ARTS WAY MANUFACTURING CO INC (Form: 10-K, Received: 02/09/2021 14:39:18)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____

FORM 10-K

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended November 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ____________

Commission file number 000-5131

ART’S-WAY MANUFACTURING CO., INC.
(Exact name of registrant as specified in its charter)

Delaware						42-0920725
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

P.O. Box 288

5556 Highway 9

Armstrong, Iowa 50514

(Address of principal executive offices, including zip code)

(712) 864-3131

(Registrant’s telephone number, including area code)

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

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

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No

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

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

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

	Large accelerated filer ☐	Accelerated filer ☐
	Non-accelerated filer ☒	Smaller reporting company ☒
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicated by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of the last business day of the registrant’s most recently completed second fiscal quarter, based on the closing sale price on May 31, 2020 as reported on the Nasdaq Stock Market LLC ($1.94 per share), was approximately $3,719,120.

As of February 4, 2021, there were 4,523,407 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for the registrant’s 2021 Annual Meeting of Stockholders to be filed within 120 days of November 30, 2020 are incorporated by reference into Part III of this Annual Report on Form 10-K.

(1)

Summary of Significant Accounting Policies

(a)

Nature of Business

Art’s-Way Manufacturing Co., Inc. (the “Company”) is primarily engaged in the fabrication and sale of specialized farm machinery in the agricultural sector of the United States. Primary product offerings include portable and stationary animal feed processing equipment; hay and forage equipment; sugar beet harvesting equipment; land maintenance equipment; manure spreaders and moldboard plows. The Company sells its labeled products through independent farm equipment dealers throughout the United States. In addition, the Company manufactures and supplies hay blowers pursuant to OEM agreements. The Company also provides after-market service parts that are available to keep its branded and OEM-produced equipment operating to the satisfaction of the end user of the Company’s products.

The Company’s Modular Buildings segment is primarily engaged in the construction of modular laboratories and animal housing facilities through the Company’s wholly-owned subsidiary, Art’s-Way Scientific, Inc. Buildings commonly produced range from basic swine buildings to complex containment research laboratories. This segment also provides services relating to the design, manufacturing, delivering, installation, and renting of the building units that it produces.

The Company’s Tools segment is a domestic manufacturer and distributor of standard single point brazed carbide tipped tools as well as PCD (polycrystalline diamond), CBN (cubic boron nitride) inserts and OEM specialty tools through the Company’s wholly-owned subsidiary, Ohio Metal Working Company/Art’s Way, Inc.

(b)

Impact of COVID-19

While the COVID-19 pandemic had very little impact on the Company’s results of operations for the first quarter of fiscal 2020, it did impact results of operations for the rest of fiscal 2020 and the Company believes that it may continue to do so for the foreseeable future. From March 23, 2020 until May 18, 2020 the majority of the Company’s office staff in all three segments worked remotely with the exception of key operations support. At the height of the initial outbreak the Company’s workforce was down approximately 17% due to self-quarantine. By the end of May 2020, the Company’s 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, the Company allowed employees that could perform their job functions remotely do so at their discretion. At this time approximately 75% of the Company’s office staff is working remote at least part-time and this has had minimal effect on operations. The Company expects that by the end of February 2021 remote employees will return full time to the office. Future outbreaks could have a material effect on the Company’s operations and are taking precautions to mitigate the spread of COVID-19.

(c)

Principles of Consolidation

The consolidated financial statements include the accounts of Art’s-Way Manufacturing Co., Inc. and its wholly-owned subsidiaries for the 2020 fiscal year, which includes Art’s-Way Scientific, Inc., and Ohio Metal Working Products/Art’s-Way, Inc. All material inter-company accounts and transactions are eliminated in consolidation.

(d)

Change in Accounting Estimate

During the fiscal year 2020, the Company made a change in accounting estimate related to the estimated costs to complete a material construction contract. The change in estimate was related to the expected collectability of change orders driven from project modifications in the design process and scope gaps that occurred because of the design changes. Further unforeseen costs including increased costs from project delays due to COVID-19, issues with site conditions, subcontractor rework and expected liquidated damages have deteriorated the gross profit margin on the project further through the fourth fiscal quarter of 2020. Overall, approximately $1.3 million of additional revenue has been generated since inception of the contract compared to $2.8 million of additional estimated costs to complete. The Company determined this was a change in accounting estimate in accordance with Accounting Standards Codification (“ASC”) 250-10 “Accounting Changes and Error Corrections” based on the timing of when information was reasonably considered available for the expected additional costs. The Company has approximately $1 million in revenue to recognize at a reduced margin for the Modular Buildings segment in the first quarter of fiscal 2021 as a result of this change in estimate.

In the fourth quarter of fiscal 2020, the Company made a change in accounting estimate related to the inventory obsolescence reserve for UHC reels, Miller Pro forage and rake, auger, and other non-current product lines. The Company concluded these items were not going to be a part of the Company’s strategic product offering going forward and increased the reserve on these items approximately $681,000 in November 2020. The Company is actively working on a scrap plan for these items to decrease carrying costs for inventory in 2021. The effect of the increased reserve reduced net inventory, added additional cost of goods sold expense reducing income from operations and also had an effect on working capital debt covenants by approximately $681,000. The Company determined this was a change in accounting estimated in accordance with Accounting Standards Codification (“ASC”) 250-10 “Accounting Changes and Error Corrections.”

