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Item 8. Financial Statements and Supplementary Data

2022-02-04 compared with 2021-01-29 · 291 added, 454 removed, 321 unchanged (70% of the section changed)

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Consolidated Balance Sheets

Consolidated Statements of Comprehensive Income

Consolidated Statements of Income

Consolidated Statements of Changes in Stockholders’ Equity

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To the Board of Directors and Stockholders of

Nobility Homes,

Nobility Homes, Inc.

Ocala, Florida

Opinion on the Financial

Opinion on the Financial Statements

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

(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

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

and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

(the “Company”) at November 6, 2021 and October 31, 2020, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the two-year

period ended November 6, 2021, 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 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial

statements are the responsibility of the Companys management.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange

Commission and the PCAOB.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the

audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal

control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal

control over financial reporting.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material

misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

that our audits provide a reasonable basis for our opinion.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ Daszkal Bolton LLP

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Jupiter, Florida

January 29, 2021

February 4, 2022

Nobility Homes, Inc.

Consolidated Balance Sheets

October 31, 2020 and November 2, 2019

November 6, 2021 and October 31, 2020

November 6, 2021

October 31,2020

Current assets:

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Income taxes receivable

Pre-owned homes, net

Prepaid expenses and other current assets

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Property, plant and equipment, net

Pre-owned homes, net

Note receivable, less current portion

Mortgage notes receivable, less current portion

Mobile home park note receivable

Other investments

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Total current liabilities

Deferred income taxes

Operating lease obligation, less current portion

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Common stock, $ .10 par value, 10,000,000 shares authorized;

5,364,907 shares issued, 3,631,196 and

3,664,070 outstanding, respectively

5,364,907 shares issued, 3,532,100 and 3,631,196 outstanding, respectively

Additional paid in capital

Retained earnings

Accumulated other comprehensive income

Less treasury stock at cost, 1,832,807 shares in 2021 and 1,733,711 shares in 2020

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Nobility Homes, Inc.

Consolidated Statements of Comprehensive Income

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

Consolidated Statements of Income

For the years ended November 6, 2021 and October 31, 2020

Cost of sales

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Proceeds received under escrow arrangement

Gain on sale of investment in retirement community

Decrease in fair value of equity investment

Increase (decrease) in fair value of equity investment

Gain on sale of assets

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Income tax expense

Other comprehensive loss

Unrealized investment loss, net of tax effect

Comprehensive income

Weighted average number of shares outstanding:

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Consolidated Statements of Changes in Stockholders’ Equity

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

For the years ended November 6, 2021 and October 31, 2020

Comprehensive

Balance at October 31, 2020

Cash dividend

Purchase of treasury stock

Stock-based compensation

Exercise of employee stock options

Balance at November 6, 2021

Balance at November 2, 2019

Adoption of ASU 2016-01

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Balance at October 31, 202 0

Balance at November 3, 2018

Cash dividend

Purchase of treasury stock

Stock-based compensation

Unrealized investment loss, net of tax effect

Exercise of employee stock options

Balance at November 2, 2019

The accompanying notes are an integral part of these financial statements.

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Consolidated Statements of Cash Flows

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

For the years ended November 6, 2021 and October 31, 2020

Cash flows from operating activities:

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Undistributed earnings in joint venture—Majestic 21

Gain on sale of investment in retirement community

Gain on property held for sale

Gain on disposal of property, plant and equipment

Decrease in fair value of equity investments

(Increase) decrease in fair value of equity investments

Stock-based compensation

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Accounts receivable—trade

Pre-owned homes

Prepaid expenses and other current assets

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Proceeds from certificates of deposit

Proceeds from property held for resale

Proceeds from sale of investment in retirement community

Proceeds from disposal of property, plant and equipment

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Collections on equipment and other notes receivable

Issuance of equipment and other notes receivable

Issuance of equipment note receivable

Issuance of mobile home park not receivable

Increase in cash surrender value of life insurance

Net cash provided by (used in) investing activities

Net cash provided by investing activities

Cash flows from financing activities:

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Net cash used in financing activities

Increase (decrease) in cash and cash equivalents

Increase cash and cash equivalents

Cash and cash equivalents at beginning of year

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The accompanying notes are an integral part of these financial statements.

