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<SEC-DOCUMENT>0000007623-07-000005.txt : 20070417
<SEC-HEADER>0000007623-07-000005.hdr.sgml : 20070417
<ACCEPTANCE-DATETIME>20070416185314
ACCESSION NUMBER:		0000007623-07-000005
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20070228
FILED AS OF DATE:		20070417
DATE AS OF CHANGE:		20070416

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:		07769235

	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>feb0710q.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
      February 28, 2007

[ ]   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    I.R.S. Employer Identification No.
  of 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 April 16, 2007: 1,978,176

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


                 ARTS-WAY MANUFACTURING CO., INC.
              Consolidated Statements of Operations
                           Condensed
                          (Unaudited)

                                              Three Months Ended
                                          February         February
                                            2007             2006
Net sales                               $ 5,275,037      $ 4,302,088
Cost of goods sold                        3,776,777        2,926,683
    Gross profit                          1,498,260        1,375,405

Expenses:
   Engineering                               79,088           91,040
   Selling                                  232,347          192,259
   General and administrative               679,826          601,448
     Total expenses                         991,261          884,747
     Income from operations                 506,999          490,658

Other income (expense):
   Interest expense                        (105,971)         (82,342)
   Other                                    182,689           16,636
     Total other expense                     76,718          (65,706)
     Income before income taxes             583,717          424,952
Income tax                                  203,388          152,983
     Net income                           $ 380,329        $ 271,969

Net income per share:
   Basic                                     $ 0.19           $ 0.14
   Diluted                                     0.19             0.14

Common shares and equivalent outstanding:
   Basic                                  1,978,176        1,964,009
   Diluted                                1,982,502        1,976,443

See accompanying notes to consolidated financial statements.


                ARTS-WAY MANUFACTURING CO., INC.
                  Consolidated Balance Sheets
                           Condensed
                                         (Unaudited)
                                          February          November
               Assets                       2007              2006
Current assets:
   Cash                                 $ 3,287,818      $ 2,072,121
   Accounts receivable-customers, net
    of allowance for doubtful accounts
    of $115,437 and $108,372 in
    February and November, respectively   2,950,415        2,313,290
   Inventories, net                       6,826,294        5,998,175
   Profit in excess of billings              12,396                0
   Deferred taxes                           672,000          672,000
   Insurance Recievable	                    871,400                0
   Other current assets                     200,396          163,114
       Total current assets              14,820,719       11,218,700

Property, plant, and equipment, net       2,846,402        3,185,298
Deferred taxes                              100,000          100,000
Other assets                                 96,478          110,240
       Total assets                    $ 17,863,599     $ 14,614,238

  Liabilities and Stockholders Equity
Current liabilities:
   Notes payable to bank                  $ 412,527              $ 0
   Current portion of term debt             270,058          220,559
   Accounts payable                       1,350,553          587,555
   Customer deposits                      1,834,258          424,205
   Billings in Excess of Cost and Profit    473,092           57,266
   Accrued expenses                       1,347,635        1,427,658
       Total current liabilities          5,688,123        2,717,243

Term debt, excluding current portion      3,749,149        3,852,372
       Total liabilities                  9,437,272        6,569,615
Stockholders equity:
   Common stock $0.01 par value.
    Authorized 5,000,000 shares;
    issued 1,978,176 and 1,963,176 shares
    in 2007 and 2006                         19,782           19,782
   Additional paid-in capital             1,767,072        1,765,697
   Retained earnings                      6,639,473        6,259,144
       Total stockholders equity         8,426,327        8,044,623
       Total liabilities and
           stockholders equity         $ 17,863,599     $ 14,614,238

See accompanying notes to consolidated financial statements.


                 ARTS-WAY MANUFACTURING CO., INC.
               Consolidated Statements of Cash Flows
                              Condensed
                             (Unaudited)