(e)

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. An adjustment has been made to the Consolidated Statements of Cash Flows for the fiscal year ended November 30, 2019, to identify the non-cash expense related to changes in the Company’s obsolete inventory reserve in the amount of $79,265. This change in classification does not affect previously reported cash flows from operating activities in the Consolidated Statements of Cash Flows.

(f)

Cash Concentration

The Company maintains several different accounts at one bank, and balances in these accounts could periodically exceed the federally insured limits. However, management believes the risk of loss to be low.

(g)

Customer Concentration

During the 2020 and 2019 fiscal years, one customer accounted for more than 18% and 21%, respectively, of consolidated revenues due to a large contract in the Modular Buildings segment. The Company’s highest recurring customer accounted for just under 6% and 10% of consolidated net revenues in 2020 and 2019 fiscal years, respectively.

(h)

Accounts Receivable

Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Accounts receivable are written-off when deemed uncollectible. Recoveries of accounts receivable previously written-off are recorded when received. Accounts receivable are generally considered past due 60 days past invoice date, with the exception of international sales which primarily are sold with 180 day terms backed by export insurance.

Trade receivables due from customers are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Trade receivables are stated at the amount billed to the customer. The Company charges interest on overdue customer account balances at a rate of 1.5% per month. Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

(i)

Inventories

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

(j)

Property, Plant, and Equipment

Property, plant, and equipment are recorded at cost. Depreciation of plant and equipment is provided using the straight-line method, based on the estimated useful lives of the assets which range from three to 40 years.

(k)

Sales-Type Leases

Modular buildings held for short term lease by the Modular Buildings segment are recorded at cost. Amortization of the property 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 Company leases modular buildings to certain customers and accounts for these transactions 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.

The components related to sales-type leases at November 30, 2020 and November 30, 2019 are as follows:

	November 30, 2020			November 30, 2019
Minimum lease receivable, current	$	29,002		$	162,425
Unearned interest income, current		(650	)		(14,420	)
Net investment in sales-type leases, current	$	28,352		$	148,005

Minimum lease receivable, long-term	$	-		$	5,851
Unearned interest income, long-term		-			(69	)
Net investment in sales-type leases, long-term	$	-		$	5,782

There was no sales activity related to sales-type leases for the years ended November 30, 2020 and November 30,2019.

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

Year Ending November 30,	Amount
2021		29,002
Total	$	29,002

(l)

Operating Leases

The Company determines if an arrangement is a lease at inception of a contract. The nature of the Company’s operating leases at this time is office equipment, mainly copiers, with terms of 12 to 60 months. Operating leases are included in other assets as operating lease right-of-use (“ROU”) assets on the Consolidated Balance Sheets while current lease liabilities are included as accrued expenses. The long-term portions of operating lease liabilities are shown as long-term liabilities on the 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. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

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

The components of operating leases on the Consolidated Balance Sheets at November 30, 2020 were as follows:

	November 30, 2020
Operating lease right-of-use assets	$	27,879

Current portion of operating lease liabilities	$	9,537
Long-term portion of operating lease liabilities		18,342
Total operating lease liabilities	$	27,879

The Company included $27,879 of operating lease ROU assets in other assets, the current portion of operating lease liabilities of $9,537 was included in accrued expenses and the $18,342 of long-term operating lease liabilities was included in the long-term liability portion of the Consolidated Balance Sheets. The Company recorded $23,121 of operating lease costs in the year ended November 30, 2020, which included variable costs tied to usage. The Company’s operating leases carry a weighted average lease term of 35 months and have a weighted average discount rate of 5.50%

Future maturities of operating lease liabilities are as follows:

Year Ending November 30,
2021	10,847
2022	10,847
2023	6,911
2024	1,630
Total lease payments	30,236
Less imputed interest	(2,356	)
Total operating lease liabilities	27,879

(m)

Income Taxes

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

On December 28, 2020 the Consolidated Appropriations Act, 2021 was signed into law. This law provides that no amount of loan forgiveness granted under the Paycheck Protection Program shall be included in gross income for tax purposes. The law also allows the deduction of expenses related to the Paycheck Protection Program creating a double tax benefit. The Company attributes 8.8% of tax rate benefit related to the permanent difference from this law.

The Company classifies interest and penalties to be paid on an underpayment of taxes as income tax expense. The Company files income tax returns in the U.S. federal jurisdiction and various states and previously in Canada. The Company is no longer subject to Canadian, U.S. federal or state income tax examinations by tax authorities for years ended before November 30, 2017.