Notes to Consolidated Financial Statements

NOTE 1 Reporting Entity and Significant Accounting Policies

Description of Business and Principles of Consolidation The consolidated financial statements include the accounts of Nobility Homes, Inc.

Description of Business and Principles of Consolidation –

The consolidated financial statements include the accounts of Nobility Homes, Inc.

(“Nobility”), its wholly-owned subsidiaries, Prestige Home Centers, Inc.

(Prestige), and Prestiges wholly-owned subsidiaries, Mountain Financial, Inc., an independent insurance agency and licensed mortgage loan originator

and Majestic Homes, Inc., (collectively the Company).

The Company is engaged in the manufacture and sale of manufactured and modular homes to various dealerships, including its own retail sales centers, and manufactured housing

communities throughout Florida.

(“Prestige”), and Prestige’s wholly-owned subsidiaries, Mountain Financial, Inc., an independent insurance agency and licensed mortgage loan originator and Majestic Homes, Inc., (collectively the “Company”).

The Company is engaged in the manufacture and sale of manufactured and modular homes to various dealerships, including its own retail sales centers, and manufactured housing communities throughout Florida.

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

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 backlog at the manufacturing facility and

difficulty in hiring staff.

At November 6, 2021, Prestige operated ten Florida retail sales centers:

Ocala (2), Chiefland, Auburndale, Inverness, Hudson, Tavares, Yulee, Panama City and Punta Gorda.

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.

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (U.S.

Use of Estimates

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

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;

These estimates and assumptions are based upon management’s 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 Company’s 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 Company’s consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s 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.

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 Company’s 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:

The year ended November 6, 2021 (fiscal year 2021) consisted of a fifty-three week period and the year ended October 31, 2020 (fiscal year 2020) consisted of a fifty-two

Revenue Recognition

The Company’s 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 Company 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;

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Construction of the home is complete,

Home has been delivered and set up at the retail home buyers site, and title has been transferred to the

retail home buyer,

Remaining funds have been released by the finance company (financed sales transaction), remaining funds have been

committed by the finance company by an agreement with respect to financing obtained by the customer, usually in the form of a written approval for permanent home financing received from a lending institution, (financed construction sales

transaction) or cash has been received from the home buyer (cash sales transaction), and

Home has been delivered and set up at the retail home buyer’s site, and title has been transferred to the retail home buyer,

Remaining funds have been released by the finance company (financed sales transaction), remaining funds have been committed by the finance company by an agreement with respect to financing obtained by the customer, usually in the form of a written approval for permanent home financing received from a lending institution, (financed construction sales transaction) or cash has been received from the home buyer (cash sales transaction), and

Completion of any other significant obligations.

The accompanying notes are an integral part of these financial statements.

The Company recognizes revenue from the sale of the repurchased homes upon transfer of title to the new purchaser.

The Company recognizes revenues from its independent dealers upon receiving wholesale floor plan financing or establishing retail credit approval for terms,

shipping of the home, and transferring title and risk of loss to the independent dealer.

The Company recognizes revenues from its independent dealers upon receiving wholesale floor plan financing or establishing retail credit approval for terms, shipping of the home, and transferring title and risk of loss to the independent dealer.

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.

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

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 Company’s 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 6, 2021 and October 31, 2020.

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:

Revenues by Products and Services

– Revenues by net sales from manufactured housing, pre-owned

homes, and insurance agent commissions for the years ended November 6, 2021 and October 31, 2020 are as follows:

Manufactured housing

Pre-owned homes

Insurance agent commissions

Total net sales

Cash and Cash Equivalents The Company considers all money market accounts and highly liquid debt

instruments purchased with an original maturity of three months or less to be cash equivalents.

Certificates of Deposit Certificates

of deposits are recorded at cost plus accrued interest and have maturities of twelve months or less.

Accounts Receivable Accounts

receivable are stated at net realizable value.

Cash and Cash Equivalents

The Company considers all money market accounts and highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Certificates of Deposit

– Certificates of deposits are recorded at cost plus accrued interest and have maturities of twelve months or less.

Accounts Receivable –

Accounts receivable are stated at net realizable value.

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

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.

Accounts receivable fluctuate

due to the number of homes sold to independent dealers.

