in the contract;

3.

     Determine the transaction price;

4.

     Allocate the transaction price to each performance obligation; and

5.

     Recognize revenue when or as each performance obligation is satisfied.

The Company’s revenues primarily result from contracts with customers. The Agricultural Products and Tools segments generally execute short-term contracts that contain a single performance obligation – the delivery of product to the common carrier. The Company recognizes revenue for the production and sale of farm equipment, service parts, and cutting tools upon shipment of the goods. The Modular Buildings segment executes contracts with customers that can be short or long-term in nature. These contracts can have multiple performance obligations and revenue from these can be recognized over time or at a point in time depending on the nature of the contracts. Payment terms generally are short-term and vary by customer and segment. The Company’s implementation process for ASC

606

included modifications to the contracts of the Modular Buildings segment.

The Company uses discounts as a form of variable consideration for the Agricultural Products and Tools segments. The variable consideration is allocated to the transaction price at contract inception and is generally

not

contingent on future outcomes. The Agricultural Products and Tools segments do

not

offer rebates or credits. The Modular Buildings segment does

not

offer discounts, credits or rebates.

The Company’s product warranty is included in the price of the product and provides assurance that the product will function in accordance with agreed-upon specifications. Product warranty is expensed at the time of sale for the Agricultural Products and Modular Buildings segments. A small reserve is kept on the balance sheet as consideration for the Tools segment warranty. This product warranty does

not

represent a separate performance obligation under ASC

606.

The Company adopted ASC

606

using the modified retrospective method. The Company has determined that amounts reported under ASC

606

are

not

materially different than amounts reported under the previous revenue guidance of ASC

605

and therefore, the Company was

not

required to make an adjustment to retained earnings.

The Company, upon adoption of ASC

606,

has increased the amount of required disclosures in the notes to its financial statements, including but

not

limited to:

•     Disaggregation of revenue that depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors;

•     The opening and closing balances of receivables, contract assets, and contract liabilities from contracts with customers, if

not

otherwise separately presented or disclosed;

•     Revenue recognized in the reporting period that was included in the contract liability balance at the beginning of the period;

•     Information about performance obligations in contracts with customers; and

•     Judgments that significantly affect the determination of the amount and timing of revenue from contracts with customers, including the timing satisfaction of performance obligation, and the transaction price and the amounts allocated to performance obligations.

Accounting Pronouncements

Not

Yet Adopted

In

February 2016,

the FASB issued ASU

2016

-

02,

“Leases (Topic

842

),” which requires a lessee to recognize a right-of-use asset and a lease liability on its balance sheet for all leases with terms of

twelve

months or greater. This guidance is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those years. The Company will adopt this guidance for the

2020

fiscal year using the modified retrospective approach, including interim periods within that reporting period. Under the modified retrospective approach, the Company will

not

adjust prior comparative periods. The Company has a moderate amount of leasing activity mainly as the lessee of office equipment and as the lessor of modular rental buildings. The Company expects to recognize a right-of-use asset and lease liability on the balance sheet for office equipment it leases. The Company does

not

expect a material impact for the addition of lessee activity to its consolidated balance sheets. The Company’s activity as a lessor will remain mostly unaffected by this guidance. The Company expects additional disclosures including but

not

limited to:

•    Nature of its leases

•    Significant assumptions and judgements used

•    Information about leases that have

not

yet commenced

•    Related-party lease transactions

•    Accounting policy election regarding short-term leases

•    Finance, operating, short-term and variable lease costs

•    Maturity analysis of operating lease payments, lease receivables and lease obligations

•    Tabular disclosure of lease-related income

•    Components of the net investment in a lease

•    Information on the management of risk associated with residual asset

XML

Consolidated Statements of Operations - USD ($)	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Sales	$ 22,889,173	$ 19,726,793
Cost of goods sold	18,961,260	16,215,237
Gross profit	3,927,913	3,511,556
Expenses:
Engineering	479,345	640,430
Selling	1,602,006	1,936,147
General and administrative	3,343,443	3,438,981
Impairment of Assets		591,268
Total expenses	5,424,794	6,606,826
(Loss) from operations	(1,496,881)	(3,095,270)
Other income (expense):
Interest expense	(358,174)	(304,566)
Other	86,235	(446,629)
Total other income (expense)	(271,939)	(751,195)
Income (Loss)	(1,768,820)	(3,846,465)
Income tax (benefit)	(349,234)	(510,416)
(Loss) from continuing operations	(1,419,586)	(3,336,049)
Discontinued Operations
Loss from operations of discontinued segment		(67,177)
Income tax benefit		(16,324)
Loss on discontinued operations		(50,853)
Net (Loss)	$ (1,419,586)	$ (3,386,902)
Net Income (Loss) per share - Basic:
Continuing Operations (in dollars per share)	$ (0.33)	$ (0.80)
Discontinued Operations (in dollars per share)		(0.01)
Net Income (Loss) per share (in dollars per share)	(0.33)	(0.81)
Net Income (Loss) per share - Diluted:
Continuing Operations (in dollars per share)	(0.33)	(0.80)
Discontinued Operations (in dollars per share)		(0.01)
Net Income (Loss) per share (in dollars per share)	$ (0.33)	$ (0.81)
Weighted average outstanding shares used to compute basic net loss per share (in shares)	4,277,375	4,202,836
Weighted average outstanding shares used to compute diluted net loss per share (in shares)	4,277,375	4,202,836

XML

Note 13 - Employee Benefit Plans (Details Textual) - USD ($)	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Defined Contribution Plan, Employer Matching Contribution, Percent of Match	25.00%
Defined Contribution Plan Minimum Threshold Percentage of Employee Contributions	4.00%
Defined Contribution Plan, Maximum Annual Contributions Per Employee, Percent	1.00%
Defined Contribution Plan, Cost	$ 36,253	$ 31,980

XML

Note 15 - Income Taxes

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

( 15 ) Income Taxes

Total income tax expense (benefit) for the

2019

and

2018

fiscal years consists of the following:

	November 30, 2019			November 30, 2018
Current Expense (benefit)	$	4,392		$	127,673
Deferred expense (benefit)		(353,626	)		(654,413	)
	$	(349,234	)	$	(526,740	)

The reconciliation of the statutory Federal income tax rate is as follows:

	November 30, 2019			November 30, 2018
Statutory federal income tax rate		21.0	%		21.0	%
Valuation allowance on foreign net operating loss		-			(1.4	)
Revaluation of deferred tax asset		-			(7.6	)
Permanent Differences and Other		(1.3	)		1.5
		19.7	%		13.5	%

Tax effects of temporary differences that give rise to significant portions of the deferred tax assets (liabilities) at

November 30, 2019

and

2018

are presented as approximate amounts below:

	November 30
	2018			2018
Current deferred tax assets (liabilities):
Accrued expenses	$	100,000		$	59,000
Inventory capitalization		21,000			73,000
NOL and tax credit carryforward		1,182,000			826,000
Asset reserves		621,000			609,000
Total current deferred tax assets	$	1,924,000		$	1,567,000
Non-current deferred tax assets
Property, plant, and equipment	$	(138,000	)	$	(135,000	)
Total non-current deferred tax assets (liabilities)	$	(138,000	)	$	(135,000	)
Net deferred taxes	$	1,786,000		$	1,432,000

In assessing the realizability of deferred tax assets, management considers whether it is more likely than

not

that some portion or all of the deferred tax assets will

not

be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company’s net operating loss amounting to approximately

$5,033,000

and tax credit carryforward amounting to approximately

$109,000

for its U.S. operations expire on

November 30, 2036,

2037,

2038

and

2039.

Management believes that the Company will be able to utilize the U.S. net operating losses and credits before their expiration.

On

December 22, 2017,

the Tax Cuts and Job Act of

2017

was enacted, which reduced the top corporate income tax rate from

35%

to

21%.

The application of this new rate was recognized in the

first

quarter of the

2018

fiscal year. Tax expense from continuing operations includes an adjustment of approximately

$298,000

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

XML

Note 19 - Subsequent Events

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Subsequent Events [Text Block]

( 19 ) Subsequent Events

Management evaluated all other activity of the Company and concluded that

no

subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the consolidated financial statements.

XML

Note 2 - Discontinued Operations (Details Textual) - USD ($)	12 Months Ended
	Nov. 30, 2017	Mar. 29, 2018	Jan. 31, 2018
Real Estate Held for Sale, Sale Price Offer		$ 1,500,000	$ 1,500,000
Impairment of Real Estate	$ 289,000
Real Estate Held for Sale, Expected Proceeds	$ 1,425,000

XML

Note 1 - Summary of Significant Accounting Policies (Details Textual)		1 Months Ended	9 Months Ended	12 Months Ended
	Mar. 29, 2018 USD ($)	Dec. 31, 2017	Aug. 31, 2018 USD ($)	Nov. 30, 2019 USD ($)	Dec. 31, 2018	Nov. 30, 2018 USD ($)
Proceeds from Sale of Real Estate, Total	$ 1,500,000
Overdue Trade Receivables Interest Rate Percent of Account Balances Per Month				1.50%
Goodwill, Impairment Loss						$ 375,000
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent		35.00%		21.00%	21.00%	21.00%
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability			$ 298,000			$ 298,000
Contract with Customer, Liability, Revenue Recognized				$ 185,000
Research and Development Expense, Total				149,000		178,000
Advertising Expense				198,000		312,000
Product [Member]
Contract with Customer, Liability, Revenue Recognized				$ 16,000		$ 202,000
Maximum [Member]
Property, Plant and Equipment, Useful Life				40 years
Lessor, Capital Lease, Term of Contract				3 years
Maximum [Member] | Assets Leased to Others [Member]
Property, Plant and Equipment, Useful Life				5 years
Minimum [Member]
Property, Plant and Equipment, Useful Life				3 years
Minimum [Member] | Assets Leased to Others [Member]
Property, Plant and Equipment, Useful Life				3 years
Customer Concentration Risk [Member] | Revenue Benchmark [Member]
Number Of Major Customers				1		0
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | Maximum [Member]
Concentration Risk, Percentage				21.00%		6.00%

