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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended May 31, 2026

☐	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 June 22, 2026: 5,201,386

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 May 31, 2026 and November 30, 2025	1
	Condensed Consolidated Statements of Operations for the Three-Month and Six-Month Periods ended May 31, 2026 and May 31, 2025	2
	Condensed Consolidated Statements of Stockholders’ Equity for the Three-Month and Six-Month Periods ended May 31, 2026 and May 31, 2025	3
	Condensed Consolidated Statements of Cash Flows for the Six-Month Periods ended May 31, 2026 and May 31, 2025	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	18
PART II – OTHER INFORMATION		19
Item 1.	Legal Proceedings	19
Item 1A.	Risk Factors	19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3.	Defaults Upon Senior Securities	19
Item 4.	Mine Safety Disclosures	19
Item 5.	Other Information	19
Item 6.	Exhibits	20
	SIGNATURES	21

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Balance Sheets

	(Unaudited)
	*May 31, 2026*			*November 30, 2025*
Assets
Current assets:
Cash		5,969			4,849
Receivables, net		2,705,607			2,201,879
Inventories, net		11,497,820			11,708,242
Cost and profit in excess of billings		856,959			379,547
Other current assets		955,203			487,020
Total current assets		16,021,558			14,781,537

Property, plant, and equipment, net		5,241,316			5,082,406
Assets held for lease, net		139,283			144,618
Deferred income taxes, net		1,953,092			2,060,934
Other assets		323,150			408,060
Total assets	$	23,678,399		$	22,477,555
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		1,508,763			902,326
Customer deposits		175,142			88,920
Billings in excess of cost and profit		529,447			430,712
Income taxes payable		15,000			15,000
Accrued expenses		1,093,748			1,327,569
Line of credit		3,495,438			3,252,437
Current portion of finance lease liabilities		269,135			255,748
Insurance premium finance liability		112,526			-
Current portion of long-term debt		191,348			165,326
Total current liabilities		7,390,547			6,438,038

Long-term portion of finance lease liabilities		268,111			408,154
Long-term debt, excluding current portion		2,215,497			2,325,103
Total liabilities		9,874,155			9,171,295
Commitments and Contingencies (Notes 8, 10, 11 and 14)
Stockholders’ equity:
Undesignated preferred stock - $0.01 par value. Authorized 500,000 shares on May 31, 2026 and November 30, 2025; issued and outstanding 0 shares on May 31, 2026 and November 30, 2025.		-			-
Common stock – $0.01 par value. Authorized 9,500,000 shares on May 31, 2026 and November 30, 2025; 5,315,673 issued on May 31, 2026 and 5,225,423 on November 30, 2025		53,157			52,254
Additional paid-in capital		5,328,020			5,199,167
Retained earnings		8,733,448			8,363,527
Treasury stock, at cost (114,287 shares on May 31, 2026 and 113,589 shares on November 30, 2025)		(310,381	)		(308,688	)
Total stockholders’ equity		13,804,244			13,306,260
Total liabilities and stockholders’ equity	$	23,678,399		$	22,477,555

See accompanying notes to condensed consolidated financial statements.

Table of Contents

ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended						Six Months Ended
	*May 31, 2026*			*May 31, 2025*			*May 31, 2026*			*May 31, 2025*
Sales	$	7,854,123		$	6,336,690		$	14,494,409		$	11,477,645
Cost of goods sold		5,822,256			4,276,913			10,551,082			7,921,359
Gross profit		2,031,867			2,059,777			3,943,327			3,556,286
Expenses
Engineering		94,062			84,115			200,609			169,345
Selling		433,573			435,902			870,276			785,879
General and administrative		1,217,650			1,029,106			2,255,843			2,087,924
Total expenses		1,745,285			1,549,123			3,326,728			3,043,148
Income from operations		286,582			510,654			616,599			513,138

Other income (expense):
Interest expense		(113,047	)		(99,666	)		(223,824	)		(175,354	)
Other		52,350			1,464,892			88,557			1,467,686
Total other income (expense)		(60,697	)		1,365,226			(135,267	)		1,292,332
Income before income taxes		225,885			1,875,880			481,332			1,805,470
Income tax expense		52,406			393,811			111,411			379,157
Net income	$	173,479		$	1,482,069		$	369,921		$	1,426,313

See accompanying notes to condensed consolidated financial statements.

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ART’S-WAY MANUFACTURING CO., INC.

Condensed Consolidated Statements of Stockholders' Equity

Six Months Ended May 31, 2026 and May 31, 2025

(Unaudited)

	*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		72,500		725		103,439		-		875		(1,542	)		102,623
Net loss		-		-		-		1,426,313		-		-			1,426,313
Balance, May 31, 2025		5,200,173	$	52,217	$	5,124,289	$	8,754,941		113,589	$	(308,688	)	$	13,622,758

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

Balance, November 30, 2025		5,225,423	$	52,254	$	5,199,167	$	8,363,527		113,589	$	(308,688	)	$	13,306,260
Stock based compensation		90,250		903		128,853		-		698		(1,693	)		128,063
Net income		-		-		-		369,921		-		-			369,921
Balance, May 31, 2026		5,315,673	$	53,157	$	5,328,020	$	8,733,448		114,287	$	(310,381	)	$	13,804,244

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)