                                               Three Months Ended
                                           February        February
                                             2007            2006
Cash flows from operations:
   Net income                             $ 380,329        $ 271,970
   Adjustments to reconcile net
    income to net cash provided by operating
    activities:
      Stock based compensation	              1,375            1,256
     (Gain) Loss on sale of property, plant,
       and equipment                        334,040                0
      Depreciation and amortization          75,957           53,429
      Deferred income taxes                       0          140,000
      Changes in assets and liabilities
       (Increase) decrease in:
         Accounts receivable               (637,125)      (1,413,037)
         Inventories                       (828,119)         (11,610)
         Other current assets               (37,282)         (27,471)
         Insurance Recievable              (871,400)               0
         Other, net                          13,762                0
        Increase (decrease) in:
         Accounts payable                   762,998          161,551
         Billings in Excess of Costs        403,430                0
         Customer deposits                1,410,053        1,152,694
         Accrued expenses                   (80,023)         (88,316)
           Net cash provided by
            operating activities            927,995          240,466
Cash flows from investing activities:
   Purchases of property, plant,
    and equipment                           (71,101)        (334,497)
           Net cash (used in)
            investing activities            (71,101)        (334,497)
Cash flows from financing activities:
   Net change in line of credit	            412,527           43,484
   Payments of notes payable to bank	    (53,724)         (44,151)
   Proceeds from the exercise of
    stock options                                 0           11,599
           Net cash provided by (used in)
            financing activities            358,803           10,932
           Net increase/(decrease)
            in cash                       1,215,697          (83,099)
Cash at beginning of period               2,072,121        1,198,238
Cash at end of period                   $ 3,287,818      $ 1,115,139

Supplemental disclosures of cash flow information:
   Cash paid/(received) during the period for:
     Interest                             $ 105,970         $ 90,906
     Income taxes                           282,000           12,902

See accompanying notes to consolidated financial statements.


                 ART'S-WAY MANUFACTURING CO., INC.

       NOTES TO CONSOLIDATED CONDENSED 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, 2006. The results of
    operations for the first quarter ended February 28, 2007 are not
    necessarily indicative of the results for the fiscal year ending
    November 30, 2007.

2.  INVENTORIES

    Major classes of inventory are:
                                      February 28, 	November 30,
                                          2007              2006
    Raw material                      $ 4,334,572       $ 3,260,897
    Work-in-process                       591,591           981,979
    Finished goods                      3,001,967         2,886,860
     Total                            $ 7,928,129       $ 7,129,736
    Less reserves                       1,101,836         1,131,561
     Inventories                      $ 6,826,294	$ 5,998,175

3.  ACCRUED EXPENSES

    Major components of accrued expenses are:
                                      February 28,      November 30,
                                          2007              2006
    Salaries, wages and commissions     $ 461,447         $ 464,609
    Accrued warranty expense              221,089           230,740
    Income tax                            257,716           356,712
    Other                                 407,423           375,597
      Total                           $ 1,347,675       $ 1,427,658

4.  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 months
    ended February 28, 2007 and February 28, 2006 are as follows:

                                          2007              2006
    Balance, beginning	                 $230,740          $131,832
    Settlements made in cash or in-kind  (107,694)         (110,413)
    Warranties issued                      98,043            63,021
    Balance, ending                      $221,089           $84,440

5.  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 matures 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 February 28, 2007 and 2006, the Company
    had borrowed approximately $413,000 and $43,000, respectively. Total
    amount available for borrowing at February 28, 2007 was $3,087,000.
    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 line of credit to 60% of accounts receivable less than 90 days, 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 shall 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 at an annual
    percentage rate of 2% of the outstanding balance to be paid monthly.
    Guarantee fee payments to Mr. McConnell were approximately $15,000 and
    $14,000, for the quarter ended February 28, 2007, and 2006,
    respectively.

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

                                                February 28,    November 30,
                                                    2007           2006
    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)	        $ 1,689,348     $ 1,701,843

    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)	          $ 935,657       $ 943,034

    West Bank loan payable in monthly
     installments of $22,063 including
     interest at Bank's prime rate plus
     1.0% due April 2016                         $1,394,202      $1,428,054

         Total term debt                        $ 4,019,207     $ 4,072,931

    Less current portion of term debt             $ 270,058       $ 220,559

         Term debt, excluding current portion	$ 3,749,149	$ 3,852,372

    (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.

6.  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

    In December 2006, the FASB issued Financial Interpretation No. 48,
    Accounting for Uncertainty in Income Taxes - an interpretation of FASB
    Statement No. 109 (Issued 6/06). This Interpretation prescribes a
    recognition threshold and measurement attribute for the financial
    statement recognition and measurement of a tax position taken or
    expected to be taken in a tax return. It also provides guidance on
    derecognition, classification, interest and penalties, accounting in
    interim periods, disclosure, and transition. For the Company, the
    Statement is effective for fiscal years beginning after
    December 15, 2006. The Company is assessing the effects of Financial
    Interpretation No. 48.