(n)

Revenue Recognition

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

In certain circumstances, upon the customer’s written request, the Company may recognize revenue when production is complete, and the goods are ready for shipment. At the customer’s request, the Company will bill the customer upon completing all performance obligations, but before shipment. The customer dictates that the Company ship the goods per the customer’s direction from the Company’s manufacturing facility, as is customary with this type of agreement, in order to minimize shipping costs. The written agreement with the customer specifies that the goods will be delivered on a schedule to be determined by the customer, with a final specified delivery date, and that the Company will segregate the goods from its inventory, such that they are not available to fill other orders. This agreement also specifies that the customer is required to purchase all goods manufactured under this agreement. Title of the goods will pass to the customer when the goods are complete and ready for shipment, per the customer agreement. At the transfer of title, all risks of ownership have passed to the customer, and the customer agrees to maintain insurance on the manufactured items that have not yet been shipped. The Company has operated using bill and hold agreements with certain customers for many years, with consistent satisfactory results for both the customer and the Company. The credit terms on these agreements are consistent with the credit terms on all other sales. All risks of loss are shouldered by the customer, and there are no exceptions to the customer’s commitment to accept and pay for these manufactured goods. Revenues recognized at the completion of production in the 2020 and 2019 fiscal years were approximately $0 and $16,000, respectively.

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 Company leases modular buildings to certain customers and accounts for these transactions as operating or sales-type leases. These leases have terms of up to 36 months and are collateralized by a security interest in the related modular building. On sales-type leases, 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 building is substantially complete. Profit related to the sale of the building is recorded upon fulfillment of the Company’s obligation to the lessee. On operating leases, the Company recognizes rent when the lessee has all the rights and benefits of ownership of the asset.

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

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

For information on product warranty as it applies to ASC 606, refer to Note 8 “Product Warranty.”

(o)

Disaggregation of Revenue

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

	Twelve Months Ended November 30, 2020
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	10,149,000	$	-	$	-	$	10,149,000
Farm equipment service parts		2,519,000		-		-		2,519,000
Steel cutting tools and inserts		-		-		2,308,000		2,308,000
Modular buildings		-		6,517,000		-		6,517,000
Modular building lease income		-		318,000		-		318,000
Other		417,000		158,000		23,000		598,000
	$	13,085,000	$	6,993,000	$	2,331,000	$	22,409,000

	Twelve Months Ended November 30, 2019
	Agricultural		Modular Buildings		Tools		Total
Farm equipment	$	10,435,000	$	-	$	-	$	10,435,000
Farm equipment service parts		2,638,000		-		-		2,638,000
Steel cutting tools and inserts		-		-		2,086,000		2,086,000
Modular buildings		-		6,460,000		-		6,460,000
Modular building lease income		-		674,000		-		674,000
Other		435,000		126,000		35,000		596,000
	$	13,508,000	$	7,260,000	$	2,121,000	$	22,889,000

(p)

Contract Receivables, Contract Assets and Contract Liabilities

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

	November 30, 2020		November 30, 2019
Receivables	$	2,391,000	$	1,680,000
Assets		56,000		727,000
Liabilities		276,000		89,000

The amount of revenue recognized in fiscal year 2020 that was included in a contract liability at November 30, 2019 was approximately $89,000 compared to $185,000 for the same period of fiscal year 2019. The change in contract receivables reflected above results from contract billings for all three segments as performance obligations are met. The decrease in contract assets from November 30, 2019 is due to billings on construction contracts catching up to expenses incurred while the increase in contract liabilities is due to overbillings on projects for the Modular Buildings segment.

The Company will utilize the practical expedient exception for these contracts and will report only on performance obligations greater than one year. As of November 30, 2020, and November 30, 2019, the Company has no performance obligations with an original expected duration greater than one year.

(q)

Research and Development

Research and development costs are expensed when incurred. Such costs approximated $199,000 and $149,000 for the 2020 and 2019 fiscal years, respectively.

(r)

Advertising

Advertising costs are expensed when incurred. Such costs approximated $175,000 and $198,000 for the 2020 and 2019 fiscal years, respectively. The Company has made a concerted effort to reduce trade show participation that was not providing the level of product exposure expected.

(s)

Net Income (Loss) Per Share of Common Stock

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

Basic and diluted (loss) per common share have been computed based on the following as of November 30, 2020 and 2019:

	For the Twelve Months Ended
	November 30, 2020			November 30, 2019
Numerator for basic and diluted net income (loss) per share:

Net income (loss)	$	(2,103,486	)	$	(1,419,586	)

Denominator:
For basic net income (loss) per share - weighted average common shares outstanding		4,393,887			4,277,375
Effect of dilutive stock options		-			-
For diluted net income (loss) per share - weighted average common shares outstanding		4,393,887			4,277,375

Net Income (Loss) per share - Basic:
Net Income (Loss) per share	$	(0.48	)	$	(0.33	)

Net Income (Loss) per share - Diluted:
Net Income (Loss) per share	$	(0.48	)	$	(0.33	)

(t)

Stock Based Compensation

(u)

Use of Estimates

Management has made a number of estimates and assumptions related to the reported amount of assets and liabilities, reported amount of revenues and expenses, and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.

(v)

Recently Issued Accounting Pronouncements

Adopted Accounting Pronouncements

Leases

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 12 months or greater. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. 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 buildings. As a result of adoption in the first fiscal quarter of 2020, the Company recognized $34,316 as a right-of-use asset and $34,316 of lease liabilities on the balance sheet for office equipment it leases. The Company’s activity as a lessor will remain mostly unaffected by this guidance. The Company’s additional disclosures may include, but are not limited to:

•

Nature of its leases

•

Significant assumptions and judgements used

•

Information about leases that have not yet commenced

•

Related-party lease transactions

•

Accounting policy election regarding short-term leases

•

Finance, operating, short-term and variable lease costs

•

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

•

Tabular disclosure of lease-related income

•

Components of the net investment in a lease

•

Information on the management of risk associated with residual asset

Accounting Pronouncements Not Yet Adopted

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, “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, 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 year 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.

