-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 BfMzXd1CX3E2lyLRW2EA67x29YtSyrCp1IVrKzoJb4SzLIpXVHmAZiwM6c5r+r00
 +p1KgOJYch/cxdmj63vy3w==

<SEC-DOCUMENT>0000007623-06-000014.txt : 20061016
<SEC-HEADER>0000007623-06-000014.hdr.sgml : 20061016
<ACCEPTANCE-DATETIME>20061016161019
ACCESSION NUMBER:		0000007623-06-000014
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20060831
FILED AS OF DATE:		20061016
DATE AS OF CHANGE:		20061016

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ARTS WAY MANUFACTURING CO INC
		CENTRAL INDEX KEY:			0000007623
		STANDARD INDUSTRIAL CLASSIFICATION:	FARM MACHINERY & EQUIPMENT [3523]
		IRS NUMBER:				420920725
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0531

	FILING VALUES:
		FORM TYPE:		10QSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-05131
		FILM NUMBER:		061146422

	BUSINESS ADDRESS:	
		STREET 1:		P O BOX 288
		CITY:			ARMSTRONG
		STATE:			IA
		ZIP:			50514
		BUSINESS PHONE:		7128643131

	MAIL ADDRESS:	
		STREET 1:		P O BOX 288
		CITY:			ARMSTRONG
		STATE:			IA
		ZIP:			50514
</SEC-HEADER>
<DOCUMENT>
<TYPE>10QSB
<SEQUENCE>1
<FILENAME>aug0610.txt
<TEXT>
                                UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                       _________________________________

                                FORM 10-QSB

(Mark One)

[x]   Quarterly report pursuant to section 13 or 15(d) of the Securities
      Exchange Act of 1934.  For the quarterly period ended August 31, 2006

[ ]   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. 0-5131

                       ART'S-WAY MANUFACTURING CO., INC.
       (Exact Name of Small Business Issuer as Specified in Its Charter)

                   DELAWARE                           42-0920725
       (State or Other Jurisdiction of     I.R.S. Employer Identification No.
        Incorporation or Organization)

                         Hwy 9 West, Armstrong, Iowa
                                    50514
                   (Address of Principal Executive Offices)

                               (712) 864-3131
                Issuer's Telephone Number, Including Area Code

Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15 (d) of the Exchange Act during the past 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 X No __

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

Number of common shares outstanding as of October 16, 2006: 1,973,176

Transitional Small Business Disclosure Format (check one): Yes _ No X


                      ART'S-WAY MANUFACTURING CO., INC.

              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                (Unaudited)

                              Three Months Ended             Year to Date
                            August 31,  August 31,     August 31,   August 31,
                               2006        2005          2006	        2005

Net sales                 $ 6,056,267  $ 4,190,253   $ 14,470,084 $ 11,581,969
Cost of goods sold          4,655,972    3,121,725     10,405,029    8,235,522
   Gross profit             1,400,295    1,068,528      4,065,055    3,346,447

Operating expenses:
  Engineering                 101,263       95,932        301,161      375,219
  Selling                     217,684      181,718        602,921      516,822
  General and administrative  665,461      336,722      1,944,265    1,146,792
    Total expenses            984,408      614,372      2,848,347    2,038,833

    Income from operations    415,887      454,156      1,216,708    1,307,614

Other expenses:
  Interest expense            112,446       71,553        294,757      198,922
  Other                       (30,412)      (9,603)       (71,870)     (51,560)
   Total other expenses	       82,034       61,950        222,887      147,362

Income before income taxes    333,853      392,206        993,821    1,160,252

Income tax expense            153,488      133,365        388,317      408,761

   Net income               $ 180,365    $ 258,841      $ 605,504    $ 751,491

Net income per share:
 Basic                      $    0.09    $    0.13      $    0.31    $    0.39
 Diluted                    $    0.09    $    0.13      $    0.31    $    0.38

Common shares and equivalent outstanding:
 Basic	                    1,973,176    1,958,611      1,970,037    1,947,009
 Diluted                    1,979,701    1,974,656      1,978,092    1,968,595

See accompanying notes to condensed consolidated financial statements.

                      ART'S-WAY MANUFACTURING CO., INC.

                   CONDENSED CONSOLIDATED BALANCE SHEETS

                                 (Unaudited)

                                                     August 31,   November 30,
                                                        2006         2005
          ASSETS
Current Assets
  Cash                                              $ 1,750,951    $ 1,198,238
  Accounts receivable-customers,
    net of allowance for doubtful accounts
    of $47,848 and $46,385 in May and November,
    respectively                                      2,000,811        956,391
  Inventories, net                                    6,499,928      6,525,051
  Deferred taxes                                        684,000        673,000
  Other current assets                                  142,864        128,877
      Total current assets                           11,078,554      9,481,557

Property, plant and equipment, at cost               13,107,998     12,263,478
   Less accumulated depreciation                     10,109,363     10,372,818
     Net property, plant and equipment	              2,998,635      1,890,660

Inventories, noncurrent	                                109,616        144,871
Deferred taxes	                                         48,000        191,000
Other assets                                            100,560         74,353
   Total Assets                                    $ 14,335,365   $ 11,782,441

 LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
  Current portion of long-term debt	              $ 228,416	     $ 223,946
  Accounts payable                                      699,672        530,722
  Customer deposits                                     476,799        569,354
  Accrued expenses                                    1,238,544	       736,464
    Total current liabilities                         2,643,431      2,060,486

Long-term debt, excluding current portion             3,895,528      2,558,273
    Total liabilities                                 6,538,959      4,618,759

Stockholders' Equity
    Common stock - $.01 par value. Authorized
      5,000,000 shares; issued 1,973,176 and
      1,963,176	shares in May and in November            19,732         19,632
    Additional paid-in capital                        1,746,907      1,719,787
    Retained earnings                                 6,029,767      5,424,263
      Total stockholders' equity                      7,796,406      7,163,682

Total liabilities and stockholders' equity         $ 14,335,365   $ 11,782,441

See accompanying notes to condensed consolidated financial statements.

                      ART'S-WAY MANUFACTURING CO., INC.

