The foregoing condensed consolidated financial statements of the Company are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) ~~which~~that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position and operating results for the interim periods. The financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, ~~2016.~~2020. The results of operations for the three and ~~nine~~six months ended ~~August~~May 31, ~~2017~~2021 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, ~~2017.~~2021.

The ~~financial books~~COVID-19 pandemic created some new challenges for the Company through the first half of fiscal 2021. The Company has experienced results consistent with that of a strengthening economy including increased demand in all three segments compared to fiscal 2020. With increased demand, material prices have been skyrocketing, while labor availability has been scarce. These factors will be a challenge for the Company as it works to fulfill its strong backlog over the remainder of fiscal 2021. The COVID-19 pandemic may continue to impact the Company’s ~~Canadian operation are kept~~business operations and financial operating results and there is uncertainty in the ~~functional currency~~nature and degree of ~~Canadian dollars~~its continued effects over time. Refer to Management’s Discussion and ~~the financial statements are converted to U.S. Dollars~~Analysis of Financial Condition and Results of Operations (Part I, Item 2 of this Form 10-Q) for consolidation. When consolidating the financial results of the Company into U.S. Dollars for reporting purposes, the Company uses the All-Current translation method. The All-Current method requires the balance sheet assets and liabilities to be translated to U.S. Dollars at the exchange rate as of quarter end. Stockholders’ equity is translated at historical exchange rates and retained earnings are translated at an average exchange rate for the period. Additionally, revenue and expenses are translated at average exchange rates for the periods presented. The resulting cumulative translation adjustment is carried on the balance sheet and is recorded in stockholders’ equity for 2017. Since the Company believes that it is more likely than not that no income tax benefit will occur if the foreign equity is sold or liquidated, the cumulative translation adjustment has not been tax adjusted.further discussion.

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. An adjustment has been made to the Condensed Consolidated Statements of Cash Flows for the six months ended May 31, 2020, to identify the non-cash expense related to changes in the Company’s obsolete inventory reserve in the amount of $191,997. This change in classification does not affect previously reported cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows.

The preparation of financial ~~statemen~~tsstatements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the three and ~~nine~~six months ended ~~August~~May 31, ~~2017.~~2021. Actual results could differ from those estimates.

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

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

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

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

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

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

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

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 adds a current expected credit loss (“CECL”) impairment model to U.S. GAAP that is based on expected losses rather than incurred losses. Modified retrospective adoption is required with any cumulative-effect adjustment recorded to retained earnings as of the beginning of the period of adoption. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022 for smaller reporting entities, including interim periods within the year of adoption. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company will adopt ASU 2016-13 in fiscal 2024. The Company does not expect the application of the CECL impairment model to have a significant impact on its allowance for uncollectible amounts for accounts receivable.

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

The amount of revenue recognized in the first six months of fiscal 2021 that was included in a contract liability on November 30, 2020 was approximately $276,000 compared to $89,000 in the same period of fiscal 2020. Contract receivables remained comparable to the Company’s fiscal year end on May 31, 2021 due to steady demand and shipment of the Company’s products through the first six months of fiscal 2021. Contract assets increased during the six months ended May 31, 2021 as costs in contract exceeded billings on projects in progress in the Modular Buildings segment. Contract liabilities increased during the six months ended May 31, 2021 as the Company completed progress on construction contracts in the Modular Buildings segment and received deposits on equipment in the Agricultural Products segment.

The Company utilizes the practical expedient exception for these contracts and will report only on performance obligations greater than one year. As of May 31, 2021, the Company has no performance obligations with an original expected duration greater than one year.

8)10)

Loan and Credit Agreements

The Company ~~previously maintained a~~maintains two revolving ~~line~~lines of credit and one term loan with Bank Midwest. The Company also has three term loans with U.S. Bank. Pursuant to a Forbearance and Fourth Loan Modification Agreement dated August 10, 2017 the (“Loan Modification”) entered into among U.S. Bank, as lender, the Company, as borrower, and Art’s-Way Scientific, Inc., Art’s-Way Vessels, Inc., and Ohio Metal Working Products/Art’s-Way, Inc., as guarantors, the agreements governing the U.S. ~~Bank line of credit and certain term loans were amended. The description that follows reflects such arrangements as amended by the Loan Modification.~~

~~U.S. Bank~~ ~~Revolving Line~~ ~~of Credit~~

~~The Company~~ had a revolving line of credit (the “Line of Credit”) with U.S. Bank, which had an availability of $4,500,000, that was obtained on May 1, 2013.As of August 31, 2017, the Company had a principal balance of $3,734,114 outstanding against the Line of Credit, with $765,886 remaining available, limited by the borrowing base calculation. The maturity date of the Line of Credit was September 25, 2017. The Line of Credit was secured by real property and fixed asset collateral. The Line of Credit stated that the borrowing base will be an amount equal to the sum of 75% of accounts receivable (discounted for aged accounts and customer balances exceeding 20% of aggregate receivables), plus 50% of inventory (this component could not exceed $3,375,000 and only included finished goods and raw materials deemed to be in good condition and not obsolete), less any outstanding loan balance of the Line of Credit, undrawn amounts of outstanding letters of credit issued by U.S. Bank or any affiliate, and any reserves that U.S. Bank deemed necessary to maintain. Monthly interest-only payments were required and the unpaid principal and accrued interest were due on the maturity date. The Company’s obligationsSmall Business Administration under the ~~Line of Credit were evidenced by a Revolving Credit Note effective May 1, 2013, a Revolving Credit Agreement dated May 1, 2013, as amended, and certain other ancillary documents.~~Economic Injury Disaster Loan program.

~~The Line of Credit~~ was subject to: (i) a minimum interest rate of 5.5% per annum; and (ii) an unused fee which accrued at the rate of 0.25% per annum on the average daily amount by which the amount available for borrowing under the Line of Credit exceeded the outstanding principal amount. As of August 31, 2017, the interest rate on the Line of Credit was the minimum of 5.5%.

~~U.S. Bank~~ ~~Term Loans~~

~~On May 10, 2012, the Company obtained $880,000 in long-term debt from U.S. Bank issued to acquire the building and property of Universal Harvester Co., Inc. located in Ames, Iowa (the “~~U.S. Bank UHC Loan”), the assets and operations of which are now held by Art’s Way Manufacturing Co., Inc. in Armstrong, Iowa. The maturity date of this loan was scheduled to be May 10, 2017, with a final payment of principal and accrued interest in the amount of $283,500 due May 10, 2017. This loan accrued interest at a fixed rate of 3.15% per annum. Following the Fourth Loan Modification the maturity date was September 25, 2017, and the interest rate was an annual rate equal to 2.0% plus the prime rate, but not less than 5%. The interest rate was to be adjusted each time that the prime rate changes. The principal balance of this loan was $238,945 as of August 31, 2017. This loan was secured by a mortgage on the building and property acquired from Universal Harvester Co., Inc. in Ames, Iowa, pursuant to a Mortgage, Security Agreement and Assignment of Rents between the Company and U.S. Bank, dated May 10, 2012, which was released upon the sale of the Company’s Ames, Iowa facility. The U.S. Bank UHC Loan was also secured by a mortgage on the building and property in Monona, Iowa, pursuant to a Mortgage, Security Agreement and Assignment of Rents between the Company and U.S. Bank, dated May 1, 2013 and a mortgage on the building and property owned by the Company in Dubuque, Iowa, pursuant to a Mortgage, Security Agreement and Assignment of Rents between the Company (as successor by merger to Art’s-Way Vessels, Inc.) and U.S. Bank, dated May 1, 2013. On May 1, 2013, the U.S. Bank UHC Loan and the mortgage were amended to extend the mortgage to secure the 2013 Term Notes (defined below) in addition to the U.S. Bank UHC Loan.

~~Three of the Company~~’s outstanding term loans were obtained from U.S. Bank on May 1, 2013. The principal balance of these loans totaled $1,738,533 at August 31, 2017. Following the Fourth Loan Modification, the 2013 Term Notes accrued interest at a rate of 2.0% plus the prime rate, with a minimum of 5% per annum. There was previously also a fourth term loan obtained from U.S. Bank on May 1, 2013, but the Company voluntarily paid off and terminated the note and the related Term Loan Agreement on February 10, 2016. The payoff amount of $1,078,196 included principal and accrued and unpaid interest. As detailed in the Company’s debt summary below, monthly principal and interest payments in the aggregate amount of $46,672 were required on the remaining 2013 Term Notes, with a revised maturity date of September 25, 2017. The 2013 Term Notes previously had a maturity date of May 1, 2018.

~~The~~ Company obtained a term loan from U.S. Bank on May 29, 2014 in the original principal amount of $1,000,000 (the “2014 Term Note”). The 2014 Term Note had a principal balance of $874,263 at August 31, 2017. Following the Fourth Loan Modification, the 2014 Term Note accrued interest at a rate of 2.0% plus the prime rate, with a minimum of 5% per annum. The Company took on the 2014 Term Note in order to partially pay down a draw on its revolving line of credit that it had used to finance the purchase of the building and property of Ohio Metal Working Products Company in Canton, Ohio. The maturity date of the 2014 Term Note was September 25, 2017. This loan was secured by a mortgage on the building and property acquired from Ohio Metal Working Products Company in Canton, Ohio pursuant to a Mortgage, Security Agreement and Assignment of Rents between the Company and U.S. Bank, dated May 29, 2014, and was also subject to a Business Security Agreement between Ohio Metal Working Products/Art’s Way, Inc. (“Ohio Metal”) and U.S. Bank and a Continuing Guaranty (Unlimited) by Ohio Metal. Each of the Company’s term loans from U.S. Bank were governed by a Term Note and a Term Loan Agreement.

~~U.S. Bank Covenants~~

As amended by the Fourth Loan Modification the Company was required to maintain (i) fiscal 2017 third quarter EBIDTA (with EBITDA meaning income, plus interest expense, plus income tax expense, plus depreciation expense, plus amortization expense, subject to adjustments in U.S. Bank’s sole discretion) of $411,000. The Company was not in compliance with this covenant as of August 31, 2017. The main reason for the non-compliance result as of August 31, 2017 was the decreased gross margins from continuing operations.

~~On September 28, 2017, the Company repaid its U.S. Bank debt in full in connection with its new credit facility with Bank Midwest, as discussed below.~~

~~Iowa Finance Authority Term Loan and Covenants~~

~~On May 1, 2010, the Company obtained a loan to finance the purchase of an additional facility located in West Union, Iowa to be~~ used as a distribution center, warehouse facility, and manufacturing plant for certain products under the Art’s-Way brand. The funds for this loan were made available by the Iowa Finance Authority by the issuance of tax exempt bonds. This loan had an original principal amount of $1,300,000, an interest rate of 3.5% per annum and a maturity date of June 1, 2020. On February 1, 2013, the interest rate was decreased to 2.75% per annum. The other terms of the loan remain unchanged.

