What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-01-29 compared with 2020-01-31 · 253 added, 271 removed, 522 unchanged (50% of the section changed)

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Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Stockholders

Consolidated Statements of Changes in Stockholders Equity

Consolidated Statements of Cash Flows

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We have audited the accompanying consolidated balance sheet of Nobility Homes, Inc.

(the Company) as of November 2,

(the Company) at October 31, 2020,

and November 2, 2019, and the related consolidated statements of comprehensive income, changes in stockholders equity, and cash flows for each of the years in the two-year period ended

November 2, 2019, and the related notes (collectively referred to as the consolidated financial statements).

October 31, 2020, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company

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Consolidated Balance Sheets

November 2, 2019 and November 3, 2018

October 31, 2020 and November 2, 2019

Current assets:

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Mortgage notes receivable

Income taxes receivable

Pre-owned homes, net

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Other investments

Property held for sale

Deferred income taxes

Operating lease right of use asset

Cash surrender value of life insurance

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Income taxes payable

Operating lease obligation

Customer deposits

Total current liabilities

Operating lease obligation, less current portion

Total liabilities

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Consolidated Statements of Comprehensive Income

For the years ended November 2, 2019 and November 3, 2018

Cost of goods sold

For the years ended October 31, 2020 and November 2, 2019

Cost of sales

Selling, general and administrative expenses

Operating income

Other income:

Other income (loss):

Interest income

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Gain on sale of investment in retirement community

Decrease in fair value of equity investment

Gain on sale of assets

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Consolidated Statements of Changes in Stockholders Equity

For the years ended November 2, 2019 and November 3, 2018

For the years ended and October 31, 2020 and November 2, 2019

Comprehensive

Balance at November 2, 2019

Adoption of ASU 2016-01

Adoption of ASU 2016-02

Balance at November 2, 2019 as adjusted

Cash dividend

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Stock-based compensation

Unrealized investment loss, net of tax effect

Balance at October 31, 2020

Balance at November 3, 2018

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Consolidated Statements of Cash Flows

For the years ended November 2, 2019 and November 3, 2018

For the years ended October 31, 2020 and November 2, 2019

Cash flows from operating activities:

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Gain on disposal of property, plant and equipment

Inventory impairment

Decrease in fair value of equity investments

Stock-based compensation

Amortization of operating lease right of use assets

Decrease (increase) in:

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Interest receivable

Income taxes receivable

(Decrease) increase in:

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Purchase of certificates of deposit

Proceeds from certificates of deposit

Proceeds from property held for resale

Proceeds from sale of investment in retirement community

Collections on note receivable

Proceeds from disposal of property, plant and equipment

Collections on interest receivable

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Increase in cash surrender value of life insurance

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

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Proceeds from exercise of employee stock options

Proceeds from paycheck protection program

Return of proceeds from paycheck protection program

Purchase of treasury stock

Reduction of operating lease obligation

Net cash used in financing activities

(Decrease) Increase in cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

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The Company has one manufacturing plant in operation that is located in Ocala, Florida.

At November 2, 2019 Prestige operated ten Florida retail sales centers:

At October 31, 2020 Prestige operated ten Florida retail sales centers:

Ocala (2), Chiefland, Auburndale, Inverness, Hudson,

Tavares, Yulee, Panama City and Punta Gorda.

In December 2017 Prestige executed a lease to open an eleventh retail sales center in north Florida and has not yet opened the retail sales center due to difficulty in hiring staff for the sales center.

In December 2017 Prestige executed a lease to open an eleventh retail sales center in north Florida and has not yet opened the retail sales center due to backlog at the manufacturing facility and

difficulty in hiring staff.

All intercompany accounts and transactions have been eliminated in consolidation.

The consolidated financial statements are prepared in conformity with

accounting principles generally accepted in the United States of America (U.S.

Use of Estimates The preparation of

financial statements in conformity with U.S.

The consolidated financial statements are

prepared in conformity with accounting principles generally accepted in the United States of America (U.S.

Use of Estimates

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures.

These estimates and assumptions are based

upon managements best knowledge of current events and actions that the Company may take in the future.

The Company is subject to uncertainties such as the impact of future events, economic, environmental and political factors and changes in

the Companys business environment;

estimates and assumptions are based upon managements best knowledge of current events and actions that the Company may take in the future.

The Company is subject to uncertainties such as the impact of future events, economic, environmental and

political factors and changes in the Companys business environment;

therefore, actual results could differ from these estimates.

Accordingly, the accounting estimates used in the preparation of the Companys consolidated financial statements will change as new events

occur, as more experience is acquired, as additional information is obtained and as the Companys operating environment changes.

Accordingly, the accounting estimates used in the preparation of the Companys consolidated financial

statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Companys operating environment changes.

