----

----

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

| ¨ | TRANSITION REPORT PURSUANT TO      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|--------|----------------------------------------------------------------------------------------------------|

| Delaware(State      or other jurisdiction ofincorporation      or organization) |   | 63-0949734(IRS      EmployerIdentification      No.) |
|---------------------------------------------------------------------------------|--------|------------------------------------------------------|

| Title      of each classCommon      Stock, $0.10 Par Value |   | Name      of each exchange on which registeredNYSE      Alternext U.S. |
|------------------------------------------------------------|--------|------------------------------------------------------------------------|

| Large      Accelerated Filer ¨ | Accelerated      Filer ¨ | Non-Accelerated      Filer ¨ | Smaller      Reporting Company x |
|-------------------------------------|-------------------------------|-----------------------------------|----------------------------------|

----

----

----

CAVALIER HOMES, INC.

|          |                                                                                                                    |   | Page   |   |
|---------------|-------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
| PART      I   |                                                                                                                    |
| Item 1.       | Business                                                                                                                |   |   | 1      |   |
| Item      1A. | Risk Factors                                                                                                            |   |   | 6      |   |
| Item 1B.      | Unresolved Staff Comments                                                                                               |   |   | 11     |   |
| Item 2.       | Properties                                                                                                              |   |   | 11     |   |
| Item 3.       | Legal Proceedings                                                                                                       |   |   | 11     |   |
| Item 4.       | Submission of Matters to a Vote of Security      Holders                                                                |   |   | 12     |   |
|          |                                                                                                                    |
| PART      II  |                                                                                                                    |
| Item 5.       | Market for Registrant’s Common Equity, Related Stockholder      Matters and Issuer Purchases of Equity Securities |   |   | 12     |   |
| Item 6.       | Selected Financial Data                                                                                                 |   |   | 14     |   |
| Item 7.       | Management’s Discussion and Analysis of Financial Condition      and Results of Operations                        |   |   | 15     |   |
| Item 7A.      | Quantitative and Qualitative Disclosures About Market      Risk                                                         |   |   | 28     |   |
| Item 8.       | Financial Statements and Supplementary    Data                                                                          |   |   | 30     |   |
| Item 9.       | Changes in and Disagreements With Accountants on Accounting      and Financial Disclosure                               |   |   | 50     |   |
| Item 9A.      | Controls and Procedures                                                                                                 |   |   | 50     |   |
| Item 9B.      | Other Information                                                                                                       |   |   | 50     |   |
|          |                                                                                                                    |
| PART      III |                                                                                                                    |
| Item 10.      | Directors, Executive Officers and Corporate      Governance                                                             |   |   | 50     |   |
| Item 11.      | Executive Compensation                                                                                                  |   |   | 50     |   |
| Item 12.      | Security Ownership of Certain Beneficial Owners and      Management and Related Stockholder Matters                     |   |   | 51     |   |
| Item 13.      | Certain Relationships and Related Transactions, and      Director Independence                                          |   |   | 51     |   |
| Item 14.      | Principal Accountant Fees and Services                                                                                  |   |   | 51     |   |
|          |                                                                                                                    |
| PART      IV  |                                                                                                                    |
| Item 15.      | Exhibits and Financial Statement    Schedules                                                                           |   |   | 51     |   |
|          |                                                                                                                    |
|          | Signatures                                                                                                              |   |   | 55     |   |

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CAVALIER HOMES, INC.

