Art’s-Way Manufacturing Co., Inc.

Index

Page No.

 

PART I – FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of February 28, 2026 and November 30, 2025	1
	Condensed Consolidated Statements of Operations for the Three-Month Periods ended February 28, 2026 and February 28, 2025	2
	Condensed Consolidated Statements of Stockholders’ Equity for the Three-Month Periods ended February 28, 2026 and February 28, 2025	3
	Condensed Consolidated Statements of Cash Flows for the Three-Month Periods ended February 28, 2026 and February 28, 2025	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.	Controls and Procedures	17
PART II – OTHER INFORMATION		18
Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3.	Defaults Upon Senior Securities	18
Item 4.	Mine Safety Disclosures	18
Item 5.	Other Information	18
Item 6.	Exhibits	19
	SIGNATURES	20

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Balance Sheets

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Statements of Stockholders' Equity

Three Months Ended February 28, 2026 and February 28, 2025

(Unaudited)

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

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 national 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.

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, 2025. The results of operations for the three months ended February 28, 2026 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2026.

 

Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the three months ended February 28, 2026. 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 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 are due 30 days or fewer 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.

 

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Recently Issued Accounting Pronouncements

 

Accounting Pronouncements Not Yet Adopted

 

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.

 

3)

Disaggregation of Revenue

 

The following table displays revenue by reportable segment from external customers, disaggregated by major source. The Company believes disaggregating by these categories depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

 

		Three Months Ended February 28, 2026
		Agricultural Products				Modular Buildings				Total
Farm equipment		$	2,884,000			$	-			$	2,884,000
Farm equipment service parts			790,000				-				790,000
Modular buildings			-				2,881,000				2,881,000
Modular building lease income			-				-				-
Other			80,000				5,000				85,000
		$	3,754,000			$	2,886,000			$	6,640,000

 

		Three Months Ended February 28, 2025
		Agricultural Products				Modular Buildings				Total
Farm equipment		$	1,994,000			$	-			$	1,994,000
Farm equipment service parts			883,000				-				883,000
Modular buildings			-				2,119,000				2,119,000
Modular building lease income			-				46,000				46,000
Other			71,000				28,000				99,000
		$	2,948,000			$	2,193,000			$	5,141,000

  

The Company offered floorplan terms in its Agricultural Products segment during its Fall of 2024 and 2025 early order programs to incentivize customers to stock farm equipment on their lots for fiscal 2025 and fiscal 2026. 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 February 28, 2026, the Company had approximately $705,000 in receivables on the floorplan program with a due date greater than 30 days compared to $195,000 on February 28, 2025.

  

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4)

Receivables

 

Receivables 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 three months ended February 28, 2026 and three months ended February 28, 2025 was as follows:

 

		Three Months Ended				Three Months Ended
		February 28, 2026				February 28, 2025
Balance, beginning		$	60,601			$	108,636
Provision charged to expense			(27,415	)			(2,400	)
Less amounts charged-off			-				-
Balance, ending		$	33,186			$	106,236

 

5)

Contract Receivables, Contract Assets and Contract Liabilities

 

The following table provides information about contract receivables, contract assets, and contract liabilities from contracts with customers included on the Condensed Consolidated Balance Sheets.

 

		February 28, 2026				November 30, 2025
Receivables		$	3,434,000			$	2,202,000
Assets (cost and profit in excess of billings)			573,000				380,000
Liabilities (billings in excess of profit and customer deposits)			1,710,000				520,000

 

The amount of revenue recognized in the first three months of fiscal 2026 that was included in a contract liability on  November 30, 2025 was approximately $403,000 compared to $197,000 in the same period of fiscal 2025. The beginning contract receivables, assets and liabilities on December 1, 2024 were approximately $2,373,000, $213,000 and $2,110,000, respectively.

 

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6)

Net Income (Loss) Per Share of Common Stock

 

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

 

Basic and diluted net income (loss) per share have been computed based on the following as of  February 28, 2026 and February 28, 2025:

 

		For the Three Months Ended
		February 28, 2026				February 28, 2025
Numerator for basic and diluted net income (loss) per share:
Net income (loss)		$	196,442			$	(55,757	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding			5,140,165				5,054,665
Effect of dilutive stock options			-				-
For diluted net income (loss) per share - weighted average common shares outstanding			5,140,165				5,054,665
Net Income (loss) per share - Basic:
Net income (loss) per share		$	0.04			$	(0.01	)
Net Income (loss) per share - Diluted:
Net income (loss) per share		$	0.04			$	(0.01	)

 

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7)

Inventory

 

Major classes of inventory are:

 

