10-K - NOBH - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended November 2, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 000-06506

NOBILITY HOMES, INC.

(Exact name of registrant as specified in its charter)

Florida	59-1166102
(State or other jurisdiction of<br><br><br>incorporation or organization)	(I.R.S. Employer<br><br><br>Identification No.)
3741 S.W. 7th Street<br><br><br>Ocala, Florida	34474
(Address of principal executive offices)	(Zip Code)

(352) 732-5157

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of Each Class	Trading Symbol(s)	Name of ea/Exchange on<br><br><br>Which Registered
Common Stock, $0.10 Par Value	NOBH	OTCQX

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The aggregate market value of the common stock held by non-affiliates of the registrant (684,697) shares), based on the closing price on the over-the-counter market on May 3, 2019 (the last business day of the second quarter of fiscal 2019), was approximately $15.6 million.

The number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:

Title of Class	Shares Outstanding on January 31,2020
Common Stock	3,649,670
DOCUMENTS INCORPORATED BY REFERENCE
Title	Form10-K
Definitive proxy statement for Annual Meeting of<br><br><br>Shareholders to be held February 28, 2020	Part III, Items 10-14

TABLE OF CONTENTS


	PART I
Item 1.	Business	2
Item 1A.	Risk Factors	4
Item 1B.	Unresolved Staff Comments	4
Item 2.	Properties	5
Item 3.	Legal Proceedings	5
Item 4.	Mine Safety Disclosures	5
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer<br> Purchases of Equity Securities	6
Item 6.	Selected Financial Data	6
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of<br>Operations	7
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	11
Item 8.	Financial Statements and Supplementary Data	12
	Index to Consolidated Financial Statements	12
	Report of Independent Registered Public Accounting Firm-Daszkal Bolton LLP	13
	Consolidated Balance Sheets	14
	Consolidated Statements of Comprehensive Income	15
	Consolidated Statements of Changes in Stockholders’<br>Equity	16
	Consolidated Statements of Cash Flows	17
	Notes to Consolidated Financial Statements	18
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	32
Item 9A.	Controls and Procedures	32
Item 9B.	Other Information	32
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	33
Item 11.	Executive Compensation	33
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder<br> Matters	33
Item 13.	Certain Relationships and Related Transactions, and Director<br>Independence	33
Item 14.	Principal Accounting Fees and Services	33
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	34
	(a) Consolidated Financial Statements and Schedules	34
	(b) Exhibits	34
SIGNATURES		36

The primary customers of Prestige are homebuyers who generally purchase manufactured homes to place on their own home sites. Prestige operates its retail sales centers with a model home concept. Each of the homes displayed at its retail sales centers is furnished and decorated as a model home. Although the model homes may be purchased from Prestige’s model home inventory, generally, customers order homes which are shipped directly from the factory to their home site. Prestige sales generally are to purchasers living within a radius of approximately 100 miles from the selling retail lot. The Company’s internet-based marketing program generates numerous leads which are directed to the Prestige retail sales centers to assist a potential buyer in purchasing a home.

The retail sale of manufactured homes is a highly competitive business. Because of the number of retail sales centers located throughout Nobility’s market area, potential customers typically can find several sales centers within a 100 mile radius of their present home. Prestige competes with over 100 other retailers in its primary market area, some of which may have greater financial resources than Prestige. In addition, manufactured homes offered by Prestige compete with site-built housing.

Prestige does not itself finance customers’ new home purchases. Financing for home purchases has historically been available from other independent sources that specialize in manufactured housing lending and banks that finance manufactured home purchases. Prestige and Nobility are not required to sign any recourse agreements with any of these retail financing sources.

Investments in 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 Company’s 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 Company’s investment historically was accounted for under the equity method, which was suspended when the carrying amount was reduced to $nil due to continued losses. (see Note 4 to the Company’s financial statements included herein).

Insurance and Financial Services

Mountain Financial, Inc., a wholly-owned subsidiary of Prestige Home Centers, Inc., is an independent insurance agent and licensed mortgage loan originator. Its principal activity is providing retail insurance services, which involves placing various types of insurance, including property and casualty, automobile and extended home warranty coverage, with insurance underwriters on behalf of its Prestige customers in connection with their purchase and financing of manufactured homes. As agent, we solely assist our customers in obtaining various types of insurance and extended warranty coverage with insurance underwriters. As such, we have no agreements with homeowners and/or third party insurance companies other than agency agreements with various insurance carriers. 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 for fiscal years 2019 and 2018.

Wholesale Sales to Manufactured Home Communities

Nobility also sells its homes on a wholesale basis through two full-time salespersons to approximately 40 manufactured home communities and independent dealers. Nobility continues to seek new opportunities in the areas in which it operates, as there is ongoing turnover in the manufactured home communities as they achieve full occupancy levels. As is common in the industry, most of Nobility’s independent dealers sell homes produced by several manufacturers.

Nobility does not generally offer consigned inventory programs or other credit terms to its independent dealers and ordinarily receives payment for its homes within 15 to 30 days of delivery. However, Nobility may offer extended terms to park dealers who do a high volume of business with Nobility. In order to stimulate sales, Nobility sells homes for display to related manufactured home communities on extended terms and recognizes revenue when the homes are sold to the end users. The high visibility of Nobility’s homes in such communities generates additional sales of its homes through such dealers.

Regulation

The manufacture, distribution and sale of homes are subject to governmental regulation at the federal, state and local levels. The Department of Housing and Urban Development (HUD) has adopted national construction and safety standards that preempt state standards. In addition, HUD regulations require that manufactured homes be constructed to more stringent wind load and thermal standards. Compliance with these standards involves approval by a HUD approved engineering firm of engineering plans and specifications on all models. HUD has also promulgated rules requiring producers of manufactured homes to utilize wood products certified by their suppliers to meet HUD’s established limits on formaldehyde emissions and to place in each home written notice to prospective purchasers of possible adverse reaction from airborne formaldehyde in homes. HUD’s standards also require periodic inspection by state or other third party inspectors of plant facilities and construction procedures, as well as inspection of manufactured home units during construction. In addition, some components of manufactured homes may also be subject to Consumer Product Safety Commission standards and recall requirements. Modular homes manufactured by Nobility are required to comply with the Florida Building Code established by the Florida Department of Business and Professional Regulations.

Nobility estimates that compliance with federal, state and local environmental protection laws will have no material effect upon capital expenditures for plant or equipment modifications or earnings for the next fiscal year.

The transportation of manufactured homes is subject to state regulation. Generally, special permits must be obtained to transport the home over public highways and restrictions are imposed to promote travel safety including restrictions relating to routes, travel periods, speed limits, safety equipment and size.

Nobility’s homes are subject to the requirements of the Magnuson-Moss Warranty Act and Federal Trade Commission rulings which regulate warranties on consumer products. Nobility provides a limited warranty of one year on the structural components of its homes.

Competition

The manufactured home industry is highly competitive. The initial investment required for entry into the business of manufacturing homes is not unduly large. State bonding requirements for entry in the business vary from state to state. The bond requirement for Florida is $50,000. Nobility competes directly with other manufacturers, some of whom are both considerably larger and possess greater financial resources than Nobility. Nobility estimates that of the 20 manufacturers selling in the state, approximately 10 manufacture homes of the same type as Nobility and compete in the same market area. Nobility believes that it is generally competitive with most of those manufacturers in terms of price, service, warranties and product performance.

Employees

As of January 10, 2020, the Company had 139 full-time employees, including 32 employed by Prestige. Approximately 81 employees are factory personnel compared to approximately 86 in such positions a year ago and 58 are in management, administrative, supervisory, sales and clerical positions (including 29 management and sales personnel employed by Prestige) compared to approximately 63 a year ago. In addition, Nobility employs part-time employees when necessary.

Nobility makes contributions toward employees’ group health and life insurance. Nobility, which is not subject to any collective bargaining agreements, has not experienced any work stoppage or labor disputes and considers its relationship with employees to be generally satisfactory.

Item 1A.	Risk Factors

As a smaller reporting company, we are not required to provide the information required by this item.

Item 1B.	Unresolved Staff Comments

None.

Item 2.	Properties

As of January 31, 2020, Nobility owned one manufacturing plant:

Location	Approximate Size
3741 SW 7^th^ Street<br><br><br>Ocala, Florida		72,000 sq. ft.

Nobility’s Ocala facility is located on approximately 35.5 acres of land on which an additional two-story structure adjoining the plant serves as Nobility’s corporate offices. The plant, which is of metal construction, is in good condition and requires little maintenance.

In April 2018, Nobility sold its Belleview facility that had been vacant since June 2015 for $635,000.

Prestige owns the properties on which it’s Ocala North, Auburndale, Inverness, Panama City, Yulee and Punta Gorda, Florida retail sales centers are located. Prestige leases the property for its other 4 retail sales centers. 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. 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 fiscal year 2018.

Item 3.	Legal Proceedings

We are a party to various legal proceedings that arise in the ordinary course of our business. We are not currently involved in any litigation nor to our knowledge, is any litigation threatened against us, the outcome of which would, in our judgment based on information currently available to us, have a material adverse effect on our financial position or results of operations.

The Company does not maintain casualty insurance on some of its property, including the inventory at its retail centers, its plant machinery and plant equipment and is at risk for those types of losses.

Item 4.	Mine Safety Disclosures

None.

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Nobility focuses on home buyers who generally purchase their manufactured homes from retail sales centers to locate on property they own. Nobility has aggressively pursued this market through its Prestige retail sales centers. While Nobility actively seeks to make wholesale sales to independent retail dealers, its presence as a competitor limits potential sales to dealers located in the same geographic areas serviced by its Prestige retail sales centers.

Nobility has aggressively targeted the retirement community market, which is made up of retirees moving to Florida and typically purchasing or renting homes to be located on sites leased from park communities offering a variety of amenities. Sales are not limited by the presence of the Company’s Prestige retail sales centers in this type of arrangement, as the retirement community sells homes only within their community.

Nobility has a product line of approximately 100 active models. Although market demand can fluctuate on a fairly short-term basis, the manufacturing process is such that Nobility can alter its product mix relatively quickly in response to changes in the market. During fiscal years 2019 and 2018, Nobility continued to experience increased consumer demand for affordable manufactured homes in Florida. Our three, four and five bedroom manufactured homes are favored by families, compared with the one, two and three-bedroom homes that typically appeal to the retirement buyers who reside in the manufactured housing communities.

In an effort to make manufactured homes more competitive with site-built housing, financing packages are available to provide (1) 30-year financing, (2) an interest rate reduction program, (3) combination land/manufactured home loans, and (4) a 5% down payment program for qualified buyers.

In the third quarter of fiscal year 2009, Majestic 21, a joint venture that the Company owns 50% of, secured $5,000,000 in financing from a commercial bank to support loan originations. The Company guaranteed 50% of this financing. 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.

Prestige maintains several other outside financing sources that provide financing to retail homebuyers for its manufactured homes. The Company continually tries to develop relationships with new lenders, since established lenders will occasionally leave manufactured home lending.

Prestige’s wholly-owned subsidiary, Mountain Financial, Inc., is an independent insurance agent and licensed loan originator. Mountain Financial provides automobile insurance, extended warranty coverage and property and casualty insurance to Prestige customers in connection with their purchase and financing of manufactured homes.

The Company’s 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.

Results of Operations

Total net sales in fiscal year 2019 were $46,347,931 compared to $41,878,186 in fiscal year 2018. The Company reported net income of $8,810,420 in fiscal year 2019, compared to a net income of $4,963,632 during fiscal year 2018.

The following table summarizes certain key sales statistics and percent of gross profit as of and for fiscal years ended November 2, 2019 and November 3, 2018.

	2019			2018
New homes sold through Company owned sales centers		440			379
Pre-owned homes sold through Company owned sales<br>centers:
Buy Back		5			8
Repossessions		7			14
Trade-Ins		4			4
Homes sold to independent dealers		145			212
Total new factory built homes produced		662			610
Average new manufactured home price - retail	$	84,217		$	79,334
Average new manufactured home price - wholesale	$	45,757		$	42,304
As a percent of net sales:
Gross profit from the Company owned retail sales centers		18	%		18	%
Gross profit from the manufacturing facilities - including intercompany sales		20	%		17	%

The demand for affordable manufactured housing in Florida continues to improve. According to the Florida Manufactured Housing Association, shipments in Florida for the period from November 2018 through October 2019 were up approximately 17% from the same period last year. Constrained consumer credit and the lack of lenders in our industry, partly as a result of an increase in government regulations, still affects our results by limiting many affordable manufactured housing buyers from purchasing homes. However, recent legislation may help improve this situation in the future.

