Arts Way Manufacturing Co Inc: Form 10-K for the period ended Nov 30, 2025

General

Art’s-Way Manufacturing Co., Inc., a Delaware corporation ("Art's-Way," “we,” “us,” “our,” and the “Company”), began operations as a farm equipment manufacturer in 1956. Since that time, we have become a worldwide manufacturer of agricultural equipment and specialized modular science and agricultural buildings. Our principal manufacturing plant and corporate headquarters is located in Armstrong, Iowa.

We have organized our 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. Our Agricultural Products segment manufactures and distributes farm equipment under the Art’s-Way name. Our Modular Buildings segment manufactures modular buildings for various uses, commonly animal containment and research laboratories, through our wholly owned subsidiary, Art’s-Way Scientific, Inc., an Iowa corporation. During the third quarter of fiscal 2023, the Company ceased operations of its Tools business, which was reported in discontinued operations for the twelve months ended November 30, 2024. The remaining components of the Tools segment were disposed prior to the twelve months ended November 30, 2025. For detailed financial information relating to segment reporting, see Note 18, “Segment Information,” to our financial statements in “Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this report.

Corporate information about Art’s-Way can be found on our website, https://www.artsway-mfg.com/, while information on our Agriculture Products segment can be found on http://www.artsway.com/. and information about our Modular Buildings Segment can be found on https://www.artsway-scientific.com/. The information contained on our websites or available by hyperlink from our websites is not a part of this report and is not incorporated into this report or any other documents we file with, or furnish to, the Securities and Exchange Commission (the "SEC").

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Exchange Act requires us to file periodic reports, proxy statements and other information with the SEC. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. These materials may be obtained electronically by accessing the SEC’s website at http://www.sec.gov.

Business of Our Segments

Agricultural Products

Our Agricultural Products segment, which accounted for 55.5% of our net revenue in the 2025 fiscal year and 59.9% of our net revenue in the 2024 fiscal year, is located primarily in Armstrong, Iowa. This segment manufactures a variety of specialized farm machinery under our own label, including portable and stationary animal feed processing equipment and related attachments used to mill and mix feed grains into custom animal feed rations; a line of forage equipment consisting of forage boxes, bale processors, running gear, and dump boxes; a line of manure spreaders; sugar beet harvesting equipment; and a line of dirt work equipment. We sell our labeled products through independent farm equipment dealers throughout the United States, Australia, Canada, Japan and the United Kingdom. We also provide after-market service parts that are available to keep our branded equipment operating to the satisfaction of the end user of our products.

Modular Buildings

Our Modular Buildings segment, which accounted for 44.5% of our net revenue in the 2025 fiscal year and 40.1% of our net revenue in the 2024 fiscal year, is located in Monona, Iowa. This segment produces, sells and leases modular buildings, which are custom-designed to meet the specific research needs of our customers. The buildings we commonly produce range from basic swine buildings to complex containment research laboratories. Our focus is providing research facilities for academic research institutions, government research and diagnostic centers, public health institutions and private research and pharmaceutical companies, as those are our primary market sectors. We provide services from start to finish by designing, manufacturing, delivering and installing these facilities to meet customers’ critical requirements. In addition to selling these facilities, we also offer a lease option to customers in need of temporary facilities.

Our Principal Agricultural Products

Arthur Luscombe built the first power take-off powered grinder mixer on his farm near Dolliver, Iowa. The product’s ability to tackle even the most demanding workload made it an overwhelming success – and secured Luscombe’s reputation as a farmer, entrepreneur and independent thinker who did things his way. Over the years our Agricultural Products segment has grown through developing several new products and with acquisitions. We take pride in our manure spreaders, forage equipment, bale processors, dirt work equipment, sugar beet harvesting equipment and feed mills. We provide limited original equipment manufacturer, or OEM, parts to some of the industry’s leading manufacturers.

Feed mills. There’s no one better than Art’s Way when it comes to processing feed. Stationary mills for livestock feeding or breweries, portable units for small operations and large grinder mixers for the modern feeding operation have our customers’ backs day in and day out. Hammer mills provide faster processing and easily changing micron size or roller mills offer more consistency. We offer the most complete lineup of equipment in feed processing.

