# EDGAR Filing Document

**Accession Number:** 0000007623
**File Stem:** 0001437749-25-022639
**Filing Date:** 2025-7
**Character Count:** 96685
**Document Hash:** 7881d0621a54c1ffe7863229d5c835d3
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001437749-25-022639.hdr.sgml**: 20250714

**ACCESSION NUMBER**: 0001437749-25-022639

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 87

**CONFORMED PERIOD OF REPORT**: 20250531

**FILED AS OF DATE**: 20250714

**DATE AS OF CHANGE**: 20250714

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** ARTS WAY MANUFACTURING CO INC
- **CENTRAL INDEX KEY:** 0000007623
- **STANDARD INDUSTRIAL CLASSIFICATION:** FARM MACHINERY & EQUIPMENT [3523]
- **ORGANIZATION NAME:** 06 Technology
- **EIN:** 420920725
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1130

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-05131
- **FILM NUMBER:** 251120472

**BUSINESS ADDRESS:**
- **STREET 1:** P O BOX 288
- **CITY:** ARMSTRONG
- **STATE:** IA
- **ZIP:** 50514
- **BUSINESS PHONE:** 7128643131

**MAIL ADDRESS:**
- **STREET 1:** P O BOX 288
- **CITY:** ARMSTRONG
- **STATE:** IA
- **ZIP:** 50514

?xml version='1.0' encoding='ASCII'? artw20250531_10q.htm

[**Table of Contents**](#toc)

**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 May 31, 2025

or

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

Commission File No. 000-05131

<u>ART</u><u>'</u><u>S-WAY MANUFACTURING CO., INC.</u>

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| <u>Delaware</u> | <u>42-0920725</u> |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |

---

---

| |
|:---|
| <u>5556 Highway 9</u><br> <u>Armstrong, Iowa 50514</u> |
| (Address of principal executive offices) (Zip Code) |

---

<u>(712) 208-8467</u>

(Registrant's telephone number, including area code)

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

---

| | | |
|:---|:---|:---|
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common stock $0.01 par value | ARTW | The Nasdaq Stock Market LLC |

---

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

---

| | |
|:---|:---|
| Large accelerated filer ☐ <br> Non-accelerated filer ☒ | Accelerated filer ☐ <br> Smaller reporting company ☒<br> 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 July 1, 2025: 5,108,084

------

[**Table of Contents**](#toc)

**Art**'**s-Way Manufacturing Co., Inc.**

**Index**

**<u>Page No.</u>**

---

| | | |
|:---|:---|:---|
| [**PART I** – **FINANCIAL INFORMATION**](#part1) | [**PART I** – **FINANCIAL INFORMATION**](#part1) | **[1](#part1)** |
| Item 1. | [Financial Statements](#fs) | [1](#fs) |
|  | [Condensed Consolidated Balance Sheets as of May 31, 2025 and November 30, 2024](#bs) | [1](#bs) |
|  | [Condensed Consolidated Statements of Operations for the Three-month and Six-month periods ended May 31. 2025 and May 31, 2024](#income) | [2](#income) |
|  | [Condensed Consolidated Statements of Stockholders' Equity for the Six-month periods ended May 31 2025 and May 31, 2024](#equity) | [3](#equity) |
|  | [Condensed Consolidated Statements of Cash Flows for the Six-month periods ended May 31, 2025 and May 31, 2024](#cf) | [4](#cf) |
|  | [Notes to Unaudited Condensed Consolidated Financial Statements](#notes) | [5](#notes) |
| Item 2. | [Management's Discussion and Analysis of Financial Condition and Results of Operations](#mda) | [19](#mda) |
| Item 3. | [Quantitative and Qualitative Disclosures About Market Risk](#qqd) | [21](#qqd) |
| Item 4. | [Controls and Procedures](#cp) | [21](#cp) |
| [**PART II** – **OTHER INFORMATION**](#part2) | [**PART II** – **OTHER INFORMATION**](#part2) | **[22](#part2)** |
| Item 1. | [Legal Proceedings](#lp) | [22](#lp) |
| Item 1A. | [Risk Factors](#rf) | [22](#rf) |
| Item 2. | [Unregistered Sales of Equity Securities and Use of Proceeds](#uses) | [22](#uses) |
| Item 3. | [Defaults Upon Senior Securities](#duss) | [22](#duss) |
| Item 4. | [Mine Safety Disclosures](#msd) | [22](#msd) |
| Item 5. | [Other Information](#oi) | [22](#oi) |
| Item 6. | [Exhibits](#exhibits) | [23](#exhibits) |
|  | [SIGNATURES](#sig) | [24](#sig) |

---

------

[**Table of Contents**](#toc)

**PART I** – **FINANCIAL INFORMATION**

**Item 1. Financial Statements**

**ART'S-WAY MANUFACTURING CO., INC.**

Condensed Consolidated Balance Sheets

---

| | | |
|:---|:---|:---|
|  | (Unaudited) |  |
|  | ***May 31, 2025*** | ***November 30, 2024*** |
| **Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp; Cash | $4534 | $1860 |
| &nbsp;&nbsp;&nbsp; Accounts receivable, net | 1840768 | 2372876 |
| &nbsp;&nbsp;&nbsp; Inventories, net | 10775803 | 10327913 |
| &nbsp;&nbsp;&nbsp; Cost and profit in excess of billings | 336396 | 213195 |
| &nbsp;&nbsp;&nbsp; Other current assets | 330148 | 208465 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total current assets | 13287649 | 13124309 |
| &nbsp;&nbsp;&nbsp; Property, plant, and equipment, net | 4996765 | 5150870 |
| &nbsp;&nbsp;&nbsp; Assets held for lease, net | 130463 | 89033 |
| &nbsp;&nbsp;&nbsp; Deferred income taxes, net | 2061576 | 2440297 |
| &nbsp;&nbsp;&nbsp; Other assets | 402867 | 436175 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets | $20879320 | $21240684 |
| **Liabilities and Stockholders' Equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp; Accounts payable | $1248135 | $944448 |
| &nbsp;&nbsp;&nbsp; Customer deposits | 206227 | 180597 |
| &nbsp;&nbsp;&nbsp; Billings in excess of cost and profit | 1040804 | 1929151 |
| &nbsp;&nbsp;&nbsp; Income taxes payable | 5000 | 5500 |
| &nbsp;&nbsp;&nbsp; Accrued expenses | 960079 | 1303718 |
| &nbsp;&nbsp;&nbsp; Line of credit | 1062437 | 1928437 |
| &nbsp;&nbsp;&nbsp; Current portion of finance lease liabilities | 235625 | 220908 |
| &nbsp;&nbsp;&nbsp; Current portion of long-term debt | 123801 | 119734 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total current liabilities | 4882108 | 6632493 |
| &nbsp;&nbsp;&nbsp; Long-term portion of operating lease liabilities |  | 4700 |
| &nbsp;&nbsp;&nbsp; Long-term portion of finance lease liabilities | 462280 | 534436 |
| &nbsp;&nbsp;&nbsp; Long-term debt, excluding current portion | 1912173 | 1975232 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities | 7256561 | 9146861 |
| Commitments and Contingencies (Notes 9, 11, 12 and 15) |  |  |
| Stockholders' equity: |  |  |
| &nbsp;&nbsp;&nbsp; Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares on May 31, 2025 and November 30, 2024; issued and outstanding 0 shares on May 31, 2025 and November 30, 2024. |  |  |
| &nbsp;&nbsp;&nbsp; Common stock – $0.01 par value. Authorized 9,500,000 shares on May 31, 2025 and November 30, 2024; 5,221,673 issued on May 31, 2025 and 5,149,173 on November 30, 2024 | 52217 | 51492 |
| &nbsp;&nbsp;&nbsp; Additional paid-in capital | 5124289 | 5020849 |
| &nbsp;&nbsp;&nbsp; Retained earnings | 8754941 | 7328628 |
| &nbsp;&nbsp;&nbsp; Treasury stock, at cost (113,589 shares on May 31, 2025 and 112,714 shares on November 30, 2024) | (308688) | (307146) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total stockholders' equity | 13622759 | 12093823 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and stockholders' equity | $20879320 | $21240684 |

---

See accompanying notes to condensed consolidated financial statements.<br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1

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[**Table of Contents**](#toc)

**ART'S-WAY MANUFACTURING CO., INC.**

Condensed Consolidated Statements of Operations

(Unaudited)