	Six Months Ended
	*May 31, 2026*			*May 31, 2025*
Cash flows from operations:
Net income	$	369,921		$	1,426,313
Adjustments to reconcile net income to net cash provided by operating activities:
Stock based compensation		129,756			104,164
Decrease in obsolete inventory reserves		122,568			71,156
Gain on disposal of property, plant, and equipment		(47,594	)		-
Depreciation and amortization expense		409,720			397,935
Amortization of cloud computing implementation costs		-			60,909
Increase (decrease) in allowance for expected credit losses - receivables		12,313			(60,796	)
Deferred income taxes		107,842			378,721
Changes in assets and liabilities:
(Increase) decrease in:
Receivables		(516,040	)		592,904
Inventories		87,854			(519,045	)
Cost and profit in excess of billings		(477,411	)		(123,201	)
Other assets		(246,093	)		(182,591	)
Increase (decrease) in:
Accounts payable		606,437			303,687
Billings in excess of cost and profit		98,735			(888,346	)
Customer deposits		86,222			25,630
Income taxes payable		-			(500	)
Accrued expenses		(233,819	)		(334,565	)
Net cash provided by operating activities		510,409			1,252,373
Cash flows from investing activities:
Purchases of property, plant, and equipment		(517,053	)		(213,441	)
Proceeds from sale of assets		86,262			-
Net cash used in investing activities		(430,791	)		(213,441	)
Cash flows from financing activities:
Net change in line of credit		243,000			(866,000	)
Principal payments on finance lease obligations		(126,656	)		(109,724	)
Principal payments on financed insurance premiums		(109,564	)		-
Repayment of term debt		(83,585	)		(58,993	)
Repurchases of common stock		(1,693	)		(1,542	)
Net cash used in financing activities		(78,498	)		(1,036,258	)
Net increase in cash		1,120			2,674
Cash at beginning of period		4,849			1,860
Cash at end of period	$	5,969		$	4,534

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	216,063		$	157,131
Income taxes	$	3,570		$	992

Supplemental disclosures of non-cash operating activities:
Financed insurance premium (other current assets)	$	222,090		$	-
Right-of-use (ROU) assets acquired (included in other assets)	$	-		$	52,285
Amortization of operating lease ROU assets (included in other assets)	$	-		$	13,774

See accompanying notes to condensed consolidated financial statements.

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Notes to Unaudited Condensed Consolidated Financial Statements

Description of the Company

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

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

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

Summary of Significant Accounting Policies

Statement Presentation

The foregoing condensed consolidated financial statements of the Company are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position and operating results for the interim periods. The condensed consolidated financial statements should be read in conjunction with the condensed financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2025. The results of operations for the three and six months ended May 31, 2026 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2026.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the three and six months ended May 31, 2026. Actual results could differ from those estimates.

Allowance for Credit Losses

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

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

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 the second quarter of 2021 and $821,267 was related to the third quarter of 2021. Because of the IRS moratorium in place on ERC refunds while filing, the Company did not record a receivable at the time of filing. The Company recorded the $1,620,103 of ERC refund in other income on the consolidated statement of operations and also incurred $405,026 of consulting fees for preparation of the credits and a tax study, which was recorded in other expense on the consolidated statement of operations. The Company also received $246,108 of interest income on the credits that was recorded in other income on the consolidated statement of operations.

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

	Agricultural Products			Modular Buildings			Consolidated (Continuing Operations)
Employee retention credit (other income)	$	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

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Recently Issued Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

In October 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("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 not expecting a significant impact to its financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact these standards will have on it financial statements.

Disaggregation of Revenue

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

	*Three Months Ended May 31, 2026*
	Agricultural Products		Modular Buildings		Total
Farm equipment	$	3,631,000	$	-	$	3,631,000
Farm equipment service parts		670,000		-		670,000
Modular buildings		-		3,452,000		3,452,000
Modular building lease income		-		-		-
Other		73,000		28,000		101,000
	$	4,374,000	$	3,480,000	$	7,854,000

	*Three Months Ended May 31, 2025*
	Agricultural Products		Modular Buildings		Total
Farm equipment	$	3,350,000	$	-	$	3,350,000
Farm equipment service parts		603,000		-		603,000
Modular buildings		-		2,227,000		2,227,000
Modular building lease income		-		26,000		26,000
Other		73,000		58,000		131,000
	$	4,026,000	$	2,311,000	$	6,337,000

	*Six Months Ended May 31, 2026*
	Agricultural		Modular Buildings		Total
Farm equipment	$	6,515,000	$	-	$	6,515,000
Farm equipment service parts		1,460,000		-		1,460,000
Modular buildings		-		6,332,000		6,332,000
Modular building lease income		-		-		-
Other		153,000		34,000		187,000
	$	8,128,000	$	6,366,000	$	14,494,000

	*Six Months Ended May 31, 2025*
	Agricultural		Modular Buildings		Total
Farm equipment	$	5,344,000	$	-	$	5,344,000
Farm equipment service parts		1,486,000		-		1,486,000
Modular buildings		-		4,346,000		4,346,000
Modular building lease income		-		72,000		72,000
Other		143,000		87,000		230,000
	$	6,973,000	$	4,505,000	$	11,478,000

The Company offered floorplan terms in its Agricultural Products segment during its Fall of 2024 and 2025 early order programs to incentivize customers to stock farm equipment on their lots for fiscal 2025 and fiscal 2026. Floorplan terms allow customers to pay the Company at the earliest of retail date or up to 360 days. This program can have an effect on the timing of the Company’s cash flows compared with historical cash flows.