               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                (Unaudited)

                                                          Year to Date
                                                   August 31,	    August 31,
                                                      2006             2005
CASH FLOW FROM OPERATIONS:
   Net income                                       $ 605,504        $ 751,491
   Adjustment to reconcile net income to net
     cash provided by operating activities:
        Stock compensation expense                      4,020                0
        (Gain) on sale of equipment                   (41,048)               0
        Depreciation and amortization                 222,901          184,025
        Deferred income tax                           132,000          386,849
        Changes in working capital components:
          (Increase) decrease in:
            Accounts receivable                      (718,595)        (327,745)
            Inventories	                              508,017          341,477
            Other current assets                      (13,987)          43,415
            Other                                         862          107,302
          Increase (decrease) in:
            Accounts payable                          168,950         (210,819)
            Customer deposits                        (406,808)         (31,924)
            Accrued expenses                          502,080         (151,894)
            Net cash provided by operating activities 963,897        1,092,177

CASH FLOW FROM INVESTING ACTIVITIES:
   Purchases of property, plant and equipment	     (743,522)	      (187,200)
   Purchases of assets of Tech Space, Inc.         (1,137,606)               0
   Proceeds from sale of property,
     plant and equipment                              132,089                0
        Net cash (used in) investing activities    (1,749,039)        (187,200)

CASH FLOW FROM FINANCING ACTIVITIES:
   Principal payments on line of credit                     0         (870,071)
   Proceeds from notes payable                      1,500,000        1,000,000
   Principal payments on long term debt	             (158,275)        (279,139)
   Loan origination fees paid                         (27,070)         (18,550)
   Proceeds from the exercises of stock options	       23,200           68,650
     Net cash provided by (used in)
      financing activities	                    1,337,855          (99,110)
Net increase in cash                                  552,713          805,867
Cash at beginning of period                         1,198,238          116,001
Cash at end of period                             $ 1,750,951        $ 921,868

Supplemental disclosures of cash flow information:
  Cash paid during the year for:
    Interest                                        $ 294,758        $ 181,869
    Income taxes                                    $  25,217        $	23,187

Supplemental schedule of investing activities:
   Tech Space, Inc. acquisition:
     Accounts Receivable                            $ 325,825	     $       0
     Inventories                                      447,639                0
     Property, plant and equipment                    678,395                0
     Customer deposits                               (314,253)               0
       Cash paid                                  $ 1,137,606	     $	     0

See accompanying notes to condensed consolidated financial statements.


                      ART'S-WAY MANUFACTURING CO., INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                 (Unaudited)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Statement Presentation

     The financial statements are unaudited and reflect all adjustments
     (consisting only of normal recurring adjustments) which are, in the
     opinion of management, necessary for a fair presentation of the
     financial position and operating results for the interim periods. The
     financial statements should be read in conjunction with the financial
     statements and notes thereto contained in the Company's Annual Report on
     Form 10-KSB for the year ended November 30, 2005. The results of
     operations for the nine months ended August 31, 2006 are not necessarily
     indicative of the results for the fiscal year ending November 30, 2006.

2.   STOCK OPTIONS

     At August 31, 2006, we had two stock-based employee compensation plans,
     which are described more fully in Note 9 of our 2005 Annual Report to
     Stockholders. We adopted Statement No. 123 (Revised 2004), Share-Based
     Payment ("SFAS123R") which replaces SFAS No. 123, Accounting for
     Stock-Based Compensation and supersedes APB Opinion No. 25, Accounting
     for Stock Issued to Employees, effective December 1, 2005. SFAS123R
     requires all share-based payments to employees, including grants of
     employee stock options, to be recognized in the financial statements
     based on their fair values. The pro forma disclosures previously
     permitted under SFAS No. 123 are no longer an alternative to financial
     statement recognition. Upon adoption, we used the prospective transition
     method. The prospective method requires that compensation expense be
     recorded for all non-vested stock options beginning with the first
     quarter after adoption of SFAS123R. Stock-based compensation expense for
     the nine months ended August 31, 2006 totaled $4,020.

     Previously, we applied Accounting Principles Board Opinion No. 25,
     Accounting for Stock Issued to Employees, and related interpretations in
     accounting for these plans. Accordingly, prior to December 1, 2005 no
     compensation cost had been recognized for stock options in the condensed
     consolidated financial statements when the options were issued at a
     price equivalent to the stock price at the time of issuance. Set forth
     below is a reconciliation of net income and earnings per share
     information for the nine months ended August 31, 2005, as if we had
     applied the fair value recognition provisions of SFAS 123, Accounting
     for Stock-based Compensation, to stock-based employee compensation for
     that period.

                                            Three months     Nine months
                                            ended August     ended August
                                              31, 2005         31, 2005

     Net income, as reported                  $ 258,841	       $ 751,491
     Deduct:
      Total stock-based compensation expense
      determined under the fair value method
      for all awards, net of tax effects       ($ 1,755)        ($ 5,265)
     Pro forma net income                     $ 257,086	       $ 746,226
     Pro forma basic earnings per share             .13              .38
     Pro forma diluted earnings per share           .13              .38

     The fair value of each option grant has been estimated using the
     Black-Scholes option-pricing model.

3.   INVENTORIES

     Major classes of inventory are:          August 31,       November 30,
                                                 2006              2005
     Raw material                            $ 2,850,073        $ 2,820,591
     Work-in-process                             569,748            455,077
     Finished goods                            3,189,723	  3,394,254
       Total                                 $ 6,609,544        $ 6,669,922
     Less inventories classified as noncurrent   109,616            144,871
       Inventories, current	             $ 6,499,928	$ 6,525,051

4.   ACCRUED EXPENSES

     Major components of accrued expenses are:	August 31,     November 30,
                                                  2006             2005
       Salaries, wages and commissions          $ 465,153       $ 371,680
       Accrued warranty expense	                  234,687         131,832
       Income taxes                               230,474           5,702
       Other                                      308,230         227,250
         Total                                $ 1,238,544       $ 736,464

5.   PRODUCT WARRANTY

     The Company offers limited 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
     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. 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.

     Changes in the Company's product warranty liability for the three and
     nine months ended August 31, 2006 and 2005 are as follows:

                                   hree Months Ended       Nine Months Ended
                                 August 31,  August 31,  August 31,   August 31
                                    2006       2005        2006         2005
     Balance, beginning          $167,487   $115,993    $131,832     $119,912
     Settlements made in cash
      or in-kind                  (76,898)  (127,684)   (224,216)    (375,937)
     Warranties issued            144,098     94,620     327,071      338,954
     Balance, ending             $234,687   $ 82,929	$234,687      $82,929

6.   LOAN AND CREDIT AGREEMENTS

     The Company has a revolving line of credit for $3,500,000 with advances
     funding the working capital, letter of credit and corporate credit card
     needs that will mature on April 30, 2007. The interest rate is West
     Bank's prime interest rate, adjusted daily. Monthly interest only
     payments are required and the unpaid principal is due on the maturity
     date. Collateral consists of a first position on assets owned by the
     Company including, but not limited to inventories, accounts receivable,
     machinery and equipment. As of August 31, 2006 and November 30, 2005,
     the Company had no borrowings against the line of credit. Other terms
     and conditions of the debt with West Bank include providing monthly
     internally prepared financial reports including accounts receivable
     aging schedules and borrowing base certificates and year-end audited
     financial statements. The borrowing base shall limit advances from the
     line of credit to 60% of accounts receivable less than 90 days old, 60%
     of finished goods inventory, 50% of raw material inventory and 50% of
     work-in-process inventory plus 40% of appraisal value of machinery and
     equipment.

     J. Ward McConnell, Jr. was required to personally guarantee
     the debt with West Bank on an unlimited and unconditional basis. The
     guarantee of the term debt is to be reduced after the first three years
     to a percentage representing his ownership of the Company. Mr.
     McConnell's guarantee shall be removed from the term debt in the event
     that his ownership interest in the Company is reduced to a level less
     than 20% after the first three years of the loan. The Company
     compensates Mr. McConnell for his personal guarantee. On the loans due
     to mature March 2015 and Aprl 2016 Mr. McConnell is compensated at an
     annual percentage rate of 2% of the outstanding balance to be paid
     monthly. On the first Westbank loan his guarantee portion has dropped to
     his pecent ownership. Guarantee fee payments to Mr. McConnell were
     approximately $45,000 and $38,000, for the nine months ended August 31,
     2006 and 2005, respectively.