XML

Document And Entity Information - USD ($)	12 Months Ended
	Nov. 30, 2019	Jan. 30, 2020	May 31, 2019
Document Information [Line Items]
Entity Registrant Name	ARTS WAY MANUFACTURING CO INC
Entity Central Index Key	0000007623
Trading Symbol	artw
Current Fiscal Year End Date	--11-30
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		4,349,642
Entity Public Float			$ 4,145,522
Entity Shell Company	false
Document Type	10-K
Document Period End Date	Nov. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Amendment Flag	false
Title of 12(b) Security	Common stock $.01 par value
Entity Interactive Data Current	Yes

XML

Consolidated Statements of Comprehensive Income - USD ($)	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Net (Loss)	$ (1,419,586)	$ (3,386,902)
Other Comprehensive Income (Loss)
Foreign currency translation adjustsments		3,830
Release of cumulative translation adjustment due to substantial liquidation of a foreign entity		253,180
Total Other Comprehensive Income (Loss)		257,010
Comprehensive (Loss)	$ (1,419,586)	$ (3,129,892)

XML

Note 14 - Equity Incentive Plan (Details Textual) - USD ($)	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018	Jan. 27, 2011
Share-based Payment Arrangement, Expense	$ 195,416	$ 197,243
Share-based Payment Arrangement, Expense, Tax Benefit	122,022	$ 157,529
Share-based Payment Arrangement, Amount Capitalized	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	0
Share-based Payment Arrangement, Shares Withheld for Tax Withholding Obligation	9,556	7,332
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	0	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares, Ending Balance	0	0
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares	0	0
Proceeds from Stock Options Exercised		$ 0
Non-qualified Stock Units to Non-employee Directors Annually or Upon Election [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	1,000		1,000
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		88,298
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period	32,600	33,150
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period	1,400	22,000
Restricted Stock [Member] | Employees, Directors, and Consultants [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	56,750
Restricted Stock [Member] | Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	9,000
Restricted Stock [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	31,687

XML

Note 10 - Loan and Credit Agreements - Summary of Term Debt (Details) - USD ($)	Nov. 30, 2019	Nov. 30, 2018
Term debt	$ 2,435,993	$ 2,750,477
Less current portion of term debt	85,401	227,459
Term debt, excluding current portion	2,350,592	2,523,018
Term Loan Due October 2037 [Member]
Term debt	2,435,993	2,517,510
The First National Bank of West Union [Member]
Term debt		$ 232,967

XML

Note 12 - Sales-type Leases (Details Textual) - USD ($)	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Capital Leases, Income Statement, Sales Type Lease Revenue	$ 0	$ 426,542

XML

Note 2 - Discontinued Operations

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

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

( 2 ) Discontinued Operations

Effective

October 31, 2016,

the Company discontinued the operations of its Pressurized Vessels segment in order to focus its efforts and resources on the business segments that have historically been more successful and that are expected to present greater opportunities for meaningful long-term shareholder returns.

In

January 2018,

the Company accepted an offer on the real estate assets of its Pressurized Vessels segment for

$1,500,000,

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

$289,000

for the

2017

fiscal year, which reduced the value to

$1,425,000,

which is the value the Company expected to receive after commissions on the sale of these real estate assets. On

March 29, 2018,

the remaining assets of the Pressurized Vessels segment, consisting of these real estate assets, were disposed of at a selling price of

$1,500,000.

As the Pressurized Vessels segment was a unique business unit of the Company, its liquidation was a strategic shift. In accordance with ASC Topic

360,

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

Income from discontinued operations, before income taxes, in the accompanying consolidated statements of operations is comprised of the following:

	Twelve Months Ended
	November 30, 2018
Revenue from external customers	$	-
Gross Profit		-
Asset Impairment		-
Total Operating Expense		51,133
Income (loss) from operations		(51,133	)
Income (loss) before tax		(67,177	)

There are

no

components of discontinued operations reflected in the accompanying consolidated balance sheets.

XML

Note 16 - Disclosures About the Fair Value of Financial Instruments

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

( 16 ) Disclosures About the Fair Value of Financial Instruments

The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. At

November 30, 2019,

and

November 30, 2018,

the carrying amount approximated fair value for cash, accounts receivable, net investment in sales-type leases, accounts payable, notes payable to bank, and other current and long-term liabilities. The carrying amounts of current assets and liabilities approximate fair value because of the short maturity of these instruments. The fair value of the net investment in sales-type leases also approximates recorded value as that is based on discounting future cash flows at rates implicit in the lease. The rates implicit in the lease do

not

materially differ from current market rates. The fair value of the Company’s installment term loans payable also approximates recorded value because the interest rates charged under the loan terms are

not

substantially different from current interest rates.

XML

Significant Accounting Policies (Policies)

12 Months Ended

Nov. 30, 2019

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

(a) Nature of Business

Art’s-Way Manufacturing Co., Inc. (the “Company”) is primarily engaged in the fabrication and sale of specialized farm machinery in the agricultural sector of the United States. Primary product offerings include portable and stationary animal feed processing equipment; hay and forage equipment; sugar beet harvesting equipment; land maintenance equipment; manure spreaders; moldboard plows; potato harvesters; and reels. The Company sells its labeled products through independent farm equipment dealers throughout the United States. In addition, the Company manufactures and supplies hay blowers pursuant to OEM agreements. The Company also provides after-market service parts that are available to keep its branded and OEM-produced equipment operating to the satisfaction of the end user of the Company’s products.

The Company’s Modular Buildings segment is primarily engaged in the construction of modular laboratories and animal housing facilities through the Company’s wholly-owned subsidiary, Art’s-Way Scientific, Inc. Buildings commonly produced range from basic swine buildings to complex containment research laboratories. This segment also provides services relating to the design, manufacturing, delivering, installation, and renting of the building units that it produces.

The Company’s Tools segment 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 through the Company’s wholly-owned subsidiary, Ohio Metal Working Company/Art’s Way, Inc.

The Company’s discontinued Pressurized Vessels segment was primarily engaged in the fabrication and sale of pressurized vessels and tanks through the Company’s wholly-owned subsidiary, Art’s-Way Vessels, Inc. On

August 11, 2016,

the Company announced its plan to discontinue the operations of its Pressurized Vessels segment in order to focus its efforts and resources on the business segments that have historically been more successful and that are expected to present greater opportunities for meaningful long-term shareholder returns. The operations of Art’s-Way Vessels, Inc. were discontinued in the

third

quarter of the

2016

fiscal year, and Art’s-Way Vessels, Inc. was merged into the Company effective

October 31, 2016.

On

March 29, 2018,

the remaining assets of the Pressurized Vessels segment, consisting of primarily real estate, were disposed of at a selling price of

$1,500,000.

Consolidation, Policy [Policy Text Block]

(b) Principles of Consolidation

The consolidated financial statements include the accounts of Art’s-Way Manufacturing Co., Inc. and its wholly-owned subsidiaries for the

2019

fiscal year, which includes Art’s-Way Scientific, Inc., and Ohio Metal Working Products/Art’s-Way, Inc. All material inter-company accounts and transactions are eliminated in consolidation.

During the

second

quarter of the

2018

fiscal year, the Company liquidated its investment in its Canadian subsidiary, Art’s-Way Manufacturing International LTD, (“International”), by selling off remaining inventory and filing dissolution paperwork for International. Prior to that liquidation and dissolution, the financial books of the Company’s Canadian operations were kept in the functional currency of Canadian dollars and the financial statements were converted to U.S. Dollars for consolidation. When consolidating the financial results of the Company into U.S. Dollars for reporting purposes, the Company used the All-Current translation method. The All-Current method requires the balance sheet assets and liabilities to be translated to U.S. Dollars at the exchange rate as of quarter end. Stockholders’ equity was translated at historical exchange rates and retained earnings were translated at an average exchange rate for the period. Additionally, revenue and expenses were translated at average exchange rates for the periods presented. The resulting cumulative translation adjustment was carried on the balance sheet and was recorded in stockholders’ equity. Following the liquidation and dissolution of International, the cumulative translation adjustment carried on the balance sheet was released into net income under other income (expense) and the financial statements will

no

longer need translation each period. Since

no

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

not

been tax adjusted.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

(c) Cash Concentration

The Company maintains several different accounts at

one

bank, and balances in these accounts could periodically exceed the federally insured limits. However, management believes the risk of loss to be low.

(d) Customer Concentration

During the

2018

fiscal year,

no

one

customer accounted for more than

6%

of consolidated revenues for continuing operations. During the

2019

fiscal year,

one

customer accounted for more than

21%

of consolidated revenues as the result of a large contract in the Modular Buildings segment. The Company’s highest recurring customer accounted for just under

10%

of consolidated net revenues.

Receivable [Policy Text Block]

(e) Accounts Receivable

Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Accounts receivable are written-off when deemed uncollectible. Recoveries of accounts receivable previously written-off are recorded when received. Accounts receivable are generally considered past due

60

days past invoice date, with the exception of international sales which primarily are sold with a letter of credit for

180

day terms.

Trade receivables due from customers are uncollateralized customer obligations due under normal trade terms requiring payment within

30

days from the invoice date. Trade receivables are stated at the amount billed to the customer. The Company charges interest on overdue customer account balances at a rate of

1.5%

per month. Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

Inventory, Policy [Policy Text Block]

(f) Inventories

Inventories are stated at the lower of cost or net realizable value, and cost is determined using the standard costing method. Management monitors the carrying value of inventories using inventory control and review processes that include, but are

not

limited to, sales forecast review, inventory status reports, and inventory reduction programs. The Company records inventory write downs to net realizable value based on expected usage information for raw materials and historical selling trends for finished goods. Additional write downs

may

be necessary if the assumptions made by management do

not

occur.

Property, Plant and Equipment, Policy [Policy Text Block]

(g) Property, Plant, and Equipment

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

three

to

forty

years.

Short-term Leases [Policy Text Block]

(h) Lessor Accounting and Sales-Type Leases

Modular buildings held for short term lease by the Modular Buildings segment are recorded at cost. Amortization of the property is calculated over the useful life of the building. Estimated useful life is

three

to

five

years. Lease revenue is accounted for on a straight-line basis over the term of the related lease agreement. Lease income for modular buildings is included in sales on the consolidated statements of operations.

The Company leases modular buildings to certain customers and accounts for these transactions as sales-type leases. These leases have terms of up to

36

months and are collateralized by a security interest in the related modular building. The lessee has a bargain purchase option available at the end of the lease term. A minimum lease receivable is recorded net of unearned interest income and profit on sale at the time the Company’s obligation to the lessee is complete. Profit related to the sale of the building is recorded upon fulfillment of the Company’s obligation to the lessee.