Manure spreaders. The X Series spreaders have a unique vertical beater placement combined with guillotine slop gate controls to create the best spread pattern in the industry. Flared sides and densilite flooring provide easy loading and material movement. Backed by our limited lifetime warranty on the apron chain, customers can depend on this rugged machine. The upgraded rate control option powered by Raven is the only unit in the industry to have completely automatic spreading capabilities with apron speed and slop gate control.

Forage. The 2100 series are user-friendly forage boxes in different lengths and unload configurations. It is the only box in its class to offer 100% in-cab controls. Tube side stakes and corrugated sides give users confidence when side-by-side with competitor models. The 9016-HD High Dump cart boasts the largest capacity in the industry at 40,000 pounds.

Bale processors. Spread large round or square bales in the same machine attached to a skid steer, telehandler, or tractor with the patented TOP-SPREAD loader mounted spreader. The compact size fits into barns and alleyways and is easy to maneuver. On a construction site, cover roadsides or fresh seeding quickly from the seat of a skid steer.

Dirt work equipment. Level out and shape fields with the single blade or folding land planes featuring our patented floating hitch design. Reduce erosion by eliminating water pockets, furrows, and implement scars in the field. Shape yards or work sites with standard or rear steer graders that follow closely behind the tractor for leveling in smaller spaces.

Sugar beet harvesting equipment. We are proud to offer the best sugar beet cleaning in the industry during muddy harvest conditions with our patented grab roll bed. Our 12-row harvester has been improved with an automatic leveling system add-on for consistent digging across the field. The defoliator cleanly removes the leaves off the beets prior to digging them up for harvest. The leaves are incorporated back into the soil to provide nutrients for next year’s crop.

Product Distribution and Markets

We distribute goods for our Agricultural Products segment primarily through a network of approximately 500 U.S. and Canadian independent dealers, as well as overseas dealers in Australia, Japan and the United Kingdom, whose customers require specialized agricultural machinery. We have sales representation in 48 states and seven Canadian provinces. Our dealers sell our products to various agricultural and commercial customers. We also maintain a local sales force in our Armstrong, Iowa facility to provide oversight services for our distribution network, communicate with end users, and recruit and train dealers on the uses of our products. Our local service parts staff is available to help customers and dealers with their service parts needs. Our Modular Buildings segment typically sells products customized to the end-users' requirements directly to the end-user.

We currently export products to five foreign countries. We have been shipping grinder mixers abroad since 2006 and have exported portable rollermills as well. We continue to strengthen these relationships and intend to develop new international markets. Our international sales accounted for 4.0% of consolidated sales during the 2025 fiscal year compared to 3.3% in the 2024 fiscal year.

Backlog. The Company’s backlog of orders varies on a daily basis. The Company’s Agricultural Products segment had a net backlog of approximately $3,224,000 as of February 2, 2026 compared to $3,486,000 on February 2, 2025. We've seen strong demand for the majority of our agriculture products for the 2025-2026 early order period compared to last fiscal year, with the exception of beet equipment. In December 2025, American Crystal Sugar announced a 44% decline in payment per ton of sugar beet crop compared to the prior year. This announcement negatively impacted early order program demand for our beet equipment, however, recent product developments on our beet equipment lead us to believe we will be able to overcome some of this negative market pressure in 2026. We expect the high price of beef will continue to fuel demand for our livestock products and are optimistic that interest rate cuts will continue to occur. The Company’s Modular Buildings segment had approximately $4,882,000 of backlog as of February 2, 2026, compared to $2,403,000 on that date in 2025. The Modular Buildings segment continues to close contracts and is expected to have a similar results in fiscal 2026 compared to fiscal 2025. The Company expects that its order backlogs will continue to fluctuate as orders are received, filled, or canceled, and, due to dealer discount arrangements it may enter into from time to time. Accordingly, these figures are not necessarily indicative of future revenue.

Recent Product Developments

In 2025, we developed a new head for our 12-row beet harvester that provides a clear view of the inner workings of the equipment. Not only does this allow a farmer to see that the harvesting components are operating as expected from the tractor cab, but it also improves serviceability, saving down time for our beet customers. This new head is designed to be backwards compatible with older harvesters, which we project will open up a new market for farmers that may not have the capital to replace their entire units, but can still get the latest technology we offer. We also spent engineering time revamping our 8-row beet head with the new clear view design. We recognized there is some demand for the 8-row units and the belief is farmers will be able to travel faster in their tractor with this unit. We also spent time developing a sack cutter for our grinders to improve a routine task for our users and are testing improvements to make our grinders unload faster. In 2026 we expect to improve upon our current product lines and increase margins through our R&D work.

