[10-Q] ARTS WAY MANUFACTURING CO INC Quarterly Earnings Report

Rhea-AI Filing Summary

Art’s-Way Manufacturing (ARTW) reported Q3 2025 results. Sales were $6,432,296 with gross margin of 27.5%, and net income from continuing operations was $254,110 ($0.05 per share). Year-to-date, sales were $17,909,941 and net income from continuing operations reached $1,680,423 ($0.33 per share). Results benefited from Employee Retention Credit refunds recorded in other income of $1,620,103 and $246,108 of interest, offset by $405,026 of consulting fees.

Segment trends diverged: Modular Buildings delivered Q3 revenue of $3,449,000 and 35.4% gross margin, while Agricultural Products posted $2,983,000 and 18.3% margin. Cash was $5,960; inventories were $11,237,942. The revolving line of credit balance was $2,672,437 (7.5% rate) with $1,327,563 remaining available. Term debt totaled $2,006,259, including a 7.00% Bank Midwest loan and two SBA EIDL loans at 3.75%. Subsequent to quarter-end, the company entered a $516,971 roof loan at 7.25%.

Insights

Equity analyst – small-cap industrials

Solid Q3; YTD profit aided by one-time ERC; segment split persists.

Art’s-Way showed steady Q3 operations with sales of $6.43M and net income from continuing operations of $254k. Year-to-date profit of $1.68M reflects operating improvements plus ERC-related other income of $1.62M and $246k interest, net of $405k fees. This nonrecurring item materially boosts the nine-month earnings base.

The business mix remains key. Modular Buildings grew to $3.45M Q3 revenue with a 35.4% gross margin, while Agricultural Products posted $2.98M and 18.3%, reflecting market headwinds and input costs. Cash from operations for the nine months was slightly negative, while liquidity relies on the revolving line of credit at 7.5% and term loans at 7.00% and 3.75%.

Balance sheet usage includes inventory positioning for demand and progress on projects. A subsequent $516,971 roof loan at 7.25% adds modest fixed obligations. Actual impact on future results will depend on segment mix and order conversion.

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended August 31, 2025

or

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

Commission File No. 000-05131

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.)

5556 Highway 9

Armstrong, Iowa 50514

(Address of principal executive offices) (Zip Code)

(712) 208-8467

(Registrant’s telephone number, including area code)

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

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

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

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

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

Large accelerated filer ☐  Non-accelerated filer ☒ 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. ☐

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

Number of common shares outstanding as of October 1, 2025: 5,106,834

Table of Contents

Art’s-Way Manufacturing Co., Inc.

Index

Page No.

PART I – FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of August 31, 2025 and November 30, 2024	1
	Condensed Consolidated Statements of Operations for the Three-month and Nine-month periods ended August 31, 2025 and August 31, 2024	2
	Condensed Consolidated Statements of Stockholders’ Equity for the Nine-month periods ended August, 31 2025 and August 31, 2024	3
	Condensed Consolidated Statements of Cash Flows for the Nine-month periods ended August 31, 2025 and August 31, 2024	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
PART II – OTHER INFORMATION		22
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Mine Safety Disclosures	22
Item 5.	Other Information	22
Item 6.	Exhibits	23
	SIGNATURES	24

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Balance Sheets

		(Unaudited)
		August 31, 2025				November 30, 2024
Assets
Current assets:
Cash		$	5,960			$	1,860
Accounts receivable, net			2,023,964				2,372,876
Inventories, net			11,237,942				10,327,913
Cost and profit in excess of billings			658,955				213,195
Other current assets			254,410				208,465
Total current assets			14,181,231				13,124,309
Property, plant, and equipment, net			5,104,659				5,150,870
Assets held for lease, net			127,796				89,033
Deferred income taxes, net			1,994,267				2,440,297
Other assets			407,787				436,175
Total assets		$	21,815,740			$	21,240,684
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	1,175,899			$	944,448
Customer deposits			72,765				180,597
Billings in excess of cost and profit			352,131				1,929,151
Income taxes payable			5,000				5,500
Accrued expenses			933,965				1,303,718
Line of credit			2,672,437				1,928,437
Current portion of finance lease liabilities			246,565				220,908
Current portion of long-term debt			125,979				119,734
Total current liabilities			5,584,741				6,632,493
Long-term portion of operating lease liabilities			-				4,700
Long-term portion of finance lease liabilities			436,910				534,436
Long-term debt, excluding current portion			1,880,280				1,975,232
Total liabilities			7,901,931				9,146,861
Commitments and Contingencies (Notes 9, 11, 12 and 15)
Stockholders’ equity:
Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares on August 31, 2025 and November 30, 2024; issued and outstanding 0 shares on August 31, 2025 and November 30, 2024.			-				-
Common stock – $0.01 par value. Authorized 9,500,000 shares on August 31, 2025 and November 30, 2024; 5,220,423 issued on August 31, 2025 and 5,149,173 on November 30, 2024			52,204				51,492
Additional paid-in capital			5,161,242				5,020,849
Retained earnings			9,009,051				7,328,628
Treasury stock, at cost (113,589 shares on August 31, 2025 and 112,714 shares on November 30, 2024)			(308,688	)			(307,146	)
Total stockholders’ equity			13,913,809				12,093,823
Total liabilities and stockholders’ equity		$	21,815,740			$	21,240,684

See accompanying notes to condensed consolidated financial statements.