On May 31, 2026, the Company had approximately $373,000 in receivables on the floorplan program with a due date greater than 30 days compared to $102,000 on May 31, 2025.

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Receivables

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

The activity related to expected credit losses for the six months ended May 31, 2026 and six months ended May 31, 2025 was as follows:

	*Six Months Ended*		*Six Months Ended*
	*May 31, 2026*		*May 31, 2025*
Balance, beginning	$	60,601	$	47,839
Provision charged to expense		12,313		(60,797	)
Less amounts charged-off		-		60,797
Balance, ending	$	72,914	$	47,839

Contract Receivables, Contract Assets and Contract Liabilities

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

	*May 31, 2026*		*November 30, 2025*
Receivables	$	2,706,000	$	2,202,000
Assets (cost and profit in excess of billings)		857,000		380,000
Liabilities (billings in excess of profit and customer deposits)		705,000		520,000

The amount of revenue recognized in the first six months of fiscal 2026 that was included in a contract liability on November 30, 2025 was approximately $421,000 compared to $248,000 in the same period of fiscal 2025. The beginning contract receivables, assets and liabilities on December 1, 2024 were approximately $2,373,000, $213,000 and $2,110,000, respectively.

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Net Income Per Share of Common Stock

Net income per share of common stock has been computed on the basis of the weighted average number of common shares outstanding.

Net income per share has been computed based on the following as of May 31, 2026 and May 31, 2025:

	For the Three Months Ended
	May 31, 2026		May 31, 2025
Numerator for net income per share:

Net income	$	173,479	$	1,482,069

Denominator:
For net income per share - weighted average common shares outstanding		5,188,198		5,094,188

Net income per share	$	0.03	$	0.29

	*For the Six Months Ended*
	*May 31, 2026*		*May 31, 2025*
Numerator for net income per share:

Net income	$	369,921	$	1,426,313

Denominator:
For net income per share - weighted average common shares outstanding		5,164,445		5,074,643

Net income per share	$	0.07	$	0.28

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Inventory

Major classes of inventory are:

	*May 31, 2026*			*November 30, 2025*
Raw materials	$	8,446,021		$	8,272,500
Work in process		424,151			387,332
Finished goods		4,743,691			5,441,067
Total Gross Inventory	$	13,613,863		$	14,100,899
Less: Reserves		(2,116,043	)		(2,392,656	)
Net Inventory	$	11,497,820		$	11,708,242

Accrued Expenses

Major components of accrued expenses are:

	*May 31, 2026*		*November 30, 2025*
Salaries, wages, and commissions	$	650,942	$	729,429
Accrued warranty expense		177,661		225,000
Other		265,145		373,140
Total accrued expenses	$	1,093,748	$	1,327,569

Assets Held for Lease

Major components of assets held for lease are:

	*May 31, 2026*		*November 30, 2025*
Modular Buildings	$	80,605	$	80,605
Agricultural Products equipment		58,678		64,013
Total assets held for lease (net)	$	139,283	$	144,618

There were approximately $1,000 and $3,000 of rents recognized from assets held for lease included in sales on the Condensed Consolidated Statements of Operations during the three and six months ended May 31, 2026, compared to $26,000 and $72,000 for the three and six months ended May 31, 2025, respectively.

There were no future minimum lease receipts as of May 31, 2026.

10)

Product Warranty

The Company offers warranties of various lengths to its customers depending on the specific product and terms of the customer purchase agreement. The average length of the warranty period is one year from the date of purchase. The Company’s warranties require it to repair or replace defective products during the warranty period at no cost to the customer. Product warranty is included in the price of the product and provides assurance that the product will function in accordance with agreed-upon specifications. It does not represent a separate performance obligation under ASC 606. The Company records a liability for estimated costs that may be incurred under its warranties. The costs are estimated based on historical experience and any specific warranty issues that have been identified. Although historical warranty costs have been within expectations, there can be no assurance that future warranty costs will not exceed historical amounts. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the balance as necessary. The accrued warranty balance is included in accrued expenses as shown in Note 8 “Accrued Expenses.” Changes in the Company’s product warranty liability for the three and six months ended May 31, 2026 and May 31, 2025 are as follows:

	*Three Months Ended*
	*May 31, 2026*			*May 31, 2025*
Balance, beginning	$	230,905		$	190,831
Provision charged to expense		99,541			98,336
Less amounts charged-off		(152,785	)		(75,238	)
Balance, ending	$	177,661		$	213,929

	*Six Months Ended*
	*May 31, 2026*			*May 31, 2025*
Balance, beginning	$	225,000		$	225,186
Provision charged to expense		177,480			183,376
Less amounts charged-off		(224,819	)		(194,633	)
Balance, ending	$	177,661		$	213,929

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11)