7.  STOCK OPTION PLANS

    On January 25, 2007 the Board of Directors adopted the 2007 Non-Employee
    Directors' Stock Option Plan. Options will be granted to non-employee
    directors to purchase shares of common stock of the Company at a price
    not less than fair market value at the date the options are granted.
    Non-employee directors are automatically or initially granted options to
    purchase 1,000 shares of common stock annually upon their election to
    the Board, which are automatically vested. Options granted are
    nonqualified stock options. The option price and terms are set by the
    Compensation Committe of the Board of Directors of the Company.

    On February 5, 2007 the Board of Directors adopted the 2007 Employee
    Stock Option Plan subject to Stockholder approval at the Annual
    Stockholders meeting on April 26, 2007.

8.  SEGMENT INFORMATION

    On October 4, 2005, the Company purchased certain assets of Vessels
    Systems, Inc. which created a separate operating segment. On August 2,
    2006, the Company purchased certain assets of Tech Space, Inc. which
    created a third operating segment. Prior to these acquisitions the
    Company operated in one reportable segment.

    The Company's 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 in the United States and worldwide. Export sales amounted
    to $844,000 and $0 in 2006 and 2005 respectively. The pressurized vessel
    segment produces pressurized tanks. The modular building segment
    produces modular buildings for animal containment and various laboratory
    uses.

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

    Approximate financial information with respect to the reportable
    segments is as follows. The agricultural products, pressurized vessels,
    and modular building segment information are for the first quarter ended
    February 28, 2007 and February 28, 2006.

                                  February 28, 2007
                            Agricultural Pressurized   Modular   Consolidated
                              Products    Vessels     Buildings
    Revenue from
     external customers     $3,272,000   $1,052,000   $ 951,000   $5,275,000
    Income from operations     288,000      209,000      10,000	     507,000
    Income before tax          236,000	    187,000     161,000      584,000
    Segment profit             149,000      125,000     106,000      380,000
    Total Assets            13,497,000    1,842,000   2,525,000   17,864,000
    Capital expenditures        65,000        6,000           0       71,000
    Depreciation                60,000       12,000       4,000	      76,000

                                  February 28, 2006
                            Agricultural Pressurized   Modular   Consolidated
                              Products     Vessels    Buildings
    Revenue from
     external customers     $3,628,000     $674,000           0	  $4,302,000
    Income from operations     478,000	     13,000           0      491,000
    Income before tax          409,000       16,000           0      425,000
    Segment profit             262,000       10,000           0      272,000
    Total Assets            13,046,000      247,000           0   13,293,000
    Capital expenditures       320,000       14,000           0	     334,000
    Depreciation                42,000	     11,000           0       53,000

                                        Item 2

           MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

      The following discussion and analysis should be read in conjunction with
      the 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.

(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 February 28, 2007 have remained unchanged from November
      30, 2006. 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,
      2006.

 (ii) Results of Operations

      Our consolidated net sales for the first quarter of 2007 increased 23%
      to $5,275,000 as compared to $4,302,000 for 2006. A majority of this
      increase was due to the inclusion of Art's-Way Scientific, Inc., net
      sales of $950,000, for the first quarter which was acquired in August of
      2006 and therefore was not included in last year's first quarter.
      Art's-Way Manufacturing had revenues totaling $3,273,000 for the first
      quarter, compared to $3,629,000 for the same period in 2006. This
      decrease was due to a reduction in sales to our OEM dealers for blowers.
      Art's-Way Vessels had revenues totaling $1,052,000 for the first
      quarter, compared to $674,000 for the same period in 2006.

      Art's-Way Manufacturing's gross profit decreased in the quarter to 28%
      as compared to 32% in 2006. The decrease was due primarily to the
      addition of Art's-Way Scientific. When we purchased Art's-Way Scientific
      we also purchased their backlog and had to honor pricing from the prior
      owners.  Art's-Way Scientific's gross profit was 20% for the first
      quarter of 2007. Art's-Way Manufacturing's gross profit was 30% while
      Art's-Way Vessel's was 32%.

      Operating expenses for the quarter increased $107,000 compared to 2006.
      However, as a percent of sales, operating expenses decreased by two
      percentage points- 19% in 2007 compared to 21% in 2006.  Art's-Way
      Manufacturing's operating expense as a percentage of sales decreased
      from 20% in 2005 to 18% in 2006. Art's-Way Vessel operating expenses as
      a percentage of sales were 12%.

      General and administrative expenses for the quarter increased $78,000 as
      compared to 2006. Substantially all of the increase was due to the
      addition of Art's-Way Scientific.