Item 1: Business (all dollars inthousands)

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|                                             |   | For      the Years Ended December 31, |   |
|--------------------------------------------------|--------|---------------------------------------|--------|
|                                             |   | 2008                                  |   |   | 2007 |   |   | 2006 |   |
| Number      of homes sold (wholesale shipments): |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Floor      shipments:                            |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| HUD-Code                                         |   |                                  | 6,076  |   |   |   | 96 | % |   |   | 7,378 |   |   |   | 91 | % |   |   | 8,261 |   |   |   | 91 | % |
| Modular                                          |   |                                  | 253    |   |   |   | 4 | % |   |   | 729 |   |   |   | 9 | % |   |   | 840 |   |   |   | 9 | % |
| Total      floor shipments                       |   |                                  | 6,329  |   |   |   | 100 | % |   |   | 8,107 |   |   |   | 100 | % |   |   | 9,101 |   |   |   | 100 | % |
|                                             |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Home      shipments:                             |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Single-section                                   |   |                                  | 1,566  |   |   |   | 40 | % |   |   | 1,460 |   |   |   | 31 | % |   |   | 1,669 |   |   |   | 31 | % |
| Multi-section                                    |   |                                  | 2,372  |   |   |   | 60 | % |   |   | 3,300 |   |   |   | 69 | % |   |   | 3,678 |   |   |   | 69 | % |
| Total      home shipments                        |   |                                  | 3,938  |   |   |   | 100 | % |   |   | 4,760 |   |   |   | 100 | % |   |   | 5,347 |   |   |   | 100 | % |

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|                                                             |   | As      of December 31, |
|------------------------------------------------------------------|--------|-------------------------|
|                                                             |   | 2008                    |   | 2007 |   | 2006 |
| Number      of independent exclusive dealer locations            |   |                    | 50 |   |   |   | 62 |   |   |   | 71 |   |
| Number      of independent non-exclusive dealer locations        |   |                    | 239 |   |   |   | 283 |   |   |   | 262 |   |
| Percentage      of manufactured home sales (excluding MEMA/FEMA) |   |                    | 56 | % |   |   | 48 | % |   |   | 58 | % |

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Item 1A: Risk Factors

----

Table of Contents

|   | · | changes      in general economic conditions; |
|--------|--------|----------------------------------------------|

|   | · | inflation; |
|--------|--------|------------|

|   | · | levels      of consumer confidence; |
|--------|--------|-------------------------------------|

|   | · | employment      and income levels; |
|--------|--------|------------------------------------|

|   | · | housing      supply and demand; |
|--------|--------|---------------------------------|

|   | · | availability      of alternative forms of housing; |
|--------|--------|----------------------------------------------------|

|   | · | availability      of wholesale (dealer) financing; |
|--------|--------|----------------------------------------------------|

|   | · | availability      of retail (consumer) financing; |
|--------|--------|---------------------------------------------------|

|   | · | the      level and stability of interest rates;and |
|--------|--------|----------------------------------------------------|

|   | · | the      availability of raw materials. |
|--------|--------|-----------------------------------------|

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|   | · | control      costs in light of currently prevailing industry  conditions; |
|--------|--------|---------------------------------------------------------------------------|

|   | · | improve      manufacturing cost efficiencies; |
|--------|--------|-----------------------------------------------|

|   | · | attempt      to generate an increase in sales in an increasingly competitive      environment; |
|--------|--------|------------------------------------------------------------------------------------------------|

|   | · | improve      brand management and penetration; |
|--------|--------|------------------------------------------------|

|   | · | increase      market share; |
|--------|--------|-----------------------------|

|   | · | maintain      consistent profitability; |
|--------|--------|-----------------------------------------|

|   | · | develop      our exclusive and independent dealernetwork; |
|--------|--------|-----------------------------------------------------------|

|   | · | eliminate      redundant products to streamline production in an effort to reduce costs;      and |
|--------|--------|---------------------------------------------------------------------------------------------------|

|   | · | manage      product/model management, engineering, and service/warranty at the      operating division in order to reduce our costs and shorten response times      to customers. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | general      economic and industry conditions; |
|--------|--------|------------------------------------------------|

|   | · | the      availability of capital andfinancing; |
|--------|--------|------------------------------------------------|

|   | · | the      availability and terms of wholesale and retail financing from lenders in      the manufactured housing industry; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|

|   | · | our      ability to control costs if industry production capacity decreases below      current levels; |
|--------|--------|--------------------------------------------------------------------------------------------------------|

|   | · | competition      from other companies in ourindustry; |
|--------|--------|-------------------------------------------------------|