~~This loan from the Iowa~~ ~~Finance Authority, which has been assigned to The First National Bank of West Union (n/k/a Bank 1~~^st), is governed by a Manufacturing Facility Revenue Note dated May 28, 2010 as amended February 1, 2013 and a Loan Agreement dated May 1, 2010 and a First Amendment to Loan Agreement dated February 1, 2013 (collectively, “the IFA Loan Agreement”), which requires the Company to provide quarterly internally prepared financial reports and year-end audited financial statements and to maintain a minimum debt service coverage ratio of 1.5 to 1.0, which is measured at November 30 of each year. Among other covenants, the IFA Loan Agreement also requires the Company to maintain proper insurance on, and maintain in good repair, the West Union Facility, and continue to conduct business and remain duly qualified to do business in the State of Iowa. The loan is secured by a mortgage on the Company’s West Union Facility, pursuant to a Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement dated May 1, 2010 between the Company and The First National Bank of West Union (the “West Union Mortgage”).

~~If the Company~~ commits an event of default under the IFA Loan Agreement or the West Union Mortgage and does not cure the event of default within the time specified by the IFA Loan Agreement, the lender may cause the entire amount of the loan to be immediately due and payable and take any other action that it is lawfully permitted to take or in equity to enforce the Company’s performance.

~~The Company was in compliance with all covenants under the IFA Loan Agreement~~ ~~except the debt service coverage ratio as measured on November 30, 2016. The First National Bank of West Union has issued a waiver, and the next measurement date is November 30, 2017.~~

~~Debt Summary~~

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

August 31, 2017

November 30, 2016

U.S. Bank loan payable in monthly installments of $9,600 plus interest at 5.5%, due September 25, 2017
$ 546,392 $ 632,126

U.S. Bank loan payable in monthly installments of $10,965 plus interest at 5.5%, due September 25, 2017
618,016 715,945

U.S. Bank loan payable in monthly installments of $26,107 plus interest at 5.5%, due September 25, 2017
574,125 808,096

U.S. Bank loan payable in monthly installments of $10,960 plus interest at 5.5%, due September 25, 2017
238,945 337,147

U.S. Bank loan payable in monthly installments of $4,301 plus interest at 5.5%, due September 25, 2017
874,263 904,751

Iowa Finance Authority loan payable in monthly installments of $12,500 including interest at 2.75%, due June 1, 2020
409,745 512,935
Total term debt
$ 3,261,486 $ 3,911,000
Less current portion of term debt
2,374,665 1,807,937
Term debt of discontinued operations
618,016 715,945
Term debt, excluding current portion
$ 268,805 $ 1,387,118

Bank Midwest Revolving ~~Line~~Lines of Credit and Term ~~Loans~~Loan

On ~~September 28, 2017, the~~The Company ~~entered into~~maintains a credit facility with Bank Midwest ~~which supersedes and replaces in its entirety the U.S. Bank credit facility. The new Bank Midwest credit facility consists~~consisting of a $5,000,000 revolving line of credit (the “2017 Line of Credit”) used for working capital purposes, and a $2,600,000 term loan due October 1, 2037 ~~and a $600,000 term loan due October 1, 2019. The proceeds~~(the “Term Loan”). On May 31, 2021, the balance of the ~~term loans were used~~2017 Line of Credit was $4,088,530 with $911,470 remaining available, as may be limited by the borrowing base calculation. The 2017 Line of Credit borrowing base is an amount equal to ~~refinance all debt previously held~~75% of accounts receivable balances (discounted for aged receivables), plus 50% of inventory, less any outstanding loan balance on the 2017 Line of Credit. On May 31, 2021, the 2017 Line of Credit was not limited by ~~U.S. Bank in~~ the amount of approximately $6,562,030, which consists of $6,528,223 in unpaid principal and approximately $33,807 in accrued and unpaid interest and fees. The revolving line of credit will be used for working capital purposes.

~~The maturity date of the revolving line of credit is March 1, 2018.~~borrowing base calculation. Any unpaid principal amount borrowed on the ~~revolving line~~2017 Line of ~~credit~~Credit accrues interest at a floating rate per annum equal to ~~1.000%~~1.00% above the Wall Street Journal rate published ~~from time to time~~ in the money rates section of the Wall Street Journal. The interest rate floor is set at ~~4.250%~~4.75% per annum and the current interest rate is ~~5.250%~~4.75% per annum. The ~~revolving line~~2017 Line of ~~credit is payable upon demand by Bank Midwest,~~Credit was most recently renewed on February 11, 2021. The 2017 Line of Credit matures on March 30, 2022 and requires monthly interest-only ~~payments are required. If no earlier demand is made, the unpaid principal and accrued interest is due on the maturity date.~~ payments.

The ~~$2,600,000 term loan~~Term Loan accrues interest at a rate of ~~5.000%~~5.00% for the first sixty months. Thereafter, ~~this loan~~the Term Loan will accrue interest at a floating rate per annum equal to ~~0.750%~~0.75% above the Wall Street Journal rate published ~~from time to time~~ in the money rates section of the Wall Street Journal. The interest rate floor is set at ~~4.150%~~4.15% per annum and the interest rate may only be adjusted by Bank Midwest once every five years. ~~This loan is payable upon demand by Bank Midwest, and monthly~~Monthly payments of $17,271 for principal and interest are required. ~~This loan will~~The Term Loan is also be guaranteed by the United States Department of Agriculture ~~(USDA)~~(“USDA”), which ~~requires~~required an upfront guarantee fee of ~~$62,500~~$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 ~~loan as well,~~Term Loan, in an amount equal to their stock ownership percentage. J. Ward McConnell, Jr. ~~will be guaranteeing~~, the former Vice Chairman of the Board of Directors and a shareholder owning more than 20% of the Company’s outstanding stock, guaranteed approximately 38% of ~~this loan,~~the Term Loan, for aan annual fee of 2% of the personally guaranteed amount. J. Ward McConnell, Jr. passed away on May 31, 2021, and his shares are currently held in trust. The ~~$600,000 term loan~~USDA will require any shareholders owning 20% once the trust assets are distributed to guarantee a portion of the Term Loan. The initial guarantee fee will be amortized over the life of the Term Loan, and the annual fees and personally guaranteed amounts are expensed monthly.

On February 13, 2019, the Company opened a $4,000,000 revolving line of credit (the “2019 Line of Credit”) with Bank Midwest in connection with bonding obligations for the Company’s performance of a large modular laboratory construction project. Funds under the 2019 Line of Credit will be undisbursed to the Company and will be held by Bank Midwest in connection with an Irrevocable Letter of Credit issued by Bank Midwest for the project. The 2019 Line of Credit accrues interest at a floating rate per annum equal to 1.00% above the Wall Street Journal rate published in the money rates section of ~~5.000%,~~the Wall Street Journal. The interest rate floor is set at 4.25% per annum and the current interest rate is 4.75% per annum. The 2019 Line of Credit was most recently renewed on February 2, 2021. The 2019 Line of Credit is payable upon demand by Bank Midwest. ~~Monthly payments of~~If no earlier demand is made, the unpaid principal and accrued interest will be payable in one payment, due on February 13, 2022. As of May 31, 2021, the funds on the 2019 Line of Credit remain undisbursed and are ~~required.~~held by Bank Midwest. The Company expects to close the 2019 Line of Credit in the second half of fiscal 2021 as the Company’s bonding obligations are met.

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

In connection with the ~~revolving line~~2017 Line of ~~credit,~~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 ~~revolving~~ 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 ~~revolving line~~2017 Line of ~~credit,~~Credit, as set forth in Commercial Guaranties, each dated September 28, 2017. The 2019 Line of Credit is also secured by these existing security documents.

To further secure the l~~ine~~2017 Line of ~~credit,~~Credit, the Company ~~has~~ granted Bank Midwest a mortgage on its ~~West Union, Iowa~~Canton, Ohio property ~~and~~held by Ohio Metal Working Products/Art’s-Way Inc. ~~has granted Bank Midwest a~~The 2019 Line of Credit is also secured by the mortgage on ~~its property located in~~the Canton, ~~Ohio.~~Ohio property. The ~~$2,600,000 term loan~~Term Loan is secured by a mortgage on the Company’s Armstrong, Iowa and Monona, Iowa ~~properties, and the $600,000 term loan is secured by a mortgage on the Company’s Dubuque, Iowa property.~~properties. Each mortgage is governed by the terms of a separate Mortgage, dated September 28, 2017, and each property is also subject to a separate Assignment of Rents, dated September 28, 2017.

If the Company or its subsidiaries (as guarantors pursuant to the Commercial Guaranties) commits an event of default with respect to the promissory notes and fails or is unable to cure that default, Bank Midwest may immediately terminate its obligation, if any, to make additional loans to the Company and may accelerate the Company’s obligations under the promissory notes. Bank Midwest shall also have all other rights and remedies for default provided by the Uniform Commercial Code, as well as any other applicable law and the various loan agreements. In addition, in an event of default, Bank Midwest may foreclose on the mortgaged property.

Compliance with Bank Midwest ~~Loan Covenants~~

~~The terms of these loan agreements require the Company to maintain a minimum working capital ratio of 1.75, while maintaining a minimum of $5,100,000 of working capital.~~ covenants is measured annually on November 30. A maximum debt to worth ratio of 1 to 1 ~~will~~must be maintained, ~~as well,~~ with a minimum of 40% tangible balance sheet equity, with variations subject to mutual agreement. The Company is also required to maintain a minimum debt service coverage ratio of 1.25, with ata 0.10 tolerance. The Company ~~will provide audited financial statements within 120 days~~also must receive bank approval for purchases or sales of equipment over $100,000 annually and maintain reasonable salaries and owner compensation. The Company received the necessary approvals for purchases of equipment over $100,000 for the six months ended May 31, 2021. The Company was out of compliance with its debt service coverage ratio and the prior minimum working capital requirements covenants in place under the Bank Midwest loans as of November 30, 2020. Bank Midwest issued a waiver forgiving the noncompliance, and in turn waived the event of default. The next measurement date is November 30, 2021.

On January 12, 2021, Bank Midwest amended the Company’s working capital requirement of maintaining a minimum working capital ratio of 1.75, while also maintaining $5,100,000 of working capital. The new covenant requires the Company to maintain a working capital requirement of $4,000,000 and drops the requirement to maintain a minimum working capital ratio of 1.75. The $4,000,000 working capital level serves as a trigger point for Bank Midwest and the Company to continue discussion of capital raising strategies to support additional capital injection. This new covenant is measured monthly. As of February 28, 2021, the Company was out of compliance with the working capital covenant by $240,885. On March 22, 2021, Bank Midwest issued a letter to the Company allowing correction of the ~~fiscal year end.~~

~~Assets~~ ~~Available~~ ~~for Sale~~ ~~and Assets Held for Lease~~

~~Major components~~noncompliance by May 31, 2021. As of ~~assets available for sale~~ ~~(excluding assets of discontinued operations as discussed in Note 3 “Discontinued Operations”) are:~~

August 31, 2017

November 30, 2016

Ames, Iowa powder coat paint system
$ 70,000 $ 70,000
$ 70,000 $ 70,000

~~Due to reduced demand for~~ ~~reels produced by the Universal Harvester by Art’s Way subsidiary,~~May 31, 2021, the Company ~~has been able~~was out of compliance with the working capital requirement by $126,496, which triggered communication with Bank Midwest to ~~absorb~~evaluate the ~~production of reels~~Company’s strategy to get back into ~~its Armstrong, Iowa facility.~~compliance with the covenant. The Company ~~continues~~and Bank Midwest determined that the Company’s strategy to ~~hold~~utilize additional funds available under the ~~powder coat system previously used in its Ames, Iowa location as available for sale. During fiscal 2016,~~Economic Injury Disaster Loans (“EIDL”) was acceptable. On May 31, 2021, the Company ~~recognized an impairment~~had $1,050,000 of ~~$44,858 related~~Economic Injury Disaster Loans (“EIDL”) pending with the U.S. Small Business Administration (“SBA”), which, once received, are expected to ~~this asset based on recent offers and comparable sales information.~~put the Company back in compliance.

