10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended February 28, 2023

or

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

Commission File No. 000-05131

ART’S-WAY MANUFACTURING CO., INC.

(Exact name of registrant as specified in its charter)

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

5556 Highway 9

Armstrong, Iowa 50514

(Address of principal executive offices) (Zip Code)

(712) 208-8467

(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 $0.01 par value	ARTW	The Nasdaq Stock Market LLC

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, a 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 Exchange Act).       Yes ☐   No ☒

Number of common shares outstanding as of April 5, 2023: 5,008,572

Art’s-Way Manufacturing Co., Inc.

Index

Page No.

PART I – FINANCIAL INFORMATION			1
	Item 1.	Financial Statements	1
		Condensed Consolidated Balance Sheets February 28, 2023 and November 30, 2022	1
		Condensed Consolidated Statements of Operations Three-month periods ended February 28, 2023 and February 28, 2022	2
		Condensed Consolidated Statements of Stockholders’ Equity Three-month periods ended February 28, 2023 and February 28, 2022	3
		Condensed Consolidated Statements of Cash Flows Three-month periods ended February 28, 2023 and February 28, 2022	4
		Notes to Condensed Consolidated Financial Statements	5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
	Item 4.	Controls and Procedures	21
PART II – OTHER INFORMATION			22
	Item 1.	Legal Proceedings	22
	Item 1A.	Risk Factors	22
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
	Item 3.	Defaults Upon Senior Securities	22
	Item 4.	Mine Safety Disclosures	22
	Item 5.	Other Information	22
	Item 6.	Exhibits	23
		SIGNATURES	24

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ART’S-WAY MANUFACTURING CO., INC.

Consolidated Balance Sheets

(Unaudited)

Assets	February 28, 2023			November 30, 2022
Current assets:
Cash	$	4,012		$	5,055
Accounts receivable-customers, net of allowance for doubtful accounts of $36,201 and $34,699 in 2023 and 2022, respectively		3,665,795			2,722,298
Inventories, net		11,604,761			10,611,552
Cost and profit in excess of billings		98,376			450,906
Other current assets		436,380			343,618
Total current assets		15,809,324			14,133,429
Property, plant, and equipment, net		6,330,449			6,178,917
Assets held for lease, net		361,845			400,325
Deferred income taxes		2,514,259			2,605,395
Other assets		588,631			630,248
Total assets	$	25,604,508		$	23,948,314
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,502,302		$	2,630,966
Customer deposits		2,797,428			828,565
Billings in excess of cost and profit		676,917			328,041
Income taxes payable		3,500			3,500
Accrued expenses		1,300,701			1,283,204
Line of credit		3,055,559			3,924,500
Current portion of finance lease liabilities		172,619			170,835
Current portion of long-term debt		100,140			97,678
Total current liabilities		10,609,166			9,267,289
Long-term liabilities
Long-term portion of operating lease liabilities		21,422			24,016
Long-term portion of finance lease liabilities		558,293			602,131
Long-term debt, excluding current portion		2,874,226			2,904,241
Total liabilities		14,063,107			12,797,677
Commitments and Contingencies (Notes 8, 9 and 15)
Stockholders’ equity:
Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares in 2023 and 2022; issued and outstanding 0 shares in 2023 and 2022.		-			-
Common stock – $0.01 par value. Authorized 9,500,000 shares in 2023 and 2022; issued 5,100,921 in 2023 and 5,013,671 in 2022		51,009			50,137
Additional paid-in capital		4,615,188			4,547,172
Retained earnings		7,096,494			6,754,284
Treasury stock, at cost (72,699 shares in 2023 and 64,574 in 2022)		(221,290	)		(200,956	)
Total stockholders’ equity		11,541,401			11,150,637
Total liabilities and stockholders’ equity	$	25,604,508		$	23,948,314

See accompanying notes to consolidated financial statements.

1

ART’S-WAY MANUFACTURING CO., INC.

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended
	February 28, 2023			February 28, 2022
Sales	$	7,894,785		$	5,613,066
Cost of goods sold		5,545,663			4,420,922
Gross profit		2,349,122			1,192,144
Expenses
Engineering		128,295			134,071
Selling		594,265			487,156
General and administrative		1,077,975			1,007,793
Total expenses		1,800,535			1,629,020
Income (loss) from operations		548,587			(436,876	)
Other income (expense):
Interest expense		(127,505	)		(76,704	)
Other		12,310			(1,552	)
Total other income (expense)		(115,195	)		(78,256	)
Income (loss) before income taxes		433,392			(515,132	)
Income tax expense		91,182			(108,643	)
Net Income (loss)		342,210			(406,489	)

See accompanying notes to consolidated financial statements.

2

ART’S-WAY MANUFACTURING CO., INC.

Consolidated Statements of Stockholders' Equity

Three Months Ended February 28, 2023 and February 28, 2022

(Unaudited)

	Common Stock				Additional					Treasury Stock
	Number of				paid-in		Retained			Number of
	shares		Par value		capital		earnings			shares		Amount			Total
Balance, November 30, 2021		4,583,504	$	45,835	$	3,760,649	$	6,656,487			44,532	$	(108,524	)	$	10,354,447
Stock based compensation		91,167		912		69,052		-			10,406		(34,905	)		35,059
Net (loss)		-		-		-		(406,489	)		-		-			(406,489	)
Balance, February 28, 2022		4,674,671		46,747		3,829,701		6,249,998			54,938		(143,429	)		9,983,017

	Common Stock				Additional				Treasury Stock
	Number of				paid-in		Retained		Number of
	shares		Par value		capital		earnings		shares		Amount			Total
Balance, November 30, 2022		5,013,671	$	50,137	$	4,547,172	$	6,754,284		64,574	$	(200,956	)	$	11,150,637
Stock based compensation		87,250		872		68,016		-		8,125		(20,334	)		48,554
Net Income		-		-		-		342,210		-		-			342,210
Balance, February 28, 2023		5,100,921		51,009		4,615,188		7,096,494		72,699		(221,290	)		11,541,401

See accompanying notes to condensed consolidated financial statements.

3

ART’S-WAY MANUFACTURING CO., INC.

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	February 28, 2023			February 28, 2022
Cash flows from operations:
Net income (loss)	$	342,210		$	(406,489	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock based compensation		68,888			69,964
Decrease in obsolete inventory reserves		(27,086	)		(140,485	)
Gain on disposal of property, plant, and equipment		(2,900	)		-
Depreciation and amortization expense		238,903			167,542
Accrued interest on deferred debt payments		-			4,213
Increase (Decrease) in allowance for doubtful accounts		1,502			(11,440	)
Deferred income taxes		91,136			(109,039	)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable		(944,999	)		1,091,906
Inventories		(966,123	)		(349,727	)
Other assets		(92,762	)		(506,294	)
Increase (decrease) in:
Accounts payable		(128,664	)		(183,362	)
Contracts in progress, net		701,406			119,397
Customer deposits		1,968,863			1,616,276
Income taxes payable		-			(500	)
Accrued expenses		18,223			(193,146	)
Net cash provided by operating activities		1,268,597			1,168,816
Cash flows from investing activities:
Purchases of property, plant, and equipment		(313,657	)		(174,133	)
Net proceeds from sale of assets		2,900			-
Net cash used in investing activities		(310,757	)		(174,133	)
Cash flows from financing activities:
Net change in line of credit		(868,941	)		(924,000	)
Principal payments on finance lease obligations		(42,055	)		(11,946	)
Repayment of term debt		(27,553	)		(23,029	)
Repurchases of common stock		(20,334	)		(34,905	)
Net cash used in financing activities		(958,883	)		(993,880	)
Net increase (decrease) in cash		(1,043	)		803
Cash at beginning of period		5,055			2,658
Cash at end of period	$	4,012		$	3,461
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	122,315		$	69,754
Income taxes		46			-
Amortization of operating lease ROU assets (included in other assets)	$	3,319		$	-

See accompanying notes to consolidated financial statements.

4

Notes to Unaudited Condensed Consolidated Financial Statements

1) Description of the Company

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

The Company began operations as a farm equipment manufacturer in 1956. Since that time, it has become a major worldwide manufacturer of agricultural equipment. Its principal manufacturing plant is located in Armstrong, Iowa.

The Company has organized its 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. The Agricultural Products segment manufactures and sells farm equipment and related replacement parts under the Art’s-Way Manufacturing label and private labels. The Modular Buildings segment manufactures and installs modular buildings for animal containment and various laboratory uses, and the Tools segment manufactures steel cutting tools and inserts.

2) 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 10-K for the fiscal year ended November 30, 2022. The results of operations for the three months ended February 28, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2023.

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, 2023. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 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 2016-13 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 2016-13 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.

5

3) 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.

	Three Months Ended February 28, 2023
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	4,732,000	$	-	$	-	$	4,732,000
Farm equipment service parts		630,000		-		-		630,000
Steel cutting tools and inserts		-		-		799,000		799,000
Modular buildings		-		1,601,000		-		1,601,000
Modular building lease income		-		32,000		-		32,000
Other		83,000		9,000		9,000		101,000
	$	5,445,000	$	1,642,000	$	808,000	$	7,895,000

	Three Months Ended February 28, 2022
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	3,515,000	$	-	$	-	$	3,515,000
Farm equipment service parts		558,000		-		-		558,000
Steel cutting tools and inserts		-		-		574,000		574,000
Modular buildings		-		851,000		-		851,000
Modular building lease income		-		-		-		-
Other		88,000		17,000		10,000		115,000
	$	4,161,000	$	868,000	$	584,000	$	5,613,000

The Company offered floorplan terms in its Agricultural Products segment during its Fall of 2021 and 2022 early order program to incentivize customers to stock farm equipment on their lots for fiscal 2022 and fiscal 2023. Floorplan terms allow customers to pay the Company at the earliest of retail date or 180 days. This program has an effect on the timing of the Company’s cash flows compared with historical cash flows.

On February 28, 2023, the Company had approximately $950,000 in receivables on the floorplan program with a due date greater than 30 days compared to $468,000 on February 28, 2022

6

4) 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 Condensed Consolidated Balance Sheets.

	February 28, 2023		November 30, 2022
Receivables	$	3,666,000	$	2,722,000
Assets		98,000		451,000
Liabilities		3,474,000		1,157,000

The amount of revenue recognized in the first three months of fiscal 2023 that was included in a contract liability on November 30, 2022 was approximately $827,000 compared to $415,000 in the same period of fiscal 2022. The beginning contract receivables, assets and liabilities on December 1, 2021 were approximately $2,663,000; $177,000 and $559,000, respectively. The increase in contract receivables on February 28, 2023 is due to a 40.7% increase in revenue for Q1 of fiscal 2023 and the timing of contract billings that were outstanding at quarter end. Contract liabilities increased significantly during the three months ended February 28, 2022 as the Company received a large number of deposits from our fall early order program. The Company incentivizes cash deposits in exchange for discounts to lock in inventory pricing and help with planning to maximize plant efficiency in the agricultural products segment.

The Company utilizes the practical expedient exception for these contracts and will report only on performance obligations greater than one year. As of February 28, 2023, the Company has no performance obligations with an original expected duration greater than one year.

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

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

Basic and diluted net income (loss) per share have been computed based on the following as of February 28, 2023 and February 28, 2022:

	For the Twelve Months Ended
	February 28, 2023		February 28, 2022
Numerator for basic and diluted net income (loss) per share:
Net income (loss)	$	342,210	$	(406,489	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,976,955		4,569,720
Effect of dilutive stock options		-		-
For diluted net income (loss) per share - weighted average common shares outstanding		4,976,955		4,569,720
Net Income (Loss) per share - Basic:
Net Income (Loss) per share	$	0.07	$	(0.09	)
Net Income (Loss) per share - Diluted:
Net Income (Loss) per share	$	0.07	$	(0.09	)

7

6) Inventory

Major classes of inventory are:

	February 28, 2023			November 30, 2022
Raw materials	$	9,600,930		$	8,700,719
Work in process		529,812			624,781
Finished goods		3,134,526			3,029,099
Total Gross Inventory	$	13,265,268		$	12,354,599
Less: Reserves		(1,660,507	)		(1,743,047	)
Net Inventory	$	11,604,761		$	10,611,552

7) Accrued Expenses

Major components of accrued expenses are:

	February 28, 2023		November 30, 2022
Salaries, wages, and commissions	$	763,350	$	755,708
Accrued warranty expense		194,464		193,301
Other		342,887		334,195
	$	1,300,701	$	1,283,204

8) Assets Held for Lease

Major components of assets held for lease are:

	February 28, 2023		November 30, 2022
Modular Buildings	$	361,845	$	400,325
Total assets held for lease	$	361,845	$	400,325

The Company recognized $32,025 in rents from assets held for lease that were included in sales on the Condensed Consolidated Statements of Operations during the three months ended February 28, 2023 compared to none for the three months ended February 28, 2022.

The Company has $46,591 of future minimum lease receipts expected to be recognized in fiscal 2023 from assets held for lease as of February 28, 2023.