The Company recognizes revenues from its independent dealers upon receiving wholesale floor plan financing or establishing retail credit approval for terms, shipping of the home, and

transferring title and risk of loss to the independent dealer.

Investments The Companys investments consist of equity

securities of a public company.

At November 6, 2021 or October 31, 2020, in the opinion of management, all accounts were considered fully collectible and, accordingly, no allowance was deemed necessary.

Accounts receivable fluctuate due to the number of homes sold to independent dealers.

The Company’s investments consist of equity securities of a public company.

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

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

net realizable value.

The Company’s 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, were recorded in accumulated other comprehensive income.

Upon the Company’s 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 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.

In addition, an allocation of

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 net realizable

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

Amendment of the Finance Revenue Sharing Agreement with 21 st Mortgage Corporation.

This inventory is valued at the Companys cost to acquire determined on the specific identification method,

plus refurbishment costs (any item on the home that needs to be repaired or replaced) incurred to date to bring the inventory to a more saleable state.

The Buy Back 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.

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.

In addition, an allocation of 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 net realizable value.

The accompanying notes are an integral part of these financial statements.

Other pre-owned

homes are acquired (Repossessions Inventory) as a convenience to the Company’s joint venture partner, 21st 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.

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

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 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 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 proceeds.

Any additional proceeds are paid to 21 st

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 $1,277,681 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.

Inventory held at consignment locations by affiliated entities is included in the Company’s inventory on the Company’s consolidated balance sheets.

Consigned inventory was $ 794,766 and $ 1,277,681 as of November 6, 2021 and October 31, 2020, respectively.

homes are also taken as trade-ins

on new home sales (Trade-in

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.

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”.

Property, Plant and Equipment Property, plant and equipment are stated at cost and depreciated over their estimated useful lives using

the straight-line method.

Property, Plant and Equipment –

Property, plant and equipment are stated at cost and depreciated over their estimated useful lives using the straight-line method.

Routine maintenance and repairs are charged to expense when incurred.

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Gains or losses are credited or charged to earnings upon disposition.

Investment in Majestic 21 Majestic 21 was formed in 1997 as a joint venture with our joint venture partner, an unrelated entity,

21 st Mortgage Corporation (21 st Mortgage).

We have been allocated our share of net income and distributions on a 50/50 basis since

Majestic 21s formation.

Investment in Majestic 21

Majestic 21 was formed in 1997 as a joint venture with our joint venture partner, an unrelated entity, 21 st

Mortgage Corporation (“21 st

We have been allocated our share of net income and distributions on a 50/50 basis

since Majestic 21’s formation.

While Majestic 21 has been deemed to be a variable interest entity, the Company only holds a 50 % interest in this entity and all allocations of profit and loss are on a 50/50 basis.

Since all allocations are to be made

on a 50/50 basis and joint decisions with the joint venture partner are made which most significantly impact Majestic 21 economic performance therefore, the Company is not required to consolidate Majestic 21 with the accounts of Nobility Homes in

accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) No.

Since all allocations are to be made on a 50/50 basis and joint decisions with the joint venture partner are made which most significantly impact Majestic 21 economic performance therefore, the Company is not required to consolidate Majestic 21 with the accounts of Nobility Homes in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) No.

810, “Consolidations” (ASC 810).

Management believes that the Companys maximum exposure to loss as a result of its

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

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.

Under this arrangement or any other arrangement, the Company is not obligated to repurchase any foreclosed/repossessed units of Majestic 21 as it does not have a repurchase agreement or any other

guarantees with Majestic 21.

However, the Company buys from 21 st Mortgage foreclosed/repossessed units from the Majestic 21 portfolio and acts as a remarketing agent.

It resells those units

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 - 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.

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.

Management believes that the Company’s maximum exposure to loss as a result of its involvement with Majestic 21 is its investment in the joint venture.

Based on management’s evaluation, there was no impairment of this investment at November 6, 2021 or October 31, 2020.

The Company entered into an arrangement in 2002 with 21 st

Mortgage to repurchase certain pre-owned

Under this arrangement or any other arrangement, the Company is not obligated to repurchase any foreclosed/repossessed units of Majestic 21 as it does not have a repurchase agreement or any other guarantees with Majestic 21.

However, the Company buys from 21 st

Mortgage foreclosed/repossessed units from the Majestic 21 portfolio and acts as a remarketing agent.

