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,~~August 31, 2021

☐	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~~ART’S-WAY MANUFACTURING CO., INC.

(Exact name of registrant as specified in its charter)

~~DELAWARE~~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) 864-3131

(Registrant’s telephone number, including area code)

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

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

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 ☐

~~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 ☐

~~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 1,~~October 5, 2021: ~~4,513,402~~4,533,972

	August 31, 2021			November 30, 2020
Assets
Current assets:
Cash	$	108,006		$	2,684
Accounts receivable-customers, net of allowance for doubtful accounts of $40,582 and $51,175 in 2021 and 2020, respectively		2,955,548			2,390,604
Inventories, net		9,288,863			7,762,400
Cost and profit in excess of billings		3,147			56,026
Net investment in sales-type leases, current		0			28,352
Other current assets		275,239			61,284
Total current assets		12,630,803			10,301,350
Property, plant, and equipment, net		5,256,459			5,218,662
Assets held for lease, net		521,555			521,555
Deferred income taxes		2,726,529			2,667,686
Other assets		119,843			93,760
Total assets	$	21,255,189		$	18,803,013
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,183,859		$	1,955,404
Customer deposits		704,332			198,225
Billings in excess of cost and profit		164,652			276,226
Income taxes payable		5,000			1,100
Accrued expenses		1,225,098			1,279,312
Line of credit		4,290,030			2,359,530
Current portion of long-term debt		96,222			94,979
Total current liabilities		8,669,193			6,164,776
Long-term liabilities
Long-term portion of finance lease liabilities		5,777			0
Long-term portion of operating lease liabilities		38,209			18,342
Long-term debt, excluding current portion		2,657,183			2,713,150
Total liabilities		11,370,362			8,896,268
Commitments and Contingencies (Notes 7, 9, 10 and 13)
Stockholders’ equity:
Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares in 2021 and 2020; issued and outstanding 0 shares in 2021 and 2020.		0			0
Common stock – $0.01 par value. Authorized 9,500,000 shares, issued 4,578,504 and 4,470,004 at August 31, 2021 and November 30, 2020, respectively		45,785			44,700
Additional paid-in capital		3,698,403			3,496,243
Retained earnings		6,249,164			6,443,856
Treasury stock, at cost (44,532 in 2021 and 35,097 in 2020 shares)		(108,525	)		(78,054	)
Total stockholders’ equity		9,884,827			9,906,745
Total liabilities and stockholders’ equity	$	21,255,189		$	18,803,013

February 28, 2021

November 30, 2020

Assets
Current assets:
Cash
$ 3,890 $ 2,684
Accounts receivable-customers, net of allowance for doubtful accounts of $25,974 and $51,175 in 2021 and 2020, respectively
1,681,025 2,390,604
Inventories, net
7,902,244 7,762,400
Cost and profit in excess of billings
293,504 56,026
Net investment in sales-type leases, current
14,283 28,352
Other current assets
295,719 61,284
Total current assets
10,190,665 10,301,350
Property, plant, and equipment, net
5,222,809 5,218,662
Assets held for lease, net
521,555 521,555
Deferred income taxes
2,765,099 2,667,686
Other assets
81,642 93,760
Total assets
$ 18,781,770 $ 18,803,013
Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable
$ 1,768,294 $ 1,955,404
Customer deposits
1,377,421 198,225
Billings in excess of cost and profit
115,784 276,226
Income taxes payable
5,000 1,100
Accrued expenses
1,198,185 1,279,312
Line of credit
1,875,530 2,359,530
Current portion of long-term debt
91,336 94,979
Total current liabilities
6,431,550 6,164,776
Long-term liabilities

Long-term portion of operating lease liabilities
15,874 18,342
Long-term debt, excluding current portion
2,699,081 2,713,150
Total liabilities
9,146,505 8,896,268
Commitments and Contingencies (Notes 7, 9 and 10)

Stockholders’ equity:

Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares in 2021 and 2020; issued and outstanding 0 shares in 2021 and 2020.
- -
Common stock – $0.01 par value. Authorized 9,500,000 shares; issued 4,563,504 and 4,470,004 at February 28, 2021 and November 30, 2020, respectively
45,635 44,700
Additional paid-in capital
3,557,362 3,496,243
Retained earnings
6,128,618 6,443,856
Treasury stock, at cost (40,667 in 2021 and 35,097 in 2020 shares)
(96,350 ) (78,054 )
Total stockholders’ equity
9,635,265 9,906,745
Total liabilities and stockholders’ equity
$ 18,781,770 $ 18,803,013

	Three Months Ended						Nine Months Ended
	August 31, 2021			August 31, 2020			August 31, 2021			August 31, 2020
Sales	$	6,591,829		$	6,464,854		$	17,702,628		$	16,936,510
Cost of goods sold		4,853,408			5,539,974			13,199,471			14,039,752
Gross profit		1,738,421			924,880			4,503,157			2,896,758
Expenses:
Engineering		143,629			128,813			387,147			361,258
Selling		532,232			370,236			1,549,164			1,227,144
General and administrative		902,356			939,125			2,626,383			3,215,963
Total expenses		1,578,217			1,438,174			4,562,694			4,804,365
Income (Loss) from operations		160,204			(513,294	)		(59,537	)		(1,907,607	)
Other income (expense):
Interest expense		(90,440	)		(73,422	)		(223,911	)		(233,942	)
Other		2,041			58,847			36,682			72,744
Total other income (expense)		(88,399	)		(14,575	)		(187,229	)		(161,198	)
Income (Loss) before income taxes		71,805			(527,869	)		(246,766	)		(2,068,805	)
Income tax expense (benefit)		15,349			(104,258	)		(52,074	)		(406,282	)
Net Income (Loss)		56,456			(423,611	)		(194,692	)		(1,662,523	)

2)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~~10-K for the fiscal year ended November 30, 2020. The results of operations for the three and nine months ended ~~February 28,~~August 31, 2021 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2021.

Impact of ~~COVID-19~~COVID-19

The ~~COVID-19~~COVID-19 pandemic ~~had little effect on~~created some new challenges for the ~~results~~Company through the firstnine months of ~~the first~~ fiscal ~~quarter of~~ 2021. The Company ~~did see signs~~has experienced results consistent with that of a strengthening economy including increased demand in all three segments compared to fiscal 2020. With increased demand, material prices have been skyrocketing, while labor availability has been scarce. These factors will be a challenge for the Company as it works to fulfill its strong backlog over the remainder of fiscal 2021. The ~~COVID-19~~COVID-19 pandemic may continue to impact ~~our~~the Company’s business operations and financial operating results and there is uncertainty in the nature and degree of its continued effects over time. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations (Part I, Item 2 of this Form ~~10-Q)~~10-Q) for further discussion.

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. An adjustment has been made to the Condensed Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~February 29,~~August 31, 2020, to identify the non-cash expense related to changes in the Company’s obsolete inventory reserve in the amount of ~~$118,974.~~$180,758. This change in classification does not affect previously reported cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the three and nine months ended ~~February 28,~~August 31, 2021. Actual results could differ from those estimates. A full description of critical accounting policies and related judgments and estimates that affect the preparation of our Condensed Consolidated Financial Statements is set forth in our Annual Report on Form 10-K for the year ended November 30, 2020.