Goodwill and Intangible Assets, Policy [Policy Text Block]

(i) Goodwill and Impairment

Goodwill represents costs in excess of the fair value of net tangible and identifiable net intangible assets acquired in business combinations. The Company performs an annual test for impairment of goodwill during the

fourth

quarter, unless factors determine an earlier test is necessary. The Company did

not

record an impairment in the

2019

fiscal year compared to a

$375,000

write down for the

2018

fiscal year. This amount represents the entire balance of goodwill carried by the Company related to the Miller Pro product line. There is

no

goodwill reported on the consolidated balance sheets as of

November 30, 2019

and

2018.

Income Tax, Policy [Policy Text Block]

(j) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred tax assets, management considers whether it is more likely than

not

that some portion or all of the deferred tax assets will

not

be realized. The ultimate realization of deferred tax assets is entirely dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

The Company classifies interest and penalties to be paid on an underpayment of taxes as income tax expense. The Company files income tax returns in the U.S. federal jurisdiction and various states and previously in Canada. The Company is

no

longer subject to Canadian, U.S. federal or state income tax examinations by tax authorities for years ended before

November 30, 2016.

On

December 22, 2017,

the Tax Cuts and Job Act of

2017

was enacted, which reduced the top corporate income tax rate from

35%

to

21%.

The application of this new rate was recognized in the

first

quarter of the

2018

fiscal year. Tax expense from continuing operations for the

2018

fiscal year includes an adjustment of approximately

$298,000

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

Revenue from Contract with Customer [Policy Text Block]

(k) Revenue Recognition

The Company’s revenues primarily result from contracts with customers. The major sources of revenue for the Agricultural Products and Tools segments are farm equipment, service parts related to farm equipment and steel cutting tools and inserts. The Agricultural Products and Tools segments generally execute short-term contracts that contain a single performance obligation – the delivery of product to the common carrier. The Company recognizes revenue for the production and sale of farm equipment, service parts and cutting tools upon shipment of the goods. Risk of ownership and title pass to the buyer upon shipment of the goods. All sales are made to authorized dealers whose application for dealer status has been approved and who have been informed of general sales policies. Any changes in the Company’s terms are documented in the most recently published price lists. Pricing is fixed and determinable according to the Company’s published equipment and parts price lists. Title to all equipment and parts sold passes to the buyer upon delivery to the carrier and is

not

subject to a customer acceptance provision. Proof of the passing of title is documented and retained by the Company. Post shipment obligations are limited to any claim with respect to the condition of the equipment or parts. The Agricultural Products and Tools segments each typically require payment in full

30

days after the ship date. To take advantage of program discounts, some customers pay deposits up front. Any deposits received increase contract liabilities.

In certain circumstances, upon the customer’s written request, the Company

may

recognize revenue when production is complete, and the goods are ready for shipment. At the buyer’s request, the Company will bill the buyer upon completing all performance obligations, but before shipment. The buyer dictates that the Company ship the goods per their direction from the Company’s manufacturing facility, as is customary with this type of agreement, in order to minimize shipping costs. The written agreement with the customer specifies that the goods will be delivered on a schedule to be determined by the customer, with a final specified delivery date, and that the Company will segregate the goods from inventory, such that they are

not

available to fill other orders. This agreement also specifies that the buyer is required to purchase all goods manufactured under this agreement. Title of the goods will pass to the buyer when the goods are complete and ready for shipment, per the customer agreement. At the transfer of title, all risks of ownership have passed to the buyer, and the buyer agrees to maintain insurance on the manufactured items that have

not

yet been shipped. The Company has operated using bill and hold agreements with certain customers for many years, with consistent satisfactory results for both buyer and seller. The credit terms on these agreements are consistent with the credit terms on all other sales. All risks of loss are shouldered by the buyer, and there are

no

exceptions to the buyer’s commitment to accept and pay for these manufactured goods. Revenues recognized at the completion of production in the

2019

and

2018

fiscal years were approximately

$16,000

and

$202,000,

respectively.

The Modular Buildings segment is in the construction industry with its major source of revenue arising from modular building sales. Sales of modular buildings are generally recognized using input methods to measure progress towards the satisfaction of a performance obligation using the percentage of completion method. Revenue and gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at completion. Contract costs consist of direct costs on contracts, including labor, materials, amounts payable to subcontractors and those indirect costs related to contract performance, such as equipment costs, insurance and employee benefits. Contract cost is recorded as incurred, and revisions in contract revenues and cost estimates are reflected in the accounting period when known. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Contract losses are recognized when current estimates of total contract revenue and contract cost indicate a loss. Estimated contract costs include any and all costs appropriately allocable to the contract. The provision for these contract losses will be the excess of estimated contract costs over estimated contract revenues. Changes in job performance, job conditions and estimated profitability, including those changes arising from contract change orders, penalty provisions and final contract settlements

may

result in revisions to costs and income and are recognized in the period in which the revisions are determined. The Company uses significant judgments in determining estimated contract costs and estimated completion throughout the life of the project. Stock modular building sales also occur and are recognized at a point in time when the performance obligation is fulfilled through substantial completion. Substantial completion is achieved through customer acceptance of the completed building. The Modular Buildings segment executes contracts with customers that can be short- or long-term in nature. These contracts can have multiple performance obligations and revenue from these can be recognized over time or at a point in time depending on the nature of the contracts. Payment terms for the Modular Buildings segment vary by contract, but typically utilize money down and progress payments throughout the life of the contract. The payment terms of the Modular Buildings segment have the most impact on the Company’s contract receivables, contract assets and contract liabilities. Project invoicing from the Modular Buildings segment increases contract receivables and has an effect on contract liabilities through billings in excess of costs and estimated gross profit and advanced payments. The balance of contract assets is typically made up of the balance of costs in and estimated gross profit in excess of billings. Costs and profit in excess of amounts billed are classified as current assets and billings in excess of cost and profit are classified as current liabilities.

The Company leases modular buildings to certain customers and accounts for these transactions as operating or sales-type leases. These leases have terms of up to

36

months and are collateralized by a security interest in the related modular building. On sales-type leases, the lessee has a bargain purchase option available at the end of the lease term. A minimum lease receivable is recorded net of unearned interest income and profit on sale at the time the building is substantially complete. Profit related to the sale of the building is recorded upon fulfillment of the Company’s obligation to the lessee. On operating leases, the Company recognizes rent when the lessee has all the rights and benefits of ownership of the asset.

The Agricultural Products segment offers variable consideration in the form of discounts depending on participation in yearly early order programs. This variable consideration is allocated to the transaction price of all products in a sales arrangement and is

not

contingent on future outcomes. The Agricultural Products segment does

not

offer rebates or credits. The Tools segment offers quantity discounts that are allocated to the transaction price of each product once the quantity break is achieved. The Tools segment does

not

offer rebates or credits. The Modular Buildings segment does

not

offer discounts, rebates or credits.

The Company’s returns policy allows for new and saleable parts to be returned, subject to inspection and a restocking charge, which is included in net sales. Whole goods are

not

returnable. Shipping costs charged to customers are included in net sales. Freight costs incurred are included in cost of goods sold. Customer deposits consist of advance payments from customers, in the form of cash, for revenue to be recognized in the following year.

For information on product warranty as it applies to ASC

606,

refer to Note

9

“Product Warranty.”

Disaggregation of Revenue, Policy [Policy Text Block]

(l) Disaggregation of Revenue

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

	Twelve Months Ended November 30, 2019
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	10,435,000	$	-	$	-	$	10,435,000
Farm equipment service parts		2,638,000		-		-		2,638,000
Steel cutting tools and inserts		-		-		2,086,000		2,086,000
Modular buildings		-		6,460,000		-		6,460,000
Modular building lease income		-		674,000		-		674,000
Other		435,000		126,000		35,000		596,000
	$	13,508,000	$	7,260,000	$	2,121,000	$	22,889,000

	Twelve Months Ended November 30, 2018
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	11,149,000	$	-	$	-	$	11,149,000
Farm equipment service parts		2,735,000		-		-		2,735,000
Steel cutting tools and inserts		-		-		2,239,000		2,239,000
Modular buildings		-		2,271,000		-		2,271,000
Modular building lease income		-		373,000		-		373,000
Gross profit on sales-type leases		-		427,000		-		427,000
Other		460,000		38,000		35,000		533,000
	$	14,344,000	$	3,109,000	$	2,274,000	$	19,727,000

Contract Receivables, Contract Assets and Contract Liabilities, Policy [Policy Text Block]

(m) Contract Receivables, Contract Assets and Contract Liabilities

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

	November 30, 2019		November 30, 2018
Receivables	$	115,000	$	159,000
Assets		727,000		99,000
Liabilities		89,000		185,000

The amount of revenue recognized in fiscal year

2019

that was included in a contract liability at

November 30, 2018

was approximately

$185,000.

The change in contract receivables reflected above results from collections and progress billings from the Modular Buildings segment. The increase in contract assets from

November 30, 2018

is due to estimated revenue earned in excess of contract billings from the Modular Buildings segment. The decrease in contract liabilities is due to decreases in customer deposits and decreases in excess billing over estimated revenue earned.

The Company will utilize the practical expedient exception for these contracts and will report only on performance obligations greater than

one

year. As of

November 30, 2019,

the Company has

no

performance obligations with an original expected duration greater than

one

year.

Research and Development Expense, Policy [Policy Text Block]

(n) Research and Development

Research and development costs are expensed when incurred. Such costs approximated

$149,000

and

$178,000

for the

2019

and

2018

fiscal years, respectively.

Advertising Cost [Policy Text Block]

( o ) Advertising

Advertising costs are expensed when incurred. Such costs approximated

$198,000

and

$312,000

for the

2019

and

2018

fiscal years, respectively. The Company has made a concerted effort to reduce trade show participation that was

not

providing the level of product exposure it expected.