It resells those units through the Company’s network of retail centers which management believes benefits the historical loss experience of the joint venture.

The only impact on the Company’s operations from this arrangement are commissions earned on the resale of these units and interest earned for the Company’s carrying costs of the units while in inventory.

See Note 14 “Commitments and Contingent Liabilities”.

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 asset’s 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

the credit worthiness of the customer.

The accompanying notes are an integral part of these financial statements.

Customer Deposits –

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

The retail customer receives the full down payment back when the Company is not able to obtain retail financing.

If the retail customer receives retail financing and decides not to go through with the retail

sale, the Company can withhold 20% of the retail contract price.

If the retail customer receives retail financing and decides not to go through with the retail sale, the Company can withhold 20 % of the retail contract price.

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

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 2020 and 2019 are as follows:

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 2021 and 2020 are as follows:

Beginning accrued warranty expense

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Ending accrued warranty expense

The Companys limited warranty covers substantial defects in material or workmanship in specified components of the home

including structural elements, plumbing systems, electrical systems, and heating and cooling systems which are supplied by the Company that may occur under normal use and service during a period of twelve (12) months from the date of delivery

to the original homeowner, and applies to the original homeowner or any subsequent homeowner to whom this product is transferred during the duration of this twelve (12) month period.

The Company’s limited warranty covers substantial defects in material or workmanship in specified components of the home including structural elements, plumbing systems, electrical systems, and heating and cooling systems which are supplied by the Company that may occur under normal use and service during a period of twelve (12) months from the date of delivery to the original homeowner, and applies to the original homeowner or any subsequent homeowner to whom this product is transferred during the duration of this twelve ( 12 ) month period.

The Company tracks the warranty claims per home.

Based on the history of the warranty claims, the Company has determined that a majority of warranty claims

usually occur within the first three months after the home is sold.

Based on the history of the warranty claims, the Company has determined that a majority of warranty claims usually occur within the first three months after the home is sold.

The Company determines its warranty accrual using the last three months of home sales.

Accrued warranty costs are included in accrued expenses in the accompanying consolidated

balance sheets.

Accrued Home Setup Costs Accrued home setup costs represent amounts due to vendors and/or independent contractors

for various items related to the actual setup of the home on the retail home buyers site.

These costs include appliances, air conditioners, electrical/plumbing hook-ups, furniture, insurance,

impact/permit fees, land/home fees, extended service plan, freight, skirting, steps, well, septic tanks and other setup costs and are included in accrued expenses in the accompanying consolidated balance sheets.

Stock-Based Compensation The Company has a stock incentive plan (the Plan) which authorizes the issuance of options to

purchase common stock.

Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense over the period during which an employee is required to provide service in exchange for the award

(usually the vesting period).

Rebate Program The Company has a rebate program for some dealers based upon the number and type of

home purchased, which pays rebates based upon sales volume to the dealers.

Accrued warranty costs are included in accrued expenses in the accompanying consolidated balance sheets.

Accrued Home Setup Costs

– Accrued home setup costs represent amounts due to vendors and/or independent contractors for various items related to the actual setup of the home on the retail home buyers’ site.

These costs include appliances, air conditioners, electrical/plumbing hook-ups,

furniture, insurance, impact/permit fees, land/home fees, extended service plan, freight, skirting, steps, well, septic tanks and other setup costs and are included in accrued expenses in the accompanying consolidated balance sheets.

Stock-Based Compensation –

The Company has a stock incentive plan (the “Plan”) which authorizes the issuance of options to purchase common stock.

Rebate Program –

The Company has a rebate program for some dealers based upon the number and type of home purchased, which pays rebates based upon sales volume to the dealers.

Volume rebates are recorded as a reduction of sales in the accompanying consolidated financial statements.

The rebate liability is calculated and recognized as eligible homes

are sold based upon factors surrounding the activity and prior experience of specific dealers and is included in accrued expenses in the accompanying consolidated balance sheets.

The rebate liability is calculated and recognized as eligible homes are sold based upon factors surrounding the activity and prior experience of specific dealers and is included in accrued expenses in the accompanying consolidated balance sheets.

There were no rebates earned by dealers during fiscal years 2021 and 2020.