|   | · | our      ability to attract, retain or sell to additional independent dealers,      especially exclusive dealers; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|

|   | · | the      availability of semi-skilled workers in the areas in which our      manufacturing facilities arelocated; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------|

|   | · | the      ability of our independent dealers to compete under current industry      conditions; |
|--------|--------|------------------------------------------------------------------------------------------------|

|   | · | the      ability to produce modular and HUD-Code products within the same      manufacturing plants; and |
|--------|--------|----------------------------------------------------------------------------------------------------------|

|   | · | market      acceptance of product offerings. |
|--------|--------|----------------------------------------------|

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|   | · | price; |
|--------|--------|--------|

|   | · | product      features and quality; |
|--------|--------|------------------------------------|

|   | · | reputation      for service quality; |
|--------|--------|--------------------------------------|

|   | · | depth      of field inventory; |
|--------|--------|--------------------------------|

|   | · | delivery      capabilities; |
|--------|--------|-----------------------------|

|   | · | warranty      repair service; |
|--------|--------|-------------------------------|

|   | · | dealer      promotions; |
|--------|--------|-------------------------|

|   | · | merchandising;      and |
|--------|--------|-------------------------|

|   | · | terms      and availability of wholesale (dealer) and retail (consumer)      financing. |
|--------|--------|-----------------------------------------------------------------------------------------|

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Item 1B: Unresolved Staff Comments

Item 2: Properties

| Locations                                 |   | Use      (Number of homemanufacturing      lines) |   | Approximate      Square Footage |   | Owned      (a) or Leased |
|-------------------------------------------|--------|---------------------------------------------------|--------|---------------------------------|--------|--------------------------|
| Home      Manufacturing – operating |   |                                              |   |                            |   |                     |
| Addison,      Alabama                     |   | Manufacturing      facilities (2)                 |   | 458,000                         |   | Owned                    |
| Hamilton,      Alabama                    |   | Manufacturing      facility (1)                   |   | 200,000                         |   | Owned                    |
| Millen,      Georgia                      |   | Manufacturing      facility (1)                   |   | 179,000                         |   | Owned                    |
| Nashville,      North Carolina            |   | Manufacturing      facility (1)                   |   | 182,000                         |   | Owned                    |
| Home      Manufacturing – idled (b) |   |                                              |   |                            |   |                     |
| Conway,      Arkansas                     |   | Manufacturing      facility                       |   | 222,000                         |   | Owned                    |
| Cordele,      Georgia (c)                 |   | Manufacturing      facility                       |   | 179,000                         |   | Owned                    |
| Shippenville,      Pennsylvania           |   | Manufacturing      facility                       |   | 120,000                         |   | Owned                    |
| Winfield,      Alabama                    |   | Manufacturing      facility                       |   | 134,000                         |   | Owned                    |
| Component      & Supply Companies     |   |                                              |   |                            |   |                     |
| Hamilton,      Alabama                    |   | Manufacturing      facility                       |   | 60,000                          |   | Owned                    |
| Haleyville,      Alabama (2 facilities)   |   | Manufacturing      facilities                     |   | 169,000                         |   | Owned                    |
| Financial      Services                   |   |                                              |   |                            |   |                     |
| Hamilton,      Alabama (d)                |   | Administrative      office                        |   | 9,000                           |   | Owned                    |
| General      Corporate                    |   |                                              |   |                            |   |                     |
| Addison,      Alabama                     |   | Administrative      office                        |   | 10,000                          |   | Owned                    |
| Wichita      Falls, Texas                 |   | Administrative      office                        |   | 1,000                           |   | Leased                   |

| (b) | Certain      of the idled facilities are leased to third parties under leasing      arrangements, which, in one case, includes an option to      purchase. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c) | This      property was sold on February 13, 2009 and has been classified as held for      sale in our consolidated balance sheet as of December 31,      2008. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d) | In      connection with the sale of our financial services subsidiary, this      property will be leased to thepurchaser. |
|-----|---------------------------------------------------------------------------------------------------------------------------|