Earnings Per Share, Policy [Policy Text Block]

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

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

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

November 30, 2019

and

2018:

	Twelve Months Ended
	November 30, 2019			November 30, 2018
Numerator for basic and diluted net income (loss) per share:
Net income (loss) from continuing operations	$	(1,419,586	)	$	(3,336,049	)
Net income (loss) from discontinued operations		-			(50,853	)
Net income (loss)	$	(1,419,586	)	$	(3,386,902	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,277,375			4,202,836
Effect of dilutive stock options		-			-
For diluted net income (loss) per share - weighted average common shares outstanding		4,277,375			4,202,836
Net Income (Loss) per share - Basic:
Continuing Operations	$	(0.33	)	$	(0.80	)
Discontinued Operations	$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.33	)	$	(0.81	)
Net Income (Loss) per share - Diluted:
Continuing Operations	$	(0.33	)	$	(0.80	)
Discontinued Operations	$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.33	)	$	(0.81	)

Share-based Payment Arrangement [Policy Text Block]

(q) Stock Based Compensation

Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant vesting period. The Company estimates the fair value of each stock-based 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. Restricted stock is valued at market value at the day of grant.

Use of Estimates, Policy [Policy Text Block]

(r) Use of Estimates

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

New Accounting Pronouncements, Policy [Policy Text Block]

(s) Recently Issued Accounting Pronouncements

Adopted Accounting Pronouncements

Effective

December 1, 2018

the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic

606,

Revenue from Contracts with Customers (“ASC

606”

). The core principle of ASC

606

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 in exchange for those goods or services. ASC

606

is effective for annual reporting periods beginning after

December 15, 2017,

including interim periods within that reporting period, and is to be applied retrospectively, with early application

not

permitted. The Company adopted ASC

606

for the

2019

fiscal year, including interim periods within that reporting period.

The Company has evaluated the new standard and applied the core principle to its contract revenue streams. To be consistent with this core principle, an entity is required to apply the following

five

-step approach:

1.

     Identify the contract(s) with a customer;

2.

     Identify each performance obligation in the contract;

3.

     Determine the transaction price;

4.

     Allocate the transaction price to each performance obligation; and

5.

     Recognize revenue when or as each performance obligation is satisfied.

The Company’s revenues primarily result from contracts with customers. The Agricultural Products and Tools segments generally execute short-term contracts that contain a single performance obligation – the delivery of product to the common carrier. The Company recognizes revenue for the production and sale of farm equipment, service parts, and cutting tools upon shipment of the goods. The Modular Buildings segment executes contracts with customers that can be short or long-term in nature. These contracts can have multiple performance obligations and revenue from these can be recognized over time or at a point in time depending on the nature of the contracts. Payment terms generally are short-term and vary by customer and segment. The Company’s implementation process for ASC

606

included modifications to the contracts of the Modular Buildings segment.

The Company uses discounts as a form of variable consideration for the Agricultural Products and Tools segments. The variable consideration is allocated to the transaction price at contract inception and is generally

not

contingent on future outcomes. The Agricultural Products and Tools segments do

not

offer rebates or credits. The Modular Buildings segment does

not

offer discounts, credits or rebates.

The Company’s product warranty is included in the price of the product and provides assurance that the product will function in accordance with agreed-upon specifications. Product warranty is expensed at the time of sale for the Agricultural Products and Modular Buildings segments. A small reserve is kept on the balance sheet as consideration for the Tools segment warranty. This product warranty does

not

represent a separate performance obligation under ASC

606.

The Company adopted ASC

606

using the modified retrospective method. The Company has determined that amounts reported under ASC

606

are

not

materially different than amounts reported under the previous revenue guidance of ASC

605

and therefore, the Company was

not

required to make an adjustment to retained earnings.

The Company, upon adoption of ASC

606,

has increased the amount of required disclosures in the notes to its financial statements, including but

not

limited to:

•     Disaggregation of revenue that depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors;

•     The opening and closing balances of receivables, contract assets, and contract liabilities from contracts with customers, if

not

otherwise separately presented or disclosed;

•     Revenue recognized in the reporting period that was included in the contract liability balance at the beginning of the period;

•     Information about performance obligations in contracts with customers; and

•     Judgments that significantly affect the determination of the amount and timing of revenue from contracts with customers, including the timing satisfaction of performance obligation, and the transaction price and the amounts allocated to performance obligations.

Accounting Pronouncements

Not

Yet Adopted

In

February 2016,

the FASB issued ASU

2016

-

02,

“Leases (Topic

842

),” which requires a lessee to recognize a right-of-use asset and a lease liability on its balance sheet for all leases with terms of

twelve

months or greater. This guidance is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those years. The Company will adopt this guidance for the

2020

fiscal year using the modified retrospective approach, including interim periods within that reporting period. Under the modified retrospective approach, the Company will

not

adjust prior comparative periods. The Company has a moderate amount of leasing activity mainly as the lessee of office equipment and as the lessor of modular rental buildings. The Company expects to recognize a right-of-use asset and lease liability on the balance sheet for office equipment it leases. The Company does

not

expect a material impact for the addition of lessee activity to its consolidated balance sheets. The Company’s activity as a lessor will remain mostly unaffected by this guidance. The Company expects additional disclosures including but

not

limited to:

•    Nature of its leases

•    Significant assumptions and judgements used

•    Information about leases that have

not

yet commenced

•    Related-party lease transactions

•    Accounting policy election regarding short-term leases

•    Finance, operating, short-term and variable lease costs

•    Maturity analysis of operating lease payments, lease receivables and lease obligations

•    Tabular disclosure of lease-related income

•    Components of the net investment in a lease

•    Information on the management of risk associated with residual asset

XML

Note 12 - Sales-type Leases

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

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

( 12 ) Sales-Type Leases

The components related to sales-type leases at

November 30, 2019

and

2018

are as follows:

	November 30, 2019			November 30, 2018
Minimum lease receivable, current	$	162,425		$	159,500
Unearned interest income, current		(14,420	)		(36,445	)
Net investment in sales-type leases, current	$	148,005		$	123,055
Minimum lease receivable, long-term	$	5,851		$	168,277
Unearned interest income, long-term		(69	)		(14,490	)
Net investment in sales-type leases, long-term	$	5,782		$	153,787

Gross revenue recognized in sales from continuing operations on the consolidated statements of operations from commencement of sales-type leases for the

2018

fiscal year was

$426,542.

There was

no

sales activity related to sales-type leases for the

2019

fiscal year.

Future minimum lease receipts from sales-type leases are as follows:

Year Ending November 30,	Amount
2020		162,425
2021		5,851
Total	$	168,276

XML

Note 4 - Inventories

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Inventory Disclosure [Text Block]

( 4 ) Inventories

Major classes of inventory are:

	November 30, 2019			November 30, 2018
Raw materials	$	7,156,001		$	7,825,278
Work in process		492,125			272,302
Finished goods		3,905,373			5,051,330
Total Gross Inventory	$	11,553,499		$	13,148,910
Less: Reserves		(2,774,992	)		(2,891,808	)
Net Inventory	$	8,778,507		$	10,257,102

XML

Note 8 - Accrued Expenses

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

( 8 ) Accrued Expenses

Major components of accrued expenses are:

	November 30, 2019		November 30, 2018
Salaries, wages, and commissions	$	555,201	$	448,737
Accrued warranty expense		203,185		96,786
Other		374,440		347,761
	$	1,132,826	$	893,284

XML

Note 9 - Product Warranty (Tables)

12 Months Ended

Nov. 30, 2019

Notes Tables

Schedule of Product Warranty Liability [Table Text Block]

	Twelve Months Ended
	November 30, 2019			November 30, 2018
Balance, beginning	$	96,786		$	68,451
Settlements / adjustments		(279,992	)		(233,316	)
Warranties issued		386,391			261,651
Balance, ending	$	203,185		$	96,786

XML

Note 5 - Contracts in Progress (Tables)

12 Months Ended

Nov. 30, 2019

Notes Tables

Costs in Excess of Billings and Billings in Excess of Costs [Table Text Block]

	Cost and Profit in			Billings in Excess of
	Excess of Billings			Costs and Profit
November 30, 2019
Costs	$	3,805,906		$	629,501
Estimated earnings		1,044,612			155,790
		4,850,518			785,291
Less: amounts billed		(4,123,851	)		(874,222	)
	$	726,667		$	(88,931	)
November 30, 2018
Costs	$	190,861		$	99,782
Estimated earnings		54,721			121,115
		245,582			220,897
Less: amounts billed		(146,295	)		(405,911	)
	$	99,287		$	(185,014	)

XML

Note 6 - Property, Plant, and Equipment - Major Classes of Property, Plant, and Equipment (Details) - USD ($)	Nov. 30, 2019	Nov. 30, 2018
Property, plant and equipment, gross	$ 19,002,613	$ 18,917,769
Less accumulated depreciation	(13,639,706)	(13,270,284)
Property, plant and equipment	5,362,907	5,647,485
Land [Member]
Property, plant and equipment, gross	220,503	220,503
Building and Building Improvements [Member]
Property, plant and equipment, gross	7,035,144	6,985,273
Construction in Progress [Member]
Property, plant and equipment, gross	82,366	35,669
Machinery and Equipment [Member]
Property, plant and equipment, gross	11,036,192	11,062,856
Vehicles [Member]
Property, plant and equipment, gross	507,575	491,822
Furniture and Fixtures [Member]
Property, plant and equipment, gross	$ 120,833	$ 121,646

XML

Note 8 - Accrued Expenses - Major Components Of Accrued Expenses (Details) - USD ($)	Nov. 30, 2019	Nov. 30, 2018
Salaries, wages, and commissions	$ 555,201	$ 448,737
Accrued warranty expense	203,185	96,786
Other	374,440	347,761
Total accrued liabilities, current	$ 1,132,826	$ 893,284

XML

Note 15 - Income Taxes - Reconciliation of the Statutory Federal Income Tax Rate (Details)	1 Months Ended	12 Months Ended
	Dec. 31, 2017	Nov. 30, 2019	Dec. 31, 2018	Nov. 30, 2018
Statutory federal income tax rate	35.00%	21.00%	21.00%	21.00%
Valuation allowance on foreign net operating loss				(1.40%)
Revaluation of deferred tax asset				(7.60%)
Permanent Differences and Other		(1.30%)		1.50%
Total		19.70%		13.50%

XML

Note 14 - Equity Incentive Plan - Fair Value Assumptions (Details)	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Expected Volatility
Expected Dividend Yield
Expected Term (Year)
Risk-Free Rate

XML

Consolidated Balance Sheets (Parentheticals) - USD ($)	Nov. 30, 2019	Nov. 30, 2018
Allowance for doubtful accounts	$ 22,925	$ 25,100
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized (in shares)	500,000	500,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized (in shares)	9,500,000	9,500,000
Common stock, issued (in shares)	4,321,087	4,225,050
Treasury stock (in shares)	18,842	9,286