Advertising Advertising for Prestige retail sales centers consists primarily of internet, newspaper, radio and television

Advertising –

Advertising for Prestige retail sales centers consists primarily of internet, newspaper, radio and television advertising.

All costs are expensed as incurred.

Advertising expense amounted to approximately $ 141,581 and $ 144,600 for fiscal years 2021 and 2020, respectively.

Notes to Consolidated Financial Statements

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.

Income Taxes –

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

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.

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.

The accompanying notes are an integral part of these financial statements.

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 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.

Comprehensive Income Comprehensive income includes net income as well as other comprehensive income or loss.

The Companys other

comprehensive income or loss consists of unrealized gains or losses on available-for-sale securities, net of related taxes.

Segments The Companys chief operating decision maker is its Chief Executive Officer, who reviews financial information on a

company-wide or consolidated basis.

Comprehensive Income –

Comprehensive income includes net income as well as other comprehensive income or loss.

The Company’s other comprehensive income or loss consists of unrealized gains or losses on available-for-sale

securities, net of related taxes.

The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information on a company-wide or consolidated basis.

Accordingly, the Company accounts for its operations in accordance with FASB ASC No.

280, Segment Reporting. No segment disclosures have been made as the Company considers its business activities

as a single segment.

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.

280, “Segment Reporting.” No segment disclosures have been made as the Company considers its business activities as a single segment.

Major Customers

There were no customers

that accounted for more than 10 % of our total net sales in fiscal year 2021 or 2020.

Concentration of Credit Risk –

The Company’s 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 Company’s 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 majority of the Company’s 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.

The Company maintains reserves for potential credit losses when deemed necessary and such losses have historically been within management’s 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.

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

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.

In January 2016, the FASB issued ASU No.

“Financial Instruments–Overall:

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

Notes to Consolidated Financial Statements

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.

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 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):

October 31, 2020

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

November 6, 2021

Amortized Cost

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Equity securities in a public company

November 2, 2019

The accompanying notes are an integral part of these financial statements.

October 31, 2020

Amortized Cost

3 unchanged sentences

NOTE 3 Fair Values of Financial Investments

amount of cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses approximates fair value because of the short maturity of those instruments.

The carrying amount of cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses approximates fair value because of the short maturity of those instruments.

The Company accounts for the fair value of financial investments in accordance with FASB ASC No.

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ASC 820 defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability (i.e.

exit price) in an orderly

transaction between market participants at the measurement date.

exit price) in an orderly transaction between market participants at the measurement date.

ASC 820 requires disclosures that categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e.

inputs) used in the

inputs) used in the valuation.

Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement.

The ASC 820 fair value hierarchy is defined as follows:

Level 1Valuations are based on unadjusted quoted prices in active markets for identical assets or

Level 2Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted

prices in markets that are not active for which significant inputs are observable, either directly or indirectly.

Level 3Valuations are based on prices or valuation techniques that require inputs that are both

unobservable and significant to the overall fair value measurement.

Level 1—Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.

Level 3—Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

Inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date.

The following table represents the

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

The following table represents the Company’s financial assets and liabilities which are carried at fair value at November 6, 2021 and October 31, 2020.

November 6, 2021

Equity securities in a public company

Notes to Consolidated Financial Statements

October 31, 2020

Equity securities in a public company

NOTE 4 Related Party Transactions

Affiliated Entities

President and Chairman of the Board of Directors (President) and the Executive Vice President each own 50% of the stock of TLT, Inc.

is the general partner of limited partnerships which are developing manufactured housing

communities in Central Florida (the TLT Communities).

Our President and Chairman of the Board of Directors (“President”) and the Executive Vice President each own 50 % of the stock of TLT, Inc.

is the general partner of limited partnerships which are developing manufactured housing communities in Central Florida (the “TLT Communities”).

Our President owns between a 24.75 % and a 56 % direct and indirect interest in each of these limited partnerships.

Our Executive Vice President owns between a 49.5% and a 57.75%

direct and indirect interest in each of these limited partnerships.

Our Executive Vice President owns between a 23.0 % and a 57.75 % direct and indirect interest in each of these limited partnerships.

The TLT Communities have purchased manufactured homes exclusively from the Company since 1990.

Sales to TLT Communities were not significant during fiscal years 2021 and 2020.

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.

Prior to the sale, the Companys President directly owned 59.43% of Walden Woods South LLC.