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | *Three Months Ended* | *Three Months Ended* | *Six Months Ended* | *Six Months Ended* |
|  | ***May 31, 2025*** | ***May 31, 2024*** | ***May 31, 2025*** | ***May 31, 2024*** |
| Sales | $6336690 | $6730268 | $11477645 | $12453663 |
| Cost of goods sold | 4276913 | 4823516 | 7921359 | 9073386 |
| Gross profit | 2059777 | 1906752 | 3556286 | 3380277 |
| Expenses |  |  |  |  |
| Engineering | 84115 | 107072 | 169345 | 267425 |
| Selling | 435902 | 397631 | 785879 | 860390 |
| General and administrative | 1029106 | 1233281 | 2087924 | 2463775 |
| Total expenses | 1549123 | 1737984 | 3043148 | 3591590 |
| Income (loss) from operations | 510654 | 168768 | 513138 | (211313) |
| Other income (expense): |  |  |  |  |
| Interest expense | (99666) | (159768) | (175354) | (321772) |
| Other | 1464892 | (14270) | 1467686 | (9221) |
| Total other income (expense) | 1365226 | (174038) | 1292332 | (330993) |
| Income (loss) from continuing operations before income taxes | 1875880 | (5270) | 1805470 | (542306) |
| Income tax expense (benefit) | 393811 | (613) | 379157 | (113391) |
| Income (loss) from continuing operations | 1482069 | (4657) | 1426313 | (428915) |
| Discontinued Operations (Note 3) |  |  |  |  |
| Loss from discontinued operations before income taxes |  | (38028) |  | (87930) |
| Income tax benefit |  | (9345) |  | (18465) |
| Loss on discontinued operations |  | (28683) |  | (69465) |
| Net Income (Loss) | $1482069 | $(33340) | $1426313 | $(498380) |

---

See accompanying notes to condensed consolidated financial statements.<br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2

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[**Table of Contents**](#toc)

---

| |
|:---|
| **ART**'**S-WAY MANUFACTURING CO., INC.** |
| Condensed Consolidated Statements of Stockholders' Equity |
| Six Months Ended May 31, 2025 and May 31, 2024 |
| (Unaudited) |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | ***Common Stock*** | ***Common Stock*** | ***Additional*** |  | ***Treasury Stock*** | ***Treasury Stock*** |  |
|  | ***Number of*** |  | ***paid-in*** | ***Retained*** | ***Number of*** |  |  |
|  | ***shares*** | ***Par value*** | ***capital*** | ***earnings*** | ***shares*** | ***Amount*** | ***Total*** |
| Balance, November 30, 2023 | 5106922 | $51069 | $4838425 | $7021253 | 94256 | $(269492) | $11641255 |
| Stock based compensation | 77250 | 773 | 126823 | *-* | 18458 | (37654) | 89942 |
| Net loss | *-* |  |  | (498380) | *-* |  | (498380) |
| Balance, May 31, 2024 | 5184172 | $51842 | $4965248 | $6522873 | 112714 | $(307146) | $11232817 |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | ***Common Stock*** | ***Common Stock*** | ***Additional*** |  | ***Treasury Stock*** | ***Treasury Stock*** |  |
|  | ***Number of*** |  | ***paid-in*** | ***Retained*** | ***Number of*** |  |  |
|  | ***shares*** | ***Par value*** | ***capital*** | ***earnings*** | ***shares*** | ***Amount*** | ***Total*** |
| Balance, November 30, 2024 | 5149173 | $51492 | $5020849 | $7328628 | 112714 | $(307146) | $12093823 |
| Stock based compensation | 72500 | 725 | 103440 | *-* | 875 | (1542) | 102623 |
| Net loss | *-* |  |  | 1426313 | *-* |  | 1426313 |
| Balance, May 31, 2025 | 5221673 | $52217 | $5124289 | $8754941 | 113589 | $(308688) | $13622759 |

---

See accompanying notes to condensed consolidated financial statements.<br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3

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[**Table of Contents**](#toc)

---

| |
|:---|
| **ART**'**S-WAY MANUFACTURING CO., INC.** |
| Condensed Consolidated Statements of Cash Flows |
| (Unaudited) |

---

---

| | | |
|:---|:---|:---|
|  | *Six Months Ended* | *Six Months Ended* |
|  | ***May 31, 2025*** | ***May 31, 2024*** |
| Cash flows from operations: |  |  |
| &nbsp;&nbsp;&nbsp; Net income (loss) from continuing operations | $1426313 | $(428915) |
| Net loss from discontinued operations |  | (69465) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock based compensation | 104165 | 127596 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Decrease in obsolete inventory reserves | 71156 | 231220 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Depreciation and amortization expense | 397937 | 434300 |
| Amortization of cloud computing implementation costs | 60909 | 60909 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Increase (decrease) in allowance for expected credit losses - accounts receivable | (60797) | 17540 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred income taxes | 378721 | (134910) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Changes in assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Increase) decrease in: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts receivable | 592905 | 767716 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Inventories | (519046) | 303321 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other assets | (182593) | (218547) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Increase (decrease) in: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable | 303687 | (1237351) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Contracts in progress, net | (1011548) | 1895655 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Customer deposits | 25630 | (246625) |
| Income taxes payable | (500) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued expenses | (334566) | (375425) |
| Net cash provided by operating activities - continuing operations | 1252373 | 1196484 |
| Net cash used in operating activities - discontinued operations |  | (48862) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash provided by operating activities | 1252373 | 1147622 |
| Cash flows from investing activities: |  |  |
| &nbsp;&nbsp;&nbsp; Purchases of property, plant, and equipment | (213441) | (512547) |
| Net cash used in investing activities - continuing operations | (213441) | (512547) |
| Net cash provided by (used in) investing activities - discontinued operations | - |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash used in investing activities | (213441) | (512547) |
| Cash flows from financing activities: |  |  |
| Net change in line of credit | (866000) | (463083) |
| &nbsp;&nbsp;&nbsp; Principal payments on finance lease obligations | (109724) | (77798) |
| &nbsp;&nbsp;&nbsp; Repayment of term debt | (58992) | (54260) |
| &nbsp;&nbsp;&nbsp; Repurchases of common stock | (1542) | (37654) |
| Net cash used in financing activities - continuing operations | (1036258) | (632795) |
| Net cash used in financing activities - discontinued operations |  | (1807) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash used in financing activities | (1036258) | (634602) |
| Net increase in cash | 2674 | 473 |
| Cash at beginning of period | 1860 | 4014 |
| Cash at end of period | $4534 | $4487 |
| Supplemental disclosures of cash flow information: |  |  |
| &nbsp;&nbsp;&nbsp; Cash paid during the period for: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest | $157131 | $323633 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income taxes | 992 | 90 |
| Supplemental disclosures of non-cash operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Right-of-use (ROU) assets acquired (included in other assets) | $52285 | $38192 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amortization of operating lease ROU assets (included in other assets) | $13774 | $4275 |

---

See accompanying notes to condensed consolidated financial statements.<br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4

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[**Table of Contents**](#toc)

**Notes to Unaudited Condensed Consolidated Financial Statements**

***1*)** **Description of the Company**

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

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

The Company has organized its business into two operating segments. Management separately evaluates the financial results of each segment because each is a strategic business unit offering different products and requiring different technology and marketing strategies. The Agricultural Products segment manufactures and sells farm equipment and related replacement parts under the Art's-Way Manufacturing label and private labels. The Modular Buildings segment manufactures and installs modular buildings for animal containment and various laboratory uses.

During the *third* quarter of fiscal *2023,* the Company ceased operations of its Tools business, which manufactured steel cutting tools and inserts. In previous periods, operations of the Tools business was reported in consolidated numbers as the Company's *third* operating segment. The Tools segment was *first* reported in discontinued operations beginning with the *three* and *nine* month periods ending *August 31, 2023.* The remaining assets and liabilities of the Tools segment were disposed in the *fourth* fiscal quarter of the year ended *November 30, 2024.* For more information on discontinued operations, see Note *3* "Discontinued Operations."

***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 condensed consolidated financial statements should be read in conjunction with the condensed financial statements and notes thereto contained in the Company's Annual Report on Form *10*-K for the fiscal year ended *November 30, 2024*. The results of operations for the *three* and *six* months ended *May 31, 2025* are *not* necessarily indicative of the results to be expected for the fiscal year ending *November 30, 2025*.