~~Revenue Recognition~~

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

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

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

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

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

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

Recently Issued Accounting Pronouncements

Recently Adopted Accounting Guidance

Leases

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU ~~2016-02,~~2016-02, “Leases (Topic ~~842)~~842),” which requires a lessee to recognize a right-of-use asset and a lease liability on its balance sheet for all leases with terms of twelve months or greater. The Company adopted this guidance for fiscal 2020 using the modified retrospective approach, including interim periods within that reporting period. Under the modified retrospective approach, the Company did not adjust prior comparative periods. The Company has a moderate amount of leasing activity mainly as the lessee of office equipment and as the lessor of modular rental buildings. As a result of adoption, the Company recognized $34,316 as a right-of-use asset and $34,316 of lease liabilities on the balance sheet in the first quarter of fiscal 2020 for office equipment it leases. The Company’s activity as a lessor will remain mostly unaffected by this guidance. ~~The Company’s additional disclosures may include, but are not limited to:~~

●

~~Nature of its leases~~

●

~~Significant assumptions and judgements used~~

●

~~Information about leases that have not yet commenced~~

●

~~Related-party lease transactions~~

●

~~Accounting policy election regarding short-term leases~~

●

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

●

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

●

~~Tabular disclosure of lease-related income~~

●

~~Components of the net investment in a lease~~

●

~~Information on the management of risk associated with residual asset~~

Accounting Pronouncements Not Yet Adopted

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU ~~2016-13,~~2016-13, “Measurement of Credit Losses on Financial Instruments.” ASU ~~2016-13~~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~~2016-13 is effective for fiscal years beginning after December 15, 2022for smaller reporting entities, 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~~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.

3)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, 2021								Three Months Ended August 31, 2021
	Agricultural		Modular Buildings		Tools		Total		Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	2,777,000	$	-	$	-	$	2,777,000	$	3,831,000	$	0	$	0	$	3,831,000
Farm equipment service parts		620,000		-		-		620,000		749,000		0		0		749,000
Steel cutting tools and inserts		-		-		606,000		606,000		0		0		613,000		613,000
Modular buildings		-		1,141,000		-		1,141,000		0		1,256,000		0		1,256,000
Modular building lease income		-		-		-		-
Other		103,000		150,000		4,000		257,000		80,000		57,000		6,000		143,000
	$	3,500,000	$	1,291,000	$	610,000	$	5,401,000	$	4,660,000	$	1,313,000	$	619,000	$	6,592,000

	Three Months Ended August 31, 2020
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	2,908,000	$	0	$	0	$	2,908,000
Farm equipment service parts		645,000		0		0		645,000
Steel cutting tools and inserts		0		0		470,000		470,000
Modular buildings		0		2,266,000		0		2,266,000
Other		118,000		53,000		5,000		176,000
	$	3,671,000	$	2,319,000	$	475,000	$	6,465,000

	Nine Months Ended August 31, 2021
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	9,723,000	$	0	$	0	$	9,723,000
Farm equipment service parts		2,027,000		0		0		2,027,000
Steel cutting tools and inserts		0		0		1,872,000		1,872,000
Modular buildings		0		3,573,000		0		3,573,000
Modular building lease income		0		0		0		0
Other		267,000		225,000		16,000		508,000
	$	12,017,000	$	3,798,000	$	1,888,000	$	17,703,000

	Nine Months Ended August 31, 2020
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	7,556,000	$	0	$	0	$	7,556,000
Farm equipment service parts		1,844,000		0		0		1,844,000
Steel cutting tools and inserts		0		0		1,648,000		1,648,000
Modular buildings		0		5,155,000		0		5,155,000
Modular building lease income		0		318,000		0		318,000
Other		295,000		102,000		19,000		416,000
	$	9,695,000	$	5,575,000	$	1,667,000	$	16,937,000

Three Months Ended February 29, 2020

Agricultural

Modular Buildings

Tools

Total

Farm equipment
$ 2,349,000 $ - $ - $ 2,349,000
Farm equipment service parts
532,000 - - 532,000
Steel cutting tools and inserts
- - 609,000 609,000
Modular buildings
- 1,271,000 - 1,271,000
Modular building lease income
- 156,000 - 156,000
Other
72,000 30,000 7,000 109,000
$ 2,953,000 $ 1,457,000 $ 616,000 $ 5,026,000

4)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, 2021		November 30, 2020		August 31, 2021		November 30, 2020
Receivables	$	1,681,000	$	2,391,000	$	2,956,000	$	2,391,000
Assets		294,000		56,000		3,000		56,000
Liabilities		1,458,000		276,000		752,000		276,000

The amount of revenue recognized in the first ~~three~~nine months of fiscal 2021 that was included in a contract liability at as of November 30, 2020 was approximately ~~$265,000~~$276,000 compared to $89,000 in the same period of fiscal 2020. ~~The decrease~~ Contract receivables increased in ~~contract receivables at February 28,~~the nine months ending August 31, 2021 is due to ~~collection of receivables~~progress billings on contracts in progress in the ~~first quarter of fiscal 2021.~~Modular Buildings segment while the Agricultural Products and Tools segments sales and receivables held steady. Contract assets ~~and contract~~decreased during the nine months ended August 31, 2021 as progress billings were made on contracts in progress in the Modular Buildings segment. Contract liabilities increased during the ~~three~~nine months ended ~~February 28,~~August 31, 2021 as the Company ~~completed progress~~billed down payments on new construction contracts in the ~~modular buildings~~Modular Buildings segment and received ~~a large amount of~~ deposits ~~from an~~for early order ~~program.~~programs on equipment 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,~~August 31, 2021, the Company has no performance obligations with an original expected duration greater than one year.

5)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,~~August 31, 2021, and ~~February 29,~~August 31, 2020:

	For the Three Months Ended
	August 31, 2021		August 31, 2020
Numerator for basic and diluted net income (loss) per share:

Net income (loss)	$	56,456	$	(423,611	)

Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,529,026		4,426,850
Effect of dilutive stock options		0		0
For diluted net income (loss) per share - weighted average common shares outstanding		4,529,026		4,426,850


Net Income (Loss) per share - Basic:
Net Income (Loss) per share	$	0.01	$	(0.10	)

Net Income (Loss) per share - Diluted:
Net Income (Loss) per share	$	0.01	$	(0.10	)

For the Twelve Months Ended

February 28, 2021

February 29, 2020

Numerator for basic and diluted net income (loss) per share:

Net income (loss)
$ (315,238 ) $ (437,192 )

Denominator:

For basic net income (loss) per share - weighted average common shares outstanding
4,475,279 4,315,481
Effect of dilutive stock options
- -
For diluted net income (loss) per share - weighted average common shares outstanding
4,475,279 4,315,481

Net Income (Loss) per share - Basic:

Net Income (Loss) per share
$ (0.07 ) $ (0.10 )

Net Income (Loss) per share - Diluted:

Net Income (Loss) per share
$ (0.07 ) $ (0.10 )

	For the Nine Months Ended
	August 31, 2021			August 31, 2020
Numerator for basic and diluted net income (loss) per share:

Net income (loss)	$	(194,692	)	$	(1,662,523	)

Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,508,986			4,381,686
Effect of dilutive stock options		0			0
For diluted net income (loss) per share - weighted average common shares outstanding		4,508,986			4,381,686


Net Income (Loss) per share - Basic:
Net Income (Loss) per share	$	(0.04	)	$	(0.38	)

Net Income (Loss) per share - Diluted:
Net Income (Loss) per share	$	(0.04	)	$	(0.38	)

6)6)

