UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON D.C. 20549

                          FORM 10-KSB (Mark one)

[x] Annual report under Section 13 or 15(d) of the Securities Exchange Act of
    1934

For the fiscal year ended November 30, 2006

[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the transition period from ______ to _______

Commission File No. 0-5131
                     ART'S-WAY MANUFACTURING CO., INC.
             (Name of Small Business Issuer In Its Charter)

           DELAWARE                         42-0920725
   _____________________________   ________________________________
  (State or Other Jurisdiction           (I.R.S. Employee
       of Incorporation                 Identification No.)
      or   Organization)

        5556 Highway 9
        Armstrong, Iowa                       50514
   _____________________________   ________________________________
     (Address of Principal                  (Zip Code)
       Executive Offices)
                           (712) 864-3131
             (Issuer's Telephone Number, Including Area Code)

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

                                                           None

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

                                           Common stock $.01 par value

Check whether the issuer is not required to file reports pursuant to
Section 13 on 15(d) of the Exchange Act. [ ]

Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing for the past 90 days.
Yes [X] No []

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-KSB or any amendment to this form 10-KSB. [ x ]

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

State issuer's revenues, for its most recent fiscal year: $19,853,812.

State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at
which the common equity was sold, or the average bid and asked prices of
such common equity as of a specified date written the past 60 days:
$15,231,955. As of February 17, 2007.

State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practical date: As of February 26,
2007, there were 1,978,176 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Definitive Proxy
Statement for the registrant's 2007 Annual Meeting of Stockholders to be
filed within 120 days of November 30, 2006, are incorporated by
reference into Part III of this Form 10-KSB.

Transitional Small Business Issuer Forecast (check one): Yes [] No [X]

               Art's-Way Manufacturing Co., Inc. and Subsidiary
                           Index to Annual Report
                             on Form 10-KSB

                                                                 Page
Part I

   Item 1 - Description of Business	                       4 thru 6

   Item 2 - Description of Property                            6 thru 7

   Item 3 - Legal Proceedings                                      7

   Item 4 - Submission of Matters to a Vote of Security Holders	   7

Part II

   Item 5 - Market for Common Equity and Related Stockholder   8 thru 9
   Matters and Small Business Issuer Purchases of
   Equity Securities

   Item 6 - Management's Discussion and Analysis or Plan       9 thru 13
   of Operation


   Item 7 - Financial Statements                                  13

   Item 8 - Changes in and Disagreements with Accountants         14
   on Accounting and Financial Disclosure

   Item 8A - Controls and Procedures                              14

   Item 8B - Other Information                                    14

Part III

   Item 9 - Directors, Executive Officers, Promoters and          15
   Control Persons; Compliance with Section 16(a) of the
   Exchange Act

   Item 10 - Executive Compensation                               15

   Item 11 - Security Ownership of Certain Beneficial
   Owners and Management And Related Stockholder Matters          15

   Item 12 - Certain Relationships and Related Transactions       15

   Item 13 - Exhibits                                             15

   Item 14 - Principal Accountant Fees and Services               15


                                      PART I

Item 1. Description of Business

   (a) Business Development

   Art's-Way Manufacturing Co., Inc. began operations as a farm equipment
   manufacturer in 1956. Our manufacturing plant is located in Armstrong,
   Iowa.

   During the 2005 beet harvesting season we field tested a new single pass
   defoliator; we projected that this product would be in production and in
   the field for the 2006 beet harvest. We also tested a new exportable
   beet harvester. The export unit is designed off of our model 6812 but
   down sized to fit in a cargo container for shipping.

   In October 2005 we purchased certain assets of Vessel Systems Inc., a
   manufacturer of pressurized tanks and vessels, located in Dubuque, Iowa.
   We purchased the inventory, fixed assets and accounts receivable for the
   purchase price of $844,284, paid in cash. We operate this new business
   through our wholly-owned subsidiary, Art's-Way Vessels, Inc.

   In July 2006, we celebrated our 50th Anniversary as an agriculture
   equipment manufacturer.

   Also in July 2006, we exported our newly designed sugar beet harvester
   and defoliator. We shipped units to the Ukraine, Russia and China. We
   are very excited to be breaking out into these new markets.

   In August 2006 we purchase certain assets of Tech Space Inc., a
   manufacturer of modular laboratories, located in Monona, Iowa. We
   purchased the inventory, fixed assets and accounts receivable for the
   purchase price of $1,137,606, paid in cash. We operate this new business
   through our wholly-owned subsidiary, Art's-Way Scientific, Inc.

   Our new grinder mixer launched in late 2005 has been a great success. A
   major competitor has exited the domestic and international market and we
   have gained significant market share. In September 2006 our first
   shipment of grinder mixers sold internationally left our Armstrong
   facility. We shipped several units to the United Kingdom and to
   Australia, and we look forward to strengthening these relationships and
   developing new ones going forward.

   (b) Business of Issuer

   Art's-Way Manufacturing manufactures specialized farm machinery under
   our own and private labels. Art's-Way Vessels manufactures pressure
   vessels and Art's-Way Scientific manufactures modular building for
   various uses, animal containment and laboratories are two of the most
   common applications.

   Farm equipment manufactured under our own label includes: portable &
   stationary animal feed processing equipment and related attachments used
   to mill and mix feed grains into custom animal feed rations; a high bulk
   mixing wagon to mix animal feeds containing silage, hay and grain; a
   line of stalk shredders; sugar beet and potato harvesting equipment; and
   a line of land maintenance equipment, edible bean equipment, moldboard
   plows and grain drill equipment.

   Private label manufacturing of farm equipment accounted for 13% and 15%
   of Art's-Way Manufacturing's consolidated sales for the years ended
   November 30, 2006 and 2005, respectively. While as a percent of sales
   this shows a decrease, sales were actually up $391,000 over 2005.

   Art's-Way labeled products are sold by farm equipment dealers throughout
   the United States. There is no contractual relationship with these
   dealers to distribute our products, and dealers may sell a competitor's
   product line.

   Art's-Way Vessels produces and sells pressurized vessels, both code and
   non-code. Vessels can range from 3 feet in length up to 40 feet. The
   diameter can be between 18 inches to 8 feet. These vessels are sold to
   manufacturing facilities that will use the vessel as a component part of
   their end product.

   Art's-Way Scientific produces and sells modular buildings. The buildings
   are designed to meet the needs of the end user. Buildings commonly
   produced include swine buildings or the lower end to animal containment
   building coupled with laboratories for research. Facilities can have a
   selling price ranging anywhere from $50,000 to in excess of $2,400,000.

   Raw materials, for Art's-Way Manufacturing, Art's-Way Vessels and
   Art's-Way Scientific in all aspects of our business are acquired from
   domestic and foreign sources and normally are readily available.

   We maintain manufacturing rights on several products covering unique
   aspects of design and have trademarks covering product identification.
   We pay royalties for use of certain manufacturing rights. Our material
   royalty agreement is with Case New Holland (CNH). The agreement with CNH
   will run through September 2006, on moldboard plows, however the
   agreement shall continue in force until terminated or cancelled. We have
   not terminated or cancelled the agreement as of November 30, 2006. In
   our opinion, our trademarks and licenses are of value in securing and
   retaining business.

   Sales of our agricultural products are seasonal; however, we have tried
   to decrease this impact of seasonality through the development of
   shredders and beet harvesting machinery coupled with private labeled
   products, as the peak periods for these different products occur at
   different times. Similar to other manufacturers in the farm equipment
   industry, we are affected by factors peculiar to the farm equipment
   field, including items such as fluctuations in farm income resulting
   from the change in commodity prices, crop damage caused by weather and
   insects, government farm programs and other unpredictable variables such
   as interest rates.

   We believe that pressure vessel sales do not tend to be seasonal.

   We believe that there is a funding cycle through the universities that
   purchase our modular buildings. We believe that this cycle can be offset
   by building back logs to get through the slow time and through sales to
   other public and private sectors.