Our Modular Buildings segment completed projects based on customer specifications and did not engage in specific product development during the 2025 fiscal year.

Competition

Both of our segments have competitive strengths described below. In addition to individual competitive strengths, the barrier to entry for competitors in our industries is high.

Agricultural Products

Our Agricultural Products segment competes in a highly competitive agricultural equipment industry. We compete with larger manufacturers and suppliers that have broader product offerings and significant resources at their disposal; however, we believe that our competitive strengths allow us to compete effectively in our market.

Management believes that grain and livestock producers, as well as those who provide services to grain and livestock operations, are the primary purchasers of agricultural equipment. Many factors influence a buyer’s choice for agricultural equipment. Any one or all factors may be determinative, but they include brand loyalty, the relationship with dealers, product quality and performance, product innovation, product availability, parts and warranty programs, price, and customer service.

While our larger competitors may have resources greater than ours, we believe we compete effectively in the farm equipment industry by serving smaller markets in specific product areas rather than directly competing with larger competitors across an extensive range of products. Our Agricultural Products segment caters to niche markets in the agricultural industry. We do not have a direct competitor that has the same product offerings that we do. Instead, each of our product lines competes with similar products of many other manufacturers. Some of our product lines face greater competition than others, but we believe that our products are competitively priced with greater diversity than most competitor product lines. Other companies produce feed processing equipment, sugar beet harvesting and defoliating equipment, grinders, and other products similar to ours; therefore, we focus on providing the best product available at a reasonable price. Overall, we believe our products are competitively priced with above average quality and performance, in a market where price, product performance, and quality are principal elements.

In addition, in order to capitalize on brand recognition for our Agricultural Products segment, we have numerous product lines produced under our own label. We also provide aftermarket service parts which are available to keep our branded and OEM-produced equipment operating to the satisfaction of the customer. We sold products to customers in the United States and five foreign countries in 2025 through a network of approximately 500 independent dealers in the United States and Canada, as well as overseas dealers in Australia, Japan and the United Kingdom.

We believe that our competitive pricing, product quality and performance, network of worldwide and domestic distributors, and strong market share for many of our products allow us to compete effectively in the agricultural products market.

Modular Buildings

We expect continued competition from our Modular Buildings segment’s existing competitors, which include conventional design/build firms, as well as competition from new entrants into the modular building market. To some extent, we believe barriers to entry in the modular building industry limit the competition we face in the industry. Barriers to entry in the market consist primarily of established customer relationships, industry knowledge, access to capital, access to a qualified labor pool, and the bidding process that accompanies many jobs in the health and education markets. Despite these barriers, manufacturers who have a skilled work force and adequate production facilities could adapt their manufacturing facilities to produce modular structures.

We believe the competitive strength of our Modular Buildings segment is our ability to design and produce high-tech modular buildings more quickly than conventional design/build firms. Conventional design/build construction may take two to five years, while our modular laboratories can be delivered in as little as six months. As one of the few companies in the industry to supply turnkey modular buildings and laboratories, we believe we provide high-quality buildings at reasonable prices that meet our customers’ time, flexibility, and security expectations.

Raw Materials, Principal Suppliers, and Customers

Raw materials for our various segments are acquired from domestic and foreign sources and normally are readily available. We rely on foreign suppliers and foreign markets for materials and components for some of our products. However, these suppliers are not principal suppliers, and there are alternative sources for these materials, with the exception of our manure spreader beaters that our imported from Italy. We undertook a reshoring project in fiscal 2025 to be prepared in the event we would not have access to our manure spreader beaters due to tariff activity or in the event that tariffs made them too expensive.

We do not typically rely on sales to one customer or a small group of customers. During the 2025 fiscal year, one customer accounted for just more than 9% of consolidated net revenues.

Intellectual Property

We maintain manufacturing rights on several products, which cover unique aspects of design. We also have trademarks covering product identification. We believe our trademarks and licenses help us to retain existing business and secure new relationships with customers. The duration of these rights ranges from 5 to 10 years, with options for renewal. We currently have no pending applications for intellectual property rights.