~~Major components of assets~~ ~~held for lease are:~~

August 31, 2017

November 30, 2016

West Union Facility
$ 1,124,715 $ -
Modular Buildings
108,225 -
$ 1,232,940 $ -

~~The Company currently leases more than half of the West Union facility to third parties for storage purposes.~~

~~The Company’s Modular Buildings segment enters into leasing arrangements with customers from time-to-time. A small leased facility was put into service in the third quarter of fiscal 2017.~~

~~10)~~

~~Recently Issued Accounting Pronouncements~~

~~Adopted Accounting~~ ~~Pronouncements~~

~~Going Concern~~SBA Economic Injury Disaster Loans

~~In August 2014,~~On June 18, 2020, and again on June 24, 2020, the ~~FASB issued ASU No. 2014-15, “~~Presentation of Financial Statements – Going Concern” which is authoritative guidance on management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and provide related footnote disclosures, codifiedCompany executed the standard loan documents required for securing loans offered by the SBA under its EIDL assistance program in ~~ASC 205-40,~~ ~~Going Concern~~~~. The guidance provides a definition~~light of the ~~term substantial doubt, requires an evaluation every reporting period including interim periods, provides principles~~impact of the COVID-19 pandemic on the Company’s business. Two loans were executed on June 18, 2020, with principal amounts of $150,000 each, with a third loan executed on June 24, 2020, with a principal amount of $150,000. Proceeds from these EIDLs are being used for ~~considering~~working capital purposes. Interest accrues at the ~~mitigating effect~~rate of ~~management’s plans, requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, requires an express statement~~3.75% per annum and ~~other disclosures when substantial doubt is not alleviated, and requires an assessment for a period of one year after~~will accrue from the date ~~that~~of inception. Installment payments, including principal and interest, are due monthly, twelve months from the ~~financial statements~~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 ~~issued (or available~~secured by a security interest on all of the Company’s assets. Each EIDL is governed by the terms of a separate Promissory Note, dated either June 18, 2020, or June 24, 2020, as applicable, entered into by the Company or the applicable subsidiary.

On March 11, 2021, the American Rescue Plan Act of 2021 was enacted, which extends the first due date for repayment of EIDLs made in 2020 to ~~be issued). ASU No. 2014-15 is effective for annual reporting periods ending after December 15, 2016.~~24 months from the date of the note. This act also increased the maximum loan amount from $150,000 to $500,000 per entity. The Company has ~~adopted this guidance~~requested increases up to the maximum of $500,000 for all three segments.

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

	May 31, 2021		November 30, 2020
Bank Midwest loan payable in monthly installments of $17,271 including interest at 5.00%, due October 1, 2037	$	2,305,595	$	2,350,593
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning June 18, 2022, due June 18, 2050		155,348		152,543
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning June 24, 2022, due June 24, 2050		155,255		152,450
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning June 18, 2022, due June 18, 2050		155,348		152,543
Total term debt	$	2,771,546	$	2,808,129
Less current portion of term debt		92,470		94,979
Term debt, excluding current portion	$	2,679,076	$	2,713,150

A summary of the minimum maturities of term debt follows for the ~~year~~years ending November 30, 2017, and it will apply to each interim and annual period thereafter. Its adoption has not had a material impact on the Company’s consolidated financial statements other than the increased disclosures.

~~Inventory~~

~~In July 2015, the FASB issued ASU 2015-11, “~~Inventory (Topic 330),” which requires inventory measured using any method other than last-in, first-out or the retail inventory method to be subsequently measured at the lower of cost or net realizable value, rather than the lower of cost or market. ASU No. 2015-11 is effective for fiscal years beginning after December 15, 2016, including interim periods within those years. The Company has adopted this guidance for the year ending November 30, 2017, including interim periods within that reporting period. The Company chose early adoption for this guidance, as its impact was expected not to be material, and it will allow the Company to focus more of its efforts on preparing for the adoption of more complex guidance. Its adoption has not had a material impact on the Company’s consolidated financial statements.

~~Income Taxes~~

In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740)”, to simplify the presentation of deferred income taxes. Under the new standard, both deferred tax liabilities and assets are required to be classified as noncurrent in a classified balance sheet. ASU No. 2015-17 is effective for fiscal years beginning after December 15, 2017 and interim periods within annual periods beginning after December 15, 2018. During the first quarter of fiscal 2017, the Company elected to prospectively adopt ASU 2015-17, thus reclassifying current deferred tax assets to noncurrent on the accompanying consolidated balance sheet. The prior reporting period was not retrospectively adjusted. The Company chose early adoption for this guidance, as its impact was expected not to be material, and it will allow the Company to focus more of its efforts on preparing for the adoption of more complex guidance. The adoption of this guidance had no impact on the Company’s consolidated statements of operations and comprehensive income.2021:

Year	Amount
2021	$	45,183
2022		99,867
2023		108,300
2024		113,460
2025		119,569
2026 and thereafter		2,285,167
	$	2,771,546

~~Accounting Pronouncements Not Yet Adopted~~

~~Revenue from Contracts with Customers~~

~~In May 2014, the FASB issued ASU No. 2014-09, “~~Revenue from Contracts with Customers” which supersedes the guidance in “Revenue Recognition (Topic 605)” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and is to be applied retrospectively, with early application not permitted. The Company is evaluating the new standard, and at this time believes that its Scientific segment will be impacted most significantly by this standard. The Company believes that this segment will need to work to revise its standard contracts with customers to more clearly define the rights and considerations transferred at the various milestones identified in the contracts. The Company believes that the other segments already have the necessary tools to evaluate their revenues in a manner consistent with the application of this standard, and will have the ability to meet the disclosure requirements using current systems. The Company continues to research and assess the implications of the adoption of this standard on its consolidated financial statements.

~~Leases~~

In February 2016, the FASB issued ASU 2016-02, “Leases (topic 842)”, which requires a lessee to recognize a right-of-use asset and a lease liability on its balance sheet for all leases with terms of twelve months or greater. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. The Company will adopt this guidance for the year ~~ending November 30, 2020 including interim periods within that reporting period. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.~~

11)

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses.

12)

Related Party Transactions

During the three and six months ended May 31, 2021, and May 31, 2020, 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 owned by the late J. Ward McConnell, Jr., the former Vice Chairman of the Company’s Board of Directors and father to Marc McConnell, the Chairman of the Company’s Board of Directors, who also serves as President of these companies. J. Ward McConnell, Jr., as a shareholder owning more than 20% of the Company’s outstanding stock, was required to guarantee a portion of the Company’s Term Loan in accordance with the USDA guarantee on the Company’s Term Loan. J. Ward McConnell, Jr. was paid a monthly fee for his guarantee. In the three and six months ended May 31, 2021, the Company recognized $7,992 and $12,661 of expense for transactions with related parties, respectively, compared to $5,314 and $9,902 for the three and six months ended May 31, 2020. As of May 31, 2021, accrued expenses contained a balance of $1,483 owed to a related party compared to $1,540 on May 31, 2020.

13)

Leases

The Company accounts for leases of modular buildings to certain customers as sales-type leases. These leases have terms of up to 36 months and are collateralized by a security interest in the related modular building. The lessee has a bargain purchase option available at the end of the lease term. A minimum lease receivable is recorded net of unearned interest income and profit on sale at the time the Company’s obligation to the lessee is complete. Profit related to the sale of the building is recorded upon fulfillment of the Company’s obligation to the lessee.

Modular buildings held for lease by the Modular Buildings segment are recorded at cost. Amortization of each modular building is calculated over the useful life of the building. Estimated useful life is three to five years. Lease revenue is accounted for on a straight-line basis over the term of the related lease agreement. Lease income for modular buildings is included in sales on the consolidated statements of operations.

The components related to sales-type leases on May 31, 2021, and November 30, 2020, are as follows:

	May 31, 2021		November 30, 2020
Minimum lease receivable, current	$	11,117	$	29,002
Unearned interest income, current		-		(650	)
Net investment in sales-type leases, current	$	11,117	$	28,352

There was no sales activity related to sales-type leases for the three and six months ended May 31, 2021, and May 31, 2020.

Future minimum lease receipts from sales-type leases are as follows:

Year Ending November 30,	Amount
2021	$	11,117
Total	$	11,117

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

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

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

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

	May 31, 2021		November 30, 2020
Operating lease right-of-use assets	$	53,983	$	27,879

Current portion of operating lease liabilities	$	12,539	$	9,537
Long-term portion of operating lease liabilities		41,444		18,342
Total operating lease liabilities	$	53,983	$	27,879

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

	May 31, 2021
Finance lease right-of-use assets (net of amortization)	$	7,392

Current portion of finance lease liabilities	$	1,296
Long-term portion of finance lease liabilities		6,111
Total finance lease liabilities	$	7,407

The Company included $53,983 of operating and $7,392 of finance lease right-of-use assets net of amortization in other assets on May 31, 2021, compared to $27,879 and $0, on November 30, 2020, respectively. Current portion of operating lease liabilities of $12,539 and $1,296 of finance lease liabilities were included in accrued expenses on May 31, 2021 compared to $9,537 and $0 on November 30, 2020, respectively. $41,444 of long-term operating lease liabilities and $6,111 of long-term finance lease liabilities were included in the long-term liability portion of the Condensed Consolidated Balance Sheets as of May 31, 2021, compared to $18,342 and $0, respectively, on November 30, 2020. The Company recorded $5,909 and $11,989 of operating lease costs in the three and six months ended May 31, 2021, respectively, which included variable costs tied to usage, compared to $5,481 and $13,632 for the three and six months ended May 31, 2020. The Company recorded $119 of amortization and $30 of interest expense in the three and six months ended May 31, 2021 compared to $0 for the same periods of fiscal 2021. The Company’s operating leases carry a weighted average lease term of 54 months and have a weighted average discount rate of 5.50%. The Company’s finance lease carries a lease term of 62 months and uses a discount rate of 4.75%.