   We have an OEM supplier agreement with CNH. Under the OEM agreement we
   have agreed to supply CNH's requirements for certain feed processing and
   service parts under CNH's label. The agreement has no minimum
   requirements and can be cancelled upon certain conditions. For the years
   ended November 30, 2006 and 2005, sales under the CNH label aggregated
   approximately 8% of consolidated sales.

   Our feed processing products, including private labeled units, compete
   with similar products of many other manufacturers. We estimated that
   there are more than 15 competitors producing similar products although
   total market statistics are not available. We believe that our products
   are competitively priced with greater diversity than most competitor
   product lines. Beet harvesting equipment is manufactured by three
   companies that have a significant impact on the market. We estimate our
   share of the domestic market is estimated to be about 35%. Other
   products such as shredders and grain drills are manufactured by
   approximately 20 other companies. We believe our products are
   competitively priced with above average quality and performance, in a
   market where price, product performance and quality are principal
   elements.

   Another important part of our business is after market service parts
   that are available to keep our branded and OEM produced equipment
   operating to the satisfaction of the end user.

   The backlog of orders booked in February 2007, was approximately
   $11,792,000. Art's-Way Vessels had a backlog of $1,953,000, Art's-Way
   Scientific had a backlog of $5,715,000 and Art's-Way Manufacturing had a
   backlog of $4,124,000. Art's-Way Manufacturing had approximately
   $7,158,000 in consolidated backlog a year ago.

   We currently do no business with any local, state or federal government
   agencies.

   We are engaged in research and development work on a continual basis to
   improve the present products and create new products. In 2006, research
   and development costs were down $99,000. In 2006 most of our research
   and development was done internally with the help of an outside
   engineering consultant. Our 2006 costs of $186,000 compare to $285,000
   in 2005. For further information please see Part II, Item 6, of this
   report.

   Art's-Way Vessels produces custom tanks and vessels that are
   manufactured to customer blue prints. Art's-Way Vessels incurred no
   research and development costs in 2006 and 2005.

   We are subject to various federal, state and local laws and regulations
   pertaining to environmental protection and the discharge of materials
   into the environment. In 2006 we completed the installation of a liquid
   paint system for our whole goods. The new paint system significantly
   improves the quality of our paint, in terms of luster, hardness and
   longevity. The paint system is situated in a new location within the
   plant, as we redesign our workflow to optimize productivity. We have
   obtained the necessary permits that allow us to change the paint systems
   and remain in compliance with all applicable laws and regulations.

   During the year ended November 30, 2006, we had peak employment of 90
   full-time and 12 part-time employees, of which 80 were factory and
   production employees, 6 were engineers and engineering draftsman, 13
   were administrative employees, and 3 were in sales and sales management.
   Employee levels fluctuate based upon the seasonality of the product
   line.

Item 2. Description of Property.

   Our existing executive offices, production and warehousing facilities in
   Armstrong, Iowa, are built of hollow clay block/concrete and contain
   approximately 240,000 square feet of usable space. Most of these
   facilities were constructed after 1965 and are in good condition. We own
   approximately 127 acres of land west of Armstrong, which includes the
   factory and inventory storage space. We currently lease excess land to
   third parties for farming.

   The facility in Dubuque, Iowa, which houses the manufacturing for
   Art's-Way Vessels, is a leased building. The building was constructed in
   2004.

   The facility in Monona, Iowa, which housed the manufacturing for
   Art's-Way Scientific, was stick built with steel siding. The main
   manufacturing facility contained approximately 360,000 square feet of
   usable space, and was constructed in 1969. This structure was totally
   destroyed by fire on January 16, 2007. There is also a warehouse at this
   location that is approximately 5,000 square feet and that was
   constructed in 1994. We are temporarily operating in this facility as we
   recover from the fire and seek additional temporary and permanent
   replacement property. For further information, see note 16 to the
   consolidated financial statements provided in this report.

Item 3. Legal Proceedings.

   We are from time to time a party to various legal actions arising in the
   normal course of business. We believe that there are no threatened or
   pending proceedings against us that, if determined adversely, would have
   a material adverse effect on our business or financial position.

Item 4. Submission of Matters to a Vote of Security Holders.

   Not Applicable.


                               PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Small
Business Issuer Purchases of Equity Securities.

   (a)  Market Information

                                Per Common Stock Bid Prices by Quarter
                                    Year ended	        Year ended
                                November 30, 2006    November 30, 2005
                                High	     Low     High	  Low
     First Quarter             6.700       4.740    8.790       5.500
     Second Quarter            9.190       5.470   11.500       5.110
     Third Quarter             7.350       4.870    9.050       5.110
     Fourth Quarter            7.850       5.010    5.950       4.500

   Our common stock trades on The NASDAQ Capital Market under the symbol
   "ARTW." The range of closing bid prices shown above, are as reported by
   NASDAQ. The quotations shown reflect inter-dealer prices, without retail
   mark-up, mark-down, or commission and may not necessarily represent
   actual transactions.

   (b)  Holders

   There were approximately 135 stockholders of our common stock as of
   February 16, 2007.

   (c) Dividends

   On October 26, 2006 our Board of Directors declared a dividend of $0.05
   per share to be paid on November 30, 2006 to stockholders of record as
   of November 15, 2006. An identical dividend was declared in November
   2005. The loan covenants that restricted the payment of dividends were
   waived by our lenders. The payment of and the amount of any future
   dividends will be governed by our financial position at that time, and
   may again require the waiver of loan covenants by our lenders.

   (d) Securities Authorization for Issuance Under Equity Compensation
   Plans.

                       Number of      Weighted-average   Number of securities
                     securities to    exercise price of   remaining available
                     be issued upon      Outstanding      for future issuance
                       exercise of        options,           under equity
                       outstanding    Warrants & rights   compensation plans
                     options, warrants                   (excluding securities
	                & rights                      reflected in columns (a))


   Equity compensation
    plans approved by
    security holders        -                 -                   -
   (1) Equity compensation
    plans not approved by
    security holders     (a)10,000        (b) $3.98           (c) 5,000

    Total                   10,000            -                   5,000

   (1) Information on Director Stock Option Plan (2001) is disclosed in
   note 9 to the Consolidated Financial Statement filed under Part II, Item
   7 of this report.

Item 6. Management's Discussion and Analysis or Plan of Operation

   The following discussion of our consolidated financial condition and
   results of operations should be read in conjunction with the financial
   statements and the related notes thereto included elsewhere in this Form
   10-KSB. The matters discussed herein contain forward-looking statements
   within the meaning of Section 21E of the Securities Exchange Act of
   1934, as amended, and Section 27A of the Securities Act of 1933, as
   amended, which involve risks and uncertainties. All statements other
   than statements of historical information provided herein may be deemed
   to be forward-looking statements. Without limiting the foregoing the
   words "believes", "anticipates", "plans", "expects" and similar
   expressions are intended to identify forward-looking statements. Factors
   that could cause actual results to differ materially from those in the
   forward-looking statements include our degree of financial leverage, the
   factors described in Item 1 of this Form 10-KSB, risks associated with
   acquisitions and in the integration thereof, risks associated with
   supplier/OEM agreements, dependence upon the farm economy and the impact
   of competitive services and pricing, as well as other risks referenced
   from time to time in our filings with the SEC. Readers are cautioned not
   to place undue reliance on these forward-looking statements, which
   reflect management's analysis, judgment, belief or expectation only as
   of the date hereof. We undertake no obligation to publicly revise these
   forward-looking statements to reflect events or circumstances that arise
   after the date hereof.

   Management's Discussion and Analysis of Financial Condition and Results
   of Operations

   Critical Accounting Policies

   We have identified the following accounting policies as critical to our
   operations.

   Revenue Recognition - Revenue is recognized when risk of ownership and
   title pass to the buyer, generally upon the shipment of the product. In
   very limited circumstances, and only upon a written customer agreement,
   we recognize revenue upon the production and invoicing of the products.
   Art's-Way Scientific, Inc. is in the construction industry and will have
   deposits and/or bench mark payment. Their revenue is recognized on a
   percentage completed basis.