*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 *six* months ended *May 31, 2025*. Actual results could differ from those estimates.

*Allowance for Credit Losses*

The Company uses aging categories to estimate expected credit losses on trade receivables. The Company considers the following factors in its analysis: historical loss experience, forward-looking macroeconomic factors, company credit risk including previous delinquencies, disputed amounts, and the intent and ability to pay. The Company's typical credit terms are Net *30,* however, it also offers terms up to *360* days on floor plan units. The Company considers trade receivables greater than *30* days past due, but is *not* required to disclose past due receivables with an original term less than *one* year. The Company performs additional analysis monthly on amounts over *90* days past due to determine collectability. The Company has assigned expected credit loss percentages based on where the asset falls in the aging schedule. The Company's actual credit losses have been low compared to historical allowance estimates. The Company has considered the current interest rate environment and the recent decline in the agricultural commodity market and believes its method of estimating a higher than historical loss percentage to be an adequate estimate of actual expected losses. The Company foresees increased credit risk over the next year while inventory on dealer lots starts to decline, interest rates continue to drop and farm income strengthens.

The Company carries contract assets related to its Modular Buildings segment in the form of costs and profit in excess of billings. These contract assets are typically converted to trade receivables in *30* to *90* days, depending on contract terms, and due *30* days or less from the billing date. Because these contract assets are typically converted to receivables and collected in less than a year, consideration for these contract assets has been included in the expected credit loss model for trade receivables.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *5*

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[**Table of Contents**](#toc)

*Employee Retention Credit*

The Company qualified for federal government assistance through Employee Retention Credit ("ERC") provisions of the Consolidated Appropriations Act of *2021.* The purpose of the Employee Retention Credit was to encourage employers to keep employees on the payroll, even if they were *not* working during the covered period because of the coronavirus outbreak. The Company filed amended tax returns with the Internal Revenue Service ("IRS") in *October* of *2023* in the amount of $1,620,103; of which $798,836 was related to *Q2* of *2021* and $821,267 was related to *Q3* of *2021.* Because of the IRS moratorium in place on ERC refunds while filing, the Company did *not* record a receivable at the time of filing. The Company recorded the $1,620,103 of ERC refund in other income on the consolidated statement of operations and also incurred $405,026 of consulting fees for preparation of the credits and a tax study, which was recorded in other expense on the consolidated statement of operations. The Company also received $246,108 of interest income on the credits that was recorded in other income on the consolidated statement of operations.

A summary of the amounts recorded on each operating segment related to the ERC refunds during the *six* months ended *May 31, 2025* is as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | *Agricultural Products* | *Modular Buildings* | *Consolidated (Continuing Operations)* |
| Employee retention credit (other income) | $1370231 | $249872 | $1620103 |
| Interest income (other income) | 207261 | 38847 | 246108 |
| Consulting fees (other expense) | (342558) | (62468) | (405026) |
| Net proceeds | $1234934 | $226251 | $1461185 |

---

The Agricultural Products segment includes $219,144 of net proceeds related to discontinued operations received after books and records were closed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *6*

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[**Table of Contents**](#toc)

***3*)** **Discontinued Operations**

On *June 7, 2023* we announced we would be discontinuing our Tools segment with the last day of normal operations occurring on *July 14, 2023.* Just over a year later, on *October 21, 2024,* we completed the sale of the remaining real estate associated with our Tools segment for $1,800,000. The assets and liabilities of this segment were gone prior to *November 30, 2024* and are *no* longer reported in discontinued operations in our financial statements moving forward.

The cessation of operations and liquidation of the Tools segment as a unique business unit of the Company, represented a strategic shift in the Company's operations. In accordance with Accounting Standards Codification ("ASC") Topic *360,* the Company has reclassified Tools as discontinued operations for all periods presented.

Segment information as of *May 31, 2024* for discontinued operations was as follows:

---

| | |
|:---|:---|
|  | ***Tools*** |
|  | ***Three Months Ended*** |
|  | *May 31, 2024* |
| Revenue from external customers | $- |
| Gross Profit (loss) | (25000) |
| Operating Expense (Income) | (1000) |
| Loss from operations | (24000) |
| Loss before tax | (38000) |
| Total Assets | 1032000 |
| Capital expenditures |  |
| Depreciation & Amortization | $7000 |

---

---

| | |
|:---|:---|
|  | ***Tools*** |
|  | ***Six Months Ended*** |
|  | *May 31, 2024* |
| Revenue from external customers | $- |
| Gross Profit (loss) | (52000) |
| Operating Expense | 9000 |
| Loss from operations | (61000) |
| Loss before tax | (88000) |
| Total Assets | 1032000 |
| Capital expenditures |  |
| Depreciation & Amortization | $14000 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *7*

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**Recently Issued Accounting Pronouncements**

Accounting Pronouncements Recently Adopted

<u>Segment Reporting - Improvements to Reportable Segment Disclosures</u>

In *November 2023,* the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") *2023*-*07,* "Segment Reporting - Improvements to Reportable Segment Disclosures." ASU *2023*-*07* adds enhanced disclosures about significant segment expenses, clarifies circumstances in which an entity can disclose multiple segment measures of profit and loss and provides new segment disclosure requirements for entities with a single reportable segment. ASU *2023*-*07* is effective for fiscal years beginning after *December 15, 2023,* and interim periods within fiscal years beginning after *December 15, 2024.* Early adoption was permitted. The Company adopted ASU *2023*-*07* in *Q1* of fiscal *2025.* The application of ASU *2023*-*07* did *not* have a significant impact on segment disclosures. The Company recast periods presented prior to the *six* months ended *May 31, 2025*.

<u>Accounting Pronouncements *Not* Yet Adopted</u>

In *October 2023,* the FASB issued ASU *2023*-*06,* Disclosure Improvements ("ASU *2023*-*06"*), to clarify or improve disclosure and presentation requirements of a variety of topics and align the requirements in the FASB ASC with the SEC's regulations. The amendments in ASU *2023*-*06* will become effective on the date the related disclosures are removed from Regulation S-*X* or Regulation S-K by the SEC, and will *no* longer be effective if the SEC has *not* removed the applicable disclosure requirement by *June 30, 2027.* Early adoption is prohibited. We are currently evaluating the impact of ASU *2023*-*06* on the Company's consolidated financial statements and disclosures.

In *December 2023,* the FASB issued ASU *2023*-*09,* "Income Taxes (Topic *740*): Improvements to Income Tax Disclosures". The standard requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid. The requirements will be effective for annual periods beginning after *December 15, 2024.* The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *8*

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***4*)** **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 May 31, 2025*** | ***Three Months Ended May 31, 2025*** | ***Three Months Ended May 31, 2025*** |
|  | *Agricultural* | *Modular Buildings* | *Total* |
| Farm equipment | $3350000 | $- | $3350000 |
| Farm equipment service parts | 603000 |  | 603000 |
| Modular buildings |  | 2227000 | 2227000 |
| Modular building lease income |  | 26000 | 26000 |
| Other | 72000 | 59000 | 131000 |
|  | $4025000 | $2312000 | $6337000 |

---

---

| | | | |
|:---|:---|:---|:---|
|  | ***Three Months Ended May 31, 2024*** | ***Three Months Ended May 31, 2024*** | ***Three Months Ended May 31, 2024*** |
|  | *Agricultural* | *Modular Buildings* | *Total* |
| Farm equipment | $3975000 | $- | $3975000 |
| Farm equipment service parts | 500000 |  | 500000 |
| Modular buildings |  | 2100000 | 2100000 |
| Modular building lease income |  | 56000 | 56000 |
| Other | 80000 | 19000 | 99000 |
|  | $4555000 | $2175000 | $6730000 |

---

---

| | | | |
|:---|:---|:---|:---|
|  | ***Six Months Ended May 31, 2025*** | ***Six Months Ended May 31, 2025*** | ***Six Months Ended May 31, 2025*** |
|  | *Agricultural* | *Modular Buildings* | *Total* |
| Farm equipment | $5344000 | $- | $5344000 |
| Farm equipment service parts | 1486000 |  | 1486000 |
| Modular buildings |  | 4346000 | 4346000 |
| Modular building lease income |  | 72000 | 72000 |
| Other | 143000 | 87000 | 230000 |
|  | $6973000 | $4505000 | $11478000 |

---

---

| | | | |
|:---|:---|:---|:---|
|  | ***Six Months Ended May 31, 2024*** | ***Six Months Ended May 31, 2024*** | ***Six Months Ended May 31, 2024*** |
|  | *Agricultural* | *Modular Buildings* | *Total* |
| Farm equipment | $7503000 | $- | $7503000 |
| Farm equipment service parts | 1143000 |  | 1143000 |
| Modular buildings |  | 3491000 | 3491000 |
| Modular building lease income |  | 92000 | 92000 |
| Other | 146000 | 79000 | 225000 |
|  | $8792000 | $3662000 | $12454000 |

---

The Company offered floorplan terms in its Agricultural Products segment during its Fall of *2023* and *2024* early order programs to incentivize customers to stock farm equipment on their lots for fiscal *2024* and fiscal *2025*. Floorplan terms allow customers to pay the Company at the earliest of retail date or up to *360* days. This program can have an effect on the timing of the Company's cash flows compared with historical cash flows.