Future maturities of operating lease liabilities are as follows:

Year Ending November 30,
2021	$	7,457
2022		14,914
2023		12,344
2024		11,162
2025		9,532
2026 and thereafter		4,766
Total lease payments		60,174
Less imputed interest		(6,191	)
Total operating lease liabilities	$	53,983

Future maturities of finance lease liabilities are as follows:

Year Ending November 30,
2021	$	810
2022		1,619
2023		1,619
2024		1,619
2025		1,619
2026 and thereafter		1,080
Total lease payments		8,367
Less imputed interest		(960	)
Total finance lease liabilities	$	7,407

14)

Equity Incentive Plan and ~~Sto~~ckStock Based Compensation

On ~~January 27, 2011,~~February 25, 2020, the Board of Directors of the Company (the “Board”) authorized and approved the ~~Art’s-Way~~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”)~~. The~~ and added an additional 500,000 shares to the number of shares reserved for issuance pursuant to equity awards. No further awards will be made under the 2011 Plan was approved by the stockholders on April 28, 2011. It replaced the Employee Stock Option Plan and the Directors’ Stock Option Plan (collectively, the “Prior Plans”), and no further stock options will be awarded under the Prior Plans.or other prior plans. Awards to directors and executive officers under the ~~2011~~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 ~~2011~~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 ~~of Directors~~ has approved a director compensation policy pursuant to which non-employee directors are automatically granted restricted stock awards of 1,000 shares of fully vested common stock annually or initially upon their election to the Board ~~which are~~and another 1,000 shares of fully ~~vested.~~vested common stock on the last business day of each fiscal quarter. During the ~~first nine~~six months ~~of fiscal 2017, 53,700~~ended May 31, 2020, restricted stock awards ~~have been~~of 88,500 shares were issued to various employees, directors, and consultants, which vest over the next three years, and ~~4,000~~ restricted stock awards ~~have been forfeited due~~of 15,000 shares were issued to ~~employee terminations.~~

~~Stock options granted prior~~directors as part of the director compensation policy, which vested immediately upon grant. In comparison, during the first six months of fiscal 2020, restricted stock awards of 128,750 shares were issued to ~~January 27, 2011 are governed by~~various employees, directors, and consultants, which vest over three years from the ~~applicable Prior Plan~~date of issuance, and restricted stock awards of 15,000 were issued to directors as part of the ~~forms of agreement adopted thereunder.~~director compensation policy.

~~Stock-bas~~edStock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant vesting period. The Company estimates the fair value of each stock-based option award on the measurement date using the Black-Scholes option valuation model which incorporates assumptions as to stock price volatility, the expected life of the options, risk-free interest rate, and dividend yield. Expected volatility is based on historical volatility of the Company’s stock and other factors. The Company uses historical option exercise and termination data to estimate the expected term the options are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is calculated using historical dividend amounts and the stock price at the option issuance date. No stock options were granted during the ~~three and nine~~six months ended ~~August~~May 31, ~~2017~~2021, or in the same respective ~~periods~~period of fiscal ~~2016.~~2020. The Company incurred a total of ~~$19,266~~$79,745 and ~~$92,225~~$141,799 of stock-based compensation expense for restricted stock awards during the three and ~~nine~~six months ended ~~August~~May 31, ~~2017,~~2021, respectively, compared to ~~$31,417~~$115,172 and ~~$70,846~~$152,752 of stock-based compensation expense for restricted stock awards for the same respective periods of fiscal ~~2016.~~2020. The Company repurchased 3,865 shares and 9,435 shares from employees in the form of treasury stock as consideration for payroll taxes paid on the employee’s behalf for the three and six months ended May 31, 2021, respectively, compared to 3,954 and 14,471 for the same periods in fiscal 2020. Stock compensation net of treasury shares repurchased for the six months ended May 31, 2021, was $111,328 compared to $126,216 for the same period in fiscal 2020.

~~12)~~15)

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. At ~~August~~On May 31, ~~2017,~~2021, and November 30, ~~2016,~~2020, the carrying amount approximated fair value for cash, accounts receivable, net investment in sales-type leases, accounts payable, notes payable to bank, 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 net investment in sales-type leases also approximates 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 ~~installment~~ term loans payable also ~~approximate~~approximates recorded value because the interest rates charged under the loan terms are not substantially different ~~than~~from current interest rates.

~~13)~~16)

Segment Information

~~There are~~The Company has three reportable segments: ~~agricultural products, modular~~ ~~buildings~~Agricultural Products, Modular Buildings and ~~tools.~~Tools. The ~~agricultural products~~Agricultural Products segment ~~fabricates~~manufactures and sells ~~farming products as well as related~~farm equipment and related replacement parts ~~for these products in~~under the ~~United States~~Art’s-Way Manufacturing label and ~~worldwide.~~private labels. The ~~modular buildings~~Modular Buildings segment manufactures and installs modular buildings for various uses, commonly animal containment and ~~various laboratory uses.~~research laboratories. The ~~tools~~Tools segment manufactures steel cutting tools and inserts.

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

Approximate financial information with respect to the ~~reportabl~~ereportable segments is as follows. ~~The tables below exclude income and balance sheet data from discontinued operations. See Note 3 “Discontinued Operations.”~~

Three Months Ended August 31, 2017

Agricultural
Products

Modular Buildings

Tools

Consolidated

Revenue from external customers
$ 5,065,000 $ 767,000 $ 718,000 $ 6,550,000
Income (loss) from operations
118,000 (37,000 ) 28,000 $ 109,000
Income (loss) before tax
123,000 (45,000 ) 15,000 $ 93,000
Total Assets
18,941,000 3,094,000 2,721,000 $ 24,756,000
Capital expenditures
61,000 117,000 - $ 178,000
Depreciation & Amortization
125,000 17,000 32,000 $ 174,000

	Three Months Ended August 31, 2016												Three Months Ended May 31, 2021
	Agricultural Products			Modular Buildings			Tools			Consolidated			Agricultural Products		Modular Buildings			Tools			Consolidated
Revenue from external customers	$	4,992,000		$	910,000		$	530,000		$	6,432,000		$	3,858,000	$	1,194,000		$	658,000		$	5,710,000
Income (loss) from operations		(116,000	)		(59,000	)		(42,000	)	$	(217,000	)	$	188,000	$	(21,000	)	$	(18,000	)	$	149,000
Income (loss) before tax		(91,000	)		(65,000	)		(68,000	)	$	(224,000	)	$	137,000	$	(28,000	)	$	(28,000	)	$	81,000
Total Assets		21,209,000			2,887,000			2,654,000		$	26,750,000		$	14,271,000	$	3,725,000		$	2,674,000		$	20,670,000
Capital expenditures		31,000			-			22,000		$	53,000		$	155,000	$	-		$	-		$	155,000
Depreciation & Amortization		117,000			15,000			32,000		$	164,000		$	87,000	$	27,000		$	33,000		$	147,000

	Nine Months Ended August 31, 2017												Three Months Ended May 31, 2020
	Agricultural Products			Modular Buildings			Tools			Consolidated			Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	11,595,000		$	2,043,000		$	2,022,000		$	15,660,000		$	3,071,000		$	1,799,000		$	576,000		$	5,446,000
Income (loss) from operations		(758,000	)		(209,000	)		3,000		$	(964,000	)	$	(722,000	)	$	(124,000	)	$	(79,000	)	$	(925,000	)
Income (loss) before tax		(743,000	)		(237,000	)		(30,000	)	$	(1,010,000	)	$	(784,000	)	$	(126,000	)	$	(87,000	)	$	(997,000	)
Total Assets		18,941,000			3,094,000			2,721,000		$	24,756,000		$	13,948,000		$	3,772,000		$	2,660,000		$	20,380,000
Capital expenditures		265,000			117,000			90,000		$	472,000		$	56,000		$	85,000		$	-		$	141,000
Depreciation & Amortization		372,000			46,000			95,000		$	513,000		$	127,000		$	71,000		$	33,000		$	231,000

Nine Months Ended August 31, 2016

Agricultural
Products

Modular Buildings

Tools

Consolidated

Revenue from external customers
$ 12,757,000 $ 3,102,000 $ 1,583,000 $ 17,442,000
Income (loss) from operations
36,000 154,000 (123,000 ) $ 67,000
Income (loss) before tax
24,000 140,000 (163,000 ) $ 1,000
Total Assets
21,209,000 2,887,000 2,654,000 $ 26,750,000
Capital expenditures
60,000 - 55,000 $ 115,000
Depreciation & Amortization
377,000 46,000 93,000 $ 516,000

	Six Months Ended May 31, 2021
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	7,357,000		$	2,485,000		$	1,269,000		$	11,111,000
Income (loss) from operations	$	(9,000	)	$	(187,000	)	$	(24,000	)	$	(220,000	)
Income (loss) before tax	$	(76,000	)	$	(199,000	)	$	(44,000	)	$	(319,000	)
Total Assets	$	14,271,000		$	3,725,000		$	2,674,000		$	20,670,000
Capital expenditures	$	310,000		$	9,000		$	-		$	319,000
Depreciation & Amortization	$	185,000		$	56,000		$	67,000		$	308,000

	Six Months Ended May 31, 2020
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	6,023,000		$	3,256,000		$	1,193,000		$	10,472,000
Income (loss) from operations	$	(1,156,000	)	$	(118,000	)	$	(120,000	)	$	(1,394,000	)
Income (loss) before tax	$	(1,282,000	)	$	(120,000	)	$	(139,000	)	$	(1,541,000	)
Total Assets	$	13,948,000		$	3,772,000		$	2,660,000		$	20,380,000
Capital expenditures	$	298,000		$	111,000		$	3,000		$	412,000
Depreciation & Amortization	$	254,000		$	139,000		$	66,000		$	459,000

*~~Consolidated~~The consolidated total in the tables is a sum of segment figures and may not tie to actual figures in the ~~table are comprised of the sum of the segments and may not agree to the total in the~~condensed consolidated financial statements due to rounding.

~~14)~~17)

~~Going Concern~~Subsequent Events

~~The Company~~’s consolidated financial statements are prepared using accounting principles generally accepted in the United States of America and applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. During fiscal 2017, the Company has incurred operating losses from continuing operations, which has depleted working capital.

~~Management has successfully implemented several strategies aimed at alleviating the Company~~’s working capital shortages for the duration of the decreased economic cycle. The Company has decreased its administrative expenses in the last several quarters, and has also successfully refinanced nearly all of its bank debt with longer amortizations and reduced required payments. Also, at this time, two of the Company’s real estate holdings are available for sale, one classified as discontinued operations assets, and one classified as held for lease, which, if sold, would decrease its bank borrowings and fund working capital for a time. Management believes these strategies will enable the Company to continue as a going concern.

~~15)~~

~~Subsequent Event~~

~~On September 28, 2017 the Company entered into a credit facility with Bank Midwest, which terminated the loan agreements with US Bank.~~ Under the new credit facility, monthly debt service amounts to Bank Midwest will be approximately $20,500, compared to $65,300 of monthly payments to US Bank under the previous credit facility. The Bank Midwest credit facility also provides for a line of credit of $5,000,000, compared to the $4,500,000 line of credit with US Bank. Details on the terms of the debt agreements are described more fully in Note 8. Management evaluated all other activity of the Company and concluded that no ~~additional~~ subsequent events have occurred that would require recognition in the condensed consolidated financial statements.