(9)

Loan and Credit Agreements

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

Bank Midwest Revolving Lines of Credit and Term Loan

The Company maintains a credit facility with Bank Midwest 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 (the “Term Loan”). On November 30, 2020, the balance of the 2017 Line of Credit was $2,359,530 with $2,640,470 remaining available, as may be limited by the borrowing base calculation. The 2017 Line of Credit borrowing base is an amount equal to 75% of accounts receivable balances (discounted for aged receivables), plus 50% of inventory, less any outstanding loan balance on the 2017 Line of Credit. At November 30, 2020, the 2017 Line of Credit was not limited by the borrowing base calculation. Any unpaid principal amount borrowed on the 2017 Line of Credit accrues interest at a floating rate per annum equal to 1.00% above the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The interest rate floor is set at 4.25% per annum and the current interest rate is 4.25% per annum. The 2017 Line of Credit was most recently renewed on March 30, 2020. The 2017 Line of Credit matures on March 30, 2021 and requires monthly interest-only payments.

The Term Loan accrues interest at a rate of 5.00% for the first sixty months. Thereafter, the Term Loan will accrue interest at a floating rate per annum equal to 0.75% above the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The interest rate floor is set at 4.15% per annum and the interest rate may only be adjusted by Bank Midwest once every five years. Monthly payments of $17,271 for principal and interest are required. The Term Loan is also guaranteed by the United States Department of Agriculture (“USDA”), which required an upfront guarantee fee of $62,400 and requires an annual fee of 0.5% of the unpaid balance. As part of the USDA guarantee requirements, shareholders owning more than 20% are required to personally guarantee a portion of the Term Loan, in an amount equal to their stock ownership percentage. J. Ward McConnell Jr., the Vice Chairman of the Board of Directors and a shareholder owning more than 20% of the Company’s outstanding stock, is guaranteeing approximately 38% of the Term Loan, for an annual fee of 2% of the personally guaranteed amount. The initial guarantee fee 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 the Wall Street Journal. The interest rate floor is set at 4.25% per annum and the current interest rate is 4.25% per annum. The 2019 Line of Credit was recently renewed on February 2, 2021. The 2019 Line of Credit is payable upon demand by Bank Midwest. If no earlier demand is made, the unpaid principal and accrued interest will be payable in one payment, due on February 13, 2022. As of November 30, 2020, the funds on the 2019 Line of Credit remain undisbursed and are held by Bank Midwest. The Company expects to close the line when the project’s lien period closes later in fiscal 2021.

On April 20, 2020, the Company obtained a loan in the amount of $1,242,900 from Bank Midwest in connection with the U.S. Small Business Administration’s Paycheck Protection Program (the “PPP Loan”). The PPP Loan accrued interest at a rate per annum equal to 1.00% and was eligible to be used for payroll costs, employee benefits, rent, utilities and mortgage interest. The PPP Loan was unsecured. On November 4, 2020 complete forgiveness was granted from the U.S. Small Business Administration.

Each of the 2017 Line of Credit and the Term Loan are governed by the terms of a separate Promissory Note, dated September 28, 2017, entered into between the Company and Bank Midwest. The 2019 Line of Credit is governed by the terms of a Promissory Note, dated February 13, 2019, entered into between the Company and Bank Midwest.

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

To further secure the 2017 Line of Credit, the Company granted Bank Midwest a mortgage on its Canton, Ohio property held by Ohio Metal Working Products/Art’s-Way Inc. The 2019 Line of Credit is also secured by the mortgage on the Canton, Ohio property. The Term Loan is secured by a mortgage on the Company’s Armstrong, Iowa and Monona, Iowa properties. Each mortgage is governed by the terms of a separate Mortgage, dated September 28, 2017, and each property is also subject to a separate Assignment of Rents, dated September 28, 2017.

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

Compliance with Bank Midwest covenants is measured annually at November 30. The terms of the Bank Midwest 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. Additionally, a maximum debt to worth ratio of 1 to 1 must be maintained, with a minimum of 40% tangible balance sheet equity, with variations subject to mutual agreement. The Company is also required to maintain a minimum debt service coverage ratio of 1.25, with a 0.10 tolerance. The Company also must receive bank approval for purchases or sales of equipment over $100,000 annually and maintain reasonable salaries and owner compensation. The Company received the necessary approvals for purchases of equipment over $100,000 for the twelve months ended November 30, 2020. The Company was out of compliance with its debt service coverage ratio and 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.

SBA Economic Injury Disaster Loans

On June 18, 2020, and again on June 24, 2020 the Company executed the standard loan documents required for securing loans offered by the U.S. Small Business Administration under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the 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 being executed on June 24, 2020 with a principal amount of $150,000. Proceeds from these EIDLs are being used for working capital purposes. Interest accrues at the rate of 3.75% per annum and will accrue from the date of inception. Installment payments, including principal and interest, are due monthly beginning June 18, 2021 (twelve months from the date of the EIDLs) and June 24, 2021 in the amount of $731 per EIDL. The balance of principal and interest is payable 30 years from the date of the EIDL. The EIDLs are secured by a security interest on all of the Company’s assets. Each EIDL is governed by the terms of a separate Promissory Note, dated either June 18, 2020 or June 24, 2020, as applicable, entered into by the Company or the applicable subsidiary.