8

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. The accrued warranty balance is included in accrued expenses as shown in Note 7 “Accrued Expenses.” Changes in the Company’s product warranty liability for the three months ended February 28, 2023 and February 28, 2022 are as follows:

	For the Three Months Ended
	February 28, 2023			February 28, 2022
Balance, beginning	$	193,301		$	202,850
Settlements / adjustments		115,596			21,624
Warranties issued		(114,433	)		(109,412	)
Balance, ending	$	194,464		$	115,062

10) Loan and Credit Agreements

Bank Midwest Revolving Lines of Credit and Term Loans

The Company maintains a $5,000,000 revolving line of credit (the “Line of Credit”) with Bank Midwest. On February 28, 2023, the balance of the Line of Credit was $3,055,559 with $1,944,441 remaining available, as may be limited by the borrowing base calculation. The Line of Credit borrowing base is an amount equal to 75% of accounts receivable balances (discounted for aged receivables), plus 50% of net inventory, less any outstanding loan balance on the Line of Credit. On February 28, 2023, the Line of Credit was not limited by the borrowing base calculation. Any unpaid principal amount borrowed on the Line of Credit accrues interest at a floating rate per annum equal to 1.25% 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 9.25% per annum. The Line of Credit was most recently renewed on March 30, 2023 which dropped the floating interest rate from 1.50% to 1.25% above the Wall Street Journal rate. The Line of Credit matures on March 30, 2024 and requires monthly interest-only payments. The Line of Credit is governed by the terms of a Promissory Note, dated March 28, 2023, entered into between the Company and Bank Midwest.

The Company carries a $2,600,000 term loan with Bank Midwest due October 1, 2037 (the “Term Loan”), and a $350,000 term loan (the “Roof Term Loan”) due on May 15, 2027. The Term Loan accrued interest at a rate of 5.00% for the first ninety months, which ended on September 28, 2022. Thereafter, the Term Loan interest rate was reset to a fixed rate of 7% based on prime plus 0.75% on the reset date. 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 $19,648 in principal and interest are required. The Term 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 Term Loan, in an amount equal to their stock ownership percentage. The J. Ward McConnell Jr. Living Trust, the estate of the former 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 the Term Loan, for an annual fee of 2% of the personally guaranteed amount. The initial guarantee fee will be amortized over the life of the Term Loan, and the annual fees and personally guaranteed amounts are expensed monthly. The Term Loan is governed by the terms of a Promissory Note, dated September 28, 2017, entered into between the Company and Bank Midwest.

9

In connection with the 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 Line of Credit, as set forth in Commercial Guaranties, each dated September 28, 2017.

The Company also entered into the Roof Term Loan of $350,000 with Bank Midwest on May 17, 2022. The Roof Term Loan’s proceeds were used to fix sections of the Armstrong facility’s roof. The Roof Term Loan requires 59 regular payments of $2,972 and an estimated balloon payment of $294,168 on the maturity date of May 15, 2027. Any unpaid principal amount borrowed on the Roof Term Loan accrues interest at a rate of 7.0% per annum. The loan previously accrued interest at a floating rate per annum equal to 2.00% above the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The Company entered into a Change of Terms Agreement with Bank Midwest on March 30, 2023 which modified the interest rate terms of the promissory note. The Roof Term Loan is further governed by the terms of a Promissory Note, dated May 17, 2022, entered into between the Company and Bank Midwest.

To further secure the Line of Credit, the Company granted Bank Midwest a mortgage on its Canton, Ohio property held by Ohio Metal Working Products/Art’s-Way Inc. The 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 on November 30. The terms of the Bank Midwest loan agreements require the Company to maintain a minimum of $4,000,000 of monthly 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 received the necessary approvals for purchases of equipment over $100,000 for the twelve months ended November 30, 2022. The Company was out of compliance with its debt to worth ratio by fifteen percentage points on the Bank Midwest loans as of November 30, 2022. Bank Midwest issued a waiver forgiving the noncompliance, and in turn waived the event of default. The next measurement date is November 30, 2023 for all covenants except the monthly working capital requirement.

10

SBA Economic Injury Disaster Loans

In June of 2020, the Company executed the standard loan documents required for securing loans offered by the U.S. Small Business Administration under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. Two loans were executed on June 18, 2020 with principal amounts of $150,000 each, with a third loan being executed on June 24, 2020 with a principal amount of $150,000. Proceeds from these EIDLs are being used for working capital purposes. Interest accrues at the rate of 3.75% per annum and will accrue from the date of inception. Installment payments, including principal and interest, were due monthly beginning December 18, 2022 (thirty months from the date of the EIDLs) and December 24, 2022 in the amount of $731 per EIDL. On March 11, 2021, the American Rescue Plan Act of 2021 was enacted, which extended the first due date for repayment of EIDLs made in 2020 from 12 months to 30 months from the date of the note. The balance of principal and interest is payable 30 years from the date of the EIDL. The EIDLs are secured by a security interest on all of the Company’s assets. Each EIDL is governed by the terms of a separate Promissory Note, dated either June 18, 2020 or June 24, 2020, as applicable, entered into by the Company or the applicable subsidiary. EID

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

	February 28, 2023		November 30, 2022
Bank Midwest loan payable in monthly installments of $19,648 including interest at 7.00%, due October 1, 2037		2,145,225		2,165,554
Bank Midwest loan payable in monthly installments of $2,972 including interest at 7.0%, due May 15, 2027		344,331		344,932
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning December 18, 2022, due June 18, 2050		162,862		163,793
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning December 18, 2022, due June 18, 2050		163,045		163,728
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning December 24, 2022, due June 24, 2050		158,903		163,912
Total term debt	$	2,974,366	$	3,001,919
Less current portion of term debt		100,140		97,678
Term debt, excluding current portion	$	2,874,226	$	2,904,241

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

Year	Amount
2023	$	74,476
2024		103,804
2025		111,745
2026		119,740
2027		447,557
2028 and thereafter		2,117,044
	$	2,974,366

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11) 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.

12) Related Party Transactions

During the three months ended February 28, 2023 and February 28, 2022, 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 previously owned by the late J. Ward McConnell, Jr., the former Vice Chairman of the Company’s Board of Directors and currently owned by his son, Marc McConnell, the Chairman of the Company’s Board of Directors, who 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.’s estate, the J. Ward McConnell, Jr. Living Trust, is paid a monthly fee for the guarantee. In the three months ended February 28, 2023, the Company recognized $4,170 of expense for transactions with related parties, compared to $9,349 for the three months ended February 28, 2022. As of February 28, 2023, accrued expenses contained a balance of $1,385 owed to a related party compared to $1,299 on February 28, 2022.

13) Leases

The Company determines if an arrangement is a lease at inception of a contract. The nature of the Company’s leases at this time is shop machinery and office equipment, mainly copiers, with terms of 12 to 60 months. Operating and finance leases are included in other assets as lease right-of-use (“ROU”) assets on the Consolidated Balance Sheets while current operating lease liabilities are included in accrued expenses. The short-term portion of finance leases along with long-term portions of operating and finance lease liabilities are presented on the face of the Consolidated Balance Sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the present value payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense for lease payments is recognized on a straight-line basis over the lease term while finance lease ROU assets are amortized on a straight-line basis and interest expense is recorded over the lease term.

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The Company has copier lease agreements with lease and non-lease components and has elected the practical expedient not to separate lease and non-lease components for this asset class. The Company has also elected not to recognize lease liabilities and ROU assets for leases with an initial term of twelve months or less. The Company recognizes variable costs that depend on usage in profit or loss as they are incurred.

The components of operating leases on the Condensed Consolidated Balance Sheets on February 28, 2023 and November 30, 2022 were as follows:

	February 28, 2023		November 30, 2022
Operating lease right-of-use assets (other assets)	$	31,612		34,931
Current portion of operating lease liabilities (accrued expenses)	$	10,190		10,915
Long-term portion of operating lease liabilities		21,422		24,016
Total operating lease liabilities	$	31,612		34,931

The Company recorded $5,192 of operating lease costs in the three months ended February 28, 2023, which included variable costs tied to usage, compared to $4,843 for the three months ended February 28, 2022. The Company’s operating leases carry a weighted average lease term of 37 months and have a weighted average discount rate of 4.82%

Future maturities of operating lease liabilities are as follows:

Year Ending November 30,
2023	8,616
2024	11,162
2025	9,532
2026	4,765
Total lease payments	34,075
Less imputed interest	(2,463	)
Total operating lease liabilities	31,612

The components of finance leases on the Consolidated Balance Sheets on February 28, 2023 and November 30, 2022 were as follows:

	February 28, 2023		November 30, 2022
Finance lease right-of-use assets (net of amortization in other assets)	$	503,080	$	540,052
	$	503,080	$	540,052
Current portion of finance lease liabilities (accrued expenses)	$	172,619	$	170,835
Long-term portion of finance lease liabilities		558,293		602,131
Total finance lease liabilities	$	730,912	$	772,966

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Future maturities of finance lease liabilities as of February 28, 2023 are as follows:

Year Ending November 30,
2023	$	149,877
2024		211,219
2025		157,393
2026		155,809
2027		122,823
Total lease payments		797,121
Less imputed interest		(66,209	)
Total finance lease liabilities	$	730,912

The weighted average lease term of the Company’s finance leases is 48 months while the weighted average rate of finance leases is 4.18%. The Company incurred $36,971 of amortization expense from ROU assets related to finance leases in the first three months ending February 28, 2023 compared to $16,142 for the same period in 2022.

14) Equity Incentive Plan and Stock Based Compensation

On February 25, 2020, the Board of Directors of the Company (the “Board”) authorized and approved the Art’s-Way Manufacturing Co., Inc. 2020 Equity Incentive Plan (the “2020 Plan”). The 2020 Plan was approved by the stockholders on April 30, 2020. The 2020 Plan replaced the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan (the “2011 Plan”) and prior plans. The 2020 Plan added an additional 500,000 shares to the number of shares reserved for issuance pursuant to equity awards. No further awards will be made under the 2011 Plan or other prior plans. Awards to directors and executive officers under the 2020 Plan are governed by the forms of agreement approved by the Board of Directors. Stock options or other awards granted prior to February 25, 2020 are governed by the applicable prior plan and the forms of agreement adopted thereunder.

The 2020 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 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 or initially 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.

Shares issued under the 2020 Plan for the three months ended February 28, 2023 and 2022 are as follows:

	For the Three Months Ended
	February 28, 2023		February 28, 2022
Shares issued to directors (immediate vesting)		5,000		5,000
Shares issued to directors, employees, and consultants (three-year vesting)		82,250		94,500
Unvested shares forfeit upon termination		-		(8,333	)
Total shares issued		87,250		91,167

15) Common Stock Purchase Agreement

On March 29, 2022, Art’s-Way Manufacturing Co., Inc. (the “Company”) entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Alumni Capital LP, a Delaware limited partnership (“Alumni Capital”), pursuant to which the Company agreed to sell, and Alumni Capital agreed to purchase, upon request of the Company in one or more transactions, a number of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) providing aggregate gross proceeds to the Company of up to $3,000,000 (the “Maximum”). The Purchase Agreement expires upon the earlier of the aggregate gross proceeds from the sale of shares meeting the maximum or June 30, 2023.

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Among other limitations, unless otherwise agreed upon by Alumni Capital, each sale of shares will be limited to 50,000 shares and further limited to no more than the number of shares that would result in the beneficial ownership by Alumni Capital and its affiliates, at any single point in time, of more than 9.99% of the then-outstanding shares of Common Stock. Alumni Capital will purchase the shares of Common Stock under the Agreement at a discount ranging from 3-5% of the lowest traded price of the Common Stock in the five business days preceding the Company delivering notice of the required purchase of shares to Alumni Capital.

In exchange for Alumni Capital entering into the Purchase Agreement, the Company issued 20,000 shares of Common Stock to Alumni Capital upon execution of the Purchase Agreement (the “Initial Commitment Shares”) and issued another 20,000 shares in connection with the first closing under the Purchase Agreement (with the Initial Commitment Shares, the “Commitment Shares”). Alumni Capital represented to the Company, among other things, that it was an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”)). The Company shares of Common Stock, including the Commitment Shares, are being offered and sold under the Purchase Agreement in reliance upon an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. The securities sold may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

The Purchase Agreement provided that the Company file a registration statement under the Securities Act covering the resale of the shares issued to Alumni Capital. Alumni Capital’s obligation to purchase shares of Common Stock under the Purchase Agreement is conditioned upon, among other things, the registration statement having been declared effective by the Securities and Exchange Commission. The Company filed a registration statement on Form S-3 (the “Registration Statement”) April 27, 2022 which was declared effective on August 9, 2022 by the SEC.

The Company evaluated the embedded options and believed they should not be bifurcated from the agreement and accounted for separately as it is indexed to the Company’s stock and would qualify for equity treatment on the balance sheet.

The Company incurred approximately $203,000 of expense related to equity issuance in the twelve months ended November 30, 2022 in the form of 40,000 commitment shares valued at approximately $160,000, attorney fees for the negotiation and execution of the Purchase Agreement and the preparation and filing of the registration statement. These equity issuance costs reduced proceeds received under the common stock purchase agreement in additional paid in capital in the 2022 fiscal year.