		February 28, 2026				November 30, 2025
Raw materials		$	8,598,022			$	8,272,500
Work in process			280,462				387,332
Finished goods			5,415,058				5,441,067
Total Gross Inventory		$	14,293,542			$	14,100,899
Less: Reserves			(2,223,692	)			(2,392,657	)
Net Inventory		$	12,069,850			$	11,708,242

  

8)

Accrued Expenses

 

Major components of accrued expenses are:

		February 28, 2026				November 30, 2025
Salaries, wages, and commissions		$	459,263			$	729,429
Accrued warranty expense			230,905				225,000
Other			273,275				373,140
Total accrued expenses		$	963,443			$	1,327,569

 

9)

Assets Held for Lease

 

Major components of assets held for lease are:

		February 28, 2026				November 30, 2025
Modular Buildings		$	80,605			$	80,605
Agricultural Products equipment			61,345				64,013
Total assets held for lease (net)		$	141,950			$	144,618

 

There were approximately $2,000 of rents recognized from assets held for lease included in sales on the Condensed Consolidated Statements of Operations during the three months ended February 28, 2026, compared to $46,000 for the three months ending February 28, 2025, respectively. There were no future minimum lease receipts as of  February 28, 2026.

 

10)

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 8 “Accrued Expenses.” Changes in the Company’s product warranty liability for the three months ended February 28, 2026 and  February 28, 2025 are as follows:

 

		Three Months Ended (Continuing Operations)
		February 28, 2026				February 28, 2025
Balance, beginning		$	225,000			$	225,186
Provision charged to expense			77,939				85,040
Less amounts charged-off			(72,034	)			(119,395	)
Balance, ending		$	230,905			$	190,831

 

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11)

Loan and Credit Agreements

 

Bank Midwest Revolving Lines of Credit and Term Loans

 

The Company maintains a $4,000,000 revolving line of credit (the "Line of Credit”) with Bank Midwest. On February 28, 2026, the balance of the Line of Credit was $3,431,937 with $568,063 remaining available. The Line of Credit is subject to a borrowing base, which is an amount equal to 75% of accounts receivable balances (discounted for aged receivables), plus 50% of net inventory, less any outstanding loan balance on the Line of Credit. On February 28, 2026, the Line of Credit was not limited by the borrowing base calculation. Any unpaid principal amount borrowed on the Line of Credit accrues interest at a floating rate per annum equal to the 1-month SOFR ("the index") rate plus 2.600 percentage points over the index that is published by the CME Group Benchmark Administration on its website each business day. The interest rate floor is set at 5.00% per annum and the interest rate on date of the loan on March 19, 2026 was 6.273% per annum. The Line of Credit was most recently renewed on March 19, 2026 with a maturity date of  March 30, 2027 and required monthly interest-only payments. The Line of Credit is governed by the terms of a Promissory Note, dated March 19, 2026, 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 6.25%, which was most recently updated with a change of terms agreement on March 19, 2026. 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. McConnell Legacy Investments 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.

 

The Company carries a term loan with Bank Midwest in the amount of $516,971 (the “Roof Loan”) to replace portions of the roof on its Armstrong facility since October 1, 2025. The Term Loan accrues interest at a rate of 6.25% with a payback period of 10 years with the latest interest rate update coming on March 19, 2026 in a change of terms agremeent. The interest rate will remain fixed until April 5, 2031 and will then be repriced to the 5-Year Treasury Index plus a margin of 3.25% . Monthly payments of $6,102 in principal and interest are required on the Term Loan beginning on November 5, 2025. 

 

In connection with the Line of Credit, the Company and Art’s-Way Scientific, 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. Art’s-Way Scientific, Inc. also agreed to guarantee the obligations of the Company pursuant to the Line of Credit, as set forth in a Commercial Guaranty, dated September 28, 2017. 

 

The Term Loan and Roof Loan are 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 guarantor pursuant to the Commercial Guaranty) commits an event of default with respect to the promissory notes and fails or is unable to cure that default, Bank Midwest may immediately terminate its obligation, if any, to make additional loans to the Company and may accelerate the Company’s obligations under the promissory 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 each  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, 2025. The next measurement date is November 30, 2026 for all covenants except the monthly working capital requirement.