1

Table of Contents

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Statements of Operations

(Unaudited)

		Three Months Ended								Nine Months Ended
		August 31, 2025				August 31, 2024				August 31, 2025				August 31, 2024
Sales		$	6,432,296			$	5,875,700			$	17,909,941			$	18,329,363
Cost of goods sold			4,666,131				4,175,575				12,587,490				13,248,961
Gross profit			1,766,165				1,700,125				5,322,451				5,080,402
Expenses
Engineering			87,339				78,949				256,684				346,373
Selling			350,771				380,797				1,136,650				1,241,187
General and administrative			983,326				1,086,685				3,071,249				3,550,460
Total expenses			1,421,436				1,546,431				4,464,583				5,138,020
Income (loss) from operations			344,729				153,694				857,868				(57,618	)
Other income (expense):
Interest expense			(83,668	)			(150,012	)			(259,022	)			(471,784	)
Other			60,196				(4,165	)			1,527,881				(13,386	)
Total other income (expense)			(23,472	)			(154,177	)			1,268,859				(485,170	)
Income (loss) from continuing operations before income taxes			321,257				(483	)			2,126,727				(542,788	)
Income tax expense (benefit)			67,147				(2,713	)			446,304				(116,131	)
Income (loss) from continuing operations			254,110				2,230				1,680,423				(426,657	)
Discontinued Operations (Note 3)
Loss from discontinued operations before income taxes			-				(35,919	)			-				(123,849	)
Income tax benefit			-				(7,489	)			-				(25,954	)
Loss on discontinued operations			-				(28,430	)			-				(97,895	)
Net Income (Loss)		$	254,110			$	(26,200	)		$	1,680,423			$	(524,552	)

See accompanying notes to condensed consolidated financial statements.

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ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Statements of Stockholders' Equity

Nine Months Ended August 31, 2025 and August 31, 2024

(Unaudited)

		Common Stock								Additional								Treasury Stock
		Number of								paid-in				Retained				Number of
		shares				Par value				capital				earnings				shares				Amount				Total
Balance, November 30, 2023			5,106,922			$	51,069			$	4,838,425			$	7,021,253				94,256			$	(269,492	)		$	11,641,255
Stock based compensation			82,250				823				186,971				-				18,458				(37,654	)			150,140
Net loss			-				-				-				(524,552	)			-				-				(524,552	)
Balance, August 31, 2024			5,189,172			$	51,892			$	5,025,396			$	6,496,701				112,714			$	(307,146	)		$	11,266,843

		Common Stock								Additional								Treasury Stock
		Number of								paid-in				Retained				Number of
		shares				Par value				capital				earnings				shares				Amount				Total
Balance, November 30, 2024			5,149,173			$	51,492			$	5,020,849			$	7,328,628				112,714			$	(307,146	)		$	12,093,823
Stock based compensation			71,250				712				140,393				-				875				(1,542	)			139,563
Net income			-				-				-				1,680,423				-				-				1,680,423
Balance, August 31, 2025			5,220,423			$	52,204			$	5,161,242			$	9,009,051				113,589			$	(308,688	)		$	13,913,809

See accompanying notes to condensed consolidated financial statements.

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ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

		Nine Months Ended
		August 31, 2025				August 31, 2024
Cash flows from operations:
Net income (loss) from continuing operations		$	1,680,423			$	(426,657	)
Net loss from discontinued operations			-				(97,895	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock based compensation			141,105				187,794
Decrease in obsolete inventory reserves			(36,233	)			(154,525	)
Gain on disposal of property, plant, and equipment			(9,100	)			(800	)
Depreciation and amortization expense			593,954				663,828
Amortization of cloud computing implementation costs			60,909				91,364
Increase (decrease) in allowance for expected credit losses - accounts receivable			(63,947	)			24,509
Deferred income taxes			446,030				(145,112	)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable			412,859				464,505
Inventories			(873,796	)			494,822
Other assets			(106,853	)			(193,993	)
Increase (decrease) in:
Accounts payable			231,451				(1,386,227	)
Contracts in progress, net			(2,022,780	)			2,433,887
Customer deposits			(107,832	)			(253,117	)
Income taxes payable			(500	)			-
Accrued expenses			(360,682	)			(294,171	)
Net cash provided by (used in) operating activities - continuing operations			(14,992	)			1,506,107
Net cash used in operating activities - discontinued operations			-				(76,123	)
Net cash provided by (used in) operating activities			(14,992	)			1,429,984
Cash flows from investing activities:
Purchases of property, plant, and equipment			(474,770	)			(614,367	)
Net proceeds from sale of assets			9,100				800
Net cash used in investing activities - continuing operations			(465,670	)			(613,567	)
Net cash provided by (used in) investing activities - discontinued operations			-				-
Net cash used in investing activities			(465,670	)			(613,567	)
Cash flows from financing activities:
Net change in line of credit			744,000				(546,083	)
Principal payments on finance lease obligations			(168,989	)			(148,129	)
Repayment of term debt			(88,707	)			(81,211	)
Repurchases of common stock			(1,542	)			(37,654	)
Net cash provided by (used in) financing activities - continuing operations			484,762				(813,077	)
Net cash used in financing activities - discontinued operations			-				(2,235	)
Net cash used in financing activities			484,762				(815,312	)
Net increase in cash			4,100				1,105
Cash at beginning of period			1,860				4,014
Cash at end of period		$	5,960			$	5,119
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest		$	259,022			$	476,809
Income taxes			829				90
Supplemental disclosures of non-cash operating activities:
Right-of-use (ROU) assets acquired (included in other assets)		$	97,120			$	38,192
Amortization of operating lease ROU assets (included in other assets)		$	13,774			$	6,451

See accompanying notes to condensed consolidated financial statements.