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

                                                   August 31,   November 30,
                                                      2006          2005
     West Bank loan payable in monthly installments
     of $17,776 including interest at Bank's prime
     rate plus 1.5%, due March 31, 2023 (A) (B)	   $ 1,713,151	 $ 1,754,866

     West Bank loan payable in monthly installments
     of $10,000 including interest at Bank's prime
     rate plus 1.5%, due March 31, 2015 (A) (B)	     $ 949,994     $ 974,356

     West Bank loan payable in monthly installments
     of $22,000 including interest at Bank's prime
     rate plus 1.0%, due April 30, 2016 (A) (B)     $1,460,799            $0

     State of Iowa Community Development Block
     Grant promissory notes at zero percent
     interest, maturity September 2006, with
     quarterly principal payments of $11,111               $ 0	    $ 33,334

     State of Iowa Community Development Block
     Grant local participation promissory notes
     at 4% interest, maturity September 2006, with
     quarterly payments of $7,007	                   $ 0      $ 19,663

         Total term debt                           $ 4,123,944   $ 2,782,219

     Less current portion of term debt               $ 228,416	   $ 223,946

         Term debt, excluding current portion	   $ 3,895,528	 $ 2,558,273

     (A) Notes are supported by a guarantee issued by the United States
     Department of Agriculture (USDA) for 75% of the loan amount outstanding.
     Collateral for these loans are primarily real estate with a second
     position on assets securing the line of credit. The USDA subordinates
     collateral rights in all assets other than real estate in an amount
     equal to West Bank's other credit commitments.

     (B) Covenants include, but are not limited to, restrictions on payment
     of dividends, debt service coverage ratio, debt/tangible net worth
     ratio, current ratio, limitation on capital expenditures, and tangible
     net worth. During the third quarter ended August 31, 2006, the Company
     did not comply with covenant limitations on capital expenditures and the
     disposal of assets. The bank waived the limitations.

7.   RELATED PARTY TRANSACTIONS

     J. Ward McConnell, Jr. owns and operates Adamson Global Technology Corp.
     During the nine months ended August 31, 2006 Adamson sold Art's-Way
     Vessels, Inc., certain raw material and equipment for an aggregate price
     of approximately $172,000. Adamson also purchased pressurized vessels
     from Art's-Way Vessels, Inc. in the first nine months, for an aggregate
     price of approximately $104,000. The Company believes that the
     transactions were done in accordance with prevailing market terms and
     conditions.

8.   SEGMENT INFORMATION

     On October 4, 2005, we purchased certain assets of Vessels Systems, Inc.
     which created a separate operating segment.

     On August 3, 2006, Art's-Way Manufacturing Co., Inc., acquired
     substantially all of the assets of TechSpace, Inc. of Monona, Iowa. We
     purchased the inventory, fixed assets and accounts receivable for the
     purchase price of $1,138,000, paid in cash. The assets will be utilized
     through a wholly owned subsidiary, Art's-Way Scientific, Inc. Art's-Way
     Scientific Inc. is a manufacturer of modular buildings for disaster
     recovery, testing and diagnostic labortories, animal research
     laboratories, biocontainment laboratories, triage/sorting facilities and
     swing space to limit disruption. This purchase created a third operating
     segment.

     Prior to October 4, 2005 the Company operated in one reportable segment.

     Our reportable segments are strategic business units that offer
     different products. They are managed separately because each business
     requires different technology and marketing strategies.

     There are three reportable segments: agricultural products, pressurized
     vessels and modular buildings. The agricultural products segment
     fabricates and sells farming products as well as replacement parts for
     these products throughout the United States. The pressurized vessel
     segment produces pressurized tanks. The modular building segment
     manufactures modular buildings for swine and scientific laboratories.

     The accounting policies applied to determine the segment information are
     the same as those described in the summary of significant accounting
     policies. Intersegment sales and transfers, if any, are accounted for at
     historical cost.

     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. The agricultural products, pressurized vessels,
     and modular segment information is for the three and nine months ended
     August 31, 2006.

                     Three Months Ended August 31, 2006
                          Agricultural   Pressurized   Modular     Consolidated
                            Products       Vessels    Buildings
     Revenue from
      external customers   $4,804,000	 $1,151,000   $101,000      $6,056,000
     Income from operations   316,000       170,000    (70,000)        416,000
     Income before tax	      253,000	    151,000    (70,000)        334,000
     Total Assets          13,169,000	    714,000    452,000      14,335,000
     Capital expenditures      26,000	      6,000	     0	        32,000
     Depreciation &
       Amortization            68,000	     17,000      6,000	        91,000

                      Nine Months Ended August 31, 2006
                          Agricultural 	 Pressurized   Modular     Consolidated
                            Products       Vessels    Buildings
     Revenue from
      external customers  $11,733,000    $2,636,000   $101,000     $14,470,000
     Income from operations   900,000       387,000    (70,000)      1,217,000
     Income before tax	      686,000       378,000    (70,000)        994,000
     Total Assets          13,169,000       714,000    452,000      14,335,000
     Capital expenditures     707,000	     37,000          0         744,000
     Depreciation &
       Amortization           179,000        38,000      6,000         223,000

                                          Item 2

               MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     The following discussion and analysis should be read in conjunction with
     the condensed consolidated financial statements and notes thereto
     appearing elsewhere in this report. Management's discussion and analysis
     contains forward-looking statements that involve risks and
     uncertainties, including but not limited to, quarterly fluctuations in
     results; customer demand for our products; economic conditions; the
     achievement of lower costs and expenses; the continued availability of
     financing in the amount and on the terms required to support future
     business; and other risks detailed from time to time in our other
     Securities and Exchange Commission filings. Actual results may differ
     materially from management's expectations.

(a)  Plan of Operation

     In the current fiscal year we plan to continue growth through new
     product development and when appropriate acquisition. We continue to
     look for new and better ways to improve our product offerings for our
     end users. We persist in our attempt to improve our efficiencies,
     through the implementation of lean manufacturing processes.

     On August 3, 2006 Art's-Way acquired the operating assets of TechSpace
     Inc. for a cash purchase price of approximately $1,138,000. The
     acquisition was made to continue the Company's growth strategy and
     diversify its product offerings outside the agricultural industry. The
     purchase price was determined based on an arms-length negotiated value.
     The transaction was accounted for under the purchase method of
     accounting, with the purchase price allocated to the individual assets
     acquired. (See cash flow statement supplemental disclosure)

(b)  Management's Discussion and Analysis of Financial Condition and
     Results of Operations

 (i) Critical Accounting Policies

     Our critical accounting policies involving the more significant
     judgments and assumptions used in the preparation of the financial
      statements as of August 31, 2006 have remained unchanged from November
     30, 2005. These policies involve revenue recognition, inventory
     valuation and income taxes. Disclosure of these critical accounting
     policies is incorporated by reference under Item 7, "Management's
     Discussion and Analysis of Financial Condition and Results of Operation"
     in our Annual Report on Form 10-KSB for the year ended November 30,
     2005.