 

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SBA Economic Injury Disaster Loans

 

In June of 2020, the Company executed the standard loan documents required for securing loans offered by the U.S. Small Business Administration under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. 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:

 

		February 28, 2026				November 30, 2025
Bank Midwest loan payable in monthly installments of $19,648 including interest at 6.25%, due October 1, 2037		$	1,637,455			$	1,666,762
Bank Midwest loan payable in monthly installments of $6,102 including interest at 6.25%, due October 5, 2035			505,156				514,406
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			153,645				154,381
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			154,636				154,880
Total term debt		$	2,450,892			$	2,490,429
Less current portion of term debt			167,811				165,326
Term debt, excluding current portion		$	2,283,081			$	2,325,103

 

A summary of the minimum maturities of term debt follows for the twelve month periods ending February 28:

 

Year		Amount
2027		$	167,811
2028			179,706
2029			192,317
2030			206,669
2031			506,995
2032 and thereafter			1,197,394
		$	2,450,892

    

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12)

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 2026 fiscal year tax liability and does not expect to have significant cash tax expense in the near future.

 

13)

Related Party Transactions

 

During the three months ended February 28, 2026, and February 28, 2025, 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. McConnell Legacy Investments 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 months ended February 28, 2026, the Company recognized $3,155 of expense for transactions with related parties compared to $3,355 for the three months ended February 28, 2025. As of February 28, 2026, accrued expenses contained a balance of $1,057 owed to a related party compared to $1,131 on February 28, 2025.

 

14)

Leases

 

 

The components of finance leases on the Condensed Consolidated Balance Sheets on February 28, 2026 and November 30, 2025 were as follows:

 

		February 28, 2026				November 30, 2025
Finance lease right-of-use assets (net of amortization in other assets)		$	327,586			$	368,720
Current portion of finance lease liabilities		$	255,143			$	255,748
Long-term portion of finance lease liabilities			345,785				408,154
Total finance lease liabilities		$	600,928			$	663,902

 

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15)

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. 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. On February 13, 2026, the Board authorized and approved an amendment to the 2020 plan to reserve an additional 500,000 shares for equity awards, subject to shareholder approval at the 2026 annual meeting of shareholders to be held on  April 21, 2026.

 

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 month periods ended February 28, 2026 and February 28, 2025 are as follows:

 

		For the Three Months Ended
		February 28, 2026				February 28, 2025
Shares issued to directors (immediate vesting)			5,000				5,000
Shares issued to directors and employees (three-year vesting)			65,250				46,000
Total shares issued (forfeited)			70,250				51,000

16)

Disclosures About the Fair Value of Financial Instruments

 

The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. On  February 28, 2026 and November 30, 2025, the carrying amount approximated fair value for cash, receivables, 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 its measurement 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 do not substantially differ from current interest rates the Company could obtain under similar terms.

 

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17)

Segment Information

 

In accordance with ASC 280, “Segment Reporting," the Company’s chief operating decision maker, or CODM, has been identified as its President, Chief Executive Officer and Chairman. The CODM reviews operating results to make decisions about allocating resources and assessing performance for the entire Company and 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.

 

		Three Months Ended February 28, 2026
		Agricultural Products				Modular Buildings				Consolidated 1
Revenue from external customers		$	3,754,000			$	2,886,000			$	6,640,000
Gross profit			1,296,000				615,000				1,911,000
Operating Expense			1,195,000				386,000				1,581,000
Income from operations			101,000				229,000				330,000
Income (loss) before tax			9,000				246,000				255,000
Income tax expense (benefit)		$	2,000			$	57,000			$	59,000
Total Assets		$	20,604,000			$	3,960,000			$	24,564,000
Capital expenditures			140,000				36,000				176,000
Depreciation & Amortization			154,000				50,000				204,000
Interest expense			97,000				14,000				111,000
Engineering			107,000				-				107,000
Selling			287,000				150,000				437,000
General and administrative (G&A)			801,000				237,000				1,038,000
Corporate expense (included in G&A)		$	97,000			$	45,000			$	142,000

 

		Three Months Ended February 28, 2025
		Agricultural Products				Modular Buildings				Consolidated 1
Revenue from external customers		$	2,948,000			$	2,193,000			$	5,141,000
Gross profit			788,000				708,000				1,496,000
Operating Expense			1,167,000				327,000				1,494,000
Income (loss) from operations			(379,000	)			381,000				2,000
Income (loss) before tax			(438,000	)			368,000				(70,000	)
Income tax expense (benefit)		$	(92,000	)		$	77,000			$	(15,000	)
Total Assets		$	18,857,000			$	2,148,000			$	21,005,000
Capital expenditures			67,000				16,000				83,000
Depreciation & Amortization			148,000				60,000				208,000
Interest Expense			61,000				15,000				76,000
Engineering			85,000				-				85,000
Selling			206,000				144,000				350,000
General and administrative (G&A)			876,000				183,000				1,059,000
Corporate expense (included in G&A)		$	101,000			$	45,000			$	146,000

 

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.