Item 2. ~~Management’s~~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 ~~Part I of~~ this ~~report~~Quarterly Report on Form 10-Q (this “report”) and the audited consolidated financial ~~statements~~statements and related notes thereto included in Part II, Item 8, “Financial Statements and ~~Management’s~~Supplementary Data,” as well as Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations, ~~contained in~~” of our Annual Report on Form 10-K for the fiscal year ended November 30, ~~2016.~~2020. Some of the statements in this report may ~~contain~~be forward-looking statements that reflect our current view on future events, future business, industry and other conditions, our future performance, and our plans and expectations for future operations and actions. In some cases you can identify forward-looking statements by the use of words such as “may,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or the negative of these terms or other similar expressions. Many of these forward-looking statements are located in this report under ~~“Item 2. Management’s~~Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations,” but they may appear in other sections as well. Forward-looking statements in this report generally relate to: (i) our ~~expectations regarding our plan to dispose of the assets of our Vessels segment; (ii) our~~ warranty costs and order backlog; ~~(iii)~~(ii) our beliefs regarding the sufficiency of working capital and cash ~~flows, and~~flows; (iii) our ~~continued ability~~expectation that we will continue to be able to renew or obtain financing on reasonable terms when necessary; (iv) the impact of recently issued accounting pronouncements; (v) our intentions and beliefs relating to our costs, business strategies, and future performance; (vi) our expected financial results; ~~and~~ (vii) our expectations concerning our primary capital and cash flow ~~needs.~~needs; and (viii) our expectations regarding the impact of COVID-19 on our business condition and results of operations.

You should read this report thoroughly with the understanding that our actual results may differ materially from those set forth in the ~~forward-looking~~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 ~~tightening~~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) ~~obstacles related to integration of acquired product lines and businesses; (iv) obstacles related to liquidation of product lines and segments; (v)~~ the effect of general economic conditions, including consumer and governmental spending, on the demand for our products and the cost of our supplies and materials; ~~(vi)~~(iv) the ongoing COVID-19 pandemic; (v) fluctuations in seasonal demand and our production cycle; ~~(vii) our ability to continue as a going concern;~~ and ~~(viii)~~(vi) other factors described from time to time in our ~~reports to the SEC.~~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 ~~the~~our financial statements as of ~~August~~May 31, ~~2017 have remained~~2021 remain unchanged from November 30, ~~2016, with the exception of the accounting pronouncements adopted as discussed in Note 10 of the financial statements.~~2020. Disclosure of these critical accounting policies is incorporated by reference from Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” inof our Annual Report on Form 10-K for the fiscal year ended November 30, ~~2016.~~2020.

Results of Operations ~~– Continuing Operations~~

Net Sales and Cost of Sales

Our consolidated corporate sales ~~for continuing operations~~ for the three- and ~~nine-month~~six-month periods ended ~~August~~May 31, ~~2017~~2021 were ~~$6,550,000~~$5,710,000 and ~~$15,660,000~~$11,111,000, respectively, compared to ~~$6,431,000~~$5,446,000 and ~~$17,442,000~~$10,472,000 during the same respective periods in ~~2016,~~fiscal 2020, a ~~$119,000,~~$264,000, or ~~1.9%~~4.8%, increase for the ~~third fiscal quarter~~three months and a ~~$1,782,000,~~$639,000, or ~~10.2%~~6.1%, ~~decrease~~increase for the ~~nine-month period.~~six months. The ~~decrease in year-to-date revenue is primarily~~three and six month increases are due to ~~the decreased~~increased demand ~~for~~in our agricultural products and tools segments. We saw a decrease in sales in our modular ~~buildings.~~buildings segment as we near completion on a large project that generated significant revenue in fiscal 2019 and 2020. Consolidated gross margin for the three-month period ended ~~August~~May 31, ~~2017~~2021 was ~~22.1%~~30.2% compared to ~~19.3% in~~18.3% for the same period in fiscal ~~2016.~~2020. Consolidated gross margin for the six-month period ended May 31, 2021 was 24.9% compared to 18.8% for the same period in fiscal 2020. The increased margin is due largely to our agricultural products segment, as discussed further below.

Our second quarter sales in our agricultural products segment were $3,858,000 compared to $3,071,000 during the same period of fiscal 2020, an increase of $787,000, or 25.6%. Our year-to-date agricultural product sales were $7,357,000 compared to $6,023,000 during the same period in fiscal 2020, an increase of $1,334,000, or 22.1%. We attribute the large increase in revenue to a strengthening agricultural economy that is producing five to ten year highs in commodity and livestock prices along with government assistance programs that provided farmers with much needed government assistance during the COVID-19 pandemic. We saw a 65% increase in our grinder mixer sales year on year and are showing a 25% increase in manure spreader sales year on year. Our backlog continues to be strong heading into the third quarter of fiscal 2021 and we anticipate improved results for the second half of fiscal 2021. However, we have seen lead times increase on our raw materials and components as suppliers in our supply chain struggle to keep up with demand. Fulfilment of our strong backlog will be contingent on whether our suppliers are able to deliver or not. We have seen rising costs for virtually all raw material and components that go in our products and in turn have increased prices twice in fiscal 2021 to offset these rising costs. Gross margin for our agricultural products segment for the three-month period ended May 31, 2021 was 36.4% compared to 23.0% for the same period in fiscal 2020. Gross margin for our agricultural products segment for the six-month period ended May 31, 2021 was 31.1% compared to 21.2% for the same period in fiscal 2020. The increased gross margin for the ~~third~~ quarter ~~was largely~~and year is due to ~~Metals. Consolidated gross~~price increases enacted to increase margin ~~for the nine-month period ended August 31, 2017 was 21.5%~~on our products in order to cover rising material costs and increased shop efficiency from continuous improvement projects.

Our second quarter sales in our modular buildings segment were $1,194,000 compared to ~~25.0%~~$1,799,000 for the same period in fiscal ~~2016. This decreased gross margin is largely attributable to Manufacturing.~~

~~Our~~ ~~third quarter sales at Manufacturing were $5,065,000 compared to $4,992,000 during the same period~~2020, a decrease of ~~2016, an increase of $73,000,~~$605,000, or ~~1.5%~~33.6%. Our year-to-date sales ~~at Manufacturing~~in our modular buildings segment were ~~$11,595,000~~$2,485,000 compared to ~~$12,757,000 during~~$3,256,000 for the same period ~~of 2016,~~in fiscal 2020, a decrease of ~~$1,162,000,~~$771,000, or ~~9.1%~~23.7%. The decrease in revenue ~~decrease~~ is due to ~~decreased demand across all~~completion of ~~our agricultural products, most specifically during the first two quarters of fiscal 2017. Also, during~~a large construction contract in the second quarter of fiscal ~~2017~~2021 that was actively being worked on in fiscal 2020. The revenue generated from that project was larger than we ~~began full production~~are accustomed to in a typical year. We have been quoting a substantial number of buildings and believe the market is economically returning to normal. We may also experience a ~~new product, a commercial forage box. The prototype and subsequent production~~short period of this product took longer than expected and delayed the delivery of a portion of these orders until the third quarter of fiscal 2017. The gross margin of Manufacturing for the three-month period ended August 31, 2017 was 20.9% compared to 19.0% for the same period in 2016. The gross margin of Manufacturing for the nine-month period ended August 31, 2017 was 20.2% compared to 24.9% for the same period in 2016. Our slightly increased gross margin year-to-date was largely due to our management of indirect costs in the production process and a more efficient usage of inventory. These increases are dampened by the inefficiencies in production of sugar beet equipment and the newly developed commercial forage box.

~~Our~~ third quarter sales at Scientific were $767,000 compared to $910,000 for the same period in 2016, a decrease of $143,000, or 15.7%. Our year-to-date sales at Scientific were $2,043,000 compared to $3,102,000 for the same period in 2016, a decrease of $1,059,000, or 34.1%. Our decrease in revenue is largely due to decreases in our sales of our agricultural buildings.heightened demand. Gross margin for the three- and ~~nine-month~~six-month periods ended ~~August~~May 31, ~~2017~~2021 was ~~21.4%~~15.7% and ~~18.5%~~9.1%, respectively, compared to ~~20.0%~~8.9% and ~~26.0%~~12.4% for the same respective periods in ~~2016. We have been experiencing some overruns on our~~ fiscal ~~2017 projects~~2020. The changes in gross margin are due to completion of the large construction project that ~~are~~ negatively ~~affecting our~~affected gross ~~margins on a year-to-date basis.~~margin. Our expectation is that gross margin will improve going forward.

~~Metals~~

Our tools segment had sales of ~~$718,000~~$658,000 and ~~$2,022,000~~$1,269,000 during the three- and ~~nine-month~~six-month periods ended ~~August~~May 31, ~~2017~~2021, respectively, compared to ~~$530,000~~$576,000 and ~~$1,583,000~~$1,193,000 for the same respective periods in ~~2016,~~fiscal 2020, a ~~35.5%~~14.2% increase and ~~27.7%~~a 6.4% increase, respectively. The increase is due to an increase in sales volume from our OEM customer of 77% and 117% for the ~~improvement~~three and six months ended May 31, 2021, respectively, compared to the same period of 2020. Sales from our other customers and industries (mainly oil and gas) have not fully recovered and are down 18% and 17% for the three and six months ended May 31, 2021, respectively, compared to the same periods of 2020. Oil prices have risen in the ~~energy industry and the additional efforts~~second quarter of ~~our increased sales staff.~~fiscal 2021, but to this point have had little effect on demand. Gross margin was ~~30.9%~~19.9% and ~~32.1%~~19.9% for the three- and ~~nine-month~~six-month periods ended ~~August~~May 31, ~~2017~~2021, respectively, compared to ~~21.1%~~20.8% and ~~23.1%~~22.7% for the same respective periods ofin fiscal ~~2016.~~2020. Our ~~increased~~ gross margin ~~was largely~~has decreased slightly year on year because of inefficiencies in labor due to ~~higher revenues with more variable margin to absorb fixed costs, but was slightly offset by increases in our health insurance expenses.~~the introduction of new products for an OEM customer.

Expenses

Our ~~third fiscal~~second quarter consolidated selling expenses were ~~$433,000~~$544,000 compared to ~~$456,000 for the same period in 2016. Our year-to-date selling expenses were $ 1,401,000 in fiscal 2017 compared to $1,353,000~~$401,000 for the same period in fiscal ~~2016.~~2020. Our year-to-date selling expenses were $1,017,000 in fiscal 2021 compared to $856,000 for the same period in fiscal 2020. The increased selling expenses are due to approximately $130,000 spent on rebranding efforts for our agricultural products segment completed by a third party consulting firm. The rebranding effort includes updated color schemes on products, a new-age logo, new tag lines and promotional product videos that we feel will help farmers associate us with a hardworking, “get work done” company. We also added a product manager at the beginning of fiscal 2021 to help us with new product development and to improve existing products, which is contributing to the increase in selling expenses year to date is due to increased salary expense compared to the prior year period, as we have increased our sales force in Metals and Manufacturing, which management believes will have a positive impact as this year progresses. This increase is offset somewhat by having a more targeted trade show and advertising presence, which has decreased our total advertising expenses.expense. Selling expenses as a percentage of sales were ~~6.6%~~9.5% and ~~8.9%~~9.2% for the three- and ~~nine-month~~six-month periods ended ~~August~~May 31, ~~2017~~2021, respectively, compared to ~~7.1%~~7.4% and ~~7.8%~~8.2% for the same respective periods in ~~2016.~~fiscal 2020.