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Notes to Unaudited Condensed Consolidated Financial Statements

1) Description of the Company

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

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

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

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

2) Summary of Significant Accounting Policies

Statement Presentation

The foregoing condensed consolidated financial statements of the Company are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position and operating results for the interim periods. The condensed consolidated financial statements should be read in conjunction with the condensed financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2024. The results of operations for the three and nine months ended August 31, 2025 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2025.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the three and nine months ended August 31, 2025. Actual results could differ from those estimates.

Allowance for Credit Losses

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

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

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Employee Retention Credit

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

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

		Agricultural Products				Modular Buildings				Consolidated (Continuing Operations)
Employee retention credit (other income)		$	1,370,231			$	249,872			$	1,620,103
Interest income (other income)			207,261				38,847				246,108
Consulting fees (other expense)			(342,558	)			(62,468	)			(405,026	)
Net proceeds		$	1,234,934			$	226,251			$	1,461,185

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

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3) Discontinued Operations

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

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

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

		Tools
		Three Months Ended
		August 31, 2024
Revenue from external customers		$	-
Gross Profit (loss)			(22,000	)
Operating Expense (Income)			-
Loss from operations			(22,000	)
Loss before tax			(36,000	)
Total Assets			1,024,000
Capital expenditures			-
Depreciation & Amortization		$	7,000

		Tools
		Nine Months Ended
		August 31, 2024
Revenue from external customers		$	-
Gross Profit (loss)			(74,000	)
Operating Expense			9,000
Loss from operations			(83,000	)
Loss before tax			(124,000	)
Total Assets			1,024,000
Capital expenditures			-
Depreciation & Amortization		$	22,000

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Recently Issued Accounting Pronouncements

Accounting Pronouncements Recently Adopted

Segment Reporting - Improvements to Reportable Segment Disclosures

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

Accounting Pronouncements Not Yet Adopted

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

 

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

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4) Disaggregation of Revenue

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

		Three Months Ended August 31, 2025
		Agricultural				Modular Buildings				Total
Farm equipment		$	1,874,000			$	-			$	1,874,000
Farm equipment service parts			1,039,000				-				1,039,000
Modular buildings			-				3,438,000				3,438,000
Modular building lease income			-				3,000				3,000
Other			70,000				8,000				78,000
		$	2,983,000			$	3,449,000			$	6,432,000

		Three Months Ended August 31, 2024
		Agricultural				Modular Buildings				Total
Farm equipment		$	2,367,000			$	-			$	2,367,000
Farm equipment service parts			532,000				-				532,000
Modular buildings			-				2,776,000				2,776,000
Modular building lease income			-				56,000				56,000
Other			89,000				56,000				145,000
		$	2,988,000			$	2,888,000			$	5,876,000

		Nine Months Ended August 31, 2025
		Agricultural				Modular Buildings				Total
Farm equipment		$	7,192,000			$	-			$	7,192,000
Farm equipment service parts			2,550,000				-				2,550,000
Modular buildings			-				7,783,000				7,783,000
Modular building lease income			-				75,000				75,000
Other			214,000				96,000				310,000
		$	9,956,000			$	7,954,000			$	17,910,000

		Nine Months Ended August 31, 2024
		Agricultural				Modular Buildings				Total
Farm equipment		$	9,870,000			$	-			$	9,870,000
Farm equipment service parts			1,674,000				-				1,674,000
Modular buildings			-				6,268,000				6,268,000
Modular building lease income			-				148,000				148,000
Other			235,000				134,000				369,000
		$	11,779,000			$	6,550,000			$	18,329,000

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

On August 31, 2025, the Company had approximately $274,000 in receivables on the floorplan program with a due date greater than 30 days compared to $341,000 on August 31, 2024.

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5) Accounts receivable 

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

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

		Nine Months Ended (Continuing operations)				Nine Months Ended (Continuing operations)
		August 31, 2025				August 31, 2024
Balance, beginning		$	108,636			$	32,137
Provision charged to expense			(63,947	)			37,128
Less amounts charged-off			-				(12,619	)
Balance, ending		$	44,689			$	56,646

6) Contract Receivables, Contract Assets and Contract Liabilities

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

		August 31, 2025				November 30, 2024
Receivables		$	2,024,000			$	2,373,000
Assets			659,000				213,000
Liabilities			425,000				2,110,000

The amount of revenue recognized in the first nine months of fiscal 2025 that was included in a contract liability on  November 30, 2024 was approximately $255,000 compared to $686,000 in the same period of fiscal 2024. The beginning contract receivables, assets and liabilities on December 1, 2023 were approximately $3,432,000, $289,000 and $767,000, respectively.

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7) Net Income (Loss) Per Share of Common Stock

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

Basic and diluted net income (loss) per share have been computed based on the following as of  August 31, 2025 and August 31, 2024:

		For the Three Months Ended
		August 31, 2025				August 31, 2024
Numerator for basic and diluted net income (loss) per share:
Net income from continuing operations		$	254,110			$	2,230
Net loss from discontinued operations			-				(28,430	)
Net income (loss)			254,110				(26,200	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding			5,106,033				5,071,512
Effect of dilutive stock options			-				-
For diluted net income (loss) per share - weighted average common shares outstanding			5,106,033				5,071,512
Net Income (loss) per share - Basic:
Continuing Operations		$	0.05			$	-
Discontinued Operations			-				(0.01	)
Net income (loss) per share		$	0.05			$	(0.01	)
Net Income (loss) per share - Diluted:
Continuing Operations		$	0.05			$	-
Discontinued Operations			-				(0.01	)
Net income (loss) per share		$	0.05			$	(0.01	)