We have a licensing and royalty agreement with Spreader, LLC to produce a loader mounted spreader in exchange for royalty payments until December 2026.

Government Relationships and Regulations; Environmental Compliance

Our Modular Buildings segment must design, manufacture, and install its modular buildings in accordance with state building codes, and we have been able to achieve the code standards in all instances. In addition, we are subject to various federal, state, and local laws and regulations pertaining to environmental protection and the discharge of materials into the environment. We do not expect that the cost of complying with these regulations will have a material impact on our consolidated results of operations, financial position, or cash flows.

Employees

As of November 30, 2025, we employed 66 employees in our Agricultural Products segment, including one on a part-time basis, and 32 employees in our Modular Buildings segment, including two on a part-time basis. These numbers do not necessarily represent peak employment during the 2025 fiscal year.

We have a multi-layered approach to assess, identify and manage material risks from cybersecurity threats. This approach includes a wide variety of mechanisms, controls, technologies, methods, systems, and other processes that are designed to prevent, detect, or mitigate data loss, theft, misuse, unauthorized access, or other cybersecurity incidents or vulnerabilities affecting the data.

The data includes confidential, proprietary, and business and personal information that we collect, process, store, and transmit as part of our business, including on behalf of third parties. We also use systems and processes designed to reduce the impact of a cybersecurity incident at a third-party vendor or customer. Additionally, we use processes to oversee and identify material risks from cybersecurity threats associated with our use of third-party technology and systems, including technology and systems we use for encryption and authentication; employee email; content delivery to customers; back-office support; and other functions.

As part of our risk management process, we conduct regular application security assessments to identify vulnerabilities within our IT infrastructure. These assessments include both automated scans and manual reviews by our cybersecurity team. Threat intelligence feeds and security reports are continuously monitored, with the goal of staying ahead of emerging threats. In the event of a cybersecurity incident, we maintain incident response plans that are utilized when incidents are detected. We require employees with access to information systems, including all corporate employees, to undertake data protection and cybersecurity training and compliance programs annually along with random internal phishing campaigns.

We are led by our Director of IT, who is responsible for implementing and maintaining centralized cybersecurity and data protection practices in close coordination with our senior leadership team. We also engage assessors, consultants, or other third parties to assist with assessing, identifying, and managing cybersecurity risks. Our cybersecurity risks and associated mitigations are evaluated by senior leadership and routinely by our Board of Directors.

Our Director of IT, who has extensive cybersecurity knowledge and skills gained from over 10 years of work experience in various information technology roles, heads the team responsible for implementing and maintaining cybersecurity and data protection practices and reports directly to the Chief Financial Officer.

As of the date of this report, we have not encountered any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition. Cybersecurity threats are continually evolving, and no assurances can be given that our risk management systems and processes will fully mitigate all cybersecurity threats and risks.

Our executive offices, as well as the primary production and warehousing facilities for our Agricultural Products segment, are located in Armstrong, Iowa. These facilities were constructed after 1965 and remain in fair condition. The facilities in Armstrong contain approximately 249,000 square feet of usable space. We have engaged in several building improvement projects during the last several years including most recently updating our office spaces and employee break room in 2021, new shop and office boilers and roofing improvements in 2022 and remodeling our production facility bathrooms in fiscal 2023. We also are in the process of a complete roof repair as of the date of this report with expected completion in fiscal 2026. In addition, we own approximately 30 acres of land west of Armstrong, on which the factory and inventory storage space is situated for our Agricultural Products segment.

Our facility in Monona, Iowa was constructed by us in 2007, and houses the manufacturing for our Modular Buildings segment. The facility was custom-designed to meet our production needs. It has approximately 50,000 square feet of usable space and accommodates a sprinkler system and crane. We own a second building to the east with approximately 12,000 square feet of space, which is used as our weld shop for building frames.

All of our owned real property is subject to mortgages granted to Bank Midwest as security for our long-term debt and our line of credit. See “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Liquidity and Capital Resources” for more information.

From time to time in the ordinary course of business, we may be named as a defendant in legal proceedings incidental to the business, including without limitation, workers’ compensation claims, tort claims, or contractual disputes. We are not currently involved in any material legal proceedings, directly or indirectly, and we are not aware of any claims pending or threatened against us or any of the directors that could result in the commencement of material legal proceedings.