Maintaining our strong financial position is vital for future growth and success. Because of very challenging business conditions during economic recessions in our market area, management will continue to evaluate all expenses and react in a manner consistent with maintaining our strong financial position, while exploring opportunities to expand our distribution and manufacturing operations.

Our many years of experience in the Florida market, combined with home buyers’ increased need for more affordable housing, should serve the Company well in the coming years. Management remains convinced that our specific geographic market is one of the best long-term growth areas in the country.

On June 5, 2019 the Company celebrated its 52nd anniversary in business specializing in the design and production of quality, affordable manufactured homes. With multiple retail sales centers, an insurance agency subsidiary, and an investment in a retirement manufactured home community, we are the only vertically integrated manufactured home company headquartered in Florida.

Insurance agent commissions in fiscal year 2019 were $272,366 compared to $273,747 in fiscal year 2018. We have established 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 and November 3, 2018.

Cost of goods sold at our manufacturing facilities include: materials, direct and indirect labor and manufacturing expenses (which consists of factory occupancy, salary and salary related, delivery costs, manufactured home service costs and other manufacturing expenses). Cost of goods sold at our retail sales centers include: appliances, air conditioners, electrical and plumbing hook-ups, furniture, insurance, impact and permit fees, land and home fees, manufactured home, service warranty, setup contractor, interior drywall finish, setup display, skirting, steps, well, septic tank and other expenses.

Gross profit as a percentage of net sales was 29% in fiscal year 2019 compared to 25% in fiscal year 2018. Our gross profit of $13,653,000 for 2019 increased 28% compared to $10,680,027 for 2018. The increase in gross profit percentage is primarily due to the increase in the average retail and wholesale selling price on each home sold.

Selling, general and administrative expenses at our manufacturing facility include salaries, professional services, advertising and promotions, corporate expense, employee benefits, office equipment and supplies and utilities. Selling, general and administrative expenses at our retail sales center include: advertising, retail sales centers expenses, salary and salary related, professional fees, corporate expense, employee benefit, office equipment and supplies, utilities and travel. Selling, general and administrative expenses at the insurance company include: advertising, professional fees and office supplies.

As a percent of net sales, selling, general and administrative expenses was 11% in fiscal year 2019 compared to 12% in fiscal 2018, which increased $395,118 from fiscal year 2018 to 2019. The increase in selling, general and administrative expenses in 2019 resulted from the increase in compensation expenses directly related to our increased sales.

The Company earned interest in the amount of $556,142 in fiscal year 2019 compared to $362,121 in fiscal year 2018. Interest income is dependent on our cash balance and available rates of return. The increase is primarily due to the increase in the balances and the interest rate in the money market accounts and certificates of deposit.

The Company earned $78,107 from its joint venture, Majestic 21, in fiscal year 2019 compared to $100,137 in fiscal year 2018. The earnings from Majestic 21 represent the allocation of profit and losses which are owned 50% by 21st Mortgage Corporation and 50% by the Company.

We received $379,104 in fiscal year 2019 and $172,911 in fiscal year 2018 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^ Mortgage Corporation, are recorded in income by the Company as received, which has been the Company’s past practice.

The Company realized pre-tax income of $11,779,529 in fiscal year 2019 compared to a pre-tax income of $6,605,462 in fiscal year 2018.

The Company recorded an income tax expense of $2,969,109 in fiscal year 2019 compared to $1,641,830 in fiscal year 2018.

Net income in fiscal year 2019 was $8,810,420 or $2.32 per basic and diluted share and net income in fiscal year 2018 was $4,963,632 or $1.27 per basic and diluted share.

Liquidity and Capital Resources

Cash and cash equivalents were $22,533,965 at November 2, 2019 compared to $28,364,861 at November 3, 2018. Certificates of deposit were $10,153,575 at November 2, 2019 compared to $6,034,093 at November 3, 2018. Short-term investments were $521,283 at November 2, 2019 compared to $537,767 at November 3, 2018. Working capital was $37,872,687at November 2, 2019 as compared to $38,128,057 at November 3, 2018. During fiscal 2019, the Company repurchased an aggregate of 212,396 shares of its common stock for an aggregate of $4,585,861. In June 2019, the Company sold its former Pace retail sales center property for net proceeds of $1,078,325. On October 30, 2019, the Company sold its 31.3% investment interest in Walden Woods South LLC for $1,510,000 in cash. A cash dividend was paid from the Company’s cash reserves in March 2019 in the amount of $3,864,216**.** We own the entire inventory for our Prestige retail sales centers which includes new, pre-owned and repossessed or foreclosed homes and do not incur any third party floor plan financing expenses. The Company has no material commitments for capital expenditures.

The Company currently has no line of credit facility and does not believe that such a facility is currently necessary to its operations. The Company has no debt. The Company also has approximately $3.6 million of cash surrender value of life insurance which it may be able to access as an additional source of liquidity though the Company has not currently viewed this to be necessary. As of November 2, 2019, the Company continued to report a strong balance sheet which included total assets of approximately $58 million which was funded primarily by stockholders’ equity of approximately $49 million.

Looking ahead, the Company’s strong balance sheet and significant cash reserves accumulated in profitable years has allowed the Company to remain sufficiently liquid so as to allow continuation of operations and should enable the Company to take advantage of market opportunities when presented by an expected improvement in the overall and the industry specific economy in fiscal 2020 and beyond. Management believes it has sufficient levels of liquidity as of the date of the filing of this Form 10-K to allow the Company to operate into the foreseeable future.

Critical Accounting Policies and Estimates

The Company applies judgment and estimates, which may have a material effect in the eventual outcome of assets, liabilities, revenues and expenses, accounts receivable, inventory and goodwill. The following explains the basis and the procedure where judgment and estimates are applied.

RevenueRecognition

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

•	Its receipt of a down payment,
•	Construction of the home is complete,
---	---
•	Home has been delivered and set up at the retail home buyer’s site and title has been transferred to the<br>retail home buyer,
---	---
•	Remaining funds have been released by the finance company (financed sales transaction), remaining funds have been<br>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<br>transaction) or cash has been received from the home buyer (cash sales transaction), and
---	---
•	Completion of any other significant obligations.
---	---

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

The Company recognizes revenue 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.

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”.

The Company recognizes revenue 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 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 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 2, 2019 or November 3, 2018.

Inventory Impairment Reserve

The Company has raw materials, work-in-process, finished home and pre-owned home inventory. The Company continually reviews its inventory to determine if there is a decline in the fair value below the cost basis. Historically, the Company has only recorded valuation allowances for its pre-owned home inventory. The Company acquires pre-owned homes from 21^st^ Mortgage Corporation, trade-ins on new home sales, and other sources. Management primarily uses current sales values of new and pre-owned homes to determine market value. When the cost of a housing unit exceeds market value, a valuation reserve is recorded and the loss is recorded in the accompanying consolidated statements of comprehensive income.

Investments in Retirement Communities

Prior to its divestiture on October 30, 2019, the Company owned a 31.3% investment interest in Walden Woods South LLC , a manufactured home community located in Homosassa, Florida.

Investment in 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.

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. 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.

Rebate Program

The Company has a rebate program for some dealers, based upon the number and type of homes 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.

Off-Balance Sheet Arrangements

As part of our ongoing business, we generally do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities (“VIE’s”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of November 2, 2019, we are not involved in any material unconsolidated entities (other than the Company’s investments in Majestic 21).

Forward Looking Statements

Certain statements in this report are forward-looking statements within the meaning of the federal securities laws. Although Nobility believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, there are risks and uncertainties that may cause actual results to differ materially from expectations. These risks and uncertainties include, but are not limited to, competitive pricing pressures at both the wholesale and retail levels, increasing material costs, uncertain economic conditions, changes in market demand, changes in interest rates, availability of financing for retail and wholesale purchasers, consumer confidence, adverse weather conditions that reduce sales at retail centers, the risk of manufacturing plant shutdowns due to storms or other factors, the impact of marketing and cost-management programs, reliance on the Florida economy, possible labor shortages, possible materials shortages, increasing labor cost, cyclical nature of the manufactured housing industry, impact of fuel costs, catastrophic events impacting insurance costs, availability of insurance coverage for various risks to Nobility, market demographics, management’s ability to attract and retain executive officers and key personnel, increased global tensions, impact of mandated tariffs on material prices, market disruptions resulting from terrorist or other attack and any armed conflict involving the United States and the impact of inflation.

Item 7A.	Quantitative and Qualitative Disclosures about Market Risk

As a smaller reporting company, we are not required to provide the information required by this item.

Item 8.	Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm—Daszkal Bolton LLP	13
Consolidated Balance Sheets	14
Consolidated Statements of Comprehensive Income	15
Consolidated Statements of Changes in Stockholders’<br>Equity	16
Consolidated Statements of Cash Flows	17
Notes to Consolidated Financial Statements	18

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Nobility Homes, Inc.

Ocala, Florida

Opinion on the FinancialStatements

We have audited the accompanying consolidated balance sheet of Nobility Homes, Inc. (the “Company”) as of November 2, 2019, and November 3, 2018, 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). 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 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 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 Company’s 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 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. We believe that our audits provide a reasonable basis for our opinion.

/s/ Daszkal Bolton LLP

We have served as the Company’s auditor since 2018.

Jupiter, Florida

January 31, 2020

Nobility Homes, Inc.

Consolidated Balance Sheets

November 2, 2019 and November 3, 2018

			November 3,<br>2018
Assets
Current assets:
Cash and cash equivalents	22,533,965		$	28,364,861
Certificates of deposit	10,153,575			6,034,093
Short-term investments	521,283			537,767
Accounts receivable—trade	1,351,838			1,783,073
Note receivable	83,231			46,444
Mortgage notes receivable	17,896			15,664
Inventories	10,616,778			7,270,550
Pre-owned homes, net	331,103			933,640
Prepaid expenses and other current assets	1,217,762			1,090,152
Total current assets	46,827,431			46,076,244
Property, plant and equipment, net	5,005,644			4,763,566
Pre-owned homes, net	808,128			473,191
Note receivable, less current portion	43,769			46,265
Mortgage notes receivable, less current portion	232,148			236,402
Other investments	1,649,273			1,571,166
Property held for sale	—			213,437
Deferred income taxes	80,405			40,156
Cash surrender value of life insurance	3,617,974			3,437,974
Other assets	156,287			156,287
Total assets	58,421,059		$	57,014,688
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	1,111,216		$	1,085,095
Accrued compensation	748,626			869,657
Accrued expenses and other current liabilities	2,055,952			1,349,381
Income taxes payable	2,016,132			579,786
Customer deposits	3,022,818			4,064,268
Total current liabilities	8,954,744			7,948,187
Total liabilities	8,954,744			7,948,187
Commitments and contingent liabilities
Stockholders’ equity:
Preferred stock, .10 par value, 500,000 shares authorized; none issued and outstanding	—			—
Common stock, .10 par value, 10,000,000 shares authorized; 5,364,907 shares issued 3,664,070 and<br>3,873,731 outstanding, respectively	536,491			536,491
Additional paid in capital	10,687,662			10,670,848
Retained earnings	55,298,750			50,352,546
Accumulated other comprehensive income	389,164			390,407
Less treasury stock at cost, 1,700,837 shares in 2019 and 1,491,176 shares in 2018	(17,445,752	)		(12,883,791	)
Total stockholders’ equity	49,466,315			49,066,501
Total liabilities and stockholders’ equity	58,421,059		$	57,014,688

All values are in US Dollars.

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

Nobility Homes, Inc.