   Inventory Valuation - Inventories are stated at the lower of cost or
   market, and cost is determined using the first-in, first-out (FIFO)
   method. Management monitors the carrying value of inventories using
   inventory control and review processes that include, but are not limited
   to, sales forecast review, inventory status reports, and inventory
   reduction programs. We record inventory write downs to market based on
   expected usage information for raw materials and historical selling
   trends for finished goods. Write downs of inventory create a new cost
   basis. Additional write downs may be necessary if the assumptions made
   by management do not occur.

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

   Results of Operations

   Twelve months ended November 30, 2006 compared to the twelve months
   ended November 30, 2005

   Our consolidated revenue of $19,854,000 for 2006 represents a 36%
   increase when compared to $14,619,000 for 2005. Art's-Way Vessels had
   revenues of $3,797,000, compared to $358,000 in 2005, the year in which
   we acquired the assets. Art's-Way Scientific had revenues of $1,032,000,
   for the period from its acquisition in August 2006 through November
   2006. Art's-Way Manufacturing had revenues totaling $15,025,000.
   Art's-Way Manufacturing's branded products increased by $992,000 while
   OEM sales increased by $228,000.

   Gross profit as a percent of sales was 29% for 2006 compared to 30% for
   2005. While we worked to retain and improve our profit margins with
   pricing, we have also experienced some disruption due to the acquisition
   and integration of Art's-Way Vessels and Art's-Way Scientific.
   Furthermore, we have made some significant changes to our manufacturing
   methods in our Armstrong facility that had caused inefficiencies during
   the transition from a batch build to a more lean continuous flow for the
   production of our grinder mixer line. We also had a number of products
   that went from the design stage into production; this seems to hurt our
   efficiencies for a certain amount of time. We do believe that we have
   instilled new disciplines and expect to regain our gross profit in 2007.

   Consolidated operating expenses in 2006 increased $1,217,000 from 2005.
   Art's-Way Vessels represents $736,000 of that increase, Art's-Way
   Scientific represents $269,000 while Art's-Way Manufacturing represents
   $230,000 of the total. As a percent of sales, operating expenses were
   20% and 19%, respectively, when comparing 2006 and 2005.

   Consolidated engineering expenses for Art's-Way Manufacturing decreased
   by $56,000. This was due to a decrease in research and development from
   2005 when we were developing an exportable beet harvester, defoliator
   and a new domestic defoliator. As we moved those new products from
   design into production our engineering department's focus shifted from
   research and development to production support. In early 2007 we updated
   our PM 25 grinder mixer. We believe that by investing in our engineering
   department and research and development we are investing in the future
   of our company. We believe that by developing new products and updating
   our current products we will secure and better our position in our
   markets and allow the company to grow sales.

   Consolidated selling expenses for Art's-Way Manufacturing increased
   $141,000 from 2005 to 2006. The newly acquired Art's-Way Scientific,
   accounts for $71,000. Art's-Way Manufacturing selling costs increased
   $70,000 as this segment increased its marketing efforts to better
   penetrate our customers and markets.

   Consolidated general and administrative expenses increased by
   $1,131,000. The addition of Art's-Way Scientific resulted in an increase
   of $198,000. Art's-Way Vessels resulted in an increase of $737,000.
   Art's-Way Manufacturing accounted for an increase of $215,000. In 2006
   we accrued for bonuses paid out in 2007 based on the results of 2006.
   This was the first year that we accrued for bonuses, as in the past
   bonus amount were not known until after the reporting period was closed.
   This change in accounting resulted in an increase in general and
   administrative expenses of $133,000 compared to 2005. Other cost
   increases for Art's-Way Manufacturing included on-going expenses to
   implement a new Enterprise Resource Planning system, costs related to
   our 50th anniversary milestone and normal inflationary increases.

   Art's-Way Manufacturing experienced a 65% increase in consolidated
   interest and other expenses in 2006 compared to 2005. Interest expense
   accounted for substantially all of the increase and was due to higher
   average loan balances, as we borrowed an additional $1,500,000 to
   finance acquisitions and equipment purchases, and increased interest
   rates.

   Income before tax in 2006 was down slightly to $1,417,000 compared to
   $1,474,000 in 2005. Net income of $934,000 for 2006 compared to $977,000
   in 2005.

   We continue to strive to reduce costs, and continue our move to a lean
   manufacturing environment. We also continue to invest in our future
   through research and development as well as new equipment and
   acquisitions. We believe that as of the end of fiscal 2006, our overall
   company has strengthened through new product offerings and the
   acquisition of Art's-Way Scientific. As previously mentioned the backlog
   of orders booked in February 2007, totaled approximately $11,792,000
   compared $7,158,000 in consolidated backlog a year ago. Overall, we are
   looking forward to another strong year in fiscal 2007.

   Liquidity and Capital Resources

   Twelve months ended November 30, 2006

   Our main sources of funds were from our ability to generate cash from
   operations and an additional long-term loan. Cash provided from
   operations was $1,570,000 for fiscal year 2006. We were able to bring
   our consolidated inventories down $527,000. This decrease was offset by
   an increase in accounts receivable of $1,357,000. This increase is
   attributed to our increase in export sales. We give extended terms to
   our export customers that must wait to take delivery of product for
   approximately two months while the freight make its way overseas. We do,
   however, have letters of credit established with our export customers,
   so the receivables are guaranteed. Our new long-term loan through West
   Bank was for $1,500,000, and was used to purchase certain assets of Tech
   Space Inc. and certain new equipment.

   Twelve months ended November 30, 2005

   Our main sources of funds were from our ability to generate cash from
   operations. Cash provided from operations was $2,497,000 for fiscal year
   2005. We will continue reinvesting in our company to strengthen its
   foundation and maximize long-term growth. In 2005 we paid a dividend to
   our stockholders for the first time in several years. This had a cash
   impact of $98,000.

   Capital Resources

   The Company has long-term financing through West Bank. Credit facilities
   consist of a revolving line of credit and three loan agreements totaling
   $8,000,000.

   Facility #1 is a revolving line of credit for $3,500,000 with advances
   funding the working capital, letter of credit and corporate credit card
   needs that mature on March 31, 2007. We are in the process of securing
   an extension for an additional year and expect to receive this
   extension. The interest rate is West Bank's prime interest rate plus 1%,
   adjusted daily. Monthly interest only payments are required and the
   unpaid principal is due on the maturity date. Collateral consists of a
   first position on our assets owned including, but not limited to
   inventories, accounts receivable, machinery and equipment. As of
   November 30, 2006 and 2005, we had not borrowed against the line of
   credit.

   Facility #2 is long-term financing for $2,000,000 that is supported by a
   guarantee issued by the United States Department of Agriculture (USDA)
   for 75% of the loan amount outstanding. The variable interest rate is
   West Bank's prime interest rate plus 1.5%, adjusted daily, monthly
   principle and interest payments are amortized over 20 years with final
   maturity date of May 31, 2023.

   Facility #3 is long-term financing for $1,000,000 that is also supported
   by a guarantee issued by the USDA for 75% of the loan amount
   outstanding. The loan for $1,000,000 was used for new product
   development in 2005.

   Facility #4 is long-term financing for $1,500,000 that is also supported
   by a guarantee issued by the USDA for 75% of the loan amount
   outstanding. The loan for $1,500,000 was used for acquisitions and new
   equipment in 2006.

   Collateral for Facilities #2 and #3 is primarily real estate with a
   second position on assets, which are the primary assets securing
   Facility #1. The USDA subordinates collateral rights in all assets other
   than real estate in an amount equal to West Bank's other credit
   commitments. As of November 30, 2006 the outstanding balances on
   Facilities #2, #3 and #4 were $1,701,842, $943,034 and $1,428,054
   respectively compared to $1,754,866, $974,356 and $0 at November 30,
   2005.