The following discussion, which focuses on our results of operations, contains forward-looking information and statements. Actual events or results may differ materially from those indicated or anticipated, as discussed in the section entitled “Forward Looking Statements.” The following discussion of our financial condition and results of operations should also be read in conjunction with our financial statements and notes to financial statements contained in “Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this report.

Financial Condition

Our Agricultural Products segment saw a 13.1% decline in revenue in fiscal 2025 as commodity prices remained depressed from highs in 2023 coupled with high borrowing rates and rising input costs. Our Modular Buildings segment increased revenues by 4.0% and once again recorded strong profitability. Our consolidated revenues from continued operations decreased 6.2% year over year, and we recorded $289,000 of operating income for the fiscal year ended November 30, 2025.

We finished the year ended November 30, 2025 with approximately $1,035,000 of consolidated net income and saw our working capital increase by approximately $1,851,000, primarily driven by increased inventory levels in our Agricultural Products segment as we prepared for anticipated year-end tax-motivated purchases and potential market improvement.

We expect to have access to capital as needed throughout fiscal 2026 from the collection of receivables, sale of inventory and the completion of projects under contract in our Modular Buildings segment. On November 30, 2025, we had $747,563 available on our line of credit and $4,012,816 of collateral in excess of our borrowing. Our working capital continued to strengthen in fiscal 2025, up to approximately $8,343,000, with a current ratio of 2.30, an increase from $6,492,000 in working capital and a current ratio of 1.98 in fiscal 2024. Our banking relationship remains positive, and we expect it to only strengthen as our balance sheet continues to improve through the retirement of debt. We believe that our current cash and financing arrangements will provide sufficient cash to finance operations for the next 12 months. We expect to continue to rely on cash from financing activities to supplement our cash flows from operations in order to meet our liquidity and capital expenditure needs in the near future.

Critical Accounting Policies

Our significant accounting policies are described in Note 1, “Summary of Significant Accounting Policies,” to our financial statements in “Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this report. Critical accounting policies are those that we believe are both important to the portrayal of our financial condition and results of operations and require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

We believe that the following represents the most critical accounting policies and estimates used in the preparation of our consolidated financial statements.

Inventories

Inventories are stated at the lower of cost or net realizable value, and cost is determined using the standard costing method, which approximates costs determined on the first-in, first-out basis. Management monitors the carrying value of inventories using inventory control and review processes that include, but are not limited to, sales forecast review, inventory status reports, and inventory reduction programs. We record inventory write downs to net realizable value based on expected usage information for raw materials and historical selling trends for finished goods. If the assumptions made by management do not occur, we may need to record additional write downs.

Revenue Recognition

In accordance with Accounting Standards Codification, or ASC, 606, revenue is measured based on consideration specified in a contract with a customer and recognized when we satisfy the performance obligation specified in each contract.

Our revenues primarily result from contracts with customers. The major sources of revenue for the Agricultural Products segment are farm equipment and service parts related to farm equipment. The Agricultural Products segment generally executes short-term contracts that contain a single performance obligation – the delivery of product to the common carrier. We recognize revenue for the production and sale of farm equipment and service parts upon shipment of the goods. Shipment of the goods is the point in time when risk of ownership and title pass to the customer. All sales are made to authorized dealers whose application for dealer status has been approved and who have been informed of general sales policies. Any changes in our terms are documented in the most recently published price lists. Pricing is fixed and determinable according to our published equipment and parts price lists. Title to all equipment and parts sold pass to the customer upon delivery to the carrier and is not subject to a customer acceptance provision. Proof of the passing of title is documented by the signing of the delivery receipt by a representative of the carrier. Post shipment obligations are limited to any claim with respect to the condition of the equipment or parts. The Agricultural Products segments typically require payment in full 30 days after the ship date. To take advantage of program discounts, some customers pay deposits up front. Any deposits received are considered unearned revenue and increase contract liabilities.

