Results of Operations

The following table summarizes certain key sales statistics and percent of gross
profit as of and for the three and nine months ended August 1, 2009 and
August 2, 2008.



                                                Three Months Ended                 Nine Months Ended
                                            August 1,         August 2,        August 1,        August 2,
                                               2009             2008             2009             2008
Homes sold through Company owned sales
centers                                              27               84               89              270
Homes sold to independent dealers                     6               12               22               54
Total new factory built homes produced               25               90               78              285
Less: intercompany                                   19               78               56              231
Average new manufactured home price -
retail                                     $     82,661      $    73,587      $    78,838      $    74,434
Average new manufactured home price -
wholesale                                  $     42,434      $    35,496      $    41,498      $    35,897

As a percent of net sales:
Gross profit from the Company owned
retail sales centers                                 19 %             21 %             19 %             21 %
Gross profit from the manufacturing
facilities - including intercompany
sales                                                 6 %             12 %              3 %             15 %

For the three and nine month periods ended August 1, 2009 and August 2, 2008, results are as follows: Total net sales in the third quarter of 2009 were $3,082,551 compared to $7,395,885 in the third quarter of 2008. Total net sales for the first nine months of 2009 were $9,032,850 compared to $24,265,336 for the first nine months of 2008.

Sales and operations for the third quarter of 2009 were adversely impacted by our country's severe economic uncertainty and the reduced manufactured housing shipments in Florida, plus the overall decline in Florida and the nation's housing market. Industry shipments in Florida for the period of November 2008 through July 2009 were down approximately 56% from the same period last year. Fiscal year 2009 is Nobility's 42nd year of operating in our market area and is proving to be our most challenging. Lack of retail and wholesale financing, increasing unemployment and home foreclosures, slow sales of existing site-built homes, very low consumer confidence and a poor economic outlook for the U.S. economy are just a few of the challenges facing our country, our industry, and Nobility.

Management understands that during these very challenging economic times, maintaining the Company's strong financial position is vital for future growth and success. Because of deteriorating business conditions and the lack of any clarity that today's economic challenges will improve significantly, the Company will continue to evaluate the fifteen retail model centers in Florida that are owned by its subsidiary, Prestige Home Centers, Inc., along with all expenses within the Company and react in a manner consistent with maintaining our strong balance sheet.

Although the overall housing picture, financial market and economy have declined significantly this past year and the immediate outlook for the manufactured housing industry in Florida and the nation is uncertain, the long-term demographic trends still favor future growth in the Florida market area we serve. Job formation, immigration growth and migration trends, plus consumers returning to more affordable housing should favor Florida. Management remains convinced that our specific geographic market is one of the best long-term growth areas in the country and, because of the strong operating leverage inherent in the Company we expect to out-perform the industry. For the remainder of fiscal 2009, the country must experience a better economy with less uncertainty, improved sales in the existing home market, declining unemployment, continued low interest rates, improving credit markets, increased consumer confidence and more retail financing for the demand of Nobility's affordable homes to improve.

Insurance agent commissions in the third quarter of 2009 were $62,680 compared to $89,894 in the third quarter of 2008. Total insurance agent commissions for the first nine months of 2009 were $223,582 compared to $328,780 for the first nine months of 2008. The decline in insurance agent commissions resulted from fewer new policies generated, because the decrease in the number of homes sold through the Prestige sales centers. Prestige's wholly-owned subsidiary, Mountain Financial, Inc., is an independent insurance agent, licensed mortgage lender and mortgage broker. Its principal activity is the performance of 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, Mountain Financial solely assists our customers in obtaining various 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. Mountain Financial, Inc. has no material commitments or contingencies. 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 is deemed necessary for policy cancellations at August 1, 2009 and August 2, 2008.

The construction lending operations provides financing to buyers who are purchasing a home through the Company's retail sales centers. Such a loan provides the homeowner with enough money to pay for the land, land improvements, construction and installation of the home, impact fees and permits. The loan is disbursed in draws as construction progresses and is secured by a first mortgage on the land, home and all of the improvements. The term is typically for one year, with interest only payable monthly. There is also a finance charge which is added to the loan at closing. The construction loan is paid off when the homeowner closes on the permanent financing, typically a 30 year fixed mortgage. The construction lending operations in the third quarter of 2009 was $9,862 compared to $44,701 in the third quarter of 2008. Net sales from construction lending operations for the first nine months of 2009 were $50,133 compared to $145,712 for the first nine months of 2008.