Consolidated engineering expenses were ~~$108,000~~$122,000 and ~~$373,000~~$244,000 for the three- and ~~nine-month~~six-month periods ended ~~August~~May 31, ~~2017~~2021, respectively, compared to ~~$124,000~~$123,000 and ~~$315,000~~$232,000 for the same respective periods in ~~2016.~~ fiscal 2020. The ~~year-to-date increases~~increase in engineering expenses ~~are a result of management’s decision~~for the six months ended May 31, 2021 was due to offer new products into the market, which have been well-received at recent trade shows. During the third quarter of fiscal 2017, in order to meet the seasonal deadlines of our newly introduced products, some of the additional engineering resources were temporarily allocated to the production of new products, and were then classified as costs of goods sold.annual wage increases. Engineering expenses as a percentage of sales were ~~1.6%~~2.1% and ~~2.4%~~2.2% for the three- and ~~nine-month~~six-month periods ended ~~August~~May 31, ~~2017~~2021, respectively, compared to ~~1.9%~~2.3% and ~~1.8%~~2.2% for the same respective periods in ~~2016.~~fiscal 2020.

Consolidated administrative expenses for the three- and ~~nine-month~~six-month periods ended ~~August~~May 31, ~~2017~~2021 were ~~$795,000~~$907,000 and ~~$2,561,000~~$1,724,000, respectively, compared to ~~$879,000~~$1,396,000 and ~~$2,618,000~~$2,277,000 for the same respective periods in ~~2016. These decreases are largely due~~fiscal 2020. The decrease in administrative expenses is related to ~~staff reductions, but are somewhat offset by the vesting of stock-based compensation issued~~one-time expenses incurred in fiscal ~~2016~~year 2020 to navigate the COVID-19 pandemic including increased wages as an incentive for shop employees to remain at work, expenses related to the transition of a new CEO and ~~2017.~~supply chain manager, implementation costs for an OEM customer in our tools segment, and additional bonus expense for operational improvements. Administrative expenses as a percentage of sales were ~~12.1%~~15.9% and ~~16.4%~~15.5% for the three- and ~~nine-month~~six-month periods ended ~~August~~May 31, ~~2017~~2021, respectively, compared to ~~13.7%~~25.6% and ~~15.0% for the same periods in 2016.~~

~~Income~~ ~~from Continuing Operations~~

~~Consolidated net~~ income from continuing operations was $42,000 for the three-month and net loss of $(721,000) for the nine-month periods ended August 31, 2017 compared to net loss of $(150,000) and net income of $1,00021.7% for the same respective periods in ~~2016. The increased~~fiscal 2020.

Net Income (Loss)

Consolidated net income ~~from continuing operations~~was $64,000 for the ~~third quarter was largely due~~three-month period ended May 31, 2021, compared to ~~the increased gross margins and administrative cost cutting measures. The decreased revenues and depressed gross margins were the major factors in the decreased income~~net loss of $(802,000) for ~~the nine months ended August 31, 2017 compared to~~ the same period in fiscal ~~2016.~~2020. Our consolidated net loss for the six months ended May 31, 2021, was $(251,000) compared to $(1,239,000) in the same period in fiscal 2020. We are reporting vast improvement on our bottom line year on year due to many factors. First and foremost, the overall health of the agricultural economy has brought some stability to our primary business segment. We are continuing to strive for operational improvement and have seen the benefits through increased labor efficiency and reduced manufacturing costs. Fiscal 2020 brought many administrative expenses that were not repeated in fiscal 2021 as we battled a global pandemic and transitioned two long-time members of management. Our business is better positioned to succeed in times of economic boom than we were five years ago. We will continue to push for operational excellence as we face the challenges of an ever changing economy.

Order Backlog

The consolidated order backlog net of discounts ~~for continuing operations~~ as of ~~October 4, 2017~~July 6, 2021, was ~~$1,958,208~~$7,531,000 compared to ~~$1,163,283~~$5,383,000 as of ~~October 4, 2016.~~July 6, 2020, an increase of $2,148,000 or 40%. The agricultural products segment order backlog was ~~$1,390,054~~$6,209,000 as of ~~October 4, 2017~~July 6, 2021, compared to ~~$668,574~~$1,666,000 in fiscal ~~2016.~~2020 an increase of $4,543,0000 or 273%. It has been five years or more since we have seen backlogs this strong during this time of year. We expect this pent up demand from years of agricultural economic struggle to continue into 2022 and believe we are positioned well to take advantage of the ~~increase in backlog can be attributed to our new pricing programs, and the successful launch of new products.~~improved economic conditions. The backlog for the modular buildings segment was ~~$455,583~~$987,000 as of ~~October 4, 2017,~~July 6, 2021, compared to ~~$449,477~~$3,553,000 in fiscal ~~2016.~~2020. While our backlog is down $2,566,000 or 72% in this segment, the quality of revenue in backlog is expected to be improved as we finished up a large project that had a very low profit margin. If we were to exclude this project’s revenue from our 2020 backlog numbers, our backlog is actually $544,000 higher, or 123% higher in fiscal 2021. The backlog for the tools segment was ~~$112,571~~$336,000 as of ~~October 4, 2017,~~July 6, 2021, compared to ~~$45,232~~$163,000 in fiscal ~~2016.~~2020. The increase in backlog for our tools segment is largely due to an OEM customer that has strengthened our business. The oil and gas industry business we were accustomed to has not yet returned to pre-pandemic levels. Recovery in this industry would be very good for our business. 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.

~~Results~~Potential Impact of ~~Operations~~ ~~– Discontinued Operations~~COVID-19

~~During our third~~The COVID-19 pandemic did impact financial results in the second quarter of fiscal ~~2016~~,2020 and the hangover of the global pandemic is starting to affect our operations in fiscal 2021. From March 23, 2020 until May 18, 2020, the majority of our office staff in all three segments worked remotely with the exception of key operations support. At the height of the initial outbreak our workforce was down approximately 17% due to self-quarantine. By the end of May 2020 our entire workforce had returned, and operations have continued as normal with additional safety precautions in place. As COVID-19 cases began to rise in November 2020, we ~~made~~allowed employees that could perform their job functions remotely do so at their discretion. At the ~~decision~~beginning of April 2021, we brought all remote employees back to ~~exit~~ the ~~pressurized vessels industry and~~office after leading a voluntary sitewide vaccination effort. Approximately 70% of our employees are currently ~~working~~vaccinated while close to ~~liquidate~~95% of our employees have either received the ~~assets. We~~vaccine or had previously contracted COVID-19. At the end of April 2021, we lifted our mask mandates for our operations and have resumed operations normally but are still asking employees to self-report any symptoms.

In our Agricultural Products segment, we did not experience any order cancellations; however, calls for new whole goods slowed significantly in the second quarter of fiscal 2020 and many dealers held off on the shipping or pickup of their completed units. Our sales levels were comparatively steady to the last few years in the third and fourth quarters of fiscal 2020 and we ultimately ended the year down 3.1% on sales. We had a very successful early order program to start 2021 which left us with backlogs higher than we have ~~any~~seen in the last five years. We attribute the large increase in backlog to stimulus payments that farmers received in 2020 along with conservative spending by farmers in 2020. This conservatism allowed farmers to retire debt in 2020 and increase spending in 2021. Our sales are up approximately 22% year to date in fiscal 2021 and we continue to see strong demand for our products. Our supply chain is currently struggling to keep up as many companies struggle to find people willing to work. We have been fortunate to be able to retain and hire a few positions as needed but believe the hangover from the pandemic is going to slow down our production in the months ahead as we wait for components.

Our Modular Buildings segment started fiscal 2020 with a more diverse backlog than we had at the beginning of fiscal 2019; however, we had some setbacks on site work as subcontractors were forced to quarantine after testing positive for COVID-19. Our workers were hesitant to travel during the ~~three~~pandemic and, ~~nine months ended August 31, 2017 compared~~as a result, we had some challenges completing site work in the third and fourth quarters of fiscal 2020. Because of COVID-19, many companies were also hesitant to ~~sales of $358,000~~enter into long-term contracts in fiscal 2020. As a result, our modular building rental fleet remained largely unused in fiscal 2020, which is evidenced by our decrease in lease revenue. Our quoting activity has picked up significantly in 2021 for both agricultural and ~~$1,481,000~~research modular buildings and we believe there will be significant opportunity for this segment in 2021 as companies start spending again.

In our Tools segment, oil prices dropped significantly at the ~~same respective periods in 2016. At this time, we are working to dispose~~start of the ~~remaining assets, primarily~~pandemic, which caused our sales to drop significantly in the ~~real estate. During the first nine months~~second quarter of fiscal ~~2017,~~2020. The diversification of our ~~holding costs for this property were somewhat offset by~~business with our new OEM customer helped us get through the oil and gas industry lows during that time; however, since oil and gas prices have not yet reached their pre-pandemic levels, we have not seen our sales ~~of scrap material generated~~levels from these customers return. We are optimistic that we have passed the low point in our ~~clean-up process, resulting~~Tools segment and expect improved sales in fiscal 2021.

While our sales were affected in fiscal 2020 by the COVID-19 pandemic, government programs including the Paycheck Protection Program and Economic Injury Disaster Loan program helped protect our liquidity that may have otherwise been materially impacted. At the start of 2021, economic conditions improved in all three segments. In turn, we have seen rises in commodity prices (steel and lumber) driven by the current high demand for these products. In addition, our supplier lead times have increased providing new challenges in fulfilling our large backlog. Travel restrictions and border closures have not had a ~~pre-tax loss~~major impact on ~~discontinued~~our ability to operate and achieve business goals. While we did minimize our travel in 2020 our operations were not materially affected by the inability to travel. Many trade shows shifted to online and some canceled altogether, however, our sales volumes were not significantly affected by the cancellation of ~~$49,000.~~these shows. As vaccinations continue to occur in 2021, we expect travel and trade show participation to pick up. We believe the worst of the economic hardship caused by COVID-19 has passed for us. We have built and improved our business over the last few years to help us better weather any economic storms that come our way.

Liquidity and Capital Resources

Our primary ~~sources~~source of f~~unds~~funds for the ~~three and nine~~six months ended ~~August~~May 31, ~~2017 were funds received for~~2021 was cash provided by financing activities, mainly the use of our line of credit. We did also have a successful early order program that provided cash in the form of customer deposits in the first quarter of fiscal 2021. Our primary use of cash was related to increasing inventory levels. With uncertainty on component availability, prolonged lead times and ~~borrowings~~rising prices, we have been bringing in inventory far earlier than previous years, which is consuming the availability on our line of credit. ~~Our primary uses of cash were costs of operation, purchases of equipment related~~We are doing all we can to ~~our manufacturing of new products, and payments on our term debt.~~ensure we meet customer delivery dates. We expect our primary capital needs for the remainder of ~~the~~ fiscal ~~year~~2021 to relate to operating costs, primarily production costs, fulfillment of ~~operation, including production.~~customer deposits, and the retirement of debt. We expect to convert $1,050,000 of current debt to long-term debt in the third quarter of fiscal 2021 as our EIDL loan modifications are processed with the SBA and also expect our line of credit to decrease as we turn through inventory in the third and fourth fiscal quarters.