On *May 31, 2025*, the Company had approximately $102,000 in receivables on the floorplan program with a due date greater than *30* days compared to $995,000 on *May 31, 2024*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *9*

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***5*)** **Accounts receivable** 

Accounts receivable are shown net of allowances for expected credit losses. Expected losses are recorded in administrative expense at the time of receivable recognition.

The activity related to expected credit losses for the *six* months ended *May 31, 2025* and *six* months ended *May 31, 2024* was as follows:

---

| | | |
|:---|:---|:---|
|  | ***Six Months Ended (Continuing operations)*** | ***Six Months Ended (Continuing operations)*** |
|  | ***May 31, 2025*** | ***May 31, 2024*** |
| Balance, beginning | $108636 | $32137 |
| Provision charged to expense | (60797) | 30159 |
| Less amounts charged-off |  | (12619) |
| Balance, ending | $47839 | $74915 |

---

***6*)** **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.

---

| | | |
|:---|:---|:---|
|  | ***May 31, 2025*** | ***November 30, 2024*** |
| Receivables | $1841000 | $2373000 |
| Assets | 336000 | 213000 |
| Liabilities | $1247000 | $2110000 |

---

The amount of revenue recognized in the *first six* months of fiscal *2025* that was included in a contract liability on *November 30, 2024* was approximately $248,000 compared to $655,000 in the same period of fiscal *2024*. The beginning contract receivables, assets and liabilities on *December 1, 2023* were approximately $3,432,000; $289,000 and $767,000, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *10*

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***7*)** **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 *May 31, 2025* and *May 31, 2024*:

---

| | | |
|:---|:---|:---|
|  | ***For the Three Months Ended*** | ***For the Three Months Ended*** |
|  | ***May 31, 2025*** | ***May 31, 2024*** |
| Numerator for basic and diluted net income (loss) per share: |  |  |
| Net income (loss) from continuing operations | $1482069 | $(4657) |
| Net loss from discontinued operations |  | (28683) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net income (loss) | 1482069 | (33340) |
| Denominator: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; For basic net income (loss) per share - weighted average common shares outstanding | 5094188 | 5067742 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Effect of dilutive stock options |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; For diluted net income (loss) per share - weighted average common shares outstanding | 5094188 | 5067742 |
| Net Income (loss) per share - Basic: |  |  |
| Continuing Operations | $0.29 | $- |
| Discontinued Operations |  | (0.01) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net income (loss) per share | $0.29 | $(0.01) |
| Net Income (loss) per share - Diluted: |  |  |
| Continuing Operations | $0.29 | $- |
| Discontinued Operations |  | (0.01) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net income (loss) per share | $0.29 | $(0.01) |

---

---

| | | |
|:---|:---|:---|
|  | ***For the Six Months Ended*** | ***For the Six Months Ended*** |
|  | ***May 31, 2025*** | ***May 31, 2024*** |
| Numerator for basic and diluted net income (loss) per share: |  |  |
| Net income (loss) from continuing operations | $1426313 | $(428915) |
| Net loss from discontinued operations |  | (69465) |
| Net income (loss) | 1426313 | (498380) |
| Denominator: |  |  |
| For basic net income (loss) per share - weighted average common shares outstanding | 5074643 | 5045334 |
| Effect of dilutive stock options |  |  |
| For diluted net income (loss) per share - weighted average common shares outstanding | 5074643 | 5045334 |
| Net Income (Loss) per share - Basic: |  |  |
| Continuing Operations | $0.28 | $(0.09) |
| Discontinued Operations |  | (0.01) |
| Net income (loss) per share | $0.28 | $(0.10) |
| Net Income (Loss) per share - Diluted: |  |  |
| Continuing Operations | $0.28 | $(0.09) |
| Discontinued Operations |  | (0.01) |
| Net income (loss) per share | $0.28 | $(0.10) |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *11*

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***8*)** **Inventory**

Major classes of inventory are:

---

| | | |
|:---|:---|:---|
|  | ***May 31, 2025*** | ***November 30, 2024*** |
| Raw materials | $7887295 | $7882271 |
| Work in process | 456924 | 160209 |
| Finished goods | 4063158 | 3942435 |
| Total Gross Inventory | $12407377 | $11984915 |
| Less: Reserves | (1631574) | (1657002) |
| Net Inventory | $10775803 | $10327913 |

---

***9*)** **Accrued Expenses**

Major components of accrued expenses are:

---

| | | |
|:---|:---|:---|
|  | ***May 31, 2025*** | ***November 30, 2024*** |
| Salaries, wages, and commissions | $537342 | $803662 |
| Accrued warranty expense | 213929 | 225186 |
| Other | 208808 | 274870 |
| Total accrued expenses | $960079 | $1303718 |

---

***10*)** **Assets Held for Lease**

Major components of assets held for lease are:

---

| | | |
|:---|:---|:---|
|  | ***May 31, 2025*** | ***November 30, 2024*** |
| Modular Buildings | $61116 | $89033 |
| Agricultural products equipment | 69347 |  |
| Total assets held for lease (net) | $130463 | $89033 |

---

There were approximately $26,000 and $72,000 of rents recognized from assets held for lease included in sales on the Condensed Consolidated Statements of Operations during the *three* and *six* months ended *May 31, 2025*, compared to $56,000 and $92,000 for the *three* and *six* months ending *May 31, 2024*.

The future minimum lease receipts for the years ended *November 30* are as follows:

---

| | |
|:---|:---|
| Year | *Amount* |
| 2025 | $19036 |

---

***11*)** **Product Warranty**

The Company offers warranties of various lengths to its customers depending on the specific product and terms of the customer purchase agreement. The average length of the warranty period is one year from the date of purchase. The Company's warranties require it to repair or replace defective products during the warranty period at *no* cost to the customer. Product warranty is included in the price of the product and provides assurance that the product will function in accordance with agreed-upon specifications. It does *not* represent a separate performance obligation under ASC *606.* The Company records a liability for estimated costs that *may* be incurred under its warranties. The costs are estimated based on historical experience and any specific warranty issues that have been identified. Although historical warranty costs have been within expectations, there can be *no* assurance that future warranty costs will *not* exceed historical amounts. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the balance as necessary. The accrued warranty balance is included in accrued expenses as shown in Note *9* "Accrued Expenses." Changes in the Company's product warranty liability for the *three* and *six* months ended *May 31, 2025* and *May 31, 2024* are as follows:

---

| | | |
|:---|:---|:---|
|  | ***Three Months Ended (Continuing Operations)*** | ***Three Months Ended (Continuing Operations)*** |
|  | ***May 31, 2025*** | ***May 31, 2024*** |
| Balance, beginning | $190831 | $211121 |
| &nbsp;&nbsp;&nbsp; Provision charged to expense | 98336 | 94940 |
| &nbsp;&nbsp;&nbsp; Less amounts charged-off | (75238) | (109393) |
| Balance, ending | $213929 | $196668 |

---

---

| | | |
|:---|:---|:---|
|  | ***Six Months Ended (Continuing Operations)*** | ***Six Months Ended (Continuing Operations)*** |
|  | ***May 31, 2025*** | ***May 31, 2024*** |
| Balance, beginning | $225186 | $295113 |
| Provision charged to expense | 183376 | 178676 |
| Less amounts charged-off | (194633) | (277121) |
| Balance, ending | $213929 | $196668 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *12*

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***12*)** **Loan and Credit Agreements**

<u>Bank Midwest Revolving Lines of Credit and Term Loans</u>

The Company maintains a $4,000,000 revolving line of credit (the *"2025* Line of Credit") with Bank Midwest. On *May 31, 2025*, the balance of the *2025* Line of Credit was $1,062,437 with $2,937,563 remaining available. The *2025* Line of Credit was subject to a borrowing base, which was an amount equal to 75% of accounts receivable balances (discounted for aged receivables), plus 50% of net inventory, less any outstanding loan balance on the Line of Credit. On *May 31, 2025*, the *2025* Line of Credit was *not* limited by the borrowing base calculation. Any unpaid principal amount borrowed on the *2025* Line of Credit accrued interest at a floating rate per annum equal to the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The interest rate floor was set at 6.00% per annum and the interest rate at *May 31, 2025* was 7.5% per annum. The *2025* Line of Credit was most recently renewed on *March 27, 2025* with a maturity date of *March 30, 2026* and required monthly interest-only payments. The *2025* Line of Credit is governed by the terms of a Promissory Note, dated *March 27, 2025,* entered into between the Company and Bank Midwest.