Item 3: Legal Proceedings

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Item 4: Submission Of Matters To A Vote Of SecurityHolders

PART II

Item 5: Market For Registrant's Common Equity, Related StockholderMatters And Issuer Purchases Of Equity Securities (all dollars in thousands, exceptper share amounts)

|                               |   | Closing      Sales Prices |
|------------------------------------|--------|---------------------------|
|                               |   | High                      |   | Low |
| Year      ended December 31, 2008: |   |                      |   |   |   |   |   |   |
| Fourth      Quarter                |   | $                         | 1.80 |   |   | $ | 0.89 |   |
| Third      Quarter                 |   |                      | 2.49 |   |   |   | 1.90 |   |
| Second      Quarter                |   |                      | 2.60 |   |   |   | 1.51 |   |
| First      Quarter                 |   |                      | 1.95 |   |   |   | 1.52 |   |
|                               |   |                      |   |   |   |   |   |   |
| Year      ended December 31, 2007: |   |                      |   |   |   |   |   |   |
| Fourth      Quarter                |   | $                         | 3.15 |   |   | $ | 1.80 |   |
| Third      Quarter                 |   |                      | 4.91 |   |   |   | 3.21 |   |
| Second      Quarter                |   |                      | 5.03 |   |   |   | 4.35 |   |
| First      Quarter                 |   |                      | 5.00 |   |   |   | 3.85 |   |

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|                     |   | 2003 |   |   | 2004   |   |   | 2005   |   |   | 2006   |   |   | 2007 |   |   | 2008   |   |
|--------------------------|--------|------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|------|--------|--------|--------|--------|
| Cavalier      Homes Inc. |   | $    | 100.00 |   |   | $      | 197.65 |   |   | $      | 216.44 |   |   | $    | 139.60 |   |   | $      | 65.44 |   |   | $ | 35.91 |   |
| S&P      500         |   | $    | 100.00 |   |   | $      | 110.88 |   |   | $      | 116.33 |   |   | $    | 134.70 |   |   | $      | 142.10 |   |   | $ | 89.53 |   |
| Peer      Group          |   | $    | 100.00 |   |   | $      | 132.98 |   |   | $      | 138.16 |   |   | $    | 104.05 |   |   | $      | 87.55 |   |   | $ | 19.33 |   |

| Period                         |   | Total      Number of Shares Purchased |    |   | Average      Price Paid per Share |   |    | Total      Number of Shares Purchased as Part of Publicly Announced Plans or Programs      (1) |   |   | Maximum      Number of Shares that May Yet Be Purchased Under the Plans or      Programs |   |
|--------------------------------|--------|---------------------------------------|---------|--------|-----------------------------------|--------|---------|------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------|--------|
| 09/28/08      – 11/01/08 |   |                                  | – |   |                              |   | – |                                                                                           |   |   | –                                                                                       |   |   |   | 831,200 |   |
| 11/02/08      – 11/29/08 |   |                                  | – |   |                              |   | – |                                                                                           |   |   | –                                                                                       |   |   |   | 831,200 |   |
| 11/30/08      – 12/31/08 |   |                                  | 831,200 |   |                              | $      | 1.09    |                                                                                           |   |   | 831,200                                                                                       |   |   |   | – |   |
| Totals                         |   |                                  | 831,200 |   |                              | $      | 1.09    |                                                                                           |   |   | 831,200                                                                                       |   |   |   |   |   |

| (1) | Pursuant      to a common stock repurchase program approved by our Board of Directors in      1998, a total of 831,200 shares were purchased in December 2008 at a cost      of $931. A cumulative total of 4,000,000 shares were authorized for      repurchase and were purchased under this program at a cost of $25,773,      which included the purchase of 3,168,800 shares during the four year      period ended December 31, 2001 for total cost of $24,842. We retired      2,151,500 of the repurchased shares at December 31, 1999, with the      remaining shares being recorded as treasury stock. During 2006, we      reissued 34,000 treasury shares upon the exercise of stock options. We      have no continuing authority to repurchase shares of our common stock      pursuant to the foregoing program. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