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

	November 30, 2020		November 30, 2019
Bank Midwest loan payable in monthly installments of $17,271 including interest at 5.00%, due October 1, 2037	$	2,350,593	$	2,435,993
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning June 18, 2021, due June 18, 2050		152,543		-
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning June 24, 2021, due June 24, 2050		152,450		-
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning June 18, 2021, due June 18, 2050		152,543		-
Total term debt	$	2,808,129	$	2,435,993
Less current portion of term debt		94,979		85,401
Term debt, excluding current portion	$	2,713,150	$	2,350,592

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

Year	Amount
2021	$	94,979
2022		104,026
2023		109,297
2024		114,499
2025		120,644
2026 and thereafter		2,264,684
	$	2,808,129

(12)

Equity Incentive Plan

The compensation cost charged against income was $247,645 and $195,416 for the 2020 and 2019 fiscal years, respectively. The total income tax deductions for share-based compensation arrangements were $176,435 and $122,022 for the 2020 and 2019 fiscal years, respectively. No compensation cost was capitalized as part of inventory or fixed assets.

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

The 2020 Plan permits the plan administrator to award nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance awards, and stock appreciation rights to employees (including officers), directors, and consultants. The Board has approved a director compensation policy pursuant to which non-employee directors are automatically granted restricted stock awards of 1,000 shares of fully vested common stock annually or initially upon their election to the Board and another 1,000 shares of fully vested common stock on the last business day of each fiscal quarter. During the year ended November 30, 2020, restricted stock awards of 128,750 shares were issued to various employees, directors, and consultants, which vest over the next three years, and restricted stock awards of 25,000 shares were issued to directors as part of the director compensation policy, which vested immediately upon grant. In comparison, during fiscal 2019, restricted stock awards of 56,750 shares were issued to various employees, directors, and consultants, which vest over three years from the date of issuance, restricted stock awards of 9,000 shares were issued to various employees, which vested immediately upon grant, and restricted stock awards of 31,687 were issued to directors as part of the director compensation policy. During the 2020 fiscal year, 74,685 shares of restricted stock became unrestricted, 4,833 shares of restricted stock were forfeited, and the Company bought 16,255 shares back as treasury stock from employees to pay payroll tax on vested shares. During 2019 fiscal year, 32,600 shares of restricted stock became unrestricted, 1,400 shares of restricted stock were forfeited, and the Company bought 9,556 shares back as treasury stock from employees to pay payroll tax on vested shares.

Stock-based compensation expense reflects the fair value of stock-based awards measured at the grant date and recognized over the relevant vesting period. The Company estimates the fair value of each stock-based option award on the measurement date using the Black-Scholes option valuation model which incorporates assumptions as to stock price volatility, the expected life of the options, risk-free interest rate, and dividend yield. Expected volatility is based on historical volatility of the Company’s stock and other factors. The Company uses historical option exercise and termination data to estimate the expected term the options are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is calculated using historical dividend amounts and the stock price at the option issuance date. No stock options were granted during the years ended November 30, 2020 or 2019. Stock compensation net of treasury shares repurchased for the year ended November 30, 2020 was $216,649 compared to $176,093 for the same period in fiscal 2019.

The fair value of each option award is estimated on the date of grant using the Black Scholes option-pricing model. 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.

	2020		2019
Expected Volatility		-		-
Expected Dividend Yield		-		-
Expected Term (in years)		-		-
Risk-Free Rate		-		-

The following is a summary of activity under the plans as of November 30, 2020 and 2019, and changes during the years then ended:

2020 Option Activity
Options	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Options O/S at beginning of period		59,000		$	6.07
Granted		-		$	-
Exercised		-		$	-				-
Options Expired or Forfeited		(23,000	)	$	5.56
Options O/S at end of Period		36,000		$	6.40		2.57		-
Options Exercisable At end of the Period		36,000		$	6.40		2.57		-

2019 Option Activity
Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Options O/S at beginning of period		59,000	$	6.07
Granted		-	$	-
Exercised		-	$	-				-
Options Expired or Forfeited		-	$	-
Options O/S at end of period		59,000	$	6.07		2.86		-
Options Exercisable at end of the period		59,000	$	6.07		2.86		-

No options were granted or vested during the 2020 or 2019 fiscal years. As of both November 30, 2020 and November 30, 2019, there were no non-vested options. As of November 30, 2020, there was no unrecognized compensation cost related to non-vested share-based compensation arrangements under the plan related to stock options.

The Company received no cash from the exercise of options during the 2020 or 2019 fiscal years.