After the sale, the Companys President and Executive Vice President directly

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

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 July 2021, the Company repurchased 100,000 shares of common stock from our President at $ 34.68 per share.

The accompanying notes are an integral part of these financial statements.

NOTE 5 Other Investments

Investment in Joint Venture Majestic 21 During fiscal 1997, the Company contributed $250,000 for a 50% interest in a joint

venture engaged in providing mortgage financing on manufactured homes.

Investment in Joint Venture – Majestic 21

During fiscal 1997, the Company contributed $ 250,000 for a 50 % interest in a joint venture engaged in providing mortgage financing on manufactured homes.

This investment is accounted for under the equity method of accounting.

Majestic 21 has been deemed to be a variable interest entity, the Company only holds a 50% interest in this entity and all allocations of profit and loss are on a 50/50 basis.

Since all allocations are to be made on a 50/50 basis and the

Companys maximum exposure is limited to its investment in Majestic 21, management has concluded that the Company would not absorb a majority of Majestic 21s expected losses nor receive a majority of Majestic 21s expected residual

While Majestic 21 has been deemed to be a variable interest entity, the Company only holds a 50 % interest in this entity and all allocations of profit and loss are on a 50/50 basis

Since all allocations are to be made on a 50/50 basis and the Company’s maximum exposure is limited to its investment in Majestic 21, management has concluded that the Company would not absorb a majority of Majestic 21’s expected losses nor receive a majority of Majestic 21’s expected residual returns;

therefore, the Company is not required to consolidate Majestic 21 with the accounts of Nobility Homes in accordance with ASC 810.

Commitments and Contingent Liabilities.

See Note 14 “Commitments and Contingent Liabilities”.

We received no distributions from the joint venture in fiscal year 2021 or 2020.

With regard to our investment in Majestic 21, there are no differences between our investment balance and the amount of underlying equity in net assets owned

by Majestic 21.

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.

With regard to our investment in Majestic 21, there are no differences between our investment balance and the amount of underlying equity in net assets owned by Majestic 21.

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.

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.

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

October 31, 2020

November 2, 2019

A breakdown of the elements of inventory at November 6, 2021 and October 31, 2020 is as follows:

Raw materials

3 unchanged sentences

Model home furniture

Pre-owned homes *

Inventory impairment reserve **

Less homes expected to sell in 12 months

Pre-owned homes, long-term

The following table summarizes a breakdown of pre-owned homes inventory

for fiscal years 2020 and 2019:

Repossessions

Balance at November 3, 2018

Balance at November 2, 2019

Balance at October 31, 2020

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

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

October 31, 2020

November 2, 2019

Balance at beginning of year

Reductions for homes sold

Inventory holding costs

Additions (reduction) to impairment reserve

Balance at end of year

NOTE 7 Property Held for Sale

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

homes, long-term

The accompanying notes are an integral part of these financial statements.

NOTE 7 Property, Plant and Equipment

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Range of Lives in Years

October 31, 2020

November 6, 2021

October 31, 2020

Land improvements

4 unchanged sentences

Less accumulated depreciation

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

respectively.

Depreciation expense during the years ended November 6, 2021 and October 31, 2020 totaled $ 186,320 and $ 180,047 , respectively.

NOTE 8 Accrued Expenses and Other Current Liabilities

1 unchanged sentence

November 6, 2021

October 31, 2020

Accrued warranty expense

3 unchanged sentences

NOTE 9 Proceeds Received Under Escrow Arrangement

The Company received $421,099 in fiscal year 2020 and $379,104 in fiscal year 2019 under an escrow arrangement related to a Finance Revenue Sharing Agreement

between 21 st Mortgage Corporation and the Company.

The Company received $ 246,216 in fiscal year 2021 and $ 421,099 in fiscal year 2020 under an escrow arrangement related to a Finance Revenue Sharing Agreement between 21 st

Mortgage Corporation and the Company.

The distributions from the escrow account, related to certain loans financed by 21 st

2 unchanged sentences

The Company computes income tax expense using the liability method.

Under this method, deferred income taxes are provided, to the extent

considered realizable by management, for basis differences of assets and liabilities for financial reporting and income tax purposes.

The Company follows

guidance issued by the FASB with respect to accounting for uncertainty in income taxes.