Inventory

Major classes of inventory are:

	February 28, 2021			November 30, 2020			August 31, 2021			November 30, 2020
Raw materials	$	7,647,204		$	7,086,367		$	8,801,878		$	7,086,367
Work in process		239,754			304,009			457,739			304,009
Finished goods		3,665,851			3,777,136			3,239,777			3,777,136
Total Gross Inventory	$	11,552,809		$	11,167,512		$	12,499,394		$	11,167,512
Less: Reserves		(3,650,565	)		(3,405,112	)		(3,210,531	)		(3,405,112	)
Net Inventory	$	7,902,244		$	7,762,400		$	9,288,863		$	7,762,400

7)7)

Accrued Expenses

Major components of accrued expenses are:

	February 28, 2021		November 30, 2020		August 31, 2021		November 30, 2020
Salaries, wages, and commissions	$	683,180	$	726,625	$	724,084	$	726,625
Accrued warranty expense		295,581		291,454		245,680		291,454
Other		219,424		261,233		255,334		261,233
	$	1,198,185	$	1,279,312	$	1,225,098	$	1,279,312

8)8)

Assets Held for Lease

Major components of assets held for lease are:

February 28, 2021

November 30, 2020

Modular Buildings
$ 521,555 $ 521,555
Total assets held for lease
$ 521,555 $ 521,555

	August 31, 2021		November 30, 2020
Modular Buildings	$	521,555	$	521,555
Total assets held for lease	$	521,555	$	521,555

There were no0 rents recognized from assets held for lease included in sales on the Condensed Consolidated Statements of Operations during the three and nine months ended ~~February 28,~~August 31, 2021, compared to ~~$155,508~~$0 and $318,227 for the three and nine months ended ~~February 29, 2020.~~August 31, 2020, respectively. Rents recognized in sales were related to the leasing of modular buildings as a part of the normal course of business operations of the Modular Buildings segment.

There were no future minimum lease receipts from assets held for lease as of ~~February 28,~~August 31, 2021.

The Company maintains two revolving lines of credit and one term loan with Bank Midwest. The Company also has three term loans with the U.S. Small Business Administration under the Economic Injury Disaster Loan program.

The Company maintains a credit facility with Bank Midwest consisting of a $5,000,000 revolving line of credit (the ~~“2017~~“2017 Line of Credit”) used for working capital purposes, and a $2,600,000 term loan due October 1, 2037 ~~(the~~(the “Term Loan”). On ~~February 28,~~August 31, 2021, the balance of the 2017 Line of Credit was ~~$1,875,530~~$4,290,030 with ~~$3,124,470~~$709,970 remaining available, as may be limited by the borrowing base calculation. The 2017 Line of Credit borrowing base is an amount equal to 75% of accounts receivable balances (discounted for aged receivables), plus 50% of inventory, less any outstanding loan balance on the 2017 Line of Credit. ~~At February 28,~~On August 31, 2021, the 2017 Line of Credit wasnot limited by the borrowing base ~~calculation to a total borrowing of $4,969,155 ($3,093,625 remaining available).~~calculation. Any unpaid principal amount borrowed on the 2017 Line of Credit accrues interest at a floating rate per annum equal to 1.00% above the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The interest rate floor is set at ~~4.25%~~4.75% per annum and the current interest rate is ~~4.25%~~4.75% per annum. The 2017 Line of Credit was most recently renewed on February 11, 2021. The 2017 Line of Credit matures on March 30, 2022 and requires monthly interest-only payments.

The Term Loan accrues interest at a rate of 5.00% for the firstsixty months. Thereafter, the Term Loan will accrue interest at a floating rate per annum equal to 0.75% above the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The interest rate floor is set at 4.15% per annum and the interest rate may only be adjusted by Bank Midwest once every five years. Monthly payments of $17,271 for principal and interest are required. 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. J. Ward McConnell, Jr., the former Vice Chairman of the Board of Directors and a shareholder owning more than 20% of the Company’s outstanding stock, ~~is guaranteeing~~guaranteed approximately 38% of the Term Loan, for an annual fee of 2% of the personally guaranteed amount. J. Ward McConnell, Jr. passed away on May 31, 2021, and his shares are currently held in trust. The USDA will require any shareholders owning 20% once the trust assets are distributed to guarantee a portion of the Term Loan. 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.

On February 13, 2019, the Company opened a $4,000,000 revolving line of credit (the ~~“2019~~“2019 Line of Credit”) with Bank Midwest in connection with bonding obligations for the Company’s performance of a large modular laboratory construction project. Funds under the 2019 Line of Credit will be undisbursed to the Company and will be held by Bank Midwest in connection with an Irrevocable Letter of Credit issued by Bank Midwest for the project. The 2019 Line of Credit accrues interest at a floating rate per annum equal to 1.00% above the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The interest rate floor is set at 4.25% per annum and the current interest rate is ~~4.25%~~4.75% per annum. The 2019 Line of Credit was most recently renewed on February 2, 2021. The 2019 Line of Credit is payable upon demand by Bank Midwest. If no earlier demand is made, the unpaid principal and accrued interest will be payable in one payment, due on February 13, 2022. As of ~~February 28,~~August 31, 2021, the funds on the 2019 Line of Credit remain undisbursed and are held by Bank Midwest. The Company ~~expects~~has completed its obligation on the construction project and is expecting the irrevocable letter of credit to ~~close the 2019 Line~~be released in Q4 of ~~Credit in the second quarter of fiscal 2021 as the Company’s bonding obligations are met.~~2021.

The Term Loan is governed by the terms of a Promissory Note, dated September 28, 2017, entered into between the Company and Bank Midwest. Each of the 2017 and 2019 Lines of Credit is governed by the terms of a Promissory Note, dated February 11, 2021 and February 2, 2021, respectively, entered into between the Company and Bank Midwest.

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

To further secure the 2017 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 2019 Line of Credit is also secured by the mortgage on the Canton, Ohio property. 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 at on November 30. A maximum debt to net 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 out of compliance with the debt to net worth covenant as of August 31, 2021. The Company expects to need a waiver for this covenant on or prior to November 30, 2021. 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~~$100,000 for the ~~three~~nine months ended ~~February 28,~~August 31, 2021. The Company was out of compliance with its debt service coverage ratio and the prior minimum working capital requirements covenants in place under the Bank Midwest loans as of November 30, 2020. Bank Midwest issued a waiver forgiving the noncompliance, and in turn waived the event of default. The ~~next measurement date~~Company is currently projecting to be in compliance with the debt service coverage ratio as of November 30, 2021.

On January 12, 2021, Bank Midwest amended the Company’s working capital requirement of maintaining a minimum working capital ratio of 1.75, while also maintaining $5,100,000 of working capital. The new covenant requires the Company to maintain a working capital requirement of $4,000,000 and ~~drops~~eliminates the requirement to maintain a minimum working capital ratio of 1.75. The ~~$4,000,000~~$4,000,000 working capital level serves as a trigger point for Bank Midwest and the Company to continue discussion of capital raising strategies to support additional capital injection. This new covenant is measured monthly. As of February 28, 2021, the Company was ~~not in~~out of compliance with the working capital ~~covenant.~~covenant by $240,885. On March 22, 2021, Bank Midwest issued a letter to the Company allowing correction of the noncompliance by May 31, 2021. If As of May 31, 2021, the Company ~~fails~~was out of compliance with the working capital requirement by $126,496, which triggered communication with Bank Midwest to ~~get back in compliance, a meeting will be conducted to review~~evaluate the Company’s strategy to get back into compliance with the covenant. The Company ~~will be considered in default if the plan is not accepted by~~and Bank Midwest or determined that the Company’s strategy to utilize additional funds available under the Economic Injury Disaster Loans (“EIDL”) was acceptable. On August 31, 2021, the Company ~~is unable~~had $1,050,000 of Economic Injury Disaster Loans (“EIDL”) pending with the U.S. Small Business Administration (“SBA”), which, once received, are expected to ~~remedy~~put the Company back in ~~the time granted by Bank Midwest.~~compliance.