Changes in estimates are made when circumstances warrant.

Such changes in estimates and refinements in estimation

methodologies are reflected in the reported financial condition and results of operations;

Such changes in

estimates and refinements in estimation methodologies are reflected in the reported financial condition and results of operations;

if material, the effects of changes in estimates are disclosed in the notes to the consolidated financial statements.

Significant estimates and assumptions by

management affect:

valuation of pre-owned homes, the allowance for doubtful accounts, the carrying value of long-lived assets, the provision for income taxes and related deferred tax accounts, certain accrued

expenses and contingencies, warranty reserve and stock-based compensation.

Fiscal Year The Companys fiscal year ends on

the first Saturday on or after October 31.

The year ended November 2, 2019 (fiscal year 2019) and the year ended November 3, 2018 (fiscal year 2018) each consisted of a fifty-two week period.

Reclassification - Certain amounts in the fiscal year 2018 consolidated financial statements have been reclassified to

conform to the current year presentation.

Revenue Recognition The Company recognizes revenue from its retail sales of new

manufactured homes upon the occurrence of the following:

Significant estimates and assumptions by management affect:

valuation of pre-owned homes, the allowance for doubtful accounts, the carrying value of long-lived assets, the provision for income taxes and

related deferred tax accounts, certain accrued expenses and contingencies, warranty reserve and stock-based compensation.

The Companys fiscal year ends on the first Saturday on or after October 31.

The year ended October 31, 2020 (fiscal year 2020) and the year ended November 2, 2019 (fiscal year 2019) each consisted of a fifty-two week period.

Revenue Recognition The Companys revenue comes substantially from the

sale of manufactured housing, modular housing and park models, along with freight billed to customers, parts sold and aftermarket services.

recognizes revenue following the comprehensive framework of Financial Accounting Standards Board ASU No.

2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which established a methodology for

determining how much revenue to recognize and when it should be recognized through application of the following five-step approach:

Identify the contract(s) with a customer;

Identify each performance obligation in the contract;

Determine the transaction price;

Allocate the transaction price to each performance obligation;

Recognize revenue when or as each performance obligation is satisfied.

The Company recognizes revenue from its retail sales of new manufactured homes upon the occurrence of the following:

Its receipt of a down payment,

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For wholesale shipments to independent dealers, the Company has no obligation to setup the home or to complete any other significant obligations.

Notes to Consolidated Financial Statements

The Company recognizes revenues from its wholly-owned subsidiary, Mountain Financial, Inc., as follows:

commission income (and fees in lieu of commissions) is

recorded as of the effective date of insurance coverage or the billing date, whichever is later.

Commissions on premiums billed and collected directly by insurance companies are recorded as revenue when received which, in many cases, is the

Companys first notification of amounts earned due to the lack of policy and renewal information.

commission income (and fees in lieu of commissions) is recorded as of the effective date of insurance coverage or the billing date, whichever is later.

Commissions on premiums billed and collected directly by insurance companies are recorded as

revenue when received which, in many cases, is the Companys first notification of amounts earned due to the lack of policy and renewal information.

Contingent commissions are recorded as revenue when received.

Contingent commissions are commissions paid by insurance underwriters and are based

on the estimated profit and/or overall volume of business placed with the underwriter.

The data necessary for the calculation of contingent commissions cannot be reasonably obtained prior to the receipt of the commission which, in many cases, is the

Companys first notification of amounts earned.

The Company provides appropriate reserves for policy cancellations based on numerous factors, including past transaction history with customers, historical experience, and other information, which

is periodically evaluated and adjusted as deemed necessary.

In the opinion of management, no reserve was deemed necessary for policy cancellations at November 2, 2019 or November 3, 2018.

Sales of homes to affiliated entities that are subject to contingent payment terms are considered inventory consignment arrangements.

Revenue from such

arrangements is recognized when the homes are sold to the end users and payment is collected by the affiliated entity.

See Note 4 Related Party

Transactions.

Notes to Consolidated Financial Statements

Revenues by Products and Services Revenues by net sales from manufactured housing, pre-owned homes, and insurance agent commissions for the years ended November 2, 2019 and November 3, 2018 are as follows:

Contingent commissions are

commissions paid by insurance underwriters and are based on the estimated profit and/or overall volume of business placed with the underwriter.

The data necessary for the calculation of contingent commissions cannot be reasonably obtained prior to

the receipt of the commission which, in many cases, is the Companys first notification of amounts earned.

The Company provides appropriate reserves for policy cancellations based on numerous factors, including past transaction history with

customers, historical experience, and other information, which is periodically evaluated and adjusted as deemed necessary.