     On September 15, 2006, the FASB issued FASB Statement No. 157, Fair
     Value Measurements (FAS 157), which addresses how companies should
     measure fair value when they are required to use a fair value measure
     for recognition or disclosure purposes under generally accepted
     accounting principles (GAAP). As a result of FAS 157 there is now a
     common definition of fair value to be used throughout GAAP. The FASB
     believes that the new standard will make the measurement of fair value
     more consistent and comparable and improve disclosures about those
     measures. FAS 157 is effective for fiscal years beginning after November
     15, 2007. The Company is currently evaluating the impact of this
     standard on its Consolidated Financial Statements.

     In June 2006, the Financial Accounting Standards Board ("FASB") issue FASB
     Interpretation No. 48, Accounting for Uncertainty in Income Taxes,
     ("FIN 48") an interpretation of FASB Statement No. 109, Accounting for
     Income Taxes.  FIN 48 requires that a position taken or expected to be
     taken in a tax return be recognized in the financial statements when it
     is more likely than not (i.e. a likelihood of more than fifty percent)
     that the position would be sustained upon examination by tax authorities.
     A recognized tax position is then measured at the largest amount of
     benefit that is greater than fifty percent likely of being realized upon
     ultimate settlement. Upon adoption, the cumulative effect of applying
     the recognition and measurement provisions of FIN 48, if any, shall be
     reflected as an adjustment to the opening balance of retained earnings.
     FIN 48 requires that subsequent to initial adoption a change in judgment
     that results in subsequent recognition, derecognition or change in a
     measurement of a tax position taken in a prior annual period (including
     any related interest and penalties) be recognized as a discrete item in
     the period in which the change occurs. Currently, we record such changes
     in judgment, including audit settlements, as a component of the
     Company's income tax provision. Thus, the Company's reported quarterly
     income tax rate may become more volatile upon adoption of FIN 48. This
     change will not impact the manner in which we record income tax expense
     on an annual basis. FIN 48 also requires expanded disclosures including
     identification of tax positions for which it is reasonably possible that
     total amounts of unrecognized tax benefits will significantly change in
     the next twelve months, a description of tax years that remain subject
     to examination by major tax jurisdiction, a tabular reconciliation of
     the total amount of unrecognized tax benefits at the beginning and end
     of each annual reporting period, the total amount of unrecognized tax
     benefits that, if recognized, would affect the effective tax rate and
     the total amounts of interest and penalties recognized in the statements
     of operations and financial position. FIN 48 is effective for fiscal
     years beginning after December 15, 2006. The Company is currently
     evaluating the impact of this standard on its Consolidated Financial
     Statements.

 (ii)Results of Operations

     The third quarter and year to date net sales were 45% and 25%
     respectively, higher than for the comparable periods one year ago. In
     addition to the sales from our two new subsidiaries, we experienced a
     shift in sales in 2006. Art's Way Manufacturing's sales of grinder
     mixers were spread more evenly in 2006 compared to 2005 when we shipped
     a large amount of grinders in the first quarter.

     Consolidated revenues increased $1,866,000 for the third quarter of 2006.
     Art's-Way Manufacturing's revenues increased $614,000, Art's-Way Vessel's
     (acquired in October of 2005) revenues increased $1,151,000, and
     Art's-Way Scientific's (acquired in August of 2006) revenues increased
     $101,000. Year to date revenues of $14,470,000 for 2006 represent an
     increase of $2,888,000 over the same period in 2005. Sales increased by
     $151,000 for Art's-Way Manufacturing, $2,636,000 for Art's-Way Vessels
     and $101,000 for Art's-Way Scientific.

     Art's-Way Manufacturing's consolidated gross profit of 28% year to date
     has remained stable compared to the same period one year ago of 29%.
     Art's-Way Manufacturing's gross profit is down from 29% to 26% year to
     date.  Quarterly gross profit is down 2.4%. This decline is due to a
     reduction in sales of grinder mixers which have a slightly higher margin
     than some of our other product offerings. Art's-Way Vessel's had a gross
     profit of 40% year to date.

     Consolidated operating expenses as a percent of sales increased by 1%
     for the quarter ended August 2006. Year to date operating expenses
     increased $810,000 compared to 2005 or by 2% of sales. Of this amount
     $667,000 relates directly to the addition of Art's-Way Vessels and
     $77,000 relates directly to the addition of Art's-Way Scientific.

     Art's-Way Manufacturing's consolidated engineering expenses were down
     $74,000 for the first nine months of 2006 as compared to 2005. In 2005
     we hired an outside engineering firm to aid in the development of an
     exportable beet harvester.

     Art's-Way Manufacturing's selling expenses were up for the first nine
     months of 2006 by $86,000 over the same period one year ago. This
     increase is mainly due to an increase in commission, advertising and
     trade show expenses. Commission expense increased $42,000 as our sales
     increased 23%. Advertising expenses were up by approximately $10,000 as
     we have tried to reach new customers. Trade show expense was also up by
     approximately $34,000 due to machine enhancement for show purposes.

     We experienced an increase in interest expense of $96,000 in the first
     nine months of 2006 as a result of the rising prime interest rate over
     the past 21 months and an additional borrowing of $1,500,000 during the
     second quarter of fiscal 2006.

     The order backlog at the end of September 2006 was $ 4,210,000 compared
     to $2,629,000 one year ago. Art's-Way Manufacturing's order backlog as
     of September 22, was $980,000 while Art's-Way Vessel's was $1,894,000
     and Art's-Way Scientific's was $1,336,000.

     In 2005 our backlog included approximately $1,850,000 in blower orders
     for Art's-Way Manufacturing's OEM dealers. This year, CNH has extended
     its order writing period to its dealers and has not submitted a firm
     purchase order. We estimate Art's-Way Manufacturing's backlog will
     increase by approximately $1,300,000 once we receive a firm purchase
     orders. This estimate is based on preliminary forecasts by CNH and H&S
     Manufacturing.

     Gehl, one of our main competitors in the grinder mixer market, announced
     in April, that it was ceasing operation of its agricultual product
     lines. We feel that we are in an excellent position to capture some of
     this market share and are optimistic that this will increase our grinder
     mixer sales.

(iii)Liquidity and Capital Resources

     On August 3, 2006 Art's-Way acquired substantially all the assets of
     TechSpace Inc. for a cash purchase price of approximately $1,138,000.
     There were no liabilities purchased or assumed in this transaction. The
     acquisition was made to continue the Company's growth strategy and
     diversify its product offerings outside the agricultural industry. The
     purchase price was determined based on an arms-length negotiated value.
     The transaction was accounted for under the purchase method of
     accounting, with the purchase price allocated to the individual assets
     acquired. (See cash flow statement supplemental disclosure)

     Accounts receivable increased $719,000 during the first nine months of
     2006. This is due primarily to sales of our beet harvesting equipment.