On June 18, 2020, and again on June 24, 2020, the Company executed the standard loan documents required for securing loans offered by the ~~U.S. Small Business Administration~~SBA under its ~~Economic Injury Disaster Loan (“EIDL”)~~EIDL assistance program in light of the impact of the ~~COVID-19~~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 executed on June 24, 2020, with a principal amount of ~~$150,000.~~$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, are due monthly, twelve months from the date of the EIDLs, in the amount of $731 per EIDL. 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.

On March 11, 2021, the American Rescue Plan Act of 2021 was enacted, which extends the first due date for repayment of EIDLs made in 2020 to 24 months from the date of the note. This act also increased the maximum loan amount from $150,000 to $500,000 per entity. The Company requested EIDL increases of $350,000 per entity under this program for a total of $1,050,000 in additional funding.

A summary of the minimum maturities of term debt follows for the years ending ~~February 28,~~November 30, 2021:

~~14)~~

~~Operating Leases~~

~~The Company determines if an arrangement is a lease at inception~~ of a contract. The nature of the Company’s operating leases at this time is office equipment, mainly copiers, with terms of 12 to 60 months. Operating leases are included in other assets as operating lease right-of-use (“ROU”) assets on the Condensed Consolidated Balance Sheets while current lease liabilities are included accrued expenses. The long-term portion of operating lease liabilities are shown as long-term liabilities on the Condensed Consolidated Balance Sheets.August 31, 2021.

1514

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. Operating 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. Lease expense for lease payments is recognized on a straight-line basis 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 short-term leases. 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 ~~at February 28,~~on August 31, 2021 ~~were~~are as follows:

	February 28, 2021		November 30, 2020		August 31, 2021		November 30, 2020
Operating lease right-of-use assets	$	25,545		27,879
Operating lease right-of-use assets (other assets)					$	50,908	$	27,879

Current portion of operating lease liabilities	$	9,671		9,537
Current portion of operating lease liabilities (accrued expenses)					$	12,699	$	9,537
Long-term portion of operating lease liabilities		15,874		18,342		38,209		18,342
Total operating lease liabilities	$	25,545		27,879	$	50,908	$	27,879

The Company included $25,545 of operating lease right-of-use assets in other assets as of February 28, 2021 compared to $27,879 at November 30, 2020. The current portion of operating lease liabilities of $9,671 was included in accrued expensesrecorded $5,547 and $15,874 of long-term operating lease liabilities was included in the long-term liability portion of the Condensed Consolidated Balance Sheets as of February 28, 2021, compared to $9,537 and $18,342, respectively, as of November 30, 2020. The Company recorded $6,080$17,536 of operating lease costs in the three and nine months ended ~~February 28,~~August 31, 2021,respectively, compared to $4,208 and $17,840 for the same periods of 2020, which included variable costs tied to ~~usage, compared to $8,151 for the three months ended February 29, 2020.~~usage. The Company’s operating leases carry a weighted average lease term of 3251 months and have a weighted average discount rate of 5.50%

Future maturities of operating lease liabilities are as follows:

Year Ending November 30,
2021	8,135		3,729
2022	10,847		14,914
2023	6,911		12,344
2024	1,630		11,162
2025			9,532
2026 and thereafter			4,766
Total lease payments	27,524		56,447
Less imputed interest	(1,979	)	(5,539	)
Total operating lease liabilities	25,545		50,908

The components of finance leases on the Condensed Consolidated Balance Sheets on August 31, 2021 are as follows:

	August 31, 2021
Finance lease right-of-use assets (net of amortization in other assets)	$	7,035

Current portion of finance lease liabilities (accrued expenses)	$	1,311
Long-term portion of finance lease liabilities		5,777
Total finance lease liabilities	$	7,088

The Company recorded $357 of amortization and $87 of interest expense in the three months ended August 31, 2021 and $477 of amortization and $116 of interest expense in the nine months ended August 31, 2021 compared to $0 for the same periods of fiscal 2021. The Company’s finance lease carries a lease term of 59 months and uses a discount rate of 4.75%.

1615

~~15)~~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~~“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~~“2011 Plan”) and 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. During the three months ended February 28, 2021, restricted stock awards of 88,500 shares were issued to various employees and directors,, which vest over three years from the date of issuance, and restricted stock awards of 5,000 shares were issued to directors as part of the director compensation policy, which vested immediately upon grant. In comparison, during the first three months of fiscal 2020, restricted stock awards of 48,750 shares were issued to various employees and directors, which vest over three years from the date of issuance, and restricted stock awards of 5,000 shares were issued to directors as part of the director compensation policy, which vested immediately upon grant.

Stock Issuance	For the Three Months Ended
	August 31, 2021		August 31, 2020
Shares issued to directors (immediate vesting)		5,000		5,000
Shares issued to directors, employees, and consultants (three-year vesting)		0		0
Total shares issued		5,000		5,000

	For the Nine Months Ended
	August 31, 2021		August 31, 2020
Shares issued to directors (immediate vesting)		20,000		20,000
Shares issued to directors, employees, and consultants (three-year vesting)		88,500		123,917
Total shares issued		108,500		143,917

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

Stock Based Compensation Expense	For the Three Months Ended
	August 31, 2021		August 31, 2020
Stock-based compensation expense		61,446		42,910
Treasury share repurchase expense		0		0
Stock-based compensation expense net of treasury repurchases		61,446		42,910

	For the Nine Months Ended
	August 31, 2021			August 31, 2020
Stock-based compensation expense		203,245			195,662
Treasury share repurchase expense		(30,471	)		(26,536	)
Stock-based compensation expense net of treasury repurchases		172,774			169,126

No stock options were granted during the ~~three~~nine months ended ~~February 28,~~August 31, 2021, or in the same respective period of fiscal 2020. The Company incurred a total of $62,054 and $37,580 of stock-based compensation expense for restricted stock awards during the three months ended February 28, 2021 and February 29, 2020, respectively. The Company repurchased 5,570 shares and 10,517 shares from employees in the form of treasury stock as consideration for payroll taxes paid on the employee’s behalf for the three months ended February 28, 2021 and February 29, 2020, respectively. Stock compensation net of treasury shares repurchased for the three months ended February 28, 2021 was $43,758 compared to $18,516, for the same period in fiscal 2020.

