Quarterly Report for Quarter Ending August 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

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

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

Critical Accounting Policies

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

Results of Operations

Net Sales and Cost of Sales

Our consolidated corporate sales from continuing operations for the three- and nine-month periods ended August 31, 2026 were $5,616,000 and $20,109,000, respectively, compared to $6,432,000 and $17,910,000, respectively, during the same periods in fiscal 2025. Our sales decreased $816,000, or 12.7% for the three months ended August 31, 2026 and increased $2,199,000, or 12.3% for the nine months ended August 31, 2026 compared to same periods in fiscal 2025. Consolidated gross margin for the three and nine months ended August 31, 2026 was 29.6% and 27.9% compared to 27.5% and 29.7% for the same periods in fiscal 2025.

Sales in our Agricultural Products segment during the third quarter of fiscal 2026 were $3,065,000 compared to $2,983,000 during the same period of fiscal 2025, an increase of $82,000, or 2.7%. Sales for the nine months ended August 31, 2026 were $11,193,000 compared to $9,956,000 during the same period of fiscal 2025, an increase of $1,237,000, or 12.4%. The overall outlook for the agricultural sector remains bleak with modest row crop prices and rising input costs. Despite this, our sales have increased compared to fiscal 2025 as heightened dealer inventories from previous years have returned to normal stocking levels. So far, fiscal 2026 has seen increased demand for grinder mixers, manure spreaders and bale processors from fiscal 2025, which we attribute mostly to strong livestock prices. Our sugar beet equipment demand is down noticeably from prior years, as sugar beet prices declined in the first fiscal quarter of 2026. We believe this softening demand was mitigated by the introduction of our new ClearView beet head in twelve and eight row configurations this year. We strategically deployed an experienced product specialist into our primary beet territory beginning in April 2026 to drive new customer activity and further technological development. We are still carrying elevated whole good inventory levels in beet and manure spreading equipment compared to prior years to put us in position to react to spikes in demand. We will build up grinder mixer inventory in the event we are able to work through our backlog, but have yet to get ahead of demand for these products. Gross margin for our Agricultural Products segment for the three-month period ended August 31, 2026 was 26.7% compared to 18.3% for the same period in fiscal 2025. Gross margin for the nine months ended August 31, 2026 was 28.4% compared to 24.4% for the same period of fiscal 2025. The margin increase for fiscal 2026 is due primarily to increased sales, which resulted in better absorption of fixed manufacturing costs. Our grinder mixer sales are up approximately $1,523,000 year-on-year. Steel prices are up over 31% from our fiscal year end and rising oil prices may challenge our margins for the rest of fiscal 2026.

Our third fiscal quarter sales in our Modular Buildings segment were $2,551,000 compared to $3,449,000 for the same period in fiscal 2025, a decrease of $898,000, or 26.0%. Our sales for the nine months ended August 31, 2026 were $8,916,000 compared to $7,954,000 for the same period of fiscal 2025, an increase of $962,000, or 12.1%. While sales for the nine months ended August 31, 2026 were up year on year, our third fiscal quarter had a lull in progress on contracts as we concluded on-site projects and completed design work for expected construction contracts that eventually became backlog. Current backlog is the highest in the history of this segment and is expected to carry us through the end of fiscal 2027. Gross margin in the Modular Buildings segment for the three- and nine-month periods ended August 31, 2026 was 33.0% and 27.2%, respectively, compared to 35.4% and 36.4% for the same periods in fiscal 2025. Our margin decrease for the first nine months of fiscal 2026 is due to the selling of a warrantied agriculture modular building at cost, project overages on site work while completing current contracts and contingencies that became profits in the first quarter of fiscal 2025 that was not repeated in the first nine months of fiscal 2026.

Expenses

Consolidated selling expenses from continuing operations for the three and nine months ended August 31, 2026 were $424,000, and $1,294,000, respectively, compared to $351,000 and $1,137,000 for the same periods in fiscal 2025. The increase in selling expenses is due to increased commissions and royalties from increased sales along with additional targeted advertising campaign expenditures in fiscal 2026. Selling expenses as a percentage of sales were 7.5% and 6.4% for the three and nine months ended August 31, 2026, respectively, compared to 5.5% and 6.3% for the same periods of fiscal 2025.

Consolidated engineering expenses from continuing operations were $99,000 for the three months ended August 31, 2026 compared to $87,000 for the same period in fiscal 2025. Consolidated engineering expenses from continuing operations were $300,000 for the nine months ended August 31, 2026 compared to $257,000 for the same period in fiscal 2025. The increase in engineering expenses is related to additional research and development costs incurred in 2026 to make product changes that we anticipate could drive more sugar beet product demand. Engineering expenses as a percentage of sales were 1.8% and 1.5% for the three and nine months ended August 31, 2026, respectively, compared to 1.4% and for the same periods in fiscal 2025.