		For the Nine Months Ended
		August 31, 2025				August 31, 2024
Numerator for basic and diluted net income (loss) per share:
Net income (loss) from continuing operations		$	1,680,423			$	(426,657	)
Net loss from discontinued operations			-				(97,895	)
Net income (loss)			1,680,423				(524,552	)
Denominator:
For basic net income (loss) per share - weighted average common shares outstanding			5,085,183				5,054,092
Effect of dilutive stock options			-				-
For diluted net income (loss) per share - weighted average common shares outstanding			5,085,183				5,054,092
Net Income (Loss) per share - Basic:
Continuing Operations		$	0.33			$	(0.08	)
Discontinued Operations			-				(0.02	)
Net income (loss) per share		$	0.33			$	(0.10	)
Net Income (Loss) per share - Diluted:
Continuing Operations		$	0.33			$	(0.08	)
Discontinued Operations			-				(0.02	)
Net income (loss) per share		$	0.33			$	(0.10	)

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8) Inventory

Major classes of inventory are:

		August 31, 2025				November 30, 2024
Raw materials		$	7,906,042			$	7,882,271
Work in process			375,943				160,209
Finished goods			4,647,244				3,942,435
Total Gross Inventory		$	12,929,229			$	11,984,915
Less: Reserves			(1,691,287	)			(1,657,002	)
Net Inventory		$	11,237,942			$	10,327,913

  

9) Accrued Expenses

Major components of accrued expenses are:

		August 31, 2025				November 30, 2024
Salaries, wages, and commissions		$	466,382			$	803,662
Accrued warranty expense			220,550				225,186
Other			247,033				274,870
Total accrued expenses		$	933,965			$	1,303,718

10) Assets Held for Lease

Major components of assets held for lease are:

		August 31, 2025				November 30, 2024
Modular Buildings		$	61,116			$	89,033
Agricultural products equipment			66,680				-
Total assets held for lease (net)		$	127,796			$	89,033

There were approximately $3,000 and $75,000 of rents recognized from assets held for lease included in sales on the Condensed Consolidated Statements of Operations during the three and nine months ended August 31, 2025, respectively, compared to $56,000 and $148,000 for the three and nine months ending August 31, 2024, respectively. There were no future minimum lease receipts as of  August 31, 2025.

11) Product Warranty

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

		Three Months Ended (Continuing Operations)
		August 31, 2025				August 31, 2024
Balance, beginning		$	213,929			$	196,668
Provision charged to expense			77,334				71,426
Less amounts charged-off			(70,713	)			(52,176	)
Balance, ending		$	220,550			$	215,918

		Nine Months Ended (Continuing Operations)
		August 31, 2025				August 31, 2024
Balance, beginning		$	225,186			$	295,113
Provision charged to expense			260,709				250,102
Less amounts charged-off			(265,345	)			(329,297	)
Balance, ending		$	220,550			$	215,918

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12) Loan and Credit Agreements

Bank Midwest Revolving Lines of Credit and Term Loans

The Company maintains a $4,000,000 revolving line of credit (the “2025 Line of Credit”) with Bank Midwest. On August 31, 2025, the balance of the 2025 Line of Credit was $2,672,437 with $1,327,563 remaining available. The 2025 Line of Credit is subject to a borrowing base, which is an amount equal to 75% of accounts receivable balances (discounted for aged receivables), plus 50% of net inventory, less any outstanding loan balance on the Line of Credit. On August 31, 2025, the 2025 Line of Credit was not limited by the borrowing base calculation. Any unpaid principal amount borrowed on the 2025 Line of Credit accrued interest at a floating rate per annum equal to the Wall Street Journal rate published in the money rates section of the Wall Street Journal. The interest rate floor is set at 6.00% per annum and the interest rate at  August 31, 2025 was 7.5% per annum. The 2025 Line of Credit was most recently renewed on March 27, 2025 with a maturity date of  March 30, 2026 and required monthly interest-only payments. The 2025 Line of Credit is governed by the terms of a Promissory Note, dated March 27, 2025, entered into between the Company and Bank Midwest.

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

On October 1, 2025 the Company entered into a term loan with Bank Midwest in the amount of $516,971 (the “Roof Loan”) to replace portions of the roof on its Armstrong facility. The Term Loan accrues interest at a rate of 7.25% with a payback period of 10 years. The interest rate will be adjusted after 60 payments to the 5-Year Treasury Index plus a margin of 3.25% . Monthly payments of $6,102 in principal and interest are required on the Term Loan beginning on November 5, 2025. 

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

The Term Loan and Roof Loan are secured by a mortgage on the Company’s Armstrong, Iowa and Monona, Iowa properties. Each mortgage is governed by the terms of a separate Mortgage, dated September 28, 2017, and each property is also subject to a separate Assignment of Rents, dated September 28, 2017.

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

Compliance with Bank Midwest covenants is measured annually each  November 30. The terms of the Bank Midwest loan agreements require the Company to maintain a minimum of $4,000,000 of monthly working capital. The Company is also required to maintain a minimum debt service coverage ratio of 1.25, with a 0.10 tolerance. The Company also must receive bank approval for individual purchases or sales of equipment over $50,000 and maintain reasonable salaries and owner compensation. The Company was in compliance with all covenants of Bank Midwest loans as of November 30, 2024. The next measurement date is November 30, 2025 for all covenants except the monthly working capital requirement.