      Engineering expenses are down $12,000 for the first quarter of 2007 as
      compared to 2006.

      Selling expenses were up for the first quarter of 2007 by $40,000. This
      is almost entire due to the addition of Art's-Way Scientific, which had
      selling expenses of $38,000.

      We experienced an increase in interest expense of $24,000 in the first
      quarter of 2007 as a result of a rise in the prime interest rate from
      the first quarter of 2006. Other income increased by $166,053 in 2007
      compared to 2006. This is the result of accounting for the fire and
      insurance in Monona, Iowa.

      On January 16th, 2007, one of our buildings in Monona, Iowa, was
      completely destroyed by fire. The building housed the production and
      offices for Art's-Way Scientific. The 36,000 square foot building was a
      stick built structure with steel siding. We were insured for the loss of
      the building, its contents as well as the disruption in business. We are
      currently working with our insurance company to settle the claim. At
      this time we have received $250,000 towards the claim and we have booked
      a receivable for the estimated loss of the building of $871,000. We have
      incurred costs in excess of $900,000 related to the fire, to include
      $334,000 in loss of fixed assets. We are currently working from one of
      our other buildings in Monona, Iowa. We are in the process of
      determining where we will be rebuilding. It is our intent to be in a new
      building by September 2007. We continue to manufacture buildings and
      have not lost any orders to date.

      The order backlog as of March 31, 2007 is $12,112,000 compared to
      $5,436,000 one year ago. Art's-Way Manufacturing's order backlog as of
      March is $3,899,000, Art's-Way Vessels is $2,149,000, and Art's-Way
      Scientific is $6,064,000.

(iii) Liquidity and Capital Resources

      Our main source of funds in the first quarter came from customer
      deposits which increased $1,410,000 over our 2006 year end. This is a
      traditional increase for us as our beet programs ran in the first
      quarter and we offer discounts to our customers for making down payments
      on their orders. We are working to settle the insurance claim for the
      building, inventory and assets that were destroyed in Monona, Iowa. We
      have currently recorded a loss on the assets of $334,000 due to the
      fire. We are also showing a receivable increase of $871,000 that relates
      directly to the expected insurance proceeds on the building. Accounts
      receivable are up $637,000 over our November year end balance. This
      increase is due to the sales of our blowers to OEM dealers in the last
      month of the quarter. Inventories increased $828,000. This increase is
      offset by the decrease in our accounts payable of $763,000, due to
      bringing in large quantities of steel for our upcoming building of sugar
      beet equipment.

      See footnote 5 of the notes to the consolidated condensed financial
      statements for a 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 of this report.


                              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: _________________________
       E.W. Muehlhausen	                 Carrie L. Majeski
       President                         Chief Financial Officer
       Date:______________________	 Date:____________________


                             Exhibits Index

10.1    Non-Employee Director's Stock Option Plan
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>exh31107.txt
<TEXT>
                             Exhibit 31.1
                            CERTIFICATIONS

I, E.W. Muehlhausen, 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: April 16, 2007
/s/ E.W. Muehlhausen

- ------------------------
President (Principal Executive Officer)

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>3
<FILENAME>exb31207.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: April 16, 2007
/s/ Carrie L. Majeski

- ----------------------------
Chief Financial Officer (Principal
Financial Officer)

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>4
<FILENAME>exh32107.txt
<TEXT>
                        Exhibit 32.1
           CERTIFICATION OF FINANCIAL STATEMENTS

Pursuant to 18 U.S.C. 63 1350, the President 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/ E.W. Muehlhausen

Name: E.W. Muehlhausen
President

Date 4/16/07

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>5
<FILENAME>exh32207.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 4/16/07

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<FILENAME>exh10107.txt
<TEXT>
                       Exhibit 10.1

             ARTS WAY MANUFACTURING CO., INC.
               2007 NON-EMPLOYEE DIRECTORS
                   STOCK OPTION PLAN

  1. NAME.

  The name of this Plan is the Arts Way Manufacturing Co., Inc., 2007
Non-Employee Directors Stock Option Plan.

  2. DEFINITIONS.

  For the purposes of the Plan, the following terms shall be defined
  as set forth below:

  (a) Affiliate means any partnership, corporation, firm, joint venture,
association, trust, limited liability company, unincorporated organization,
or other entity (other than a Subsidiary) that, directly or indirectly
through one or more intermediaries, is controlled by the Company, where
the term "controlled by" means the possession, direct or indirect, of
the power to cause the direction of the management and policies of such
entity, whether through the ownership of voting interests or voting
securities, as the case may be, by contract or otherwise.