Consolidated administrative expenses from continuing operations for the three months ended August 31, 2026 were $1,208,000 compared to $983,000 for the same period in fiscal 2025. Consolidated administrative expenses from continuing operations for the nine months ended August 31, 2026 were $3,463,000 compared to $3,071,000 for the same period in fiscal 2025. Administrative expenses as a percentage of sales were 21.5% and 17.2% for the three and nine months ended August 31, 2026, respectively, compared to 15.3% and 17.1% for the same periods in fiscal 2025. Administrative fees are up for the fiscal quarter and year due to professional fees, pending litigation for which we are the plantiff and early retirement paid out in the third fiscal quarter. We do not anticipate replacing the early retirees unless an agricultural market upticks, so we anticipate savings from offering early retirement over the next 12 months.

Net income (loss)

Consolidated net loss was $140,000 for the three-month period ended August 31, 2026, compared to net income of $254,000 for the same period in fiscal 2025. Consolidated net income was $230,000 for the nine-month period ended August 31, 2026, compared to net income of $1,680,000 for the same period in fiscal 2025. In the nine months ended August 31, 2025 we received approximately $1,154,000 of Employee Retention Credit refunds net of preparation fees and tax, which is the largest difference in comparability of net income from fiscal 2025 to fiscal 2026. Despite the increase in net sales, there are other factors decreasing net income including: steel prices (up over 39% since year end), increased legal expenses, increase in advertising footprint and early retirement offering. While our Agricultural Products segment was not profitable for the nine months ended August 31, 2025, we are continuing to make operational improvements including the acquisition of a new laser, brake press and roller to prepare for the next uptick in the ag market. We believe the acquisition of this equipment will greatly improve our operational capacity, efficiency and enhance quality. Our Modular Buildings segment continues to have strong profitability and is carrying historic backlog.

Order Backlog

The consolidated order backlog net of discounts as of October 6, 2026 was $19,075,000 compared to $3,595,000 as of October 6, 2025, a 430.6% increase. The order backlog in our Agricultural Products segment was $1,643,000 as of October 6, 2026 compared to $848,000 in fiscal 2025, a 93.8% increase. Record cattle prices continue to fuel demand for our grinder mixers and manure spreaders as we close out fiscal 2026. Demand is improved from the previous year but overall it is not a strong farm economy. It will take rising row crop prices to increase our demand in this segment. The backlog for the Modular Buildings segment was $17,432,000 as of October 6, 2026, compared to $2,747,000 in fiscal 2025, a 534.6% increase. The Modular Buildings segment secured two significant contracts in the third fiscal quarter of 2026 that we expect will drive strong revenues through fiscal 2027. Our order backlog is not necessarily indicative of future revenue to be generated from such orders due to the possibility of order cancellations and dealer discount arrangements we may enter into from time to time.

Liquidity and Capital Resources

Our primary source of funds for the nine months ended August 31, 2026 was cash generated by operating activities including profitability and reduction of inventory. While our billings in excess of costs indicate strong cash generation, most of that is still in accounts receivable as indicated by a mostly offsetting cash utilization amount. We expect the collection of accounts receivable including progress on construction contracts and the reduction of inventory to be primary sources of cash for the remainder of fiscal 2026 as we work through on hand manure spreader and beet harvesting equipment. We expect our primary cash needs for the remainder of the fiscal year to be tied to operating expenses, acquisition of capital equipment that improves operations, and the retirement of debt.

As of August 31, 2026, our revolving credit line (the "Line of Credit") had an outstanding principal balance of $3,645,000. We renewed our revolving line of credit with Bank Midwest on March 19, 2026, with a scheduled maturity date of March 30, 2027. In our most recent renewal, we negotiated an interest rate 50 basis points lower than our previous line of credit tied to SOFR to recognize expected interest rate decreases sooner. On June 22, 2026, we entered into a credit facility consisting of a $500,000 revolving line of credit (the "Reserve Line of Credit"). The Reserve Line of Credit is secondary to the Line of Credit and will be utilized upon the Line of Credit reaching capacity. The Reserve Line of Credit was activated in June 2026 to pay large equipment deposits on a new fiberoptic laser and crane system and has since been paid off with operational cash flow. The deposits and balance of this equipment will be funded with a term loan when installation is complete later this year. The Company expects this capital expenditure will improve quality, efficiency and reliability of our products.

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