Art’s-Way(ARTW) - 2022 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION The first part presents the company's financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures Financial Statements The company's financial statements for the period ended August 31, 2022, show total assets increasing to $24.7 million, sales growing 18.8% to $21.0 million, and a shift to positive operating cash flow Condensed Consolidated Balance Sheets As of August 31, 2022, total assets increased to $24.7 million from $20.9 million at November 30, 2021, primarily driven by increases in inventories and accounts receivable Consolidated Balance Sheet Highlights (Unaudited) | Account | August 31, 2022 ($) | November 30, 2021 ($) | | :--- | :--- | :--- | | Total current assets | 14,948,616 | 12,174,245 | | Inventories, net | 10,499,593 | 9,210,103 | | Total assets | 24,721,073 | 20,854,048 | | Total current liabilities | 10,258,106 | 7,686,817 | | Line of credit | 4,559,000 | 4,074,530 | | Total liabilities | 13,839,381 | 10,499,601 | Condensed Consolidated Statements of Operations For the nine-month period ended August 31, 2022, sales grew 18.8% to $21.0 million, leading to a net income of $6,403, a significant turnaround from a net loss of $194,692 in the same period of 2021 Statement of Operations Summary (Unaudited) | Period | Metric | August 31, 2022 ($) | August 31, 2021 ($) | | :--- | :--- | :--- | :--- | | Three Months | Sales | 8,140,253 | 6,591,829 | | | Gross Profit | 2,040,481 | 1,738,421 | | | Net Income (Loss) | 237,775 | 56,456 | | | EPS (Diluted) | 0.05 | 0.01 | | Nine Months | Sales | 21,028,673 | 17,702,628 | | | Gross Profit | 5,425,546 | 4,503,157 | | | Net Income (Loss) | 6,403 | (194,692) | | | EPS (Diluted) | 0.00 | (0.04) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased from $10.35 million at November 30, 2021, to $10.88 million at August 31, 2022, driven by stock-based compensation and proceeds from a common stock purchase agreement - Total stockholders' equity grew to $10,881,692 as of August 31, 2022, up from $10,354,447 at the end of fiscal 2021[13] - Key changes in equity for the nine months ended August 31, 2022, include stock-based compensation ($131,859), a common stock purchase agreement ($388,983), and net income ($6,402)[13] Condensed Consolidated Statements of Cash Flows For the nine months ended August 31, 2022, net cash provided by operating activities was $197,663, a significant improvement from the $1.25 million used in the prior-year period, with net cash used in investing activities increasing to $1.18 million Cash Flow Summary (Nine Months Ended) | Cash Flow Activity | August 31, 2022 ($) | August 31, 2021 ($) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | 197,663 | (1,247,748) | | Net cash used in investing activities | (1,178,493) | (479,515) | | Net cash provided by financing activities | 982,316 | 1,832,585 | | Net increase in cash | 1,486 | 105,322 | Notes to Condensed Consolidated Financial Statements The notes detail the company's operations across three segments: Agricultural Products, Modular Buildings, and Tools, with significant revenue growth in Agricultural Products, a new common stock purchase agreement, and a waiver for a debt covenant non-compliance - The company operates in three segments: Agricultural Products (farm equipment), Modular Buildings (animal containment and labs), and Tools (steel cutting tools)[19] - On March 29, 2022, the company entered into a Common Stock Purchase Agreement with Alumni Capital to sell up to $3,000,000 of its common stock[77] - The company was out of compliance with its debt-to-worth ratio covenant as of November 30, 2021, but Bank Midwest issued a waiver, forgiving the noncompliance[55] Revenue by Segment (Nine Months Ended Aug 31, 2022) | Segment | Revenue ($) | % of Total | | :--- | :--- | :--- | | Agricultural Products | 15,823,000 | 75.2% | | Modular Buildings | 3,208,000 | 15.3% | | Tools | 1,998,000 | 9.5% | | Total | 21,029,000 | 100% | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 18.8% year-to-date sales increase to a strong agricultural economy, driving growth in Agricultural Products, while Modular Buildings declined due to delays, and the consolidated order backlog increased by 49% Consolidated Sales Performance | Period | Sales (2022) ($) | Sales (2021) ($) | % Change | | :--- | :--- | :--- | :--- | | Three Months | 8,140,000 | 6,592,000 | +23.5% | | Nine Months | 21,029,000 | 17,703,000 | +18.8% | - The Agricultural Products segment sales increased 36.2% for the quarter and 31.7% year-to-date, driven by a strong agricultural economy, high commodity prices, and a new floor plan program for dealers[99] - The Modular Buildings segment sales decreased 13.9% for the quarter and 15.5% year-to-date due to contract delays and a focus on readying rental buildings for sale[101] - The consolidated order backlog as of October 5, 2022, was $9.1 million, a 49% increase from $6.1 million a year prior, with strong demand across all three segments[108] Quantitative and Qualitative Disclosures About Market Risk The company is a smaller reporting company and is not required to provide disclosure for this item - As a smaller reporting company, Art's-Way is not required to provide disclosure pursuant to Item 3[115] Controls and Procedures Based on an evaluation as of August 31, 2022, the company's principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of August 31, 2022[116] - No changes occurred during the period that have materially affected, or are reasonably likely to materially affect, the company's internal controls over financial reporting[117] PART II – OTHER INFORMATION The second part covers legal proceedings, risk factors, unregistered sales of equity securities, other information, and exhibits Legal Proceedings The company reports that it is not currently a party to any material pending legal proceedings - The company is not currently a party to any material pending legal proceedings[118] Risk Factors As a smaller reporting company, Art's-Way is not required to provide disclosure under this item - Disclosure for this item is not required as the company is a smaller reporting company[119] Unregistered Sales of Equity Securities and Use of Proceeds During the third quarter of fiscal 2022, the company did not purchase any of its common stock, other than shares withheld to offset tax withholding obligations related to the vesting of restricted stock awards - No shares were purchased during the third quarter of fiscal 2022, except for shares withheld to satisfy tax obligations on vested restricted stock awards[120] Other Information There is no other information to report for this period - The company reported no information for this item[121] Exhibits The report lists the exhibits filed, which include CEO and CFO certifications and iXBRL formatted financial statements - Exhibits filed include CEO/CFO certifications and iXBRL data files[123] Signatures This section confirms the official signing and authorization of the Form 10-Q report Signatories The Form 10-Q report was signed on October 14, 2022, by David A. King, President and Chief Executive Officer, and Michael W. Woods, Chief Financial Officer - The report was duly signed and authorized on October 14, 2022[125]