~~17)~~16)

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 and private labels. 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, 2021												Three Months Ended August 31, 2021
	Agricultural Products			Modular Buildings			Tools			Consolidated			Agricultural Products		Modular Buildings		Tools			Consolidated
Revenue from external customers	$	3,500,000		$	1,291,000		$	610,000		$	5,401,000		$	4,660,000	$	1,313,000	$	619,000		$	6,592,000
Income (loss) from operations	$	(198,000	)	$	(165,000	)	$	(6,000	)	$	(369,000	)	$	95,000	$	89,000	$	(24,000	)	$	160,000
Income (loss) before tax	$	(212,000	)	$	(172,000	)	$	(16,000	)	$	(400,000	)	$	26,000	$	82,000	$	(36,000	)	$	72,000
Total Assets	$	12,990,000		$	3,171,000		$	2,621,000		$	18,782,000		$	14,981,000	$	3,701,000	$	2,573,000		$	21,255,000
Capital expenditures	$	155,000		$	9,000		$	-		$	164,000		$	153,000	$	11,000	$	5,000		$	169,000
Depreciation & Amortization	$	99,000		$	29,000		$	33,000		$	161,000		$	85,000	$	27,000	$	33,000		$	145,000

	Three Months Ended February 29, 2020											Three Months Ended August 31, 2020
	Agricultural Products			Modular Buildings		Tools			Consolidated			Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	2,953,000		$	1,457,000	$	616,000		$	5,026,000		$	3,671,000		$	2,319,000		$	475,000		$	6,465,000
Income (loss) from operations	$	(435,000	)	$	6,000	$	(41,000	)	$	(470,000	)	$	(210,000	)	$	(188,000	)	$	(115,000	)	$	(513,000	)
Income (loss) before tax	$	(498,000	)	$	6,000	$	(52,000	)	$	(544,000	)	$	(249,000	)	$	(152,000	)	$	(127,000	)	$	(528,000	)
Total Assets	$	13,870,000		$	4,373,000	$	2,757,000		$	21,000,000		$	13,387,000		$	3,272,000		$	2,661,000		$	19,320,000
Capital expenditures	$	241,000		$	26,000	$	-		$	267,000		$	149,000		$	13,000		$	40,000		$	202,000
Depreciation & Amortization	$	126,000		$	68,000	$	33,000		$	227,000		$	123,000		$	33,000		$	33,000		$	189,000

	Nine Months Ended August 31, 2021
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	12,017,000		$	3,798,000		$	1,888,000		$	17,703,000
Income (loss) from operations	$	85,000		$	(97,000	)	$	(48,000	)	$	(60,000	)
Income (loss) before tax	$	(48,000	)	$	(118,000	)	$	(81,000	)	$	(247,000	)
Total Assets	$	14,981,000		$	3,701,000		$	2,573,000		$	21,255,000
Capital expenditures	$	463,000		$	20,000		$	5,000		$	488,000
Depreciation & Amortization	$	271,000		$	83,000		$	100,000		$	454,000

	Nine Months Ended August 31, 2020
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	9,695,000		$	5,575,000		$	1,667,000		$	16,937,000
Income (loss) from operations	$	(1,367,000	)	$	(306,000	)	$	(235,000	)	$	(1,908,000	)
Income (loss) before tax	$	(1,531,000	)	$	(272,000	)	$	(266,000	)	$	(2,069,000	)
Total Assets	$	13,387,000		$	3,272,000		$	2,661,000		$	19,320,000
Capital expenditures	$	447,000		$	124,000		$	43,000		$	614,000
Depreciation & Amortization	$	377,000		$	172,000		$	99,000		$	648,000

*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.

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, 2020. 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 warranty costs and 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; (iv) the impact of recently issued accounting pronouncements; (v) our intentions and beliefs relating to our costs, business strategies, and future performance; (vi) our expected financial results; (vii) our expectations concerning our primary capital and cash flow needs; (viii) our expectations with respect to debt covenant compliance and ~~(viii)~~related activities; and (ix) our expectations regarding the impact of COVID-19 on our business condition and results of operations.

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 general economic conditions, including consumer and governmental spending, on the demand for our products and the cost of our supplies and materials; (iv) the ongoing COVID-19 pandemic; (v) fluctuations in seasonal demand and our production cycle; and (vi) 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.

Our critical accounting policies involving the more significant judgments and assumptions used in the preparation of our financial statements as of ~~February 28,~~August 31, 2021 remain unchanged from November 30, 2020. 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, 2020.

Our consolidated corporate sales for the three- and nine-month periods ended August 31, 2021 were $6,592,000 and $17,703,000, respectively, compared to $6,465,000 and $16,937,000 during the same respective periods in fiscal 2020, a $127,000, or a 2.0%, increase for the three months and a $766,000, or 4.5%, increase for the nine months. We saw sales growth of over 26% in both our Agricultural Products and Tools segments for Q3 of fiscal 2021, respectively, while we saw approximately a 43% decrease in our Modular Buildings segment for such period. Year-to-date, our Agricultural Products and Tools segments both saw increased sales from a year ago while the Modular Buildings segment was down approximately 32%. Consolidated gross margin for the three-month period ended ~~February 28,~~August 31, 2021 ~~were $5,401,000~~was 26.4% compared to ~~$5,026,000~~14.3% for the same period in fiscal 2020. Consolidated gross margin for the nine-month period ended August 31, 2021 was 25.4% compared to 17.1% for the same period in fiscal 2020. We saw increased gross margin improvement on all three segments for the three months ended August 31, 2021, while we also had gross margin improvement in two of our three segments for the nine months ended August 31, 2021.

Our third quarter sales in the Agricultural Products segment were $4,660,000 compared to $3,671,000 during the same period of fiscal 2020, an increase of $989,000, or 26.9%. Our year-to-date Agricultural Product sales were $12,017,000 compared to $9,695,000 during the same period in fiscal 2020, an increase of ~~$375,000,~~$2,322,000, or ~~7.5%~~24.0%. ~~The~~We attribute the large increase in ~~consolidated~~ revenue to a strengthening agricultural economy that is ~~due~~producing five to ~~increased~~ten year highs in commodity and livestock prices along with government assistance programs that provided farmers with much needed government assistance during the COVID-19 pandemic. Compared to the nine months ending August 30, 2020, we had a 71% increase in our grinder mixer sales, a 60% increase in beet equipment and a 13% increase in manure spreader sales. We expect continued demand in the fourth quarter with our current ag backlog up 269% from a year ago. Supplier delays have improved but are not gone completely. We also continue to receive price increases from our suppliers. Further price increases before our early order program will be necessary to maintain strong margins on our products. It is currently challenging to get production employees on board with the lack of available workforce in our community and a highly competitive job market. We are taking steps to automate production tasks with the use of robotic welding and other new equipment to help us increase efficiency and output. Gross margin for our Agricultural Products ~~segment. Consolidated gross margin~~segment for the three-month period ended ~~February 28,~~August 31, 2021 was ~~19.3%~~27.4% compared to ~~19.4%~~21.5% for the same period in fiscal 2020.