A tax position is recognized as a benefit only if it is more-likely-than-not that the tax position would

be sustained in a tax examination, with a tax examination being presumed to occur.

Under this method, deferred income taxes are provided, to the extent considered realizable by management, for basis differences of assets and liabilities for financial reporting and income tax purposes.

The Company follows guidance issued by the FASB with respect to accounting for uncertainty in income taxes.

A tax position is recognized as a benefit only if it is “more-likely-than-not”

that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.

The amount recognized is the largest amount of tax benefit that is greater than 50 % likely of being realized on examination.

For tax positions not meeting

the more-likely-than-not test, no tax benefit is recorded.

The Company and its subsidiaries are

subject to U.S.

For tax positions not meeting the “more-likely-than-not”

test, no tax benefit is recorded.

The Company and its subsidiaries are subject to U.S.

federal income tax, as well as income tax of the state of Florida.

1 unchanged sentence

The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

The Company did not reflect any amounts for interest and

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 Company did not reflect any amounts for interest and penalties in its 2021 or 2020 statements of operations, nor are any amounts accrued for interest and penalties at November 6, 2021 and October 31, 2020.

The accompanying notes are an integral part of these financial statements.

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

October 31, 2020

November 6, 2021

October 31, 2020

Current tax expense:

1 unchanged sentence

Provision for income taxes

The following table shows the reconciliation between the statutory federal income tax rate and the actual provision for income

taxes for the years ended:

October 31, 2020

The following table shows the reconciliation between the statutory federal income tax rate and the actual provision for income taxes for the years ended:

November 6, 2021

October 31, 2020

Provision—federal statutory tax rate

6 unchanged sentences

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:

October 31, 2020

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 6, 2021

October 31, 2020

Deferred tax assets:

Allowance for doubtful accounts

Prepaid Expenses

Accrued expenses

7 unchanged sentences

Net deferred tax assets (liabilities)

Notes to Consolidated Financial Statements

The accompanying notes are an integral part of these financial statements.

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

October 31, 2020

November 6, 2021

October 31, 2020

Current assets (liabilities):

2 unchanged sentences

Net current deferred tax assets

Non-current assets (liabilities):

assets (liabilities):

Deferred tax assets

Deferred tax liabilities

Net non-current deferred tax (liabilities)

Net non-current

deferred tax assets

(liabilities)

Net deferred tax assets (liabilities)

In assessing the ability to realize a portion of the deferred tax assets, management considers whether it is more likely than

not that some portion or all of the deferred tax assets will not be realized.

For fiscal years 2020 and 2019, the Company determined that a valuation reserve for the Companys deferred tax assets was not considered necessary as the deferred tax

assets were fully realizable.

In assessing the ability to realize a portion of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

For fiscal years 2021 and 2020, the Company determined that a valuation reserve for the Company’s deferred tax assets was not considered necessary as the deferred tax assets were fully realizable.

NOTE 11 Stockholders’ Equity

Authorized preferred stock may be issued in series with rights and preferences designated by the Board of Directors at the time it authorizes the issuance of

Authorized preferred stock may be issued in series with rights and preferences designated by the Board of Directors at the time it authorizes the issuance of such stock.

The Company has never issued any preferred stock.

Treasury stock is recorded at cost and is presented as a reduction of stockholders’ equity in the accompanying consolidated financial statements.

The Company repurchased 33,100 and

212,396 shares of its common stock during fiscal years 2020 and 2019, respectively.

The Company repurchased 100,346 and 33,100 shares of its common stock during fiscal years 2021 and 2020, respectively.

NOTE 12 Stock Option Plan

In June 2011, the Company’s Board of Directors adopted and the Company’s shareholders later approved, the Nobility Homes, Inc.

2011 Stock Incentive

Plan (the Plan), providing for the issuance of options to purchase shares of common stock, stock appreciation rights and other stock-based awards to employees and non-employee directors.

2011 Stock Incentive Plan (the “Plan”), providing for the issuance of options to purchase shares of common stock, stock appreciation rights and other stock-based awards to employees and non-employee

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

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

value of the award.

The Plan was amended by the Board of Directors to extend the termination date from June 2021 until June 1, 2026

At November 6, 2021, 252,700 options were available for future grant under the Plan and 47,300 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 value of the award.