In the opinion of management, no reserve was deemed necessary for policy cancellations at October 31, 2020 or

November 2, 2019.

Sales of homes to affiliated entities that are subject to contingent payment terms are considered inventory consignment

arrangements.

Revenue from such arrangements is recognized when the homes are sold to the end users and payment is collected by the affiliated entity.

See Note 4 Related Party Transactions.

Revenues by Products and Services Revenues by net sales from manufactured housing, pre-owned

homes, and insurance agent commissions for the years ended October 31, 2020 and November 2, 2019 are as follows:

Manufactured housing

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An allowance for doubtful accounts is provided based on prior collection experiences and managements analysis of specific accounts.

At November 2, 2019 or November 3, 2018, in the

At October 31, 2020 or November 2, 2019, in the

opinion of management, all accounts were considered fully collectible and, accordingly, no allowance was deemed necessary.

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Investments with maturities of less than one year are classified as short-term investments.

The Companys equity investment in a public company is classified as available-for-sale and carried at fair value.

Unrealized gains on the available-for-sale securities, net of taxes,

are recorded in accumulated other comprehensive income.

The Company continually reviews its investments to determine whether a decline in fair value

below the cost basis is other than temporary.

If the decline in fair value is judged to be other than temporary, the cost basis of the security is written down to fair value and the amount of the write-down is included in the accompanying

consolidated statements of income and other comprehensive income.

The Companys equity investment in a public company is classified as available-for-sale and carried at fair

Unrealized gains on the available-for-sale securities, net of taxes, were recorded in accumulated other comprehensive income.

Upon the Companys adoption of ASU 2016-01, unrealized gains and losses on these available-for-sale securities,

are reflected in the statement of income and comprehensive income.

Inventories New home inventory is carried at the lower of cost or

market value.

net realizable value.

The cost of finished home inventories determined on the specific identification method is removed from inventories and recorded as a component of cost of sales at the time revenue is recognized.

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depreciation and amortization is included in cost of goods sold.

Under the specific identification method, if finished home inventory can be sold for a profit there is no basis to write down the inventory below the lower of cost or fair market

Under the specific identification method, if finished home inventory can be sold for a profit there is no basis to write down the inventory below the lower of cost or net realizable

The Company acquired certain repossessed pre-owned inventory (Buy Back Inventory) in 2011 as part of an

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reserve which management believes results in inventory being valued at market.

Other pre-owned homes are acquired

(Repossessions Inventory) as a convenience to the Companys joint venture partner, 21st Mortgage Corporation.

This inventory has been repossessed by 21 st Mortgage Corporation or through

mortgage foreclosure.

Notes to Consolidated Financial Statements

Other pre-owned homes are acquired (Repossessions Inventory) as a

convenience to the Companys joint venture partner, 21 st Mortgage Corporation.

This inventory has been repossessed by 21 st Mortgage

Corporation or through mortgage foreclosure.

The Company acquired this inventory at the amount of the uncollected balance of the financing at the time of the foreclosure/repossessions by 21st Mortgage Corporation.

The Company records this inventory at cost determined on

the specific identification method.

The Company records this inventory

at cost determined on the specific identification method.

All of the refurbishment costs are paid by 21 st Mortgage Corporation.

This arrangement assists 21 st

Mortgage Corporation with liquidation their repossessed inventory.

The timing of these repurchases by the Company is unpredictable as it is based on the repossessions 21 st Mortgage Corporation

incurs in the portfolio.

When the home is sold, the Company retains the cost of the home, an interest factor on the cost of the home and a sales commission for the sale of the home, from the sales proceeds.

This arrangement assists 21 st Mortgage Corporation with liquidation of their repossessed inventory.

The timing of these repurchases by the Company is unpredictable as it is based on the repossessions 21 st Mortgage Corporation incurs in the portfolio.

When the home is sold, the Company retains the cost of the home, an interest factor on the cost of the home and a sales commission, from the sales

Any additional proceeds are paid to 21 st Mortgage.

Any shortfall from the proceeds to cover these amounts is paid by 21 st Mortgage to the Company.

As the Company has no risk of loss on

the sale, there is no valuation allowance necessary for this inventory.

Inventory held at consignment locations by affiliated entities is included in the

Companys inventory on the Companys consolidated balance sheets.

Consigned inventory was $1,540,949 and $1,140,982 as of November 2, 2019 and November 3, 2018, respectively.

Notes to Consolidated Financial Statements

Pre-owned homes are also taken as

trade-ins on new home sales (Trade-in Inventory).

This inventory is recorded at estimated actual wholesale value which is generally lower then market value, determined

on the specific identification method, plus refurbishment costs incurred to date to bring the inventory to a more saleable state.