Consolidated Statements of Comprehensive Income

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

	Year Ended
	November 2,<br>2019			November 3,<br>2018
Net sales	$	46,347,931		$	41,878,186
Cost of goods sold		(32,694,931	)		(31,198,159	)
Gross profit		13,653,000			10,680,027
Selling, general and administrative expenses		(5,352,319	)		(4,957,201	)
Operating income		8,300,681			5,722,826
Other income:
Interest income		556,142			362,121
Undistributed earnings in joint venture—Majestic 21		78,107			100,137
Proceeds received under escrow arrangement		379,104			172,911
Gain on sale of investment in retirement community		1,510,000			—
Gain on sale of assets		880,129			203,512
Miscellaneous		75,366			43,955
Total other income		3,478,848			882,636
Income before provision for income taxes		11,779,529			6,605,462
Income tax expense		(2,969,109	)		(1,641,830	)
Net income		8,810,420			4,963,632
Other comprehensive loss
Unrealized investment loss, net of tax effect		(1,243	)		(21,826	)
Comprehensive income	$	8,809,177		$	4,941,806
Weighted average number of shares outstanding:
Basic		3,803,400			3,912,188
Diluted		3,804,673			3,914,312
Net income per share:
Basic	$	2.32		$	1.27
Diluted	$	2.32		$	1.27

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

Nobility Homes, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

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

			Common<br>Stock		Additional<br>Paid-in<br>Capital		Retained<br>Earnings			Accumulated<br>Other<br>Comprehensive<br>Income			Treasury<br>Stock			Total
Balance at November 4, 2017	3,997,569		$	536,491	$	10,669,231	$	46,167,528		$	412,233		$	(10,371,186	)	$	47,414,297
Cash dividend	—			—		—		(778,614	)		—			—			(778,614	)
Purchase of treasury stock	(123,838	)		—		—		—			—			(2,512,605	)		(2,512,605	)
Stock-based compensation	—			—		1,617		—			—			—			1,617
Unrealized investment loss, net of tax effect	—			—		—		—			(21,826	)		—			(21,826	)
Net income	—			—		—		4,963,632			—			—			4,963,632
Balance at November 3, 2018	3,873,731		$	536,491	$	10,670,848	$	50,352,546		$	390,407		$	(12,883,791	)	$	49,066,501
Cash dividend	—			—		—		(3,864,216	)		—			—			(3,864,216	)
Purchase of treasury stock	(212,396	)		—		—		—			—			(4,585,861	)		(4,585,861	)
Stock-based compensation	485			—		16,814		—			—			4,190			21,004
Unrealized investment loss, net of tax effect	—			—		—		—			(1,243	)		—			(1,243	)
Exercise of employee stock options	2,250			—		—		—			—			19,710			19,710
Net income	—			—		—		8,810,420			—			—			8,810,420
Balance at November 2, 2019	3,664,070		$	536,491	$	10,687,662	$	55,298,750		$	389,164		$	(17,445,752	)	$	49,466,315

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

Nobility Homes, Inc.

Consolidated Statements of Cash Flows

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

	Year Ended
	November 2,<br>2019			November 3,<br>2018
Cash flows from operating activities:
Net income	$	8,810,420		$	4,963,632
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		163,077			148,204
Deferred income taxes		(25,008	)		(437,540	)
Undistributed earnings in joint venture—Majestic 21		(78,107	)		(100,137	)
Gain on sale of investment in retirement community		(1,510,000	)		—
Gain on property held for sale		(864,887	)		(203,512	)
Gain on disposal of property, plant and equipment		(15,242	)		—
Inventory impairment		—			105,000
Stock-based compensation		21,004			1,617
Decrease (increase) in:
Accounts receivable—trade		431,235			1,151,227
Inventories		(3,346,228	)		235,131
Pre-owned homes		267,600			445,390
Prepaid expenses and other current assets		(127,610	)		(269,928	)
Interest receivable		(73,517	)		(34,093	)
(Decrease) increase in:
Accounts payable		26,121			235,313
Accrued compensation		(121,031	)		244,668
Accrued expenses and other current liabilities		706,572			221,984
Income taxes payable		1,436,346			319,370
Customer deposits		(1,041,450	)		1,267,441
Net cash provided by operating activities		4,659,295			8,293,767
Cash flows from investing activities:
Purchase of property, plant and equipment		(447,413	)		(606,999	)
Purchase of certificates of deposit		(4,080,058	)		(6,000,000	)
Proceeds from property held for resale		1,078,324			589,530
Proceeds from sale of investment in retirement community		1,510,000			—
Collections on note receivable		—			1,530,000
Collections on interest receivable		34,093			101,301
Collections on mortgage notes receivable		2,022			1,726
Collections on equipment and other notes receivable		62,977			36,828
Issuance of equipment and other notes receivable		(39,768	)		(25,451	)
Increase in cash surrender value of life insurance		(180,001	)		(175,126	)
Net cash used in investing activities		(2,059,824	)		(4,548,191	)
Cash flows from financing activities:
Payment of cash dividend		(3,864,216	)		(778,614	)
Proceeds from exercise of employee stock options		19,710			—
Purchase of treasury stock		(4,585,861	)		(2,512,605	)
Net cash used in financing activities		(8,430,367	)		(3,291,219	)
(Decrease) Increase in cash and cash equivalents		(5,830,896	)		454,357
Cash and cash equivalents at beginning of year		28,364,861			27,910,504
Cash and cash equivalents at end of year	$	22,533,965		$	28,364,861
Supplemental disclosure of cash flow information:
Income taxes paid	$	1,550,000		$	1,760,000

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. (“Nobility”), its wholly-owned subsidiaries, Prestige Home Centers, Inc. (“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 November 2, 2019 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.

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. GAAP).

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 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 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; 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 Company’s 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:

•	Its receipt of a down payment,
•	Construction of the home is complete,
---	---
•	Home has been delivered and set up at the retail home buyer’s site, and title has been transferred to the<br>retail home buyer,
---	---
•	Remaining funds have been released by the finance company (financed sales transaction), remaining funds have been<br>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<br>transaction) or cash has been received from the home buyer (cash sales transaction), and
---	---
•	Completion of any other significant obligations.
---	---

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

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 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 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 2, 2019 or November 3, 2018.

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:

	2019		2018
Manufactured housing	$	45,583,022	$	40,708,950
Pre-owned homes		492,543		895,489
Insurance agent commissions		272,366		273,747
Total net sales	$	46,347,931	$	41,878,186

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 November 2, 2019 or November 3, 2018, 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 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 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, 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.

Inventories – New home inventory is carried at the lower of cost or market 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 fair market value.

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 Company’s 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.

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 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. 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 Company’s inventory on the Company’s 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.

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. Routine maintenance and repairs are charged to expense when incurred. Major replacements and improvements are capitalized. 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 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. 810, “Consolidations” (ASC 810). 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 2, 2019 or November 3, 2018.

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

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 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 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. 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.

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:

	2019			2018
Beginning accrued warranty expense	$	125,000		$	125,000
Less: reduction for payments		(413,734	)		(392,479	)
Plus: additions to accrual		413,734			392,479
Ending accrued warranty expense	$	125,000		$	125,000

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. 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. 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. There were no rebates earned by dealers during fiscal years 2019 and 2018.

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 $140,520 and $169,000 for fiscal years 2019 and 2018, 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. 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.

Notes to Consolidated Financial Statements

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

Segments – 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 – 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 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 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 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.

Recently Issued or Adopted Accounting Pronouncements – In November 2015, the FASB issued ASU No. 2015-17 “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (ASU 2015-17). 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. The 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. 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. The Company 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 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 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.

Notes to Consolidated Financial Statements

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): 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; and
Recognize revenue when or as each performance obligation is satisfied.

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 impact of the Company’s initial adoption of ASU 2014-09 using the modified retrospective method did not have a material impact on its consolidated financial statements and disclosures.

NOTE 2 Investments

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

	November 2, 2019
	Amortized Cost		Gross<br>Unrealized<br>Gains		Gross<br>Unrealized<br>Losses		Estimated Fair<br>Value
Equity securities in a public company	$	167,930	$	353,353	$	—	$	521,283

Notes to Consolidated Financial Statements

	November 3, 2018
	Amortized Cost		Gross<br>Unrealized<br>Gains		Gross<br>Unrealized<br>Losses		Estimated Fair<br>Value
Equity securities in a public company	$	167,930	$	369,837	$	—	$	537,767

The fair values were estimated based on unadjusted quoted prices at each respective period end.

NOTE 3 Fair Values of Financial Investments

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. 820, “Fair Value Measurements” (ASC 820).

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. 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 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 1—Valuations are based on unadjusted quoted prices in active markets for identical assets or<br>liabilities.
•	Level 2—Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted<br>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<br>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<br>Company’s financial assets and liabilities which are carried at fair value at November 2, 2019 and November 3, 2018.
---	---
	November 2, 2019
---	---	---	---	---	---	---
	Level 1		Level 2		Level 3
Equity securities in a public company	$	521,283	$	—	$	—
	November 3, 2018
---	---	---	---	---	---	---
	Level 1		Level 2		Level 3
Equity securities in a public company	$	537,767	$	—	$	—

NOTE 4 Related Party Transactions

Affiliated Entities

TLT, Inc. – Our President and Chairman of the Board of Directors (“President”) and the Executive Vice President each own 50% of the stock of TLT, Inc. 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 49.5% 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. The TLT Communities have purchased manufactured homes exclusively from the Company since 1990. Sales to TLT Communities were not significant during fiscal years 2019 and 2018.

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 retirement community, to certain related parties and existing owners. Prior to the sale, the Company’s President directly owned 59.43% of Walden Woods South LLC. After the sale, the Company’s President and Executive Vice President directly 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.

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

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.

See Note 15 “Commitments and Contingent Liabilities”.

We received no distributions from the joint venture in fiscal year 2019 or 2018.

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 – 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 Company’s 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 Company’s investment historically was accounted for under the equity method, which was suspended when the carrying amount was reduced to $nil due to continued losses.

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 Company’s 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 November 2, 2019 and November 3, 2018 is as follows:

	November 2, 2019			November 3, 2018
Raw materials	$	941,206		$	904,399
Work-in-process		125,371			113,220
Inventory consigned to affiliated entities		1,540,949			1,140,982
Finished homes		7,888,879			4,998,004
Model home furniture		120,372			113,946
Inventories	$	10,616,778		$	7,270,550
Pre-owned homes *	$	1,311,626		$	1,956,265
Inventory impairment reserve **		(172,395	)		(549,434	)
		1,139,231			1,406,831
Less homes expected to sell in 12 months		(331,103	)		(933,640	)
Pre-owned homes, long-term	$	808,128		$	473,191
*	The following table summarizes a breakdown of pre-owned homes inventory<br>for fiscal years 2019 and 2018:
---	---
	Buy Back			Repossessions			Trade-Ins			Total
---	---	---	---	---	---	---	---	---	---	---	---	---
Balance at November 4, 2017		1,412,902			1,263,927			60,117			2,736,946
Additions		—			498,831			95,428			594,259
Sales		(697,154	)		(607,115	)		(70,671	)		(1,374,940	)
Balance at November 3, 2018		715,748			1,155,643			84,874			1,956,265
Additions		—			253,600			18,860			272,460
Sales		(573,353	)		(316,496	)		(27,250	)		(917,099	)
Balance at November 2, 2019	$	142,395		$	1,092,747		$	76,484		$	1,311,626
**	An analysis of the pre-owned home inventory impairment reserve at<br>November 2, 2019 and November 3, 2018 is as follows:
---	---
	November 2, 2019			November 3, 2018
---	---	---	---	---	---	---
Balance at beginning of year	$	549,434		$	779,725
Less: Reductions for homes sold		(207,180	)		(253,314	)
Inventory holding costs		(36,232	)		(81,977	)
Additions (reduction) to impairment reserve		(133,627	)		105,000
Balance at end of year	$	172,395		$	549,434

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.

Notes to Consolidated Financial Statements

NOTE 8 Property, Plant and Equipment

Property, plant and equipment, along with their estimated useful lives and related accumulated depreciation are summarized as follows:

		November 2, 2019			November 3, 2018
Land	—	$	3,092,463		$	3,092,463
Land improvements	10-20		908,439			743,956
Buildings and improvements	15-40		2,461,040			2,449,095
Machinery and equipment	3-10		932,040			904,312
Furniture and fixtures	3-10		294,113			277,386
Construction in progress	—		181,765			—
			7,869,860			7,479,947
Less accumulated depreciation			(2,864,216	)		(2,716,381	)
		$	5,005,644		$	4,763,566

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

NOTE 9 Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities are comprised of the following:

	November 2, 2019		November 3, 2018
Accrued warranty expense	$	125,000	$	125,000
Accrued property and sales taxes		398,877		450,742
Other accrued expenses		1,532,090		773,639
Total accrued expenses and other current liabilities	$	2,055,967	$	1,349,381

NOTE 10 Proceeds Received Under Escrow Arrangement

The Company received $379,104 in fiscal year 2019 and $172,911 in fiscal year 2018 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^ Mortgage Corporation, are recorded in income by the Company when received, which has been the Company’s past practice.