   J. Ward McConnell, Jr. was required to personally guarantee all
   four credit facilities on an unlimited and unconditional basis. The
   guarantees will be reduced after the first three years to a percentage
   representing his ownership of the Company. Mr. McConnell's guarantees
   shall be removed in the event that his ownership interest in the Company
   is reduced to a level less than 20% after the first three years of the
   loans. On Facilities #1 and #2 Mr. McConnell's guarantee portion has
   dropped to his percent ownership. The Company compensates Mr. McConnell
   at an annual percentage rate of 2% on 40% of the outstanding balance. On
   Facilities #3 and #4 the Company compensates Mr. McConnell for his
   personal guarantees at an annual percentage rate of 2% of the
   outstanding balances. Guarantee payments are made on a monthly basis.
   Guarantee fee payments to Mr. McConnell were approximately $60,000 and
   $56,000, for the years ended November 30, 2006, and 2005, respectively.

   Other terms and conditions of all three facilities include providing
   monthly internally prepared financial reports including accounts
   receivable aging schedules and borrowing base certificates and year-end
   audited financial statements. The borrowing bases shall limit advances
   from Facility #1 to 60% of accounts receivable less than 90 days, 60% of
   finished goods inventory, 50% of raw material inventory and 50% of
   work-in-process inventory plus 40% of appraisal value of machinery and
   equipment. Covenants include, but are not limited to, restrictions on
   debt service coverage ratio, debt/tangible net worth ratio, current
   ratio, capital expenditures, and tangible net worth. During the year
   ended November 30, 2006, we violated the restriction on capital
   expenditures, payment of dividends and loans to third parties. Under our
   loan agreement West Bank would have had the right to call the loan
   and/or increase the interest rate by three percentage points. As stated
   above, we provide West Bank with monthly financial statements, as well
   as a cash flow statement on a monthly basis. Therefore they were aware
   of the amount of capital expenditures we had incurred throughout the
   year. They were also aware of the decision to pay dividends, and the
   inter-company loan to Art's-Way Vessels in connection with the asset
   purchase from Vessels Systems, well in advance of the actual
   expenditures. The bank views this spending favorably, and waived the
   covenants.

   Contractual Obligations

   Contractual Obligation         Payments due by period
                               Total   < 1 yr    1-3 yrs    3-5 yrs    >5 yrs
   *Long-term debt          5,926,851  598,091  1,196,945  1,198,097  2,933,718
    including interest
   Capital lease obligation       0          0	     0           0         0
   Operating lease obligation 125,000   125,000      0           0         0
   Purchase Obligations           0          0       0           0         0
   Other                          0          0       0           0         0
   Total                    6,051,851   723,091 1,196,945   1,198,097 2,933,718

   * Based on current interest rates at November 30, 2006.

   Our current ratio and its working capital are as shown in the
   following table:

                                     November 30, 2006	    November 30, 2005
              Current Assets            $11,218,700             $9,481,557
              Current Liabilities         2,717,243              2,060,486
              Working Capital            $8,501,457             $7,421,071

              Current Ratio                  4.1                    4.6

   Utilization of Deferred Tax Assets

   At November 30, 2006 and 2005, we established a deferred tax asset
   valuation allowance of approximately $11,000 and $41,000, respectively.
   In assessing our deferred tax assets, management considers whether it is
   more likely than not that some portion of all of the deferred tax assets
   will not be realized. The ultimate realization of deferred tax assets is
   dependent upon the generation of future taxable income during the
   periods in which those temporary differences become deductible.

   Off-Balance Sheet Arrangements

   We have no off-balance sheet arrangements.

   Item 7. Financial Statements.







Report of Independent Registered Public Accounting Firm

To the Board of Directors
Art's-Way Manufacturing Co., Inc.
Armstrong, Iowa

We have audited the consolidated balance sheet of Art's-Way
Manufacturing Co., Inc. and subsidiary as of November 30, 2005, and the
related consolidated statements of operations, stockholders' equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Art's-Way Manufacturing Co., Inc. and subsidiary as of November 30,
2005, and the results of their operations and their cash flows for the
year then ended in conformity with U.S. generally accepted accounting
principles.


                                       By: /s/ McGladrey & Pullen

Des Moines, Iowa
January 9, 2006








REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
Art's-Way Manufacturing Co., Inc.
Armstrong, Iowa

We have audited the accompanying consolidated balance sheet of Art's-Way
Manufacturing Co., Inc. and Subsidiaries as of November 30, 2006, and
the related consolidated statements of operations, stockholders' equity,
and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we do not express such an opinion. An
audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Art's-Way Manufacturing Co., Inc. and Subsidiaries as of November 30,
2006, and the results of its operations and its cash flows for the year
then ended in conformity with accounting principles generally accepted
in the United States of America.

By: /s/ Eide Bailly


Minneapolis, Minnesota
February 23, 2007



                ART'S-WAY MANUFACTURING CO., INC.

                       Table of Contents

                                                           Page

     Consolidated Statements of Operations -
       Years ended November 30, 2006 and 2005               F-4

     Consolidated Balance Sheets -
       November 30, 2006 and 2005                           F-5

     Consolidated Statements of Stockholders' Equity -
       Years ended November 30, 2006 and 2005               F-6

     Consolidated Statements of Cash Flows -
       Years ended November 30, 2006 and 2005               F-7

     Notes to Consolidated Financial Statements -
       Years ended November 30, 2006 and 2005           F-8 - F-18



                    ART'S-WAY MANUFACTURING CO., INC.
                 Consolidated Statements of Operations
                 Years ended November 30, 2006 and 2005

                                    	       2006	     2005
Net sales                               $ 19,853,812    $ 14,618,904
Cost of goods sold                        14,148,787      10,213,951
      Gross profit                         5,705,025       4,404,953

Expenses:
  Engineering                                428,336         483,831
  Selling                                    821,291         680,219
  General and administrative               2,682,558       1,551,213
      Total expenses                       3,932,185       2,715,263
      Income from operations               1,772,840       1,689,690

Other income (expense):
  Interest expense                          (408,618)       (261,162)
  Other                                       52,624          45,792
      Total other expense                   (355,994)       (215,370)
      Income before income taxes           1,416,846       1,474,320
Income tax (benefit)                         483,306         497,003
      Net income                           $ 933,540       $ 977,317

Net income per share:
  Basic                                       $ 0.47          $ 0.50
  Diluted                                       0.47            0.50

See accompanying notes to consolidated financial statements.



                    ARTS-WAY MANUFACTURING CO., INC.
                      Consolidated Balance Sheets
                       November 30, 2006 and 2005

                Assets                         2006          2005
Current assets:
  Cash                                   $ 2,072,121     $ 1,198,238
  Accounts receivable-customers,
   net of allowance for doubtful
   accounts of $108,372 and $46,385
   in 2006 and 2005, respectively          2,313,290         956,391
  Inventories, net                         5,998,175       6,525,051
  Deferred taxes                             672,000         673,000
  Other current assets                       163,114         128,877
      Total current assets                11,218,700       9,481,557

Property, plant, and equipment, net        3,185,298       1,890,660
Inventories, noncurrent                            0         144,871
Inter Company Trans AWV                            0               0
Inter Company Trans AWS	                           0               0
Deferred taxes                               100,000         191,000
Acquisition AWV                                    0               0
Acquisition AWS                                    0               0
Other assets                                 110,240          74,353
      Total assets                      $ 14,614,238    $ 11,782,441

   Liabilities and Stockholders Equity
Current liabilities:
  Notes payable to bank                          $ 0             $ 0
  Current portion of term debt               220,559         223,946
  Accounts payable                           587,555         530,722
  Customer deposits                          424,205         569,354
  Billings in Excess of Cost and Profit       57,266               0
  Accrued expenses                         1,427,658         736,464
      Total current liabilities	           2,717,243       2,060,486

Long-term liabilities                              0               0
Term debt, excluding current portion       3,852,372       2,558,273
      Total liabilities                    6,569,615       4,618,759

Stockholders equity:
  Common stock $0.01 par value.
   Authorized 5,000,000 shares;
   issued 1,978,176 and 1,963,176
   shares in 2006 and 2005                    19,782          19,632
  Additional paid-in capital               1,765,697       1,719,787
  Retained earnings                        6,259,144       5,424,263
       Total stockholders equity          8,044,623       7,163,682
       Total liabilities and
        stockholders equity	        $ 14,614,238    $ 11,782,441


See accompanying notes to consolidated financial statements.