Loan and Credit Agreements

Bank Midwest Revolving Lines of Credit and Term Loans

The Company maintains a $4,000,000 revolving line of credit (the "Line of Credit”) with Bank Midwest. On May 31, 2026, the balance of the Line of Credit was $3,495,438 with $504,562 remaining available. The Line of Credit is subject to a borrowing base, which is an amount equal to 75% of accounts receivable balances (discounted for aged receivables), plus 50% of net inventory, less any outstanding loan balance on the Line of Credit. On May 31, 2026, the Line of Credit was not limited by the borrowing base calculation. Any unpaid principal amount borrowed on the Line of Credit accrues interest at a floating rate per annum equal to the 1-month SOFR (the "index") rate plus 2.600 percentage points over the index that is published by the CME Group Benchmark Administration on its website each business day. The interest rate floor is set at 5.00% per annum and the interest rate on June 18, 2026 was 6.23% per annum. The Line of Credit was most recently renewed on March 19, 2026 with a maturity date of March 30, 2027 and requires monthly interest-only payments. The Line of Credit is governed by the terms of a Promissory Note, dated March 19, 2026, entered into between the Company and Bank Midwest.

On June 22, 2026, the Company entered into a credit facility (the “Credit Facility”) with Bank Midwest, consisting of a $500,000 revolving line of credit (the “Reserve Line of Credit”) which is governed by a Promissory Note executed and delivered by the Company on such date. The Reserve Line of Credit is secondary to the Company’s Line of Credit and will be utilized upon the Line of Credit reaching capacity. The Reserve Line of Credit matures on March 30, 2027 with monthly interest-only payments at a rate of 2.600% above the 1-month SOFR index with an initial interest rate is 6.225% per annum. The Reserve Line of Credit was activated to pay large equipment deposits on a new fiberoptic laser and crane system for the Agricultural Products Segment. Upon delivery and installation, which is estimated in 16-18 weeks, the deposits and balance of the equipment will be converted to term debt with a 15-year term at an original estimated rate of 6.50% per annum (estimated interest rate may fluctuate with market rates).

The Company carries a $2,600,000 term loan with Bank Midwest due October 1, 2037 (the “Term Loan”). The Term Loan accrues interest at a rate of 6.25%, which was most recently updated with a change of terms agreement on March 19, 2026. The interest rate may only be adjusted by Bank Midwest once every five years. Monthly payments of $19,648 in principal and interest are required on the Term Loan. The Term Loan is also guaranteed by the United States Department of Agriculture (“USDA”), which required an upfront guarantee fee of $62,400 and requires an annual fee of 0.5% of the unpaid balance. As part of the USDA guarantee requirements, shareholders owning more than 20% are required to personally guarantee a portion of the Term Loan, in an amount equal to their stock ownership percentage. McConnell Legacy Investments, which owns more than 20% of the Company’s outstanding stock, is guaranteeing approximately 38% of the Term Loan, for an annual fee of 2% of the personally guaranteed amount. The initial guarantee fee is being amortized over the life of the Term Loan, and the annual fees and personally guaranteed amounts are expensed monthly. The Term Loan is governed by the terms of a Promissory Note, dated September 28, 2017, entered into between the Company and Bank Midwest.

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

In connection with the Line of Credit, the Company and Art’s-Way Scientific, Inc. each entered into a Commercial Security Agreement with Bank Midwest, dated September 28, 2017, pursuant to which each granted to Bank Midwest a first priority security interest in certain inventory, equipment, accounts, chattel paper, instruments, letters of credit and other assets to secure the obligations of the Company under the Line of Credit. Art’s-Way Scientific, Inc. also agreed to guarantee the obligations of the Company pursuant to the Line of Credit, as set forth in a Commercial Guaranty, dated September 28, 2017.

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

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

Compliance with Bank Midwest covenants is measured annually each November 30. The terms of the Bank Midwest loan agreements require the Company to maintain a minimum of $4,000,000 of monthly working capital. The Company is also required to maintain a minimum debt service coverage ratio of 1.25, with a 0.10 tolerance. The Company also must receive bank approval for individual purchases or sales of equipment over $50,000 and maintain reasonable salaries and owner compensation. The Company was in compliance with all covenants of Bank Midwest loans as of November 30, 2025. The next measurement date is November 30, 2026 for all covenants except the monthly working capital requirement.

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SBA Economic Injury Disaster Loans

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

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

	*May 31, 2026*		*November 30, 2025*
Bank Midwest loan payable in monthly installments of $19,648 including interest at 6.25%, due October 1, 2037	$	1,605,209	$	1,666,762
Bank Midwest loan payable in monthly installments of $6,102 including interest at 6.25%, due October 5, 2035		495,142		514,406
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning December 18, 2022, due June 18, 2050		152,854		154,381
U.S. Small Business Administration loan payable in monthly installments of $731 including interest at 3.75% beginning December 24, 2022, due June 24, 2050		153,640		154,880
Total term debt	$	2,406,845	$	2,490,429
Less current portion of term debt		191,348		165,326
Term debt, excluding current portion	$	2,215,497	$	2,325,103

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

Year	Amount
2027	$	191,348
2028		199,352
2029		212,469
2030		226,106
2031		240,622
2032 and thereafter		1,336,948
	$	2,406,845

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12)

Income Taxes

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

The Company has net operating losses and tax credits that are expected to offset any 2026 fiscal year tax liability and does not expect to have significant cash tax expense in the near future.