  (b) Board means the Board of Directors of the Company.

  (c) Code means the Internal Revenue Code of 1986, as amended from time
to time, and the Treasury regulations promulgated thereunder.

  (d) Common Stock means the common stock, $.01 par value per share, of the
Company or any security of the Company identified by the Board as having
been issued in substitution or exchange therefor or in lieu thereof.

  (e) Company means Arts Way Manufacturing Co., Inc., a Delaware corporation.

  (f) Effective Date means January 25, 2007.

  (g) Employee means an individual whose wages are subject to the
withholding of federal income tax under Section 3401 of the Code.

  (h) Exchange Act means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute.

  (i) Fair Market Value of a Share as of a specified date means the average
of the highest and lowest market prices of a Share as quoted on the OTC
Bulletin Board on such date, or, if no trading of Common Stock is
reported for that day, the next preceding day on which trading was
reported. In the event the Common Stock is not then quoted on the OTC
Bulletin Board, the Fair Market Value of a Share shall be
determined by reference to the principal market or exchange on which the
Shares are then traded.

  (j) Non-Employee Director means an individual who (i) is now or hereafter
becomes a member of the Board, and (ii) is not an Employee of the Company or
of any Subsidiary or Affiliate on the date of the grant of the NQSO.

  (k) NQSO means a stock option that is not qualified under Section 422 of
the Code.

  (l) Officer means an individual elected or appointed by the Board or by
the board of directors of a Subsidiary, or chosen in such other manner
as may be prescribed by the bylaws of the Company or a Subsidiary, as
the case may be, to serve as such.

  (m) Participant means a Non-Employee Director who is granted an NQSO
under the Plan.

  (n) Plan means this 2007 Non-Employee Directors Stock Option Plan.

  (o) Rule 16b-3 means Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act, or any successor or
replacement rule adopted by the Securities and Exchange Commission.

  (p) Share means one share of
Common Stock, adjusted in accordance with Section 9(b), if applicable.

  (q) Stock Option Agreement means the written agreement between the
Company and the Participant that contains the terms and conditions
pertaining to the NQSO.

  (r) Subsidiary means any corporation or entity of which the Company,
directly or indirectly, is the beneficial owner of fifty percent (50%)
or more of the total voting power of all classes of its stock having
voting power, unless the Board shall determine that any such corporation
or entity shall be excluded hereunder from the definition of the term
Subsidiary.

  3. PURPOSE.

The purpose of the Plan is to enable the Company to provide incentives,
which are linked directly to increases in stockholder value, to
Non-Employee Directors so that they will be encouraged to serve on the
Board and exert their best efforts on behalf of the Company.

  4. ADMINISTRATION.

  (a) Board of Directors.

      The Plan shall be administered by the Board of Directors, which shall
have the authority to administer the Plan in its sole and absolute
discretion to grant NQSOs, and to determine the number of Shares subject
to NQSOs and the price at which each Share covered by an NQSO may be
purchased pursuant to the Plan, all as set forth in Section 8. To this
end, the Board of Directors is authorized to construe and interpret the
Plan and to make all other determinations necessary or advisable for the
administration of the Plan. Subject to the foregoing, any determination,
decision or action of the Board of Directors in connection with the
construction, interpretation, administration or application of the Plan
shall be final, conclusive and binding upon all Participants and any
person validly claiming under or through a Participant.

  (b) Liability of Board Members.

      No member of the Board will be liable for any action or determination
made in good faith by the Board with respect to the Plan or any grant or
exercise of an NQSO thereunder.

  (c) NQSO Accounts.

      The Company shall maintain a journal in which a separate account for
each Participant shall be established. Whenever NQSOs are granted to or
exercised by a Participant, the Participants account shall be
appropriately credited or debited. Appropriate adjustment shall also be
made in the journal with respect to each account in the event of an
adjustment pursuant to Section 9(b).

  5. EFFECTIVE DATE OF THE PLAN; TERM; PLAN YEAR.

  (a) Effective Date of the Plan.

      The Plan was adopted by the Board and became effective on January
25, 2007.

  (b) Term of the Plan.

      No NQSO shall be granted pursuant to the Plan on or after
January 25, 2017 but NQSOs theretofore granted may extend beyond that
date.

  (c) Plan Year.

      The initial Plan Year begins on the date of the 2007 annual meeting
of stockholders and ends on the day prior to the 2008 annual meeting of
the stockholders. Subsequent Plan Years begin on the date of the annual
meeting of stockholders of each year and end on the day prior to the
meeting of the following year.

