Subsequent Events

9 Months Ended

Aug. 06, 2011

Subsequent Events [Abstract]

Subsequent Events

14. Subsequent Events

Finance Revenue Sharing Agreement

The Company repurchased $333,167 in defaulted loans under the “FRSA” from August 6, 2011 through October 25, 2011.

Effective October 25, 2011, the Company entered into the Seventh Amendment to the FRSA with 21st Mortgage Corporation (“21st”). The following changes were made.

• The Company’s obligation to buyback contracts on repossessed homes ceased as of the effective date of the agreement.

• Any homes repurchased as of the effective date of the agreement that have not yet been re-sold, shall be liquidated by the Company and there will be no reimbursement from the FRSA escrow, for any expenses or losses upon sale of the home. As a result, the Company will record an impairment charge of approximately $4,100,000 in the fourth quarter 2011.

• In consideration for the Company waiving its right to any reimbursement for expenses or losses on the repurchased homes in inventory, 21st will contribute $3,000,000 to the Escrow account in the FRSA.

• As future loans in the FRSA are repossessed, 21st will have sole responsibility for the sale of such repossessions and all expenses will be charged to the FRSA Escrow account.

• There will be no distributions from the Escrow account until December 31, 2015.

• In no event shall the Company be required to make up any shortfall in the Escrow account.

As a result of these changes, the Company on October 25, 2011 recorded an impairment charge of $4,098,824 to reduce the value of the repossessed inventory down to market value, since no future reimbursement is available. Beginning in 2009, the Company had been booking a reserve for losses upon disposition of the repossessed home, for each home repurchased. This balance had accumulated to $555,794 at November 5th, 2011. Consequently, the net charge to be booked in the 4th quarter will be $3,543,030.

The Company’s management believes that this Amendment should significantly improve future liquidity of the Company primarily as a result of the elimination of its obligation under the Finance Revenue Sharing Agreement to repurchase additional repossessions and, to a lesser extent, to make any additional contributions to the reserve account. Management considers the benefit of the elimination of these obligations as being very important to the future operations of the Company and believes that it significantly outweighs the largely non-cash costs which result from the execution of the Amendment.

Additionally, the $1,707,230 guarantee liability will be reversed as a result of not having to buy back any additional defaulted loans after the October 25, 2011 amendment to the FRSA. Also, the Company will no longer have any continuing involvement with repossessed homes that are bundled with land sales. The Company will no longer be required to recognize profit under the installment method and in the future will recognize revenue and profit associated with sales of repossessed homes bundled with land under the full accrual method. Existing bundled transactions treated under the installment method will be recognized in the fourth quarter as a result of the FRSA amendment.

As has been its past practice, the Company will reflect revenue sharing distributions from the escrow account in income when received. The Company will also maintain the value of its initial deposit to the escrow account as an asset as it expects to receive at least this amount in future cash distributions.

Legal Proceedings

In September 2008 David & Judith Gardner (Plaintiffs) filed a home warranty complaint against the Company. The case went to a jury trial in September 2011. The jury rendered a verdict in favor of Plaintiffs on all counts for breach of warranty under the Magnuson-Moss Warranty Act and Florida Statutes in the amount of $143,734. In April 2012 the court awarded attorney fees and cost in the amount of $224,332. These amounts are accrued as August 6, 2011 in accrued expenses and other current liabilities and all amounts were paid in fiscal year 2012.

Delisting from NASDAQ

On September 17, 2012, Nobility Homes, Inc. (the “Company”) received a letter from The NASDAQ Stock Market LLC (“NASDAQ”) informing the Company that it has not regained compliance with NASDAQ Listing Rule 5250(c)(1) within the 180 day extension period previously granted by NASDAQ.

As previously reported, the Company is not in compliance with NASDAQ Listing Rule 5250(c)(1) because the Company has not filed its Form 10-Q reports for the periods ended August 6, 2011, February 4, 2012 and May 5, 2012 (the “Form 10-Qs”) and Form 10-K for the year ended November 5, 2011 (the “Form 10-K) with the Securities and Exchange Commission (the “SEC”). As a result, NASDAQ has advised that the Company’s securities were delisted from the NASDAQ Global Market and trading in the Company’s common stock was suspended on September 19, 2012 and a Form 25-NSE will be filed with the SEC which removed the Company’s securities from listing and registration on the NASDAQ Stock Market.

After the Company’s common stock was delisted by NASDAQ, it commenced trading on the OTC Markets Group, Inc. (the “Pink Sheets’). The Company’s common stock will be eligible for trading only on the Pink Sheets unless and until it is eligible for trading on the OTC Bulletin Board (“OTCBB”). OTCBB trading may occur only if a market maker applies to quote the Company’s common stock; however, a potential market maker’s application to quote the Company’s common stock on the OTCBB will not be cleared until the Company is current in its reporting obligations under the Securities Act of 1934. There is no assurance that the Company will become current in its reporting obligations, that any market maker will apply to quote the Company’s common stock or that the Company’s common stock will become eligible to trade on the OTCBB.