13)

Related Party Transactions

During the three and six months ended May 31, 2026, and May 31, 2025, the Company did not recognize any revenues from transactions with a related party, and no amounts in accounts receivable balances were due from a related party. From time to time, the Company purchases various supplies from related parties, which are companies in which Marc McConnell, the Company's chairman and principal executive officer, has an ownership interest and also serves as President. McConnell Legacy Investments is paid a monthly fee to guarantee a portion of the Company’s term debt in accordance with the USDA guarantee obtained on the Company’s term debt. In the three and six months ended May 31, 2026, the Company recognized $2,960 and $6,115 of expense for transactions with related parties compared to $3,175 and $6,530 for the three and six months ended May 31, 2025. As of May 31, 2026, accrued expenses contained a balance of $1,003 owed to a related party compared to $1,131 on May 31, 2025.

14)

Leases

The components of finance leases on the Condensed Consolidated Balance Sheets on May 31, 2026 and November 30, 2025 were as follows:

	*May 31, 2026*		*November 30, 2025*
Finance lease right-of-use assets (net of amortization in other assets)	$	286,463	$	368,720

Current portion of finance lease liabilities	$	269,135	$	255,748
Long-term portion of finance lease liabilities		268,111		408,154
Total finance lease liabilities	$	537,246	$	663,902

The Company entered into a sales-type lease agreement as the lessor in the second quarter of fiscal 2026. The expected inception of the lease is July 1, 2026 with $5,682 per month over 36 months of lease payments and $62,500 for delivery and installation.

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15)

Equity Incentive Plan and Stock Based Compensation

On February 25, 2020, the Board of Directors of the Company (the “Board”) authorized and approved the Art’s-Way Manufacturing Co., Inc. 2020 Equity Incentive Plan (the “2020 Plan”). The 2020 Plan was approved by the stockholders on April 30, 2020. The 2020 Plan replaced the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan (the “2011 Plan”) and prior plans. The 2020 Plan added an additional 500,000 shares to the number of shares reserved for issuance pursuant to equity awards. No further awards will be made under the 2011 Plan or other prior plans. Awards to directors and executive officers under the 2020 Plan are governed by the forms of agreement approved by the Board. Stock options or other awards granted prior to February 25, 2020 are governed by the applicable prior plan and the forms of agreement adopted thereunder. At the April 21, 2026 annual meeting, shareholders approved an amendment to the 2020 plan reserving an additional 500,000 shares for equity awards.

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

Shares issued under the 2020 Plan for the three and six month periods ended May 31, 2026 and 2025 are as follows:

	*For the Three Months Ended*
	*May 31, 2026*		*May 31, 2025*
Shares issued to directors (immediate vesting)		20,000		20,000
Shares issued to directors, employees, and consultants (three year vesting)		-		1,500
Total shares issued (forfeited)		20,000		21,500

	*For the Six Months Ended*
	*May 31, 2026*		*May 31, 2025*
Shares issued to directors (immediate vesting)		25,000		25,000
Shares issued to directors and employees (three-year vesting)		65,250		47,500
Total shares issued (forfeited)		90,250		72,500

16)

Disclosures About the Fair Value of Financial Instruments

The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. On May 31, 2026 and November 30, 2025, the carrying amount approximated fair value for cash, receivables, accounts payable, notes payable to bank, finance lease liabilities and other current and long-term liabilities. The carrying amounts of current assets and liabilities approximate fair value because of the short maturity of these instruments. The fair value of the finance lease liabilities also approximate recorded value, as its measurement is based on discounting future cash flows at rates implicit in the lease. The rates implicit in the lease do not materially differ from current market rates. The fair value of the Company’s term loans payable also approximates recorded value because the interest rates do not substantially differ from current interest rates the Company could obtain under similar terms.

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17)

Segment Information

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

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

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

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

	*Three Months Ended May 31, 2026*
	Agricultural Products			Modular Buildings		Consolidated 1
Revenue from external customers	$	4,374,000		$	3,480,000		7,854,000
Gross profit		1,066,000			966,000		2,032,000
Operating Expense		1,295,000			450,000		1,745,000
Income from operations		(229,000	)		516,000		287,000
Income (loss) before tax		(279,000	)		505,000		226,000
Income tax expense (benefit)	$	(64,000	)	$	117,000		53,000

Total Assets	$	19,315,000		$	4,363,000		23,678,000
Capital expenditures		309,000			31,000		340,000
Depreciation & Amortization		163,000			42,000		205,000
Interest expense		100,000			13,000		113,000
Engineering		94,000			-		94,000
Selling		257,000			177,000		434,000
General and administrative (G&A)		944,000			273,000		1,217,000
Corporate expense (included in G&A)	$	162,000		$	45,000		207,000

	*Three Months Ended May 31, 2025*
	Agricultural Products			Modular Buildings		Consolidated ¹
Revenue from external customers	$	4,026,000		$	2,311,000		6,337,000
Gross profit		1,095,000			965,000		2,060,000
Operating Expense		1,144,000			406,000		1,550,000
Income (loss) from operations		(49,000	)		559,000		510,000
Income (loss) before tax		1,105,000			771,000		1,876,000
Income tax expense (benefit)	$	232,000		$	162,000		394,000