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SBA Economic Injury Disaster Loans

In June of 2020, the Company executed the standard loan documents required for securing loans offered by the U.S. Small Business Administration under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. One outstanding loan was executed on June 18, 2020 with a principal amount of $150,000, with a second loan being executed on June 24, 2020 with a principal amount of $150,000. Proceeds from these EIDLs were used for working capital purposes. Interest accrues at the rate of 3.75% per annum and will accrue from the date of inception. Installment payments, including principal and interest, were due monthly beginning December 18, 2022 and December 24, 2022 (thirty months from the date of the EIDLs) in the amount of $731 per EIDL. The balance of principal and interest is payable 30 years from the date of the EIDL. The EIDLs are secured by a security interest on all of the Company’s assets subordinate to Bank Midwest’s security interest. Both EIDLs are governed by the terms of a separate Promissory Note, dated  June 18, 2020 and  June 24, 2020, as applicable, entered into by the Company or the applicable subsidiary.

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

		August 31, 2025				November 30, 2024
Bank Midwest loan payable in monthly installments of $19,648 including interest at 7.00%, due October 1, 2037		$	1,695,544			$	1,779,877
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning December 18, 2022, due June 18, 2050			155,110				157,304
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning December 24, 2022, due June 24, 2050			155,605				157,785
Total term debt		$	2,006,259			$	2,094,966
Less current portion of term debt			(125,979	)			(119,734	)
Term debt, excluding current portion		$	1,880,280			$	1,975,232

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

Year		Amount
2026		$	125,979
2027			134,233
2028			143,550
2029			154,157
2030			165,225
2031 and thereafter			1,283,115
		$	2,006,259

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13) Income Taxes

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

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

14) Related Party Transactions

During the three and nine months ended August 31, 2025, and August 31, 2024, the Company did not recognize any revenues from transactions with a related party, and no amounts in accounts receivable balances were due from a related party. From time to time, the Company purchases various supplies from related parties, which are companies in which Marc McConnell, the Company's chairman and principal executive officer, has an ownership interest and also serves as President. The J. Ward McConnell, Jr. Living Trust, is paid a monthly fee to guarantee a portion of the Company’s term debt in accordance with the USDA guarantee obtained on the Company’s term debt. In the three and nine months ended August 31, 2025, the Company recognized $3,267 and $9,796 of expense for transactions with related parties compared to $3,869 and $11,549 for the three and nine months ended August 31, 2024. As of August 31, 2025, accrued expenses contained a balance of $1,094 owed to a related party compared to $1,299 on August 31, 2024.

15) Leases

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

		November 30, 2024
Operating lease right-of-use assets (in other assets)		$	13,774
Current portion of operating lease liabilities (in accrued expenses)		$	9,074
Long-term portion of operating lease liabilities			4,700
Total operating lease liabilities		$	13,774

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

		August 31, 2025				November 30, 2024
Finance lease right-of-use assets (net of amortization in other assets)		$	367,120			$	377,753
Current portion of finance lease liabilities		$	246,565			$	220,908
Long-term portion of finance lease liabilities			436,910				534,436
Total finance lease liabilities		$	683,475			$	755,344

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16) Equity Incentive Plan and Stock Based Compensation

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

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

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

		For the Three Months Ended
		August 31, 2025				August 31, 2024
Shares issued to directors (immediate vesting)			5,000				5,000
Unvested shares forfeited upon termination			(6,250	)			-
Total shares issued (forfeited)			(1,250	)			5,000

		For the Nine Months Ended
		August 31, 2025				August 31, 2024
Shares issued to directors (immediate vesting)			30,000				20,000
Shares issued to directors, employees, and consultants (three-year vesting)			47,500				69,000
Unvested shares forfeited upon termination			(6,250	)			(6,750	)
Total shares issued (forfeited)			71,250				82,250

17) Disclosures About the Fair Value of Financial Instruments

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

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18) Segment Information

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

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

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

Approximate financial information with respect to the reportable segments is as follows.

		Three Months Ended August 31, 2025
		Agricultural Products				Modular Buildings				Consolidated (Continuing Operations)1
Revenue from external customers		$	2,983,000			$	3,449,000			$	6,432,000
Gross profit			546,000				1,220,000				1,766,000
Operating Expense			1,029,000				392,000				1,421,000
Income (loss) from operations			(483,000	)			828,000				345,000
Income (loss) before tax			(491,000	)			812,000				321,000
Income tax expense (benefit)		$	(103,000	)		$	170,000			$	67,000
Total Assets		$	18,323,000			$	3,493,000			$	21,816,000
Capital expenditures2			218,000				88,000				306,000
Depreciation & Amortization			150,000				45,000				195,000
Interest expense			68,000				16,000				84,000
Engineering			87,000				-				87,000
Selling			199,000				152,000				351,000
General and administrative (G&A)			743,000				240,000				983,000
Corporate expense (included in G&A)		$	85,000			$	45,000			$	130,000

		Three Months Ended August 31, 2024
		Agricultural Products				Modular Buildings				Consolidated (Continuing Operations)1
Revenue from external customers		$	2,988,000			$	2,888,000			$	5,876,000
Gross profit			814,000				886,000				1,700,000
Operating Expense			1,287,000				259,000				1,546,000
Income (loss) from operations			(472,000	)			626,000				154,000
Income (loss) before tax			(618,000	)			618,000				-
Income tax expense (benefit)		$	(130,000	)		$	127,000			$	(3,000	)
Total Assets		$	19,311,000			$	3,136,000			$	22,447,000
Capital expenditures			50,000				52,000				102,000
Depreciation & Amortization			163,000				66,000				229,000
Interest Expense			140,000				10,000				150,000
Engineering			79,000				-				79,000
Selling			303,000				78,000				381,000
General and administrative (G&A)			905,000				181,000				1,086,000
Corporate expense (included in G&A)		$	162,000			$	30,000			$	192,000