Below is a summary of shares purchased by Alumni Capital under this agreement as of the filing date of this report:

Date	Shares		Share price net of discount		Proceeds
7/25/2022		50,000	$	2.07	$	103,305
8/03/2022		50,000	$	1.98	$	98,940
8/15/2022		50,000	$	2.00	$	99,910
8/23/2022		65,000	$	1.99	$	129,253
9/23/2022		65,000	$	1.76	$	114,120
Total		280,000			$	545,528

The Company has $2,454,472 of funding under the common stock purchase agreement that can be utilized as of February 28, 2023, subject to the limitations and conditions summarized above.

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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. On February 28, 2023 and November 30, 2022, the carrying amount approximated fair value for cash, accounts receivable, accounts payable, notes payable to bank, finance lease liabilities 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 finance lease liabilities also approximate 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 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) Segment Information

The Company has three reportable segments: Agricultural Products, Modular Buildings and Tools. The Agricultural Products segment manufactures and sells farm equipment and related replacement parts under the Art’s-Way Manufacturing label. The Modular Buildings segment manufactures and installs modular buildings for various uses, commonly animal containment and research laboratories. The Tools segment manufactures steel cutting tools and inserts.

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

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

	Three Months Ended February 28, 2023
	Agricultural Products		Modular Buildings		Tools			Consolidated
Revenue from external customers	$	5,445,000	$	1,642,000	$	808,000		$	7,895,000
Income (loss) from operations	$	502,000	$	42,000	$	5,000		$	549,000
Income (loss) before tax	$	407,000	$	36,000	$	(10,000	)	$	433,000
Total Assets	$	19,761,000	$	3,291,000	$	2,553,000		$	25,605,000
Capital expenditures	$	252,000	$	44,000	$	18,000		$	314,000
Depreciation & Amortization	$	125,000	$	77,000	$	37,000		$	239,000

	Three Months Ended February 28, 2022
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	4,161,000		$	868,000		$	584,000		$	5,613,000
Income (loss) from operations	$	(129,000	)	$	(223,000	)	$	(85,000	)	$	(437,000	)
Income (loss) before tax	$	(186,000	)	$	(230,000	)	$	(99,000	)	$	(515,000	)
Total Assets	$	15,784,000		$	2,695,000		$	2,373,000		$	20,852,000
Capital expenditures	$	153,000		$	14,000		$	7,000		$	174,000
Depreciation & Amortization	$	101,000		$	34,000		$	33,000		$	168,000

*The consolidated total in the tables is a sum of segment figures and may not tie to actual figures in the condensed consolidated financial statements due to rounding.

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18) Subsequent Events

Management evaluated all other activity of the Company and concluded that no subsequent events have occurred that would require recognition in the condensed consolidated financial statements other than the line of credit renewal and change in terms on the roof term loan as discussed in “Item 1 - Notes to Condensed Consolidated Financial Statements - Note 10 Loan and Credit Agreements.”

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

Forward-Looking Statements

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q (this “report”) and the audited consolidated financial statements and related notes thereto included in Part II, Item 8, “Financial Statements and Supplementary Data,” as well as Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the fiscal year ended November 30, 2022. Some of the statements in this report may be forward-looking statements that reflect our current view on future events, future business, industry and other conditions, our future performance, and our plans and expectations for future operations and actions. In some cases you can identify forward-looking statements by the use of words such as “may,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or the negative of these terms or other similar expressions. Many of these forward-looking statements are located in this report under Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but they may appear in other sections as well. Forward-looking statements in this report generally relate to: (i) our expectations with respect to order backlog; (ii) our beliefs regarding the sufficiency of working capital and cash flows; (iii) our expectation that we will continue to be able to renew or obtain financing on reasonable terms when necessary as well as our continued positive relationship with our creditors and lenders; (iv) our expectations as to the impact on margins due to recent price increases and expect costs of materials, such as steel; (v) our intentions and beliefs relating to our costs, business strategies, and future performance; (vi) our beliefs about the potential impact of our rebranding and customer experience efforts; (vii) our beliefs concerning our ability to attract and maintain an adequate workforce in a competitive labor market (viii) our expected financial results, including without limitation, our expected results for the Modular and Tools segments; and (ix) our expectations concerning our primary capital and cash flow needs.

You should read this report thoroughly with the understanding that our actual results may differ materially from those set forth in the forward-looking statements for many reasons, including events beyond our control and assumptions that prove to be inaccurate or unfounded. We cannot provide any assurance with respect to our future performance or results. Our actual results or actions could and likely will differ materially from those anticipated in the forward-looking statements for many reasons, including but not limited to: (i) the impact of changing credit markets on our ability to continue to obtain financing on reasonable terms; (ii) our ability to repay current debt, continue to meet debt obligations and comply with financial covenants; (iii) the effect of inflation as well as general economic conditions, including consumer and governmental spending, on the demand for our products and the cost of our supplies and materials; (iv) any further impact from COVID-19; (v) fluctuations in seasonal demand and our production cycle; (vi) the ability of our suppliers to meet our demands for raw materials and component parts; (vii) fluctuations in the price of raw materials, especially steel; (viii) our ability to predict and meet the demands of each market in which our segments operate; and (ix) other factors described from time to time in our Securities and Exchange Commission filings. We do not intend to update the forward-looking statements contained in this report other than as required by law. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits completely and with the understanding that our actual future results may be materially different from what we currently expect. We qualify all of our forward-looking statements by these cautionary statements.

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Critical Accounting Policies

Our critical accounting policies involving the more significant judgments and assumptions used in the preparation of our financial statements as of February 28, 2023 remain unchanged from November 30, 2022. Disclosure of these critical accounting policies is incorporated by reference from Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended November 30, 2022.

Results of Operations

Net Sales and Cost of Sales

Our consolidated corporate sales for the three-month period ended February 28, 2023 were $7,895,000 compared to $5,613,000 during the same period in fiscal 2022, an increase of $2,282,000, or 40.7%. We saw increased sales across all three of our business segments for the three months ended February 28, 2023 compared to the same period of fiscal 2022. Consolidated gross margin for the three-month period ended February 28, 2023 was 29.8% compared to 21.2% for the same period in fiscal 2022.

Our first quarter fiscal 2023 sales in our Agricultural Products segment were $5,445,000 compared to $4,161,000 for the same period in fiscal 2022, an increase of $1,284,000, or 30.9%. Because of strong demand and continued manufacturing efficiency improvements, this segment was able to build on recent success and increase sales significantly. We saw increased sales in the first fiscal quarter in our portable feed, manure spreader, land maintenance, top spread and defoliator products. Our recent manufacturing improvements allowed us to improve product availability and capitalize on the recent period of heightened demand. In addition, we believe our rebranding efforts and improved customer experience is yielding positive results. Gross margin for the three-month period ended February 28, 2023 was 34.2% compared to 25.9% for the same period in fiscal 2022. Our margins improved in the first fiscal quarter of 2023 as the price of steel has dropped from its peak in fiscal 2022 and also from price increases we have initiated to stay ahead of rising overhead costs. We have started to see the price of steel rise again in fiscal 2023 and expect overhead and component prices to continue to increase.

Our first quarter fiscal 2023 sales in our Modular Buildings segment were $1,642,000 compared to $868,000 for the same period in fiscal 2022, an increase of $774,000, or 89.2%. This segment had a light first quarter of fiscal 2022 as the approval process for some large research projects was longer than originally expected. The first quarter of fiscal 2023 was met with a steady stream of project work in both the agriculture and research sectors and led to the increase in sales. Our fiscal 2022 revenue was dominated by agricultural buildings, while our fiscal 2023 backlog consists of more research buildings which typically carry better margins. Gross margin for the three-month period ended February 28, 2023 was 19.7% compared to 4.8% for the same period in fiscal 2022. The increase in gross margin is due to increased coverage on fixed manufacturing costs from the large revenue increase.

Our Tools segment had sales of $808,000 during the first quarter compared to $584,000 for the same period in fiscal 2022, an increase of $224,000, or 38.4%. The sales increase for the first quarter of fiscal 2023 was due to a more stable workforce than we had seen over the past fiscal year coupled with automation equipment we put in place. This segment’s demand remains steady, and we expect price increases we put into place last year to help with sales increases and improved margins. Gross margin was 20.1% for the three-month period ended February 28, 2023 compared to 12.5% for the same period in fiscal 2022. The increased margin is due to price increases enacted near the end of fiscal 2022 and additional volume to absorb fixed overhead costs.

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Expenses

Our first quarter consolidated selling expenses were $594,000 compared to $487,000 for the same period in fiscal 2022. The increase in selling expenses is due to increased commission expense in our Agricultural Products and Modular Buildings segments. Selling expenses as a percentage of sales were 7.5% for the three-month period ended February 28, 2023 compared to 8.7% for the same period in fiscal 2022.

Consolidated engineering expenses were $128,000 for the three-month period ended February 28, 2023 compared to $134,000 from the same period in fiscal 2022. Engineering expenses as a percentage of sales were 1.6% for the three-month period ended February 28, 2023 compared to 2.4% for the same period in fiscal 2022.

Consolidated administrative expenses for the three-month period ended February 28, 2023 were $1,078,000 compared to $1,008,000 for the same period in fiscal 2022. The increase in administrative expenses for the first quarter of fiscal 2023 is due to the rising wages to help battle inflation for our employees. Administrative expenses as a percentage of sales were 13.7% for the three-month period ended February 28, 2023 compared to 18.0% for the same period in fiscal 2022.

Net Income (loss)

Consolidated net income was $342,000 for the three-month period ended February 28, 2023 compared to net loss of $(406,000) for the same period in fiscal 2022. We reported net income in two of our three segments for the first fiscal quarter of 2023 but also reported operating income in all three. Despite the first quarter of our fiscal years being our slowest quarter historically for our Agricultural Products segment, we met our customer inventory demands and finished with a strong first quarter of fiscal 2023. In the Modular Buildings segment, we started to ramp up production of research buildings at the end of Q1 of fiscal 2023 and expect fiscal 2023 to be stronger than 2022 with respect to the segment. In the Tools segment, we wrote-off approximately $18,000 of inventory items that ultimately drove a net loss for the first quarter of fiscal 2023. Our Tools segment had steady revenue and production through the first quarter of fiscal 2023, which we believe will continue based on current backlog.

Order Backlog

The consolidated order backlog net of discounts as of April 5, 2023 was $13,042,000 compared to $11,210,000 as of April 5, 2022, a 16% increase. The Agricultural Products segment order backlog was $8,370,000 as of April 5, 2023 compared to $9,057,000 in fiscal 2022. The backlog for the Modular Buildings segment was $4,203,000 as of April 5, 2023, compared to $1,449,000 in fiscal 2022. The large backlog increase is due to a large research project that came under contract in the first quarter of fiscal 2023 that we believe will drive strong revenue numbers this fiscal year. The backlog for the Tools segment was $469,000 as of April 5, 2023 compared to $704,000 in fiscal 2022. Our Tools backlog has decreased in fiscal 2023 as our workforce has stabilized allowing us to produce more and reduce our past due backlog. Our order backlog is not necessarily indicative of future revenue to be generated from such orders due to the possibility of order cancellations and dealer discount arrangements we may enter into from time to time.

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Liquidity and Capital Resources

Our primary source of funds for the three months ended February 28, 2023 was cash generated by our operating activities. We collected approximately $2.5 million in customer deposits on our early order program for fiscal 2023 which we then used to fund a million dollar increase in our inventory. The early order deposit program helps us better plan our production schedule to maximize plant efficiency and helps us lock in material pricing for the year. The large influx of deposits helped to lower our line of credit balance and overall, we retired approximately a million dollars of debt in the first quarter of fiscal 2023. We also saw a large increase in our receivables due to increased sales and large billings in our Modular Buildings segment in February 2023, which we expect to provide a source of cash. We expect our primary capital needs for the remainder of fiscal 2023 to relate to operating costs for the fulfillment of customer deposits, capital expenditures to continue improving operations and the retirement of debt.

We have a $5,000,000 revolving line of credit with Bank Midwest that, as of February 28, 2023, had an outstanding principal balance of $3,055,559. This line of credit was renewed on March 30, 2023 and is scheduled to mature on March 30, 2024.

The Company also has up to $2,454,472 available funds that can potentially be utilized by June 30, 2023 under a Common Stock Purchase Agreement with Alumni Capital LP, subject to certain limitations, conditions and market conditions.

We believe our current financing arrangements will provide sufficient cash to finance operations and pay debt when due during the next twelve months. We expect to continue to be able to procure financing upon reasonable terms.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The 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 effective as of February 28, 2023. Our management has concluded that the consolidated financial statements included in this report 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.

Changes in Internal Control over Financial Reporting

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

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

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

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

The following table presents the information with respect to purchases made by us of our common stock during the first quarter of fiscal 2023:

	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
December 1 to December 31, 2022		-	$	-		N/A		N/A
January 1 to January 31, 2023		8,125	$	2.50		N/A		N/A
February 1 to February 28, 2023		-	$	-		N/A		N/A
Total		8,125	$	2.50

⁽¹⁾ Reflects shares withheld pursuant to the terms of restricted stock awards under our 2020 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.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Line of Credit Renewals and Change in Terms Agreement

Effective March 30, 2023, we renewed our $5,000,000 revolving line of credit with Bank Midwest. The revolving line of credit matures on March 30, 2024 and requires monthly interest-only payments. The updated Promissory Note with Bank Midwest is included as Exhibit 10.1 hereto and is incorporated herein.