     Our customer deposits have decreased by $407,000 as our beet equipment,
     on which we offer discounts to our customers for making down payments on
     their orders, has now started shipping.

     Our inventory level decreased $508,000 over November 2005. This is due
     to the completed production and sale of the majority our beet harvesting
     equipment. We are also working on a continuous flow line for our grinder
     mixers. This will allow us to reduce our whole goods and work in process
     inventory, while maximzing product quality.

     In late 2005 we entered into an agreement to purchase a new Bystronic
     laser, used to cut metal, which called for three payments totaling
     approximately $627,000. We made the second and third payments in the
     first half of 2006. In May we completed our new whole goods paint booth
     for $47,000.

     In April of 2006 we obtained additional long term financing through West
     Bank of $1,500,000.

     See footnote 6 of the notes to the condensed consolidated financial
     statements for further discussion of our credit facilities.

                                  Item 3
                         CONTROLS AND PROCEDURES

Senior management, including the Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this
report. Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures
are effective to ensure that information required to be disclosed by us
in the reports that we file or submit under the Exchange Act is (a)
accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure; and (b) recorded,
processed, summarized and reported, within the time specified in the
SEC's rules and forms. Since that evaluation process was completed there
have been no significant changes in our disclosure controls or in other
factors that could significantly affect these controls.

There were no changes in our internal control over financial reporting,
identified in connection with this evaluation that occurred during the
period covered by this report that materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.

                       Part II - Other Information

ITEM 1. LEGAL PROCEEDINGS

During the period covered by this report, we were not a party to any
legal action or claim which was other than routine litigation incidental
to our business.

ITEM 6. EXHIBITS

See exhibit index on page 15.

                                SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

ART'S-WAY MANUFACTURING CO., INC.

By: _________________________________	By: ___________________________
    Michael B. Hilderbrand                  Carrie L. Majeski
    Chief Executive Officer                 Chief Financial Officer
    Date: ___________________________       Date:______________________


                                Exhibits Index

10.10   Puchase Agreement with TechSpace, Inc.
31.1    Certification of Chief Executive Officer pursuant to Rule 13a-14(a).
31.2    Certification of Chief Financial Officer pursuant to Rule 13a-14(a).
32.1    Certification of Chief Executive Officer under 18 U.S.C. Section
        1350.
32.2	Certification of Chief Financial Officer under 18 U.S.C. Section 1350.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>2
<FILENAME>ceo321my.txt
<TEXT>
                             Exhibit 31.1
                            CERTIFICATIONS


I, Michael B. Hilderbrand, certify that:

1. I have reviewed this report on Form 10-QSB of Art's-Way Manufacturing
Co., Inc.;

2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the small business issuer as of, and for, the periods presented in
this report;

4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and
have:

(a) Designed such disclosure controls and procedures, or caused such
disclosure control and procedures to be designed under our supervision,
to ensure that material information relating to the small business
issuer, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which
this report is being prepared;

(b) Designed such internal controls over financial reporting, or caused
such internal controls over financial reporting to be designed under our
supervision, 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;

(c) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and

(d) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business
issuer's fourth fiscal quarter in the case of an annual report) that has
most recent fiscal affected, or is reasonably likely to materially
affect, the small business issuer's internal control over financial
reporting; and

5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the
audit committee of the small business issuer's board of directors (or
persons performing equivalent functions):

(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial information;
and

(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.



Date:    October 16, 2006
/s/  Michael B. Hilderbrand

- ------------------------
Chief Executive Officer



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>3
<FILENAME>cfo321my.txt
<TEXT>
                               Exhibit 31.2
                              CERTIFICATIONS

I, Carrie L. Majeski, certify that:

1. I have reviewed this report on Form 10-QSB of Art's-Way Manufacturing
Co., Inc.;

2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the small business issuer as of, and for, the periods presented in
this report;

4. The small business issuer's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and
have:

(a) Designed such disclosure controls and procedures, or caused such
disclosure control and procedures to be designed under our supervision,
to ensure that material information relating to the small business
issuer, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which
this report is being prepared;

(b) Designed such internal controls over financial reporting, or caused
such internal controls over financial reporting to be designed under our
supervision, 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;

(c) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and

(d) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business
issuer's fourth fiscal quarter in the case of an annual report) that has
most recent fiscal affected, or is reasonably likely to materially
affect, the small business issuer's internal control over financial
reporting; and

5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the
audit committee of the small business issuer's board of directors (or
persons performing equivalent functions):

(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial information;
and

(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.


Date: October 16, 2006
/s/ Carrie L. Majeski

- ----------------------------
Chief Financial Officer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>exhbt101.txt
<TEXT>
                            Exhibit 10.10

 ASSET PURCHASE AGREEMENT

   THIS AGREEMENT is made and entered into this 2nd day of August, 2006 by
and among Arts-Way Manufacturing Co., Inc., a Delaware corporation ("Buyer"),
and Freedom Bank, a bank organized and existing under the laws of the State
of Iowa ("Seller").

                             RECITALS
   Seller is presently the owner as the secured party transferee of certain
assets and properties formerly used by Techspace, Inc., in the business of the
design, manufacture, and installation of custom research or diagnostic
facilities for laboratory animal research, for biocontainment, public
health and general laboratory requirements that are distributed to third
party purchasers (the "Subject Business") which assets were voluntarily
surrendered to Seller who was the holder of a security interest therein.
Buyer desires to purchase the Subject Business, including the assets
connected therewith, from Seller all on the terms and conditions set
forth herein.

   NOW, THEREFORE, in consideration of the mutual promises,
covenants, agreements and other good and valuable consideration
hereinafter set forth, the receipt and legal sufficiency of which are
hereby acknowledged, the parties do hereby promise and agree as follows:


   1. ASSETS TO BE PURCHASED AND EXCLUDED.

      (a) Personal Property. Subject to the terms and conditions set forth
in this Agreement, Seller agrees to sell, convey, assign and deliver to Buyer
and Buyer agrees to purchase from Seller at the Closing (as defined in
Section 6) the following assets owned as provided above by Seller and used by
Techspace, lnc%, in the operation of the Subject Business as they exist
on the Closing Date (collectively, the "Subject Assets"):

         (i) all machinery, equipment, furniture and fixed assets surrendered
   by Techspace, Inc. to Seller including without limitation those items
   identified or described, on attached Exhibit A and incorporated herein.

         (ii) all inventories of raw materials, work in process, and finished
   goods (including all such inventory at Techspace, Inc.s facility in
   Monona, Iowa); (the "Inventory");

         (iii) all purchase orders, order backlog, engineering, all drawings,
   designs, specifications, process information, performance data, software,
   programs, backlog, contracts, proprietary designs and other information,
   and data relating to the Subject Business and related equipment listed;

         (iv) all sales and customer lists and records, personnel and payroll
   records, purchasing, supplier and sale records (the "Subject Business
   Records");

         (v) all supplies, packaging materials, marketing and sales literature,
   consumable materials and other miscellaneous items of similar character;
   and,

         (vi) any and all intellectual property, trademarks, patents, phone
   numbers, website, e-mail addresses, and any other goodwill of the
   Subject Business.