NOTE 11 Income Taxes

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. 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. federal income tax, as well as income tax of the state of Florida. The Company’s income tax returns for the past three years are subject to examination by tax authorities, and may change upon examination.

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

Notes to Consolidated Financial Statements

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

	November 2, 2019			November 3, 2018
Current tax expense:
Federal	$	2,338,619		$	1,681,641
State		655,498			403,874
					2,085,515
Deferred tax (benefit)		( 25,007	)		(443,685	)
Provision for income taxes	$	2,969,109		$	1,641,830

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 2, 2019			November 3, 2018
Provision—federal statutory tax rate	$	2,473,701		$	1,541,697
Increase (decrease) resulting from:
State taxes, net of federal tax benefit		511,821			278,507
Permanent differences:
Stock option expirations		160			(178	)
Decrease in federal tax rate		—			(171,248	)
Other comprehensive income		(3,462	)		86,882
Other		(13,112	)		(93,830	)
Income tax expense	$	2,969,109		$	1,641,830

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			November 3, 2018
Deferred tax assets:
Allowance for doubtful accounts	$	58,773		$	58,773
Inventories		48,360			158,598
Accrued expenses		158,171			144,814
Other Assets		55,903			—
Stock-based compensation		2,072			1,312
Total deferred tax assets		323,279			363,497
Deferred tax liabilities:
Depreciation		(78,553	)		(39,490	)
Carrying value of investments		(90,168	)		(221,600	)
Amortization		(39,611	)		(39,611	)
Prepaid expenses		(34,542	)		(22,640	)
Net deferred tax assets (liabilities)	$	80,405		$	40,156

Notes to Consolidated Financial Statements

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

	November 2, 2019			November 3, 2018
Current assets (liabilities):
Deferred tax assets	$	—		$	—
Deferred tax liabilities		—			—
Net current deferred tax assets		—			—
Non-current assets (liabilities):
Deferred tax assets		323,279			363,498
Deferred tax liabilities		(242,874	)		(323,342	)
Net non-current deferred tax (liabilities)		80,405			40,156
Net deferred tax assets (liabilities)	$	80,405		$	40,156

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 2019 and 2018, 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.

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (H.R. 1) (the “Act”). 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

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 212,396 and 123,838 shares of its common stock during fiscal years 2019 and 2018, respectively.

NOTE 13 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. A total of 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 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 2019 and 2018, the Company recognized compensation cost related to the vesting of stock options of approximately $21,000 and $1,600 respectively.

Notes to Consolidated Financial Statements

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

		Stock Option Price<br>Range		Weighted<br>Average<br>Exercise<br>Price		Aggregate<br>Intrinsic<br>Value
Outstanding at November 4, 2017	5,000	$	12.10	$	12.10
Granted	—		—		—
Exercised	—		—		—
Canceled	—		—		—
Outstanding at November 3, 2018	5,000	$	12.10	$	12.10
Granted	—		—		—
Exercised	2,250		12.10		12.10
Canceled	—		—		—
Outstanding at November 2, 2019	2,750	$	12.10	$	12.10	$	34,788

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 2019 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:

Options Outstanding						Options Exercisable
Exercise Price		Weighted<br>Average<br>Remaining<br>Contractual<br>Life (years)		Weighted<br>Average<br>Exercise<br>Price		Number<br>Exercisable		Weighted<br>Average<br>Exercise Price
12.10	2,750		2	$	12.10		2,750	$	12.10
	2,750		2	$	12.10		2,750	$	12.10

All values are in US Dollars.

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.

NOTE 14 Employee Benefit Plan

The Company has a defined contribution retirement plan (the “Plan”) qualifying under Section 401(k) of the Internal Revenue Code. 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 $170,000 and $88,000 in fiscal years 2019 and 2018, respectively.

NOTE 15 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. The Company also leases certain equipment under unrelated operating leases. 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:

2020		49,944
2021		3,000
Total minimum payments required	$	52,944

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. 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.

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There were no disagreements with accountants on accounting and financial disclosure matters.

Item 9A.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures. The Company’s Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a–15(e) and 15d–15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report (the “Evaluation Date”). Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the Evaluation Date.

*Management’s Annual Report on Internal Control over Financial Reporting.*The Company’s management is responsible for establishing and maintaining adequate and effective internal control over financial reporting in order to provide reasonable assurance of the reliability of the Company’s financial reporting and preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting involves policies and procedure that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of assets of the issuer; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made in accordance with authorizations of management and directors of the issuer; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer Company assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of its internal control over financial reporting as of November 2, 2019 based on criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and determined that its internal controls were effective.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.

Changes in internal control over financial reporting. There were no changes in our internal controls over financial reporting that occurred during the fourth quarter of fiscal 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Item 9B.	Other Information

None.

(f)	Loan and Security Agreement dated<br> May 20, 2009, by and among Clayton Bank & Trust, Majestic 21 Partnership, 21st Mortgage Corporation, Majestic Homes, Inc. and the Company, as guarantor (filed as an exhibit to Nobility’s Form<br>10-K for the fiscal year ended October 31, 2009 and incorporated herein by reference).
(g)	Term Note dated May <br>20, 2009 in favor of Clayton Bank & Trust (filed as an exhibit to Nobility’s Form 10-K for the fiscal year ended October 31, 2009 and incorporated herein by reference).<br>
---	---
(h)	Assignment of Membership Interest by and among Nobility Homes, Inc. and Thomas W. Trexler<br> dated as of October 21, 2019.
---	---
21.1	Subsidiaries of Nobility.
---	---
23.1	Consent of Daszkal Bolton LLP
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31.(a)	Written Statement of Chief Executive Officer pursuant to Section <br>302 of the Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934.
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(b)	Written Statement of Chief Financial Officer pursuant to Section <br>302 of the Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934.
---	---
32.(a)	Written Statement of Chief Executive Officer pursuant to 18 U.S.C. §1350.<br>
---	---
(b)	Written Statement of Chief Financial Officer pursuant to 18 U.S.C. §1350.<br>
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101.	Interactive data filing formatted in XBRL.
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Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NOBILITY HOMES, INC.

DATE: January 31, 2020	By: /s/ Terry E. Trexler
	Terry E. Trexler, Chairman,
	President and Chief Executive Officer (Principal Executive Officer)
DATE: January 31, 2020	By: /s/ Thomas W. Trexler
	Thomas W. Trexler, Executive Vice President
	and Chief Financial Officer (Principal Financial Officer)
DATE: January 31, 2020	By: /s/ Lynn J. Cramer, Jr.
	Lynn J. Cramer, Jr., Treasurer
	and Principal Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

DATE: January 31, 2020	By: /s/ Terry E. Trexler
	Terry E. Trexler, Director
DATE: January 31, 2020	By: /s/ Arthur L. Havener
	Arthur L. Havener, Director
DATE: January 31, 2020	By: /s/ Robert P. Saltsman
	Robert P. Saltsman, Director
DATE: January 31, 2020	By: /s/ Thomas W. Trexler
	Thomas W. Trexler, Director

EX-10(h)

Exhibit 10(h)

ASSIGNMENT OF MEMBERSHIP INTEREST

THIS ASSIGNMENT OF MEMBERSHIP INTEREST (this “Assignment”) is made this 21^st^ day of October 2019, by NOBILITY HOMES, INC., a Florida corporation (hereinafter referred to as “Transferor”) to THOMAS W. TREXLER (hereinafter referred to as “Transferee”).

WITNESSETH:

WHEREAS, Transferor is the owner and holder of Six Thousand Three Hundred Ninety-Seven (6,397) (63.97%) of the Class A Membership Units of NOBILITY PARKS I, LLC, a Florida limited liability company (hereinafter referred to as the “Company”); and

WHEREAS, Transferor desires to assign Four Thousand Seven Hundred Two and One-Half (4,702.50) (47.025%) of the Class A Membership Units in the Company, and any and all interest Transferor may have related thereto and in the Company (the “Membership Interest”) to the Transferee.

NOW, THEREFORE, in consideration of the premises hereof and of the mutual covenants and conditions herein set forth, the parties hereto agree as follows:

The recitals set forth above in the “Whereas” clauses are true and correct and are incorporated herein by reference.
Transferor hereby conveys to Transferee all of its right, title and interest to the Membership Interest. Transferor shall execute this Assignment and other appropriate documents as are necessary to effectuate a transfer of the Membership Interest to the Transferee and the consideration shall be as set forth in Paragraph 3 below, Transferor hereby authorizes an officer for Company to execute any other documents on its behalf to effectuate the above transfer.
The consideration paid to the Transferor by Transferee for the transfer of its Membership Interest shall be One Million One Hundred Ten Thousand Sixteen and 40/100 Dollars ($1,110,016.40), to be paid by wire transfer after execution of this Assignment by both parties.
Transferor warrants that it is the legal and beneficial owner of the Membership Interest and that the Membership Interest is free and clear from any and all encumbrances.
Transferor hereby represents that Transferor has the authority and power to execute this Assignments and is the authorized officer, and President and owner of Transferor.
Transferor agrees to indemnify Transferee for the accuracy of all representations and warranties in this Assignment, and any and all amounts which Transferor may owe Transferee related to said representations and warranties.

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Transferor instructs legal counsel of record to make the appropriate changes in the Company’s records at his or her office or as may be required in any state or federal filing.
This Assignment may be executed in any number of counterparts, including by facsimile or e-mail, each of which, when executed, shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument,
Transferee hereby agrees to be bound by the Operating Agreements of the Company, and all its respective terms and conditions.

10, This transfer shall be effective as of October 21, 2019.

IN WITNESS WHEREOF, Transferor and Transferee have executed this Assignment in manner and form sufficient to bind them as of the day and year first above written.

“Transferor”
NOBILITY HOMES, INC.
a Florida corporation
By:	/s/ Terry E. Trexler
	Terry E. Trexler, President
“Transferee”
/s/ Thomas W. Trexler
THOMAS W. TREXLER

Page 2 of 3

CONSENT OF VOTING MEMBERS

Pursuant to Section 9 of the Company’s Operating Agreement the undersigned, representing the Company as the sole voting member, hereby approves of the foregoing Assignment of Membership Interest from NOBILITY HOMES, INC., a Florida corporation, to THOMAS W. TREXLER.

NOBILITY HOMES, INC.
a Florida corporation
By:	/s/ Terry E. Trexler
	Terry E. Trexler, President

Page 3 of 3

ASSIGNMENT OF MEMBERSHIP INTEREST

THIS ASSIGNMENT OF MEMBERSHIP INTEREST (this “Assignment”) is made this 21^st^ day of October 2019, by NOBILITY HOMES, INC., a Florida corporation (hereinafter referred to as “Transferor”) to WILLIAM STARKEY (hereinafter referred to as “Transferee”).

WITNESSETH:

WHEREAS, Transferor desires to assign Eight Hundred Forty-Seven and Three Tenths (847.3) (8.473%) of the Class A Membership Units in the Company, and any and all interest Transferor may have related thereto and in the Company (the “Membership Interest”) to the Transferee.

NOW, THEREFORE, in consideration of the premises hereof and of the mutual covenants and conditions herein set forth, the parties hereto agree as follows:

The recitals set forth above in the “Whereas” clauses are true and correct and are incorporated herein by reference.
Transferor hereby conveys to Transferee all of its right, title and interest to the Membership Interest. Transferor shall execute this Assignment and other appropriate documents as are necessary to effectuate a transfer of the Membership Interest to the Transferee and the consideration shall be as set forth in Paragraph 3 below, Transferor hereby authorizes an officer for Company to execute any other documents on its behalf to effectuate the above transfer.
The consideration paid to the Transferor by Transferee for the transfer of its Membership Interest shall be Two Hundred Thousand Three and 60/100 Dollars ($200,003.60), to be paid by wire transfer after execution of this Assignment by both parties.
Transferor warrants that it is the legal and beneficial owner of the Membership Interest and that the Membership Interest is free and clear from any and all encumbrances.
Transferor hereby represents that Transferor has the authority and power to execute this Assignments and is the authorized officer, and President and owner of Transferor.
Transferor agrees to indemnify Transferee for the accuracy of all representations and warranties in this Assignment, and any and all amounts which Transferor may owe Transferee related to said representations and warranties.
Transferor instructs legal counsel of record to make the appropriate changes in the Company’s records at his or her office or as may be required in any state or federal filing.