  6. SHARES SUBJECT TO THE PLAN.

  The maximum aggregate number of Shares which may be subject to NQSOs
granted to Non-Employee Directors under the Plan shall be One Hundred
Thousand (100,000). The limitation on the number of Shares which may be
subject to NQSOs under the Plan shall be subject to adjustment as
provided in Section 9(b).

  If any NQSO granted under the Plan expires, or is terminated for any reason
without having been exercised in full, the Shares allocable to the
unexercised portion of such NQSO shall again become available for grant
pursuant to the Plan. At all times during the term of the Plan, the
Company shall reserve and keep available for issuance such number of
shares as the Company is obligated to issue upon the exercise of all
then outstanding NQSOs.

  7. SOURCE OF SHARES ISSUED UNDER THE PLAN.

  Common Stock issued under the Plan shall be authorized and unissued
Shares. No fractional Shares shall be issued under the Plan.

  8. NON-QUALIFIED STOCK OPTIONS.

  (a) Grant of NQSOs.

  On the beginning date of each Plan Year, NQSOs to purchase One Thousand
(1,000) Shares shall be granted automatically to each Non-Employee
Director. With respect to any Non-Employee Director who first becomes a
member of the Board after the beginning date of a Plan Year, NQSOs to
purchase One Thousand (1,000) Shares shall be granted automatically on
the next succeeding business day following his or her election to the
Board. Additional NQSOs may be granted to any Non-Employee Director by
the Board in its sole and absolute discretion.

  (b) The Exercise Price.

  The exercise price of a Share shall be the Fair Market Value of such
Share on the first day of the Plan Year for which the options are
granted (or the next business day if such date falls on a weekend or
holiday), or if granted on another day then the date of such grant.

  (c) Terms and Conditions.

  All NQSOs granted pursuant to the Plan shall be evidenced by a Stock
Option Agreement (which need not be the same for each Participant or
NQSO), approved by the Board, which shall be subject to the following
express terms and conditions and to the other terms and conditions
specified in this Section 8, and to such other terms and conditions as
shall be determined by the Board in its sole and absolute discretion
which are not inconsistent with the terms of the Plan:

      (i) all NQSOs automatically granted to a Participant shall vest
and become first exercisable immediately upon grant; those NQSOs
granted pursuant to the Boards discretion shall vest as provided by the
Board on the date of such grant;

      (ii) the failure of an NQSO to vest for any reason whatsoever shall
cause the NQSO to expire and be of no further force or effect;

      (iii) unless terminated earlier pursuant to this Plan, the term
of each NQSO shall be five (5) years from the date of grant;

      (iv) NQSOs shall not be transferable by the Participant otherwise
than by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the Participant only by him or her,
or by his or her guardian or legal representative, and after death of
the Participant pursuant to will or applicable law provided, however,
that any exercise after death of the Participant shall occur within one
(1) year of the date of death or prior to the expiration of the term of
the NQSO, whichever is sooner;

      (v) no NQSO or interest therein may be transferred, assigned,
pledged or hypothecated by the Participant during his or her
lifetime whether by operation of law or otherwise, or be made subject to
execution, attachment or similar process; and

      (vi) payment for the Shares to be received upon exercise of an
NQSO may be made in cash, in Shares (determined with reference to their
Fair Market Value on the date of exercise) or any combination thereof.


  (d) Additional Means of Payment.

      Any Stock Option Agreement may, in the sole and absolute
discretion of the Board, permit payment by any other form of legal
consideration consistent with applicable law and any rules and
regulations relating thereto.

   (e) Exercise.

       The holder of an NQSO may exercise the same by filing with the
Corporate Secretary of the Company a written election, in such form as
the Board may determine, specifying the number of Shares with respect to
which such NQSO is being exercised. Such notice shall be accompanied by
payment in full of the exercise price for such Shares. Notwithstanding
the foregoing, the Board may specify a reasonable minimum number of
Shares that may be purchased on any exercise of an option, provided that
such minimum number will not prevent the holder from exercising the
option with respect to the full number of Shares as to which the option
is then exercisable.


  (f) Termination of NQSOs.