~~Our first quarter sales in~~ Gross margin for our Agricultural Products segment ~~were $3,500,000~~for the nine-month period ended August 31, 2021 was 29.6% compared to $2,953,000 for the same period in fiscal 2020, an increase of $547,000, or 18.5%. The increase in revenue is due to increased demand for our grinder mixers, beet equipment and service parts. We had a very successful early order program last fall producing the strongest backlog we have seen in the last five years, setting us up for a strong first half of the year. We attribute the increased backlog to the government payments farmers received last year coupled with recent years of conservative spending during times of agriculture downturn. According to the USDA's Coronavirus Food Assistance Program data, over $13 billion in financial assistance has been given to agricultural producers in the U.S. to date. Gross margin for the three-month period ended February 28, 2021 was 25.2% compared to 19.3%21.3% for the same period in fiscal 2020. The ~~increase in~~increased gross margin in fiscal 2021 is ~~due to an efficient workforce in 2021 as the result~~a reflection of continuous improvement ~~projects along with strong demand for higher margin products in 2021. We do expect some margin erosion in 2021 as commodity~~initiatives enacted over the past few years that have boosted our workforce production efficiency, product eliminations that have improved our margins and eliminated production floor disruption, price increases enacted to combat rising material prices ~~(mainly steel) have been steadily rising. We have increased prices to attempt to offset these increased costs.~~

~~Our first quarter sales in our Modular Buildings segment were $1,291,000 compared to $1,457,000 for the same period in fiscal 2020,~~and fixed overhead spread over a decrease of $166,000, or 11.4%. Our decrease in revenue is due largely to the progress on a large construction contract that neared completion at the end of the first quarter of fiscal 2021. Quoting activity for modular buildings increased greatly during the first quarter of fiscal 2021 compared to activity during fiscal 2020. We believe this bodes well for this business segment going forward. Gross margin for the three-month period ended February 28, 2021 was 2.9% compared to 17.6% for the same period in fiscal 2020. The decrease in gross profit is due to margin erosion on a large construction contract as our estimated costs to complete the contract increased with unforeseen project issues.

Our Tools segment had sales of $610,000 during the first quarter compared to $616,000 for the same period in fiscal 2020, a decrease of $6,000, or 1.0%. While the sales volume for the first quarter of fiscal 2021 is comparative to that of the first quarter of fiscal 2020, we believe the potential of this segment will grow as gas prices increase and as we are fully able to handle the volume of our OEM customer. Gross margin was 20.2% for the three-month period ended February 28, 2021 compared to 24.5% for the same period in fiscal 2020. The decreased gross margin is due to increased OEM work in the first quarter of fiscal 2021, which has a lower margin than our other product lines; however, we do not pay commissions on OEM work like we do the rest of our product offering so there is a trade off in selling expense.

Our first quarter consolidated selling expenses were $473,000 compared to $456,000 for the same period in fiscal 2020. The increase in selling expenses is due to increased wages from the addition of a product manager in the Agricultural Products segment and increased commissions as a result of the 18.5% increase in sales from the same segment. Selling expenses as a percentage of sales were 8.8% for the three-month period ended February 28, 2021 compared to 9.1% for the same period in fiscal 2020.larger production base.

~~Consolidated engineering expenses~~Our third quarter sales in the Modular Buildings segment were ~~$121,000~~$1,313,000 compared to $2,319,000 for the ~~three-month~~same period in fiscal 2020, a decrease of $1,006,000, or 43.4%. Sales in our Modular Buildings segment for the nine months ended ~~February 28,~~August 31, 2021 were $3,798,000 compared to $5,575,000 for the same period in fiscal 2020, a decrease of $1,777,000, or 31.9%. The decrease in sales for the quarter and the year is largely due to the completion of a large laboratory project in the third quarter of fiscal 2021. While revenue is down the quality of our revenue has improved. Gross margin for the three- and nine-month periods ended August 31, 2021 was 25.8% and 14.8%, respectively, compared to 2.4% and 8.6% for the same respective periods in fiscal 2020. The large laboratory product had thinner margins than our typical construction projects because of the sheer volume of the contract and the role of general contractor we took on during the project, which is not our typical role. The modular buildings segment has a strong backlog moving into the fourth quarter which can provide positive results as long as supply chain delays do not affect our construction material deliveries.

Our Tools segment had sales of $619,000 and $1,888,000 during the three- and nine-month periods ended August 31, 2021, respectively, compared to $475,000 and $1,667,000 for the same respective periods in fiscal 2020, a 30.3% increase and a 13.3% increase, respectively. The increase in sales for the quarter and year to date fiscal 2021 is due to better economic conditions than existed a year ago during the height of the COVID-19 pandemic. While the oil and gas industry demand has not returned to its pre-pandemic levels, it is improved over a year ago. Gross margin was 20.0% for both the three- and nine-month periods ended August 31, 2021, compared to ~~$110,000 from~~17.1% and 21.1% for the same respective periods in fiscal 2020. The gross margin increase in Q3 of fiscal 2021 is due to increased sales volume available to cover fixed costs while the year-to-date gross margin decrease is due to the need to increase production wages to hire and retain production employees.

Our third quarter consolidated selling expenses were $532,000 compared to $370,000 for the same period in fiscal 2020. Our year-to-date selling expenses were $1,549,000 in fiscal 2021 compared to $1,227,000 for the same period in fiscal 2020. The Agricultural Products segment contributed largely to the increase ~~is due~~in selling expenses as we added a product development manager in November of 2020 to ~~standard~~help us bring new products to market and improve on existing product lines. We also underwent a rebranding effort in our Agricultural Products segment that included a new logo, promotional videos and updated website which contributed to the increase in selling expenses. Additionally, we saw increased commissions as a result of increased sales in the Agricultural Products segment. The modular buildings segment also had increased commission expenses as a surge of ag buildings were sold in Q3 of fiscal 2021. Selling expenses as a percentage of sales were 8.1% and 8.7% for the three- and nine-month periods ended August 31, 2021, respectively, compared to 5.7% and 7.3% for the same respective periods in fiscal 2020.

Consolidated engineering expenses were $144,000 and $387,000 for the three- and nine-month periods ended August 31, 2021, respectively, compared to $129,000 and $361,000 for the same respective periods in fiscal 2020. The increase in engineering expenses were related to wage increases ~~given~~implemented to retain skilled engineers in ~~the later part of fiscal 2020 and research & development costs related to~~ a ~~landplane redesign.~~highly competitive job market. Engineering expenses as a percentage of sales were 2.2% ~~for the three-month period ended February 28, 2021 compared to~~and 2.2% for the three- and nine-month periods ended August 31, 2021, respectively, compared to 2.0% and 2.1% for the same ~~period~~respective periods in fiscal 2020.

Consolidated administrative expenses for the ~~three-month period~~three- and nine-month periods ended ~~February 28,~~August 31, 2021 were ~~$817,000~~$902,000 and $2,627,000, respectively, compared to ~~$882,000~~$939,000 and $3,216,000 for the same ~~period~~respective periods in fiscal 2020. The decrease in administrative expenses is ~~due~~the result of non-recurring expenses incurred in 2020 including approximately $133,000 of recruitment expense for management recruitment, dual management salaries of approximately $68,000 as we transitioned our Chief Executive Officer and director of materials positions, approximately $54,000 for the implementation of our OEM customer’s product line in the tools segment, and additional expense of $280,000 that included stock granted to ~~recovery~~new management staff, payout of ~~bad debts, a decrease in expected~~employment agreements and bonus ~~expense compared to~~accruals for incentives offered by the Compensation Committee of the Board for fiscal 2020 ~~and a reduction in implementation costs year on year from~~targets. We also had $197,000 of pandemic-related expense related to employment rewards for keeping our operations running safely during the ~~Tools segment OEM customer.~~COVID-19 pandemic. Administrative expenses as a percentage of sales were ~~15.1%~~13.7% and 14.8% for the three- and nine-month periods ended August 31, 2021, respectively, compared to 14.5% and 19.0% for the same respective periods in fiscal 2020.

Consolidated net income was $56,000 for the three-month period ended ~~February 28,~~August 31, 2021 compared to ~~17.5%~~net loss of $(424,000) for the same period in fiscal 2020.