XML

Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Cash flows from operations:
Net (loss) from continuing operations	$ (1,419,586)	$ (3,336,049)
Net (loss) from discontinued operations		(50,853)
Adjustments to reconcile net (loss) to net cash provided by operating activities:
Stock based compensation	195,416	197,243
Loss on release of cumulative translation adjustment		253,180
Realized foreign currency loss		3,830
Impairment of Assets		591,268
Gain on disposal of property, plant, and equipment	(9,999)	(4,837)
Depreciation and amortization expense	1,003,541	960,606
Change in allowance for doubtful accounts	(2,175)	(7,198)
Deferred income taxes	(353,626)	(531,026)
Changes in assets and liabilities:
Accounts receivable	(140,687)	380,379
Inventories	1,478,595	900,854
Net investment in sales-type leases	123,055	(276,842)
Other assets	54,158	150,666
Accounts payable	403,251	128,409
Contracts in progress, net	(723,463)	102,662
Customer deposits	(40,269)	(454,693)
Income taxes payable		3,300
Accrued expenses	239,542	(88,274)
Net cash provided by (used in) operating activities - continuing operations	807,753	(1,026,522)
Net cash (used in) operating activities - discontinued operations		(92,090)
Net cash provided by (used in) operating activities	807,753	(1,118,612)
Cash flows from investing activities:
Purchases of property, plant, and equipment	(447,025)	(434,505)
Additions to assets held for lease		(329,815)
Net proceeds from sale of assets	899,713	52,606
Net cash provided by (used in) investing activities - continuing operations	452,688	(711,714)
Net cash provided by investing activities - discontinued operations		1,418,761
Net cash provided by investing activities	452,688	707,047
Cash flows from financing activities:
Net change in line of credit	927,000	(1,043,000)
Repayment of term debt	(314,485)	(219,429)
Repurchases of common stock	(19,323)	(21,310)
Net cash provided by (used in) financing activities - continuing operations	(1,260,808)	802,261
Net cash (used in) financing activities - discontinued operations		(599,584)
Net cash provided by (used in) financing activities	(1,260,808)	202,677
Net (decrease) in cash	(367)	(208,888)
Cash at beginning of period	3,512	212,400
Cash at end of period	3,145	3,512
Supplemental disclosures of cash flow information:
Interest	329,356	286,070
Income taxes	3,855	5,237
Supplemental disclosures of non-cash operating and investing activities:
Transfer of inventory to assets held for lease		$ 808,766

XML

Note 10 - Loan and Credit Agreements - Summary of Minimum Maturities of Term Debt (Details) - USD ($)	Nov. 30, 2019	Nov. 30, 2018
2020	$ 85,401
2021	90,179
2022	94,858
2023	99,781
2024	104,665
2025 and thereafter	1,961,109
Total term debt	$ 2,435,993	$ 2,750,477

XML

Note 12 - Sales-type Leases - Future Minimum Lease Receipts (Details)	Nov. 30, 2018 USD ($)
2020	$ 162,425
2021	5,851
Total	$ 168,276

XML

Note 3 - Allowance for Doubtful Accounts - Activity in the Allowance for Doubtful Accounts (Details) - USD ($)	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Balance, beginning	$ 25,100	$ 32,298
Provision charged to expense	(1,602)	2,242
Less amounts charged-off	(573)	(9,440)
Balance, ending	$ 22,925	$ 25,100

XML

Note 1 - Summary of Significant Accounting Policies - Contract With Customers (Details) - USD ($)	Nov. 30, 2019	Nov. 30, 2018
Receivables	$ 115,000	$ 159,000
Assets	727,000	99,000
Liabilities	$ 89,000	$ 185,000

XML

Note 15 - Income Taxes (Tables)

12 Months Ended

Nov. 30, 2019

Notes Tables

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	November 30, 2019			November 30, 2018
Current Expense (benefit)	$	4,392		$	127,673
Deferred expense (benefit)		(353,626	)		(654,413	)
	$	(349,234	)	$	(526,740	)

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	November 30, 2019			November 30, 2018
Statutory federal income tax rate		21.0	%		21.0	%
Valuation allowance on foreign net operating loss		-			(1.4	)
Revaluation of deferred tax asset		-			(7.6	)
Permanent Differences and Other		(1.3	)		1.5
		19.7	%		13.5	%

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	November 30
	2018			2018
Current deferred tax assets (liabilities):
Accrued expenses	$	100,000		$	59,000
Inventory capitalization		21,000			73,000
NOL and tax credit carryforward		1,182,000			826,000
Asset reserves		621,000			609,000
Total current deferred tax assets	$	1,924,000		$	1,567,000
Non-current deferred tax assets
Property, plant, and equipment	$	(138,000	)	$	(135,000	)
Total non-current deferred tax assets (liabilities)	$	(138,000	)	$	(135,000	)
Net deferred taxes	$	1,786,000		$	1,432,000

XML

Note 14 - Equity Incentive Plan

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

( 14 ) Equity Incentive Plan

On

November 30, 2019,

the Company had

one

equity incentive plan, the

2011

Plan, which is described below. The compensation cost charged against income was

$195,416

and

$197,243

for the

2019

and

2018

fiscal years, respectively, for all awards granted under the

2011

Plan during such years. The total income tax deductions for share-based compensation arrangements were

$122,022

and

$157,529

for the

2019

and

2018

fiscal years, respectively.

No

compensation cost was capitalized as part of inventory or fixed assets.

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”), subject to approval by the stockholders on or before

January 27, 2012. 

The

2011

Plan was approved by the stockholders on

April 28, 2011. 

It replaced the Employee Stock Option Plan and the Directors’ Stock Option Plan (collectively, the “Prior Plans”), and

no

further stock options will be awarded under the Prior Plans. Awards to directors and executive officers under the

2011

Plan are governed by the forms of agreement approved by the Board of Directors.

The

2011

Plan permits the plan administrator to award nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance awards, and stock appreciation rights to employees (including officers), directors, and consultants. The Board of Directors has approved a director compensation policy pursuant to which non-employee directors are automatically granted restricted stock awards of

1,000

shares of fully-vested common stock annually upon their election to the Board and another

1,000

shares of fully-vested common stock on the last business day of each fiscal quarter. Additionally, directors can elect to receive their board compensation as restricted stock. During the

2019

fiscal year, restricted stock awards of

56,750

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

three

years, restricted stock awards of

9,000

shares were issued to various employees, which vested immediately upon grant, and restricted stock awards of

31,687

shares were issued to directors as part of the compensation policy, which vested immediately upon grant. During

2019

fiscal year,

32,600

shares of restricted stock became unrestricted,

1,400

shares of restricted stock were forfeited, and the Company bought

9,556

shares back as treasury stock from employees to pay payroll tax on vested shares. During the

2018

fiscal year, the Company issued

88,298

shares of restricted stock,

33,150

shares of restricted stock became unrestricted,

22,000

shares of restricted stock were forfeited, and the Company bought

7,332

shares back as treasury stock from employees to pay payroll tax on vested shares

Stock options granted prior to

January 27, 2011

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

The fair value of each option award is estimated on the date of grant using the Black Scholes option-pricing model. 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.

	201 9		201 8
Expected Volatility		-		-
Expected Dividend Yield		-		-
Expected Term (in years)		-		-
Risk-Free Rate		-		-

The following is a summary of activity under the plans as of

November 30, 2019

and

2018,

and changes during the years then ended:

2019 Option Activity
Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Options O/S at beginning of period		59,000	$	6.07
Granted		-	$	-
Exercised		-	$	-				-
Options Expired or Forfeited		-	$	-
Options O/S at end of period		59,000	$	6.07		2.86		-
Options Exercisable at end of the period		59,000	$	6.07		2.86		-

2018 Option Activity
Options	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Options O/S at beginning of period		96,000		$	7.77
Granted		-		$	-
Exercised		-		$	-				-
Options Expired or Forfeited		(37,000	)	$	10.37
Options O/S at end of period		59,000		$	6.07		3.86		-
Options Exercisable at end of the period		59,000		$	6.07		3.86		-

No

options were granted during the

2019

or

2018

fiscal years. As of both

November 30, 2019

and

November 30, 2018,

there were

no

non-vested options. As of

November 30, 2019,

there was

no

unrecognized compensation cost related to non-vested share-based compensation arrangements under the plan related to stock options.

No

options vested during the

2019

or

2018

fiscal years.

The Company received

no

cash from the exercise of options during the

2019

or

2018

fiscal years.

XML

Note 18 - Segment Information

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

( 18 ) Segment Information

There are

three

reportable segments: Agricultural Products, Modular Buildings, and Tools. The Agricultural Products segment fabricates and sells farming products as well as replacement parts for these products in the United States and worldwide. The Modular Buildings segment produces 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.

Approximate financial information with respect to the reportable segments is as follows. The tables below exclude income and balance sheet data from discontinued operations. See Note

2

above, “Discontinued Operations.”