We ~~had~~have a $5,000,000 revolving line of credit with ~~U.S.~~ Bank ~~which, per the Third Loan Modification has an availability of $4,500,000, and which,~~Midwest that, as of ~~August~~May 31, ~~2017,~~2021, had an outstanding principal balance of ~~$3,734,114. As amended by the Fourth Loan Modification, the~~$4,088,530. This line of credit ~~matured~~is scheduled to mature on September 25, 2017. In addition, as amended by the Fourth Loan Modification, all of our five outstanding term loans with U.S. Bank matured in September of 2017. For additional information about our financing activities, please refer to Note 10 to the audited consolidated financial statements and to the discussion entitled “Liquidity and Capital Resources,” each contained in our Annual Report on Form 10-K for the fiscal year ended NovemberMarch 30, ~~2016, and Note 8 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report.~~2022.

We believe ~~that~~ our ~~cash flows from operations and our new~~current financing arrangements ~~with Bank Midwest~~ will provide sufficient cash to finance operations and pay debt when due during the next twelve months. This new credit facility provides longer amortization on our term loans, and greater availability on our line of credit. We are also working to liquidate two of our real estate holdings to provide additional working capital and to pay down some debt. We expect to continue to ~~rely on cash from~~be able to procure financing ~~activities to supplement our cash flows from operations in order to meet our liquidity and capital expenditure needs in the near future.~~ upon reasonable terms.

Off Balance Sheet Arrangements

None.

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~~.Procedures.

Evaluation of Disclosure Controls and Procedures

The ~~person~~spersons serving as our principal executive officer and principal financial officer have evaluated the effectiveness of our disclosure controls and procedures, as defined in ~~Exchange Act~~ 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, 2021. Our management has concluded that the consolidated financial statements included in this report present fairly, in all material respects, our financial position, results of operations and ~~provide reasonable assurance that information required to be disclosed by us~~cash flows for the periods presented in conformity with accounting principles generally accepted in the periodic and current reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the periods specified by the Securities and Exchange Commission’s rules and forms.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.

~~None.~~The following table presents the information with respect to purchases made by us of our common stock during the second quarter of fiscal 2021:

	Total Number of Shares Purchased ⁽¹⁾		Average Price Paid per Share		Total Number of Shares Purchased as part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs
March 1 to March 31, 2021		3,865	$	3.15		N/A		N/A
April 1 to April 30, 2021		-	$	-		N/A		N/A
May 1 to May 31, 2021		-	$	-		N/A		N/A
Total		3,865	$	3.15

⁽¹⁾ Reflects shares withheld pursuant to the terms of restricted stock awards under our 2020 Plan to offset tax withholding obligations that occur upon vesting and release of shares. The value of the shares withheld is the closing price of our common stock on the date the relevant transaction occurs.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not ~~applicable~~.applicable.

Item 5.Other Information.

None.

Item 6. ~~Exhibits~~.Exhibits.

~~See “~~Exhibit ~~Index” on page 23 of this report.~~ No.	Description
31.1	Certificate of Chief Executive Officer pursuant to 17 CFR 13a-14(a) – filed herewith.
31.2	Certificate of Chief Financial Officer pursuant to 17 CFR 13a-14(a) – filed herewith.
32.1	Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 - filed herewith.
32.2	Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 - filed herewith.
101	The following materials from this report, formatted in XBRL (Extensible Business Reporting Language) are filed herewith: (i) condensed consolidated balance sheets, (ii) condensed consolidated statement of operations, (iii) condensed consolidated statements of cash flows, and (iv) the notes to the condensed consolidated financial statements.

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: October 6, 2017~~		~~By:/s/Carrie~~ L.~~Gunnerson~~
		~~Carrie L.~~ ~~Gunnerson~~
		~~President~~ ~~and Chief Executive Officer~~

Date: ~~October 6, 2017~~July 12, 2021	By: /s/ David A. King
	~~By:~~ ~~/s/ Amber~~ J. ~~Murra~~David A. King
	President and Chief Executive Officer

~~Amber~~ ~~J. Murra~~Date: July 12, 2021	By: /s/ Michael W. Woods
	Michael W. Woods
	Chief Financial Officer

~~Art’s-Way Manufacturing Co., Inc.~~

~~Exhibit Index~~

~~Form 10-Q for the Quarterly Period Ended August 31, 2017~~

~~Exhibit~~ ~~No.~~	~~Description~~
~~10.1~~	~~Forbearance and Fourth Loan Modification Agreement dated August 10, 2017~~ ~~– incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed August 16, 2017.~~
~~10.2~~	~~Promissory Note, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 29, 2017.~~
~~10.3~~	~~Promissory Note~~, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed September 29, 2017.
~~10.4~~	~~Promissory Note, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed September 29, 2017.~~
~~10.5~~	~~Commercial Guaranty, by Ohio Metal Working Products/Art’s-Way Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed September 29, 2017.~~
~~10.6~~	~~Commercial Guaranty, by Art’s-Way Scientific Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed September 29, 2017.~~
~~10.7~~	~~Commercial Security Agreement, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed September 29, 2017.~~
~~10.8~~	~~Commercial Security Agreement, between Bank Midwest and Ohio Metal Working Products/Art’s-Way Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed September 29, 2017.~~
~~10.9~~	~~Commercial Security Agreement, between Bank Midwest and Art’s-Way Scientific Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed September 29, 2017.~~
~~10.10~~	~~Mortgage (800 Highway 150 South, West Union, IA 52175), by Art’s-Way Manufacturing Co., Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed September 29, 2017.~~
~~10.11~~	~~Open-End Mortgage (3620 Progress Street ND, Canton, OH 44705), by Ohio Metal Working Products/Art’s-Way Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed September 29, 2017.~~
~~10.12~~	~~Mortgage (556 Highway 9 and 203 West Oak Street, Armstrong & Monona, Iowa, 50514/55215), by Art’s-Way Manufacturing Co., Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed September 29, 2017.~~
~~10.13~~	~~Mortgage (7010 Chavenelle Rd, Dubuque, IA 52002) , by Art’s-Way Manufacturing Co., Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed September 29, 2017.~~
~~10.14~~	~~Assignment of Rents (3620 Progress Street ND, Canton, OH 44705), by Ohio Metal Working Products/Art’s-Way Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed September 29, 2017.~~
~~10.15~~	~~Assignment of Rents (800 Highway 150 South, West Union, IA 52175) by Art’s-Way Manufacturing Co., Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K filed September 29, 2017.~~
~~10.16~~	~~Assignment of Rents (556 Highway 9 and 203 West Oak Street, Armstrong & Monona, Iowa, 50514/55215), by Art’s-Way Manufacturing Co., Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.15 to the Company’s Current Report on Form 8-K filed September 29, 2017.~~

~~10.17~~	~~Assignment of Rents (7010 Chavenelle Rd, Dubuque, IA 52002) , by Art’s-Way Manufacturing Co., Inc., dated September 28, 2017 – incorporated by reference to Exhibit 10.16 to the Company’s Current Report on Form 8-K filed September 29, 2017.~~
~~31.1~~	~~Certificate of Chief Executive Officer pursuant to 17 CFR 13a-14(a)~~ ~~– filed herewith.~~
~~31.2~~	~~Certificate of Chief Financial Officer pursuant to 17 CFR 13a-14(a)~~ ~~– filed herewith.~~
~~32.1~~	~~Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350~~ ~~– filed herewith.~~
~~32.2~~	~~Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350~~ ~~– filed herewith.~~
~~101~~	The following materials from this report, formatted in XBRL (Extensible Business Reporting Language) are filed herewith: (i) condensed consolidated balance sheets, (ii) condensed consolidated statement of operations, (iii) condensed consolidated statements of cash flows, and (iv) the notes to the condensed consolidated financial statements.

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

Large accelerated filer ~~[ ]~~ ☐	Accelerated filer ~~[ ]~~☐
Non-accelerated filer ~~[ ]~~☒	Smaller reporting company ~~[x]~~☒
~~(Do not check if a smaller reporting company)~~
Emerging growth company ~~[ ]~~	☐

	(Unaudited)
	August 31, 2017			November 30, 2016
Assets
Current assets:
Cash	$	393,276		$	1,063,716
Accounts receivable-customers, net of allowance for doubtful accounts of $36,642 and $22,746 in 2017 and 2016, respectively		2,416,119			1,420,051
Inventories, net		13,180,464			13,529,352
Deferred income taxes		-			1,066,740
Cost and profit in excess of billings		9,867			108,349
Income taxes receivable		-			265,924
Assets of discontinued operations		22,034			9,700
Other current assets		315,064			158,087
Total current assets		16,336,824			17,621,919
Property, plant, and equipment, net		6,076,275			7,387,187
Assets held for lease, net		1,232,940			-
Assets held for sale, net		70,000			70,000
Goodwill		375,000			375,000
Other assets of discontinued operations		1,714,198			1,745,528
Deferred income taxes		649,054			-
Other assets		37,487			42,956
Total assets	$	26,491,778		$	27,242,590
Liabilities and Stockholders’ Equity
Current liabilities:
Line of credit	$	3,734,114		$	3,284,114
Current portion of long-term debt		2,374,665			1,807,937
Accounts payable		1,340,209			469,481
Customer deposits		124,225			289,195
Billings in Excess of Cost and Profit		88,800			4,297
Accrued expenses		1,033,694			1,019,056
Liabilites of discontinued operations		656,058			182,426
Income taxes payable		3,100			-
Total current liabilities		9,354,865			7,056,506
Long-term liabilities
Deferred taxes		-			737,519
Long-term liabilities of discontinued operations		-			585,168
Long-term debt, excluding current portion		268,805			1,387,118
Total liabilities		9,623,670			9,766,311
Commitments and Contingencies (Notes 7 and 8)
Stockholders’ equity:
Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares in 2017 and 2016; issued 0 shares in 2017 and 2016.		-			-
Common stock – $0.01 par value. Authorized 9,500,000 shares in 2017 and 2016; issued 4,158,752 in 2017 and 4,109,052 in 2016		41,587			41,091
Additional paid-in capital		2,838,238			2,746,509
Retained earnings		14,236,529			14,990,911
Accumulated other comprehensive income		(241,821	)		(302,232	)
Treasury stock, at cost (1,838 in 2017 and 0 in 2016 shares)		(6,425	)		-
Total stockholders’ equity		16,868,108			17,476,279
Total liabilities and stockholders’ equity	$	26,491,778		$	27,242,590

	Three Months Ended						Six Months Ended
	May 31, 2021			May 31, 2020			May 31, 2021			May 31, 2020
Sales	$	5,710,228		$	5,445,732		$	11,110,800		$	10,471,656
Cost of goods sold		3,988,170			4,451,016			8,346,063			8,499,779
Gross profit		1,722,058			994,716			2,764,737			1,971,877
Expenses:
Engineering		122,127			122,593			243,518			232,445
Selling		543,958			401,224			1,016,933			856,908
General and administrative		907,192			1,395,515			1,724,028			2,276,837
Total expenses		1,573,277			1,919,332			2,984,479			3,366,190
Income (Loss) from operations		148,781			(924,616	)		(219,742	)		(1,394,313	)
Other income (expense):
Interest expense		(74,787	)		(77,246	)		(133,471	)		(160,520	)
Other		6,984			4,698			34,642			13,897
Total other income (expense)		(67,803	)		(72,548	)		(98,829	)		(146,623	)
Income (Loss) before income taxes		80,978			(997,164	)		(318,571	)		(1,540,936	)
Income tax expense (benefit)		16,888			(195,444	)		(67,423	)		(302,023	)
Net Income (Loss)		64,090			(801,720	)		(251,148	)		(1,238,913	)

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

Balance, November 30, 2019		4,321,087	$	43,211	$	3,250,087	$	8,547,342			18,842	$	(47,058	)	$	11,793,582
Stock based compensation		143,750		1,437		151,315		-			14,471		(26,536	)		126,216
Net (loss)		-		-		-		(1,238,913	)		-		-			(1,238,913	)
Balance, May 31, 2020		4,464,837		44,648		3,401,402		7,308,429			33,313		(73,594	)		10,680,885

		Page No.