The Trade-in inventory amount is reduced where necessary on a unit specific

basis by a valuation reserve which management believes results in inventory being valued at market.

Other inventory costs are determined on a first-in, first-out basis.

Any shortfall from the proceeds to cover these amounts is paid by 21 st Mortgage to

As the Company has no risk of loss on the sale, there is no valuation allowance necessary for this inventory.

Inventory held at consignment

locations by affiliated entities is included in the Companys inventory on the Companys consolidated balance sheets.

Consigned inventory was $1,277,681 and $1,540,949 as of October 31, 2020 and November 2, 2019, respectively.

Pre-owned homes are also taken as trade-ins on new home sales (Trade-in Inventory).

This inventory is recorded at estimated actual wholesale value, which is generally lower than market value, determined on the specific identification method, plus refurbishment costs incurred

to date to bring the inventory to a more saleable state.

The Trade-in Inventory amount is reduced where necessary on a unit specific basis by a valuation reserve, which management believes results in inventory

being valued at market.

Other inventory costs are determined on a first-in,

first-out basis.

See Note 6 Inventories.

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involvement with Majestic 21 is its investment in the joint venture.

Based on managements evaluation, there was no impairment of this investment at November 2, 2019 or November 3, 2018.

Based on managements evaluation, there was no impairment of this investment at October 31, 2020 or November 2, 2019.

The Company entered into an arrangement in 2002 with 21 st Mortgage to repurchase certain pre-owned homes.

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through the Companys network of retail centers which management believes benefits the historical loss experience of the joint venture.

The only impact on the Companys operations from this arrangement are commissions earned on the

resale of these units and interest earned for the Companys carrying costs of the units while in inventory.

See Note 15 Commitments and

Contingent Liabilities.

Other Investments - On October 30, 2019, the Company sold its 31.3% investment interest in Walden Woods South

to certain related parties and existing owners, including the Companys Executive Vice President, who purchased the majority of the 31.3% interest.

The transaction value was based on a 3rd party appraisal, and the Company received $1,510,000 in

The Companys investment historically was accounted for under the equity method, which was suspended when the carrying amount was reduced to $nil due to continued losses.

The only impact on the Companys operations from this arrangement are commissions earned on the resale

of these units and interest earned for the Companys carrying costs of the units while in inventory.

See Note 15 Commitments and Contingent

Liabilities.

Other Investments - In October 2019, the Company sold its 31.3% investment interest in Walden Woods South and the

Company received $1,510,000 in cash.

See Note 4 Related Party Transactions.

Impairment of Long-Lived Assets In the event that facts and circumstances indicate that the carrying value of a long-lived asset may be

impaired, an evaluation of recoverability is performed by comparing the estimated future undiscounted cash flows associated with the asset to the assets carrying amount to determine if a write-down is required.

If such evaluations indicate

that the future undiscounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values.

Notes to Consolidated Financial Statements

Impairment of Long-Lived Assets In the event that facts and circumstances indicate that

the carrying value of a long-lived asset may be impaired, an evaluation of recoverability is performed by comparing the estimated future undiscounted cash flows associated with the asset to the assets carrying amount to determine if a

write-down is required.

If such evaluations indicate that the future undiscounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values.

Customer Deposits A retail customer is required to make a down payment ranging from $500 to 35% of the retail contract price based upon

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The Company does not typically receive any deposits from independent dealers.

Notes to Consolidated Financial Statements

Company Owned Life Insurance The Company has purchased life insurance policies on

certain key executives.

Company owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are

probable at settlement.

Company Owned Life Insurance The Company has purchased life insurance policies on certain key executives.

Company owned life insurance is

recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Warranty Costs The Company provides for a warranty as the manufactured homes are sold.

Amounts related to

these warranties for fiscal years 2019 and 2018 are as follows:

Amounts related to these warranties for fiscal

years 2020 and 2019 are as follows:

Beginning accrued warranty expense

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Advertising expense amounted to approximately $144,600 and $140,520 for fiscal years 2020 and 2019, respectively.

Income Taxes The Company accounts for income taxes utilizing the asset and liability method.

This approach requires the recognition of

deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Deferred tax assets and liabilities are measured using enacted tax

rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of

Net Income per Share These financial statements include basic and diluted net income per share

information for all periods presented.

The basic net income per share is calculated by dividing net income by the weighted-average number of shares outstanding.

The diluted net income per share is calculated by dividing net income by the

weighted-average number of shares outstanding, adjusted for dilutive common shares.

Notes to Consolidated Financial Statements

Shipping and Handling Costs Net sales include the revenue related to shipping and

handling charges billed to customers.