	Twelve Months Ended November 30, 2019
	Agricultural Products			Modular Buildings		Tools			Consolidated
Revenue from external customers	$	13,508,000		$	7,260,000	$	2,121,000		$	22,889,000
Income (loss) from operations	$	(1,599,000	)	$	208,000	$	(106,000	)	$	(1,497,000	)
Income (loss) before tax	$	(1,843,000	)	$	220,000	$	(146,000	)	$	(1,769,000	)
Total Assets	$	13,169,000		$	3,584,000	$	2,594,000		$	19,347,000
Capital expenditures	$	257,000		$	147,000	$	43,000		$	447,000
Depreciation & Amortization	$	503,000		$	372,000	$	129,000		$	1,004,000

	Twelve Months Ended November 30, 2018
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	14,344,000		$	3,109,000		$	2,274,000		$	19,727,000
Income (loss) from operations	$	(2,462,000	)	$	(566,000	)	$	(67,000	)	$	(3,095,000	)
Income (loss) before tax	$	(3,206,000	)	$	(530,000	)	$	(111,000	)	$	(3,847,000	)
Total Assets	$	15,458,000		$	3,401,000		$	2,466,000		$	21,325,000
Capital expenditures	$	321,000		$	4,000		$	110,000		$	435,000
Depreciation & Amortization	$	516,000		$	317,000		$	128,000		$	961,000

XML

Note 2 - Discontinued Operations (Tables)

12 Months Ended

Nov. 30, 2019

Notes Tables

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

	Twelve Months Ended
	November 30, 2018
Revenue from external customers	$	-
Gross Profit		-
Asset Impairment		-
Total Operating Expense		51,133
Income (loss) from operations		(51,133	)
Income (loss) before tax		(67,177	)

XML

Note 12 - Sales-type Leases (Tables)

12 Months Ended

Nov. 30, 2019

Notes Tables

Schedule of Sales-type Leases [Table Text Block]

	November 30, 2019			November 30, 2018
Minimum lease receivable, current	$	162,425		$	159,500
Unearned interest income, current		(14,420	)		(36,445	)
Net investment in sales-type leases, current	$	148,005		$	123,055
Minimum lease receivable, long-term	$	5,851		$	168,277
Unearned interest income, long-term		(69	)		(14,490	)
Net investment in sales-type leases, long-term	$	5,782		$	153,787

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

Year Ending November 30,	Amount
2020		162,425
2021		5,851
Total	$	168,276

XML

Note 7 - Assets Held for Lease (Tables)

12 Months Ended

Nov. 30, 2019

Notes Tables

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

Assets Held for Lease
	November 30, 2019		November 30, 2018
West Union Facility	$	-	$	878,079
Modular Buildings		713,782		992,046
	$	713,782	$	1,870,125

Schedule of Future Minimum Payments Receivable for Operating Leases [Table Text Block]

Year Ending November 30,	Amount
2020	$	283,989

XML

Note 3 - Allowance for Doubtful Accounts (Tables)

12 Months Ended

Nov. 30, 2019

Notes Tables

Financing Receivable, Allowance for Credit Loss [Table Text Block]

	Twelve Months Ended
	November 30, 2019			November 30, 2018
Balance, beginning	$	25,100		$	32,298
Provision charged to expense		(1,602	)		2,242
Less amounts charged-off		(573	)		(9,440	)
Balance, ending	$	22,925		$	25,100

XML

Note 6 - Property, Plant, and Equipment

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

( 6 ) Property, Plant, and Equipment

Major classes of property, plant, and equipment used in continuing operations are:

	November 30, 2019			November 30, 2018
Land	$	220,503		$	220,503
Buildings and improvements		7,035,144			6,985,273
Construction in Progress		82,366			35,669
Manufacturing machinery and equipment		11,036,192			11,062,856
Trucks and automobiles		507,575			491,822
Furniture and fixtures		120,833			121,646
		19,002,613			18,917,769
Less accumulated depreciation		(13,639,706	)		(13,270,284	)
Property, plant and equipment	$	5,362,907		$	5,647,485

Depreciation and amortization expense for continuing operations totaled

$1,003,541

and

$960,606

for the

2019

and

2018

fiscal years, respectively.

XML

Note 10 - Loan and Credit Agreements

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

( 10 ) Loan and Credit Agreements

The Company maintains

two

revolving lines of credit and a term loan with Bank Midwest. The Company previously maintained a term loan with The First National Bank of West Union, and a

second

term loan with Bank Midwest.

Bank Midwest Revolving Line of Credit and Term Loans

On

September 28, 2017,

the Company entered into a credit facility with Bank Midwest, which superseded and replaced in its entirety the Company’s previous credit facility with U.S. Bank. The Bank Midwest credit facility initially consisted of a

$5,000,000

revolving line of credit (the

“2017

Line of Credit”), a

$2,600,000

term loan due

October 1, 2037,

and a

$600,000

term loan due

October 1, 2019.

The

2017

Line of Credit is being used for working capital purposes. On

March 29, 2018,

the Company paid in full the

$600,000

term loan due

October 1, 2019

using proceeds from the sale of the Company’s Dubuque, Iowa property. The payment consisted of

$596,563

in principal and

$2,328

in interest.

On

November 30, 2019,

the balance of the

2017

Line of Credit was

$2,578,530

with

$2,421,470

remaining available, as

may

be limited by the borrowing base calculation. The

2017

Line of Credit borrowing base is an amount equal to

75%

of accounts receivable balances (discounted for aged receivables), plus

50%

of inventory, less any outstanding loan balance on the

2017

Line of Credit. At

November 30, 2019,

the

2017

Line of Credit was

not

limited by the borrowing base calculation. Any unpaid principal amount borrowed on the

2017

Line of Credit accrues interest at a floating rate per annum equal to

1.00%

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

4.25%

per annum and the current interest rate is

6.00%

per annum. The

2017

Line of Credit was most recently renewed on

March 30, 2019.

The

2017

Line of Credit is payable upon demand by Bank Midwest, and monthly interest-only payments are required. If

no

earlier demand is made, the unpaid principal and accrued interest is due on

March 30, 2020.

The Company expects to renew the

2017

Line of Credit prior to the current maturity date.   

The

$2,600,000

term loan accrues interest at a rate of

5.00%

for the

first

sixty

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

0.75%

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

4.15%

per annum and the interest rate

may

only be adjusted by Bank Midwest once every

five

years. Monthly payments of

$17,271

for principal and interest are required. This loan is also guaranteed by the United States Department of Agriculture (“USDA”), which required an upfront guarantee fee of

$62,400

and requires an annual fee of

0.5%

of the unpaid balance. As part of the USDA guarantee requirements, shareholders owning more than

20%

are required to personally guarantee a portion of the loan, in an amount equal to their stock ownership percentage. J. Ward McConnell Jr., the Vice Chairman of the Board of Directors and a shareholder owning more than

20%

of the Company’s outstanding stock, is guaranteeing approximately

38%

of this loan, for an annual fee of

2%

of the personally guaranteed amount. The initial guarantee fee will be amortized over the life of the loan, and the annual fees and personally guaranteed amounts are expensed monthly.

On

February 13, 2019,

the Company opened a

$4,000,000

revolving line of credit (the

“2019

Line of Credit”) with Bank Midwest in connection with bonding obligations for the Company’s performance of a large modular laboratory construction project. Funds under the

2019

Line of Credit will be undisbursed to the Company and will be held by Bank Midwest in connection with an Irrevocable Letter of Credit issued by Bank Midwest for the project. The

2019

Line of Credit accrues interest at a floating rate per annum equal to

1.00%

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

4.25%

per annum and the current interest rate is

5.75%

per annum. The

2019

Line of Credit is payable upon demand by Bank Midwest. If

no

earlier demand is made, the unpaid principal and accrued interest will be payable in

one

payment, due on

February 13, 2020.

As of

November 30, 2019,

the funds on the

2019

Line of Credit remain undisbursed and are held by Bank Midwest. The Company expects to renew the

2019

Line of Credit prior to the current maturity date.

Each of the

2017

Line of Credit and the

$2,600,000

term loan are governed by the terms of a separate Promissory Note, dated

March 30, 2019

and

September 28, 2017,

respectively, entered into between the Company and Bank Midwest. The

2019

Line of Credit is governed by the terms of a Promissory Note, dated

February 13, 2019,

entered into between the Company and Bank Midwest.

In connection with the

2017

Line of Credit, the Company, Art’s-Way Scientific Inc. and Ohio Metal Working Products/Art’s-Way Inc. each entered into a Commercial Security Agreement with Bank Midwest, dated

September 28, 2017,

pursuant to which each granted to Bank Midwest a

first

priority security interest in certain inventory, equipment, accounts, chattel paper, instruments, letters of credit and other assets to secure the obligations of the Company under the line of credit. Each of Art’s-Way Scientific Inc. and Ohio Metal Working Products/Art’s-Way Inc. also agreed to guarantee the obligations of the Company pursuant to the

2017

Line of Credit, as set forth in Commercial Guaranties, each dated

September 28, 2017.

The

2019

Line of Credit is also secured by these existing security documents.

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

second

mortgage on its West Union, Iowa property and Ohio Metal Working Products/Art’s-Way Inc. granted Bank Midwest a mortgage on its property located in Canton, Ohio. The mortgage on the West Union property was released in conjunction with the sale of that property in

December 2018.

The

$2,600,000

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

$600,000

term loan was secured by a mortgage on the Company’s Dubuque, Iowa property. The mortgage on the Dubuque property was released in conjunction with the sale of that property in

March 2018.

Each mortgage is governed by the terms of a separate Mortgage, dated

September 28, 2017,

and each property is also subject to a separate Assignment of Rents, dated

September 28, 2017.

To further secure the

2017

Line of Credit, the Company granted Bank Midwest a

second

mortgage on its West Union, Iowa property and Ohio Metal Working Products/Art’s-Way Inc. granted Bank Midwest a mortgage on its property located in Canton, Ohio. The mortgage on the West Union property was released in conjunction with the sale of that property on

December 14, 2018.

The

2019

Line of Credit is also secured by the mortgage on the Canton, Ohio property. The

$2,600,000

term loan is secured by a mortgage on the Company’s Armstrong, Iowa and Monona, Iowa properties. Each mortgage is governed by the terms of a separate Mortgage, dated

September 28, 2017,

and each property is also subject to a separate Assignment of Rents, dated

September 28, 2017.

If the Company or its subsidiaries (as guarantors pursuant to the Commercial Guaranties) commits an event of default with respect to the promissory notes and fails or is unable to cure that default, Bank Midwest

may

immediately terminate its obligation, if any, to make additional loans to the Company and

may

accelerate the Company’s obligations under the promissory notes. Bank Midwest shall also have all other rights and remedies for default provided by the Uniform Commercial Code, as well as any other applicable law and the various loan agreements. In addition, in an event of default, Bank Midwest

may

foreclose on the mortgaged property.

Compliance with Bank Midwest covenants is measured annually at

November 30.

The terms of the Bank Midwest loan agreements require the Company to maintain a minimum working capital ratio of

1.75,

while maintaining a minimum of

$5,100,000

of working capital. Additionally, a maximum debt to worth ratio of

1

to

1

must be maintained, with a minimum of

40%

tangible balance sheet equity, with variations subject to mutual agreement. The Company is also required to maintain a minimum debt service coverage ratio of

1.25,

with a

0.10

tolerance. The Company also must receive bank approval for purchases or sales of equipment over

$100,000

annually and maintain reasonable salaries and owner compensation. The Company was in compliance with all covenants as of

November 30, 2019

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

no

event of default has occurred. The next measurement date is

November 30, 2020.

First National Bank of West Union Term Loan

On

May 1, 2010,

the Company obtained a

$1,300,000

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 loan was 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.