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, mobile 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 and septic tank and other expenses.

Gross profit as a percentage of net sales was 22.3% in the third quarter of 2009 compared to 26.5% in third quarter of 2008 and was 21.2% for the first nine months of 2009 compared to 27.4% for the first nine months of 2008. In third quarter 2009, the fixed overhead costs associated with the lower sales volume at the

manufacturing facility and retail sales centers reduced gross profit margins. The expenses to temporarily close the Belleview manufacturing facility (see Liquidity and Capital Resources) and transfer the raw materials to the Ocala manufacturing facility along with the fixed overhead costs associated with the lower sales volume at the manufacturing facility and retail sales centers were the primary reason gross profit margins declined for the first nine months of 2009.

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.

Selling, general and administrative expenses as a percent of net sales was 32.0% in third quarter of 2009 compared to 23.6% in the third quarter of 2008 and was 40.0% for the first nine months of 2009 compared to 21.2% for the first nine months of 2008. The increase in selling, general and administrative expenses as a percent of net sales resulted from the fixed expenses directly related to the decreased sales at the Company's manufacturing facilities during the three and nine month periods of 2009. The Company closed two retail sales centers and the write-off of certain capitalized assets also increased selling, general and administrative expenses as a percent of net sales for the first nine months of 2009 (see Liquidity and Capital Resources).

The Company earned $45,426 from its joint venture, Majestic 21, in the third quarter of 2009 compared to $60,035 for the third quarter of 2008. For the first nine months of 2009, the Company earned from Majestic 21 $137,159 compared to $228,730 for the first nine months of 2008. 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. The primary assets are loans that were originated from 1997 until 2003. In 2003, the Company entered into a finance revenue sharing agreement with 21st Mortgage Corporation and all loans originated from that point forward, are owned by 21st Mortgage Corporation pursuant to the finance revenue sharing agreement. Consequently, no additional loans are going into the Majestic 21 joint venture and the balance of the loans/assets of the partnership is declining each month due to amortization and payoffs.

The Company did not receive a distribution in the third quarter of 2009 from the finance revenue sharing agreement with 21st Mortgage Corporation, Prestige Home Centers, Inc. and Majestic Homes, Inc. To the extent that the finance revenue sharing agreement has reserves in excess of the minimum reserve (as required to be maintained), those funds are available for distribution. The minimum reserve is determined by a formula and the higher the delinquency of the loan portfolio the more that is needed in the minimum reserve. During the second and third quarter of 2009, the loan delinquencies had increased to the point that there was not enough excess reserve to warrant a distribution due to the higher delinquency in the loan portfolio. The reserve for loan losses is held by 21st Mortgage Corporation and does not appear on the Company's books. Included in the reserve is the cost of refurbishing and reselling the repurchased and foreclosed homes. All of the earnings of the loans originated under the finance revenue sharing agreement go to the reserve account. If this reserve amount is greater than the minimum required reserve, a distribution can be made. If the delinquencies in the loan portfolio rises, the required minimum reserve rises, and could equal or exceed the reserve amount. In this case, no amount would be available for distribution. The Company earned $191,000 in the third quarter of 2008. For the first nine months of 2009, the Company earned from the finance revenue sharing agreement $157,700 compared to $536,300 for the first nine months of 2008.

The Company earned interest on cash, cash equivalents and investments in the amount of $64,380 for the third quarter of 2009 compared to $118,993 for the third quarter of 2008. For the first nine months of 2009, interest

earned on cash, cash equivalents and investments were $279,218 compared to $389,923 in the first nine months of 2008. The decreased interest income was primarily due to a decrease in the amount of cash and cash equivalents and in the variable rate portion of our cash and cash equivalents balances.

The Company reported losses from investments in the retirement community limited partnerships in the amount of $85,306 for the third quarter of 2009 compared to income of $10,646 for the third quarter of 2008. For the first nine months of 2009 the Company reported losses of $273,343 compared to $168,196 in the first nine months of 2008. Although these investments will report losses in the initial fill-up stage, management believes that new attractive and affordable manufactured home communities for senior citizens will be a significant growth area for Florida in the future.

The projected tax effect of tax positions arising in the current year have been reflected as a component of the estimated annual effective tax rate for the interim period. In that regard, the Company has recognized $200,000 in benefits due to the statute of limitations expiring on uncertain tax positions previously recognized as a liability on the Company's financial statements.

