Results of Operations

Total net sales in first quarter of 2022 increased 19% to $10,808,270 compared to $9,071,511 in first quarter of 2021. The Company reported net income of $1,157,034 in first quarter of 2022, compared to a net income of $1,065,765 in first quarter 2021. According to the Florida Manufactured Housing Association, shipments for the industry in Florida for the period from November 2021 through January 2022 were up approximately 24% from the same period last year. During first quarter of 2022, we continued to experience the negative impact of limitations being placed on certain key production materials from suppliers, the delay or lack of key components from vendors as well as back orders, delayed shipments, price increases and labor shortages. Production has incurred shortages in many building products, which has limited production and delayed the completion of the homes both at the manufacturing plant and the set up process in the field. In addition, we have continued to experience record inflation in most building products, resulting in increases to our material and labor costs and a corresponding decrease in gross profits. We expect that these challenges will continue for much of 2022 and potentially beyond until the industry supply chain normalizes.



The following table summarizes certain key sales statistics and percent of gross
profit.

                                                               Three Months Ended
                                                        February 5,          January 30,
                                                           2022                 2021
New homes sold through Company owned sales centers                87                   82

Pre-owned


homes sold through Company owned sales centers                     6                    1
Homes sold to independent dealers                                 10                   40
Total new factory built homes produced                            92                  150
Average new manufactured home price - retail           $     107,281        $      88,250
Average new manufactured home price - wholesale        $      63,781        $      47,515
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                                      13 %                 15 %

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, 2021 the Company celebrated its 54th anniversary in business specializing in the design and production of quality, affordable manufactured homes. With multiple retail sales centers in Florida for over 31 years and an insurance agency subsidiary, we are the only vertically integrated manufactured home company headquartered in Florida.



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Insurance agent commission revenues in first quarter of 2022 were $66,988 compared to $65,971 in first quarter of 2021. Revenues are generated by new and renewal policies being written which affects agent commission earned. The Company establishes 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 February 5, 2022 and November 6, 2021.

Gross profit as a percentage of net sales was 25% in first quarter of 2022 compared to 28% for first quarter of 2021. The gross profit in first quarter of 2022 was $2,728,228 compared to $2,497,447 in first quarter of 2021. The gross profit is dependent on the sales mix of wholesale and retail homes and number of pre-owned homes sold. The reduction in gross profit as a percentage of net sales is primary due to the continued inflation, shortages in certain building products, labor shortages and increased labor cost.

Selling, general and administrative expenses as a percent of net sales was 13% in first quarter of 2022 compared to 14% in first quarter of 2021. Selling, general and administrative expenses in first quarter of 2022 was $1,416,543 compared to $1,273,381 in first quarter of 2021. The dollar increase in expenses in 2022 were the direct results of increases to variable employee benefits compensation due to the increase in sales.



We earned interest income of $74,680 for first quarter of 2022 compared to
$30,656 for first quarter of 2021. The increase is primarily due to the interest
earned from the sale of
pre-owned
(repossessed) inventory acquired from the Company's joint venture partner, 21st
Mortgage Corporation. When the home is sold, the Company retains an interest
factor on the cost of the homes from the sales proceeds.

Our earnings from Majestic 21 in first quarter of 2022 were $12,557 compared to $13,708 for first quarter of 2021. 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 earnings from the Majestic 21 loan portfolio will continue to decrease due to the amortization, maturity and payoff of the loans.



We received distributions of $118,045 in first quarter of 2022 compared to
$45,868 in first quarter of 2021. The distributions are from an escrow
arrangement related to a Finance Revenue Sharing Agreement between 21
st
Mortgage Corporation and the Company. The distributions from the escrow
arrangement, relates to certain loans financed by 21
st
Mortgage Corporation, are recorded as income by the Company when received.

The Company realized
pre-tax
income in first quarter of 2022 of $1,526,430 as compared to $1,401,574 in first
quarter of 2021.

The Company recorded an income tax expense in the amount of $369,396 in first quarter of 2022 as compared to $335,809 in first quarter 2021.

We reported net income of $1,157,034 for first quarter of 2022 or $0.33 per basic and diluted share, compared to $1,065,765 or $0.29 per basic and diluted share, for first quarter of 2021.

Liquidity and Capital Resources



Cash and cash equivalents were $38,932,257 at February 5, 2022 compared to
$36,126,059 at November 6, 2021. Certificates of deposit were $0 at February 5,
2022 compared to $2,093,015 at November 6, 2021. Short-term investments were
$617,835 at February 5, 2022 compared to $621,928 at November 6, 2021. Working
capital was $37,315,738 at February 5, 2022 as compared to $35,563,355 at
November 6, 2021. We own the entire inventory for our Prestige retail sales
centers, which includes new and
pre-owned
homes, and do not incur any third party floor plan financing expenses. As of
February 5, 2022 the Company has incurred approximately $112,000 of the
estimated construction cost of the approximately $1.1 allocated to build an
11,900 square foot frame shop on the Company's property in Ocala, Florida.

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The Company currently has no line of credit facility and no debt and does not believe that such a facility is currently necessary to its operations. The Company also has approximately $4.0 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 February 5, 2022, the Company continued to report a strong balance sheet which included total assets of approximately $66.9 million which was funded primarily by stockholders' equity of approximately $50.5 million.

Critical Accounting Policies and Estimates



In Item 7 of our Form
10-K,
under the heading "Critical Accounting Policies and Estimates," we have provided
a discussion of the critical accounting policies and estimates that management
believes affect its more significant judgments and estimates used in the
preparation of our Consolidated Financial Statements. No significant changes
have occurred since that time.

Forward-Looking Statements



Certain statements in this report are unaudited or forward-looking statements
within the meaning of the federal securities laws. Although Nobility believes
that the amounts and 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, the potential adverse impact on
our business caused by the
COVID-19
pandemic or other health pandemics, competitive pricing pressures at both the
wholesale and retail levels, inflation, increasing material costs (including
forest based products) or availability of materials due to potential supply
chain interruptions (such as current inflation with forest products and supply
issues with vinyl siding and PVC piping), 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, impact of labor shortage, impact of materials shortage,
increasing labor cost, cyclical nature of the manufactured housing industry,
impact of rising 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, market disruptions resulting from
terrorist or other attack, any armed conflict involving the United States and
the impact of inflation.

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