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		Nine Months Ended August 31, 2025
		Agricultural Products				Modular Buildings				Consolidated (Continuing Operations)1
Revenue from external customers		$	9,956,000			$	7,954,000			$	17,910,000
Gross profit			2,428,000				2,894,000				5,322,000
Operating Expense			3,340,000				1,125,000				4,465,000
Income (loss) from operations			(911,000	)			1,769,000				858,000
Income (loss) before tax			176,000				1,951,000				2,127,000
Income tax expense (benefit)		$	37,000			$	409,000			$	446,000
											-
Total Assets		$	18,323,000			$	3,493,000			$	21,816,000
Capital expenditures2			419,000				153,000				572,000
Depreciation & Amortization			445,000				148,000				593,000
Interest expense			214,000				45,000				259,000
Engineering			257,000				-				257,000
Selling			666,000				471,000				1,137,000
General and administrative (G&A)			2,417,000				654,000				3,071,000
Corporate expense (included in G&A)		$	325,000			$	135,000			$	460,000

		Nine Months Ended August 31, 2024
		Agricultural Products				Modular Buildings				Consolidated (Continuing Operations)1
Revenue from external customers		$	11,779,000			$	6,550,000			$	18,329,000
Gross profit			3,278,000				1,802,000				5,080,000
Operating Expense			4,336,000				802,000				5,138,000
Income (loss) from operations			(1,057,000	)			999,000				(58,000	)
Income (loss) before tax			(1,516,000	)			973,000				(543,000	)
Income tax expense (benefit)		$	(318,000	)		$	202,000			$	(116,000	)
Total Assets		$	19,311,000			$	3,136,000			$	22,447,000
Capital expenditures			438,000				176,000				614,000
Depreciation & Amortization			472,000				192,000				664,000
Interest expense			443,000				28,000				471,000
Engineering			346,000				1,000				347,000
Selling			1,010,000				232,000				1,242,000
General and administrative (G&A)			2,980,000				569,000				3,549,000
Corporate expense (included in G&A)		$	486,000			$	90,000			$	576,000

1. The consolidated total in the tables is a sum of segment figures and may not tie to actual figures in the condensed consolidated financial statements due to rounding.

2. Includes $45,000 of Right of Use Assets acquired in the Agricultural Products Segment.

3. Includes $97,000 of Right of Use Assets acquired in the Agricultural Products Segment.

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19) Subsequent Events

Management evaluated all other activity of the Company and concluded that no subsequent events have occurred other than the roof loan that was signed on October 1, 2025 in Note 12 Loan and Credit Agreements that would require recognition in the condensed consolidated financial statements.

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

Forward-Looking Statements

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

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

Critical Accounting Policies

Our critical accounting policies involving the more significant judgments and assumptions used in the preparation of our financial statements as of August 31, 2025 remain unchanged from November 30, 2024. Disclosure of these critical accounting policies is incorporated by reference from Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended November 30, 2024.

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Results of Operations

Net Sales and Cost of Sales

Our consolidated corporate sales from continuing operations for the three- and nine-month period ended August 31, 2025 were $ 6,432,000, and  $17,910,000, respectively, compared to $5,876,000 and $18,329,000, respectively, during the same periods in fiscal 2024. For the three months ended August 31, 2025, we saw a sales increase of  $556,000, or 9.5%, from the same period in fiscal 2024. For the nine months ended August 31, 2025, we saw a sales decrease of  $419,000, or 2.3%, from the same period in fiscal 2024. Consolidated gross margin for the three and nine months ended August 31, 2025 was 27.5% and 29.7%, respectively, compared to 28.9%  and 27.7%, respectively, for the same periods in fiscal 2024. 

Our 2025 third fiscal quarter sales in our Agricultural Products segment were $2,983,000 compared to $2,988,000 during the same period of fiscal 2024, a decrease of $5,000, or 0.2%. For the nine months ended August 31, 2025, our sales in the Agricultural Products segment were $9,956,000 compared to $11,779,000 during the same period of fiscal 2024, a decrease of $1,823,000, or 15.5%. We have experienced decreased demand for the last six fiscal quarters due to difficult agricultural market conditions highlighted by high interest rates, increasing input costs and low row crop prices. Although our inventory decreased from heightened levels in fiscal 2024, many dealers are still sitting on inventory from other equipment manufacturers, which hampers our ability to get these dealers to stock more of our equipment. We believe product availability will be key for the next two fiscal quarters to capitalize on retail opportunities and year end tax buying. Strategically, we are continuing to build inventory through our fiscal year end despite low demand in order to be responsive to farmers; needs this fall. Livestock prices, predominately cattle, continue to be at all-time highs in fiscal 2025 and have driven strong grinder mixer sales activity thus far in fiscal 2025. We expect cattle farmers to have strong earnings in 2025 and we could potentially see retail opportunities in an attempt to offset tax liability prior to the calendar year-end. The agriculture market is highly cyclical, and we believe this is the bottom of the cycle. We anticipate that conditions will start to improve in the next 9 to 15 months in our market. Our efforts in fiscal 2024 to right-size our production and administrative staff has reduced our operating expenses which is aiding in our efforts to weather the bottom of the cycle. Our fall early order program starts in October and runs through January 15th. Gross margin for our Agricultural Products segment for the three-month period ended August 31, 2025 was 18.3% compared to 27.2% for the same period in fiscal 2024, while our gross margin for the nine-month period ended August 31, 2025 was 24.4% compared to 27.8% for the same period of fiscal 2024. The sales decreases for the three- and nine- months periods ended August 31, 2025 compared to the same periods in fiscal 2024, resulted in less variable margin to cover our fixed costs comparatively while inflationary forces also negatively affected our gross margin. Steel prices began to rise in February 2025 due to tariff uncertainty and infrastructure projects that impacted domestic demand. While steel prices have dropped from their peak in April 2025, we have not seen them return to 2024 levels. We are also paying higher prices from tariff charges for imported products, which is negatively affecting our margin. We are exploring reshoring options for these items in an attempt to reduce the gross margin impact. We expect to pass on a 3-5% price increase to our customers with our fall early order program due to rising costs from our suppliers.