      NQSOs granted under the Plan shall be subject to the following
events of termination:

      (i) in the event a Participant is removed from the Board for cause
(as contemplated by the Companys bylaws), all unexercised NQSOs held by
such Participant on the date of such removal (whether or not vested) will
expire immediately;

      (ii) in the event a Participant is no longer a member of
the Board, other than by reason of removal for cause, all NQSOs which
have vested prior to such time shall expire twelve (12) months
thereafter unless by their terms they expire sooner; and

      (iii) in the event a Participant becomes an Officer or Employee
of the Company or a Subsidiary (whether or not such Participant remains
a member of the Board) all NQSOs which have vested prior to such time shall
expire twelve (12) months thereafter unless by their terms they expire sooner.


  9. RECAPITALIZATION.

  (a) Corporate Flexibility.

      The existence of the Plan and the NQSOs granted hereunder shall not
affect or restrict in any way the right or power of the Board or the
stockholders of the Company, in their sole and absolute discretion, to
make, authorize or consummate any adjustment, recapitalization,
reorganization or other change in the Companys capital structure or its
business, any merger or consolidation of the Company, any issue of
bonds, debentures, common stock, preferred or prior preference stocks
ahead of or affecting the Companys capital stock or the rights thereof,
the dissolution or liquidation of the Company, or any sale or transfer
of all or any part of its assets or business, or any other grant of
rights, issuance of securities, transaction, corporate act or
proceeding, notwithstanding the fact that any such activity,
proceedings, action, transaction or other event may have, or be expected
to have, an impact (whether positive or negative) on the value of any
NQSO.

  (b) Adjustments Upon Changes in Capitalization.

      Except as otherwise provided in Section 10 below and subject to any
required action by the stockholders of the Company, in the event of any change
in capitalization affecting the Common Stock of the Company, such as a stock
dividend, stock split or recapitalization, the Board shall make proportionate
adjustments with respect to:

      (i) the aggregate number of Shares available for issuance under the Plan;

      (ii) the number of Shares subject to each grant under the Plan;

      (iii) the number and exercise price of Shares subject to outstanding
NQSOs; and

      (iv) such other matters as shall be appropriate in light of
the circumstances; provided, however, that the number of Shares subject
to any NQSO shall always be a whole number and that no such adjustment
shall be made if the adjustment would cause the Plan to fail to comply
with the formula award exception, as set forth in Rule 16b-3(c)(2)(ii)
of the Exchange Act, for grants of NQSOs to Non-Employee Directors.

  10. CHANGE OF CONTROL.

  In the event of a Change of Control (as defined below), all options not
vested on or prior to the effective time of any such Change of Control
shall immediately vest as of such effective time. The Board in its
discretion may make provisions for the assumption of outstanding
options, or the substitution for outstanding options of new incentive
awards covering the stock of a successor corporation or a parent or
subsidiary thereof, with appropriate adjustments as to the number and
kind of shares and prices so as to prevent dilution or enlargement of
rights; provided, however, that no such adjustment shall be made if the
adjustment would cause the Plan to fail to comply with the formula award
exception, as set forth in Rule 16b-3(c)(2)(ii) of the Exchange Act, for
grants of NQSOs to Non-Employee Directors.

  A Change of Control will be deemed to occur on the date any of the
following events occur:

  (a) any person or persons acting together which would constitute a
group for the purpose of Section 13(d) of the Exchange Act (other than
the Company, any Subsidiary and any entity beneficiary owned by any of
the foregoing), beneficially owns (as defined in Rule 13d-3 under the
Exchange Act) without Board approval, directly or indirectly, at least
30% of the total voting power of the Company entitled to vote generally
in the election of the Board;

  (b) either (i) the Current Directors (as herein defined) cease for any
reason to constitute at least a majority of the members of the Board
(for these purposes, a Current Director means any member of the Board as
of January 25, 2007, and any successor of a Current Director, and any
additional director filling a vacancy created by an expansion of the
size of the Board, whose election, or nomination for election by the
Companys shareholders, was approved by at least a majority of the
Current Directors then on the Board), or (ii) at any meeting of the
stockholders of the Company called for the purpose of electing
directors, a majority of the persons nominated by the Board for election
as directors fail to be elected;

  (c) the stockholders of the Company approve (i) a plan of complete
liquidation of the Company, or (ii) an agreement providing for the
merger or consolidation of the Company (A) in which the Company is not
the continuing or surviving corporation (other than consolidation or
merger with a wholly-owned subsidiary of the Company in which all Shares
outstanding immediately prior to the effectiveness thereof are changed
into or exchanged for the same consideration), or (B) pursuant to which
the Shares are converted into cash, securities or other property, except
a consolidation or merger of the Company in which the holders of the
Shares immediately prior to the consolidation or merger have, directly
or indirectly, at least a majority of the common stock of the continuing
or surviving corporation immediately after such consolidation or merger,
or in which the Board immediately prior to the merger or consolidation
would, immediately after the merger or consolidation, constitute a
majority of the board of directors of the continuing or surviving
corporation; or

  (d) the stockholders of the Company approve an agreement
(or agreements) providing for the sale or other disposition (in one
transaction or a series of transactions) of all or substantially all of
the assets of the Company.