                    ARTS-WAY MANUFACTURING CO., INC.
             Consolidated Statements of Stockholders Equity
                 Years ended November 30, 2006 and 2005

                        Common stock        Additional
	            Number of	             paid-in     Retained
                      share     Par value    capital     earnings      Total
Balance,
 November 30, 2004  1,938,176   $ 19,382  $ 1,634,954  $ 4,545,105 $ 6,199,441
    Exercise of
     stock options     25,000        250       79,033            0      79,283
    Stock based
     compensation           0          0        5,800            0       5,800
    Dividends paid,
     $0.05 per share        0          0            0      (98,159)    (98,159)
    Net income              0          0            0      977,317     977,317
Balance,
 November 30, 2005  1,963,176   $ 19,632  $ 1,719,787  $ 5,424,263 $ 7,163,682
    Exercise of
     stock options     15,000        150       40,550            0      40,700
    Stock based
     compensation           0          0        5,360            0       5,360
    Dividends paid,
     $0.05 per share        0          0            0      (98,659)    (98,659)
    Net income              0          0            0      933,540     933,540
Balance,
 November 30, 2006   1,978,176   $ 19,782  $ 1,765,697  $ 6,259,144 $ 8,044,623

See accompanying notes to consolidated financial statements.



                    ARTS-WAY MANUFACTURING CO., INC.
                  Consolidated Statements of Cash Flows
                  Years ended November 30, 2006 and 2005

                                                            2006       2005
Cash flows from operations:
  Net income                                             $ 933,540   $ 977,317
  Adjustments to reconcile net
   income to net cash provided by
   operating activities:
     Stock based compensation                                5,360       5,800
     (Gain) Loss on sale of
       property, plant, and equipment                      (71,764)     (8,486)
     Depreciation and amortization                         303,754     268,616
     Deferred income taxes                                  92,000     461,000
     Changes in assets and liabilities,
      net of TechSpace Inc & Vessel
      Systems Inc. acquisition:
      (Increase) decrease in:
          Accounts receivable                           (1,031,074)     21,202
          Inventories                                    1,119,386     204,736
          Other current assets                             (34,237)    127,072
          Other, net                                       (35,887)     71,653
      Increase (decrease) in:
          Accounts payable                                  56,833      (6,207)
          Billings in Excess of Costs                       57,266           0
          Customer deposits                               (459,402)    491,379
          Accrued expenses                                 691,188    (117,331)
            Net cash provided by operating activities    1,626,963   2,496,751

Cash flows from investing activities:
  Purchases of property, plant, and equipment             (974,716)   (378,420)
  Purchase of assets of Vessels Systems Inc.                     0    (844,284)
  Purchase of assets of Tech Space Inc.	                (1,137,606)          0
  Proceeds from sale of property, plant, and equipment	   126,489      22,600
    Net cash (used in) investing activities             (1,985,833) (1,200,104)

Cash flows from financing activities:
  Payments on Line of Credit                                     0    (870,071)
  Payments of notes payable to bank                       (209,288)   (180,697)
  Payments of long-term liabilities                              0    (144,766)
  Proceeds from term debt                                1,500,000   1,000,000
  Proceeds from the exercise of stock options               40,700      79,283
  Dividends paid to stockholders	                   (98,659)    (98,159)
    Net cash provided by (used in) financing activities  1,232,753    (214,410)

    Net increase/(decrease) in cash                        873,883   1,082,237
Cash at beginning of period                              1,198,238     116,001
Cash at end of period                                  $ 2,072,121 $ 1,198,238

Supplemental disclosures of cash flow information:
  Cash paid/(received) during the period for:
     Interest                                            $ 391,149   $ 246,598
     Income taxes                                           40,359      52,993

Supplemental schedule of investing activities:
  Vessel Systems Inc acquisition:
    Accounts Receivable	                                       $ 0   $ 240,585
    Inventories	                                                 0     116,817
    Property, plant and equipment                                0     486,882
    Cash paid                                                  $ 0   $ 844,284

Supplemental schedule of investing activities:
  Tech Space Inc acquisition:
    Accounts Receivable	                                 $ 325,825         $ 0
    Inventories	                                           447,639           0
    Property, plant and equipment                          678,395           0
    Customer deposits                                     (314,253)          0
    Cash paid                                          $ 1,137,606         $ 0

See accompanying notes to consolidated financial statements.




             Notes to Consolidated Financial Statements

(1)  Summary of Significant Accounting Policies

   (a) Nature of Business

       Art's-Way Manufacturing Co., Inc. is primarily engaged in the
       fabrication and sale of metal products in the agricultural sector of
       the United States economy. Major product offerings include animal feed
       processing equipment, sugar beet and potato harvesting equipment, land
       maintenance equipment, finished mowing and crop shredding equipment and
       seed planting equipment. A significant part of the Company's business
       is supplying hay blowers to original equipment manufacturers (OEMs).
       Another important part of the Company's business is after market
       service parts that are available to keep its branded and OEM produced
       equipment operating to the satisfaction of the end user of the Company's
       products. Art's-Way Vessels, Inc. is primarily engaged in the
       fabrication and sale of pressurized vessels and tanks.  Art's-Way
       Scientific, Inc. is primarily engaged in the construction of modular
       laboratories and animal housing facilities.

   (b) Principles of Consolidation

       The consolidated financial statements include the accounts of Art's-Way
       Manufacturing Co., Inc. and its wholly-owned subsidiaries, Art's-Way
       Vessels, Inc. and Art's-Way Scientific, Inc. Art's-Way Vessels became
       active in October 2005 after purchasing certain assets of Vessel
       Systems, Inc., while Art's-Way Scientific, Inc. became active in August
       2006 after purchasing certain assets of Tech Space, Inc. All material
       inter-company accounts and transactions are eliminated in consolidation.

   (c) Cash Concentration

       The Company maintains its cash balances in several different accounts
       in two different banks, balances in these accounts are periodically in
       excess of federally insured limits

   (d) Accounts Receivable

       Accounts receivable are carried at original invoice amount less an
       estimate made for doubtful accounts based on a review of all outstanding
       amounts on a monthly basis. Management determines the allowance for
       doubtful accounts by identifying troubled accounts and by using
       historical experience applied to an aging of accounts. Accounts
       receivable are written-off when deemed uncollectible. Recoveries of
       accounts receivable previously written-off are recorded when received.
       Accounts receivable are considered past due 60 days past invoice date,
       with the exception of international sales which primarily are sold with
       a letter of credit for 120 day terms.

   (e) Inventories

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

   (f) Property, Plant, and Equipment

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

   (g) Income Taxes

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

   (h) Revenue Recognition

       Revenue is recognized when risk of ownership and title pass to the
       buyer, generally upon the shipment of the product.  Shipping costs
       charged to customers are included in net sales. Freight costs incurred
       are included in cost of goods sold. In very limited circumstances, and
       only upon a written customer agreement, we recognize revenue upon the
       production and invoicing of the products.

       Art's-Way Scientific, Inc. is in the construction industry and will have
       deposits and/or bench mark payment. Their revenue is recognized on a
       percentage completed basis.

   (i) Research and Development

       Research and development costs are expensed when incurred. Such costs
       approximated $186,000 and $285,000 for the years ended November 30, 2006
       and 2005, respectively.

   (j) Advertising

       Advertising costs are expensed when incurred. Such costs
       approximated $99,000 and $66,000 for the years ended November 30, 2006
       and 2005, respectively.

   (k) Income Per Share

       Basic net income per common share has been computed on the basis of
       the weighted average number of common shares outstanding. Diluted net
       income 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.