Total Assets	$	17,848,000		$	3,031,000		20,879,000
Capital expenditures²		134,000			49,000		183,000
Depreciation & Amortization		147,000			42,000		190,000
Interest Expense		85,000			14,000		99,000
Engineering		84,000			-		84,000
Selling		261,000			175,000		436,000
General and administrative (G&A)		799,000			231,000		1,030,000
Corporate expense (included in G&A)	$	139,000		$	45,000		184,000

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	*Six Months Ended May 31, 2026*
	Agricultural Products			Modular Buildings		Consolidated¹
Revenue from external customers	$	8,128,000		$	6,366,000	$	14,494,000
Gross profit		2,362,000			1,581,000		3,943,000
Operating Expense		2,490,000			837,000		3,327,000
Income (loss) from operations		(128,000	)		744,000		616,000
Income (loss) before tax		(270,000	)		751,000		481,000
Income tax expense (benefit)		(62,000	)	$	174,000	$	112,000

Total Assets	$	19,315,000		$	4,363,000	$	23,678,000
Capital expenditures		449,000			67,000		516,000
Depreciation & Amortization		317,000			92,000		409,000
Interest expense		197,000			27,000		224,000
Engineering		201,000			-		201,000
Selling		543,000			327,000		870,000
General and administrative (G&A)		1,746,000			510,000		2,256,000
Corporate expense (included in G&A)	$	259,000		$	90,000	$	349,000

	*Six Months Ended May 31, 2025*
	Agricultural Products			Modular Buildings		Consolidated¹
Revenue from external customers	$	6,973,000		$	4,505,000		11,478,000
Gross profit		1,883,000			1,674,000		3,557,000
Operating Expense		2,310,000			733,000		3,043,000
Income (loss) from operations		(428,000	)		941,000		513,000
Income (loss) before tax		667,000			1,138,000		1,805,000
Income tax expense (benefit)	$	140,000		$	239,000		379,000

Total Assets	$	17,848,000		$	3,031,000		20,879,000
Capital expenditures²		200,000			65,000		265,000
Depreciation & Amortization		295,000			103,000		397,000
Interest expense		147,000			29,000		176,000
Engineering		169,000			-		169,000
Selling		467,000			319,000		786,000
General and administrative (G&A)		1,674,000			414,000		2,088,000
Corporate expense (included in G&A)	$	240,000		$	90,000	$	330,000

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

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18)

Subsequent Events

Management evaluated all other activity of the Company and concluded that no subsequent events have occurred that would require recognition in the condensed consolidated financial statements with the exception of the "Reserve Line of Credit" in Note 11 - Loan and Credit Agreements, the sales-type lessor agreement in Note 14 - Leases and the following:

In June of 2026, the Company was informed that Rural Energy for America Program funding was depleted and decided to not move forward with completing the solar project that was signed on December 19, 2025. The Solar System Purchase Agreement (the “Agreement”) was for the installation of a solar energy system by Midwest Solar Installers at the Company’s principal executive offices. The Agreement was contingent on a grant from the United States Department of Agriculture under its Rural Energy for America Program of which 25% of the total eligible project costs can be paid for with USDA funds and another 50% of the project costs can be guaranteed in the form of a loan from the USDA.

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

Forward-Looking Statements

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q (this “report”) and the audited consolidated financial statements and related notes thereto included in Part II, Item 8, “Financial Statements and Supplementary Data,” as well as Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the fiscal year ended November 30, 2025. Some of the statements in this report may be forward-looking statements that reflect our current view on future events, future business, industry and other conditions, our future performance, and our plans and expectations for future operations and actions. In some cases you can identify forward-looking statements by the use of words such as “may,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” “foresee," "opportunity," or the negative of these terms or other similar expressions. Many of these forward-looking statements are located in this report under Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but they may appear in other sections as well. Forward-looking statements in this report generally relate to: (i) our expectations with respect to order backlog, future demand for products, expected product mix and resulting sales; (ii) our beliefs regarding the sufficiency of working capital and cash flows; (iii) our expectation that we will continue to be able to renew or obtain financing on reasonable terms when necessary as well as our continued positive relationship with our creditors and lenders; (iv) our beliefs regarding production capabilities; (v) our intentions and beliefs relating to our costs, business strategies, and future performance, including without limitation, the impact of cost cutting measures, process improvement measures and new product development; (vi) our beliefs that normalizing dealer equipment stock levels may positively impact future demand for our agricultural products (vii) our beliefs regarding our early order program providing a picture of future demand; (viii) our expected financial results, including without limitation, our expected results for the Modular Buildings and Agricultural Products segments; and (ix) our expectations concerning our primary capital and cash flow needs.

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

Critical Accounting Policies

Our critical accounting policies involving the more significant judgments and assumptions used in the preparation of our financial statements as of May 31, 2026 remain unchanged from November 30, 2025. Disclosure of these critical accounting policies is incorporated by reference from Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended November 30, 2025.

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Results of Operations

Net Sales and Cost of Sales

Our consolidated corporate sales from continuing operations for the three- and six-month periods ended May 31, 2026 were $7,854,000 and $14,494,000, respectively, compared to $6,337,000 and $11,478,000, respectively, during the same periods in fiscal 2025. Our sales increased $1,517,000, or 23.9% for the three months ended May 31, 2026 and $3,016,000, or 26.3% for the six months ended May 31, 2026 compared to same periods in fiscal 2025. Consolidated gross margin for the three and six months ended May 31, 2026 was 25.9% and 27.2% compared to 32.5% and 31.0% for the same periods in fiscal 2025.