         (vii) all accounts receivable that are less than 91 days old arising
   in the ordinary course of Techspace, Inc.s business from the sale of
   products to customers.

         (viii) all other property located at Techspace, Inc.s facility in
   Monona, Iowa.

   (b) Real Property. The real property previously occupied by Techspace, Inc.,
was deeded to Freedom Bank and is being transferred to Arts Way
Manufacturing Company, Inc. by Freedom Bank. The real property being
transferred to Arts Way Manufacturing Company, Inc. is legally
described as follows:

   Lot One (1) of Lot One (1) of Lot Nine (9) in the Northeast Quarter
(NEI/4) of the Southeast Quarter (SE1/4) of Section Fourteen (14),
Township Ninety-five (95) North, Range Five (5), West of the 5th P.M.,
in the City of Monona, Clayton County, Iowa, according to Plat recorded
in Book 8, Plats, Page 85; EXCEPT Lot One (1) of Lot One (1) of Lot One
(1) of Lot Nine (9) thereof;

   AND

   Lot One (1) of Lot One (1) of Lot One (1) of Lot Nine (9) in the
Northeast Quarter (NE1/4) of the Southeast Quarter (SE1/4) of Section
Fourteen (14), Township Ninety-Five (95) North, Range Five (5), West
of the P.M., in the City of Monona, in Clayton County, Iowa, according
to Plat recorded in Book 14, Plats, Page 49.

   AND

   Lot Two (2) of Lot One (1) of Lot Nine (9) of the Northeast
Quarter (NE1/4) of the Southeast Quarter (SE1/4) of Section Fourteen (14),
Township Ninety-Five (95) North, Range Five(s), West of the hh1 P.M., in
Clayton County, Iowa, according to the recorded Platthereof in Book 8,
Land Rats, Page 85 in the office of the Clayton County Recorder.

   (c) Excluded Assets. Except as provided, the Subject Assets shall not
include any of the following (collectively, the "Excluded Assets"):

       (i) any cash, or cash equivalent assets of Subject Business;

       (ii) Techspace, Inc.s corporate minute book, financial statements
   and records, stock records or tax returns;

       (iii) any personal effects of the shareholders, directors, officers
   and employees of the Techspace, Inc. described on the attached Exhbit B; and

       (iv) a certain Kyocera Mita KM3035 copier with Base, Finisher, Print
   Controller and Document Feeder that are subject to a lease with Great
   America Leasing Corporation lease number 330332 of Cedar Rapids, Iowa.

   2. NO ASSUMPTION OF LIABILITIES. Buyer shall assume no obligations
or liabilities of Seller or Techspace, Inc., whatsoever, of any kind or
nature, whether they are accrued, absolute, contingent or otherwise.
Arts-Way Manufacturing Company, Inc. shall be liable for any road use
taxes payable in connection with the purchase of vehicles contemplated
herein. The transfer taxes on the real estate shall be charged against
the purchase price to be received by Seller at closing. Seller assumes
no liability for any and all taxes, accounts payable, claims (both known
and unknown), and debts incurred by, assessed against, and/or in the
name of Techspace, Inc.

   3. PURCHASE PRICE; ADJUSTMENT; PAYMENT; ALLOCATION.

      (a) Purchase Price for Personal Property. Subject to the
adjustments in Section 3(b), the purchase price for the Subject Assets
is One Million Four Hundred Fifty One Thousand Eight Hundred Fifty Nine
Dollars ($1,451,859). Buyer has deposited with Techspace, Inc.s broker,
Equity Partners, Inc. the sum of $145,000 as earnest money (herein
"Earnest Money") which Earnest Money, together with any interest
thereon, shall be applied to the purchase price at closing.

      (b) Adjustments to Purchase Price. The Purchase Price shall be
adjusted upward or downward by the sum of the following adjustments:

          (i) Accounts Receivable Adjustment. The purchase price shall be
          calculated as a percentage of their face amount according to age
          as follows:

              those less than 30 days old shall be valued at 90% of the
                face amount
              thereof;
              those 31 to 60 days old shall be valued at 80% of the face amount
              thereof; and,
              those 61 to 90 days old shall be valued at 70% of the face amount
              thereof.

              No accounts receivable more than 90 days old shall be purchased.

          The valuation of the currently existing accounts receivable is
          calculated as set forth in the following table:

          Age       Less Than    31-60 Days   61-90 Days         Total
                     30 Days                                    Valuation
    Face Amount*   360,749.20      1,181.21      295.00        $362,225.38
    Percentage            90%           80%         70%
     of Face
     Amount
    Valuation      324,674.28        944.97      206.50        $325,825.75

     No account receivable shall be given a value in making such calculation
     that is not an account receivable from a customer arising from the sale
     of goods by Techspace, Inc., in the ordinary course of business. In
     applying the foregoing valuation, the face amount of all accounts
     receivable shall be net of all offsets and applicable discounts. No
     account receivable which is contested in whole or in part by the debtor
     thereon shall be included as an account receivable in determining the
     foregoing valuation nor shall it be transferred to Buyer but shall be
     retained by Seller.

     No account receivable shall be given a value in making such calculation
     with respect to which the debtor on such account receivable is also a
     creditor of Techspace, Inc.

        (ii) Inventory Valuation. The purchase price of the inventory shall
     be calculated as a percentage of such inventorys original cost or its
     current market value if lower than original cost (hereinafter "Inventory
     Cost") according to age as follows:

         Inventories (including both Work in Process (WIP) and other inventory
         less than six months old shall be valued at 75% of the Inventory Cost
         thereof,

         Inventories (including both Work in Process (WIP) and other inventory
         six month old or more than six months old shall be valued at 0% of
         the Inventory Cost thereof (Note a shrink factor was determined to be
         3.13% based on a sampling of inventory counted by Buyer and Techspace,
         Inc. representatives and has been taken into account in calculating
         the current inventory value shown in the table below),

         Obsolete inventory that is useable in existing orders shall be valued
         at 10% of the Inventory Cost thereof.

     The valuation of the currently existing Inventory valued using the
     foregoing schedule, is illustrated on Exhibit "C".

     Any item of inventory that is not new, is damaged, is otherwise unusable
     for the purpose intended, is in excess of a 6 month supply at current
     production rates, or is not used in the production of products in
     Techspace, Inc.s current product line shall be given a value of zero
     with the exception of the useable old inventory referred to above.


        (iii) Adjustment for Customer Deposits. The purchase price shall be
     reduced by the amount of any customer deposits or prepayments for future
     delivery of goods that are not turned over to purchaser.

     (c) Purchase Price for Real Property. At the closing, Buyer shall pay
Seller the sum of $539,030 for the real property deeded to it as is legally
described in paragraph 1(b) above subject to adjustments for real estate
closing costs as are set forth on Exhibit C attached.

     (d) Paymentof Purchase Price. AttheClosing, Buyershall paythe Purchase
Price via cashiers check or wire transfer, as the parties shall agree. Seller
agrees that certain lien, lease, tax, commissions or other payments with
respect to the Subject Assets and the property subject to the lease provided
for in Paragraph 4. shall be made out of the purchase price and that the
purchase price shall be distributed to those persons and in those amounts
shown on the Schedule of Distribution of Purchase Price attached hereto
as Exhibit C-I at closing. Payment of the Purchase Price in accordance
with said Schedule shall constitute full payment of the Purchase Price
by Buyer.