Effective March 30, 2023, we agreed to a change in terms on our $350,000 roof term loan with Bank Midwest. The interest rate changed to a fixed 7.0% from a floating rate of 2.0% plus the Wall Street Journal rate. The updated Promissory Note with Bank Midwest is included as Exhibit 10.2 hereto and is incorporated herein.

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Item 6. Exhibits.

Exhibit No.	Description
3.1	Conformed Certificate of Incorporation of Art’s-Way Manufacturing Co., Inc. – incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2020.
3.2	Conformed 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, 2020.
4.1	Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 – incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2019.
31.1	Certificate of Chief Executive Officer pursuant to 17 CFR 13a-14(a) – filed herewith.
32.1	Certificate of Chief Financial Officer pursuant to 17 CFR 13a-14(a) – filed herewith.
32.1	Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 - filed herewith.
32.2	Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 - filed herewith.
101	The following materials from this report, formatted in iXBRL (Inline Extensible Business Reporting Language) are filed herewith: (i) condensed consolidated balance sheets, (ii) condensed consolidated statement of operations, (iii) condensed consolidated statements of cash flows, and (iv) the notes to the condensed consolidated financial statements.
104	Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101).

23

SIGNATURES

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

	ART’S-WAY MANUFACTURING CO., INC.
Date: April 13, 2023		By: /s/ David A. King
		David A. King
		President and Chief Executive Officer
Date: April 13, 2023		By: /s/ Michael W. Woods
		Michael W. Woods
		Chief Financial Officer

24

EX-31.1

Exhibit 31.1

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

(SECTION 302 CERTIFICATION)

I, David A. King, certify that:

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

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

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

4. 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:	April 13, 2023	/s/ David A. King
		David A. King
		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 quarterly report on Form 10-Q of Art’s-Way Manufacturing Co., Inc.;

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

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

4. 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:	April 13, 2023	/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 quarterly report on Form 10-Q of Art’s-Way Manufacturing Co., Inc. (the “Company”) for the fiscal quarter ended February 28, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David A. King, 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:	April 13, 2023	/s/ David A. King
		David A. King
		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 quarterly report on Form 10-Q of Art’s-Way Manufacturing Co., Inc. (the “Company”) for the fiscal quarter ended February 28, 2023, 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:	April 13, 2023	/s/ Michael W. Woods
		Michael W. Woods
		Chief Financial Officer

XML

Document And Entity Information - shares	3 Months Ended
	Feb. 28, 2023	Apr. 05, 2023
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Feb. 28, 2023
Document Transition Report	false
Entity File Number	000-05131
Entity Registrant Name	ART’S-WAY MANUFACTURING CO., INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	42-0920725
Entity Address, Address Line One	5556 Highway 9
Entity Address, City or Town	Armstrong
Entity Address, State or Province	IA
Entity Address, Postal Zip Code	50514
City Area Code	712
Local Phone Number	208-8467
Title of 12(b) Security	Common stock $0.01 par value
Trading Symbol	ARTW
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		5,008,572
Entity Central Index Key	0000007623
Current Fiscal Year End Date	--11-30
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Feb. 28, 2023	Nov. 30, 2022
Current assets:
Cash	$ 4,012	$ 5,055
Accounts receivable-customers, net of allowance for doubtful accounts of $36,201 and $34,699 in 2023 and 2022, respectively	3,665,795	2,722,298
Inventories, net	11,604,761	10,611,552
Cost and profit in excess of billings	98,376	450,906
Other current assets	436,380	343,618
Total current assets	15,809,324	14,133,429
Property, plant, and equipment, net	6,330,449	6,178,917
Assets held for lease, net	361,845	400,325
Deferred income taxes	2,514,259	2,605,395
Other assets	588,631	630,248
Total assets	25,604,508	23,948,314
Current liabilities:
Accounts payable	2,502,302	2,630,966
Customer deposits	2,797,428	828,565
Billings in excess of cost and profit	676,917	328,041
Income taxes payable	3,500	3,500
Accrued expenses	1,300,701	1,283,204
Line of credit	3,055,559	3,924,500
Current portion of finance lease liabilities	172,619	170,835
Current portion of long-term debt	100,140	97,678
Total current liabilities	10,609,166	9,267,289
Long-term liabilities
Long-term portion of operating lease liabilities	21,422	24,016
Long-term portion of finance lease liabilities	558,293	602,131
Long-term debt, excluding current portion	2,874,226	2,904,241
Total liabilities	14,063,107	12,797,677
Commitments and Contingencies
Stockholders’ equity:
Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares in 2023 and 2022; issued and outstanding 0 shares in 2023 and 2022.	0	0
Common stock – $0.01 par value. Authorized 9,500,000 shares in 2023 and 2022; issued 5,100,921 in 2023 and 5,013,671 in 2022	51,009	50,137
Additional paid-in capital	4,615,188	4,547,172
Retained earnings	7,096,494	6,754,284
Treasury stock, at cost (72,699 shares in 2023 and 64,574 in 2022)	(221,290)	(200,956)
Total stockholders’ equity	11,541,401	11,150,637
Total liabilities and stockholders’ equity	$ 25,604,508	$ 23,948,314

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Feb. 28, 2023	Nov. 30, 2022
Accounts Receivable, Allowance for Credit Loss, Current	$ 36,201	$ 34,699
Preferred Stock, Par or Stated Value Per Share (in dollars per share)	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized (in shares)	500,000	500,000
Preferred Stock, Shares Issued (in shares)	0	0
Preferred Stock, Shares Outstanding, Ending Balance (in shares)	0	0
Common Stock, Par or Stated Value Per Share (in dollars per share)	$ 0.01	$ 0.01
Common Stock, Shares Authorized (in shares)	9,500,000	9,500,000
Common Stock, Shares, Issued (in shares)	5,100,921	5,013,671
Treasury Stock, Shares, Total (in shares)	72,699	64,574

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Consolidated Statements of Operations - USD ($)	3 Months Ended	12 Months Ended
	Feb. 28, 2023	Nov. 30, 2022
Sales	$ 7,894,785	$ 5,613,066
Cost of goods sold	5,545,663	4,420,922
Gross profit	2,349,122	1,192,144
Expenses
Engineering	128,295	134,071
Selling	594,265	487,156
General and administrative	1,077,975	1,007,793
Total expenses	1,800,535	1,629,020
Income (loss) from operations	548,587	(436,876)
Other income (expense):
Interest expense	(127,505)	(76,704)
Other	12,310	(1,552)
Total other income (expense)	(115,195)	(78,256)
Income (loss) before income taxes	433,392	(515,132)
Income tax expense	91,182	(108,643)
Net Income (loss)	$ 342,210	$ (406,489)

XML

Consolidated Statements of Stockholders' Equity - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Total
Balance, November 30, 2021 (in shares) at Nov. 30, 2021	4,583,504			44,532
Balance, November 30, 2021 at Nov. 30, 2021	$ 45,835	$ 3,760,649	$ 6,656,487	$ (108,524)	$ 10,354,447
Stock based compensation (in shares)	91,167			10,406
Stock based compensation	$ 912	69,052	0	$ (34,905)	35,059
Net (loss)	0	0	(406,489)	0	(406,489)
Net (loss)	$ 0	0	(406,489)	$ 0	(406,489)
Balance, February 28, 2022 (in shares) at Feb. 28, 2022	4,674,671			54,938
Balance, February 28, 2022 at Feb. 28, 2022	$ 46,747	3,829,701	6,249,998	$ (143,429)	9,983,017
Balance, November 30, 2021 (in shares) at Nov. 30, 2021	4,583,504			44,532
Balance, November 30, 2021 at Nov. 30, 2021	$ 45,835	3,760,649	6,656,487	$ (108,524)	10,354,447
Net (loss)					(406,489)
Net (loss)					(406,489)
Balance, February 28, 2022 (in shares) at Nov. 30, 2022	5,013,671			64,574
Balance, February 28, 2022 at Nov. 30, 2022	$ 50,137	4,547,172	6,754,284	$ (200,956)	11,150,637
Balance, November 30, 2021 (in shares) at Feb. 28, 2022	4,674,671			54,938
Balance, November 30, 2021 at Feb. 28, 2022	$ 46,747	3,829,701	6,249,998	$ (143,429)	9,983,017
Net (loss)					342,210
Net (loss)					342,210
Balance, February 28, 2022 (in shares) at Feb. 28, 2023	5,100,921			72,699
Balance, February 28, 2022 at Feb. 28, 2023	$ 51,009	4,615,188	7,096,494	$ (221,290)	11,541,401
Balance, November 30, 2021 (in shares) at Nov. 30, 2022	5,013,671			64,574
Balance, November 30, 2021 at Nov. 30, 2022	$ 50,137	4,547,172	6,754,284	$ (200,956)	11,150,637
Stock based compensation (in shares)	87,250			8,125
Stock based compensation	$ 872	68,016	0	$ (20,334)	48,554
Net (loss)	0	0	342,210	0	342,210
Net (loss)	$ 0	0	342,210	$ 0	342,210
Balance, February 28, 2022 (in shares) at Feb. 28, 2023	5,100,921			72,699
Balance, February 28, 2022 at Feb. 28, 2023	$ 51,009	$ 4,615,188	$ 7,096,494	$ (221,290)	$ 11,541,401

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Feb. 28, 2023	Feb. 28, 2022
Cash flows from operations:
Net income (loss)	$ 342,210	$ (406,489)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock based compensation	68,888	69,964
Decrease in obsolete inventory reserves	(27,086)	(140,485)
Gain on disposal of property, plant, and equipment	(2,900)	0
Depreciation and amortization expense	238,903	167,542
Accrued interest on deferred debt payments	0	4,213
Increase (Decrease) in allowance for doubtful accounts	1,502	(11,440)
Deferred income taxes	91,136	(109,039)
Changes in assets and liabilities:
Accounts receivable	(944,999)	1,091,906
Inventories	(966,123)	(349,727)
Other assets	(92,762)	(506,294)
Accounts payable	(128,664)	(183,362)
Contracts in progress, net	701,406	119,397
Customer deposits	1,968,863	1,616,276
Income taxes payable	0	(500)
Accrued expenses	18,223	(193,146)
Net cash provided by operating activities	1,268,597	1,168,816
Cash flows from investing activities:
Purchases of property, plant, and equipment	(313,657)	(174,133)
Net proceeds from sale of assets	2,900	0
Net cash used in investing activities	(310,757)	(174,133)
Cash flows from financing activities:
Net change in line of credit	(868,941)	(924,000)
Principal payments on finance lease obligations	(42,055)	(11,946)
Repayment of term debt	(27,553)	(23,029)
Repurchases of common stock	(20,334)	(34,905)
Net cash used in financing activities	(958,883)	(993,880)
Net increase (decrease) in cash	(1,043)	803
Cash at beginning of period	5,055	2,658
Cash at end of period	4,012	3,461
Supplemental disclosures of cash flow information:
Interest	122,315	69,754
Income taxes	46	0
Amortization of operating lease ROU assets (included in other assets)	$ 3,319	$ 0

XML

Note 1 - Description of the Company

3 Months Ended

Feb. 28, 2023

Notes to Financial Statements

Nature of Operations [Text Block]

1) Description of the Company

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

The Company began operations as a farm equipment manufacturer in 1956. Since that time, it has become a major worldwide manufacturer of agricultural equipment. Its principal manufacturing plant is located in Armstrong, Iowa.

The Company has organized its 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. The Agricultural Products segment manufactures and sells farm equipment and related replacement parts under the Art’s-Way Manufacturing label and private labels. The Modular Buildings segment manufactures and installs modular buildings for animal containment and various laboratory uses, and the Tools segment manufactures steel cutting tools and inserts.

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Note 2 - Summary of Significant Accounting Policies

3 Months Ended

Feb. 28, 2023

Notes to Financial Statements

Significant Accounting Policies [Text Block]

2) 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 10-K for the fiscal year ended November 30, 2022. The results of operations for the three months ended February 28, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2023.

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, 2023. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 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 2016-13 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 2016-13 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.

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Note 3 - Disaggregation of Revenue

3 Months Ended

Feb. 28, 2023

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

3) 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.

	Three Months Ended February 28, 2023
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	4,732,000	$	-	$	-	$	4,732,000
Farm equipment service parts		630,000		-		-		630,000
Steel cutting tools and inserts		-		-		799,000		799,000
Modular buildings		-		1,601,000		-		1,601,000
Modular building lease income		-		32,000		-		32,000
Other		83,000		9,000		9,000		101,000
	$	5,445,000	$	1,642,000	$	808,000	$	7,895,000

	Three Months Ended February 28, 2022
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	3,515,000	$	-	$	-	$	3,515,000
Farm equipment service parts		558,000		-		-		558,000
Steel cutting tools and inserts		-		-		574,000		574,000
Modular buildings		-		851,000		-		851,000
Modular building lease income		-		-		-		-
Other		88,000		17,000		10,000		115,000
	$	4,161,000	$	868,000	$	584,000	$	5,613,000

The Company offered floorplan terms in its Agricultural Products segment during its Fall of 2021 and 2022 early order program to incentivize customers to stock farm equipment on their lots for fiscal 2022 and fiscal 2023. Floorplan terms allow customers to pay the Company at the earliest of retail date or 180 days. This program has an effect on the timing of the Company’s cash flows compared with historical cash flows.