As a result of the factors discussed above, earnings for the third quarter of 2009 were $21,862 or $0.01 per diluted share compared to $397,561 or $0.10 per diluted share for the third quarter of 2008. For the first nine months of 2009 losses were $607,726 or $0.15 per diluted share compared to earnings of $1,606,284 or $0.39 per diluted share in the third quarter 2008.

Liquidity and Capital Resources

Cash and cash equivalents were $2,996,853 at August 1, 2009 compared to $8,649,724 at November 1, 2008. The decrease in cash and cash equivalents was primarily due to (i) repurchase of $5,019,855 in defaulted secured loans that were financed under the finance revenue sharing agreement, and (ii) the payment of cash dividends of $1,018,669. Short and long-term investments were $8,026,914 at August 1, 2009 compared to $8,308,436 at November 1, 2008. Working capital was $19,953,772 at August 1, 2009 as compared to $21,232,995 at November 1, 2008. Nobility owns the entire inventory for its Prestige retail sales centers and does not incur any third party floor plan financing expenses.

Accounts payable at August 1, 2009 was $97,144 compared to $186,477 at November 1, 2008. The decrease in accounts payable was primarily due to a decrease in materials purchased since the number of homes produced in third quarter of 2009 at the Company's manufacturing plants decreased by 65% percent from fourth quarter of 2008. Accrued compensation at August 1, 2008 was $55,259 compared to $201,155 at November 1, 2008. Since accrued compensation consists largely of sales commissions and bonuses, the decrease in accrued compensation was primarily due to the 56% decrease in the number of homes sold at the Company's retail sales centers in third quarter of 2009 compared to fourth quarter of 2008. Accrued expenses and other current liabilities at August 1, 2009 was $338,590 compared to $355,218 at November 1, 2008. Customer deposits continued to decrease to a below normal historic level due to the deteriorating housing and financial markets resulting in a decrease in the number of sold retail homes and no backlog at the manufacturing facility.

The Belleview manufacturing plant was consolidated into the Ocala manufacturing plant in second quarter of 2009, because of the poor economic conditions in Florida and the rest of the United States and no immediate improvement of either in sight. The Company was not selling enough manufactured homes to justify keeping both plants open. The Company was able to transfer the raw material inventory to the Ocala plant and use it in building the Belleview plant's models in our Ocala plant. Most members of the Belleview plant's management team and several of the employees were integrated into the Ocala plant. The cost to close the Belleview plant was approximately $10,000 and the ongoing cost for insurance, taxes, and minimum utilities is approximately $16,000 per quarter. The Company plans to reopen the Belleview plant when business conditions improve to the point that the Ocala plant production is at or near capacity.

There have been two retail model centers closed in fiscal year 2009. One was located in Ft. Walton, Florida and the other in Ocala, Florida. The inventory was transported to other retail model centers with the close down costing approximately $34,000 per model center and no on going cost associated with the locations closed. There was approximately $60,000 in goodwill written off relating to the Ft. Walton model center and $16,000 in land improvements written off relating to the Ocala model center.

Nobility paid an annual cash dividend of $0.25 per common share for fiscal year 2008 on January 12, 2009 in the amount of $1,018,669. On January 11, 2008, the Company paid an annual cash dividend of $0.50 per common share for fiscal year 2007 in the amount of $2,043,572.

Nobility repurchased in the open market 32,390 shares of its common stock for $263,467 during the first nine months of 2009.

Nobility maintains a revolving credit agreement with a major bank providing for borrowing up to $4,000,000. At August 1, 2009 and November 1, 2008 and there were no amounts outstanding under this agreement. The Company has experienced no credit rating downgrades which would have an impact on our ability to draw on our revolving credit facility. On June 4, 2009, the Company renewed the $4 million unsecured revolving credit agreement to expire on May 30, 2010, and management expects to renew again prior to its expiration.

We do not plan to purchase any of our leased centers in 2009. The expenditures associated with defaulted loans is primarily related to the unemployment rate in our market area and the length and severity of the recession, in addition to how quickly the Company can resell the foreclosed homes. Our joint venture still has a significant loan loss reserve of over $5 million on the portfolio of $80 million in loans. Based on the current level of sales, construction loans should not exceed $500,000. The Company could be required to repurchase several million dollars more of defaulted loans during the remainder of fiscal 2009 depending upon delinquency and foreclosure rates.