     (e) Allocation of Purchase Price. The Purchase Price shall be
allocated among the Subject Assets as follows:

Item                                                   Amount
Real Property                                        539,030.00
Rental Buildings                                     325,525.00
Equipment and Machinery                              105,937.00
Intellectual Property and Intangibles
Accounts Receivable                                   11,573.00
Vehicles                                              33,428.00
WIP                                                   94,040.00
Inventories                                           28,074.00
Total                                             $1,137,606.00

     The parties hereto agree to report the amounts payable under this
Agreement and under the documents and agreements executed in connection
herewith in a manner consistent with the intentions of the parties as
indicated in such documents and agreements. In addition, the parties hereto
agree not to take any position on their respective federal income tax
returns (including Internal Revenue Service form 8594) which is inconsistent
with such allocations. The allocations above contain the allocation of purchase
price among whole categories of Assets. Buyer may at any time up to the date
of closing make further allocations of the amount designated for each category
of Assets to the specific items within each such category.

      (f) Good Faith Deposit Buyer has deposited with Techspace, Inc.s broker,
Equity Partners, Inc. $145,000.00 representing a Good Faith Deposit. Said Good
Faith Deposit, together with all accrued interest, shall be applied against
payment of the purchase price set forth above at Closing.

   4. REAL ESTATE. Subject to and in accordance with the terms of this
Agreement, Freedom Bank shall deed the real property formerly owned by
Techspace, Inc. located at 203 Oak Street, Monona, Iowa, legally
described in Paragraph 1(b) above to Buyer via Warranty Deed in
substantially the form of Exhibit D and incorporated herein.

   5. CLOSING.

   (i) Time and Place of Closing. The closing of the purchase and sale
contemplated herein (the "Closing") shall take place on August 1, 2006
or as soon thereafter after as Buyer shall be satisfied with Sellers
ability to deliver clear title to the assets being sold. Closing shall
take place at the offices of Freedom Bank, in Monona, Iowa or such other
time and place as Seller and Buyer may agree. The effective time of the
Closing shall be deemed to 12:01 a.m. CDT on the Closing Date.

   (b) Sellers Deliveries. At the Closing, Seller shall deliver to Buyer
   the following:

       (i) a transfer statement pursuant to Section 554.9619 of the Iowa
   Code, together with any bills of sale, assignments, certificates of title
   and such other instruments of conveyance as Buyer shall reasonably require,
   in a form reasonably satisfactoryto Buyer and Buyers counsel, duly
   executed, conveying to Buyerthe Subject Assets, free and clear of all
   liens, claims and encumbrances;

       (ii) a certificate from the Secretary of Seller, in a form reasonably
   satisfactory to Buyer and Buyers counsel, setting forth the resolutions
   adopted by the board of directors of Seller authorizing the execution of
   this Agreement and all documents to be executed in connection herewith and
   the taking of any and all actions deemed necessary and advisable to
   consummate the sale of the Subject Assets;

       (iii) actual or constructive possession of the Subject Assets and the
   Subject Business Records;

       (iv) duly executed satisfactions, termination statements and/or releases
   in form and substance reasonably satisfactory to Buyer and its counsel
   sufficient to release any and all liens, claims or encumbrances of Seller
   affecting the Subject Assets;

       (v) such other instruments as Buyer may reasonably request to vest in
   Buyer, full and unencumbered title to the Subject Assets.

   (c) Buyers Deliveries. At the Closing, Buyer shall deliver to Seller
the Purchase Price in the manner specified pursuant to Section 3(a).

   6. WARRANTIES AND REPRESENTATIONS OF SELLER. Seller hereby warrants and
represents to Buyer, which warranties and representations shall survive
the Closing as hereinafter set forth, as follows:

   (a) Corporate Matters.

       (i) Seller is a corporation duly incorporated and validly existing under
   the laws of the State of Iowa and has the authority and power, corporate
   and otherwise, to carry on all business activities currently or
   previously conducted by it. Seller has the corporate power and authority
   to enter into this Agreement and to consummate the transactions
   contemplated hereby. The execution and delivery of this Agreement, the
   agreements and instruments relating hereto and the consummation of the
   transactions contemplated hereby have been approved by the board of
   directors of Seller and are and shall constitute valid and legally
   binding obligations of Seller, enforceable against it in accordance with
   their respective terms.

       (ii) The execution of this agreement and the consummation hereof, do not
   conflict, or result in the breach of, or constitute a default under, the
   articles of incorporation or bylaws of Seller or any material agreement or
   instrument affecting the Subject Assets of which Seller has knowledge and
   to which Seller is a party or by which it is bound.

   (b) No Consent. No consent, approval, order or authorization of,
registration, declaration or filing with, any court, administrative agency
or commission or other governmental authority or instrumentality, domestic
or foreign, is required to be obtained or made by or with respect to the
Subject Assets as a condition to the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.

   (c) Title to Subject Assets. Seller owns as hereinbefore provided,
and shall at closing assign, transfer and convey to Buyer all of Techspace,
Inc.s rights to legal and beneficial ownership of all of the Subject
Assets free and clear of all liens or encumbrances whatsoever.

   (d) Compliance with Law. Seller has complied in all material respects
with applicable Iowa Law concerning obtainment of the Subject Assets and
transfer of same to Buyer.

   (d) Location of Assets: All of the Subject Assets are located at 203 Oak
Street, Monona, Iowa unless they are on assignment to a project in the state
of Iowa.

   (e) Notice Regarding Changes: Seller shall promptly inform Buyer in
writing of any change in facts and circumstances that will render any of
the representations or warranties made herein by Seller inadequate or
misleading if such representations and warranties had been made upon the
occurrence of the fact or circumstance in question.



   7. CONDITIONS TO CLOSING. The obligations of the Buyer to close this
transaction are specifically conditioned upon the occurrence of, or
satisfaction of, the following events and conditions:

      (a) Techspace, Inc. and Buyer shall have conducted a physical
   inventory on or before closing which results are satisfactory to Buyer
and approved and accepted by Techspace, Inc. for purposes of determining an
adjustment to the purchase price under paragraph 3(b);

      (b) All representations and warranties of Seller as contained in this
agreement shall be true and correct in all material respects at and as of the
closing as if such representations and warranties were made at and as of the
closing (except for changes contemplated by the terms of this agreement), and
Seller shall have performed and satisfied in all material respects all
covenants and agreements required by this agreement to be performed and
satisfied by it at or prior to closing.

      (c) There shall not have occurred any damage, destruction or loss of any
of the Subject Assets (whether or not covered by insurance).

   8. CONDUCT SUBSEQUENT TO CLOSING.

      (a) Execution and Delivery of Further Instruments by Seller. Seller
shall as reasonably necessary upon the request of Buyer or its
successors or assigns, execute, acknowledge and deliver to Buyer or its
successors or assigns such further instruments of conveyance,
assignment, transfer, powers of attorney, consents and assurances and
shall take such other action as Buyer or its successors or assigns may
reasonably request in order to convey, assign, transfer and deliver any
of the Subject Assets to Buyer.