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This Assignment may be executed in any number of counterparts, including by facsimile or e-mail, each of which, when executed, shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument,
Transferee hereby agrees to be bound by the Operating Agreements of the Company, and all its respective terms and conditions.

10, This transfer shall be effective as of October 21, 2019.

IN WITNESS WHEREOF, Transferor and Transferee have executed this Assignment in manner and form sufficient to bind them as of the day and year first above written.

“Transferor”
NOBILITY HOMES, INC.
a Florida corporation
By:	/s/ Terry E. Trexler
	Terry E. Trexler, President
“Transferee”
/s/ William Starkey
WILLIAM STARKEY

Page 2 of 3

CONSENT OF VOTING MEMBERS

NOBILITY HOMES, INC.
a Florida corporation
By:	/s/ Terry E. Trexler
	Terry E. Trexler, President

Page 3 of 3

ASSIGNMENT OF MEMBERSHIP INTEREST

THIS ASSIGNMENT OF MEMBERSHIP INTEREST (this “Assignment”) is made this 21^st^ day of October 2019, by NOBILITY HOMES, INC., a Florida corporation (hereinafter referred to as “Transferor”) to TERRI LYNN YANCEY (hereinafter referred to as “Transferee”).

WITNESSETH:

WHEREAS, Transferor desires to assign Four Hundred Twenty-Three and Six-Tenths (423.65) (4.236%) of the Class A Membership Units in the Company, and any and all interest Transferor may have related thereto and in the Company (the “Membership Interest”) to the Transferee.

NOW, THEREFORE, in consideration of the premises hereof and of the mutual covenants and conditions herein set forth, the parties hereto agree as follows:

The recitals set forth above in the “Whereas” clauses are true and correct and are incorporated herein by reference.
Transferor hereby conveys to Transferee all of its right, title and interest to the Membership Interest. Transferor shall execute this Assignment and other appropriate documents as are necessary to effectuate a transfer of the Membership Interest to the Transferee and the consideration shall be as set forth in Paragraph 3 below, Transferor hereby authorizes an officer for Company to execute any other documents on its behalf to effectuate the above transfer.
The consideration paid to the Transferor by Transferee for the transfer of its Membership Interest shall be Ninety-Nine Thousand Nine Hundred Ninety and No/100 Dollars ($99,990.00), to be paid by wire transfer after execution of this Assignment by both parties.
Transferor warrants that it is the legal and beneficial owner of the Membership Interest and that the Membership Interest is free and clear from any and all encumbrances.
Transferor hereby represents that Transferor has the authority and power to execute this Assignments and is the authorized officer, and President and owner of Transferor.
Transferor agrees to indemnify Transferee for the accuracy of all representations and warranties in this Assignment, and any and all amounts which Transferor may owe Transferee related to said representations and warranties.
Transferor instructs legal counsel of record to make the appropriate changes in the Company’s records at his or her office or as may be required in any state or federal filing.

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This Assignment may be executed in any number of counterparts, including by facsimile or e-mail, each of which, when executed, shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument,
Transferee hereby agrees to be bound by the Operating Agreements of the Company, and all its respective terms and conditions.

10, This transfer shall be effective as of October 21, 2019.

IN WITNESS WHEREOF, Transferor and Transferee have executed this Assignment in manner and form sufficient to bind them as of the day and year first above written.

“Transferor”
NOBILITY HOMES, INC.
a Florida corporation
By:	/s/ Terry E. Trexler
	Terry E. Trexler, President
“Transferee”
/s/ Terri Lynn Yancey
TERRI LYNN YANCEY

Page 2 of 3

CONSENT OF VOTING MEMBERS

NOBILITY HOMES, INC.
a Florida corporation
By:	/s/ Terry E. Trexler
	Terry E. Trexler, President

Page 3 of 3

ASSIGNMENT OF MEMBERSHIP INTEREST

THIS ASSIGNMENT OF MEMBERSHIP INTEREST (this “Assignment”) is made this 21^st^ day of October 2019, by NOBILITY HOMES, INC., a Florida corporation (hereinafter referred to as “Transferor”) to LISA LEE TREXLER TRUST U/A/D 9/24/71, AS AMENED, GLORIA JEAN ETHEREDGE, TRUSTEE (hereinafter referred to as “Transferee”).

WITNESSETH:

NOW, THEREFORE, in consideration of the premises hereof and of the mutual covenants and conditions herein set forth, the parties hereto agree as follows:

The recitals set forth above in the “Whereas” clauses are true and correct and are incorporated herein by reference.
Transferor hereby conveys to Transferee all of its right, title and interest to the Membership Interest. Transferor shall execute this Assignment and other appropriate documents as are necessary to effectuate a transfer of the Membership Interest to the Transferee and the consideration shall be as set forth in Paragraph 3 below, Transferor hereby authorizes an officer for Company to execute any other documents on its behalf to effectuate the above transfer.
The consideration paid to the Transferor by Transferee for the transfer of its Membership Interest shall be Ninety-Nine Thousand Nine Hundred Ninety and No/100 Dollars ($99,990.00), to be paid by wire transfer after execution of this Assignment by both parties.
Transferor warrants that it is the legal and beneficial owner of the Membership Interest and that the Membership Interest is free and clear from any and all encumbrances.
Transferor hereby represents that Transferor has the authority and power to execute this Assignments and is the authorized officer, and President and owner of Transferor.
Transferor agrees to indemnify Transferee for the accuracy of all representations and warranties in this Assignment, and any and all amounts which Transferor may owe Transferee related to said representations and warranties.
Transferor instructs legal counsel of record to make the appropriate changes in the Company’s records at his or her office or as may be required in any state or federal filing.

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This Assignment may be executed in any number of counterparts, including by facsimile or e-mail, each of which, when executed, shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument,
Transferee hereby agrees to be bound by the Operating Agreements of the Company, and all its respective terms and conditions.

10, This transfer shall be effective as of October 21, 2019.

IN WITNESS WHEREOF, Transferor and Transferee have executed this Assignment in manner and form sufficient to bind them as of the day and year first above written.

“Transferor”
NOBILITY HOMES, INC.
a Florida corporation
By:	/s/ Terry E. Trexler
	Terry E. Trexler, President
“Transferee”
LISA LEE TREXLER TRUST U/A/D 9/24/71, AS AMENDED, GLORIA JEAN ETHEREDGE, TRUSTEE
/s/ Gloria Jean Etheredge
Gloria Jean Etheredge, Trustee

Page 2 of 3

CONSENT OF VOTING MEMBERS

NOBILITY HOMES, INC.
a Florida corporation
By:	/s/ Terry E. Trexler
	Terry E. Trexler, President

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UNANIMOUS CONSENT ACTION

OF THE INDEPENDENT DIRECTORS OF

NOBILITY HOMES, INC.,

A FLORIDA CORPORATION

The undersigned, as the sole Independent Director of Nobility Homes, Inc., a Florida corporation (the “Corporation”), unanimously agree, adopt, consent to, and order the following corporate actions:

The undersigned waive all formal requirements, including the necessity of holding a formal or informal meeting and any requirement that notice of such meeting be given.
The undersigned adopt the following corporate actions:

WHEREAS, the Corporation has been approached with an offer to purchase its 63.97% ownership in Nobility Parks I, LLC, a Florida limited liability company, (“NPI”) for $1,510,000; and

WHEREAS, the sole Independent Director has been asked to evaluate the fairness of the offer on behalf of the Corporation since all other directors may or do have a conflict with respect to the transaction; and

WHEREAS, NPI owns a 49% interest in Walden Wood South, LLC (“Walden”) and Walden’s sole asset is a Manufactured Home Community in Homosassa, Florida; and

WHEREAS, Albright and Associates of Ocala, Inc. has completed an appraisal of Walden, attached hereafter as Exhibit A, which concludes a gross value of $4,504,000 for Walden’s asset without consideration of any discount associated with a non-controlling minor interest in Walden; and

WHEREAS, an examination of the financial statement, attached as Exhibit B, shows two material liabilities: (1) a $3,800,000 note and mortgage to Terry E. Trexler related to the original purchase by him, and (2) $700,000 owed to Stoneridge Landing, Ltd. and Lake Harris Landing, Ltd.; and

WHEREAS, based on the appraisal and existing liabilities, the existing net equity of Walden is approximately zero, so based on these facts, the purchase price of $1,510,000 is well in excess of fair value; and

WHEREAS, the price offered is the original amount invested by the Corporation, representing an overall ownership of 31.35% (63.97% times 49%) of Walden.

RESOLVED, that the Independent Director hereby concludes that based on the above facts, the purchase price of $1,510,000 in the above offer is a fair value for the Corporation’s ownership in NPI.

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FURTHER RESOLVED, that the President is hereby directed and authorized to carry out the purpose or intent of the foregoing resolution and to do or cause to be done any and all such acts and things by or on behalf of the Corporation.

IN WITNESS WHEREOF, the undersigned, constituting all of the Independent Directors of the Corporation, have executed the foregoing corporate action for the purpose of giving their consent to it as of the 21^st^ day of October 2019.