       Basic and diluted earnings per common share have been computed based on
       the following as of November 30, 2006 and 2005:

                                                 2006         2005
       Basic:
         Numerator, net income                $	933,540    $ 977,317
         Denominator: Average number of
           common shares Outstanding          1,970,676    1,951,108
         Basic earnings per common share         $ 0.47       $ 0.50
       Diluted
         Numerator, net income                $ 933,540    $ 977,317
         Denominator: Average number of
           common shares Ourstanding          1,970,676    1,951,108

         Effect of dilutive stock options         7,432	      19,113
                                              1,978,108    1,970,221
         Diluted earnings per common share       $ 0.47       $ 0.50

   (l) Stock Based Compensation

       The Company accounted for stock options in accordance with the
       provisions of the Financial Accounting Standards Board (FASB) Statement
       No. 123(Revised), Share-Based Payments (FAS 123(R)). Statement FAS
       123(R) requires that share-based compensation, which includes stock
       options, be accounted for at the fair value of the applicable equity
       instrument. The Company utilized the Black Scholes option pricing model
       to value stock options.

   (m) Use of Estimates

       Management of the Company has made a number of estimates and assumptions
       related to the reported amount of assets and liabilities, reported
       amount of revenues and expenses, and the disclosure of contingent assets
       and liabilities to prepare these financial statements in conformity with
       generally accepted accounting principles. These estimates include the
       valuation of the Company's accounts receivable, inventories and
       realizability of the deferred tax assets. Actual results could differ
       from those estimates.

   (n) Recently Issued Accounting Pronouncements

       In December 2006, the FASB issued Financial Interpretation No. 48,
       Accounting for Uncertainty in Income Taxes - an interpretation of
       FASB Statement No. 109 (Issued 6/06). This Interpretation
       prescribes a recognition threshold and measurement attribute for
       the financial statement recognition and measurement of a tax position
       taken or expected to be taken in a tax return. It also provides
       guidance on derecognition, classification, interest and penalties,
       accounting in interim periods, disclosure, and transition.  For the
       Company, the Statement is effective for fiscal years beginning
       after December 15, 2006. The Company is assessing the effects of
       Financial Interpretation No. 48.

(2)  Allowance for Doubtful Accounts

     A summary of the Company's activity in the allowance for doubtful
     accounts is as follows:
                                                  2006         2005

      Balance, beginning                        $46,385      $30,417
        Provision charged to expense             88,528       19,909
        Less amounts charged-off                (26,541)      (3,941)
      Balance, ending                          $108,372      $46,385

(3)  Inventories

     Major classes of inventory are:
                                                 2006         2005
        Raw materials                        $3,260,897   $3,414,777
        Work in process                         981,979      480,101
        Finished goods                        2,886,860    3,889,825
                                             $7,129,736	  $7,784,703
        Less: Reserves	                      1,131,561    1,114,781
                                             $5,998,175	  $6,669,922

(4)  Property, Plant, and Equipment

     Major classes of property, plant, and equipment are:
                                                 2006	      2005
         Land                                  $223,509	    $180,909
         Buildings and improvements           3,341,804	   2,704,570
         Manufacturing machinery & equipment  9,511,453	   9,163,149
         Trucks and automobiles                 167,535      104,016
         Furniture and fixtures                 116,286      110,834
                                             13,360,587   12,263,478
         Less accumulated depreciation       10,175,289   10,372,818
         Property, plant and equipment       $3,185,298   $1,890,660

(5)  Accrued Expenses

     Major components of accrued expenses are:
                                                 2006         2005
         Salaries, wages, and commissions      $464,609     $371,680
         Accrued warranty expense               230,740      131,832
         Other                                  732,309	     232,952
                                             $1,427,658	    $736,464

(6)  Product Warranty

     The Company offers warranties of various length to its customers
     depending on the specific product and terms of the customer purchase
     agreement. The average length of the warranty period is 1 year from
     date of purchase. The Company's warranties require it to repair or
     replace defective products during the warranty period at no cost to
     the customer. The Company records a liability for estimated costs that
     may be incurred under its warranties. The costs are estimated based on
     historical experience and any specific warranty issues that have been
     identified. Although historical warranty costs have been within
     expectations, there can be no assurance that future warranty costs will
     not exceed historical amounts. The Company periodically assesses the
     adequacy of its recorded warranty liability and adjusts the balance as
     necessary.

     Changes in the Company's product warranty liability for the years ended
     November 30, 2006, and 2005 are as follows:
                                                 2006	      2005
         Balance, beginning	               $131,832     $119,912
           Settlements made in cash or in-kind (216,068)    (294,633)
           Warranties issued                    314,976	     306,553
         Balance, ending                       $230,740	    $131,832

(7)  Loan and Credit Agreements

     The Company has a revolving line of credit for $3,500,000 with advances
     funding the working capital, letter of credit and corporate credit card
     needs that mature on March 2007. The interest rate is West Bank's prime
     interest rate, adjusted daily. Monthly interest only payments are
     required and the unpaid principal is due on the maturity date.
     Collateral consists of a first position on assets owned by the Company
     including, but not limited to inventories, accounts receivable,
     machinery and equipment. As of November 30, 2006 and 2005, the Company
     had not borrowed against the line of credit. Other terms and conditions
     of the debt with West Bank include providing monthly internally prepared
     financial reports including accounts receivable aging schedules and
     borrowing base certificates and year-end audited financial statements.
     The borrowing base shall limit advances from line of credit to 60% of
     accounts receivable less than 90 days, 60% of finished goods inventory,
     50% of raw material inventory and 50% of work-in-process inventory plus
     40% of appraisal value of machinery and equipment.

     J. Ward McConnell, Jr. was required to personally guarantee the debt
     with West Bank on an unlimited and unconditional basis. The guarantee of
     the term debt shall be reduced after the first three years to a
     percentage representing his ownership of the Company. Mr. McConnell's
     guarantee shall be removed from the term debt in the event that his
     ownership interest in the Company is reduced to a level less than 20%
     after the first three years of the loan. The Company compensates Mr.
     McConnell for his personal guarantee at an annual percentage rate of 2%
     of the outstanding balance to be paid monthly. Guarantee fee payments to
     Mr. McConnell were approximately $60,000 and $56,000, for the years
     ended November 30, 2006, and 2005, respectively.

     A summary of the Company's term debt is as follows:
                                                 2006         2005
     West Bank loan payable in monthly
      installments of $17,776 including
      interest at Bank's prime rate plus 1.5%
      due May 2023  (A) (B)                  $1,701,843	  $1,754,866

     West Bank loan payable in monthly
      installments of $10,000 including
      interest at Bank's prime rate plus
      1.5% due March 2015 (A) (B)               943,034      974,356

     West Bank loan payable in monthly
      installments of $22,063 including
      interest at Bank's prime rate plus
      1.0% due April 2016 (A) (B)             1,428,054            0

     State of Iowa Community Development
      Block Grant promissory note at 0%
      interest, maturity 2006 with quarterly
      principal payments of $11,111                   0       33,334

     State of Iowa Community Development
      Block Grant local participation
      promissory notes at 4% interest,
      maturity 2006, with quarterly principal
      payments of $7,007                              0       19,663

        Total term debt                       4,072,931    2,782,219
      Less current portion of term debt         220,559      223,946
        Term debt, excluding current portion $3,852,372	  $2,558,273

     (A) Notes are supported by a guarantee issued by the United States
     Department of Agriculture (USDA) for 75% of the loan amount outstanding.
     Collateral for these loans are primarily real estate with a second
     position on assets securing the line of credit. The USDA subordinates
     collateral rights in all assets other than real estate in an amount
     equal to West Bank's other credit commitments.

     (B) Covenants include, but are not limited to, restrictions on payment
     of dividends, debt service coverage ratio, debt/tangible net worth
     ratio, current ratio, limitation on capital expenditures, and tangible
     net worth. During the year ended November 30, 2006, and 2005, the
     Company violated certain debt covenants that were waived.

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

                            Year:	                     Amount
                             2007	                   $ 220,559
                             2008                            242,695
                             2009                            267,083
                             2010                            293,891
                             2011                            323,359
                           Thereafter                      2,725,344
                                                         $ 4,072,931

(8)  Employee Benefit Plans

     The Company sponsors a defined contribution 401(k) savings plan
     which covers substantially all full-time employees who meet eligibility
     requirements. Participating employees may contribute as salary
     reductions a minimum of 4% of their compensation up to the limit
     prescribed by the Internal Revenue Code. The Company began making 25%
     matching contribution up to 1% of eligible compensation starting June
     2005. The Company recognized an expense of $17,525 and $10,613 related
     to this plan during the years ended November 30, 2006 and 2005,
     respectively.