The Company carries a $2,600,000 term loan with Bank Midwest due *October 1, 2037 (*the "Term Loan"). The Term Loan accrues interest at a rate of 7.00%. The interest rate *may* only be adjusted by Bank Midwest once every *five* years. Monthly payments of $19,648 in principal and interest are required on the Term Loan. The Term Loan is also guaranteed by the United States Department of Agriculture ("USDA"), which required an upfront guarantee fee of $62,400 and requires an annual fee of 0.5% of the unpaid balance. As part of the USDA guarantee requirements, shareholders owning more than *20%* are required to personally guarantee a portion of the Term Loan, in an amount equal to their stock ownership percentage. The J. Ward McConnell Jr. Living Trust, the estate of the former Vice Chairman of the Board of Directors and a shareholder owning more than 20% of the Company's outstanding stock, is guaranteeing approximately 38% of the Term Loan, for an annual fee of 2% of the personally guaranteed amount. The initial guarantee fee is being amortized over the life of the Term Loan, and the annual fees and personally guaranteed amounts are expensed monthly. The Term Loan is governed by the terms of a Promissory Note, dated *September 28, 2017,* entered into between the Company and Bank Midwest.

In connection with the Line of Credit, the Company, Art's-Way Scientific, Inc. and Ohio Metal Working Products/Art's-Way Inc. each entered into a Commercial Security Agreement with Bank Midwest, dated *September 28, 2017,* pursuant to which each granted to Bank Midwest a *first* priority security interest in certain inventory, equipment, accounts, chattel paper, instruments, letters of credit and other assets to secure the obligations of the Company under the line of credit. Each of Art's-Way Scientific, Inc. and Ohio Metal Working Products/Art's-Way Inc. also agreed to guarantee the obligations of the Company pursuant to the Line of Credit, as set forth in Commercial Guaranties, each dated *September 28, 2017.* The Ohio Metal Working Products/Art's-Way Inc.'s mortgage, commercial security agreements and commercial guaranties were released upon sale of the Ohio real estate associated with the Company's discontinued Tools segment in *October* of *2024.*

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 subsidiary (as guarantors pursuant to the Commercial Guaranties) commits an event of default with respect to the promissory note 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 note. Bank Midwest shall also have all other rights and remedies for default provided by the Uniform Commercial Code, as well as any other applicable law and the various loan agreements. In addition, in an event of default, Bank Midwest *may* foreclose on the mortgaged property.

Compliance with Bank Midwest covenants is measured annually on *November 30.* The terms of the Bank Midwest loan agreements require the Company to maintain a minimum of $4,000,000 of monthly working capital. 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 individual purchases or sales of equipment over $50,000 and maintain reasonable salaries and owner compensation. The Company was in compliance with all covenants of Bank Midwest loans as of *November 30, 2024*. The next measurement date is *November 30, 2025* for all covenants except the monthly working capital requirement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *13*

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<u>SBA Economic Injury Disaster Loans</u>

In *June* of *2020,* the Company executed the standard loan documents required for securing loans offered by the U.S. Small Business Administration under its Economic Injury Disaster Loan ("EIDL") assistance program in light of the impact of the COVID-*19* pandemic on the Company's business. One outstanding loan was executed on *June 18, 2020* with a principal amount of $150,000, with a *second* loan being executed on *June 24, 2020* with a principal amount of $150,000. Proceeds from these EIDLs were used for working capital purposes. Interest accrues at the rate of 3.75% per annum and will accrue from the date of inception. Installment payments, including principal and interest, were due monthly beginning *December 18, 2022* and *December 24, 2022 (thirty* 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 subordinate to Bank Midwest's security interest. Both EIDLs are governed by the terms of a separate Promissory Note, dated *June 18, 2020* and *June 24, 2020,* as applicable, entered into by the Company or the applicable subsidiary.

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

---

| | | |
|:---|:---|:---|
|  | ***May 31, 2025*** | ***November 30, 2024*** |
| Bank Midwest loan payable in monthly installments of $19,648 including interest at 7.00%, due October 1, 2037 | $1723820 | $1779877 |
| U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning December 18, 2022, due June 18, 2050 | 155832 | 157304 |
| U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning December 24, 2022, due June 24, 2050 | 156322 | 157785 |
| Total term debt | $2035974 | $2094966 |
| Less current portion of term debt | (123801) | (119734) |
| Term debt, excluding current portion | $1912173 | $1975232 |

---

A summary of the minimum maturities of term debt follows for the *twelve* month periods ending *May 31:*

---

| | |
|:---|:---|
| Year | *Amount* |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2026 | $123801 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2027 | 131911 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2028 | 141066 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2029 | 151488 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2030 | 162362 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2031 and thereafter | 1325346 |
|  | $2035974 |

---

&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *14*

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***13*)** **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.

The Company has net operating losses and tax credits that are expected to offset any *2025* fiscal year tax liability and does *not* expect to have significant cash tax cost in the near future.

***14*)** **Related Party Transactions**

During the *three* and *six* months ended *May 31, 2025*, and *May 31, 2024*, the Company did not recognize any revenues from transactions with a related party, and no amounts in accounts receivable balances were due from a related party. From time to time, the Company purchases various supplies from related parties, which are companies in which Marc McConnell, the Company's chairman and principal executive officer, has an ownership interest and also serves as President. The J. Ward McConnell, Jr. Living Trust, is paid a monthly fee to guarantee a portion of the Company's term debt in accordance with the USDA guarantee obtained on the Company's term debt. In the *three* and *six* months ended *May 31, 2025*, the Company recognized $3,175 and $6,530 of expense for transactions with related parties compared to $3,749 and $7,680 for the *three* and *six* months ended *May 31, 2024*. As of *May 31, 2025*, accrued expenses contained a balance of $1,077 owed to a related party compared to $1,272 on *May 31, 2024*.

***15*)** **Leases**

The components of operating leases on the Condensed Consolidated Balance Sheets on *November 30, 2024* were as follows:

---

| | |
|:---|:---|
|  | **November 30, 2024** |
| Operating lease right-of-use assets (in other assets) | $13774 |
| Current portion of operating lease liabilities (in accrued expenses) | $9074 |
| Long-term portion of operating lease liabilities | 4700 |
| Total operating lease liabilities | $13774 |

---

The components of finance leases on the Condensed Consolidated Balance Sheets on *May 31, 2025* and *November 30, 2024* were as follows:

---

| | | |
|:---|:---|:---|
|  | ***May 31, 2025*** | ***November 30, 2024*** |
| Finance lease right-of-use assets (net of amortization in other assets) | $360872 | $377753 |
| Current portion of finance lease liabilities | $235625 | $220908 |
| Long-term portion of finance lease liabilities | 462280 | 534436 |
| Total finance lease liabilities | $697905 | $755344 |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *15*

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***16*)** **Equity Incentive Plan and Stock Based Compensation** 

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

The *2020* Plan permits the plan administrator to award nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance awards, and stock appreciation rights to employees (including officers), directors, and consultants. The Board has approved a director compensation policy pursuant to which directors are automatically granted restricted stock awards of 3,000 shares of fully vested common stock annually or initially upon their election to the Board and another 1,000 shares of fully vested common stock on the last business day of each fiscal quarter.