The cost is to be recognized over the period during which an employee is required to provide service in exchange for the award (usually the vesting period).

The grant date fair value of employee share options and similar

instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available).

If an equity award is modified after the

grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification.

During fiscal years 2020 and 2019,

the Company recognized compensation cost related to the vesting of stock options of approximately $3,624 and $21,000 respectively.

Notes to Consolidated Financial Statements

The grant date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available).

If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification.

During fiscal years 2021 and 2020, the Company recognized compensation cost related to the vesting of stock options of approximately $ 69,750 and $ 3,624 respectively.

The accompanying notes are an integral part of these financial statements.

A summary of information with respect to options granted is as follows:

1 unchanged sentence

Outstanding at November 2, 2019

Outstanding at October 3

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 October 31, 2020.

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

Outstanding at November 6, 2021

12.10 - 25.75

The aggregate intrinsic value in the table above represents total intrinsic value (of options in the money), which is the difference between the Company’s closing stock price on the last trading day of fiscal year 2021 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 6, 2021.

The following table summarizes information about the outstanding stock options at November 6, 2021:

Options Outstanding

2 unchanged sentences

Exercise Price

The fair value of each option is determined using the Black-Scholes option-pricing model which values options based on the

stock price at the grant date, the expected life of the option, the estimated volatility of the stock, expected dividend payments, and the risk-free interest rate over the expected life of the option.

The dividend yield was calculated by dividing

the current annualized dividend by the option exercise price for each grant.

The expected volatility was determined considering the Companys historical stock prices for the fiscal year the grant occurred and prior fiscal years for a period

equal to the expected life of the option.

The fair value of each option is determined using the Black-Scholes option-pricing model which values options based on the stock price at the grant date, the expected life of the option, the estimated volatility of the stock, expected dividend payments, and the risk-free interest rate over the expected life of the option.

The dividend yield was calculated by dividing the current annualized dividend by the option exercise price for each grant.

The expected volatility was determined considering the Company’s historical stock prices for the fiscal year the grant occurred and prior fiscal years for a period equal to the expected life of the option.

The risk-free interest rate was the rate available on zero coupon U.S.

government obligations with a term equal to the expected life of the option.

The expected life of the option was estimated based on the

exercise history from previous grants.

The expected life of the option was estimated based on the exercise history from previous grants.

NOTE 13 Employee Benefit Plan

The Company has a defined contribution retirement plan (the “Plan”) qualifying under Section 401(k) of the Internal Revenue Code.

covers employees who have met certain service requirements.

The Plan covers employees who have met certain service requirements.

The Company makes a discretionary matching contribution, up to a maximum of 6 % of an employee’s compensation.

The contribution expense charged to operations amounted to approximately

$175,000 and $170,000 in fiscal years 2020 and 2019, respectively.

The contribution expense charged to operations amounted to approximately $ 219,900 and $ 175,000 in fiscal years 2021 and 2020, respectively.

NOTE 14 Commitments and Contingent Liabilities

Operating Leases The Company leases the property for several Prestige retail sales centers from various unrelated entities under operating

lease agreements expiring through December 2020.

Operating Leases –

The Company leases the property for several Prestige retail sales centers from various unrelated entities under operating lease agreements expiring through December 2021.

The Company also leases certain equipment under unrelated operating leases.

These leases have varying renewal options.

Notes to Consolidated Financial Statements

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 accompanying notes are an integral part of these financial statements.

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 Company’s assessments on whether a contract is or contains a lease, and the Company’s 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.

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.

Right of use assets are included as a non-current

asset in the amount of $ 1,597 , net of amortization in the consolidated Balance Sheet as of November 6, 2021.

Based on the terms of the lease agreements, all of the Company’s 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 in February 2019.

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

The weighted average remaining lease term and weighted average discount rate of the operating leases is .

08 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 $ 179,802 for the twelve months ended November 6, 2021.

Other Contingent Liabilities –

Certain claims and suits arising in the ordinary course of business have been filed or are pending against the Company.

In the opinion of management, the ultimate outcome of these matters will not have a material adverse effect on the Company’s 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.

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.

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.

The accompanying notes are an integral part of these financial statements.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

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What changed 10-K

Item 8. Financial Statements and Supplementary Data