On

December 14, 2018,

the Company repaid this loan in full in connection with the sale of the West Union, Iowa facility.

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

	November 30, 2019		November 30, 2018
Bank Midwest loan payable in monthly installments of $17,271 including interest at 5.00%, due October 1, 2037	$	2,435,993	$	2,517,510
First National Bank of West Union loan payable in monthly installments of $12,500 including interest at 2.75%, due June 1, 2020		-		232,967
Total term debt	$	2,435,993	$	2,750,477
Less current portion of term debt		85,401		227,459
Term debt, excluding current portion	$	2,350,592	$	2,523,018

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

November 30:

Year:	Amount
2020	$	85,401
2021		90,179
2022		94,858
2023		99,781
2024		104,665
2025 and thereafter		1,961,109
Total term debt	$	2,435,993

XML

Note 18 - Segment Information (Details Textual)	12 Months Ended
	Nov. 30, 2019
Number of Reportable Segments	3

XML

Note 15 - Income Taxes (Details Textual) - USD ($)	1 Months Ended	9 Months Ended	12 Months Ended
	Dec. 31, 2017	Aug. 31, 2018	Nov. 30, 2019	Dec. 31, 2018	Nov. 30, 2018
Operating Loss Carryforwards, Total			$ 5,033,000
Tax Credit Carryforward, Amount			$ 109,000
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	35.00%		21.00%	21.00%	21.00%
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability		$ 298,000			$ 298,000

XML

Note 5 - Contracts in Progress - Long-term Contracts (Details) - USD ($)	Nov. 30, 2019	Nov. 30, 2018
Costs in Excess of Billings, Cost	$ 3,805,906	$ 190,861
Billings in Excess of Costs, Costs	629,501	99,782
Costs in Excess of Billings, Estimated Earnings	1,044,612	54,721
Billings in Excess of Costs, Estimated Earnings	155,790	121,115
Costs in Excess of Billings, Costs and Estimated Earnings	4,850,518	245,582
Billings in Excess of Costs, Costs and Estimated Earnings	785,291	220,897
Costs in Excess of Billings, Amounts Billed	(4,123,851)	(146,295)
Billings in Excess of Costs, Amounts Billed	(874,222)	(405,911)
Cost and Profit in Excess of Billings	726,667	99,287
Billings in Excess of Cost	$ (88,931)	$ (185,014)

XML

Note 7 - Assets Held for Lease - Summary of Assets Held for Lease (Details) - USD ($)	Nov. 30, 2019	Nov. 30, 2018
Net assets held for lease	$ 713,782	$ 1,870,125
West Union Facility [Member]
Net assets held for lease		878,079
Modular Buildings [Member]
Net assets held for lease	$ 713,782	$ 992,046

XML

Note 9 - Product Warranty - Changes in Product Warranty Liability (Details) - USD ($)	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Balance, beginning	$ 96,786	$ 68,451
Settlements / adjustments	(279,992)	(233,316)
Warranties issued	386,391	261,651
Balance, ending	$ 203,185	$ 96,786

XML

Note 8 - Accrued Expenses (Tables)

12 Months Ended

Nov. 30, 2019

Notes Tables

Schedule of Accrued Liabilities [Table Text Block]

	November 30, 2019		November 30, 2018
Salaries, wages, and commissions	$	555,201	$	448,737
Accrued warranty expense		203,185		96,786
Other		374,440		347,761
	$	1,132,826	$	893,284

XML

Note 4 - Inventories (Tables)

12 Months Ended

Nov. 30, 2019

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	November 30, 2019			November 30, 2018
Raw materials	$	7,156,001		$	7,825,278
Work in process		492,125			272,302
Finished goods		3,905,373			5,051,330
Total Gross Inventory	$	11,553,499		$	13,148,910
Less: Reserves		(2,774,992	)		(2,891,808	)
Net Inventory	$	8,778,507		$	10,257,102

XML

Note 14 - Equity Incentive Plan (Tables)

12 Months Ended

Nov. 30, 2019

Notes Tables

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	201 9		201 8
Expected Volatility		-		-
Expected Dividend Yield		-		-
Expected Term (in years)		-		-
Risk-Free Rate		-		-

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

2019 Option Activity
Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Options O/S at beginning of period		59,000	$	6.07
Granted		-	$	-
Exercised		-	$	-				-
Options Expired or Forfeited		-	$	-
Options O/S at end of period		59,000	$	6.07		2.86		-
Options Exercisable at end of the period		59,000	$	6.07		2.86		-

2018 Option Activity
Options	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Options O/S at beginning of period		96,000		$	7.77
Granted		-		$	-
Exercised		-		$	-				-
Options Expired or Forfeited		(37,000	)	$	10.37
Options O/S at end of period		59,000		$	6.07		3.86		-
Options Exercisable at end of the period		59,000		$	6.07		3.86		-

XML

Note 5 - Contracts in Progress

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Long-term Contracts or Programs Disclosure [Text Block]

( 5 ) Contracts in Progress

Amounts included in the consolidated financial statements related to uncompleted contracts are as follows:

	Cost and Profit in			Billings in Excess of
	Excess of Billings			Costs and Profit
November 30, 2019
Costs	$	3,805,906		$	629,501
Estimated earnings		1,044,612			155,790
		4,850,518			785,291
Less: amounts billed		(4,123,851	)		(874,222	)
	$	726,667		$	(88,931	)
November 30, 2018
Costs	$	190,861		$	99,782
Estimated earnings		54,721			121,115
		245,582			220,897
Less: amounts billed		(146,295	)		(405,911	)
	$	99,287		$	(185,014	)

The amounts billed on these long-term contracts are due

30

days from invoice date. All amounts billed are expected to be collected within the next

12

months. Retainage was

$0

and

$8,405

as of

November 30, 2019

and

2018,

respectively.

XML

Note 9 - Product Warranty

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Product Warranty Disclosure [Text Block]

( 9 ) Product Warranty

The Company offers warranties of various lengths to its customers depending on the specific product and terms of the customer purchase agreement. The average length of the warranty period is

one

year from the date of purchase. The Company’s warranties require it to repair or replace defective products during the warranty period at

no

cost to the customer. Product warranty is included in the price of the product and provides assurance that the product will function in accordance with agreed-upon specifications. It does

not

represent a separate performance obligation under ASC

606.

The Company records a liability for estimated costs that

may

be incurred under its warranties. The costs are estimated based on historical experience and any specific warranty issues that have been identified. Although historical warranty costs have been within expectations, there can be

no

assurance that future warranty costs will

not

exceed historical amounts. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the balance as necessary.

Changes in the Company’s product warranty liability included in “accrued expenses” for the

2019

and

2018

fiscal years are as follows:

	Twelve Months Ended
	November 30, 2019			November 30, 2018
Balance, beginning	$	96,786		$	68,451
Settlements / adjustments		(279,992	)		(233,316	)
Warranties issued		386,391			261,651
Balance, ending	$	203,185		$	96,786

XML

Note 18 - Segment Information - Segment Reporting Information (Details) - USD ($)	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Revenue from external customers	$ 22,889,173	$ 19,726,793
Income (loss) from operations	(1,496,881)	(3,095,270)
Total Assets	19,346,938	21,325,474
Capital expenditures	447,025	434,505
Depreciation & Amortization	1,003,541	960,606
Operating Segments [Member]
Revenue from external customers	22,889,000	19,727,000
Income (loss) from operations	(1,497,000)	(3,095,000)
Income (loss) before tax	(1,769,000)	(3,847,000)
Total Assets	19,347,000	21,325,000
Capital expenditures	447,000	435,000
Depreciation & Amortization	1,004,000	961,000
Operating Segments [Member] | Agricultural Products [Member]
Revenue from external customers	13,508,000	14,344,000
Income (loss) from operations	(1,599,000)	(2,462,000)
Income (loss) before tax	(1,843,000)	(3,206,000)
Total Assets	13,169,000	15,458,000
Capital expenditures	257,000	321,000
Depreciation & Amortization	503,000	516,000
Operating Segments [Member] | Modular Buildings [Member]
Revenue from external customers	7,260,000	3,109,000
Income (loss) from operations	208,000	(566,000)
Income (loss) before tax	220,000	(530,000)
Total Assets	3,584,000	3,401,000
Capital expenditures	147,000	4,000
Depreciation & Amortization	372,000	317,000
Operating Segments [Member] | Tools [Member]
Revenue from external customers	2,121,000	2,274,000
Income (loss) from operations	(106,000)	(67,000)
Income (loss) before tax	(146,000)	(111,000)
Total Assets	2,594,000	2,466,000
Capital expenditures	43,000	110,000
Depreciation & Amortization	$ 129,000	$ 128,000

XML

Note 15 - Income Taxes - Income Tax Expense (Benefit) (Details) - USD ($)	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Current Expense (benefit)	$ 4,392	$ 127,673
Deferred expense (benefit)	(353,626)	(654,413)
Total	$ (349,234)	$ (526,740)

XML

Note 9 - Product Warranty (Details Textual)	12 Months Ended
	Nov. 30, 2019
Standard Product Warrant Term	1 year

XML

Note 5 - Contracts in Progress (Details Textual) - USD ($)	Nov. 30, 2019	Nov. 30, 2018
Contract Receivable Retainage, Total	$ 0	$ 8,405

XML

Note 7 - Assets Held for Lease (Details Textual)		12 Months Ended
	Dec. 14, 2018 USD ($)	Nov. 30, 2019 USD ($)	Nov. 30, 2018 USD ($)
Proceeds from Sale of Property, Plant, and Equipment, Total		$ 899,713	$ 52,606
Asset Impairment Charges, Total			591,268
Sales [Member]
Operating Leases, Income Statement, Lease Revenue, Total		674,000	373,000
Other Nonoperating Income (Expense) [Member]
Operating Leases, Income Statement, Lease Revenue, Total		$ 2,500	$ 44,000
Modular Buildings [Member] | Leased Buildings [Member]
Property Subject to or Available for Operating Lease, Number of Units		5	7
West Union Facility [Member]
Proceeds from Sale of Property, Plant, and Equipment, Total	$ 900,000
Asset Impairment Charges, Total			$ 216,000
Remediation Cost		$ 235,000
Inventory Write-down		$ 67,000