/s/ Robert P. Saltsman
ROBERT P. SALTSMAN

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EXHIBIT A ALBRIGHT & ASSOCIATES of Ocala, Inc. Walden Woods South 10522 S. Pebbleshire Dr Homosassa, Florida Restricted Appraisal Report A&A File #2019.065.017.001 Certified to: Mr. Bob Saltsman Nobility Homes 3741 SW7th St Ocala, FL 34474 Certified by: Stephen J. Albright, Jr., MAI State-Certified General Real Estate Appraiser RZ2392 Copyright © 2019, Stephen J. Albright, Jr., MAI All Rights Reserved Albright & Associates of Ocala, Inc. 207 SE 8th Street, Ocala, FL 34471 This appraisal report is confidential and is protected by copyright; no part hereof may be reproduced, stored or introduced to a retrieval system or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without the prior written permission of the copyright owner, identified author and client of the report. A&A File #2019.065.017.001 Copyright © 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. Mr. Bob Saltsman September 10, 2019 Nobility Homes 3741 SW 7th St Ocala, FL 34474 Re: Walden Woods South @ 10522 S, Pebbleshire Dr, Homosassa, Florida Dear Mr. Saltsman: Pursuant to your request, an appraisal has been prepared of the above captioned property documented by the enclosed text. The subject property consists of the Walden Woods South mobile home park (age-restricted) in Homosassa, Florida. The park includes 236 spaces along with significant amenities. The park has not achieved stabilized occupancy but is anticipated to do so within the next four years (requiring significant capital expense for lot infrastructure and advertising). As a professional discipline, the appraisal practice requires conformance with stringent ethics and standards which are noted, summarized or cited by reference herein. To that end, opinions and conclusions of this report were prepared in conformance with my interpretation of generally accepted appraisal practices and requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute as well as the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Standards Board of the Appraisal Foundation. This assignment is published as a Restricted Appraisal Report format. By definition, the Restricted Appraisal Report sets forth only a synopsis of the appraiser’s opinions and conclusions. It does not include detailed presentation pertaining to the facts, data, reasoning and analyses used within the appraisal process to develop the opinions and conclusions. The depth and breadth of my presentation, by prior agreement, caters specifically to the needs of the client who is the intended user of this appraisal report. Further, much of the supporting documentation pertaining to my analyses, opinions and conclusions has been retained in my file memorandum and is, by reference, considered an integral part of this appraisal report, The abbreviated format of this restricted appraisal report presumes a certain level of familiarity by the reader with: 1. Physical characteristics of the subject property. 2. Economic and environmental influences which primarily impact the subject, 3. Appraisal process. Accordingly, I am not responsible for the unauthorized distribution or use of this restricted appraisal report. You are advised of special conditions of this appraisal including the following: Intended User: Mr. Bob Saltsman of Nobility Homes A&A File #2019.065.017.001 2 Copyright © 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. Intended Use: asset evaluation Effective Valuation Date: July 16, 2019 Objective/Purpose: form an opinion of market value Interest Appraised: leased fee estate The appraisal is limited to valuation of real estate, excluding personalty, furnishings, equipment, inventory and goodwill of the business, if any. Based on prevailing economic conditions in all aspects to the extent possible, taking into account all relevant global, national, regional, neighborhood and local environmental influences, in consideration of the physical characteristics impacting upon the subject property, weighing the best market evidence available as has been set forth in this report, I have formed an opinion of market value of the subject property identified within this report, with a reasonable degree of appraisal certainty, with respect to the interest identified, according to the program of property utilization that is consistent with our opinion of highest and best use, and predicated on the Certification, General Assumptions, Extraordinary Assumptions well as the Hypothetical Conditions, expressed in this appraisal report, as of the effective valuation date reported for this assignment, of: Opinion of Market Value $4,504,000 Respectfully submitted, ALBRIGHT & ASSOCIATES of Ocala, Inc. Stephen J. Albright, Jr., MAI State-Certified General Real Estate Appraiser RZ2392 A&A File #2019.065.017.001 3 Copyright © 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. Contents Title Page 1 Letter of Transmittal 2 Contents 4 Executive Summary 5 Certification 6 General Assumptions 8 Extraordinary Assumptions 10 Hypothetical Conditions 10 Identification and Location 11 Apparent Owner of Record 11 Relevant Dates of Appraisal Process 11 Type and Definition of Value 11 Intended User and Intended Use of Appraisal 11 Scope of Work 12 Interest Appraised 12 Legal Description 13 Property Assessment 13 History of Title 13 Public and Private Utilities and Services 14 Comprehensive Plan, Land Use and Zoning 14 Description and Analysis of Region 14 Description and Analysis of Neighborhood 14 Description and Analysis of Site 15 Description and Analysis of Improvements 15 Economic Life and Depreciation Analysis 15 Highest and Best Use 15 Reasonable Exposure Time 16 Valuation Methodology 16 Income Capitalization Approach 17 Reconciliation 18 Addendum A&A File #2019.065.017.001 4 Copyright 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. Executive Summary Subject Identification: Walden Woods South @ 10522 S. Pebbleshire Dr, Homosassa, Florida Effective Valuation Date: July 16, 2019 Type Appraise Report: restricted Intended User/Use: Mr. Bob Saltsman of Nobility Homes/asset evaluation Objective: form an opinion of market value Interest Appraised: leased fee estate Site: 74.45 AC (per plat document) Improvements: mobile home park including 236 spaces along with considerable amenities (gated entry, clubhouse, pool with spa) Land Use/Zoning: blend of mostly MDR (medium density residential)but also RUR (rural residential)/blend of MDR, MDR-MH and RUR Highest and Best Use: continued use for mobile home park Indicators of Value: Income Capitalization Approach $4,504,000 Opinion of Market Value $4,504,000 A&A File #2019.065.017.001 5 Copyright © 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. Certification The undersigned certifies that, to the best of my knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions and conclusions are limited only by the reported assumptions and hypothetical conditions and are my personal, impartial and unbiased professional analyses, opinions and conclusions. 3. I have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved. 4. I have no bias with respect to the property that is the subject of this report or to the parties involved in this assignment. 5. My engagement in this assignment was not contingent on developing or reporting predetermined results. 6. My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. 7. To the best of my knowledge and belief, the reported analyses, opinions and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute as well as the Uniform Standards of Professional Appraisal Practice, 8. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 9. An on-site interior and exterior inspection of the subject property was made by the undersigned. 10. No person added significant real property appraisal assistance except as specified. 11. USPAP requires appraisers, prior to accepting assignments, to possess experience and skill necessary for completion, or: A. Disclose lack of knowledge and/or experience before assignment acceptance. A&A File #2019.065.017.001 6 Copyright © 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. B. Take necessary and appropriate steps to complete assignment competently. C. Describe lack of knowledge and/or experience in appraisal report, D. Describe steps taken to complete assignment competently in appraisal report. Stephen J. Albright, Jr. has performed appraisals of numerous mobile home parks in the north central Florida market for a combination of private- and public-sector clients for more than 25 years. 12. This Certification was prepared in conformance with the Uniform Standards of Professional Appraisal Practice of the Appraisal Standards Board of the Appraisal Foundation as well as the Supplemental Standards of Professional Practice of the Appraisal Institute, 13. At the date of this report, I, Stephen J. Albright, Jr., have completed the continuing education program for Designated Members of the Appraisal Institute. 14. I have performed no professional services associated with the property that is the subject of this report within the three-year period immediately preceding acceptance of the assignment. Stephen J. Albright, Jr., MAI State-Certified General Real Estate Appraiser RZ2392 A&A File #2019.065.017.001 7 Copyright © 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. General Assumptions The following are general assumptions upon which this appraisal is predicated. That is, these conditions are taken to be true. 1. This report is the work product of Albright & Associates of Ocala, Inc. and is protected by copyright. Violators will be prosecuted to the fullest extent of the law. Consideration for this appraisal report is full payment of our fee by the client. Liability for this appraisal report is limited only to the extent of fees paid for services rendered, No change of any item in the appraisal report shall be made by anyone other than the appraisers who shall have no responsibility for unauthorized changes, 2. Disclosure of the report content is governed by the bylaws and regulations of the Appraisal Institute. 3. The appraiser assumes no responsibility for legal matters affecting the property appraised or its title. While title of the subject property is assumed good and marketable, the appraiser renders no such opinion thereof. 4. The appraiser is not required to give testimony, or to appear in court, as a result of having performed the appraisal of the identified subject property, unless prior arrangements have been made. 5. No party shall use or rely upon this appraisal, or Data Book (if one is prepared pursuant to this assignment), or any part of its content (i.e. value opinions, appraiser identity, professional designations, reference to professional appraisal organizations or appraiser’s firm affiliation), for any purposes, except the client and/or intended users specifically identified herein. Other parties seeking to use or rely on this appraisal must first obtain the written consent of the appraiser before any of the warranties or representations contained in the appraisal report, expressed or implied, shall inure to the benefit of any other party. Violation of this condition renders these findings null and void. Moreover, this report is to be used only in total presented form and cannot be taken out of context or used in any other form including, but not limited to, excerpts or fractions or redistribution thereof, as such a format change may be misleading. The appraiser assumes no liability for any part of the work product taken in fraction from the total report. Any distribution of value in the report between land and improvements applies only under the existing program of utilization. Separate valuations for land and building, outside the scope of this assignment, must not be used for any purpose and are invalid if so used. Any redistribution of value (land and/or improvements) may render the findings of this appraisal null and void. 6. Information, data and opinions furnished to the appraiser, and contained herein, were obtained from sources considered reliable and are believed to be true and correct. However, no responsibility or liability is assumed by the appraiser for accuracy of confirmed or unconfirmed data. A diligent effort was made to verify all reported data. However, as some principals reside out of the area, or are entities that could not be contacted in the time allowed for report completion, some data may not A&A File #2019.065.017.001 8 Copyright 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. have been confirmed. The appraiser has made no survey of the property. Any sketch of the land and/or of the improvements herein is intended to show approximate dimensions and to assist the reader in visualizing the subject property. The physical size of the subject property is not warranted as fully accurate. This appraisal is contingent on the findings of a qualified survey in terms of not only actual dimensions of the land and/or improvements but also any easements, encroachments or other encumbrances. The findings of such a survey may result in the need for re-evaluation of the appraisal process and value opinions associated therewith. 7. In this appraisal assignment, the existence of potentially hazardous materials or waste on, in or beneath the site (including, but not limited to, such items as urea formaldehyde foam insulation, toxic waste, Radon gas level and/or toxic mold, all of which may pose a risk to the property or its inhabitants) has been disregarded from consideration with respect to valuation analysis. The appraiser is neither qualified to detect such substances nor capable of precisely determining its potential impact on the subject property. Moreover, the appraiser assumes no responsibility for hidden or unapparent conditions of the property, subsoil or structures which would render it more or less valuable or for engineering which might be required to discover such features. Depending on the level of concern as to the property’s condition (i.e. potential on- and off-site soil contamination, ground water pollution and various environmentally-sensitive issues), it may be necessary to retain the services of an expert in this field and/or undergo a Phase I environmental audit, if either or both have not been conducted. 8. Value opinions concluded herein are warranted as accurate, subject to assumptions and hypothetical conditions stated or implicit herein as of the effective valuation date. A thorough property inspection has been conducted as of the specified date shown herein. However, the appraiser(s) are not experts in the field of construction, engineering, repair, renovation, remediation or building inspection services, as such, a professional building inspection is always recommended. 9. No responsibility is assumed by the appraiser for changes or influences, in or about the subject property and its neighborhood, which result in a change, positive or negative, to the subject and thereby to its value conclusion, subsequent to the effective inspection and/or valuation date. The value opinions are applicable only to the fixed point in time associated with the effective valuation date herein and are not applicable to any other point in time, specific or general, prior or subsequent to said date. Values expressed herein are opinions. There is no guarantee, written or implied, that the subject property will sell for this value opinion. For example, expressions of market value constitute “value in exchange” which should not be construed as liquidation value in the unforeseen eventuality that a business operation associated with the subject property proves economically unfeasible and/or the property is conveyed by conditions inconsistent with the market value definition. With respect to income-producing properties, value opinions are contingent on competency of ownership and management as the operational success of leasing real estate is inevitably linked with economic achievement of business. When values include prospective opinions, the appraiser is not responsible for unforeseen events that may alter interim market A&A File #2019.065.017.001 9 Copyright © 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. conditions. 10 . Before any loans or commitments are made which may be predicated on the value conclusions reported in this appraisal, the mortgagee should verify facts, data and value conclusions contained in this report. 11 . Notwithstanding any specification herein of flood plain status of the subject property appraised, it is recommended additional confirmation of the same be obtained prior to any contemplated loan or development, 12 . This appraisal and value findings are contingent on the impact, if any, to the subject property by the “Americans With Disabilities Act,” 13, Natural landscaping is a habitat for many living species. A good faith effort should be made to preserve maximum natural landscaping, saving all specimen trees and otherwise complying with all tree ordinances. A reasonable effort should be made to allow natural displacement (trap and release) of all habitat. This valuation is based on the assumption that the property is free from any endangered species and does not require any mitigation associated with natural habitats. Extraordinary Assumptions The following are assumptions upon which this appraisal is predicated. These assumptions are also taken to be true. Their use may have affected the appraisal results, 1. This valuation is based on the assumption that my estimates for “lease up” advertising costs ($120,000 in Year 1) and individual lot infrastructure cost ($40,000 per lot in Year 1) are accurate. Hypothetical Conditions The following are hypothetical conditions upon which this appraisal is predicated. That is, these are conditions which are contrary to those which presently exist at the effective valuation date. Their use may have affected the appraisal results. None, A&A File #2019.065.017.001 10 Copyright © 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. Identification and Location The subject is generally identified as follows. Property Identification: Walden Woods South Address: 10522 S, Pebbleshire Dr, Homosassa, Florida Apparent Owner of Record The following information from another source is believed reliable though not warranted as such. Name: Walden Woods South LLC Address: 3741 SW 7th St, Ocala, Florida 34478 Relevant Dates of Appraisal Process The following represent the most critical dates of analysis of the appraisal process. Inspection/Photography: July 16, 2019 Effective Valuation: July 16, 2019 Type and Definition of Value The purpose of the appraisal is to form an opinion of market value. Intended User and Intended Use of Appraisal The intended user of this appraisal is Mr. Bob Saltsman of Nobility Homes. The specifically designed and intended use of this appraisal is for asset evaluation. Use of this appraisal is prohibited as it relates to any function other than that identified herein. 