PART I – FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets ~~August~~May 31, ~~2017~~2021 and November 30, ~~2016~~ 2020	1

	Condensed Consolidated Statements of Operations ~~Three~~Three-month and ~~nine-month~~six-month periods ended ~~August~~May 31, ~~2017~~2021 and ~~August~~May 31, ~~2016~~2020	2

	Condensed Consolidated Statements of ~~Comprehensive Income Three and nine-month~~Stockholders’ Equity Six-month periods ended ~~August~~May 31, ~~2017~~2021 and ~~August~~May 31, ~~2016~~2020	3

	Condensed Consolidated Statements of Cash Flows ~~Nine-month~~Six-month periods ended ~~August~~May 31, ~~2017~~2021 and ~~August~~May 31, ~~2016~~2020	4

	Notes to Condensed ~~Consolidated~~Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1922

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2327

Item 4.	Controls and Procedures	2327

PART II – OTHER INFORMATION		2428

Item 1.	Legal Proceedings	2428

Item 1A.	Risk Factors	2428

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2428

Item 3.	Defaults Upon Senior Securities	2428

Item 4.	Mine Safety Disclosures	2428

Item 5.	Other Information	2428

Item 6.	Exhibits	2428

	SIGNATURES	25

	~~Exhibit Index~~	2629

~~ART’S-WAY MANUFACTURING CO., INC.~~
~~Condensed Consolidated Balance Sheets~~

	Three Months Ended						Nine Months Ended
	August 31, 2017			August 31, 2016			August 31, 2017			August 31, 2016
Sales	$	6,549,772		$	6,431,217		$	15,660,294		$	17,441,869
Cost of goods sold		5,104,826			5,189,532			12,290,041			13,088,340
Gross profit		1,444,946			1,241,685			3,370,253			4,353,529
Expenses:
Engineering		107,944			123,653			372,932			314,794
Selling		432,562			456,037			1,401,003			1,352,875
General and administrative		795,200			879,160			2,560,894			2,618,488
Total expenses		1,335,706			1,458,850			4,334,829			4,286,157
Income (Loss) from operations		109,240			(217,165	)		(964,576	)		67,372
Other income (expense):
Interest expense		(92,351	)		(60,537	)		(235,398	)		(182,510	)
Other		75,236			53,884			190,155			116,181
Total other income (expense)		(17,115	)		(6,653	)		(45,243	)		(66,329	)
Income (Loss) from continuing operations before income taxes		92,125			(223,818	)		(1,009,819	)		1,043
Income tax expense (benefit)		50,477			(74,142	)		(288,919	)		236
Income (Loss) from continuing operations		41,648			(149,676	)		(720,900	)		807
Discontinued Operations
Income (loss) from operations of discontinued segment		(26,449	)		(207,203	)		(49,238	)		(387,321	)
Income tax expense (benefit)		(8,008	)		(68,600	)		(15,756	)		(122,636	)
Income (Loss) on discontinued operations		(18,441	)		(138,603	)		(33,482	)		(264,685	)
Net Income (Loss)		23,207			(288,279	)		(754,382	)		(263,878	)

Earnings (Loss) per share - Basic:
Continuing Operations	$	0.01		$	(0.04	)	$	(0.17	)	$	-
Discontinued Operations	$	-		$	(0.03	)	$	(0.01	)	$	(0.06	)
Net Income (Loss) per share	$	0.01		$	(0.07	)	$	(0.18	)	$	(0.06	)

Earnings (Loss) per share - Diluted:
Continuing Operations	$	0.01		$	(0.04	)	$	(0.17	)	$	-
Discontinued Operations	$	-		$	(0.03	)	$	(0.01	)	$	(0.06	)
Net Income (Loss) per share	$	0.01		$	(0.07	)	$	(0.18	)	$	(0.06	)


Weighted average outstanding shares used to compute basic net income per share		4,161,421			4,105,704			4,148,966			4,093,993
Weighted average outstanding shares used to compute diluted net income per share		4,161,421			4,105,704			4,148,966			4,093,993

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

	Three Months Ended May 31, 2021
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	3,115,000	$	-	$	-	$	3,115,000
Farm equipment service parts		659,000		-		-		659,000
Steel cutting tools and inserts		-		-		652,000		652,000
Modular buildings		-		1,177,000		-		1,177,000
Modular building lease income		-		-		-		-
Other		84,000		17,000		6,000		107,000
	$	3,858,000	$	1,194,000	$	658,000	$	5,710,000

	Art's Way Vessels
	Three Months Ended
	August 31, 2017			August 31, 2016
Revenue from external customers	$	-		$	358,253

Gross Profit		-			(97,357	)
Operating Expense		17,082			104,113

Income (loss) from operations		(17,082	)		(201,470	)

Income (loss) before tax		(26,449	)		(207,203	)

	August 31, 2017		November 30, 2016
Cash	$	14,534	$	-
Accounts Receivable - Net		7,500		9,700
Property, plant, and equipment, net		1,714,198		1,745,528
Assets of discontinued operations	$	1,736,232	$	1,755,228

Accounts payable	$	-	$	1,588
Accrued expenses		38,042		50,061
Notes Payable		618,016		715,945
Liabilities of discontinued operations	$	656,058	$	767,594

	May 31, 2021		November 30, 2020
Receivables	$	2,405,000	$	2,391,000
Assets		287,000		56,000
Liabilities		1,015,000		276,000

	For the three months ended
	August 31, 2017			August 31, 2016
Numerator for basic and diluted (loss) earnings per common share:

Net (loss) income from continuing operations	$	41,648		$	(149,676	)
Net (loss) income from discontinued operations		(18,441	)		(138,603	)
Net (loss) income	$	23,207		$	(288,279	)

Denominator:
For basic (loss) earnings per share - weighted average common shares outstanding		4,161,421			4,105,704
Effect of dilutive stock options		-			-
For diluted (loss) earnings per share - weighted average common shares outstanding		4,161,421			4,105,704


Earnings (Loss) per share - Basic:
Continuing Operations	$	0.01		$	(0.04	)
Discontinued Operations	$	-		$	(0.03	)
Net Income (Loss) per share	$	0.01		$	(0.07	)

Earnings (Loss) per share - Diluted:
Continuing Operations	$	0.01		$	(0.04	)
Discontinued Operations	$	-		$	(0.03	)
Net Income (Loss) per share	$	0.01		$	(0.07	)

	For the nine months ended
	August 31, 2017			August 31, 2016
Numerator for basic and diluted (loss) earnings per common share:

Net (loss) income from continuing operations	$	(720,900	)	$	807
Net (loss) income from discontinued operations		(33,482	)		(264,685	)
Net (loss) income	$	(754,382	)	$	(263,878	)

Denominator:
For basic (loss) earnings per share - weighted average common shares outstanding		4,148,966			4,093,993
Effect of dilutive stock options		-			-
For diluted (loss) earnings per share - weighted average common shares outstanding		4,148,966			4,093,993


Earnings (Loss) per share - Basic:
Continuing Operations	$	(0.17	)	$	0.00
Discontinued Operations	$	(0.01	)	$	(0.06	)
Net Income (Loss) per share	$	(0.18	)	$	(0.06	)

Earnings (Loss) per share - Diluted:
Continuing Operations	$	(0.17	)	$	0.00
Discontinued Operations	$	(0.01	)	$	(0.06	)
Net Income (Loss) per share	$	(0.18	)	$	(0.06	)

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

Net income (loss)	$	(251,148	)	$	(1,238,913	)

Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,498,687			4,358,982
Effect of dilutive stock options		-			-
For diluted net income (loss) per share - weighted average common shares outstanding		4,498,687			4,358,982


Net Income (Loss) per share - Basic:
Net Income (Loss) per share	$	(0.06	)	$	(0.28	)

Net Income (Loss) per share - Diluted:
Net Income (Loss) per share	$	(0.06	)	$	(0.28	)

	August 31, 2017		November 30, 2016
Salaries, wages, and commissions	$	518,162	$	542,449
Accrued warranty expense		133,194		134,373
Other		382,338		342,234
	$	1,033,694	$	1,019,056

	August 31, 2017		November 30, 2016
U.S. Bank loan payable in monthly installments of $9,600 plus interest at 5.5%, due September 25, 2017	$	546,392	$	632,126

U.S. Bank loan payable in monthly installments of $10,965 plus interest at 5.5%, due September 25, 2017		618,016		715,945

U.S. Bank loan payable in monthly installments of $26,107 plus interest at 5.5%, due September 25, 2017		574,125		808,096

U.S. Bank loan payable in monthly installments of $10,960 plus interest at 5.5%, due September 25, 2017		238,945		337,147

U.S. Bank loan payable in monthly installments of $4,301 plus interest at 5.5%, due September 25, 2017		874,263		904,751

Iowa Finance Authority loan payable in monthly installments of $12,500 including interest at 2.75%, due June 1, 2020		409,745		512,935
Total term debt	$	3,261,486	$	3,911,000
Less current portion of term debt		2,374,665		1,807,937
Term debt of discontinued operations		618,016		715,945
Term debt, excluding current portion	$	268,805	$	1,387,118

	August 31, 2017		November 30, 2016
Ames, Iowa powder coat paint system	$	70,000	$	70,000
	$	70,000	$	70,000

	August 31, 2017		November 30, 2016
West Union Facility	$	1,124,715	$	-
Modular Buildings		108,225		-
	$	1,232,940	$	-

	Three Months Ended August 31, 2017
	Agricultural Products		Modular Buildings			Tools		Consolidated
Revenue from external customers	$	5,065,000	$	767,000		$	718,000	$	6,550,000
Income (loss) from operations		118,000		(37,000	)		28,000	$	109,000
Income (loss) before tax		123,000		(45,000	)		15,000	$	93,000
Total Assets		18,941,000		3,094,000			2,721,000	$	24,756,000
Capital expenditures		61,000		117,000			-	$	178,000
Depreciation & Amortization		125,000		17,000			32,000	$	174,000

	Nine Months Ended August 31, 2016
	Agricultural Products		Modular Buildings		Tools			Consolidated
Revenue from external customers	$	12,757,000	$	3,102,000	$	1,583,000		$	17,442,000
Income (loss) from operations		36,000		154,000		(123,000	)	$	67,000
Income (loss) before tax		24,000		140,000		(163,000	)	$	1,000
Total Assets		21,209,000		2,887,000		2,654,000		$	26,750,000
Capital expenditures		60,000		-		55,000		$	115,000
Depreciation & Amortization		377,000		46,000		93,000		$	516,000