	Page
Part I
Item 1. BUSINESS	4
Item 1A. RISK FACTORS	8
Item 1B. UNRESOLVED STAFF COMMENTS	8
Item 2. PROPERTIES	8
Item 3. LEGAL PROCEEDINGS	9
Item 4. MINE SAFETY DISCLOSURES	9
Part II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 11	10
Item 6. SELECTED FINANCIAL DATA	10
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11	10
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	17
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	18
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	39
Item 9A. CONTROLS AND PROCEDURES	39
Item 9B. OTHER INFORMATION	40
Part III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	41
Item 11. EXECUTIVE COMPENSATION	41
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 38	41
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 38	41
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES	41
Part IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES	42

	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
September 1 to September 30, 2020		892	$	2.27		N/A		N/A
October 1 to October 31, 2020		-	$	-		N/A		N/A
November 1 to November 30, 2020		892	$	2.73		N/A		N/A
		1,784	$	2.50

	November 30, 2020		November 30, 2019
Current Assets	$	10,301,350	$	11,407,230
Current Liabilities		6,164,776		5,202,764
Working Capital	$	4,136,574	$	6,204,466

Current Ratio		1.67		2.19

	November 30, 2020			November 30, 2019
Assets
Current assets:
Cash	$	2,684		$	3,145
Accounts receivable-customers, net of allowance for doubtful accounts of $51,175 and $22,925 in 2020 and 2019, respectively		2,390,604			1,679,975
Inventories, net		7,762,400			8,778,507
Cost and profit in excess of billings		56,026			726,667
Net investment in sales-type leases, current		28,352			148,005
Other current assets		61,284			70,931
Total current assets		10,301,350			11,407,230
Property, plant, and equipment, net		5,218,662			5,362,907
Assets held for lease, net		521,555			713,782
Deferred income taxes		2,667,686			1,786,048
Net investment in sales-type leases, long-term		-			5,782
Other assets		93,760			71,189
Total assets	$	18,803,013		$	19,346,938
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,955,404		$	1,205,313
Customer deposits		198,225			105,363
Billings in excess of cost and profit		276,226			88,931
Income taxes payable		1,100			6,400
Accrued expenses		1,279,312			1,132,826
Line of credit		2,359,530			2,578,530
Current portion of long-term debt		94,979			85,401
Total current liabilities		6,164,776			5,202,764
Long-term liabilities
Long-term portion of operating lease liabilities		18,342			-
Long-term debt, excluding current portion		2,713,150			2,350,592
Total liabilities		8,896,268			7,553,356
Commitments and Contingencies (Notes 8, 9 and 15)
Stockholders’ equity:
Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares in 2020 and 2019; issued and outstanding 0 shares in 2020 and 2019.		-			-
Common stock – $0.01 par value. Authorized 9,500,000 shares in 2020 and 2019; issued 4,470,004 in 2020 and 4,321,087 in 2019		44,700			43,211
Additional paid-in capital		3,496,243			3,250,087
Retained earnings		6,443,856			8,547,342
Treasury stock, at cost (35,097 in 2020 and 18,842 in 2019 shares)		(78,054	)		(47,058	)
Total stockholders’ equity		9,906,745			11,793,582
Total liabilities and stockholders’ equity	$	18,803,013		$	19,346,938

	Years Ended
	November 30, 2020			November 30, 2019
Sales	$	22,409,123		$	22,889,173
Cost of goods sold		20,009,523			18,961,260
Gross profit		2,399,600			3,927,913
Expenses:
Engineering		476,721			479,345
Selling		1,623,960			1,602,006
General and administrative		4,208,553			3,343,443
Total expenses		6,309,234			5,424,794
(Loss) from operations		(3,909,634	)		(1,496,881	)
Other income (expense):
Interest expense		(304,611	)		(358,174	)
Other		1,254,289			86,235
Total other income (expense)		949,678			(271,939	)
Income (loss) before income taxes		(2,959,956	)		(1,768,820	)
Income tax (benefit)		(856,470	)		(349,234	)
Net Income (Loss)		(2,103,486	)		(1,419,586	)

Net Income (Loss) per share
Basic Net Income (Loss) per share	$	(0.48	)	$	(0.33	)
Diluted Net Income (Loss) per share	$	(0.48	)	$	(0.33	)

Weighted average outstanding shares used to compute basic net loss per share		4,393,887			4,277,375
Weighted average outstanding shares used to compute diluted net loss per share		4,393,887			4,277,375

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

Balance, November 30, 2018		4,225,050	$	42,250	$	3,055,632	$	9,966,928			9,286	$	(27,735	)	$	13,037,075
Stock based compensation		96,037		961		194,455		-			9,556		(19,323	)		176,093
Net (loss)		-		-		-		(1,419,586	)		-		-			(1,419,586	)
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		148,917		1,489		246,156					16,255		(30,996	)		216,649
Net (loss)								(2,103,486	)							(2,103,486	)
Balance, November 30, 2020		4,470,004		44,700		3,496,243		6,443,856			35,097		(78,054	)		9,906,745