On February 28, 2023, the Company had approximately $950,000 in receivables on the floorplan program with a due date greater than 30 days compared to $468,000 on February 28, 2022

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Note 4 - Contract Receivables, Contract Assets and Contract Liabilities

3 Months Ended

Feb. 28, 2023

Notes to Financial Statements

Contract Receivable, Contract Assets, and Contract Liabilities [Text Block]

4) 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 Condensed Consolidated Balance Sheets.

	February 28, 2023		November 30, 2022
Receivables	$	3,666,000	$	2,722,000
Assets		98,000		451,000
Liabilities		3,474,000		1,157,000

The amount of revenue recognized in the first three months of fiscal 2023 that was included in a contract liability on November 30, 2022 was approximately $827,000 compared to $415,000 in the same period of fiscal 2022. The beginning contract receivables, assets and liabilities on December 1, 2021 were approximately $2,663,000; $177,000 and $559,000, respectively. The increase in contract receivables on February 28, 2023 is due to a 40.7% increase in revenue for Q1 of fiscal 2023 and the timing of contract billings that were outstanding at quarter end. Contract liabilities increased significantly during the three months ended February 28, 2022 as the Company received a large number of deposits from our fall early order program. The Company incentivizes cash deposits in exchange for discounts to lock in inventory pricing and help with planning to maximize plant efficiency in the agricultural products segment.

The Company utilizes the practical expedient exception for these contracts and will report only on performance obligations greater than one year. As of February 28, 2023, the Company has no performance obligations with an original expected duration greater than one year.

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Note 5 - Net Income (Loss) Per Share of Common Stock

3 Months Ended

Feb. 28, 2023

Notes to Financial Statements

Earnings Per Share [Text Block]

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

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

Basic and diluted net income (loss) per share have been computed based on the following as of February 28, 2023 and February 28, 2022:

	For the Twelve Months Ended
	February 28, 2023		February 28, 2022
Numerator for basic and diluted net income (loss) per share:
Net income (loss)	$	342,210	$	(406,489	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,976,955		4,569,720
Effect of dilutive stock options		-		-
For diluted net income (loss) per share - weighted average common shares outstanding		4,976,955		4,569,720
Net Income (Loss) per share - Basic:
Net Income (Loss) per share	$	0.07	$	(0.09	)
Net Income (Loss) per share - Diluted:
Net Income (Loss) per share	$	0.07	$	(0.09	)

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Note 6 - Inventory

3 Months Ended

Feb. 28, 2023

Notes to Financial Statements

Inventory Disclosure [Text Block]

6) Inventory

Major classes of inventory are:

	February 28, 2023			November 30, 2022
Raw materials	$	9,600,930		$	8,700,719
Work in process		529,812			624,781
Finished goods		3,134,526			3,029,099
Total Gross Inventory	$	13,265,268		$	12,354,599
Less: Reserves		(1,660,507	)		(1,743,047	)
Net Inventory	$	11,604,761		$	10,611,552

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Note 7 - Accrued Expenses

3 Months Ended

Feb. 28, 2023

Notes to Financial Statements

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

7) Accrued Expenses

Major components of accrued expenses are:

	February 28, 2023		November 30, 2022
Salaries, wages, and commissions	$	763,350	$	755,708
Accrued warranty expense		194,464		193,301
Other		342,887		334,195
	$	1,300,701	$	1,283,204

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Note 8 - Assets Held for Lease

3 Months Ended

Feb. 28, 2023

Notes to Financial Statements

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

8) Assets Held for Lease

Major components of assets held for lease are:

	February 28, 2023		November 30, 2022
Modular Buildings	$	361,845	$	400,325
Total assets held for lease	$	361,845	$	400,325

The Company recognized $32,025 in rents from assets held for lease that were included in sales on the Condensed Consolidated Statements of Operations during the three months ended February 28, 2023 compared to none for the three months ended February 28, 2022.

The Company has $46,591 of future minimum lease receipts expected to be recognized in fiscal 2023 from assets held for lease as of February 28, 2023.

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Note 9 - Product Warranty

3 Months Ended

Feb. 28, 2023

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. The accrued warranty balance is included in accrued expenses as shown in Note 7 “Accrued Expenses.” Changes in the Company’s product warranty liability for the three months ended February 28, 2023 and February 28, 2022 are as follows:

	For the Three Months Ended
	February 28, 2023			February 28, 2022
Balance, beginning	$	193,301		$	202,850
Settlements / adjustments		115,596			21,624
Warranties issued		(114,433	)		(109,412	)
Balance, ending	$	194,464		$	115,062

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Note 10 - Loan and Credit Agreements

3 Months Ended

Feb. 28, 2023

Notes to Financial Statements

Debt Disclosure [Text Block]

10) Loan and Credit Agreements

Bank Midwest Revolving Lines of Credit and Term Loans

The Company maintains a $5,000,000 revolving line of credit (the “Line of Credit”) with Bank Midwest. On February 28, 2023, the balance of the Line of Credit was $3,055,559 with $1,944,441 remaining available, as may be limited by the borrowing base calculation. The Line of Credit borrowing base is an amount equal to 75% of accounts receivable balances (discounted for aged receivables), plus 50% of net inventory, less any outstanding loan balance on the Line of Credit. On February 28, 2023, the Line of Credit was not limited by the borrowing base calculation. Any unpaid principal amount borrowed on the Line of Credit accrues interest at a floating rate per annum equal to 1.25% 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 9.25% per annum. The Line of Credit was most recently renewed on March 30, 2023 which dropped the floating interest rate from 1.50% to 1.25% above the Wall Street Journal rate. The Line of Credit matures on March 30, 2024 and requires monthly interest-only payments. The Line of Credit is governed by the terms of a Promissory Note, dated March 28, 2023, entered into between the Company and Bank Midwest.

The Company carries a $2,600,000 term loan with Bank Midwest due October 1, 2037 (the “Term Loan”), and a $350,000 term loan (the “Roof Term Loan”) due on May 15, 2027. The Term Loan accrued interest at a rate of 5.00% for the first ninety months, which ended on September 28, 2022. Thereafter, the Term Loan interest rate was reset to a fixed rate of 7% based on prime plus 0.75% on the reset date. 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 $19,648 in principal and interest are required. The Term 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 Term Loan, in an amount equal to their stock ownership percentage. The J. Ward McConnell Jr. Living Trust, the estate of the former 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 the Term Loan, for an annual fee of 2% of the personally guaranteed amount. The initial guarantee fee will be amortized over the life of the Term Loan, and the annual fees and personally guaranteed amounts are expensed monthly. The Term Loan is governed by the terms of a Promissory Note, dated September 28, 2017, entered into between the Company and Bank Midwest.

In connection with the 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 Line of Credit, as set forth in Commercial Guaranties, each dated September 28, 2017.

The Company also entered into the Roof Term Loan of $350,000 with Bank Midwest on May 17, 2022. The Roof Term Loan’s proceeds were used to fix sections of the Armstrong facility’s roof. The Roof Term Loan requires 59 regular payments of $2,972 and an estimated balloon payment of $294,168 on the maturity date of May 15, 2027. Any unpaid principal amount borrowed on the Roof Term Loan accrues interest at a rate of 7.0% per annum. The loan previously accrued interest at a floating rate per annum equal to 2.00% above the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The Company entered into a Change of Terms Agreement with Bank Midwest on March 30, 2023 which modified the interest rate terms of the promissory note. The Roof Term Loan is further governed by the terms of a Promissory Note, dated May 17, 2022, entered into between the Company and Bank Midwest.

To further secure the Line of Credit, the Company granted Bank Midwest a mortgage on its Canton, Ohio property held by Ohio Metal Working Products/Art’s-Way Inc. The 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 on November 30. The terms of the Bank Midwest loan agreements require the Company to maintain a minimum of $4,000,000 of monthly 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 received the necessary approvals for purchases of equipment over $100,000 for the twelve months ended November 30, 2022. The Company was out of compliance with its debt to worth ratio by fifteen percentage points on the Bank Midwest loans as of November 30, 2022. Bank Midwest issued a waiver forgiving the noncompliance, and in turn waived the event of default. The next measurement date is November 30, 2023 for all covenants except the monthly working capital requirement.

SBA Economic Injury Disaster Loans

In June of 2020, the Company executed the standard loan documents required for securing loans offered by the U.S. Small Business Administration under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. Two loans were executed on June 18, 2020 with principal amounts of $150,000 each, with a third loan being executed on June 24, 2020 with a principal amount of $150,000. Proceeds from these EIDLs are being used for working capital purposes. Interest accrues at the rate of 3.75% per annum and will accrue from the date of inception. Installment payments, including principal and interest, were due monthly beginning December 18, 2022 (thirty months from the date of the EIDLs) and December 24, 2022 in the amount of $731 per EIDL. On March 11, 2021, the American Rescue Plan Act of 2021 was enacted, which extended the first due date for repayment of EIDLs made in 2020 from 12 months to 30 months from the date of the note. The balance of principal and interest is payable 30 years from the date of the EIDL. The EIDLs are secured by a security interest on all of the Company’s assets. Each EIDL is governed by the terms of a separate Promissory Note, dated either June 18, 2020 or June 24, 2020, as applicable, entered into by the Company or the applicable subsidiary. EID

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

	February 28, 2023		November 30, 2022
Bank Midwest loan payable in monthly installments of $19,648 including interest at 7.00%, due October 1, 2037		2,145,225		2,165,554
Bank Midwest loan payable in monthly installments of $2,972 including interest at 7.0%, due May 15, 2027		344,331		344,932
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning December 18, 2022, due June 18, 2050		162,862		163,793
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning December 18, 2022, due June 18, 2050		163,045		163,728
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning December 24, 2022, due June 24, 2050		158,903		163,912
Total term debt	$	2,974,366	$	3,001,919
Less current portion of term debt		100,140		97,678
Term debt, excluding current portion	$	2,874,226	$	2,904,241

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

Year	Amount
2023	$	74,476
2024		103,804
2025		111,745
2026		119,740
2027		447,557
2028 and thereafter		2,117,044
	$	2,974,366

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Note 11 - Income Taxes

3 Months Ended

Feb. 28, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

11) 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.

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Note 12 - Related Party Transactions

3 Months Ended

Feb. 28, 2023

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

12) Related Party Transactions

During the three months ended February 28, 2023 and February 28, 2022, 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 previously owned by the late J. Ward McConnell, Jr., the former Vice Chairman of the Company’s Board of Directors and currently owned by his son, Marc McConnell, the Chairman of the Company’s Board of Directors, who 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.’s estate, the J. Ward McConnell, Jr. Living Trust, is paid a monthly fee for the guarantee. In the three months ended February 28, 2023, the Company recognized $4,170 of expense for transactions with related parties, compared to $9,349 for the three months ended February 28, 2022. As of February 28, 2023, accrued expenses contained a balance of $1,385 owed to a related party compared to $1,299 on February 28, 2022.

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Note 13 - Leases

3 Months Ended

Feb. 28, 2023

Notes to Financial Statements

Leases [Text Block]

13) Leases

The Company determines if an arrangement is a lease at inception of a contract. The nature of the Company’s leases at this time is shop machinery and office equipment, mainly copiers, with terms of 12 to 60 months. Operating and finance leases are included in other assets as lease right-of-use (“ROU”) assets on the Consolidated Balance Sheets while current operating lease liabilities are included in accrued expenses. The short-term portion of finance leases along with long-term portions of operating and finance lease liabilities are presented on the face of the Consolidated Balance Sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the present value payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense for lease payments is recognized on a straight-line basis over the lease term while finance lease ROU assets are amortized on a straight-line basis and interest expense is recorded over the lease term.

The Company has copier lease agreements with lease and non-lease components and has elected the practical expedient not to separate lease and non-lease components for this asset class. The Company has also elected not to recognize lease liabilities and ROU assets for leases with an initial term of twelve months or less. The Company recognizes variable costs that depend on usage in profit or loss as they are incurred.

The components of operating leases on the Condensed Consolidated Balance Sheets on February 28, 2023 and November 30, 2022 were as follows:

	February 28, 2023		November 30, 2022
Operating lease right-of-use assets (other assets)	$	31,612		34,931
Current portion of operating lease liabilities (accrued expenses)	$	10,190		10,915
Long-term portion of operating lease liabilities		21,422		24,016
Total operating lease liabilities	$	31,612		34,931

The Company recorded $5,192 of operating lease costs in the three months ended February 28, 2023, which included variable costs tied to usage, compared to $4,843 for the three months ended February 28, 2022. The Company’s operating leases carry a weighted average lease term of 37 months and have a weighted average discount rate of 4.82%

Future maturities of operating lease liabilities are as follows:

Year Ending November 30,
2023	8,616
2024	11,162
2025	9,532
2026	4,765
Total lease payments	34,075
Less imputed interest	(2,463	)
Total operating lease liabilities	31,612

The components of finance leases on the Consolidated Balance Sheets on February 28, 2023 and November 30, 2022 were as follows:

	February 28, 2023		November 30, 2022
Finance lease right-of-use assets (net of amortization in other assets)	$	503,080	$	540,052
	$	503,080	$	540,052
Current portion of finance lease liabilities (accrued expenses)	$	172,619	$	170,835
Long-term portion of finance lease liabilities		558,293		602,131
Total finance lease liabilities	$	730,912	$	772,966

Future maturities of finance lease liabilities as of February 28, 2023 are as follows:

Year Ending November 30,
2023	$	149,877
2024		211,219
2025		157,393
2026		155,809
2027		122,823
Total lease payments		797,121
Less imputed interest		(66,209	)
Total finance lease liabilities	$	730,912

The weighted average lease term of the Company’s finance leases is 48 months while the weighted average rate of finance leases is 4.18%. The Company incurred $36,971 of amortization expense from ROU assets related to finance leases in the first three months ending February 28, 2023 compared to $16,142 for the same period in 2022.