1 Market value (value-in-exchange) is defined by Office of the Comptroller of the Currency (12CFR, Part 34) and the Appraisal Institute (The Dictionary Of Real Estate Appraisal, 6th Edition) as: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specific dale and the passing of title from seller to buyer under conditions whereby: Buyer and seller are typically motivated; . Both parties are well informed or well advised, and acting in what they consider their best interests; A reasonable time is allowed for exposure in the open market; Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. A&A File #2019.065.017.001 11 Copyright 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. Scope of Work USPAP specifically indicates that “for each appraisal and appraisal review assignment, an appraiser must: 1. Identify the problem to be solved; 2. Determine and perform the scope of work necessary to develop credible assignment results; 3. Disclose the scope of work in the report.” To that end, the problem to be solved for this assignment is to form an opinion of market value of the leased fee estate of the subject property as of current effective valuation date. The necessary scope of work to develop a credible result includes the following. Identify a current effective date of valuation (July 16, 2019). Physically inspect and photograph the subject property. Review available information regarding the subject site, improvements and historical/current financial performance. Research the subject’s environment (i.e. region and neighborhood). Analyze highest and best use of subject property. This valuation includes only the Income Capitalization Approach which happens to represent the single most reliable and relevant approach to value for the subject property (particularly considering that the subject has yet to achieve stabilized occupancy). In that regard, the exclusion of the Cost Approach and Sales Comparison Approach is not regarded as providing a result that is misleading to the intended user. @ Form an opinion of market value from market indicators. ® Prepare a restricted appraisal report, as defined in USPAP, which will include an extremely brief presentation of data and descriptions (supporting data and analysis relevant to the assignment has been retained in my files). Interest Appraised Leased fee interest2, subject to restrictions of record. 2 As defined in the Dictionary of Real Estate, 6th Edition, leased fee interest is “a freehold (ownership interest) where the possessory interest has been granted to another party by creation of a contractual landlord-tenant relationship (i.e, a lease).” A&A File #2019.065.017.001 12 Copyright © 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. Legal Description The following legal description was obtained from the public records of Citrus County, Florida. While believed accurate, it is not warranted as such. DISCRIPTION: Property Assessment The subject is included in the 2018 Citrus County Property Assessment Roll as Alternate Key No. 3424403 with a 2018 just/assessed/taxable value of $3,071,290 and tax burden of $54,860.09. History off Title The subject has been within the reported ownership for more than the past five years. As of the date of valuation, the majority of the subject lots were leased and improved with manufactured housing units. A&A File #2019.065.017.001 13 Copyright © 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. Public and Private Utilities and Services The subject is positioned in unincorporated Citrus County, In that regard, central water and sewer are provided via the private systems associated with the adjacent north Walden Woods development. Additional services include cable, telephone and internet. Comprehensive Plan, Land Use and Zoning The subject is positioned in, and governed by, the jurisdiction and comprehensive plan of, Citrus County. The future land use designation of the subject property includes a blend of mostly MDR (medium density residential)but also RUR (rural residential). The corresponding zoning includes a blend of MDR, MDR-MH and RUR (with Planned Development overlay). Description and Analysis of Region Citrus County is located in the west-central portion of the State of Florida and is bordered on the north by Marion and Levy Counties, on the south by Hernando County, on the east by Sumter County and on the west by the Gulf of Mexico. The total land area for the county is about 773 square miles, of which 582 square miles is land and 192 square miles (or about 25%) is water. Citrus County is rather sparsely populated with the main areas of population concentrated in the urban areas of Homosassa, Hernando, Inverness, Crystal River, Beverly Hills and Floral City. In conclusion, Citrus County includes a relatively sparse, but steadily growing, population base influenced by a significant level of retirees as well as seasonal tourism and recreational opportunities. The impact of the expanding population of Citrus County has represented a leading force in the prosperity of this community. The increase in population has generally led to increased demand for services in all segments of the economy. Market conditions and the economy in the subject region have not only stabilized but improved significantly subsequent to the economic downturn and ensuing national recession. In the final analysis, barring any further extended economic recession, the local real estate market should benefit from long-term growth. Description and Analysis of Neighborhood Neighborhood is defined as “...a group of complementary land uses,”3 The physical neighborhood may be the same as, or different from, the economic neighborhood. The immediate market area of the subject property is generally defined as the US Hwy 19 corridor in westerly Citrus County, Florida. The area benefits from the recreational demand associated with Crystal River and Kings Bay to the north as well as Homosassa Springs to the south. US Hwy 19 (a/k/a Suncoast Blvd) represents the primary corridor through the subject neighborhood. The northerly extreme portion of the neighborhood is located within the city limits of Crystal River. Commercial uses are common 3 Appraisal Institute (The Dictionary Of Real Estate Appraisal, 6th Edition). A&A File #2019.065.017.001 14 Copyright © 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. along the corridor and associated with numerous “nodes” of development. There remains a significant amount of vacant acreage along US Hwy 19 as well. There is also a significant residential population both east and west of the corridor. Finally, the subject property is an integral part of its defined physical neighborhood, contributing to highest and best use thereof. Description and Analysis of Site The subject includes 74.45 AC positioned at the southeast comer of West Merrivale Ln and US Hwy 19. The site includes generally level terrain with the majority of the site outside the special flood hazard area designations (scattered areas of Zone “A” are associated with on-site drainage and wetlands). In summary, the site represents a physically and functionally effective entity contributing towards ultimate highest and best use. Description and Analysis of Improvements The subject property is improved with a mobile home park identified as Walden Woods South. The park includes a total of 236 lots which benefit from gated entrance, secondary construction entrance, on-site drainage and asphalt-paved interior roads. Upon execution of a lease, each lot is improved by the developer with a considerable level of horizontal and vertical improvement at a reported cost of about $40,000 per lot. The park also benefits from a clubhouse building (with pool/spa and shuffleboard courts) as well as a park office (manufactured housing unit) with parking area. In summary, the improvements are highly functional in terms of their intended and ongoing use for a mobile home park community. Economic Life and Depreciation Analysis Economic life is the period of time during which an improvement contributes to the value of land. When this period of time ends, the improvement becomes a liability to the site to the extent of, and measured by, cost of removal. The majority of subject park improvements appear to have been constructed from 2006 to 2008 for an actual age range from 11 to 13 years. The park infrastructure and amenities were all in good condition as of the date of my inspection. Highest and Best Use As defined in the Appraisal of Real Estate, 14th Edition (published by the Appraisal Institute in 2013), highest and best use is: “The reasonably probable use of property that results in the highest value.” Application of the four categories of highest and best use to the subject supports the following conclusions. As Vacant Based upon the relevant criteria, it is my opinion that the four tests of highest and best use of the A&A File #2019.065.017.001 15 Copyright © 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. subject property, as vacant, would include mobile home park development. As Improved Based upon the relevant criteria, highest and best use, as improved, is for continued use for a mobile home park (stabilized occupancy anticipated within the next four years but requiring significant capital expense for individual lot infrastructure and advertising). Reasonable Exposure Time Reasonable exposure time is historically-oriented (time lapsed prior to sale’s closing or lease). Based upon research with respect to reasonable exposure time of the subject property type, I have formed an opinion of reasonable exposure time applicable to my opinion of market value of the subject property of 6 to 12 months. Valuation Methodology The three traditional approaches to value of real estate appraisal process are: Cost Approach, Sales Comparison Approach and Income Capitalization Approach. Per the specific scope of work of this assignment, this valuation is based upon the Income Capitalization Approach only which happens to represent the single-most reliable indicator of value for the subject property. 4 “Reasonable Marketing Time” differs from “Reasonable Exposure Time” as it is: Future-oriented, subsequent to or post-effective valuation dale; thus, if introduced, “Reasonable Marketing Time” follows Reconciliation. A&A File #2019.065.017.001 16 Copyright © 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. Income Capitalization Approach This approach forms an opinion of net operating income (NOI before debt service and depreciation) which is converted to present worth of future anticipated net benefits. As the subject has yet to achieve stabilized occupancy, discounted cash flow analysis is considered the most appropriate methodology in support of an opinion of present value of the subject property. In that regard, the following are the major variables and assumptions which form the basis of the following cash flow: absorption forecasted at 20 lots per year (resulting in 179 lot in Year 1) with stabilized occupancy to occur in Year 4 Year 1 average lot rent of $342/mo anticipated to grow at 2.5% per year lot preparation expense of $40,000/lot anticipated to grow at 2% per year Years I thru 4 require additional advertising expense to achieve stabilized occupancy ($120,000 in Year 1 with growth at 2% per year; only 50% in Year 4 during which stabilized occupancy project to occur); thereafter, management expense allocation considered sufficient to sustain such occupancy pass thru income of $40 per lot anticipated to increase at 2% per year— operating expenses at 45% Year 1, decreasing to eventual stabilization at 40% in Year 4 discount rate of 9.5% based on capitalization rate of 7% plus 2.5% annual growth reversion calculated using 5th year anticipated NOI, 7.5% terminal cap rate, 3% cost of sale and present value factor at beginning of Year 5— mid-point discounting for present value of NOI for Years 1 thru 4 Discount Rato: 9.50% INCOME: Year 1 Year 2 Year 3 Year 4 Year 5 Occupied Lot Income 5734.610 5837.113 $944.277 $1.043.016 $1.069.091 PASG Thru income $7,160 $8,119 $9,114 $10,010 $10,718 Annual Occupancy: 76% 84% 93% 100% 100% EGI: $741,776 $845.233 $953,390 $1,053,034 $1.079.310 EXPENSES: Operating 5.133.709 $363.450 $400,424 $421,214 $431.724 Marketing $120,000 $122,400 $124.048 $63,672 *0 Lot Prep 5800.000 $816.000 $832.370 $721.621 $0 Total Expenses: $1.253, 790 $1,301,850 $1.357.592 $1.206.507 $431,724 HOI: $512.023 -$-156,617 -$404,202 -$153,474 $647,586 PV FACTORS: 0.955637 0.872728 0.797012 0.727865 0.695574 PV NOI: •$489.308 •5398,503 .$322,153 ..5111,708 *0 51,321,872 PV REVERSION: $5.825.742 VAI UE INDICATOR: $4.504.(100 Indicator of Market Value $4,504,000 [via laconic Capitalization Approach] A&A File #2019.065.017.001 17 Copyright © 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. Reconciliation The Income Capitalization Approach forms the sole basis for valuation herein. Based on prevailing economic conditions, taking all relevant (area) influences and (property) characteristics into consideration, weighing the best market evidence available as has been set forth in this report, I have formed an opinion of market value of the subject property, with a reasonable degree of appraisal certainty, with respect to the interest identified, according to the program of property utilization which is consistent with the threshold of highest and best use, subject to the certification, assumptions and hypothetical conditions, expressed in this appraisal report, as of the effective valuation date identified herein, of: Opinion of Market Value $4,504,000 A&A File #2019.065.017.001 18 Copyright © 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. Stephen J. Albright, Jr. Curriculum Vitae Employment Professional Golf, Tommy Armour and T.C. Jordan Tour (1992-1993) Marion and St. Johns County School Boards, School Teacher (1993) Albright & Associates, Ocala, Inc. (1994 to 2002) Stephen Albright & Associates, Inc. (2002 to present) Formal Education University of North Carolina, Chapel Hill, NC; BA, Psychology, 1992 Professional Designations State-Certified General Real Estate Appraiser, RZ2392 Member, Appraisal Institute, MAI Professional Organizations/Service Appraisal Institute, East Florida Chapter (Former Board Member) Ocala/Marion County Multiple Listing Service Community Organizations/Service Ocala/Marion County Chamber of Commerce First Presbyterian Church of Ocala (Former Elder) Community College of Central Florida Foundation (Former Board Member) Silver Springs Rotary Club (Former Board Member) Ocala Vision 2035 Leadership Group Mastering the Possibilities (Board of Directors) First Tee of Greater Ocala (Board of Directors) Florida State Golf Association (Board of Directors) Real Estate Appraisal Education (Courses) Appraisal Principles, Appraisal Institute Appraisal Procedures, Appraisal Institute Basic Income Capitalization, Appraisal Institute Standards of Professional Practice, Part A (USPAP), Appraisal Institute Standards of Professional Practice, Part B (USPAP), Appraisal Institute Standards of Professional Practice, Part C (USPAP), Appraisal Institute General Applications, Appraisal Institute Florida License, Core Law A&A File #2019.065.017.00 1 20 Copyright © 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. Advanced Income Capitalization, Appraisal Institute Highest and Best Use & Market Analysis, Appraisal Institute Advanced Sales Comparison and Cost Approaches Report Writing and Valuation Analysis Advanced Applications Uniform Appraisal Standards for Federal Land Acquisitions Fundamentals of Separating Real Property, Personal Property, and Intangible Business Assets Condemnation Appraising: Principles & Applications Real Estate Appraisal Education (Seminars) Using Your HP12C Financial Calculator (Appraisal Institute) The Internet and Appraising (Appraisal Institute) Uniform Standards of Professional Appraisal Practice (Appraisal Institute) Small Hotel/Motel Valuation (Appraisal Institute) Analyzing Operating Expenses (Appraisal Institute) Appraising From Blueprints and Specifications (Appraisal Institute) Residential Design & Functional Utility (Appraisal Institute) Appraisal of Nursing Facilities (Appraisal Institute) Analyzing Distressed Real Estate (Appraisal Institute) Feasibility, Market Value, Investment Timing: Option Value (Appraisal Institute) Specialized Services [Expert Witness] 5th Circuit- Marion County- Judge Swigert (City of Ocala; “Yard Relief Program”; 1997) 5th Circuit- Marion County- Judge Singbush (City of Ocala; “SW 44th Ave Project”; 2000) 5th Circuit- Marion County- Judge Singbush (William Post; 2002) 5th Circuit- Marion County- Judge Singbush (SE/SW 31st St Project; 2005) 5th Circuit- Marion County- Judge Singbush (SW 20th St Project; 2006) 5th Circuit- Marion County- Judge Singbush (Marion County vs Bahia Honda; 2006) 5th Circuit- Marion County- Judge Singbush (NW 44th Ave Project; 2007) 5th Circuit- Marion County- Judge Musleh (Marco Polo vs Peterson, et al; 2007) 5th Circuit- Marion County- Judge Singbush (NW 44th Ave Project Order of Taking; 2007) 5th Circuit- Marion County- Judge Harris (SE 31st St Project Order of Taking; 2009) 5th Circuit- Marion County- Judge Edwards-Stephens (SE 31st St Project Order of Taking; 2009) 5th Circuit- Marion County- Judge Lambert (CR 200A Project Order of Taking; 2009) 5th Circuit- Marion County- Judge King (SW 95th St Project Order of Taking; 2010) 5th Circuit- Marion County- Judge Lambert (SW 42nd St Flyover Project Order of Taking; 2010) 5th Circuit- Marion County- Judge Eddy (Marion Co vs Morgran Center; Fee Hearing; 2012) A&A File #2019.065.017.001 21 Copyright © 2019 SJA