	Twelve Months Ended
	November 30, 2020			November 30, 2019
Cash flows from operations:
Net (loss)	$	(2,103,486	)	$	(1,419,586	)
Adjustments to reconcile net (loss) to net cash provided by operating activities:
Stock based compensation		247,645			195,416
Increase in obsolete inventory reserves		556,303			79,265
(Gain) Loss on disposal of property, plant, and equipment		25,195			(9,999	)
Depreciation and amortization expense		818,234			1,003,541
Accrued interest on deferred debt payments		7,536			-
Change in allowance for doubtful accounts		28,250			(2,175	)
Debt forgiveness from Paycheck Protection Program loan		(1,242,900	)		-
Deferred income taxes		(881,638	)		(353,626	)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable		(738,879	)		(140,687	)
Inventories		459,804			1,399,330
Net investment in sales-type leases		125,435			123,055
Other assets		9,649			54,158
Increase (decrease) in:
Accounts payable		750,091			403,251
Contracts in progress, net		857,936			(723,463	)
Customer deposits		92,862			(40,269	)
Income taxes payable		(5,300	)		-
Accrued expenses		136,949			239,542
Net cash provided by (used in) operating activities		(856,314	)		807,753
Cash flows from investing activities:
Purchases of property, plant, and equipment		(693,414	)		(447,025	)
Net proceeds from sale of assets		191,764			899,713
Net cash provided by (used in) investing activities		(501,650	)		452,688
Cash flows from financing activities:
Net change in line of credit		(219,000	)		(927,000	)
Proceeds from term debt		1,692,900			-
Repayment of term debt		(85,401	)		(314,485	)
Repurchases of common stock		(30,996	)		(19,323	)
Net cash provided by (used in) financing activities		1,357,503			(1,260,808	)
Net (decrease) in cash		(461	)		(367	)
Cash at beginning of period		3,145			3,512
Cash at end of period	$	2,684		$	3,145

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	263,598		$	329,356
Income taxes		28,514			3,855

	Twelve Months Ended
	November 30, 2020			November 30, 2019
Balance, beginning	$	22,925		$	25,100
Provision charged to expense		44,222			(1,602	)
Less amounts charged-off		(15,972	)		(573	)
Balance, ending	$	51,175		$	22,925

	November 30, 2020			November 30, 2019
Raw materials	$	7,086,367		$	7,156,001
Work in process		304,009			492,125
Finished goods		3,777,136			3,905,373
Total Gross Inventory	$	11,167,512		$	11,553,499
Less: Reserves		(3,405,112	)		(2,774,992	)
Net Inventory	$	7,762,400		$	8,778,507

	Cost and Profit in			Billings in Excess of
	Excess of Billings			Costs and Profit
November 30, 2020
Costs	$	511,152		$	9,697,061
Estimated earnings		98,084			579,747
		609,236			10,276,808
Less: amounts billed		(553,210	)		(10,553,034	)
	$	56,026		$	(276,226	)

November 30, 2019
Costs	$	3,805,906		$	629,501
Estimated earnings		1,044,612			155,790
		4,850,518			785,291
Less: amounts billed		(4,123,851	)		(874,222	)
	$	726,667		$	(88,931	)

	November 30, 2020			November 30, 2019
Land	$	220,503		$	220,503
Buildings and improvements		7,255,955			7,035,144
Construction in Progress		31,571			82,366
Manufacturing machinery and equipment		11,123,104			11,036,192
Trucks and automobiles		510,955			507,575
Furniture and fixtures		119,907			120,833
		19,261,995			19,002,613
Less accumulated depreciation		(14,043,333	)		(13,639,706	)
Property, plant and equipment	$	5,218,662		$	5,362,907

	November 30, 2020		November 30, 2019
Salaries, wages, and commissions	$	726,625	$	555,201
Accrued warranty expense		291,454		203,185
Other		261,233		374,440
	$	1,279,312	$	1,132,826

	November 30, 2020			November 30, 2019
Current expense (benefit)	$	25,168		$	4,392
Deferred expense (benefit)		(881,638	)		(353,626	)
Total income tax expense (benefit)	$	(856,470	)	$	(349,234	)

	November 30, 2020			November 30, 2019
Statutory federal income tax rate		21.0	%		21.0	%
PPP Loan Forgiveness		8.8			-
Permanent differences and other		(0.9	)		(1.3	)
		28.9	%		19.7	%

	November 30
	2020			2019
Current deferred tax assets (liabilities):
Accrued expenses	$	161,000		$	100,000
Inventory capitalization		71,000			21,000
NOL and tax credit carryforward		1,695,000			1,182,000
Asset reserves		796,000			621,000
Total current deferred tax assets	$	2,723,000		$	1,924,000
Non-current deferred tax assets
Property, plant, and equipment	$	(55,000	)	$	(138,000	)
Total non-current deferred tax assets (liabilities)		(55,000	)		(138,000	)
Net deferred taxes	$	2,668,000		$	1,786,000

	Twelve Months Ended November 30, 2020
	Agricultural Products			Modular Buildings			Tools			Consolidated
Revenue from external customers	$	13,085,000		$	6,993,000		$	2,331,000		$	22,409,000
Income (loss) from operations	$	(2,318,000	)	$	(1,295,000	)	$	(297,000	)	$	(3,910,000	)
Income (loss) before tax	$	(1,723,000	)	$	(1,058,000	)	$	(179,000	)	$	(2,960,000	)
Total Assets	$	12,785,000		$	3,310,000		$	2,708,000		$	18,803,000
Capital expenditures	$	499,000		$	146,000		$	48,000		$	693,000
Depreciation & Amortization	$	481,000		$	205,000		$	132,000		$	818,000