Income Taxes The Company accounts for income taxes utilizing the asset and liability

This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities

and their respective tax bases.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Deferred tax assets and

liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Deferred tax assets and liabilities are adjusted for the effects of

changes in tax laws and rates on the date of enactment.

Net Income per Share These financial statements include basic

and diluted net income per share information for all periods presented.

The basic net income per share is calculated by dividing net income by the weighted-average number of shares outstanding.

The diluted net income per share is

calculated by dividing net income by the weighted-average number of shares outstanding, adjusted for dilutive common shares.

Shipping and Handling

Costs Net sales include the revenue related to shipping and handling charges billed to customers.

The related costs associated with shipping and handling is included as a component of cost of goods sold.

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as a single segment.

Major Customers Sales to one publicly traded REIT (Real Estate Investment Trust), which owns

multiple retirement communities in our market area accounted for $1,308,500 or 2% of our total net sales in fiscal year 2019 and $2,097,200 or 5% of our total net sales in fiscal year 2018.

Three other companies which own multiple retirement

communities in our market area accounted for $2,629,605 or 6% of our total net sales in fiscal year 2019 and $4,026,060 or 10% of our total net sales in fiscal year 2018.

Accounts receivable due from these customers were $685,671 or 51% and $864,410

or 48% at November 2, 2019 and November 3, 2018, respectively.

Concentration of Credit Risk The Companys financial instruments

that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term and long-term investments and accounts receivable.

At times, the Companys deposits may exceed federally insured limits.

Company has not experienced any losses in such accounts and management believes the Company is not exposed to any significant credit risk on these accounts.

The majority of the Companys sales are credit sales which are made primarily to

customers whose ability to pay is dependent upon the industry economics prevailing in the areas where they operate;

however, concentrations of credit risk with respect to accounts receivables is limited due to generally short payment terms.

Company also performs ongoing credit evaluations of its customers to help further reduce credit risk.

The Company maintains reserves for potential credit losses when deemed necessary and such losses have historically been within managements

expectations.

Concentration of Retail Financing Sources There are two national lenders that

service the manufactured housing industry with several others who specialize in government insured loans (Fannie, Freddie, FHA, VA, etc.).

With only a few lenders dedicated to our industry, the loss of any of them could adversely affect our retail

Recently Issued or Adopted Accounting Pronouncements In November 2015, the FASB issued ASU

2015-17 Income Taxes (Topic 740):

Balance Sheet Classification of Deferred Taxes (ASU 2015-17).

simplifies the presentation of deferred income taxes by eliminating the separate classification of deferred income tax liabilities and assets into current and noncurrent amounts in the consolidated balance sheet statement of financial position.

amendments in the update require that all deferred tax liabilities and assets be classified as noncurrent in the consolidated balance sheet.

The amendments in this update are effective for annual periods beginning after December 15, 2016, and

interim periods there in and may be applied either prospectively or retrospectively to all periods presented.

The Company prospectively adopted ASU 2015-17 beginning with its February 3, 2018 consolidated

financial statements.

As such, deferred tax assets and liabilities for fiscal year 2018 have been presented as noncurrent.

In February 2016, the FASB

issued Accounting Standards Update (ASU) No.

Major Customers Two c ompanies which own multiple retirement communities in our market area

accounted for $3,497,285 or 8% and $2,579,380 or 6% respectively, of our total net sales in fiscal year 2020 compare to three companies which accounted for $2,536,870 or 5% of our total net sales in fiscal year 2019.

Accounts receivable due from

these customers were $467,078 or 78% and $685,671 or 57% at October 31, 2020 and November 2, 2019, respectively.

Concentration of Credit

Risk The Companys financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term and long-term investments and accounts receivable.

At times, the Companys

deposits may exceed federally insured limits.

However, the Company has not experienced any losses in such accounts and management believes the Company is not exposed to any significant credit risk on these accounts.

The majority of the

Companys sales are credit sales which are made primarily to customers whose ability to pay is dependent upon the industry economics prevailing in the areas where they operate;

however, concentrations of credit risk with respect to accounts

receivables is limited due to generally short payment terms.

The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk.

The Company maintains reserves for potential credit losses when deemed necessary

and such losses have historically been within managements expectations.

Concentration of Retail Financing Sources

There are two national lenders that service the manufactured housing industry with several others who specialize in government insured loans (Fannie, Freddie, FHA, VA, etc.).

With only a few lenders dedicated to

our industry, the loss of any of them could adversely affect our retail sales.

Recently Issued or Adopted Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update (ASU) No.

2016-02, Leases (ASU 2016-02).

The core principle of ASU 2016-02 is

that lessees should recognize on its balance sheet assets and liabilities arising from a lease.

In accordance with that principle, ASU 2016-02 requires that a lessee recognize a liability to make lease

payments (the lease liability) and a right-of-use asset representing its right to use the underlying leased asset for the lease term.