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ALBRIGHT & ASSOCIATES of Ocala, Inc. 5th Circuit- Marion County- Judge Singbush (NW 35th/49th St Project Order of Taking; 2012) 5th Circuit- Citrus County- Judge Falvey (Community Bank; Deficiency Hearing; 2014) 5th Circuit- Marion County- Judge Tatti (Community Bank; Deficiency Hearing; 2014) 5th Circuit- Marion County- Judge Rogers (Murvin & Altogrey, LLC vs Brown; 2014) 5th Circuit- Lake County- Judge Singeltary (M & S Bank; Deficiency Hearing; 2016) [Arbitration/Mediation Hearings] Marion County, Florida Ignatius Ciesla v. Bonded Builders Home Warranty (2006) [Special Magistrate] Marion County Value Adjustment Board Hearings (2008-2018) Citrus County Value Adjustment Board Hearings (2010-2014) [Speaking Engagements] International Association of Assessing Officers—Florida Chapter 2015 TPP Seminar—VAB Special Master Panel—Lake Mary, Florida A&A File #2019.065.017.001 22 Copyright © 2019 SJA

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WALDEN WOODS SOUTH LLC SCHEDULE K OTHER ITEMS STATEMENT 5 DESCRIPTION AMOUNT SECTION 199A QUALIFIED BUSINESS INCOME -226,217. SECTION 199A UNADJUSTED BASIS 3,292,984. SCHEDULE L OTHER ASSETS STATEMENT 6 DESCRIPTION BEGINNING OF TAX YEAR END OF TAX YEAR NOTE RECEIVABLE 3,380. 1,502. UTILITY DEPOSITS 4,710. 2,845. TOTAL TO SCHEDULE L, LINE 13 8,090. 4,347. SCHEDULE L OTHER CURRENT LIABILITIES STATEMENT 7 DESCRIPTION BEGINNING OF TAX YEAR END OF TAX YEAR ACCRUED EXPENSES 68,918. 120,051. ACCRUED SALES TAX 27,196. 13,877. CUSTOMER DEPOSITS 80,029. 171, 597. TOTAL TO SCHEDULE L, LINE 17 176,143. 305,525. SCHEDULE L OTHER LIABILITIES STATEMENT 8 DESCRIPTION BEGINNING OF TAX YEAR END OF TAX YEAR N/P—LH 50,000. 50,000. N/P—MANAGEMENT FEE 30,730. 30,730. N/P—SRL 650,100. 650,100. TOTAL TO SCHEDULE L, LINE 20 730,830. 730, 830. 11 STATEMENT(S) 5, 6, 7, 8 2018. 02040 WALDEN WOODS SOUTH LLC 3 0317.01

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EXHIBIT B Form 1035 (2018) WALDEN WOODS SOUTH LLC **-***9351 page 5 Analysis of Net Income (Loss) 1 Net income floss), Combing Scheming K. lines 1 through11.1’iuin the : . of the sum o/Schedule to line 12 though l.’Ut. and 16p | 1 -22 6,085. 2 Analysis by partner type: a General partners (i) Corporate (ii) Individual (active) (iii) Individual (passive) (iv) Partnership (v) Exempt Organization (vi) Nominee/Other b Limited partners -110,781. -115, 304. Schedule L Balance Sheets per Books Beginning of tax year End of tax year Assets (a) (b) (c) (d) 1 Cash 103,411. 48,311. 2a Trade notes and accounts receivable 6,298 b Less allowance for bad debts 6,298. 3 Inventories 641,491. 866 , 505. 4 U.S. Government obligations 5 Tax-exempt securities 6 Other current a ) assets (attach statement 7a Loans to partners (or persons related to partners) b Mortgage and real estate loans 8 Other investments (attach statement 9a Buildings and other depreciable assets b Less accumulated depreciation 10a Depletable assets . ets 3 , 292 , 984. 3,292,984. 1,369,501. 1,923,483. 1,580,465. 1,712,519. b Less accumulated 11 Land (net of any ed depletion amortization) 524,717. 524,717. 12a Intangible assets (amortizable only) b Less accumulated amortization 13 Other assets (attach statement) 14 Total assets Liabilities and Capital STATEMENT 6 8,090. 4,347. 3,201,192. 3,162,697. 15 Accounts payable 16 Morlgages, notes, bond payable 963,786. 1,070,123. bonds payable in less than 1 year 17 Other current liabilities (attach statement) 18 All nonrecourse loans 19a Loans from partners (or persons related to partners b Mortagages, notes, bonds payable In 1 year or more 20 Other liabilities (attach statement) 21 Partners’ capital accounts 22 Total liabilities and capital STATEMENT 7 176,143. 305,525. 3 ,800,000. 3,800,000. STATEMENTS STATEMENT 8 730,830. 730 ,830. -2,469,567. -2.743,781. 3,201,192. 3,162, 697. Schedule M-1 Reconciliation of Income (Loss) per Books With Income (Loss) per Return Note: The partnership may be required to file Schedule M-3. See instructions. 1 Net income (loss) per books -274,214 . 6 Income recorded on books this year not included Schedule K, lines 1 through 11 (itemize): exernpt interest $ 2 Income included on 5, 6a, 7, 8, 9a, 10, this year (itemize): 3 Guaranteed payments insurance) 4 Expanses recorded on books Schedule K. lines 1 through Schedule K, lines 1, 2, 3c, and 11, not recorded on books on Schedule a Tax-exernpt payments (other than health Books this year not included on through 13d, and 16p (itemize): 7 Deductions through included on Schedule K, lines 1 13d, and 16p, not charged against income this year (itemize): Depreciation $ 48 ,129 book in a Depreciation b Depreciation $ 47,819. 8 Add lines 6 and 7 Travel and entertainment $ 310 9 Income (loss) (Analysis of Net Income (Loss), -226,085. 5 Add lines 1 through 4 -226,085. line 1). Subtract line 8 from line 5 . Schedule 1 Schedule M-2 Analysis of Partners’ Capital Accounts Balance at beginning of year -2,469,567. 6 Distributions: a Cash b Property 2 Capital contributed: a Cash b Property 3 Net income (loss) per books 7 Other de decreases (itemize): ): .. -274,214. 4 Other increases (itemize): 5 Add lines I through 4 ze): 8 Add lines 6 and 7 9 Balance at end of year Subtract line 8 from 4 -2,743,781. from line 5 -2 , 743,781.

EX-21.1

Exhibit 21.1

Subsidiaries of Registrant

Prestige Home Centers, Inc.	Florida
Mountain Financial, Inc. (a subsidiary of Prestige Home Centers, Inc.)	Florida
Majestic Homes, Inc. (a subsidiary of Prestige Home Centers, Inc.)	Florida

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

Nobility Homes, Inc.

Ocala, Florida

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-102919 and No. 333-193608) of Nobility Homes, Inc., of our report dated January 31, 2020, relating to the consolidated financial statements of Nobility Homes, Inc. at and for the years ended November 2, 2019 and November 3, 2018, which appear in this Form 10-K.

/s/ Daszkal Bolton

Jupiter, Florida

January 31, 2020

EX-31.A

Exhibit 31(a)

Certifications of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)

or 15d-14(a) under the Securities Exchange Act of 1934

I, Terry E. Trexler, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Nobility Homes,<br>Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a<br>material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
---	---
3.	Based on my knowledge, the financial statements, and other financial information included in this report,<br>fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
---	---
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining<br>disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act<br>Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
---	---
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be<br>designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is<br>being prepared;
---	---
(b)	Designed such internal control over financial reporting, or caused such internal control over financial<br>reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting<br>principles;
---	---
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this<br>report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
---	---
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that<br>occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal<br>control over financial reporting; and
---	---
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of<br>internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
---	---
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over<br>financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
---	---
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in<br>the registrant’s internal control over financial reporting.
---	---
DATE: January 31, 2020	By: /s/ Terry E. Trexler
---	---
	Terry E. Trexler, Chairman,
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.B

Exhibit 31(b)

Certifications of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)

or 15d-14(a) under the Securities Exchange Act of 1934

I, Thomas W. Trexler, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Nobility Homes,<br>Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a<br>material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
---	---
3.	Based on my knowledge, the financial statements, and other financial information included in this report,<br>fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
---	---
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining<br>disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act<br>Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
---	---
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be<br>designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is<br>being prepared;
---	---
(b)	Designed such internal control over financial reporting, or caused such internal control over financial<br>reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting<br>principles;
---	---
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this<br>report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
---	---
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that<br>occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal<br>control over financial reporting; and
---	---
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of<br>internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
---	---
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over<br>financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
---	---
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in<br>the registrant’s internal control over financial reporting.
---	---
DATE: January 31, 2020	By: /s/ Thomas W. Trexler
---	---
	Thomas W. Trexler, Executive Vice President
	and Chief Financial Officer
	(Principal Financial Officer)

EX-32.A

Exhibit 32(a)

Written Statement of the Chief Executive Officer

Pursuant to 18 U.S.C. §1350

Solely for the purposes of complying with 18 U.S.C. Section 1350, I, the undersigned Chairman and Chief Executive Officer of Nobility Homes, Inc. (the “Company”), hereby certify that:

1.	The Annual Report on Form 10-K of the Company for the year ended<br>November 2, 2019 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and<br>results of operations of the Company.
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DATE: January 31, 2020	By: /s/ Terry E. Trexler
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	Terry E. Trexler, Chairman,
	President and Chief Executive Officer

EX-32.B

Exhibit 32(b)

Written Statement of the Chief Financial Officer

Pursuant to 18 U.S.C. §1350

Solely for the purposes of complying with 18 U.S.C. Section 1350, I, the undersigned Executive Vice President and Chief Financial Officer of Nobility Homes, Inc. (the “Company”), hereby certify that:

1.	The Annual Report on Form 10-K of the Company for the year ended<br>November 2, 2019 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and<br>results of operations of the Company.
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DATE: January 31, 2020	By: /s/ Thomas W. Trexler
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	Thomas W. Trexler, Executive Vice President
	and Chief Financial Officer