Exhibit No.	Description
3.1	Conformed Certificate of Incorporation of Art’s-Way Manufacturing Co., Inc. – filed herewith.
3.2	Conformed Bylaws of Art’s-Way Manufacturing Co., Inc.– filed herewith.
4.1	Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 – incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2019.
10.1*	Director Compensation Policy – incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2018.
10.2*	Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan – incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 3, 2011.
10.3*	Form of Incentive Stock Option Agreement under the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan – incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed May 3, 2011.
10.4*	Form of Nonqualified Stock Option Agreement under the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan – incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed May 3, 2011.
10.5*	Form of Restricted Stock Agreement under the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan – incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed May 3, 2011.
10.6*	Form of Restricted Stock Unit Agreement under the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan – incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed May 3, 2011.
10.7	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.
10.8	Promissory Note, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated February 2, 2021 – filed herewith

10.9	Promissory Note, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated March 30, 2020 – incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 29, 2020.
10.10	Promissory Note, between Bank Midwest and Art’s-Way Manufacturing Co., Inc., dated April 20, 2020 – incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 22, 2020.
10.11	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
10.12	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.
10.13	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.
10.14	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.
10.15	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.
10.16	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.
10.17	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.
10.18	Modification of Mortgage (3620 Progress Street ND, Canton, OH 44705), by Ohio Metal Working Products/Art’s-Way Inc., dated March 30, 2018 – incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2018.
10.19	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.
10.20	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.
10.21	Promissory Note, between the Small Business Administration and Art’s-Way Scientific Inc., dated June 18, 2020 – incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2020.
10.22	Promissory Note, between the Small Business Administration and Ohio Metal Working Products/Art’s-Way, dated June 18, 2020 – incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2020
10.23	Promissory Note, between the Small Business Administration and Art’s-Way Manufacturing Co., Inc., dated June 24, 2020 – incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 31, 2020.
10.24*	Employment Agreement between the Company and Michael Woods, dated February 1, 2020 – incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 29, 2020.
10.25*	Offer Letter between the Company and David King, dated March 5, 2020 – incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed March 11, 2020.
10.26*	Employment Agreement between the Company and David A. King, effective March 30, 2020 – incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 29, 2020.

10.27*	Art’s-Way Manufacturing Co., Inc. 2020 Equity Incentive Plan – incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 4, 2020.
10.28*	Form of Restricted Stock Agreement under 2020 Equity Incentive Plan – incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed May 4, 2020.
10.29*	Form of Restricted Stock Unit Agreement under 2020 Equity Incentive Plan – incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed May 4, 2020.
10.30*	Form of Incentive Stock Option Award under 2020 Equity Incentive Plan – incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed May 4, 2020.
10.31*	Form of Non-Qualified Option Award under 2020 Equity Incentive Plan – incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed May 4, 2020.
10.32*	Consulting Agreement, between the Carrie Gunnerson and Art’s-Way Manufacturing Co., Inc., dated July 22, 2020 – incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2020.
21.1	List of Subsidiaries – filed herewith.
23.1	Consent of independent registered public accounting firm – filed herewith.
24.1	Power of Attorney (included on the “Signatures” page of this Annual Report on Form 10-K).
31.1	Certificate pursuant to 17 CFR 240 13(a)-14(a) – filed herewith.
31.2	Certificate pursuant to 17 CFR 240 13(a)-14(a) – filed herewith.
32.1	Certificate pursuant to 18 U.S.C. Section 1350 – filed herewith.
32.2	Certificate pursuant to 18 U.S.C. Section 1350 – filed herewith.
101	The following financial statements from the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2020, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Stockholders’ Equity, and (vi) Notes to the Consolidated Financial Statements.

		ART’S-WAY MANUFACTURING CO., INC.


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

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

Date: February 9, 2021		/s/ Michael W. Woods
		Michael W. Woods, Chief Financial Officer

Date: February 9, 2021		/s/ Marc H. McConnell
		Marc H. McConnell, Chairman, Director

Date: February 9, 2021		/s/ J. Ward McConnell, Jr.
		J. Ward McConnell, Jr., Vice Chairman, Director

Date: February 9, 2021		/s/ Thomas E. Buffamante
		Thomas E. Buffamante, Director

Date: February 9, 2021		/s/ David R. Castle
		David R. Castle, Director

Date: February 9, 2021		/s/ David A. White
		David A. White, Director

NAME	MAILING ADDRESS

James L. Koley	One Pacific Place, Suite 800 1125 South 103 Street Omaha, Nebraska 68124

Harold A. Westberg	Highway 9 West Armstrong, Iowa 50514


Principal Amount: $4,000,000.00	Date of Note: February 2, 2021

ART'S-WAY MANUFACTURING CO., INC.

By:		By:
	Michael Woods, CFO of Art's-Way Manufacturing Co., Inc.		David King, CEO of Art's-Way Manufacturing Co., Inc.

LENDER:


BANK MIDWEST

X
	Jeffrey J Newlin, SVP Market President

Company	Jurisdiction of Formation

Art’s-Way Scientific, Inc.	Iowa
Ohio Metal Working Products/Art’s Way, Inc.	Ohio