    

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18)

Subsequent Events

 

Management evaluated all other activity of the Company and concluded that no subsequent events have occurred other than the line of credit renewal and the change of terms agreements for the Company's two term loans that were signed on March 19, 2026, as discussed in Note 11 Loan and Credit Agreements, 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, 2025. 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," "opportunity," 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 Buildings 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 February 28, 2026 remain unchanged from November 30, 2025. 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, 2025.

   

 

Results of Operations

 

Net Sales and Cost of Sales

 

Our consolidated corporate sales from continuing operations for the three- month period ended February 28, 2026 were $ 6,640,000 compared to $5,141,000 during the same period in fiscal 2025, an increase of  $1,499,000, or 29.2%. Consolidated gross margin for the three months ended February 28, 2026 was 28.8% compared to 29.1% for the same periods in fiscal 2025. 

 

Sales in our Agricultural Products segment during the first quarter of fiscal 2026 were $3,754,000 compared to $2,948,000 during the same period of fiscal 2025, an increase of $806,000, or 27.3%. We have experienced increased demand this quarter, as compared to the same period in 2025, with increased sales on grinder mixers, manure spreaders and bale processors. While row crop commodity prices have increased from their lowest point in 2024, they remain substantially below the peak levels experienced in 2022. The slight increase in commodity prices and product availability did, however, lead to improved results for the first quarter of fiscal 2026. Livestock prices remained elevated through Q1 of fiscal 2026 and are driving most of the demand for our agricultural products as a large portion of our customer base raises livestock and row crops. Sugar beet prices declined in the first fiscal quarter of 2026 and we are expecting less demand for our sugar beet equipment for the remainder of fiscal 2026. To offset some of the anticipated decrease in demand, we are deploying a product specialist into our primary beet territory to drive new customer activity and technological development as we unveil a new product in that market for fiscal 2026. Our fall early order program ended with a 62% increase in orders on our non beet equipment, while our beet orders were down 63%. Overall order book from the early order program was up 11%, which leads us to believe the agricultural market is entering a recovery despite continued increasing input costs. Gross margin for our Agricultural Products segment for the three-month period ended February 28, 2026 was 34.5% compared to 26.7% for the same period in fiscal 2025. The margin increase is due primarily to the mix of products sold in Q1 of fiscal 2026. Our grinder mixer sales were up $909,000 year-on-year and was our most profitable product line for the first quarter of fiscal 2026. We continue to carry strong grinder mixer backlog into the second quarter of fiscal 2026 and foresee steady shipments in the second quarter of fiscal 2026.. Steel prices continued to rise in the first quarter of fiscal 2026 and will challenge our strong first fiscal quarter margins. Rising fuel prices in fiscal 2026 could negatively affect demand if it has a large impact on farmer's input costs and 

 

Our first fiscal quarter sales in our Modular Buildings segment were $2,886,000 compared to $2,193,000 for the same period in fiscal 2025, an increase of $693,000, or 31.6%. We carried strong modular building backlog into fiscal 2026, unlike a year ago, which drove the revenue increase this year. We experienced continued strong demand for our buildings on both the livestock and research sides in the first quarter of fiscal 2026. Current backlog is expected to carry us well into the third quarter of fiscal 2026, which is somewhat unusual given the sales life cycle in our Modular Buildings segment. Our leads remain abundant and we continue to be optimistic about the future prospects and continued success of this business segment. Gross margin in the Modular Buildings segment for the three- month period ended February 28, 2026 was 21.3% compared to 32.3% for the same period in fiscal 2025. Our margin decrease in the first fiscal quarter of fiscal 2026 is due to the selling of a warrantied agriculture modular building at cost and project overages on site work while completing current contracts.

 

Expenses

 

Consolidated selling expenses from continuing operations for the three months ended February 28, 2026 were $437,000, compared to $350,000 for the same period in fiscal 2025. The increase in selling expenses is due to increased commissions and royalties on increased sales along with additional targeted advertising campaign expenditures.  Selling expenses as a percentage of sales were 6.6% for the three months ended February 28, 2026 compared to 6.8% for three months ended February 28, 2025. 

 

Consolidated engineering expenses from continuing operations were $107,000 for three months ended February 28, 2026 compared to $85,000 for the same period in fiscal 2025. The increase in engineering expenses is related to additional research and development costs incurred in 2026 as we made product changes that we felt could drive more sugar beet product demand. Engineering expenses as a percentage of sales were 1.6% for the three months ended February 28, 2026, compared to 1.7% for the same period in fiscal 2025.