Shares issued under the *2020* Plan for the *three* and *six* month periods ended *May 31, 2025* and *May 31, 2024* are as follows:

---

| | | |
|:---|:---|:---|
|  | ***For the Three Months Ended*** | ***For the Three Months Ended*** |
|  | ***May 31, 2025*** | ***May 31, 2024*** |
| Shares issued to directors (immediate vesting) | 20000 | 10000 |
| Shares issued to directors, employees, and consultants (three year vesting) | 1500 |  |
| Total shares issued | 21500 | 10000 |

---

---

| | | |
|:---|:---|:---|
|  | ***For the Six Months Ended*** | ***For the Six Months Ended*** |
|  | ***May 31, 2025*** | ***May 31, 2024*** |
| Shares issued to directors (immediate vesting) | 25000 | 15000 |
| Shares issued to directors, employees, and consultants (three-year vesting) | 47500 | 69000 |
| Unvested shares forfeited upon termination |  | (6750) |
| Total shares issued | 72500 | 77250 |

---

***17*)** **Disclosures About the Fair Value of Financial Instruments**

The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. On *May 31, 2025* and *November 30, 2024*, the carrying amount approximated fair value for cash, accounts receivable, accounts payable, notes payable to bank, finance lease liabilities and other current and long-term liabilities. The carrying amounts of current assets and liabilities approximate fair value because of the short maturity of these instruments. The fair value of the finance lease liabilities also approximate recorded value as that is based on discounting future cash flows at rates implicit in the lease. The rates implicit in the lease do *not* materially differ from current market rates. The fair value of the Company's term loans payable also approximates recorded value because the interest rates charged under the loan terms are *not* substantially different from current interest rates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *16*

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***18*)** **Segment Information**

In accordance with ASC *280,* "Segment Reporting," the Company's chief operating decision maker, or CODM, has been identified as the President, Chief Executive Officer and Chairman, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. The CODM utilizes gross profit and income from operations to evaluate segment performance and allocate resources. The Company's selling, general and administrative expenses and engineering expenses are charged to each segment as incurred by each reportable segment. The Company allocates a small portion of corporate expenses from the Agricultural Products segment to the Modular Buildings segment monthly for administrative support services provided.

The Company has two reportable segments: Agricultural Products and Modular Buildings. The Agricultural Products segment manufactures and sells farm equipment and related replacement parts under the Art's-Way Manufacturing label. The Modular Buildings segment manufactures and installs modular buildings for various uses, commonly animal containment and research laboratories under the Art's Way Scientific and Evolution Modular labels.

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.

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| | | | |
|:---|:---|:---|:---|
|  | ***Three Months Ended May 31, 2025*** | ***Three Months Ended May 31, 2025*** | ***Three Months Ended May 31, 2025*** |
|  | *Agricultural Products* | *Modular Buildings* | *Consolidated (Continuing Operations)1* |
| Revenue from external customers | $4025000 | $2312000 | $6337000 |
| Gross profit | 1095000 | 965000 | 2060000 |
| Operating Expense | 1144000 | 406000 | 1550000 |
| Income (loss) from operations | (49000) | 559000 | 510000 |
| Income (loss) before tax | 1105000 | 771000 | 1876000 |
| Income tax expense (benefit) | $232000 | $162000 | $394000 |
| Total Assets | $17848000 | $3031000 | $20879000 |
| Capital expenditures2 | 134000 | 49000 | 183000 |
| Depreciation & Amortization | 148000 | 42000 | 190000 |
| Interest expense | 85000 | 14000 | 99000 |
| Engineering | 84000 |  | 84000 |
| Selling | 261000 | 175000 | 436000 |
| General and administrative (G&A) | 799000 | 231000 | 1030000 |
| Corporate expense (included in G&A) | $139000 | $45000 | $184000 |

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| | | | |
|:---|:---|:---|:---|
|  | ***Three Months Ended May 31, 2024*** | ***Three Months Ended May 31, 2024*** | ***Three Months Ended May 31, 2024*** |
|  | *Agricultural Products* | *Modular Buildings* | *Consolidated (Continuing Operations)1* |
| Revenue from external customers | $4555000 | $2175000 | $6730000 |
| Gross profit | 1323000 | 584000 | 1907000 |
| Operating Expense | 1481000 | 257000 | 1738000 |
| Income (loss) from operations | (158000) | 327000 | 169000 |
| Income (loss) before tax | (323000) | 318000 | (5000) |
| Income tax expense (benefit) | $(68000) | $67000 | $(1000) |
| Total Assets | $19528000 | $2611000 | $22139000 |
| Capital expenditures | 205000 | 27000 | 232000 |
| Depreciation & Amortization | 161000 | 71000 | 232000 |
| Interest Expense | 150000 | 9000 | 159000 |
| Engineering | 107000 |  | 107000 |
| Selling | 321000 | 77000 | 398000 |
| General and administrative (G&A) | 1053000 | 180000 | 1233000 |
| Corporate expense (included in G&A) | $136000 | $30000 | $166000 |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *17*

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| | | | |
|:---|:---|:---|:---|
|  | ***Six Months Ended May 31, 2025*** | ***Six Months Ended May 31, 2025*** | ***Six Months Ended May 31, 2025*** |
|  | *Agricultural Products* | *Modular Buildings* | *Consolidated (Continuing Operations)1* |
| Revenue from external customers | $6973000 | $4505000 | $11478000 |
| Gross profit | 1883000 | 1674000 | 3557000 |
| Operating Expense | 2310000 | 733000 | 3043000 |
| Income (loss) from operations | (428000) | 941000 | 513000 |
| Income (loss) before tax | 667000 | 1138000 | 1805000 |
| Income tax expense (benefit) | $140000 | $239000 | $379000 |
| Total Assets | $17848000 | $3031000 | $20879000 |
| Capital expenditures2 | 200000 | 65000 | 265000 |
| Depreciation & Amortization | 295041 | 103000 | 398041 |
| Interest expense | 147000 | 29000 | 176000 |
| Engineering | 169000 |  | 169000 |
| Selling | 467000 | 319000 | 786000 |
| General and administrative (G&A) | 1674000 | 414000 | 2088000 |
| Corporate expense (included in G&A) | $240000 | $90000 | $330000 |

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| | | | |
|:---|:---|:---|:---|
|  | ***Six Months Ended May 31, 2024*** | ***Six Months Ended May 31, 2024*** | ***Six Months Ended May 31, 2024*** |
|  | *Agricultural Products* | *Modular Buildings* | *Consolidated (Continuing Operations)1* |
| Revenue from external customers | $8792000 | $3662000 | $12454000 |
| Gross profit | 2464000 | 916000 | 3380000 |
| Operating Expense | 3049000 | 543000 | 3592000 |
| Income (loss) from operations | (584000) | 373000 | (211000) |
| Income (loss) before tax | (897000) | 355000 | (542000) |
| Income tax expense (benefit) | $(188000) | $75000 | $(113000) |
| Total Assets | $19528000 | $2611000 | $22139000 |
| Capital expenditures | 389000 | 124000 | 513000 |
| Depreciation & Amortization | 308000 | 126000 | 434000 |
| Interest expense | 303000 | 19000 | 322000 |
| Engineering | 266000 | 1000 | 267000 |
| Selling | 707000 | 154000 | 861000 |
| General and administrative (G&A) | 2076000 | 388000 | 2464000 |
| Corporate expense (included in G&A) | $324000 | $60000 | $384000 |

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*1.* 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.

*2.* Includes $52,000 of Right of Use Assets acquired in the Agricultural Products Segment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 18

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***19*)** **Subsequent Events**

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

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

**Forward-Looking Statements**

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q (this "report") and the audited consolidated financial statements and related notes thereto included in Part II, Item 8, "Financial Statements and Supplementary Data," as well as Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of our Annual Report on Form 10-K for the fiscal year ended November 30, 2024. 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," "foresee," or the negative of these terms or other similar expressions. Many of these forward-looking statements are located in this report under Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," but they may appear in other sections as well. Forward-looking statements in this report generally relate to: (i) our expectations with respect to order backlog, future demand for products, expected product mix and resulting sales; (ii) our beliefs regarding the sufficiency of working capital and cash flows; (iii) our expectation that we will continue to be able to renew or obtain financing on reasonable terms when necessary as well as our continued positive relationship with our creditors and lenders; (iv) our beliefs regarding production capabilities; (v) our intentions and beliefs relating to our costs, business strategies, and future performance, including without limitation, the impact of cost cutting measures, process improvement measures and new product development; (vi) our beliefs that normalizing dealer equipment stock levels may positively impact future demand for our agricultural products (vii) our beliefs regarding our early order program providing a picture of future demand; (viii) our expected financial results, including without limitation, our expected results for the Modular and Agricultural Products segments; and (ix) our expectations concerning our primary capital and cash flow needs.