The Company owns a 50% interest in Majestic 21, a joint venture with 21st Mortgage Corporation. The decision by the parent company of 21st Mortgage Corporation to not provide additional capital to support the lending operation has required us to consider seeking capital from alternative sources. However, the Company has since been able to sign dealer agreements with a number of lenders who provide financing for our homes. In addition, Majestic 21 secured $5,000,000 in financing from a commercial bank. The Company guarantees 50% of this financing. Both additional sources of funding have been sufficient to fund our loan originations to date. We do not believe we are losing sales based on a lack of available financing. To date, we are able to fund loans without interruption.

The significant decline in gross profit, negative cash flows, net operating losses and the repurchase of defaulted loans under the finance revenue sharing agreement will not impact our ability to continue operations through 2010 because of our current cash and investment balances on hand. We will continue to monitor and eliminate all unnecessary expenses.

Dividends are determined by the board of directors and based on the profitability of the Company. Management will not recommend to the board that a dividend be paid based on the anticipated results in fiscal 2009.

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, for accounts receivable, inventory and goodwill. The following explains the basis and the procedure for each account where judgment and estimates are applied.

Revenue Recognition

The Company recognizes revenue from its retail sales 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 retail home buyer,

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

• completion of any other significant obligations.

The 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 is deemed necessary for policy cancellations at August 1, 2009 or November 1, 2008.

Investment In Manufactured Home Communities

Nobility's investments in the retirement communities are evaluated as facts and circumstances present themselves. Nobility compares the communities' financial statements with our investment expectations. We receive financial statements on each community quarterly. In addition, by being the sole supplier of homes to the two communities we know each day how many homes are sold. We also get a monthly inventory report showing all homes set up as models, all homes sold waiting for closing, all homes with 15% deposit waiting for a closing date, plus homes sold for the month. We follow the number of customers booked into the communities on the "guest house" program and monitor the communities' advertising and marketing plans and

programs. With a manufactured home community, each home sold increases the monthly rental income and increases the value of the community since the new homeowner agrees to pay monthly payment to the community for the community's amenities and the land upon which the home is located. We analyze all of this information for any indicators of possible impairment. Even with the current recession, the Company does not believe our investments in the retirement community limited partnerships are impaired. See disclosure of Investment in Manufactured Home Communities in note 4 of the consolidated financial statements included in Item 1.

Investment in Majestic 21

The Majestic 21 joint venture partnership is a loan portfolio that is owned 50% by 21st Mortgage Corporation and 50% by the company. The primary assets are loans that were originated from 1997 until 2003. 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 it's 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 FIN 46R. 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 recorded in the accounts of Nobility Homes of $1,930,013 as of August 1, 2009 and $1,876,354 as of November 1, 2008. However, based on management's evaluation, there was no impairment of this investment at August 1, 2009 or November 1, 2008. In 2003, the Company entered into a finance revenue sharing agreement with 21st Mortgage Corporation and all loans originated from that point forward, are owned by 21st Mortgage Corporation pursuant to the finance revenue sharing agreement. Consequently, no additional loans are going into the Majestic 21 joint venture and the balance of the loans/assets of the joint venture is declining each month due to amortization and payoffs. At August 1, 2009, there were loan loss reserves of 2.6% of Majestic 21's loan portfolio. The Majestic 21 joint venture partnership is monitoring loan loss reserves on a monthly basis and is adjusting the loan loss reserves as necessary. The Majestic 21 venture is reflected on 21st Mortgage Corporation's financial statements which are audited and included in the financial statements of its ultimate parent which is a public company. Management believes the loan loss reserves are adequate based upon its review of the Majestic 21 joint venture partnership's financial statements.

Unlike the Company's obligations under the finance revenue sharing agreement, 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. On behalf of the joint venture, the Company resells foreclosed/repossessed units of Majestic 21 through the Company's network of retail centers as we believe it benefits the historical loss experience of the joint venture. We earn commissions from reselling such foreclosed/repossessed units and have historically not recorded any material losses in connection with this activity.

Finance Revenue Sharing Agreement

During fiscal year 2004, the Company transferred $250,000 from its existing joint venture in Majestic 21 in order to participate in a finance revenue sharing agreement between 21st Mortgage Corporation, Prestige Homes, Inc., and . . .