Lessees shall classify all leases

as finance or operating leases.

This new accounting guidance is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

Early adoption is permitted.

expects the adoption of ASU 2016-02 will result in the recognition of the right-of-use assets and related obligations on its

consolidated financial statements.

In January 2016, the FASB issued ASU No.

2016-01, Financial

InstrumentsOverall:

The core principle of ASU 2016-02 is that lessees should recognize on its balance sheet assets and liabilities arising from a lease.

In accordance with that principle, ASU 2016-02 requires that a

lessee recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying leased asset for the

Lessees shall classify all leases as finance or operating leases.

This new accounting guidance was effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal

The Company adopted ASU 2016-02, on November 3 rd , 2019 which resulted in the recognition of the right-of-use assets and related obligations on its consolidated financial statements.

In January 2016, the FASB

issued ASU No.

2016-01, Financial InstrumentsOverall:

Recognition and Measurement of Financial Assets and Financial Liabilities.

The amendments require all equity investments to be measured at fair value with changes in the fair value recognized through net income (other

than those accounted for under the equity method of accounting or those that result in consolidation of the investee).

The amendments also require an entity to present separately in other comprehensive income the portion of the total change in the

fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.

In addition, the

amendments eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.

The amendments in

this update are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.

The Company expects the adoption of this amendment to recognize changes in the fair value of

equity investment in earnings.

The amendments require all equity investments to be

measured at fair value with changes in the fair value recognized through net income (other than those accounted for under the equity method of accounting or those that result in consolidation of the investee).

The amendments also require an entity

to present separately in other comprehensive income the portion

Notes to Consolidated Financial Statements

In July 2015, the FASB issued ASU No.

2015-11, Inventory

Simplifying the Measurement of Inventory.

The amendments require an entity to measure in scope inventory at the lower of cost and net realizable value.

Net realizable value is the estimated selling prices in the ordinary course of

business, less reasonably predictable costs of completion, disposal, and transportation.

The amendments do not apply to inventory that is measured using last-in,

first-out (LIFO) or the retail inventory method.

The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost.

The amendments in this update are effective for public companies for fiscal years beginning after December 15, 2016.

The Company adopted this ASU in the quarter ended

February 3, 2018 and it did not have a material impact on its consolidated financial statements.

In May 2014, the FASB issued ASU No.

2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which requires an entity to recognize revenue from the transfer of promised

goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services together with subsequent updates, the guidance addresses, in particular, contracts with

more than one performance obligation, as well as the accounting for some costs to obtain or fulfill a contract with a customer;

and provides for additional disclosures with respect to revenues and cash flows arising from contracts with customers.

With respect to public entities, this update, together with subsequent amendments, is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and early adoption is not permitted.

The core principal of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods

or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Using this principle, a comprehensive framework was established for determining how much

revenue to recognize and when it should be recognized.

To be consistent with this core principle, an entity is required to apply the following five-step approach:

Identify the contract(s) with a customer;

Identify each performance obligation in the contract;

Determine the transaction price;

Allocate the transaction price to each performance obligation;

Recognize revenue when or as each performance obligation is satisfied.

The Companys revenue comes substantially from the sale of manufactured housing, modular housing and park models, along with freight billed to customers,

parts sold and aftermarket services.

The impact of the Companys initial adoption of ASU 2014-09 using the modified retrospective method did not

have a material impact on its consolidated financial statements and disclosures.

of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in

accordance with the fair value option for financial instruments.

In addition, the amendments eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for

financial instruments measured at amortized cost on the balance sheet.

The Company adopted ASU 2016-01 resulting in recognition changes in the fair value of equity investment in earnings.

NOTE 2 Investments

The following is a summary of short-term investments (available for sale):

November 2, 2019

The following is a summary of

short-term investments (available for sale):

October 31, 2020

Amortized Cost

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Equity securities in a public company

Notes to Consolidated Financial Statements

November 2, 2019

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The following table represents the

Companys financial assets and liabilities which are carried at fair value at November 2, 2019 and November 3, 2018.

November 2, 2019

Companys financial assets and liabilities which are carried at fair value at October 31, 2020 and November 2, 2019.

October 31, 2020

Equity securities in a public company

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Equity securities in a public company

Notes to Consolidated Financial Statements

NOTE 4 Related Party Transactions

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Sales to TLT Communities were not significant during fiscal years 2020 and 2019.

Walden Woods South - On October 30, 2019, the Company sold its 31.3% investment interest in Walden Woods South LLC, which owns the Walden Woods South

Walden Woods South In October 2019, the Company sold its 31.3% investment interest in Walden Woods South LLC, which owns the Walden Woods South

retirement community, to certain related parties and existing owners.