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Note 14 - Equity Incentive Plan and Stock Based Compensation

3 Months Ended

Feb. 28, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

14) Equity Incentive Plan and Stock Based Compensation

On February 25, 2020, the Board of Directors of the Company (the “Board”) authorized and approved the Art’s-Way Manufacturing Co., Inc. 2020 Equity Incentive Plan (the “2020 Plan”). The 2020 Plan was approved by the stockholders on April 30, 2020. The 2020 Plan replaced the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan (the “2011 Plan”) and prior plans. The 2020 Plan added an additional 500,000 shares to the number of shares reserved for issuance pursuant to equity awards. No further awards will be made under the 2011 Plan or other prior plans. Awards to directors and executive officers under the 2020 Plan are governed by the forms of agreement approved by the Board of Directors. Stock options or other awards granted prior to February 25, 2020 are governed by the applicable prior plan and the forms of agreement adopted thereunder.

The 2020 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 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 or initially 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.

Shares issued under the 2020 Plan for the three months ended February 28, 2023 and 2022 are as follows:

	For the Three Months Ended
	February 28, 2023		February 28, 2022
Shares issued to directors (immediate vesting)		5,000		5,000
Shares issued to directors, employees, and consultants (three-year vesting)		82,250		94,500
Unvested shares forfeit upon termination		-		(8,333	)
Total shares issued		87,250		91,167

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Note 15 - Common Stock Purchase Agreement

3 Months Ended

Feb. 28, 2023

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

15) Common Stock Purchase Agreement

On March 29, 2022, Art’s-Way Manufacturing Co., Inc. (the “Company”) entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Alumni Capital LP, a Delaware limited partnership (“Alumni Capital”), pursuant to which the Company agreed to sell, and Alumni Capital agreed to purchase, upon request of the Company in one or more transactions, a number of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) providing aggregate gross proceeds to the Company of up to $3,000,000 (the “Maximum”). The Purchase Agreement expires upon the earlier of the aggregate gross proceeds from the sale of shares meeting the maximum or June 30, 2023.

Among other limitations, unless otherwise agreed upon by Alumni Capital, each sale of shares will be limited to 50,000 shares and further limited to no more than the number of shares that would result in the beneficial ownership by Alumni Capital and its affiliates, at any single point in time, of more than 9.99% of the then-outstanding shares of Common Stock. Alumni Capital will purchase the shares of Common Stock under the Agreement at a discount ranging from 3-5% of the lowest traded price of the Common Stock in the five business days preceding the Company delivering notice of the required purchase of shares to Alumni Capital.

In exchange for Alumni Capital entering into the Purchase Agreement, the Company issued 20,000 shares of Common Stock to Alumni Capital upon execution of the Purchase Agreement (the “Initial Commitment Shares”) and issued another 20,000 shares in connection with the first closing under the Purchase Agreement (with the Initial Commitment Shares, the “Commitment Shares”). Alumni Capital represented to the Company, among other things, that it was an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”)). The Company shares of Common Stock, including the Commitment Shares, are being offered and sold under the Purchase Agreement in reliance upon an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. The securities sold may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

The Purchase Agreement provided that the Company file a registration statement under the Securities Act covering the resale of the shares issued to Alumni Capital. Alumni Capital’s obligation to purchase shares of Common Stock under the Purchase Agreement is conditioned upon, among other things, the registration statement having been declared effective by the Securities and Exchange Commission. The Company filed a registration statement on Form S-3 (the “Registration Statement”) April 27, 2022 which was declared effective on August 9, 2022 by the SEC.

The Company evaluated the embedded options and believed they should not be bifurcated from the agreement and accounted for separately as it is indexed to the Company’s stock and would qualify for equity treatment on the balance sheet.

The Company incurred approximately $203,000 of expense related to equity issuance in the twelve months ended November 30, 2022 in the form of 40,000 commitment shares valued at approximately $160,000, attorney fees for the negotiation and execution of the Purchase Agreement and the preparation and filing of the registration statement. These equity issuance costs reduced proceeds received under the common stock purchase agreement in additional paid in capital in the 2022 fiscal year.

Below is a summary of shares purchased by Alumni Capital under this agreement as of the filing date of this report:

Date	Shares		Share price net of discount		Proceeds
7/25/2022		50,000	$	2.07	$	103,305
8/03/2022		50,000	$	1.98	$	98,940
8/15/2022		50,000	$	2.00	$	99,910
8/23/2022		65,000	$	1.99	$	129,253
9/23/2022		65,000	$	1.76	$	114,120
Total		280,000			$	545,528

The Company has $2,454,472 of funding under the common stock purchase agreement that can be utilized as of February 28, 2023, subject to the limitations and conditions summarized above.

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Note 16 - Disclosures About the Fair Value of Financial Instruments

3 Months Ended

Feb. 28, 2023

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. On February 28, 2023 and November 30, 2022, the carrying amount approximated fair value for cash, accounts receivable, accounts payable, notes payable to bank, finance lease liabilities 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 finance lease liabilities also approximate 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 term loans payable also approximates recorded value because the interest rates charged under the loan terms are not substantially different from current interest rates.

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Note 17 - Segment Information

3 Months Ended

Feb. 28, 2023

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

17) Segment Information

The Company has three reportable segments: Agricultural Products, Modular Buildings and Tools. The Agricultural Products segment manufactures and sells farm equipment and related replacement parts under the Art’s-Way Manufacturing label. The Modular Buildings segment manufactures and installs modular buildings for various uses, commonly animal containment and research laboratories. The Tools segment manufactures steel cutting tools and inserts.

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

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

	Three Months Ended February 28, 2023
	Agricultural Products		Modular Buildings		Tools			Consolidated
Revenue from external customers	$	5,445,000	$	1,642,000	$	808,000		$	7,895,000
Income (loss) from operations	$	502,000	$	42,000	$	5,000		$	549,000
Income (loss) before tax	$	407,000	$	36,000	$	(10,000	)	$	433,000
Total Assets	$	19,761,000	$	3,291,000	$	2,553,000		$	25,605,000
Capital expenditures	$	252,000	$	44,000	$	18,000		$	314,000
Depreciation & Amortization	$	125,000	$	77,000	$	37,000		$	239,000

	Three Months Ended February 28, 2022
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	4,161,000		$	868,000		$	584,000		$	5,613,000
Income (loss) from operations	$	(129,000	)	$	(223,000	)	$	(85,000	)	$	(437,000	)
Income (loss) before tax	$	(186,000	)	$	(230,000	)	$	(99,000	)	$	(515,000	)
Total Assets	$	15,784,000		$	2,695,000		$	2,373,000		$	20,852,000
Capital expenditures	$	153,000		$	14,000		$	7,000		$	174,000
Depreciation & Amortization	$	101,000		$	34,000		$	33,000		$	168,000

*The consolidated total in the tables is a sum of segment figures and may not tie to actual figures in the condensed consolidated financial statements due to rounding.

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Note 18 - Subsequent Events

3 Months Ended

Feb. 28, 2023

Notes to Financial Statements

Subsequent Events [Text Block]

18) Subsequent Events

Management evaluated all other activity of the Company and concluded that no subsequent events have occurred that would require recognition in the condensed consolidated financial statements other than the line of credit renewal and change in terms on the roof term loan as discussed in “Item 1 - Notes to Condensed Consolidated Financial Statements - Note 10 Loan and Credit Agreements.”

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Significant Accounting Policies (Policies)	3 Months Ended
	Feb. 28, 2023
Accounting Policies [Abstract]
Basis of Accounting, Policy [Policy Text Block]	Statement PresentationThe 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 10-K for the fiscal year ended November 30, 2022. The results of operations for the three months ended February 28, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2023.
Use of Estimates, Policy [Policy Text Block]	EstimatesThe 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, 2023. Actual results could differ from those estimates.
New Accounting Pronouncements, Policy [Policy Text Block]	Recently Issued Accounting PronouncementsAccounting Pronouncements Not Yet AdoptedMeasurement of Credit Losses on Financial InstrumentsIn June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 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 2016-13 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 2016-13 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.

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Note 3 - Disaggregation of Revenue (Tables)

3 Months Ended

Feb. 28, 2023

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three Months Ended February 28, 2023
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	4,732,000	$	-	$	-	$	4,732,000
Farm equipment service parts		630,000		-		-		630,000
Steel cutting tools and inserts		-		-		799,000		799,000
Modular buildings		-		1,601,000		-		1,601,000
Modular building lease income		-		32,000		-		32,000
Other		83,000		9,000		9,000		101,000
	$	5,445,000	$	1,642,000	$	808,000	$	7,895,000

	Three Months Ended February 28, 2022
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	3,515,000	$	-	$	-	$	3,515,000
Farm equipment service parts		558,000		-		-		558,000
Steel cutting tools and inserts		-		-		574,000		574,000
Modular buildings		-		851,000		-		851,000
Modular building lease income		-		-		-		-
Other		88,000		17,000		10,000		115,000
	$	4,161,000	$	868,000	$	584,000	$	5,613,000

XML

Note 4 - Contract Receivables, Contract Assets and Contract Liabilities (Tables)

3 Months Ended

Feb. 28, 2023

Notes Tables

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

	February 28, 2023		November 30, 2022
Receivables	$	3,666,000	$	2,722,000
Assets		98,000		451,000
Liabilities		3,474,000		1,157,000

XML

Note 5 - Net Income (Loss) Per Share of Common Stock (Tables)

3 Months Ended

Feb. 28, 2023

Notes Tables

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

	For the Twelve Months Ended
	February 28, 2023		February 28, 2022
Numerator for basic and diluted net income (loss) per share:
Net income (loss)	$	342,210	$	(406,489	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,976,955		4,569,720
Effect of dilutive stock options		-		-
For diluted net income (loss) per share - weighted average common shares outstanding		4,976,955		4,569,720
Net Income (Loss) per share - Basic:
Net Income (Loss) per share	$	0.07	$	(0.09	)
Net Income (Loss) per share - Diluted:
Net Income (Loss) per share	$	0.07	$	(0.09	)

XML

Note 6 - Inventory (Tables)

3 Months Ended

Feb. 28, 2023

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	February 28, 2023			November 30, 2022
Raw materials	$	9,600,930		$	8,700,719
Work in process		529,812			624,781
Finished goods		3,134,526			3,029,099
Total Gross Inventory	$	13,265,268		$	12,354,599
Less: Reserves		(1,660,507	)		(1,743,047	)
Net Inventory	$	11,604,761		$	10,611,552

XML

Note 7 - Accrued Expenses (Tables)

3 Months Ended

Feb. 28, 2023

Notes Tables

Schedule of Accrued Liabilities [Table Text Block]

	February 28, 2023		November 30, 2022
Salaries, wages, and commissions	$	763,350	$	755,708
Accrued warranty expense		194,464		193,301
Other		342,887		334,195
	$	1,300,701	$	1,283,204

XML

Note 8 - Assets Held for Lease (Tables)

3 Months Ended

Feb. 28, 2023

Notes Tables

Property, Plant, and Equipment, Lessor Asset under Operating Lease [Table Text Block]

	February 28, 2023		November 30, 2022
Modular Buildings	$	361,845	$	400,325
Total assets held for lease	$	361,845	$	400,325

XML

Note 9 - Product Warranty (Tables)

3 Months Ended

Feb. 28, 2023

Notes Tables

Schedule of Product Warranty Liability [Table Text Block]

	For the Three Months Ended
	February 28, 2023			February 28, 2022
Balance, beginning	$	193,301		$	202,850
Settlements / adjustments		115,596			21,624
Warranties issued		(114,433	)		(109,412	)
Balance, ending	$	194,464		$	115,062

XML

Note 10 - Loan and Credit Agreements (Tables)

3 Months Ended

Feb. 28, 2023

Notes Tables

Schedule of Debt [Table Text Block]

	February 28, 2023		November 30, 2022
Bank Midwest loan payable in monthly installments of $19,648 including interest at 7.00%, due October 1, 2037		2,145,225		2,165,554
Bank Midwest loan payable in monthly installments of $2,972 including interest at 7.0%, due May 15, 2027		344,331		344,932
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning December 18, 2022, due June 18, 2050		162,862		163,793
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning December 18, 2022, due June 18, 2050		163,045		163,728
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning December 24, 2022, due June 24, 2050		158,903		163,912
Total term debt	$	2,974,366	$	3,001,919
Less current portion of term debt		100,140		97,678
Term debt, excluding current portion	$	2,874,226	$	2,904,241

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

Year	Amount
2023	$	74,476
2024		103,804
2025		111,745
2026		119,740
2027		447,557
2028 and thereafter		2,117,044
	$	2,974,366