(9)  Stock Option Plan

     Under the Director Option Plan (2001), stock options may be granted
     to non-employee directors to purchase shares of common stock of the
     Company at a price not less than fair market value at the date the
     options are granted. Non-employee directors who have served for at least
     one year are automatically granted options to purchase 5,000 shares of
     common stock. Options granted are nonqualified stock options. The option
     price, vesting period, and term are set by the Compensation Committee of
     the Board of Directors of the Company. Options for an aggregate of
     50,000 common shares may be granted under the Plan. Each option will be
     for a period of 10 years and may be exercised at a rate of 25% at the
     date of grant and 25% on the first, second, and third anniversary date
     of the grant on a cumulative basis. At November 30, 2006, the Company
     had approximately 5,000 shares available for issuance under the 2001
     Director Option Plan.

     A summary of changes in the stock option plan is as follows:
                                                    November 30
                                                  2006         2005
     Options outstanding at beginning of period	 25,000       45,000
     Granted                                          0        5,000
     Exercised                                  (15,000)     (25,000)
     Options outstanding at end of period        10,000       25,000
     Options price range for the period	         $ 2.32       $ 2.32
                                                    To           To
                                                 $ 5.21       $ 5.21
     Options exercisable at end of period         8,750       20,000

     At November 30, 2006 and 2005, the weighted-average remaining
     contractual life of options outstanding was 6.5 years and 6.9 years
     respectively, and the weighted-average exercise price was $3.98 and
     $3.22, respectively. The weighted-average exercise price for options
     exercisable at November 30, 2006 was $3.80.

     The per share weighted-average fair value of stock options granted in
     the year ended November 30, 2005, was $3.45, on the date of grant using
     the Black Scholes option-pricing model with the following
     weighted-average assumptions: expected dividend yield 0.0%, risk-free
     interest rate 4.25%, expected volatility factor of 30.01%, and an
     expected life of 10 years.

(10) Income Taxes

     Total income tax expense (benefit) for the years ended November 30, 2006
     and 2005 consists of the following:
                                                    November 30
                                                  2006	      2005
     Current expense                           $391,306	    $574,003
     Benefit of utilization of operating
      loss carryforward	                              0     (538,000)
     Deferred expense (benefit)	                 92,000	     461,000
                                               $483,306     $497,003

     The reconciliation of the statutory Federal income tax rate and the
     effective tax rate are as follows:
                                                    November 30
                                                  2006        2005
     Statutory federal income tax rate	           34.0%        34.0%
     Other due primarily to change in
       valuation allowance                           .1	        (0.3)
                                                   34.1%        33.7%

     Tax effects of temporary differences that give rise to significant
     portions of the deferred tax assets at November 30, 2006 and 2005
     are presented below:

                                                    November 30
                                                  2006	      2005
     Deferred tax assets:
        Tax credits                              11,000      214,000
        Accrued expenses                        152,000      100,000
        Inventory capitalization                202,000	     243,000
        Asset reserves                          440,000	     330,000
        Property, plant, and equipment	        (22,000)      18,000
      Total deferred tax assets	                783,000	     905,000
      Less valuation allowance                   11,000	      41,000
      Net deferred tax assets	               $772,000	    $864,000

     At November 30, 2006 the Company has approximately $132,000 of research
     and development credits, 29,000 of state tax credits, and $41,000 of AMT
     credits. The R&D and state tax credits will begin to expire in 2012 and
     2007, respectively.

     The Company has established a deferred tax asset valuation allowance
     of $11,000 at November 30, 2006 and $41,000 at 2005, due to the
     uncertainty of realizing its deferred tax assets related to the state
     tax credits. In assessing the realizability of deferred tax assets,
     management considers whether it is more likely than not that some
     portion or all of the deferred tax assets will not be realized. The
     ultimate realization of deferred tax assets is dependent upon the
     generation of future taxable income during the periods in which those
     temporary differences become deductible.

(11) Disclosures About the Fair Value of Financial Instruments

     SFAS 107, Disclosures about Fair Value of Financial Instruments, defines
     fair value of a financial instrument as the amount at which the
     instrument could be exchanged in a current transaction between willing
     parties. At November 30, 2006 and 2005, the carrying amount approximates
     fair value for cash, accounts receivable, accounts payable, notes
     payable to bank, term debt, and other current and long-term liabilities.
     The carrying amounts approximate fair value because of the short
     maturity of these instruments. The fair value of the Company's
     installment term loan payable also approximates fair value because the
     interest rate is variable as it is tied to the lender's borrowing rate.

(12) Litigation and Contingencies

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

(13) Lease Obligations

     The Company leases the facility in Dubuque Iowa. Under an operating
     lease agreement which expires in October 2007. The minimum lease
     payments for the fiscal year ended November 30, 2007 will be
     approximately $125,000. Total rent expense recognized for the year ended
     November 30, 2006 and November 30, 2005 was $150,000 and $25,000,
     respectively.

(14) 2006 and 2005 Acquisition

     Effective August 2, 2006, the Company acquired the operating assets of
     Tech Space, Inc. for a cash purchase price of approximately $1,138,000.
     Effective October 4, 2005, the Company acquired the operating assets of
     Vessels Systems, Inc. for a cash purchase price of approximately
     $844,000. The operating results of the acquired businesses are reflected
     in the Company's consolidated statement of income from the acquisition
     date forward. The acquisitions were made to continue the Company's
     growth strategy and diversify its product offerings outside the
     agricultural industry. The purchase price was determined based on an
     arms-length negotiated value. The transaction was accounted for under
     the purchase method of accounting, with the purchase price allocated to
     the individual assets acquired. (See cash flow statement supplemental
     disclosure)

     Proforma sales and net income information for Tech Space and Vessels
     Systems, Inc. for 2006 and 2005 were not included as management believes
     that the Companies would not have had a material impact on the Company's
     financial statements.

(15) Segment Information

     On October 4, 2005, the Company purchased certain assets of Vessels
     Systems, Inc. which created a separate operating segment. Then on August
     2, 2006, the Company purchased certain assets of Tech Space, Inc. which
     created a third operating segment. Prior to these acquisitions the
     Company operated in one reportable segment.

     Our reportable segments are strategic business units that offer
     different products. They are managed separately because each business
     requires different technology and marketing strategies.

     There are three reportable segments: agricultural products, pressurized
     vessels and modular buildings. The agricultural products segment
     fabricates and sells farming products as well as replacement parts for
     these products in the United States and worldwide. Export sales amounted
     to $844,000 and $0 in 2006 and 2005 respectively. The pressurized vessel
     segment produces pressurized tanks. The modular building segment
     produces modular buildings for animal containment and various laboratory
     uses.

     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. The agricultural products and pressurized
     vessels segment information is for the year ended November 30, 2006 and
     the modular buildings segment information is for the period from
     acquisition to November 30, 2006.

                                  Twelve Months Ended November 30, 2006
                           Agricultural  Pressurized    Modular   Consolidated
                            Products       Vessels     Buildings
     Revenue from
      external customers   $15,025,000   $3,797,000   $1,032,000   $19,854,000
     Income from operations  1,280,000      535,000      (42,000)    1,773,000
     Income before tax       1,004,000      478,000      (65,000)    1,417,000
     Total Assets           10,799,000    1,736,000    2,079,000    14,614,000
     Capital expenditures      925,000	     50,000            0       950,000
     Depreciation
        & Amortization         243,000       51,000       10,000       304,000

                                  Twelve Months Ended November 30, 2005
                           Agricultural  Pressurized    Modular   Consolidated
                            Products       Vessels     Buildings
     Revenue from
      external customer    $14,261,000     $358,000	      $0   $14,619,000
     Income from operations  1,683,000        7,000            0     1,690,000
     Income before tax       1,467,000        7,000            0     1,474,000
     Total Assets           10,691,000    1,091,000            0    11,782,000
     Capital expenditures      374,000	      4,000            0       378,000
     Depreciation
        & Amortization         262,000        7,000            0       269,000

(16) Subsequent Events

     On January 16, 2007, a fire occurred late in the evening at Art's-Way
     Scientific's plant in Monona, Iowa. The fire destroyed the manufacturing
     building and all of its contents. There were no injuries, and the
     Company was able to save the computer server.