  11. SECURITIES LAW REQUIREMENTS.

  No Shares shall be issued under the Plan unless and until: (i) the
Company and the Participant have taken all actions required to register
the Shares under the Securities Act of 1933, as amended, or perfect an
exemption from the registration requirements thereof; (ii) any
applicable requirement of Nasdaq or any stock exchange on which the
Common Stock is listed has been satisfied; and (iii) any other
applicable provisions of state or federal law have been satisfied. The
Company shall be under no obligation to register the Shares under the
Securities Act of 1933, as amended, or to effect compliance with the
registration or qualification requirements of any state securities laws.


  12. AMENDMENT AND TERMINATION.

  (a) Modifications to the Plan.

      The Board may, insofar as permitted by law, from time to time,
with respect to any Shares at the time not subject to NQSOs, suspend or
terminate the Plan or, subject to Sections 8(a) through 8(c), revise or
amend the Plan in any respect whatsoever. However, unless the Board
specifically otherwise provides, any revision or amendment that would
cause the Plan to fail to comply with Rule l6b-3 or any other
requirement of applicable law or regulation if such amendment were not
approved by the stockholders of the Company, shall not be effective
unless and until such approval is obtained.

  (b) Rights of Participant.

      No amendment, suspension or termination of the Plan that would
adversely affect the right of any Participant with respect to an NQSO
previously granted under the Plan will be effective without the written
consent of the affected Participant.


  13. MlSCELLANEOUS.

  (a) Stockholders Rights.

      Neither a Participant, nor a beneficiary, nor other person claiming
under or through such Participant shall acquire any rights as a
stockholder of the Company by virtue of such Participant having been
granted an NQSO under the Plan. No Participant and no beneficiary or
other person claiming under or through such Participant will have any
right, title or interest in or to any Shares allocated or reserved under
the Plan or subject to any NQSO except as to Shares, if any, that have
been issued or transferred to such Participant. No adjustment shall be
made for cash dividends for which the record date is prior to the date
of exercise.

  (b) Other Compensation Arrangements.

      Nothing contained in the Plan shall prevent the Board from adopting
other compensation arrangements, subject to
stockholder approval if such approval is required. Such other
arrangements may be either generally applicable or applicable only in
specific cases.

  (c) Treatment of Proceeds.

      Proceeds realized from the exercise of NQSOs under the Plan shall
constitute general funds of the Company.

  (d) Costs of the Plan.

      The costs and expenses of administering the Plan shall be borne by
the Company.

  (e) No Right to Continue as Director.

      Nothing contained in the Plan or in any instrument executed
pursuant to the Plan will confer upon any Participant any right to
continue as a member of the Board or affect the right of the Company,
the Board or the stockholders of the Company to terminate the
directorship of any Participant at any time with or without cause.

  (f) Severability.

      The provisions of the Plan shall be deemed severable and
the validity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.

  (g) Binding Effect of Plan.

      The Plan shall inure to the benefit of the Company, its
successors and assigns.

  (h) No Waiver of Breach.

      No waiver by any party hereto at any time of any breach by another party
hereto of, or compliance with, any condition or provision of the Plan to
be performed by such other party shall be deemed a waiver of the same,
any similar or any dissimilar provisions of conditions at the same or at
any prior or subsequent time.

  (i) Governing Law.

      The Plan and all actions taken thereunder shall be enforced, governed
and construed by and interpreted under the laws of the State of Delaware
applicable to contracts made and to be performed wholly within such State
without giving effect to the principles of conflict of laws thereof.

  (j) Headings.

      The headings contained in the Plan are for reference purposes
only and shall not affect in any way the meaning or interpretation of
the Plan.

  14. EXECUTION.

  To record the adoption of the Plan to read as set forth herein, the
Company has caused the Plan to be signed by its Chief financial Officer
and Secretary as of January 25, 2007.

                                          ARTS WAY MANUFACTURING CO., INC.,
                                          a Delaware corporation


                                          By: Carrie L. Majeski
                                          Chief Financial Officer and Secretary
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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