~~Consolidated~~ Our consolidated net loss ~~was $(315,000)~~ for the ~~three-month period~~nine months ended ~~February 28,~~August 31, 2021 was $(195,000) compared to $(1,663,000). We have now reported two straight quarters with net ~~loss~~income after a long stretch of ~~$(437,000) for~~losses. The overall health of the ~~same period~~agricultural economy has stabilized our primary business segment while operational improvements made during our down years have proven to increase our productivity in ~~fiscal 2020. The decreased net loss is due~~this time of high demand. We have combated labor shortages, rising material costs and supply chain delays well to ~~increased sales in our Agricultural Products segment and a decrease in our consolidated administrative costs.~~this point, but believe the economic effects of COVID-19 have hampered greater earnings potential. We are ~~carrying~~set up well in regards to backlog to have a strong ~~backlogs into the second quarter in two of three segments and are expecting improved results for the second quarter of~~finish to fiscal 2021.

The consolidated order backlog net of discounts as of ~~April 5,~~October 8, 2021, was ~~$6,997,000~~$5,941,000 compared to ~~$7,395,000~~$3,440,000 as of ~~April 5, 2020.~~October 8, 2020, an increase of $2,501,000 or 73%. The ~~agricultural products~~Agricultural Products segment order backlog was ~~$5,456,000~~$3,598,000 as of ~~April 5,~~October 8, 2021, compared to ~~$2,699,000~~$974,000 in fiscal ~~2020. While we did report~~2020 an ~~18.5%~~ increase ~~in sales in fiscal Q1~~ of ~~2021 we are still carrying a backlog that is twice the size of last year’s backlog. The increase is due~~$2,624,0000 or 269%. We expect strong demand for our agricultural products to ~~increased farmer spending as a result of financial assistance received under coronavirus relief packages.~~continue into 2022. The backlog for the modular buildings segment was ~~$1,205,000~~$1,998,000 as of ~~April 5,~~October 8, 2021, compared to ~~$4,528,000~~$2,124,000 in fiscal 2020. ~~The decrease is due~~Approximately $1,610,000 of the fiscal 2020 comparative backlog was related to ~~progress made on~~ a large ~~contract~~project that ~~is not part of~~had a lower profit margin than our typical ~~year. Excluding~~projects. Because of this, ~~project from backlog, our backlog would be $1,056,000 compared to $1,094,000~~we expect better results in Q4 of fiscal ~~2020.~~2021 despite the lower backlog. The backlog for the tools segment was ~~$336,000~~$345,000 as of ~~April 5,~~October 8, 2021, compared to ~~$168,000~~$341,000 in fiscal 2020. The ~~increase in backlog for~~oil and gas industry business we were accustomed to has not yet returned to pre-pandemic levels, however, we are still seeing strong demand on our ~~tools segment is largely due to an OEM customer that has strengthened our business.~~other products. 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.

~~While~~Management cannot predict the future impact of the COVID-19 ~~pandemic had little effect on the first fiscal quarters of 2021 and 2020,~~pandemic; however, we ~~believe that there may be some~~are seeing lasting effects of the pandemic ~~that can~~negatively affect our operations going forward. From March 23, 2020 until May 18, 2020 the majority of our office staff in all three segments worked remotely with the exception of key operations support. At the height of the initial outbreak our workforce was down approximately 17% due to self-quarantine. By the end of May 2020 our entire workforce had returned,supply chain. Employment disruptions, increased material costs and operations have continued as normal with additional safety precautions in place. As COVID-19 cases began to rise in November 2020, we allowed employees that could perform their job functions remotely do so at their discretion. At this time approximately 4% of our office staff is working remote at least part-time and this has had minimal effect on how we operate as a business. We expect that by the end of March 2021 remote employees will return full time to the office. Future outbreaks could have a material effect on our operations, and we are taking precautions to mitigate the spread of COVID-19 including trying to organize mass vaccinations onsite. Workers in our Iowa facilities are eligible to receive the vaccine according to the state’s distribution plan and many employees have started to do so. A small portion of our Ohio facility’s workers have become eligible for the vaccine and have begun the vaccination process.

In our Agricultural Products segment, we did not experience any order cancellations; however, calls for new whole goods slowed significantly in the second quarter of fiscal 2020 and many dealers held off on the shipping or pickup of their completed units. Our sales levels were comparatively steady to the last few years in the third and fourth quarters of fiscal 2020 and we ultimately ended the year down 3.1% on sales. We had a very successful early order program to start 2021 which left us with backlogs higher than we have seen in the last five years. We attribute the large increase in backlog to stimulus payments that farmers received in 2020 along with conservative spending by farmers in 2020. This conservatism allowed farmers to retire debt in 2020 and increase spending in 2021.

Our Modular Buildings segment started fiscal 2020 with a more diverse backlog than we had at the beginning of fiscal 2019; however, we had some setbacks on site work as subcontractors were forced to quarantine after testing positive for COVID-19. Our workers were hesitant to travel during the pandemic and, as a result, we had some challenges completing site work in the third and fourth quarters of fiscal 2020. Because of COVID-19, many companies were also hesitant to enter into long-term contracts in fiscal 2020. As a result, our modular building rental fleet remained largely unused in fiscal 2020, which is evidenced by our decrease in lease revenue. Our quoting activity has picked up significantly in 2021 for both agricultural and research modular buildings and we believe there will be a lot of opportunity for this segment in 2021 as companies start spending again.

In our Tools segment, oil prices dropped significantly at the start of the pandemic, which caused our sales to drop significantly in the second quarter of fiscal 2020. The diversification of our business with our new OEM customer helped us get through the oil and gas industry lows during that time; however, since oil and gas prices have not yet reached their pre-pandemic levels, we have not seen our sales levels from these customers return. We are optimistic that we have passed the low point in our Tools segment and expect improved sales in fiscal 2021.

While our sales were affected in fiscal 2020 by the COVID-19 pandemic, government programs including the Paycheck Protection Program and Economic Injury Disaster Loan program helped protect our liquidity that may have otherwise been materially impacted. At the start of 2021, economic conditions improved in all three segments. In turn, we have seen rises in commodity prices (steel and lumber) driven by the current highoverall demand for ~~these products. In addition, our supplier lead times~~products have ~~increased providing new challenges in fulfilling our large backlog. Travel restrictions~~delayed the receipt of parts and border closures have not had a major impact on our ability to operate and achieve business goals. While we did minimize our travel in 2020 our operations were not materially affected by the inability to travel. Many trade shows shifted to online and some canceled altogether, however, our sales volumes were not significantly affected by the cancellation of these shows. As vaccinations continue to occur in 2021, we expect travel and trade show participation to pick up.components needed for production. We ~~believe the worst of the economic hardship caused by COVID-19 has passed for us. We have built and improved our business~~anticipate continued delays over the ~~last~~next few ~~years to help us better weather any economic storms that come~~quarters. This problem is widespread and does not create an advantage for our ~~way.~~competitors.