In certain circumstances, upon the customer’s written request, we may recognize revenue when production is complete, and the goods are ready for shipment. At the customer’s request, we will bill the customer upon completing all performance obligations, but before shipment. The customer dictates that we ship the goods per its direction from our manufacturing facility, as is customary with this type of agreement, in order to minimize shipping costs. The written agreement with the customer specifies that the goods will be delivered on a schedule to be determined by the customer, with a final specified delivery date, and that we will segregate the goods from our inventory, such that they are not available to fill other orders. This agreement also specifies that the customer is required to purchase all goods manufactured under this agreement. Title of the goods will pass to the customer when the goods are complete and ready for shipment, per the customer agreement. At the transfer of title, all risks of ownership have passed to the customer, and the customer agrees to maintain insurance on the manufactured items that have not yet been shipped. We have operated using bill and hold agreements with certain customers for many years, with consistent satisfactory results for both the customers and us. The credit terms on this agreement are consistent with the credit terms on other sales. All risks of loss are shouldered by the customer, and there are no exceptions to the customer’s commitment to accept and pay for these manufactured goods. There were no revenues recognized when goods were ready for shipment in fiscal 2025 compared to $1,073,000 in fiscal 2024.

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

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

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

For information on product warranty as it applies to ASC 606, refer to Note 9, “Product Warranty,” contained in our financial statements in “Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this report.

Results of Operations

Fiscal Year Ended November 30, 2025 Compared to Fiscal Year Ended November 30, 2024

Our consolidated net sales from continuing operations totaled $22,975,000 for the 2025 fiscal year, which represents a 6.2% decrease from our consolidated net sales of $24,499,000 for the 2024 fiscal year. Revenue increased in our Modular Buildings segment while our Agricultural Products segment continued to experience difficult market conditions in fiscal 2025. Our consolidated gross profit as a percentage of net sales decreased to 27.3% in the 2025 fiscal year compared to 29.8% of net sales in the 2024 fiscal year. Our consolidated operating expenses from continuing operations decreased by 12.7%, from $6,849,000 in the 2024 fiscal year to $5,977,000 in the 2025 fiscal year. The majority of our corporate general and administrative expenses are borne by our Agricultural Products segment, including costs associated with being a public company. The Agricultural Products segment represented $4,439,000 of our total consolidated operating expenses, while our Modular Buildings segment represented $1,539,000.

Our consolidated operating income for the 2025 fiscal year was $289,000, a 37% decrease from consolidated operating income of $461,000 for the 2024 fiscal year. Our Agricultural Products segment had an operating loss of $1,462,000, and our Modular Buildings segment had operating income of $1,751,000.

Consolidated net income for the 2025 fiscal year was $1,035,000 compared to consolidated net income of $307,000 in the 2024 fiscal year.

Our effective tax rate for the 2025 and 2024 fiscal years was 28.0% and 30.3%, respectively.

Agricultural Products. Our Agricultural Products segment’s net sales for the 2025 fiscal year were $12,749,000 compared to $14,663,000 during the 2024 fiscal year, a decrease of $1,914,000, or 13.1%. Commodity prices in the agricultural market, particularly on row crops, which dropped below five-year averages in fiscal 2024, continued to be weak in fiscal 2025. This led to a second straight fiscal year of decreased demand. Our cattle customers benefited from record beef prices in fiscal 2025, which helped offset some of the decreased demand. We believe our experience in fiscal 2025 was similar to many others in our industry. Our agriculture business is highly cyclical, and with forecasts of continued interest rate relief for farmers, as well as continued increases in commodity prices and easing of rising input costs, we believe things could begin to improve in fiscal 2026.

Gross profit percentage in the Agricultural Products segment for the 2025 fiscal year was 23.4% compared to 28.3% for the 2024 fiscal year. The gross profit decline in fiscal 2025 was due to decreased sales and the lack of availability of margin to cover fixed costs from the decrease, coupled with other inflationary pressures. For example, the price of steel was up 26% from 2024 fiscal year end to the end of fiscal 2025, which had a major impact on gross profit. We also saw rising insurance costs, utility costs and supply costs. Additionally, we incurred tariffs on imported products that were not present in fiscal 2024. We expect demand for steel to continue to be strong in fiscal 2026, which likely means that steel prices will remain elevated until supply increases. We anticipate that recent declines in oil price could help slow fiscal 2026 price increases.