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Note 13 - Leases (Tables)

3 Months Ended

Feb. 28, 2023

Notes Tables

Lessee, Operating Leases, Assets and Liabilities [Table Text Block]

	February 28, 2023		November 30, 2022
Operating lease right-of-use assets (other assets)	$	31,612		34,931
Current portion of operating lease liabilities (accrued expenses)	$	10,190		10,915
Long-term portion of operating lease liabilities		21,422		24,016
Total operating lease liabilities	$	31,612		34,931

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

Year Ending November 30,
2023	8,616
2024	11,162
2025	9,532
2026	4,765
Total lease payments	34,075
Less imputed interest	(2,463	)
Total operating lease liabilities	31,612

Lessee, Finance Leases, Assets and Liabilities [Table Text Block]

	February 28, 2023		November 30, 2022
Finance lease right-of-use assets (net of amortization in other assets)	$	503,080	$	540,052
	$	503,080	$	540,052
Current portion of finance lease liabilities (accrued expenses)	$	172,619	$	170,835
Long-term portion of finance lease liabilities		558,293		602,131
Total finance lease liabilities	$	730,912	$	772,966

Finance Lease, Liability, Fiscal Year Maturity [Table Text Block]

Year Ending November 30,
2023	$	149,877
2024		211,219
2025		157,393
2026		155,809
2027		122,823
Total lease payments		797,121
Less imputed interest		(66,209	)
Total finance lease liabilities	$	730,912

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Note 14 - Equity Incentive Plan and Stock Based Compensation (Tables)

3 Months Ended

Feb. 28, 2023

Notes Tables

Share-Based Payment Arrangement, Activity [Table Text Block]

	For the Three Months Ended
	February 28, 2023		February 28, 2022
Shares issued to directors (immediate vesting)		5,000		5,000
Shares issued to directors, employees, and consultants (three-year vesting)		82,250		94,500
Unvested shares forfeit upon termination		-		(8,333	)
Total shares issued		87,250		91,167

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Note 15 - Common Stock Purchase Agreement (Tables)

3 Months Ended

Feb. 28, 2023

Notes Tables

Schedule of Stockholders Equity [Table Text Block]

Date	Shares		Share price net of discount		Proceeds
7/25/2022		50,000	$	2.07	$	103,305
8/03/2022		50,000	$	1.98	$	98,940
8/15/2022		50,000	$	2.00	$	99,910
8/23/2022		65,000	$	1.99	$	129,253
9/23/2022		65,000	$	1.76	$	114,120
Total		280,000			$	545,528

XML

Note 17 - Segment Information (Tables)

3 Months Ended

Feb. 28, 2023

Notes Tables

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

	Three Months Ended February 28, 2023
	Agricultural Products		Modular Buildings		Tools			Consolidated
Revenue from external customers	$	5,445,000	$	1,642,000	$	808,000		$	7,895,000
Income (loss) from operations	$	502,000	$	42,000	$	5,000		$	549,000
Income (loss) before tax	$	407,000	$	36,000	$	(10,000	)	$	433,000
Total Assets	$	19,761,000	$	3,291,000	$	2,553,000		$	25,605,000
Capital expenditures	$	252,000	$	44,000	$	18,000		$	314,000
Depreciation & Amortization	$	125,000	$	77,000	$	37,000		$	239,000

	Three Months Ended February 28, 2022
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	4,161,000		$	868,000		$	584,000		$	5,613,000
Income (loss) from operations	$	(129,000	)	$	(223,000	)	$	(85,000	)	$	(437,000	)
Income (loss) before tax	$	(186,000	)	$	(230,000	)	$	(99,000	)	$	(515,000	)
Total Assets	$	15,784,000		$	2,695,000		$	2,373,000		$	20,852,000
Capital expenditures	$	153,000		$	14,000		$	7,000		$	174,000
Depreciation & Amortization	$	101,000		$	34,000		$	33,000		$	168,000

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Note 1 - Description of the Company (Details Textual)	3 Months Ended
	Feb. 28, 2023
Number of Operating Segments	3

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Note 3 - Disaggregation of Revenue (Details Textual) - USD ($)	Feb. 28, 2023	Feb. 28, 2022
Agricultural Products, Floorplan Program [Member]
Contract with Customer, Receivable, after Allowance for Credit Loss, Current, Total	$ 950,000	$ 468,000

XML

Note 3 - Disaggregation of Revenue - Disaggregated Revenue From External Customer (Details) - USD ($)	3 Months Ended
	Feb. 28, 2023	Feb. 28, 2022
Farm equipment	$ 7,895,000	$ 5,613,000
Farm Equipment [Member]
Farm equipment	4,732,000	3,515,000
Farm Equipment Service Parts [Member]
Farm equipment	630,000	558,000
Steel Cutting Tools and Inserts [Member]
Farm equipment	799,000	574,000
Modular Buildings [Member]
Farm equipment	1,601,000	851,000
Modular Buildings Lease Income [Member]
Farm equipment	32,000	0
Product and Service, Other [Member]
Farm equipment	101,000	115,000
Agricultural Products [Member]
Farm equipment	5,445,000	4,161,000
Agricultural Products [Member] | Farm Equipment [Member]
Farm equipment	4,732,000	3,515,000
Agricultural Products [Member] | Farm Equipment Service Parts [Member]
Farm equipment	630,000	558,000
Agricultural Products [Member] | Steel Cutting Tools and Inserts [Member]
Farm equipment	0	0
Agricultural Products [Member] | Modular Buildings [Member]
Farm equipment	0	0
Agricultural Products [Member] | Modular Buildings Lease Income [Member]
Farm equipment	0	0
Agricultural Products [Member] | Product and Service, Other [Member]
Farm equipment	83,000	88,000
Modular Buildings [Member]
Farm equipment	1,642,000	868,000
Modular Buildings [Member] | Farm Equipment [Member]
Farm equipment	0	0
Modular Buildings [Member] | Farm Equipment Service Parts [Member]
Farm equipment	0	0
Modular Buildings [Member] | Steel Cutting Tools and Inserts [Member]
Farm equipment	0	0
Modular Buildings [Member] | Modular Buildings [Member]
Farm equipment	1,601,000	851,000
Modular Buildings [Member] | Modular Buildings Lease Income [Member]
Farm equipment	32,000	0
Modular Buildings [Member] | Product and Service, Other [Member]
Farm equipment	9,000	17,000
Tools [Member]
Farm equipment	808,000	584,000
Tools [Member] | Farm Equipment [Member]
Farm equipment	0	0
Tools [Member] | Farm Equipment Service Parts [Member]
Farm equipment	0	0
Tools [Member] | Steel Cutting Tools and Inserts [Member]
Farm equipment	799,000	574,000
Tools [Member] | Modular Buildings [Member]
Farm equipment	0	0
Tools [Member] | Modular Buildings Lease Income [Member]
Farm equipment	0	0
Tools [Member] | Product and Service, Other [Member]
Farm equipment	$ 9,000	$ 10,000

XML

Note 4 - Contract Receivables, Contract Assets and Contract Liabilities (Details Textual) - USD ($)	3 Months Ended
	Feb. 28, 2023	Feb. 28, 2022	Nov. 30, 2022	Dec. 30, 2021	Nov. 30, 2021
Contract with Customer, Liability, Revenue Recognized	$ 827,000	$ 415,000
Construction Contractor, Receivable, Excluding Contract Retainage, Total	3,666,000		$ 2,722,000		$ 2,663,000
Contract with Customer, Asset, after Allowance for Credit Loss, Total	98,000		451,000	$ 177,000
Contract with Customer, Liability, Total	$ 3,474,000		$ 1,157,000	$ 559,000
Increase (Decrease) in Revenue, Percentage	40.70%

XML

Note 4 - Contract Receivables, Contract Assets and Contract Liabilities - Contract With Customers (Details) - USD ($)	Feb. 28, 2023	Nov. 30, 2022	Dec. 30, 2021	Nov. 30, 2021
Receivables	$ 3,666,000	$ 2,722,000		$ 2,663,000
Assets	98,000	451,000	$ 177,000
Liabilities	$ 3,474,000	$ 1,157,000	$ 559,000

XML

Note 5 - Net Income (Loss) Per Share of Common Stock- Basic and Diluted Earnings Per Common Share (Details) - USD ($)	3 Months Ended		12 Months Ended
	Feb. 28, 2023	Feb. 28, 2022	Feb. 28, 2023	Nov. 30, 2022	Feb. 28, 2022
Net (loss)	$ 342,210	$ (406,489)	$ 342,210	$ (406,489)	$ (406,489)
For basic net income (loss) per share - weighted average common shares outstanding (in shares)			4,976,955		4,569,720
Effect of dilutive stock options (in shares)			0		0
For diluted net income (loss) per share - weighted average common shares outstanding (in shares)			4,976,955		4,569,720
Net Income (Loss) per share (in dollars per share)			$ 0.07		$ (0.09)
Net Income (Loss) per share (in dollars per share)			$ 0.07		$ (0.09)

XML

Note 6 - Inventory - Major Classes of Inventory (Details) - USD ($)	Feb. 28, 2023	Nov. 30, 2022
Raw materials	$ 9,600,930	$ 8,700,719
Work in process	529,812	624,781
Finished goods	3,134,526	3,029,099
Total Gross Inventory	13,265,268	12,354,599
Less: Reserves	1,660,507	1,743,047
Net Inventory	$ 11,604,761	$ 10,611,552

XML

Note 7 - Accrued Expenses - Major Components of Accrued Expenses (Details) - USD ($)	Feb. 28, 2023	Nov. 30, 2022
Salaries, wages, and commissions	$ 763,350	$ 755,708
Accrued warranty expense	194,464	193,301
Other	342,887	334,195
Accrued Liabilities, Current, Total	$ 1,300,701	$ 1,283,204

XML

Note 8 - Assets Held for Lease (Details Textual) - USD ($)	3 Months Ended
	Feb. 28, 2023	Feb. 28, 2022
Property Plant and Equipment, Lessor Asset Under Operating Lease, Next Rolling 12 Months	$ 46,591
Sales [Member]
Operating Lease, Lease Income, Total	$ 32,025	$ 0

XML

Note 8 - Assets Held for Lease - Summary of Assets Held for Lease (Details) - USD ($)	Feb. 28, 2023	Nov. 30, 2022
Modular Buildings	$ 361,845	$ 400,325
Modular Buildings [Member]
Modular Buildings	$ 361,845	$ 400,325

XML

Note 9 - Product Warranty (Details Textual)	3 Months Ended
	Feb. 28, 2023
Standard Product Warrant Term	1 year

XML

Note 9 - Product Warranty - Changes in Product Warranty Liability (Details) - USD ($)	3 Months Ended
	Feb. 28, 2023	Feb. 28, 2022
Balance, beginning	$ 193,301	$ 202,850
Settlements / adjustments	115,596	21,624
Warranties issued	(114,433)	(109,412)
Balance, ending	$ 194,464	$ 115,062

XML

Note 10 - Loan and Credit Agreements (Details Textual)				3 Months Ended	12 Months Ended
	Jun. 24, 2020 USD ($)	Jun. 18, 2020 USD ($)	Sep. 28, 2017 USD ($)	Feb. 28, 2023 USD ($)	Nov. 30, 2022 USD ($)	Sep. 28, 2022	May 17, 2022 USD ($)
Long-Term Debt, Total				$ 2,974,366	$ 3,001,919
Term Loan Due October 2037 [Member]
Long-Term Debt, Total				$ 2,145,225	$ 2,165,554
Debt Instrument, Interest Rate, Stated Percentage				7.00%	7.00%
Debt Instrument, Periodic Payment, Total				$ 19,648	$ 19,648
EIDL Assistance Program, Loan One [Member]
Proceeds from Issuance of Debt		$ 150,000
EIDL Assistance Program, Loan Three [Member]
Proceeds from Issuance of Debt	$ 150,000
Economic Injury Distaster Loan Assistance Program [Member]
Debt Instrument, Interest Rate, Stated Percentage	3.75%
Debt Instrument, Term	30 years
EIDL Assistance Program, Loan Two [Member]
Debt Instrument, Periodic Payment, Total	$ 731
Proceeds from Issuance of Debt		$ 150,000
Bank Midwest [Member]
Long-Term Line of Credit, Total				3,055,559
Line of Credit Facility, Remaining Borrowing Capacity				$ 1,944,441
Line of Credit, Borrowing Base, Accounts Receivable				75.00%
Line of Credit, Borrowing Base, Inventory				50.00%
Debt Instrument, Covenant, Minimum Working Capital			$ 4,000,000
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			0.0125
Debt Instrument, Covenant, Minimum Debt Service Coverage Ratio, Tolerance			0.0010
Debt Instrument, Covenant, Annual Purchases or Sales Price of Equipment Before Requiring Bank Approval			$ 100,000
Debt Instrument, Debt to Worth Exceeding Percent					1
Bank Midwest [Member] | Reserve Line of Credit [Member]
Long-Term Debt, Total							$ 350,000
Bank Midwest [Member] | Term Loan Due October 2037 [Member]
Long-Term Debt, Total				$ 2,600,000
Debt Instrument, Periodic Payment, Total				$ 19,648
Bank Midwest [Member] | Term Loan Due October 2037 [Member] | United States Department of Agriculture [Member]
Guarantee Requirement, Personally Guarantee, Shareholders Ownership Percentage				20.00%
Bank Midwest [Member] | Roof Term Loan [Member]
Long-Term Debt, Total				$ 350,000
Debt Instrument, Interest Rate, Stated Percentage				7.00%
Debt Instrument, Periodic Payment, Total				$ 2,972
Debt Instrument, Number of Periodic Payment							59
Debt Instrument, Estimated Balloon Payments				$ 294,168
Bank Midwest [Member] | Wall Street Journal Rate [Member] | Roof Term Loan [Member]
Debt Instrument, Basis Spread on Variable Rate				2.00%
Bank Midwest [Member] | Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity				$ 5,000,000
Line of Credit Facility, Wall Street Journal Rate Floor				4.25%
Bank Midwest [Member] | Revolving Credit Facility [Member] | Wall Street Journal Rate [Member]
Debt Instrument, Basis Spread on Variable Rate				1.25%
Line of Credit Facility, Interest Rate During Period				9.25%
Bank Midwest [Member] | Revolving Credit Facility [Member] | Wall Street Journal Rate [Member] | Reserve Line of Credit [Member] | Maximum [Member]
Debt Instrument, Basis Spread on Variable Rate				1.50%
Bank Midwest [Member] | Revolving Credit Facility [Member] | Wall Street Journal Rate [Member] | Reserve Line of Credit [Member] | Minimum [Member]
Debt Instrument, Basis Spread on Variable Rate				1.25%
Bank Midwest [Member] | Term Loan Due October 2037 [Member]
Debt Instrument, Interest Rate, Stated Percentage				7.00%		5.00%
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 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%