~~Our~~A primary source of funds for the ~~three~~nine months ended ~~February 28,~~August 31, 2021 was cash ~~generated~~provided by ~~operating~~financing activities, ~~including~~mainly the ~~collection~~use of ~~receivables~~our line of credit. Cash deposits in our first and ~~customer deposits~~second early order programs were also a primary source of cash for us in the nine months ending August 31, 2021. Our primary use of cash was related to ~~cash deposit discounts offered~~increasing inventory levels to meet the high levels of demand. With uncertainty on component availability, prolonged lead times and rising prices, we have been bringing in inventory far earlier than previous years, which is consuming the availability on our ~~early order program. Our primary uses~~line of ~~cash were related to the retirement of debt and progress on construction projects for our modular buildings segment.~~credit. We expect our primary capital needs for the remainder of fiscal 2021 to relate to operating costs, primarily production costs, fulfillment of customer deposits, and the retirement of debt. We expect to convert $1,050,000 of current debt to long-term debt in the fourth quarter of fiscal 2021 provided our EIDL loan modifications are approved and processed with the SBA and also expect our line of credit to decrease as we turn through inventory in the fourth fiscal quarter.

We have a $5,000,000 revolving line of credit with Bank Midwest that, as of ~~February 28,~~August 31, 2021, had an outstanding principal balance of ~~$1,875,530.~~$4,290,030. This line of credit is scheduled to mature on March 30, 2022.

We believe cash from operations and 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.

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

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,~~August 31, 2021. 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.

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.

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

The following table presents the information with respect to purchases made by us of our common stock during the ~~first~~third quarter of fiscal 2021:

⁽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.

Effective February 2, 2021, we renewed our $4,000,000 revolving line of credit with Bank Midwest. The revolving line of credit is payable upon demand by Bank Midwest. If no earlier demand is made, the unpaid principal and accrued interest will be payable in one payment, due on February 13, 2022. The updated Promissory Note with Bank Midwest is included as Exhibit 10.1 hereto and is incorporated herein by reference.None.

Effective February 11, 2021, we renewed our $5,000,000 revolving line of credit with Bank Midwest. The revolving line of credit matures on March 30, 2022 and requires monthly interest-only payments. The updated Promissory Note with Bank Midwest is included as Exhibit 10.2 hereto and is incorporated herein by reference.

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.


Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets August 31, 2021 and November 30, 2020	1

	~~Condensed Consolidated Balance Sheets February 28, 2021 and November 30, 2020~~	1

	Condensed Consolidated Statements of Operations Three-month and nine-month periods ended ~~February 28,~~August 31, 2021 and ~~February 29,~~August 31, 2020	2

	Condensed Consolidated Statements of Stockholders’ Equity ~~Three-month~~Nine-month periods ended ~~February 28,~~August 31, 2021 and ~~February 29,~~August 31, 2020	3

	Condensed Consolidated Statements of Cash Flows ~~Three-month~~Nine-month periods ended ~~February 28,~~August 31, 2021 and ~~February 29,~~August 31, 2020	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4.	Controls and Procedures	23


Item 1.	Legal Proceedings	24

Item 1A.	Risk Factors	24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 3.	Defaults Upon Senior Securities	24

Item 4.	Mine Safety Disclosures	24

Item 5.	Other Information	24

Item 6.	Exhibits	2524

	SIGNATURES	2625

	Three Months Ended
	February 28, 2021			February 29, 2020
Sales	$	5,400,572		$	5,025,924
Cost of goods sold		4,357,894			4,048,762
Gross profit		1,042,678			977,162
Expenses:
Engineering		121,391			109,852
Selling		472,974			455,684
General and administrative		816,836			881,322
Total expenses		1,411,201			1,446,858
(Loss) from operations		(368,523	)		(469,696	)
Other income (expense):
Interest expense		(58,684	)		(83,274	)
Other		27,657			9,199
Total other income (expense)		(31,027	)		(74,075	)
Income (loss) before income taxes		(399,550	)		(543,771	)
Income tax (benefit)		(84,312	)		(106,579	)
Net Income (Loss)		(315,238	)		(437,192	)

ART’S-WAY MANUFACTURING CO., INC.
Consolidated Statements of Stockholders' Equity
~~Three~~Nine Months Ended ~~February 28,~~August 31, 2021 and ~~February 29,~~August 31, 2020
(Unaudited)

	Common Stock				Additional					Treasury Stock								Common Stock				Additional					Treasury Stock
	Number of				paid-in		Retained			Number of								Number of				paid-in		Retained			Number of
	shares		Par value		capital		earnings			shares		Amount			Total			shares		Par value		capital		earnings			shares		Amount			Total

Balance, November 30, 2019		4,321,087	$	43,211	$	3,250,087	$	8,547,342			18,842	$	(47,058	)	$	11,793,582			4,321,087	$	43,211	$	3,250,087	$	8,547,342			18,842	$	(47,058	)	$	11,793,582
Stock based compensation		53,750		537		37,043		-			10,517		(19,064	)		18,516			143,917		1,439		194,223		0			14,471		(26,536	)		169,126
Net (loss)		-		-		-		(437,192	)		-		-			(437,192	)		-		0		0		(1,662,523	)		-		0			(1,662,523	)
Balance, February 29, 2020		4,374,837		43,748		3,287,130		8,110,150			29,359		(66,122	)		11,374,906
Balance, August 31, 2020																			4,465,004		44,650		3,444,310		6,884,819			33,313		(73,594	)		10,300,185

ART’S-WAY MANUFACTURING CO., INC.
Condensed Consolidated Balance Sheets
(Unaudited)

~~ART~~’~~S-WAY MANUFACTURING CO., INC.~~
~~Condensed Consolidated Statements of Operations~~
~~(Unaudited)~~

ART’S-WAY MANUFACTURING CO., INC.
Condensed Consolidated Statements of Cash Flows
~~Condensed Consolidated Statements of Cash Flows~~
(Unaudited)

	For the Twelve Months Ended
	February 28, 2021			February 29, 2020
Numerator for basic and diluted net income (loss) per share:

Net income (loss)	$	(315,238	)	$	(437,192	)

Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,475,279			4,315,481
Effect of dilutive stock options		-			-
For diluted net income (loss) per share - weighted average common shares outstanding		4,475,279			4,315,481


Net Income (Loss) per share - Basic:
Net Income (Loss) per share	$	(0.07	)	$	(0.10	)

Net Income (Loss) per share - Diluted:
Net Income (Loss) per share	$	(0.07	)	$	(0.10	)

Year	Amount
2021	$	68,307
2022		98,275
2023		108,314
2024		113,474
2025		119,584
2026 and thereafter		2,282,463
	$	2,790,417

	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, 2020		-	$	-		N/A		N/A
January 1 to January 31, 2021		-	$	-		N/A		N/A
February 1 to February 28, 2021		5,570	$	3.28		N/A		N/A
Total		5,570	$	3.28

Exhibit No.	Description
~~10.1~~	Promissory Note, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated February 2, 2021 – incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ending November 30, 2020.
~~10.2~~	~~Promissory Note, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated February 11, 2021 – filed herewith.~~
31.1	Certificate of Chief Executive Officer pursuant to 17 CFR 13a-14(a) – filed herewith.
31.2	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 ~~XBRL (Extensible~~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 (formatted as Inline XBRL and contained in Exhibit 101)

~~Date: April 9, 2021~~	~~By:~~	~~/s/ David A. King~~
		~~David A. King~~
		~~President and Chief Executive Officer~~


Date: ~~April 9,~~October 14, 2021	~~By:~~	By: /s/ ~~Michael W. Woods~~	David A. King
		~~Michael W. Woods~~	David A. King
		President and Chief Executive Officer
Date: October 14, 2021		By: /s/ Michael W. Woods
		Michael W. Woods
		Chief Financial Officer


PART II – OTHER INFORMATION		24