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own 59.43% and 23.04%, respectively, of Walden Woods South LLC.

Notes to Consolidated Financial Statements

Repurchase of Common Stock In June 2019, the Company repurchased 100,000 shares of common stock

from our President at $21.95 per share.

Repurchase of Common Stock In June 2019, the Company repurchased 100,000

shares of common stock from our President at $21.95 per share.

NOTE 5 Other Investments

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by Majestic 21.

Investment in Retirement Community Limited Partnerships On October 30, 2019, the Company sold its 31.3%

investment interest in Walden Woods South to certain related parties and existing owners, including the Companys Executive Vice President, who purchased the majority of the 31.3% interest.

The transaction value was based on a 3rd party

appraisal, and the Company received $1,510,000 in cash.

The Companys investment historically was accounted for under the equity method, which was suspended when the carrying amount was reduced to $nil due to continued losses.

Investment in Retirement Community Limited Partnerships In October 2019, the Company sold its 31.3% investment

interest in Walden Woods South and the Company received $1,510,000 in cash.

NOTE 6 Inventories

The Company acquired a significant

amount of repossessed pre-owned (Buy Back) inventory in 2011.

Other pre-owned homes are periodically acquired (Repossessions) as a convenience to the Companys

joint venture partner.

The Company acquired a significant amount of repossessed pre-owned (Buy Back) inventory in 2011.

Other pre-owned homes are periodically acquired (Repossessions) as a convenience to the Companys joint venture partner.

Pre-owned homes are also taken as trade-ins on new home sales (Trade-Ins).

This inventory consists of

individual homes and homes on a real estate parcel.

The Company continually monitors this inventory and records a valuation allowance where necessary on a unit specific basis which management believes results in inventory being valued at market.

Company could experience additional losses on the disposition of these homes beyond the level of the reserve recorded by the Company.

This inventory consists of individual homes and homes on a real estate parcel.

The Company continually monitors this inventory and

records a valuation allowance where necessary on a unit specific basis which management believes results in inventory being valued at market.

The Company could experience additional losses on the disposition of these homes beyond the level of the

reserve recorded by the Company.

Notes to Consolidated Financial Statements

A breakdown of the elements of inventory at November 2, 2019 and November 3, 2018 is as follows:

November 2, 2019

A breakdown of the elements of inventory at October 31, 2020 and November 2, 2019 is as follows:

October 31, 2020

November 2, 2019

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Balance at November 2, 2019

Balance at October 31, 2020

An analysis of the pre-owned home inventory impairment reserve at

November 2, 2019 and November 3, 2018 is as follows:

November 2, 2019

October 31, 2020 and November 2, 2019 is as follows:

October 31, 2020

November 2, 2019

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NOTE 7 Property Held for Sale

On June 28, 2019 the Company sold its former Pace retail sales center property located in Pace, Florida for total net proceeds of $1,078,325 and was

included on the balance sheet in property held for sale (non-current asset) for $213,437.

In April 2018, Nobility

sold its Belleview facility that had been vacant since June 2015 for $635,000.

In June 2019 the Company sold its former Pace, Florida retail sales center property for total net proceeds of $1,078,325.

Notes to Consolidated Financial Statements

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Range of Lives in Years

November 2, 2019

October 31, 2020

November 2, 2019

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Less accumulated depreciation

Depreciation expense during the years ended November 2, 2019 and November 3, 2018 totaled $163,097 and $148,204,

Depreciation expense during the years ended October 31, 2020 and November 2, 2019 totaled $180,047 and $163,097,

respectively.

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November 2, 2019

November 3, 2018

Accrued warranty expense

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The Company did not reflect any amounts for interest and

penalties in its 2019 or 2018 statements of operations, nor are any amounts accrued for interest and penalties at November 2, 2019 and November 3, 2018.

penalties in its 2020 or 2019 statements of operations, nor are any amounts accrued for interest and penalties at October 31, 2020 and November 2, 2019.

Notes to Consolidated Financial Statements

The provision for income taxes for the years ended consists of the following:

November 2, 2019

October 31, 2020

November 2, 2019

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taxes for the years ended:

November 2, 2019

October 31, 2020

November 2, 2019

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Stock option expirations

Decrease in federal tax rate

Decrease in FL corporate tax rate

Other comprehensive income

Income tax expense

Provision for income taxes

The types of temporary differences between the tax bases of assets and liabilities and their financial reporting amounts and

the related deferred tax assets and deferred tax liabilities are as follows:

November 2, 2019

October 31, 2020

November 2, 2019

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Accrued expenses

Lease right of use liability

Stock-based compensation

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Prepaid expenses

Lease right of use asset

Net deferred tax assets (liabilities)

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These amounts are included in the accompanying consolidated balance sheets under the following captions:

November 2, 2019

October 31, 2020

November 2, 2019

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assets were fully realizable.