Item 6: Selected Financial Data

|                                                                                                                     |   | Years      Ended December 31,                 |
|--------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|
|                                                                                                                     |   | 2008                                          |   | 2007 |   | 2006 |   | 2005 |   | 2004 |
|                                                                                                                     |   | (in      thousands, except per share amounts) |
| Statement      of Operations Data:                                                                                       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                                                                                                                  |   | $                                             | 164,405 |   |   | $ | 206,884 |   |   | $ | 224,602 |   |   | $ | 269,031 |   |   | $ | 209,297 |   |
| Cost      of sales                                                                                                       |   |                                          | 134,507 |   |   |   | 181,920 |   |   |   | 189,175 |   |   |   | 219,435 |   |   |   | 172,244 |   |
| Gross      profit                                                                                                        |   |                                          | 29,898 |   |   |   | 24,964 |   |   |   | 35,427 |   |   |   | 49,596 |   |   |   | 37,053 |   |
| Selling,      general, and administrative                                                                                |   |                                          | 26,992 |   |   |   | 34,684 |   |   |   | 36,201 |   |   |   | 37,317 |   |   |   | 32,512 |   |
| Restructuring      and impairment charges                                                                                |   |                                          | -- |   |   |   | 267 |   |   |   | -- |   |   |   | 143 |   |   |   | -- |   |
| Operating      income (loss)                                                                                             |   |                                          | 2,906 |   |   |   | (9,987 | ) |   |   | (774 | ) |   |   | 12,136 |   |   |   | 4,541 |   |
| Other      income (expense):                                                                                             |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      expense                                                                                                    |   |                                          | (488 | ) |   |   | (672 | ) |   |   | (1,150 | ) |   |   | (1,323 | ) |   |   | (1,141 | ) |
| Other,      net                                                                                                          |   |                                          | 501 |   |   |   | 314 |   |   |   | 1,298 |   |   |   | 835 |   |   |   | 554 |   |
|                                                                                                                     |   |                                          | 13 |   |   |   | (358 | ) |   |   | 148 |   |   |   | (488 | ) |   |   | (587 | ) |
| Income      (loss) from continuing operations before income taxes and equity in      earnings of equity-method investees |   |                                          | 2,919 |   |   |   | (10,345 | ) |   |   | (626 | ) |   |   | 11,648 |   |   |   | 3,954 |   |
| Income      tax provision (benefit)                                                                                      |   |                                          | (61 | ) |   |   | (221 | ) |   |   | 665 |   |   |   | (27 | ) |   |   | (82 | ) |
| Equity      in earnings of equity-method investees                                                                       |   |                                          | 96 |   |   |   | 971 |   |   |   | 805 |   |   |   | 775 |   |   |   | 980 |   |
| Income      (loss) from continuing operations                                                                            |   |                                          | 3,076 |   |   |   | (9,153 | ) |   |   | (486 | ) |   |   | 12,450 |   |   |   | 5,016 |   |
| Income      (loss) from discontinued operations, net of income taxes and gain on      disposal of $439 (2005)            |   |                                          | 273 |   |   |   | 634 |   |   |   | 658 |   |   |   | (1,535 | ) |   |   | (1,775 | ) |
| Net      income (loss)                                                                                                   |   | $                                             | 3,349 |   |   | $ | (8,519 | ) |   | $ | 172 |   |   | $ | 10,915 |   |   | $ | 3,241 |   |
|                                                                                                                     |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      (loss) per share:                                                                                            |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic:                                                                                                                   |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| From      continuing operations                                                                                          |   | $                                             | 0.17 |   |   | $ | (0.50 | ) |   | $ | (0.03 | ) |   | $ | 0.69 |   |   | $ | 0.28 |   |
| From      discontinued operations                                                                                        |   |                                          | 0.01 |   |   |   | 0.04 |   |   |   | 0.04 |   |   |   | (0.09 | ) |   |   | (0.10 | ) |
| Net      income (loss)                                                                                                   |   | $                                             | 0.18 |   |   | $ | (0.46 | ) |   | $ | 0.01 |   |   | $ | 0.60 |   |   | $ | 0.18 |   |
| Weighted      average shares outstanding                                                                                 |   |                                          | 18,342 |   |   |   | 18,378 |   |   |   | 18,335 |   |   |   | 18,119 |   |   |   | 17,880 |   |
| Diluted:                                                                                                                 |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| From      continuing operations                                                                                          |   | $                                             | 0.17 |   |   | $ | (0.50 | ) |   | $ | (0.03 | ) |   | $ | 0.68 |   |   | $ | 0.28 |   |
| From      discontinued operations                                                                                        |   |                                          | 0.01 |   |   |   | 0.04 |   |   |   | 0.04 |   |   |   | (0.09 | ) |   |   | (0.10 | ) |
| Net      income (loss)                                                                                                   |   | $                                             | 0.18 |   |   | $ | (0.46 | ) |   | $ | 0.01 |   |   | $ | 0.59 |   |   | $ | 0.18 |   |
| Weighted      average shares outstanding                                                                                 |   |                                          | 18,353 |   |   |   | 18,378 |   |   |   | 18,470 |   |   |   | 18,357 |   |   |   | 18,178 |   |
|                                                                                                                     |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      Data:                                                                                                         |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital      expenditures                                                                                                |   | $                                             | 380 |   |   | $ | 2,177 |   |   | $ | 1,995 |   |   | $ | 1,410 |   |   | $ | 786 |   |
| Working      capital                                                                                                     |   | $                                             | 24,662 |   |   | $ | 20,762 |   |   | $ | 25,347 |   |   | $ | 24,216 |   |   | $ | 12,967 |   |
| Total      assets                                                                                                        |   | $                                             | 80,795 |   |   | $ | 91,377 |   |   | $ | 96,706 |   |   | $ | 132,821 |   |   | $ | 98,230 |   |
| Long-term      debt                                                                                                      |   | $                                             | 959 |   |   | $ | 3,678 |   |   | $ | 4,512 |   |   | $ | 7,631 |   |   | $ | 11,400 |   |
| Stockholders’      equity                                                                                          |   | $                                             | 52,596 |   |   | $ | 49,984 |   |   | $ | 58,400 |   |   | $ | 57,845 |   |   | $ | 45,167 |   |