Sales in our Agricultural Products segment during the second quarter of fiscal 2026 were $4,374,000 compared to $4,026,000 during the same period of fiscal 2025, an increase of $348,000, or 8.6%. Sales for the six months ended May 31, 2026 were $8,128,000 compared to $6,973,000, an increase of $1,155,000, or 16.6%. Livestock prices continued to be elevated through the second quarter of fiscal 2026 and are driving the increased demand for our agricultural products year-on-year. We continue to see steady demand for grinder mixers, manure spreaders and bale processors, despite modest row crop prices through the first six months of fiscal 2026. Our sugar beet equipment demand is down from prior years, as sugar beet prices declined in the first fiscal quarter of 2026. To offset some of the demand decrease, we strategically deployed an experienced product specialist into our primary beet territory to drive new customer activity and technological development. The timing of this hire aligns with the unveiling of a new product in the beet market for fiscal 2026. We have increased our finished product inventory since the fall of 2025 to be prepared for retail opportunities in fiscal 2026, which we believe has been an opportunistic move. Our inventory levels are still elevated as compared to prior years, but are putting us in a position where our short lead times are providing a competitive edge. Gross margin for our Agricultural Products segment for the three-month period ended May 31, 2026 was 24.4% compared to 27.2% for the same period in fiscal 2025. Gross margin for the six months ended May 31, 2026 was 29.1% compared to 27.0% for the same period of fiscal 2025. The margin decrease for the three months ended May 31, 2026 is due primarily to price increases on steel. The gross margin increase for the six months ended May 31, 2026 is due primarily to strong demand for our grinder mixers. Our grinder mixer sales are up approximately $1,319,000 year-on-year. Rising steel and oil prices may challenge our margins for the rest of fiscal 2026 if we continue to see increases.

Our second fiscal quarter sales in our Modular Buildings segment were $3,480,000 compared to $2,311,000 for the same period in fiscal 2025, an increase of $1,169,000, or 50.6%. Our sales for the six months ended May 31, 2026 were $6,366,000 compared to $4,505,000 for the same period of fiscal 2025, an increase of $1,861,000, or 41.3%. We carried a strong modular building backlog into fiscal 2026, unlike fiscal 2025, which has driven the revenue increase so far this year. Our agricultural modular building business is up approximately $407,000, or 29.5% year-on-year due to strong livestock prices. Our research-related modular building sales are up approximately $1,578,000 or 53.2% for the six months ended May 31, 2026 due to large projects we contracted at the end of fiscal 2025. Current backlog is expected to carry us through the third quarter of fiscal 2026. Additionally, we expect current engineering projects to convert to construction projects in the third fiscal quarter. The private research market continued to carry strong demand for laboratory space during the first six months of fiscal 2026. Gross margin in the Modular Buildings segment for the three- and six-month period ended May 31, 2026 was 27.8% and 24.8%, respectively, compared to 41.7% and 37.2% for the same periods in fiscal 2025. Our margin decrease for the first six months of fiscal 2026 is due to the selling of a warrantied agriculture modular building at cost, project overages on site work while completing current contracts and contingencies that became profits in the first quarter of fiscal 2025 that was not repeated in the first six months of fiscal 2026.

Expenses

Consolidated selling expenses from continuing operations for the three and six months ended May 31, 2026 were $434,000, and $870,000, respectively, compared to $436,000 and $786,000 for the same periods in fiscal 2025. The increase in selling expenses is due to increased commissions and royalties from increased sales along with additional targeted advertising campaign expenditures in fiscal 2026. Selling expenses as a percentage of sales were 6.0% for the six months ended May 31, 2026 compared to 6.9% for the six months ended May 31, 2025.

Consolidated engineering expenses from continuing operations were $94,000 for the three months ended May 31, 2026 compared to $84,000 for the same period in fiscal 2025. Consolidated engineering expenses from continuing operations were $201,000 for the six months ended May 31, 2026 compared to $169,000 for the same period in fiscal 2025. The increase in engineering expenses is related to additional research and development costs incurred in 2026 as we made product changes that we felt could drive more sugar beet product demand. Engineering expenses as a percentage of sales were 1.4% for the six months ended May 31, 2026, compared to 1.5 % for the same period in fiscal 2025.

Consolidated administrative expenses from continuing operations for the three months ended May 31, 2026 were $1,218,000 compared to $1,029,000 for the same period in fiscal 2025. Consolidated administrative expenses from continuing operations for the six months ended May 31, 2026 were $2,256,000 compared to $2,088,000 for the same period in fiscal 2025. Administrative expenses as a percentage of sales were 15.6% for the six months ended May 31, 2026, compared to 18.2% for the same period in fiscal 2025. Administrative expenses have increased in fiscal 2026 despite the increase in sales as we have not replaced overhead cut in previous years. We continue to be conscious of adding additional overhead while market conditions are still slow in the Agricultural Products segment.