You should read this report thoroughly with the understanding that our actual results may differ materially from those set forth in the forward-looking statements for many reasons, including events beyond our control and assumptions that prove to be inaccurate or unfounded. We cannot provide any assurance with respect to our future performance or results. Our actual results or actions could and likely will differ materially from those anticipated in the forward-looking statements for many reasons, including but not limited to: (i) the impact of changing credit markets on our ability to continue to obtain financing on reasonable terms; (ii) our ability to repay current debt, continue to meet debt obligations and comply with financial covenants; (iii) the effect of inflation as well as general economic conditions, including consumer and governmental spending, on the demand for our products and the cost of our supplies and materials; (iv) impacts caused by fluctuating commodity prices and fluctuating farm income; (v) fluctuations in seasonal demand and our production cycle; (vi) the ability of our suppliers to meet our demands for raw materials and component parts; (vii) fluctuations in the price of raw materials, especially steel and the impact of U.S. tariff policy and retaliatory tariffs on our business; (viii) our ability to predict and meet the demands of each market in which our segments operate; (ix) the impact of future interest rate changes on our business and the demand of our products, or interest rate changes may be different than we currently expect; and (x) 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.

**Critical Accounting Policies**

Our critical accounting policies involving the more significant judgments and assumptions used in the preparation of our financial statements as of May 31, 2025 remain unchanged from November 30, 2024. 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, 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 19

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**Results of Operations**

*Net Sales and Cost of Sales*

Our consolidated corporate sales from continuing operations for the three- and six-month period ended May 31, 2025 were $6,337,000, and $11,478,000, respectively, compared to $6,730,000 and $12,454,000, respectively, during the same periods in fiscal 2024. For the three months ended May 31, 2025, we saw a sales decrease of $393,000, or 5.8%, from the same period in fiscal 2024. For the six months ended May 31, 2025, we saw a sales decrease of $976,000, or 7.8%, from the same period in fiscal 2024. Consolidated gross margin for the three and six months ended May 31, 2025 was 32.5% and 31.0%, respectively, compared to 28.3% and 27.1%, respectively, for the same periods in fiscal 2024.

Our 2025 second fiscal quarter sales in our Agricultural Products segment were $4,025,000 compared to $4,555,000 during the same period of fiscal 2024, a decrease of $530,000, or 11.6%. For the six months ended May 31, 2025, our sales in the Agricultural Products segment were $6,973,000 compared to $8,792,000 during the same period of fiscal 2024, a decrease of $1,819,000, or 20.7%. Weakened row crop prices and high interest rates continue to make for a difficult agricultural market through the first six months of fiscal 2025. Livestock prices, predominately cattle, are at all time highs in fiscal 2025 and have driven strong grinder mixer sales activity thus far in fiscal 2025. While we have seen quite a bit of destocking from heightened levels in fiscal 2024, many dealers are not eager to replace their stock at current interest rate levels. The agriculture market is highly cyclical, and we still believe we are at the bottom of the cycle. We anticipate that conditions will improve in the next 12 to 18 months in our market. Our efforts in fiscal 2024 to right-size our production and administrative staff has reduced our operating expenses which is aiding in our efforts to weather the bottom of the cycle. In Q3 of fiscal 2025 we expect to be building stock inventory in order to react to retail opportunities in the second half of fiscal 2025. We will continue to release product specific programs in the second half of fiscal 2025 to turn inventory and unlock cash from product lines where our inventory levels are higher, which has been successful so far in fiscal 2025. Gross margin for our Agricultural Products segment for the three-month period ended May 31, 2025 was 27.2% compared to 29.0% for the same period in fiscal 2024, while our gross margin for the six-month period ended May 31, 2025 was 27.0% compared to 28.0% for the same period of fiscal 2024. The sales decreases for the three and six months periods ended May 31, 2025 compared to fiscal 2024, resulted in less variable margin to cover our fixed costs comparatively. We are seeing steel prices rise as tariff uncertainty impacts domestic demand. We expect U.S.-based steel manufacturers to be able to increase production to meet ongoing demand and note the presence of a major U.S. investment by Nippon Steel for a new US Steel mill. The United States currently imports approximately 25% of steel used by industry with Canada, Brazil and Mexico being the top suppliers. The majority of our manufacturing components are sourced in the U.S., however, some of our suppliers do source some of their components from China and other countries. We have also been seeing tariff charges from some of these suppliers and expect some minor impact from these tariffs on our gross profit.

Our second fiscal quarter sales in our Modular Buildings segment were $2,312,000 compared to $2,175,000 for the same period in fiscal 2024, an increase of $137,000, or 6.3%. Our Modular Buildings segment sales for the six months ended May 31, 2025 were $4,505,000 compared to $3,662,000 for the same period of fiscal 2024, an increase of $843,000, or 23.0%. Demand for our modular buildings continue to be strong in fiscal 2025. Our expertise and execution in the custom research and laboratory market has established us as an industry leader. There continues to be a copious amount of quoting activity and custom build inquiries in fiscal 2025, despite some concerns about governmental grants and funding. In Q1 of fiscal 2025, we brought on a Director of Business Development and Sales who is transitioning to replace our current President and Director of Sales. The overlap in these positions in fiscal 2025 is providing additional sales capacity for us in fiscal 2025. We also expect to utilize our outgoing President and Director of Sales as a consultant moving forward to improve sales and maintain customer relationships. We are utilizing the transition period to explore new markets where our custom building can offer competitiveness to the marketplace. Gross margin in the Modular Buildings segment for the three- and six-month period ended May 31, 2025 was 41.7% and 37.2%, respectively, compared to 26.9% and 25.0%, respectively, for the same periods in fiscal 2024. The increased margin is due to our team performing under budget on large research projects in fiscal 2025. Investments made in construction software and human capital from years past is coming together to produce results in this segment.

*Expenses*

Consolidated selling expenses from continuing operations for the three months ended May 31, 2025 were $436,000, compared to $398,000 for the same period in fiscal 2024. For the six months ended May 31, 2025, our consolidated selling expenses from continuing operations were $786,000 compared to $860,000 from the same period in fiscal 2024. The decrease in selling expenses is due to a reduction of employees on the sales and marketing teams in the Agricultural Products segment. Selling expenses as a percentage of sales were 6.8% for the six months ended May 31, 2025 compared to 6.9% for six months ended May 31, 2024. The increase is selling expenses as a percentage of sales is due to more commissionable sales in the Modular Buildings segment in the first six months of fiscal 2025 compared to fiscal 2024.

Consolidated engineering expenses from continuing operations were $84,000 for Q2 of fiscal 2025 compared to $107,000 for the same period in fiscal 2024. For the six months ended May 31, 2025, consolidated engineering expenses were $169,000 compared to $267,000 for same period in fiscal 2024. The decrease in engineering expenses is related to the reduction in our engineer headcount at the beginning of fiscal 2024. We expect to add a product development manager to our team in fiscal 2025 in order to bolster our product offerings. Engineering expenses as a percentage of sales were 1.5% for the six months ended May 31, 2025, compared to 2.1% for the same period in fiscal 2024.

Consolidated administrative expenses from continuing operations for the three- and six-month period ended May 31, 2025 were $1,029,000 and $2,088,000, respectively, compared to $1,233,000 and $2,464,000, respectively, for the same periods in fiscal 2024. Administrative expenses as a percentage of sales were 18.2% for the six months ended May 31, 2025, compared to 19.8% for the same period in fiscal 2024. Administrative expenses decreased year-over-year primarily due to early retirement incentives we offered to help right-size our workforce in Q1 of fiscal 2024, which was not repeated in fiscal 2025. We also reduced administrative headcount including our Chairman of the Board stepping in to fill our Chief Executive Officer role in Q4 of fiscal 2024, which positively impacted administrative expenses in fiscal 2025 versus fiscal 2024.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 20

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*Net income (loss) from continuing operations*

Consolidated net income from continuing operations was $1,482,000 for the three-month period ended May 31, 2025, compared to net loss of $5,000 for the same period in fiscal 2024. Our consolidated net income from continuing operations was $1,426,000 for the six months ended May 31, 2025, compared to net loss of $429,000 for the same period in fiscal 2024. Our operating results are improved in both reportable segments year on year. Despite the decrease in sales for our Agricultural Products segment, our operating loss is much improved from a year ago due to cost cutting procedures enacted in fiscal 2024. Our team continues to be committed to reducing manufacturing and overhead expenses in fiscal 2025, as we manage the reduced demand from adverse agricultural economic conditions. We believe, this segment will be poised to capitalize and provide profitability in the event markets improve. Our Modular Buildings segment continues to perform with solid operating income and near record sales. We expect continued success in the Modular Buildings segment as leads continue converting to contract. Our net income for the three and six months ended May 31, 2025 also benefited largely from the receipt of Employee Retention Credit refunds in the approximate amount of $1,154,000 including interest, net of consulting fees to prepare credit and tax study and net of tax.