XML

Note 10 - Loan and Credit Agreements - Summary of Term Debt (Details) (Parentheticals) - USD ($)	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Term Loan Due October 2037 [Member]
Debt instrument, periodic payment	$ 17,271	$ 17,271
Debt instrument, interest rate, stated percentage	5.00%	5.00%
The First National Bank of West Union [Member]
Debt instrument, periodic payment		$ 12,500
Debt instrument, interest rate, stated percentage		2.75%

XML

Note 12 - Sales-type Leases - Components Related to Sales-type Leases (Details) - USD ($)	Nov. 30, 2019	Nov. 30, 2018
Minimum lease receivable, current	$ 162,425	$ 159,500
Unearned interest income, current	(14,420)	(36,445)
Net investment in sales-type leases, current	148,005	123,055
Minimum lease receivable, long-term	5,851	168,277
Unearned interest income, long-term	(69)	(14,490)
Net investment in sales-type leases, long-term	$ 5,782	$ 153,787

XML

Consolidated Balance Sheets - USD ($)	Nov. 30, 2019	Nov. 30, 2018
Current assets:
Cash	$ 3,145	$ 3,512
Accounts receivable-customers, net of allowance for doubtful accounts of $22,925 and $25,100 in 2019 and 2018, respectively	1,679,975	1,537,113
Inventories, net	8,778,507	10,257,102
Cost and profit in excess of billings	726,667	99,287
Net investment in sales-type leases, current	148,005	123,055
Other current assets	70,931	125,089
Total current assets	11,407,230	12,145,158
Property, plant, and equipment, net	5,362,907	5,647,485
Assets held for lease, net	713,782	1,870,125
Deferred income taxes	1,786,048	1,432,422
Net investment in sales-type leases, long-term	5,782	153,787
Other assets	71,189	76,497
Total assets	19,346,938	21,325,474
Current liabilities:
Accounts payable	1,205,313	802,062
Customer deposits	105,363	145,632
Billings in excess of cost and profit	88,931	185,014
Income taxes payable	6,400	6,400
Accrued expenses	1,132,826	893,284
Line of credit	2,578,530	3,505,530
Current portion of long-term debt	85,401	227,459
Total current liabilities	5,202,764	5,765,381
Long-term liabilities
Long-term debt, excluding current portion	2,350,592	2,523,018
Total liabilities	7,553,356	8,288,399
Commitments and Contingencies (Notes 9, 10 and 17)
Stockholders’ equity:
Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares in 2019 and 2018; issued and outstanding 0 shares in 2019 and 2018.
Common stock – $0.01 par value. Authorized 9,500,000 shares in 2019 and 2018; issued 4,321,087 in 2019 and 4,225,050 in 2018	43,211	42,250
Additional paid-in capital	3,250,087	3,055,632
Retained earnings	8,547,342	9,966,928
Treasury stock, at cost (18,842 in 2019 and 9,286 in 2018 shares)	(47,058)	(27,735)
Total stockholders’ equity	11,793,582	13,037,075
Total liabilities and stockholders’ equity	$ 19,346,938	$ 21,325,474

XML

Consolidated Statements of Stockholders' Equity - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Treasury Stock [Member]	Total
Balance (in shares) at Nov. 30, 2017	4,158,752				1,954
Balance at Nov. 30, 2017	$ 41,587	$ 2,859,052	$ 13,353,830	$ (257,010)	$ (6,425)	$ 15,991,034
Stock based compensation (in shares)	66,298				7,332
Stock based compensation	$ 663	196,580			$ (21,310)	175,933
Foreign Currency Translation Adjustment				3,830		3,830
Release of cumulative translation adjustment due to substantial liquidation of a foreign entity				253,180		253,180
Net (Loss)			(3,386,902)			(3,386,902)
Balance (in shares) at Nov. 30, 2018	4,225,050				9,286
Balance at Nov. 30, 2018	$ 42,250	3,055,632	9,966,928		$ (27,735)	13,037,075
Stock based compensation (in shares)	96,037				9,556
Stock based compensation	$ 961	194,455			$ (19,323)	176,093
Release of cumulative translation adjustment due to substantial liquidation of a foreign entity
Net (Loss)			(1,419,586)			(1,419,586)
Balance (in shares) at Nov. 30, 2019	4,321,087				18,842
Balance at Nov. 30, 2019	$ 43,211	$ 3,250,087	$ 8,547,342		$ (47,058)	$ 11,793,582

XML

Note 1 - Summary of Significant Accounting Policies - Basic and Diluted Earnings Per Common Share (Details) - USD ($)	12 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Numerator for basic and diluted net income (loss) per share:
Net (loss) from continuing operations	$ (1,419,586)	$ (3,336,049)
Net (loss) from discontinued operations		(50,853)
Net income (loss)	$ (1,419,586)	$ (3,386,902)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding (in shares)	4,277,375	4,202,836
Effect of dilutive stock options (in shares)
For diluted net income (loss) per share - weighted average common shares outstanding (in shares)	4,277,375	4,202,836
Net Income (Loss) per share - Basic:
Continuing Operations (in dollars per share)	$ (0.33)	$ (0.80)
Discontinued Operations (in dollars per share)		(0.01)
Net Income (Loss) per share (in dollars per share)	(0.33)	(0.81)
Net Income (Loss) per share - Diluted:
Continuing Operations (in dollars per share)	(0.33)	(0.80)
Discontinued Operations (in dollars per share)		(0.01)
Net Income (Loss) per share (in dollars per share)	$ (0.33)	$ (0.81)

XML

Note 18 - Segment Information (Tables)

12 Months Ended

Nov. 30, 2019

Notes Tables

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

	Twelve Months Ended November 30, 2019
	Agricultural Products			Modular Buildings		Tools			Consolidated
Revenue from external customers	$	13,508,000		$	7,260,000	$	2,121,000		$	22,889,000
Income (loss) from operations	$	(1,599,000	)	$	208,000	$	(106,000	)	$	(1,497,000	)
Income (loss) before tax	$	(1,843,000	)	$	220,000	$	(146,000	)	$	(1,769,000	)
Total Assets	$	13,169,000		$	3,584,000	$	2,594,000		$	19,347,000
Capital expenditures	$	257,000		$	147,000	$	43,000		$	447,000
Depreciation & Amortization	$	503,000		$	372,000	$	129,000		$	1,004,000

	Twelve Months Ended November 30, 2018
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	14,344,000		$	3,109,000		$	2,274,000		$	19,727,000
Income (loss) from operations	$	(2,462,000	)	$	(566,000	)	$	(67,000	)	$	(3,095,000	)
Income (loss) before tax	$	(3,206,000	)	$	(530,000	)	$	(111,000	)	$	(3,847,000	)
Total Assets	$	15,458,000		$	3,401,000		$	2,466,000		$	21,325,000
Capital expenditures	$	321,000		$	4,000		$	110,000		$	435,000
Depreciation & Amortization	$	516,000		$	317,000		$	128,000		$	961,000

XML

Note 4 - Inventories - Major Classes of Inventory (Details) - USD ($)	Nov. 30, 2019	Nov. 30, 2018
Raw materials	$ 7,156,001	$ 7,825,278
Work in process	492,125	272,302
Finished goods	3,905,373	5,051,330
Total Gross Inventory	11,553,499	13,148,910
Less: Reserves	(2,774,992)	(2,891,808)
Net Inventory	$ 8,778,507	$ 10,257,102

XML

Note 1 - Summary of Significant Accounting Policies (Tables)

12 Months Ended

Nov. 30, 2019

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Twelve Months Ended November 30, 2019
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	10,435,000	$	-	$	-	$	10,435,000
Farm equipment service parts		2,638,000		-		-		2,638,000
Steel cutting tools and inserts		-		-		2,086,000		2,086,000
Modular buildings		-		6,460,000		-		6,460,000
Modular building lease income		-		674,000		-		674,000
Other		435,000		126,000		35,000		596,000
	$	13,508,000	$	7,260,000	$	2,121,000	$	22,889,000

	Twelve Months Ended November 30, 2018
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	11,149,000	$	-	$	-	$	11,149,000
Farm equipment service parts		2,735,000		-		-		2,735,000
Steel cutting tools and inserts		-		-		2,239,000		2,239,000
Modular buildings		-		2,271,000		-		2,271,000
Modular building lease income		-		373,000		-		373,000
Revenue from sales-type leases		-		427,000		-		427,000
Other		460,000		38,000		35,000		533,000
	$	14,344,000	$	3,109,000	$	2,274,000	$	19,727,000

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

	November 30, 2019		November 30, 2018
Receivables	$	115,000	$	159,000
Assets		727,000		99,000
Liabilities		89,000		185,000

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

	Twelve Months Ended
	November 30, 2019			November 30, 2018
Numerator for basic and diluted net income (loss) per share:
Net income (loss) from continuing operations	$	(1,419,586	)	$	(3,336,049	)
Net income (loss) from discontinued operations		-			(50,853	)
Net income (loss)	$	(1,419,586	)	$	(3,386,902	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,277,375			4,202,836
Effect of dilutive stock options		-			-
For diluted net income (loss) per share - weighted average common shares outstanding		4,277,375			4,202,836
Net Income (Loss) per share - Basic:
Continuing Operations	$	(0.33	)	$	(0.80	)
Discontinued Operations	$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.33	)	$	(0.81	)
Net Income (Loss) per share - Diluted:
Continuing Operations	$	(0.33	)	$	(0.80	)
Discontinued Operations	$	-		$	(0.01	)
Net Income (Loss) per share	$	(0.33	)	$	(0.81	)

XML

Note 13 - Employee Benefit Plans

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Compensation and Employee Benefit Plans [Text Block]

( 13 ) Employee Benefit Plans

The Company sponsors a defined contribution

401

(k) savings plan which covers substantially all full-time employees who meet eligibility requirements. Participating employees

may

contribute as salary reductions any amount of their compensation up to the limit prescribed by the Internal Revenue Code. The Company makes a

25%

matching contribution to employees contributing a minimum of

4%

of their compensation, up to

1%

of eligible compensation. The Company recognized an expense of

$36,253

and

$31,980

related to this plan during the

2019

and

2018

fiscal years, respectively.

XML

Note 17 - Litigation and Contingencies

12 Months Ended

Nov. 30, 2019

Notes to Financial Statements

Legal Matters and Contingencies [Text Block]

( 17 ) Litigation and Contingencies

Various legal actions and claims that arise in the normal course of business are pending against the Company. In the opinion of management adequate provisions have been made in the accompanying financial statements for all pending legal actions and other claims.