      (b) Execution and Delivery of Further Instruments by Buyer. Buyer shall
at anytime, and from time to time after the Closing upon the request of Seller,
or its successors or assigns, execute, acknowledge and deliver to the
requesting party such further instruments and take such other actions as Seller
may reasonably request in order to more effectively consummate the transactions
contemplated by this Agreement.

      (c) Access to Business Records. From and after the Closing Date, the
Buyer shall use ordinary care to maintain the business records of Techspace,
Inc. acquired by it pursuant hereto and, damage by fire or other casualty or
accident excepted, shall not for a period of seven (7) years after the Closing
Date destroy or dispose of any such records unless it shall first have notified
Seller of its intention to do so in writing and shall have afforded Seller an
opportunity to take possession thereof. For the seven calendar years
following closing, Seller, Techspace, Inc. and its owners shall have
access to business records of Techspace, Inc., as needed, on all normal
business days provided that Seller, Techspace, Inc., or either of its
owners, Daniel H. Palmer, J. Keith Wilson, Margaret H. Wilson, William
E. Britz, Jr. Marina S. Britz, provide 48 hour written notice to Buyer
or its assigns. The obligation contained herein to provide access to
business records shall survive the closing and shall be an obligation of
any successor in interest to Buyer.

      (d) Survival of Obligations. Unless otherwise provided, the
representations and obligations contained in this Agreement will survive
the consummation of the transactions contemplated by this Agreement. Any
investigation made at any time by Buyer or Buyers representatives shall
not constitute a waiver of Buyers rights under any representation set
forth in this Agreement.

   9. BUYERS RIGHT OF TERMINATION: Buyer shall have the right and option to
terminate this contract immediately upon the happening of any of the
following:

      a. Upon breach by Seller of any representation or warranty
   made by Seller herein.

      b. Upon Sellers ceasing, prior to closing, operations of its
   business in the normal course and as a going concern.

      c. Upon the failure of Seller to satisfy any condition precedent to
   Buyers obligation to close hereunder set forth in this agreement

In the event Buyer shall elect to terminate this agreement pursuant to the
option to terminate contained in this Paragraph 9, upon written notice
of such election by Buyer to Seller, this contract shall be deemed
terminated.

   10. MISCELLANEOUS.

      (a) Expenses. The parties hereto shall pay their own expenses,
including, without limitation, accountants and attorneys fees incurred
in connection with the negotiation and consummation of the transactions
contemplated by this Agreement.

      (b) Notices. All notices or other communications required or permitted
to be given hereunder to either party shall be in writing and shall be
considered to be given and received in all respects when personally
delivered or sent by prepaid telex, cable or telecopy or sent by
reputable overnight courier service or three days after deposited in the
United States mail, certified mail, postage prepaid, return receipt
requested, addressed as follows, orto such other address as shall be
designated by notice duly given:

      IF TO BUYER:                    Arts-Way Manufacturing Co., Inc.
                                      Attn: Michael B. Hilderbrand, President
                                      P0 Box 288
                                      Armstrong, Iowa 50514
                                      (712) 864-3131, ext. 222
                                      fax (712) 864-3393
                                      e-mail artsway@ncn.net

      WITH A COPY TO:                 Everette L. Wooten, Jr.
                                      600 Plaza Blvd.
                                      Kinston, NC 28501-1600
                                      (252) 523-8000
                                      fax (252) 523-2060
                                      e-mail wootencolevearthlink. net

      IF TO SELLER:                   Freedom Bank
                                      c/o James Burger, President
                                      106 South Main
                                      Monona, IA 52159

      WITH A COPY TO:                 Kevin Clefisch
                                      Clefisch & Saunders Attorneys at Law
                                      108 S. Main, Box 37
                                      Garnavillo, IA 52049

      (c) Public Announcements. The parties shall mutually agree as to
what, if any, public announcements are to be made after the sale. Except
as may be required by law there shall be no announcement of the Purchase
Price by either party.

      (d) Entire Agreement This Agreement, and the agreements executed and
delivered simultaneously herewith constitute the entire agreement between
the parties hereto relating to the subject matter hereof, and all prior
agreements, correspondence, discussions and understandings of the parties
(whether oral or written) are hereby superseded, it being the intention of
the parties hereto that this agreement shall serve as the complete and
exclusive statement of the terms of their agreement together. No amendment,
waiver or modification hereto or hereunder shall be valid unless in writing
signed by an authorized signatory of the party or parties to be affected
thereby.

      (e) Binding Effect. This Agreement shall be binding upon the parties
hereto, their respective legal representative, successors, and assigns.

      (f) Paragraph Headings. The headings in this Agreement are for purposes
of convenience and ease of reference only and shall not be construed to limit
or otherwise affect the meaning of any part of this Agreement.

      (g) Severability. The parties agree that if any provision of this
Agreement shall under any circumstances be deemed invalid or
inoperative, this Agreement shall be construed with the invalid or
inoperative provision deleted, and the rights and obligations of the
parties shall be construed and enforces accordingly.

      (h) Applicable Law. This Agreement and all questions arising in
connection herewith shall be governed by and construed in accordance with the
laws of the State of Iowa.

       IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day, month and year first above written.

SELLER:                            BUYER:
Freedom Bank                       Arts-Way Manufacturing Co., Inc.
By: /s/ Keith L. Garms             By: /s/ J. Ward McConnell, Jr.
        Keith L. Garms, President          J. Ward McConnell, Jr. Chairman of
                                           the Board



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>5
<FILENAME>exhbt321.txt
<TEXT>
                            Exhibit 32.1
               CERTIFICATION OF FINANCIAL STATEMENTS

Pursuant to 18 U.S.C. 63 1350, the President/Chief Executive Officer
of Art's-Way Manufacturing Co., Inc. (the "Company"), hereby certify that
this Form 10-QSB and the financial statements thereto fully comply with
the requirements of Sections 13(a) and 15(d) of the Securities Exchange
Act of 1934, and the information contained in the Form 10-QSB and the
financial statements thereto fairly present, in all material respects,
the financial condition and results of operations of the Company.

By: /s/ Michael B. Hilderbrand

Name: Michael B. Hilderbrand
President and Chief Executive Officer

Date 10/16/06

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>6
<FILENAME>exhbt322.txt
<TEXT>

                              Exhibit 32.2
                 CERTIFICATION OF FINANCIAL STATEMENTS

Pursuant to 18 U.S.C. 63 1350, the Chief Financial Officer of Art's-Way
Manufacturing Co., Inc. (the "Company"), hereby certify that this Form
10-QSB and the financial statements thereto fully comply with the
requirements of Sections 13(a) and 15(d) of the Securities Exchange Act
of 1934, and the information contained in the Form 10-QSB and the
financial statements thereto fairly present, in all material respects,
the financial condition and results of operations of the Company.

By: /s/ Carrie L. Majeski

Name: Carrie L. Majeski
Chief Financial Officer

Date 10/16/06

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