Our Agricultural Products segment’s operating expenses for the 2025 fiscal year were $4,439,000 compared to $5,665,000 for the 2024 fiscal year, a decrease of $1,226,000, or 21.6%. Our selling expenses accounted for approximately $450,000 of the operating expense decrease. Our director of sales pursued a new opportunity at the end of fiscal 2024 and we did not replace him. We also had an inside salesperson depart at the same time, which further decreased salaries and travel costs in selling expense. To fill the gaps left by these employees, we promoted an inside salesman and the CEO, CFO and VP of Operations stepped in to absorb day-to-day sales responsibilities. We also utilized some existing territory representatives to help better service our customers after the departures. Our general and administrative expenses decreased approximately $689,000 from fiscal 2024 partially due to our CEO stepping down in October of 2024 and other personnel layoffs. Our chairman of the board stepped in to fill the CEO role in October of 2024 and has been serving in this role since. We expect our current CEO to remain in the role for the foreseeable future. We believe this will avoid extra administrative expenses, which is advantageous in today's market conditions. In fiscal 2024, we paid out approximately $201,000 in early retirement benefits to employees in order to drop our headcount to align with our lessened demand. This impacted our general and administrative expense in 2024; it was not repeated in 2025. Our engineering expenses decreased approximately $87,000 from fiscal 2024 due to a reduction in headcount in our engineering department. We expect the engineering headcount reduction to be temporary, as we recognize the strategic value in new product development and continued product improvement. We focused our engineering effort in fiscal 2025 on new product development and successfully used other resources to take non-value added inquiries off our engineering team. Total loss from operations for our Agricultural Products segment during the 2025 fiscal year was $1,462,000 compared to operating loss of $1,510,000 for the 2024 fiscal year. Despite the 13.1% decrease in revenue, we improved our results. We also benefited from an employee retention credit refund of approximately $1,235,000 that brought our net loss to $341,000 for this segment.

Modular Buildings. Our Modular Buildings segment’s net sales for the 2025 fiscal year were $10,226,000 compared to $9,836,000 for the 2024 fiscal year, an increase of $390,000, or 4.0%. We benefited from strong livestock prices in this segment, which increased our agricultural building sales by approximately $1,355,000. We continued to see strong demand on the research side and expect continued success in fiscal 2026. Our reputation as an industry leader in the research modular building industry is gaining traction, which has garnered the attention of repeat customers. Most notably, we have buildings that are being used by companies which are renowned for being leaders in xenotransplantation and cancer research. Our Modular Building segment's gross profit percentage for the 2025 fiscal year was 32.2% compared to 32.1% during the 2024 fiscal year. Our operations team has built a strong core that is consistently hitting and outperforming budgets and while maintaining a strong standard of quality. Effective leadership in this division has successfully retained quality employees that are performing at a high-level. Operating expenses for the 2025 fiscal year were $1,539,000 compared to $1,184,000 for the 2024 fiscal year, an increase of $355,000, or 30.0%. We paid approximately $74,000 more in commission expense in fiscal 2025 due to the large increase in agricultural building sales. We also experienced an increase in sales salaries with our new business development manager assuming sales responsibilities in tandem with our long-time primary sales leader, President Dan Palmer, who will remain with the Company in a part-time capacity through the second quarter of fiscal 2026 and possibly beyond. Total income from operations from our Modular Buildings segment during the 2025 fiscal year was $1,751,000, a decrease from $1,971,000 in the 2024 fiscal year. This segment benefited from an employee retention credit refund of approximately $226,000 and recorded net income of $1,376,000.

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, 2025 and will no longer report discontinued operations in our current year financials moving forward. Our discontinued operations generated approximately $1,271,000 from operating, investing and financing activities mainly related to closing activities and the sale of real estate in fiscal 2024. Our Tools segment reported no activity for the twelve months ended November 30, 2025 compared to net income of $402,000 in the same period of fiscal 2024.

Trends and Uncertainties

We are subject to a number of trends and uncertainties that may affect our short-term or long-term liquidity, sales revenues, and operations. Similar to other farm equipment manufacturers, we are affected by items unique to the farm industry, including fluctuations in net farm income resulting from changes in commodity prices, crop damage caused by weather and insects, government farm programs, interest rate fluctuations, rising input costs and other unpredictable variables. Other uncertainties include our customers and the decisions they make regarding their current supply chain structure, inventory levels, and overall business conditions. Management believes that our business is dependent on the farming industry for the bulk of our sales revenues. As such, our business tends to reap the benefits of increases in net farm income, as farmers tend to purchase equipment in lucrative times and forgo purchases in less profitable years. Direct government payments over the past few years and costs of agricultural production are increasing; further increases in the value of production will benefit our business, while any future decreases in the value of production will decrease net farm income and may negatively affect our financial results.