     The Company is currently working with its insurance carrier to assess
     the value of the loss and commence replacement of its assets. The
     Company has contacted all of the customers that had orders booked and
     buildings ready to deliver. To date the Company has not lost any orders.

     The Company's main goal at present is to manufacture and ship against
     its existing backlog. Within a week of the fire the Company was able to
     start rebuilding one of the buildings that was lost in the fire. The
     Company also owns a smaller warehouse in Monona which is being used as a
     temporary production facility. The Company brought in trailers to serve
     as additional space. Two buildings are to be shipped in February.

Item 8. Changes in and Disagreements With Accountants on Accounting and
        Financial Disclosure.

        On August 25, 2006, the Company engaged Eide Bailly, LLP to be its
        independent accountant to audit the Company's financial statements.
        Prior to the engagement, the Company had not previously had consulted
        with Eide Bailly, LLP on any matters.

Item 8A. Controls and Procedures.

        Senior management, including the President and Chief Financial Officer,
        evaluated the effectiveness of our disclosure controls and procedures
        as of the end of the period covered by this report. Based on that
        evaluation, the President and Chief Financial Officer concluded that.
        our disclosure controls and procedures are effective to ensure that
        information required to be disclosed by us in the reports that we file
        or submit under the Exchange Act is (a) accumulated and communicated to
        our management, including our President and Chief Financial Officer, as
        appropriate to allow timely decisions regarding required disclosure;
        and (b) recorded, processed, summarized and reported, within the time
        specified in the SEC's rules and forms. Since that evaluation process
        was completed there have been no significant changes in our disclosure
        controls or in other factors that could significantly affect these
        controls.

        There were no changes in our internal control over financial reporting,
        identified in connection with this evaluation that occurred during the
        fourth fiscal quarter that materially affected, or is reasonably likely
        to materially affect, our internal control over financial reporting.

Item 8B. Other Information.

        Not Applicable

                               PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.

        The information required by Item 9 is incorporated by reference to our
        Definitive Proxy Statement to be filed pursuant to Regulation 14A
        within 120 days after November 30, 2006.

        We have adopted a Code of Ethics that applies to our principal
        executive officer, principal financial officer, principal accounting
        officer and the Board of Directors. A copy of the Code of Ethics may
        be obtained free of charge by writing to us at the following address:
        Art's-Way Manufacturing Co., Inc. 5556 Highway 9 Armstong, IA 50514

Item 10. Executive Compensation.

        The information required by Item 10 is incorporated by reference to our
        Definitive Proxy Statement to be filed pursuant to Regulation 14A
        within 120 days after November 30, 2006.

Item 11. Security Ownership of Certain Beneficial Owners & Management
and Related Stockholder Matters.

        The information required by Item 11 is incorporated by reference to our
        Definitive Proxy Statement to be filed pursuant to Regulation 14A
        within 120 days after November 30, 2006.

Item 12. Certain Relationships and Related Transactions.

        The information required by Item 12 is incorporated by reference to our
        Definitive Proxy Statement to be filed pursuant to Regulation 14A
        within 120 days after November 30, 2006.

Item 13. Exhibits.

        Please see Exhibit Index.

Item 14. Principal Accountant Fees and Services.

        The information required by Item 14 is incorporated by reference to our
        Definitive Proxy Statement to be filed pursuant to Regulation 14A
        within 120 days after November 30, 2006.

                               Signatures

In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

ART'S-WAY MANUFACTURING CO., INC.

By: ___________________________      By:_____________________________
    E.W. Muehlhausen                    Carrie L. Majeski
    President                           Chief Financial Officer
    (Principal Executive Officer)       (Principal Financial and
                                           Accounting Officer)
Date:__________________________	     Date:___________________________

In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

______________________________	              February 26, 2007
 J. Ward McConnell, Jr.
Chairman of the Board and Director	            Date

______________________________	              February 26, 2007
David R. Castle
Director	                                    Date

______________________________	              February 26, 2007
Fred Krahmer
Director                                            Date

______________________________	              February 26, 2007
James Lynch
Director                                            Date

______________________________	              February 26, 2007
Douglas McClellan
Director                                            Date

_____________________________	              February 28, 2007
Marc H. McConnell
Director                                            Date

_____________________________	              February 28, 2007
Thomas E. Buffamante
Director                                            Date


                Art's-Way Manufacturing Co., Inc.
                         Exhibit Index

Number	Exhibit Description

2	Agreement & Plan of Merger for Reincorporation of Art's-Way
        Manufacturing Co., Inc., in Delaware. Incorporated by reference to
        Exhibit 2 of Annual Report on Form 10-K for the year ended
        May 27, 1989.
3	Certificate of Incorporation and By-laws for Art's-Way
        Manufacturing Co., Inc. Incorporated by reference to Exhibit 3 of
        Annual Report on Form 10-K for the year ended May 27, 1989.
3.1     Amendments to Bylaws of Art's-Way Manufacturing Co., Inc. Incorporated
        by reference to Exhibit 3.1 to the Form 10-QSB for the quarter ended
        May 31, 2004
10	Incorporated by reference to the material contracts filed as Exhibit 10
        to the Annual Report on Form 10-K for the fiscal year ended
        May 30, 1991.
10.1	Art's-Way Manufacturing Co., Inc. 401 (k) Savings Plan. Incorporated by
        reference to Exhibit 28 (a) to the Art's-Way Manufacturing Co., Inc.
        Registration Statement on Form S-8 filed on October 23, 1992.
10.2	Art's-Way Manufacturing Co., Inc. Employee Stock Option Plan (1991).
        Incorporated by reference to Exhibit "A" to Proxy Statement for Annual
        Meeting of Stockholders held on October 15, 1991.
10.3	Art's-Way Manufacturing Co., Inc. Director Stock Option Plan (2001).
        Incorporated by reference as Exhibit 10.3.1 of the Annual Report on
        Form 10-K for the fiscal year ended November 30, 2002.
10.4	Asset Purchase Agreement between the Company and J. Ward McConnell,
        Jr., and Logan Harvesters, Inc. Incorporated by reference to Current
        Report on Form 8-K dated September 6, 1996.
10.5    Agreement dated February 12, 2002 between the Company and J. Ward
        McConnell, Jr., purchase of 640,000 shares of common stock.
        Incorporated by reference to Current Report on Form 8-K filed
        February 22, 2002.
10.6    Forbearance Agreement and Fifteenth Amendment to Loan and Security
        Agreement dated January 31, 2003 between the Company and UPS Capital
        Corporation. Incorporated by reference to the Form 10-Q for the quarter
        ended February 28, 2003.
10.7    Long-term Financing Agreement dated April 25, 2003 between the Company
        and West Des Moines State Bank.  Incorporated by reference to the Form
        10-Q for the quarter ended May 31, 2003.
10.8    Asset Purchase Agreement between the Company and Obeco Truck Body, Inc.
        Incorporated by reference to the Form 10-Q filed for the quarter ended
        August 31, 2003.
10.9    Asset Purchase Agreement with Vessels Systems Inc. incorporated by
        reference to the Form 10-KSB filed for the year ended November 31, 2005
10.10   Asset Purchase Agreement with Tech Space Inc.
21      Subsidiaries of the small business issuer.
23      Consent of McGladrey & Pullen, LLP
23.1    Consent of Eide Bailly, LLP
31.1    Certification of Chief Executive Officer under the Section 302 of the
        Sarbanes-Oxley Act of 2002.
31.2    Certification of Chief Financial Officer under the Section 302 of the
        Sabanes-Oxley Act of 2002.
32.1    Certification of Chief Executive Officer under 18 U.S.C. Section 1350.
32.2	Certification of Chief Financial Officer under 18 U.S.C. Section 1350.