*Order Backlog*

The consolidated order backlog net of discounts for continuing operations as of July 7, 2025 was $4,728,000 compared to $7,784,000 as of July 7, 2025, a 39.3% decrease. Immediately following the 2025 planting season, we experienced a period of slow demand in the Agricultural Products segment. The order backlog in this segment was $863,000 as of July 7, 2025 compared to $1,348,000 in fiscal 2024, a 36.0% decrease. As we get into harvest season, we expect to see orders pick up again as yearend tax buying occurs. Livestock operators continue to see record high prices and we expect them to have money to spend while the row crop farmers are continuing to experience five year low commodity prices. The backlog for the Modular Buildings segment was $3,865,000 as of July 7, 2025, compared to $6,436,000 in fiscal 2024, a 39.9% decrease. Despite out recent backlog being down year on year, our Modular building demand continues to be strong in fiscal 2025. Our sales are up 23.0% year to date with strong future expected project closings that we expect will give us similar results to fiscal 2024 for the remainder of our year. 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.

**Liquidity and Capital Resources**

Our primary source of funds for the six months ended May 31, 2025 was cash generated by operating activities, mainly net income from continuing operations. We received net proceeds of approximately $1,461,000 from Employer Retention Credit refunds in Q2 of fiscal 2025. We also had operating income from continuing operations of approximately $513,000 with an additional $952,000 of non cash reconciling items to net income for the six months ended May 31, 2025. Our primary cash usage activities for the first six months of fiscal 2025 was a reduction of billings in excess of costs through progress on our construction projects, increasing of inventory as we made speculative beet equipment for year end tax buying in the Agricultural Products segment and payment of accrued expenses. We expect progress on construction products and line of credit usage to be a primary source of cash for the remainder of our fiscal year. We expect our primary cash needs for the remainder of the fiscal year to be operating expenses and inventory stocking in the Agricultural Products segment.

As of May 31, 2025, our revolving credit line had an outstanding principal balance of $1,062,437. We renewed our revolving line of credit with Bank Midwest on March 27, 2025, with a scheduled maturity date of March 30, 2026. In our most recent renewal, we dropped our principal balances from $5,500,000 to $4,000,000 and also negotiated an interest rate 75 basis points lower than our previous line of credit. The bank's credit committee has preapproved an additional $1,500,000 of principal for the 2025 renewal, consistent with the borrowing availability of our previous line of credit, in the event we need additional funding.

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

**Item 3. Quantitative and Qualitative Disclosures About Market Risk.**

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

**Item 4. Controls and Procedures.**

**Evaluation of Disclosure Controls and Procedures**

The persons serving as our principal executive officer and principal financial officer have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of the end of the period subject to this report. Based on this evaluation, the persons serving as our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of May 31, 2025. Our management has concluded that the consolidated financial statements included in this report present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

**Changes in Internal Control over Financial Reporting**

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 21

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**PART II** – **OTHER INFORMATION**

**Item 1. Legal Proceedings.**

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

**Item 1A. Risk Factors.**

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

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

We did not purchase any shares our common stock during the second quarter of fiscal 2025.

**Item 3. Defaults Upon Senior Securities.**

None.

**Item 4. Mine Safety Disclosures.**

Not applicable.

**Item *5.* Other Information.**

*Insider Trading Arrangements*. During the *six* months ended *May 31, 2025*, no director or officer (as defined in Rule *16a*-*1*(f) under the Exchange Act) of the Company adopted or terminated a "Rule *10b5*-*1* trading arrangement" or "non-Rule *10b5*-*1* trading arrangement," as each term is defined in Item *408*(a) of Regulation S-K.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *22*

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**Item 6. Exhibits.** 

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| | |
|:---|:---|
| **Exhibit**<br> **No.** | **Description** |
| 3.1 | [Conformed Certificate of Incorporation of Art's-Way Manufacturing Co., Inc. – incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 2020.](http://www.sec.gov/Archives/edgar/data/7623/000143774921002312/ex_224746.htm) |
| 3.2 | [Conformed Bylaws of Art's-Way Manufacturing Co., Inc.– incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 2020.](http://www.sec.gov/Archives/edgar/data/7623/000143774921002312/ex_224747.htm) |
| 10.1 | [<u>Promissory Note, between Bank Midwest and Art's-Way Manufacturing Co., Inc. incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2025</u>](http://www.sec.gov/Archives/edgar/data/7623/000143774925011614/ex_800134.htm) |
| 31.1 | [Certification of Chief Executive Officer pursuant to 17 CFR 13a-14(a) – filed herewith.](ex_803692.htm) |
| 31.2 | [Certification of Chief Financial Officer pursuant to 17 CFR 13a-14(a) – filed herewith.](ex_803693.htm) |
| 32.1 | [Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 - furnished herewith.](ex_803694.htm) |
| 32.2 | [Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 - furnished herewith.](ex_803695.htm) |
| 101 | The following materials from this report, formatted in iXBRL (Inline Extensible Business Reporting Language) are filed herewith: (i) condensed consolidated balance sheets, (ii) condensed consolidated statement of operations, (iii) condensed consolidated statements of stockholders' equity, (iv) condensed consolidated statements of cash flows, and (v) the notes to the condensed consolidated financial statements. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101). |

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**SIGNATURES**

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

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| | |
|:---|:---|
|  | ART'S-WAY MANUFACTURING CO., INC. |
| Date: July 14, 2025 | By: <u>/s/ Marc H. McConnell</u>  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Marc H. McConnell |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; President, Chief Executive Officer and Chairman |
| Date: July 14, 2025 | By: <u>/s/ Michael W. Woods</u>  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Michael W. Woods |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Chief Financial Officer |

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## Exhibit 31.1

**Exhibit 31.1**

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

**(SECTION 302 CERTIFICATION)**

I, Marc H. McConnell, certify that:

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

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

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

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

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

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

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

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

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

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

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

---

| | | |
|:---|:---|:---|
| | | ART'S-WAY MANUFACTURING CO., INC. |
| Date: | July 14, 2025 | /s/ Marc H. McConnell |
| | | Marc H. McConnell |
| | | President, Chief Executive Officer and Chairman |

---

## Exhibit 31.2

**Exhibit 31.2**

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

**(SECTION 302 CERTIFICATION)**

I, Michael W. Woods, certify that:

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

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

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

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

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

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

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

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

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

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

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

---

| | | |
|:---|:---|:---|
| | | ART'S-WAY MANUFACTURING CO., INC. |
| Date: | July 14, 2025 | /s/ Michael W. Woods |
| | | Michael W. Woods |
| | | Chief Financial Officer |

---

## Exhibit 32.1

**Exhibit 32.1**

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

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

In connection with the quarterly report on Form 10-Q of Art's-Way Manufacturing Co., Inc. (the "Company") for the fiscal quarter ended May 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Marc H. McConnell, as the President, Chief Executive Officer and Chairman of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

---

| | | |
|:---|:---|:---|
| Date: | July 14, 2025 | /s/ Marc H. McConnell |
| | | Marc H. McConnell |
| | | President, Chief Executive Officer and Chairman |

---

## Exhibit 32.2

**Exhibit 32.2**

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

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

In connection with the quarterly report on Form 10-Q of Art's-Way Manufacturing Co., Inc. (the "Company") for the fiscal quarter ended May 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael W. Woods, as the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

---

| | | |
|:---|:---|:---|
| Date: | July 14, 2025 | /s/ Michael W. Woods |
| | | Michael W. Woods |
| | | Chief Financial Officer |

---