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (H.R.

The Act includes a number of changes in existing tax law impacting businesses including, among other things, a permanent reduction in the corporate income tax rate from 34% to 21%.

The rate reduction took effect on

January 1, 2018.

NOTE 12 Stockholders Equity

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300,000 shares were reserved for issuance under the Plan, all of which may be issued pursuant to the exercise of incentive stock options.

At November 2, 2019, 297,250 options were available for future grant under the plan and 2,750 options were

At October 31, 2020, 272,700 options were available for future grant under the plan and 27,300 options

were outstanding.

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair

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Outstanding at November 2, 2019

Outstanding at October 31, 2020

12.10 24.00

The aggregate intrinsic value in the table above represents total intrinsic value (of options in the money), which is the

difference between the Companys closing stock price on the last trading day of fiscal year 2020 and the exercise price times the number of shares, that would have been received by the option holder had the option holder exercised their options

on November 2, 2019.

The following table summarizes information about the outstanding stock options at November 2, 2019:

on October 31, 2020.

The following table summarizes information about the outstanding stock options at October 31, 2020:

Options Outstanding

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These leases have varying renewal options.

Total rent expense for operating leases, including those with terms of less than

one year, amounted to $162,929 and $161,105 in fiscal year 2019 and 2018, respectively.

Notes to Consolidated Financial Statements

Future minimum payments by year and in the aggregate, under the aforementioned leases and other non-cancelable operating leases with initial or remaining terms in excess of one year, as of November 2, 2019 are as follows for the fiscal years ending:

Total minimum payments required

On November 3, 2019, the Company adopted ASC Topic 842 using the modified retrospective method applied

to leases that were in place as of November 3, 2019.

Results for reporting periods beginning after November 3, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with

our historic accounting under Topic 840.

The Company elected the package of practical expedients permitted under the transition guidance, which allows

for the historical lease classification to be carried forward, the Companys assessments on whether a contract is or contains a lease, and the Companys initial direct costs for any leases that exist prior to adoption of the new standard.

The Company also elected the short-term lease recognition exemption for all leases that qualify.

To determine the present value of minimum future lease

payments for operating leases at November 3, 2019, the Company was required to estimate a rate of interest that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar

economic environment (the incremental borrowing rate or IBR).

The Company determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain

lease-specific circumstances.

For the reference rate, the Company used mortgage interest rates for similar terms.

Right of use assets are included as a non-current asset in the amount of $715,368, net of amortization in the consolidated Balance Sheet as of October 31, 2020.

Based on the terms of the lease agreements, all of the Companys leases are classified as operating leases.

The weighted average remaining lease term and

weighted average discount rate of the operating leases is 9.16 years and 3.0%, respectively.

Minimum rental payments under operating leases are

recognized on a straight-line basis over the term of the lease.

Individual components of the total lease cost incurred by the Company in the amount of $209,273 for the twelve months ended October 31, 2020.

The amount of future minimum lease payments under operating are as follows:

Operating Lease

Undiscounted future minimum lease payments:

Amount representing imputed interest

Total operating lease liability

Current portion of operating lease liability

Operating lease liability, non-current

Majestic 21 On May 20, 2009, the Company became a 50% guarantor on a $5 million note payable

entered into by Majestic 21, a joint venture in which the Company owns a 50% interest.

The outstanding principal balance of $94,694 on the note was repaid on February 1, 2019, at which time the Company was relieved of its guarantee obligation.

Other Contingent Liabilities Certain claims and suits arising in the ordinary course of business have been filed or are pending

against the Company.

The outstanding principal balance of $94,694 on the note was repaid in February 2019.

Other Contingent Liabilities Certain claims and suits arising in the ordinary course of business have been filed or are pending against

In the opinion of management, the ultimate outcome of these matters will not have a material adverse effect on the Companys financial position, results of operations or cash flows.

Accordingly, the Company has not made any

accrual provisions for litigation in the accompanying consolidated financial statements.

Accordingly, the Company has not made any accrual

provisions for litigation in the accompanying consolidated financial statements.

The Company does not maintain casualty insurance on some of its

property, including the inventory at our retail centers, our plant machinery and plant equipment and is at risk for those types of losses.

Paycheck Protection Program Loan

During the second quarter of 2020, the Company applied for and received funding in the amount of approximately

$1,750,000 under the CARES Act and the Paycheck Protection Program (the PPP).

Upon receipt, the Company promptly returned the funds, as management determined that the loan was not necessary to support its ongoing operations.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data