Our third fiscal quarter sales in our Modular Buildings segment were $3,449,000 compared to $2,888,000 for the same period in fiscal 2024, an increase of $561,000, or 19.4%. Our Modular Buildings segment sales for the nine months ended August 31, 2025 were $7,954,000 compared to $6,550,000 for the same period of fiscal 2024, an increase of $1,404,000, or 21.4%. Consistent execution on our backlog by our project managers and production team has driven sales up approximately 20% for the quarter and year to date ending August 31, 2025. We continue to grow our reputation with impactful projects in the custom research and laboratory fields in fiscal 2025. Quoting activity and custom build inquiries continue to remain strong as we cross into Q4 of fiscal 2025, despite earlier concerns about a pullback of governmental grants and funding. In Q1 of fiscal 2025, we brought on a Director of Business Development and Sales who replaced our then-serving President and Director of Sales. Our outgoing President and Director of Sales is working part time as a consultant moving forward to maintain customer relationships. With the additional sales help we are exploring new markets where our custom buildings can offer competitiveness to the marketplace including but not limited to: datacenters, wastewater treatment facilities, petroleum and mining analysis labs, chemical production and transportation offices. Gross margin in the Modular Buildings segment for the three- and nine-month period ended August 31, 2025 was 35.4% and 36.4%, respectively, compared to 30.7% and 27.5%, respectively, for the same periods in fiscal 2024. We continue to see strong margins in this segment from increased workforce proficiency and software improvements, which have improved our data analytics and ability to remain within budgeted costs. 

Expenses

Consolidated selling expenses from continuing operations for the three months ended August 31, 2025 were $351,000, compared to $381,000 for the same period in fiscal 2024. For the nine months ended August 31, 2025, our consolidated selling expenses from continuing operations were $1,137,000 compared to $1,241,000 from the same period in fiscal 2024. The decrease in selling expenses is due to a reduction of employees on the sales and marketing teams in the Agricultural Products segment. Selling expenses as a percentage of sales were 6.3% for the nine months ended August 31, 2025 compared to 6.8% for nine months ended August 31, 2024. 

Consolidated engineering expenses from continuing operations were $87,000 for Q3 of fiscal 2025 compared to $79,000 for the same period in fiscal 2024. For the nine months ended August 31, 2025, consolidated engineering expenses were $257,000 compared to $346,000 for the same period in fiscal 2024. The decrease in engineering expenses is related to the reduction in our engineer headcount at the beginning of fiscal 2024. We expect to add a product development manager to our team as we find the right candidate to fit our business in an attempt to bolster our product offerings. Engineering expenses as a percentage of sales were 1.4% for the nine months ended August 31, 2025, compared to 1.9% for the same period in fiscal 2024.

Consolidated administrative expenses from continuing operations for the three- and nine-month period ended August 31, 2025 were $983,000 and $3,071,000, respectively, compared to $1,087,000 and $3,550,000, respectively, for the same periods in fiscal 2024. Administrative expenses as a percentage of sales were 17.1% for the nine months ended August 31, 2025, compared to 19.4% for the same period in fiscal 2024. Administrative expenses decreased year-over-year primarily due to early retirement incentives we offered to help right-size our workforce in Q1 of fiscal 2024, which was not repeated in fiscal 2025. We also reduced administrative headcount including our Chairman of the Board stepping in to fill our Chief Executive Officer role in Q4 of fiscal 2024, which positively impacted administrative expenses in fiscal 2025 versus fiscal 2024. Cloud computing expenses related to upgrading an enterprise resource planning system in the Agricultural Products segment was fully amortized in Q2 of fiscal 2025, and has reduced our administrative expenses in fiscal 2025 and is expected to continue to do so comparatively in fiscal 2026. 

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Net income (loss) from continuing operations

Consolidated net income from continuing operations was $254,000 for the three-month period ended August 31, 2025, compared to net income of $2,000 for the same period in fiscal 2024. Our consolidated net income from continuing operations was $1,680,000 for the nine months ended August 31, 2025, compared to net loss of $427,000 for the same period in fiscal 2024. Our operating results are improved in both reportable segments year on year, despite the decrease in sales for our Agricultural Products segment. Cost cutting procedures enacted in fiscal 2024 in the Agricultural Products segment has stabilized our operating results while the agriculture market waits for a rebound. We remain focused on maintaining our agricultural product reputation and price competitiveness to ensure our brand endures the current slowdown. We have identified some existing product line opportunities to capitalize on in fiscal 2026 that we believe help drive up our sales even in a downtown. We believe, this segment will be poised to capitalize and provide profitability when markets do improve. Our Modular Buildings segment continues to perform with solid operating income and near record sales. We expect continued success in the Modular Buildings segment as leads continue converting to contract. Our consolidated net income from continuing operations for the nine months ended August 31, 2025 also benefited largely from the receipt of Employee Retention Credit refunds in the approximate amount of $1,154,000 including interest, net of consulting fees to prepare credit and tax study and net of tax.  