 

Consolidated administrative expenses from continuing operations for the three- month period ended February 28, 2026 were $1,038,000 compared to $1,059,000  for the same period in fiscal 2025. Administrative expenses as a percentage of sales were 15.6% for the three months ended February 28, 2026, compared to 20.6% for the same period in fiscal 2025. Administrative expenses have decreased slightly in fiscal 2026 despite the increase in sales as we have not replaced overhead cut in previous years. We continue to be conscious of adding additional overhead while market conditions are still slow in the Agricultural Products segment.

 

 

Net income (loss)

 

Consolidated net income was $196,000 for the three-month period ended February 28, 2026, compared to net loss of $56,000 for the same period in fiscal 2025. We are reporting positive operating results in both of our business segments through the first quarter of fiscal 2026. The small uptick in the agricultural market coupled with cost cutting procedures enacted in fiscal 2024 in the Agricultural Products segment has stabilized our operating result to prepare us for a future uptrend in the agriculture cycle. We continue to focus on remaining competitive with pricing, features and availability to ensure we are considered for retail opportunities. Our Modular Buildings segment's success is expected to continue as solid leads make their way to our sales team.

 

Order Backlog

 

The consolidated order backlog net of discounts as of April 7, 2026 was $7,287,000 compared to $4,482,000 as of April 7, 2025, a 62.6% increase. The order backlog in our Agricultural Products segment was $2,774,000 as of  April 7, 2026 compared to $2,016,000 in fiscal 2025, a 37.6% increase. Demand has remained steady throughout fiscal 2026 for our agriculture products and is much improved from a year ago due to higher row crop prices and record cattle prices. The backlog for the Modular Buildings segment was $4,513,000 as of April 7, 2026, compared to $2,466,000 in fiscal 2025, an 83% increase. Quoting activity in both the research and agriculture buildings markets have been strong so far in fiscal 2026, with further contracts expected to execute with customers we are performing design agreements for. 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 three months ended February 28, 2026 was cash generated by operating activities including profitability and the increase of customer deposits and accounts payable as we incurred costs on construction contracts. We expect the collection of accounts receivable, progress on construction contracts and reduction of inventory to be primary sources of cash for the remainder of fiscal 2026. We expect our primary cash needs for the remainder of the fiscal year to be tied to operating expenses and retirement of debt. 

 

As of February 28, 2026, our revolving credit line had an outstanding principal balance of $3,431,937. We renewed our revolving line of credit with Bank Midwest on March 19, 2026, with a scheduled maturity date of March 30, 2027. In our most recent renewal, we negotiated an interest rate 50 basis points lower than our previous line of credit tied to SOFR to recognize expected interest rate decreases sooner. Bank Midwest's credit committee has preapproved an additional $1,500,000 of principal for the 2026 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 February 28, 2026. 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.

 

 

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 of our common stock during the first quarter of fiscal 2026.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

Item 5. Other Information.

 

Insider Trading Arrangements. During the three months ended  February 28, 2026, 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.

 

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Item 6. Exhibits.

 

Exhibit No.	Description
3.1	Conformed Certificate of Incorporation of Art’s-Way Manufacturing Co., Inc. – incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2020.
3.2	Conformed Bylaws of Art’s-Way Manufacturing Co., Inc.– incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2020.
10.1	Solar System Purchase Agreement, dated as of December 19, 2025, by and between Art's-Way Manufacturing Co., Inc., and Midwest Solar Installers - incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on December 29, 2025.
10.2	Change in Terms Agreement (Mortgage), Between Bank Midwest and Art's Way Manufacturing Co., Inc. dated March 19, 2026 - filed herewith.
10.3	Change in Terms Agreement (Roof Loan), Between Bank Midwest and Art's Way Manufacturing Co., Inc. dated March 19, 2026 - filed herewith.
10.4	Promissory Note, Between Bank Midwest and Art's Way Manufacturing Co., Inc. dated March 19, 2026 - filed herewith.
31.1	Certification of Chief Executive Officer pursuant to 17 CFR 13a-14(a) – filed herewith.
31.2	Certification of Chief Financial Officer pursuant to 17 CFR 13a-14(a) – filed herewith.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 - furnished herewith.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 - furnished herewith.
101	The following materials from this report, formatted in iXBRL (Inline Extensible Business Reporting Language) are filed herewith: (i) condensed consolidated balance sheets, (ii) condensed consolidated statement of operations, (iii) condensed consolidated statements of 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).

 

SIGNATURES

 

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

 

	ART’S-WAY MANUFACTURING CO., INC.
Date: April 13, 2026	By: /s/ Marc H. McConnell
	Marc H. McConnell
	President, Chief Executive Officer and Chairman
Date: April 13, 2026	By: /s/ Michael W. Woods
	Michael W. Woods
	Chief Financial Officer