As with other farm equipment manufacturers, we depend on our network of dealers to influence customers’ decisions, and dealer influence is often more persuasive than a manufacturer’s reputation or the price of the product.

Seasonality

Sales of our agricultural products are seasonal; however, we have tried to decrease the impact of this seasonality through the development of beet harvesting machinery, as the peak periods for these products occur at different times.

Our modular building sales are somewhat seasonal, and we believe that this is due to the budgeting and funding cycles of the universities that commonly purchase our modular buildings. We believe that this cycle can be offset by building backlogs of inventory, by increasing sales to other public and private entities and by creating repeatable business opportunities.

Liquidity and Capital Resources

Our main source of funds during the 2025 fiscal year was cash generated by financing activities, which primarily consisted of approximately $1,324,000 we drew on our line of credit. While we had strong net income for the year, we consumed cash in our operating activities mainly by inventory increases in our Agricultural Products segment and by fulfillment of contract work in our Modular Buildings segment. We were strongly over billed at the end of fiscal 2024 on contracts in our Modular Buildings segment, which generated cash flow for some larger projects. Our consolidated inventory consumed $1,437,000 of cash in fiscal 2025, while our whole good inventory in our Agricultural Products segment was up approximately $1,778,000 at November 30, 2025. We continued to build inventory despite slow demand in anticipation of improving agricultural markets in this segment. It has been rare in our history that we have had readily available products on hand, so our goal is to make sure that when a farmer is ready to buy, our equipment lead times will be minimal, as we identified that as a key factor for funding operations in slower economic times. We expect to utilize favorable billing schedules in our Modular Buildings segment in fiscal 2026 to help fund operations moving forward along with similar operating results based on strong early backlog numbers. We also expect inventory reductions in our Agricultural Products segment to provide cash in fiscal 2026 as we begin to turn the whole good inventory we have built up in the fourth quarter of fiscal 2025. If our backlog does not strengthen through the first quarter of fiscal 2026, we plan to utilize the Iowa Workforce Development Voluntary Workshare program to conserve cash on wages. We have seen a small uptick in demand at the start of the first quarter of 2026 in our Agricultural Products segment compared to the first quarter of fiscal 2025, which gives us some optimism that this agricultural cycle is trending upwards. We expect our primary capital needs for fiscal 2026 to be operating expenses and continued retirement of debt. We do not expect our operating expenses to vary significantly from fiscal 2025 unless orders slow down significantly in our Agricultural Products segment. We expect to use available cash or financing in fiscal 2026 to acquire equipment that we identify as improving efficiency in our manufacturing process.

We have a Bank Midwest credit facility consisting of a $4,000,000 revolving line of credit, pursuant to which we had borrowed $3,252,437, with $747,563 remaining, as of November 30, 2025, and two term loans, which had outstanding principal balances of $1,666,762 and $ 514,406 as of November 30, 2025. The revolving line of credit is being used for working capital purposes. We also have two Economic Injury Disaster Loans provided by the U.S. Small Business Administration with an aggregate principal balance of $309,261 as of November 30, 2025.

Our loans require us to comply with various covenants, including maintaining certain financial ratios and obtaining prior written consent from Bank Midwest for any investment in, acquisition of, or guaranty relating to another business or entity. We were in compliance with the covenants in place under the Bank Midwest credit facility and term loans as of November 30, 2025.

For additional information about our financing activities, please refer to Note 10 “Loan and Credit Agreements” to our financial statements in “Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this report.

The following table represents our working capital and current ratio as of the end of the past two fiscal years:

We believe that our current cash and financing arrangements will provide sufficient cash to finance operations for the next 12 months. We expect to continue to rely on cash from financing activities to supplement our cash flows from operations in order to meet our liquidity and capital expenditure needs in the near future. We expect to continue to be able to procure financing upon reasonable terms as necessary.

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 November 30, 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.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Under the supervision and with the participation of management, including the persons serving as our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of November 30, 2025.

This report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this report.

Limitations on Controls

Our management, including the persons serving as our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. In addition, the design of any system of controls is based in part on certain assumptions about the likelihood of future events, and controls may become inadequate if conditions change. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes to Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three months ended November 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.