)

Summary of Significant Accounting Policies

Statement Presentation

The foregoing condensed consolidated financial statements of the Company are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company's financial position and operating results for the interim periods. The financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's Annual Report on Form

-K for the fiscal year ended

November 30, 2020.

The results of operations for the

three

months ended

February 28, 2021

are

not

necessarily indicative of the results to be expected for the fiscal year ending

November 30, 2021.

Impact of COVID-

The COVID-

pandemic had little effect on the results of the

first

fiscal quarter of

2021.

The Company did see signs of a strengthening economy in all

three

segments compared to fiscal

2020.

The COVID-

pandemic

may

continue to impact our business operations and financial operating results, and there is uncertainty in the nature and degree of its continued effects over time. Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations (Part I, Item

of this Form

-Q) for further discussion.

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had

effect on the reported results of operations. An adjustment has been made to the Condensed Consolidated Statements of Cash Flows for the

three

months ended

February

29,

2020,

to identify the non-cash expense related to changes in the Company's obsolete inventory reserve in the amount of

$118,974.

This change in classification does

not

affect previously reported cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the

three

months ended

February 28, 2021.

Actual results could differ from those estimates.

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 customer upon shipment of the goods. The Tools segment has an OEM agreement with

one

customer for which sales are recognized FOB destination – when the goods hit the customer's dock. 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 customer 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

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 customer's request, the Company will bill the customer upon completing all performance obligations, but before shipment. The customer dictates that the Company ship the goods per the customer's 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 its inventory, such that they are

not

available to fill other orders. This agreement also specifies that the customer is required to purchase all goods manufactured under this agreement. Title of the goods will pass to the customer 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 customer, and the customer 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 the customer and the Company. The credit terms on these agreements are consistent with the credit terms on all other sales. All risks of loss are shouldered by the customer, and there are

exceptions to the customer's commitment to accept and pay for these manufactured goods.

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 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 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 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 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

“Product Warranty.”

Recently Issued Accounting Pronouncements

Recently Adopted Accounting Guidance

Leases

February 2016,

the Financial Accounting Standards Board (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. The Company adopted this guidance for fiscal

2020

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

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. As a result of adoption, the Company recognized

$34,316

as a right-of-use asset and

$34,316

of lease liabilities on the balance sheet in the

first

quarter of fiscal

2020

for office equipment it leases. The Company's activity as a lessor will remain mostly unaffected by this guidance. The Company's additional disclosures

may

include, but are

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

Accounting Pronouncements

Not

Yet Adopted

Measurement of Credit Losses on Financial Instruments

June 2016,

the FASB issued ASU

2016

13,

“Measurement of Credit Losses on Financial Instruments.” ASU

2016

adds a current expected credit loss (“CECL”) impairment model to U.S. GAAP that is based on expected losses rather than incurred losses. Modified retrospective adoption is required with any cumulative-effect adjustment recorded to retained earnings as of the beginning of the period of adoption. ASU

2016

is effective for fiscal years beginning after

December 15, 2022,

including interim periods within the year of adoption. Early adoption is permitted for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. The Company will adopt ASU

2016

in fiscal

2024.

The Company does

not

expect the application of the CECL impairment model to have a significant impact on its allowance for uncollectible amounts for accounts receivable.