XML

Note 10 - Loan and Credit Agreements - Summary of Term Debt (Details) - USD ($)	Feb. 28, 2023	Nov. 30, 2022
Long-Term Debt, Total	$ 2,974,366	$ 3,001,919
Less current portion of term debt	100,140	97,678
Term debt, excluding current portion	2,874,226	2,904,241
Term Loan Due October 2037 [Member]
Long-Term Debt, Total	2,145,225	2,165,554
Bank Midwest Loan 2 [Member]
Long-Term Debt, Total	344,331	344,932
SBA Loan One [Member]
Long-Term Debt, Total	162,862	163,793
SBA Loan Two [Member]
Long-Term Debt, Total	163,045	163,728
SBA Loan Three [Member]
Long-Term Debt, Total	$ 158,903	$ 163,912

XML

Note 10 - Loan and Credit Agreements - Summary of Term Debt (Details) (Parentheticals) - USD ($)	3 Months Ended	12 Months Ended
	Feb. 28, 2023	Nov. 30, 2022
Term Loan Due October 2037 [Member]
Debt Instrument, Periodic Payment, Total	$ 19,648	$ 19,648
Debt Instrument, Interest Rate, Stated Percentage	7.00%	7.00%
Debt Instrument, Maturity Date	Oct. 01, 2037	Oct. 01, 2037
Debt Instrument, Interest Rate, Stated Percentage	7.00%	7.00%
Debt Instrument, Maturity Date	Oct. 01, 2037	Oct. 01, 2037
Bank Midwest Loan 2 [Member]
Debt Instrument, Periodic Payment, Total	$ 2,972	$ 2,972
Debt Instrument, Interest Rate, Stated Percentage	7.00%	7.00%
Debt Instrument, Maturity Date	May 15, 2027	May 15, 2027
Debt Instrument, Interest Rate, Stated Percentage	7.00%	7.00%
Debt Instrument, Maturity Date	May 15, 2027	May 15, 2027
SBA Loan One [Member]
Debt Instrument, Periodic Payment, Total	$ 731	$ 731
Debt Instrument, Interest Rate, Stated Percentage	3.75%	3.75%
Debt Instrument, Interest Rate, Stated Percentage	3.75%	3.75%
Debt Instrument, Maturity Date Range, Start	Dec. 18, 2022	Dec. 18, 2022
Debt Instrument, Maturity Date Range, End	Jun. 18, 2050	Jun. 18, 2050
SBA Loan Two [Member]
Debt Instrument, Periodic Payment, Total	$ 731	$ 731
Debt Instrument, Interest Rate, Stated Percentage	3.75%	3.75%
Debt Instrument, Interest Rate, Stated Percentage	3.75%	3.75%
Debt Instrument, Maturity Date Range, Start	Dec. 18, 2022	Dec. 18, 2022
Debt Instrument, Maturity Date Range, End	Jun. 18, 2050	Jun. 18, 2050
SBA Loan Three [Member]
Debt Instrument, Periodic Payment, Total	$ 731	$ 731
Debt Instrument, Interest Rate, Stated Percentage	3.75%	3.75%
Debt Instrument, Interest Rate, Stated Percentage	3.75%	3.75%
Debt Instrument, Maturity Date Range, Start	Dec. 24, 2022	Dec. 24, 2022
Debt Instrument, Maturity Date Range, End	Jun. 24, 2050	Jun. 24, 2050

XML

Note 10 - Loan and Credit Agreements - Summary of Minimum Maturities of Term Debt (Details) - USD ($)	Feb. 28, 2023	Nov. 30, 2022
2023	$ 74,476
2024	103,804
2025	111,745
2026	119,740
2027	447,557
2028 and thereafter	2,117,044
Long-Term Debt, Total	$ 2,974,366	$ 3,001,919

XML

Note 12 - Related Party Transactions (Details Textual) - USD ($)	3 Months Ended
	Feb. 28, 2023	Feb. 28, 2022
Revenue from Related Parties	$ 0	$ 0
Due from Related Parties, Total	0	0
Related Party Transaction, Expenses from Transactions with Related Party	4,170	9,349
Due to Related Parties, Total	$ 1,385	$ 1,299

XML

Note 13 - Leases (Details Textual) - USD ($)	3 Months Ended
	Feb. 28, 2023	Feb. 28, 2022
Lease, Cost, Total	$ 5,192	$ 4,843
Operating Lease, Weighted Average Remaining Lease Term	37 months
Operating Lease, Weighted Average Discount Rate, Percent	4.82%
Lessee, Finance Lease, Term of Contract	48 months
Finance Lease, Weighted Average Discount Rate, Percent	4.18%
Finance Lease, Right-of-Use Asset, Amortization	$ 36,971	$ 16,142

XML

Note 13 - Leases - Components of Operating Lease Liabilities (Details) - USD ($)	Feb. 28, 2023	Nov. 30, 2022
Operating lease right-of-use assets (other assets)	$ 31,612	$ 34,931
Current portion of operating lease liabilities (accrued expenses)	10,190	10,915
Long-term portion of operating lease liabilities	21,422	24,016
Total operating lease liabilities	$ 31,612	$ 34,931

XML

Note 13 - Leases - Maturities of Operating Leases (Details) - USD ($)	Feb. 28, 2023	Nov. 30, 2022
2023	$ 8,616
2024	11,162
2025	9,532
2026	4,765
Total lease payments	34,075
Less imputed interest	(2,463)
Total operating lease liabilities	$ 31,612	$ 34,931

XML

Note 13 - Leases - (Details) - USD ($)	Feb. 28, 2023	Nov. 30, 2022
Finance lease right-of-use assets (net of amortization in other assets)	$ 503,080	$ 540,052
Current portion of finance lease liabilities	172,619	170,835
Long-term portion of finance lease liabilities	558,293	602,131
Total finance lease liabilities	$ 730,912	$ 772,966

XML

Note 13 - Leases - Maturities of Finance Lease Liabilities (Details) - USD ($)	Feb. 28, 2023	Nov. 30, 2022
2023	$ 149,877
2024	211,219
2025	157,393
2026	155,809
2027	122,823
Total lease payments	797,121
Less imputed interest	(66,209)
Total finance lease liabilities	$ 730,912	$ 772,966

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Note 14 - Equity Incentive Plan and Stock Based Compensation (Details Textual)	Feb. 25, 2020 shares
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
Non-qualified Stock Units to Non-employee Directors, Quarterly [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Additional Shares Authorized	1,000
The 2020 Plan [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Additional Shares Authorized	500,000

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Note 14 - Equity Incentive Plan and Stock Based Compensation - Summary of Shares Issued (Details) - shares	3 Months Ended
	Feb. 28, 2023	Feb. 28, 2022
Shares issued to directors (immediate vesting) (in shares)	87,250	91,167
Unvested shares forfeit upon termination (in shares)	0	(8,333)
Director [Member] | Vesting Immediately [Member]
Shares issued to directors (immediate vesting) (in shares)	5,000	5,000
Employees, Directors, and Consultants [Member] | Awards with Three-year Vesting [Member]
Shares issued to directors (immediate vesting) (in shares)	82,250	94,500

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Note 15 - Common Stock Purchase Agreement (Details Textual) - USD ($)							12 Months Ended	15 Months Ended
	Sep. 23, 2022	Aug. 23, 2022	Aug. 15, 2022	Aug. 03, 2022	Jul. 25, 2022	Mar. 29, 2022	Nov. 30, 2022	Feb. 28, 2023
Common Stock, Par or Stated Value Per Share						$ 0.01	$ 0.01	$ 0.01
Alumni Capital [Member]
Common Stock Purchase Agreement, Maximum Gross Proceeds from Issuance or Sale of Equity						$ 3,000,000
Common Stock Purchase Agreement, Maximum Shares Authorized to be Issued						50,000
Common Stock Purchase Agreement, Percentage of Common Shares Outstanding						9.99%
Stock Issued During Period, Shares, New Issues (in shares)	65,000	65,000	50,000	50,000	50,000	20,000	40,000	280,000
Common Stock Purchase Agreement, Shares to be Issued						20,000
Equity Issuance Cost, Total							$ 203,000
Stock Issued During Period, Value, New Issues							$ 160,000
Common Stock Purchase Agreement, Funding Remaining to be Utilized								$ 2,454,472
Alumni Capital [Member] | Minimum [Member]
Common Stock Purchase Agreement, Discount on Shares, Percent								3.00%
Alumni Capital [Member] | Maximum [Member]
Common Stock Purchase Agreement, Discount on Shares, Percent								5.00%

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Note 15 - Common Stock Purchase Agreement - Summary of Shares Purchased by Alumni Capital (Details) - Alumni Capital [Member] - USD ($)							12 Months Ended	15 Months Ended
	Sep. 23, 2022	Aug. 23, 2022	Aug. 15, 2022	Aug. 03, 2022	Jul. 25, 2022	Mar. 29, 2022	Nov. 30, 2022	Feb. 28, 2023
7/25/2022 (in shares)	65,000	65,000	50,000	50,000	50,000	20,000	40,000	280,000
7/25/2022 (in dollars per share)	$ 1.76	$ 1.99	$ 2.00	$ 1.98	$ 2.07
7/25/2022	$ 114,120	$ 129,253	$ 99,910	$ 98,940	$ 103,305			$ 545,528

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Note 17 - Segment Information (Details Textual)	3 Months Ended
	Feb. 28, 2023
Number of Reportable Segments	3

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Note 17 - Segment Information - Segment Reporting Information (Details) - USD ($)	3 Months Ended		12 Months Ended
	Feb. 28, 2023	Feb. 28, 2022	Nov. 30, 2022
Revenue from external customers	$ 7,894,785		$ 5,613,066
Income (loss) from operations	548,587		(436,876)
Income (loss) from operations	548,587		(436,876)
Total Assets	25,604,508		$ 23,948,314
Capital expenditures	313,657	$ 174,133
Depreciation & Amortization	238,903	167,542
Operating Segments [Member]
Revenue from external customers	7,895,000	5,613,000
Income (loss) from operations	549,000	(437,000)
Income (loss) from operations	549,000	(437,000)
Income (loss) before tax	433,000	(515,000)
Income (loss) before tax	433,000	(515,000)
Total Assets	25,605,000	20,852,000
Capital expenditures	314,000	174,000
Depreciation & Amortization	239,000	168,000
Operating Segments [Member] | Agricultural Products [Member]
Revenue from external customers	5,445,000	4,161,000
Income (loss) from operations	502,000	(129,000)
Income (loss) from operations	502,000	(129,000)
Income (loss) before tax	407,000	(186,000)
Income (loss) before tax	407,000	(186,000)
Total Assets	19,761,000	15,784,000
Capital expenditures	252,000	153,000
Depreciation & Amortization	125,000	101,000
Operating Segments [Member] | Modular Buildings [Member]
Revenue from external customers	1,642,000	868,000
Income (loss) from operations	42,000	(223,000)
Income (loss) from operations	42,000	(223,000)
Income (loss) before tax	36,000	(230,000)
Income (loss) before tax	36,000	(230,000)
Total Assets	3,291,000	2,695,000
Capital expenditures	44,000	14,000
Depreciation & Amortization	77,000	34,000
Operating Segments [Member] | Tools [Member]
Revenue from external customers	808,000	584,000
Income (loss) from operations	5,000	(85,000)
Income (loss) from operations	5,000	(85,000)
Income (loss) before tax	(10,000)	(99,000)
Income (loss) before tax	(10,000)	(99,000)
Total Assets	2,553,000	2,373,000
Capital expenditures	18,000	7,000
Depreciation & Amortization	$ 37,000	$ 33,000