Order Backlog

The consolidated order backlog net of discounts for continuing operations as of October 5, 2025 was $3,532,000 compared to $5,455,000 as of October 5, 2025, a 35.2% decrease. The order backlog in our Agricultural Products segment was $847,000 as of  October 5, 2025 compared to $708,000 in fiscal 2024, a 19.7% increase. We expect to see fall orders pick up as yearend tax buying occurs for cattle farmers who are seeing record beef prices. The backlog for the Modular Buildings segment was $2,685,000 as of October 5, 2025, compared to $4,747,000 in fiscal 2024, a 43.4% decrease. The backlog decrease is due mostly to the timing of when project contracts were signed. We expect similar results in this segment due to project opportunities we are quoting that are not under contract yet. Our order backlog is not necessarily indicative of future revenue to be generated from such orders due to the possibility of order cancellations and dealer discount arrangements we may enter into from time to time.

Liquidity and Capital Resources

Our primary source of funds for the nine months ended August 31, 2025 was cash generated by financing activities, mainly the use of our line of credit. Our line usage increased as we fulfilled obligations on our contracts in progress in the Modular Buildings segment; moving from a position where we were overbilled by approximately $1,715,000 at November 30, 2024 to our position at August 31, 2025, underbilled by approximately $307,000. Our line usage is also up due to increasing inventory in the Agricultural Products segment as we build stocking inventory to be responsive to end user needs. With equipment dealers not in a position to stock, we need to be able to react to retail opportunities quickly. We received a cash boost in Q2 of fiscal 2025, receiving net proceeds of approximately $1,461,000 from Employer Retention Credit refunds. Collection of accounts receivable and an increase in accounts payable drove cash in for the nine months ended August 31, 2025. We also had operating income from continuing operations of approximately $858,000 for the nine months ended August 31, 2025 with approximately $687,000 of non-cash reconciling items. We expect progress on construction products to be a major generator of cash and line of credit usage to remain steady for the remainder of fiscal 2025. We expect our primary cash needs for the remainder of the fiscal year to be inventory increases in the Agricultural Products segment and capital needs including fixing a portion of our roof and equipment that increases our production efficiency.

As of August 31, 2025, our revolving credit line had an outstanding principal balance of $2,672,437. We renewed our revolving line of credit with Bank Midwest on March 27, 2025, with a scheduled maturity date of March 30, 2026. In our most recent renewal, we dropped our principal balances from $5,500,000 to $4,000,000 and also negotiated an interest rate 75 basis points lower than our previous line of credit. Bank Midwest's credit committee has preapproved an additional $1,500,000 of principal for the 2025 renewal, consistent with the borrowing availability of our previous line of credit, in the event we need additional funding.

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

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

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

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

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

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

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

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

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Item 6. Exhibits.

Exhibit No.	Description
3.1	Conformed Certificate of Incorporation of Art’s-Way Manufacturing Co., Inc. – incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2020.
3.2	Conformed Bylaws of Art’s-Way Manufacturing Co., Inc.– incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2020.
10.1	Promissory Note, between Bank Midwest and Art's-Way Manufacturing Co., Inc. - filed herewith.
31.1	Certification of Chief Executive Officer pursuant to 17 CFR 13a-14(a) – filed herewith.
31.2	Certification of Chief Financial Officer pursuant to 17 CFR 13a-14(a) – filed herewith.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 - furnished herewith.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 - furnished herewith.
101	The following materials from this report, formatted in iXBRL (Inline Extensible Business Reporting Language) are filed herewith: (i) condensed consolidated balance sheets, (ii) condensed consolidated statement of operations, (iii) condensed consolidated statements of stockholders' equity, (iv) condensed consolidated statements of cash flows, and (v) the notes to the condensed consolidated financial statements.
104	Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101).

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SIGNATURES

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

	ART’S-WAY MANUFACTURING CO., INC.
Date: October 14, 2025	By: /s/ Marc H. McConnell
	Marc H. McConnell
	President, Chief Executive Officer and Chairman
Date: October 14, 2025	By: /s/ Michael W. Woods
	Michael W. Woods
	Chief Financial Officer

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FAQ

What were ARTW’s Q3 2025 sales and earnings?

Q3 2025 sales were $6,432,296, with net income from continuing operations of $254,110 and EPS of $0.05.

How did Art’s-Way’s segments perform in Q3 2025?

Modular Buildings delivered $3,449,000 revenue and 35.4% gross margin; Agricultural Products posted $2,983,000 and 18.3% gross margin.

What drove ARTW’s year-to-date profitability in 2025?

Nine-month net income from continuing operations was $1,680,423, supported by ERC-related other income of $1,620,103 plus $246,108 interest, offset by $405,026 fees.

What is ARTW’s liquidity position and debt mix?

Cash was $5,960. The revolving line of credit had $2,672,437 outstanding at 7.5% with $1,327,563 available. Term debt totaled $2,006,259.

Did ARTW enter any new financing after quarter-end?

Yes. On October 1, 2025, the company entered a $516,971 roof loan at 7.25% with a 10-year payback.

What were ARTW’s year-to-date results?

Year-to-date sales were $17,909,941, with net income from continuing operations of $1,680,423 and EPS of $0.33.

What was the order backlog as of early October 2025?

As of October 5, 2025, consolidated order backlog for continuing operations was $3,532,000.