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Net income

Consolidated net income was $173,000 for the three-month period ended May 31, 2026, compared to net income of $1,482,000 for the same period in fiscal 2025. Consolidated net income was $370,000 for the six-month period ended May 31, 2026, compared to net income of $1,426,000 for the same period in fiscal 2025. In the six months ended May 31, 2025 we received approximately $1,154,000 of Employee Retention Credit refunds net of preparation fees and tax, which is the primary reason for our decrease in net income for fiscal 2026. Overall we did see improved income from operations for both the three and six months ended May 31, 2026. The small uptick in the agricultural market coupled with cost cutting procedures enacted in fiscal 2024 in the Agricultural Products segment has stabilized our operating results to prepare us for a potential future uptrend in the agriculture cycle. We continue to focus on remaining competitive with pricing, features and availability to ensure we are considered for retail opportunities. Our Modular Buildings segment's success is expected to continue as solid leads make their way to our sales team.

Order Backlog

The consolidated order backlog net of discounts as of July 7, 2026 was $2,744,000 compared to $4,407,000 as of July 7, 2025, a 37.7% decrease. The order backlog in our Agricultural Products segment was $1,413,000 as of July 7, 2026 compared to $863,000 in fiscal 2025, a 63.7% increase. Demand has remained steady throughout fiscal 2026 for our agriculture products and is much improved from a year ago due to higher row crop prices and record cattle prices. The backlog for the Modular Buildings segment was $1,332,000 as of July 7, 2026, compared to $3,544,000 in fiscal 2025, a 62.4% decrease. Quoting activity in both the research and agriculture buildings markets have been strong so far in fiscal 2026, with further contracts expected to execute with customers we are performing design agreements for. Our order backlog is not necessarily indicative of future revenue to be generated from such orders due to the possibility of order cancellations and dealer discount arrangements we may enter into from time to time.

Liquidity and Capital Resources

Our primary source of funds for the six months ended May 31, 2026 was cash generated by operating activities including profitability and the increase of accounts payable as we incurred costs on construction contracts. We expect the collection of accounts receivable, progress on construction contracts, and reduction of inventory to be primary sources of cash for the remainder of fiscal 2026. We expect our primary cash needs for the remainder of the fiscal year to be tied to operating expenses and retirement of debt.

As of May 31, 2026, our revolving credit line (the "Line of Credit") had an outstanding principal balance of $3,495,438. We renewed our revolving line of credit with Bank Midwest on March 19, 2026, with a scheduled maturity date of March 30, 2027. In our most recent renewal, we negotiated an interest rate 50 basis points lower than our previous line of credit tied to SOFR to recognize expected interest rate decreases sooner. Bank Midwest's credit committee has preapproved an additional $1,500,000 of principal for the 2026 renewal, consistent with the borrowing availability of our previous line of credit, in the event we need additional funding. On June 22, 2026, we entered into a credit facility consisting of a $500,000 revolving line of credit (the “Reserve Line of Credit”). The Reserve Line of Credit is secondary to the Line of Credit and will be utilized upon the Line of Credit reaching capacity. The Reserve Line of Credit was activated to pay large equipment deposits on a new fiberoptic laser and crane system. The deposits and balance of this equipment will be converted to a term loan when installation is complete later this year. The Company expects this capital expenditure will improve quality, efficiency and reliability of our products.

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The persons serving as our principal executive officer and principal financial officer have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period subject to this report. Based on this evaluation, the persons serving as our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of May 31, 2026. Our management has concluded that the consolidated financial statements included in this report present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

Changes in Internal Control over Financial Reporting

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

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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.

Our common stock repurchases during the second quarter of fiscal 2026 were as follows:

Total Number of

Shares

Approximate Dollar

Purchased as part

Value of Shares that

Total

Average

May

Number

Price

Publicly

Yet Be Purchased

of Shares

Paid per

Announced

under the

Purchased (1)

Share

Plans or Programs

March 1 to March 31, 2026

N/A

April 1 to April 30, 2026

698

2.43

N/A

May 1 to May 31, 2026

N/A

Total

698

2.43

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 May 31, 2026, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits.

Exhibit No.	Description
3.1	Conformed Certificate of Incorporation of Art’s-Way Manufacturing Co., Inc. – incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2020.
3.2	Conformed Bylaws of Art’s-Way Manufacturing Co., Inc.– incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2020.
10.1	Change in Terms Agreement (Mortgage), Between Bank Midwest and Art's Way Manufacturing Co., Inc. dated March 19, 2026 - incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the three months ended February 28, 2026.
10.2	Change in Terms Agreement (Roof Loan), Between Bank Midwest and Art's Way Manufacturing Co., Inc. dated March 19, 2026 - incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the three months ended February 28, 2026.
10.3	Promissory Note, Between Bank Midwest and Art's Way Manufacturing Co., Inc. dated March 19, 2026 - incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the three months ended February 28, 2026.
10.4	Promissory Note, Between Bank Midwest and Art's Way Manufacturing Co., Inc. dated June 22, 2026 - filed herewith.
10.5	Amendment No. 1 to the Art's-Way Manufacturing Co., Inc. 2020 Equity Incentive Plan - incorporated by reference to Exhibit 99.2 to the Company's Registration Statement on Form S-8 filed May 13, 2026.
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: July 15, 2026	By: /s/ Marc H. McConnell
	Marc H. McConnell
	President, Chief Executive Officer and Chairman

Date: July 15, 2026	By: /s/ Michael W. Woods
	Michael W. Woods
	Chief Financial Officer

ARTS WAY MANUFACTURING CO INC 10-Q