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Item 7: Management’s Discussion and Analysis of Financial Conditionand Results of Operations (dollars in thousands, exceptaverage sales price per unit)

|   |   | Floor      Shipments |    |
|--------|--------|----------------------|---------|
|   |   | Nationwide           |    |   | Cavalier’s      Core 11 States |   |
| Year   |   | Industry             |    |   | Increase      (decrease) from prioryear |   |   | Cavalier |   |   | Increase      (decrease) from prioryear |   |   | MarketShare |   |   | Industry |   |   | Increase      (decrease) from prioryear |   |   | Cavalier |   |   | Increase      (decrease) from prioryear |   |   | MarketShare |   |
| 1999   |   |                 | 582,498 |   |   |   |   |   |   | 34,294 |   |   |   |   |   |   | 5.9 | % |   |   | 284,705 |   |   |   |   |   |   | 30,070 |   |   |   |   |   |   | 10.6 | % |
| 2000   |   |                 | 431,787 |   |   |   | (25.9 | )% |   |   | 18,590 |   |   |   | (45.8 | )% |   |   | 4.3 | % |   |   | 199,276 |   |   |   | (30.0 | )% |   |   | 15,941 |   |   |   | (47.0 | )% |   |   | 8.0 | % |
| 2001   |   |                 | 342,321 |   |   |   | (20.7 | )% |   |   | 21,324 |   |   |   | 14.7 | % |   |   | 6.2 | % |   |   | 149,162 |   |   |   | (25.1 | )% |   |   | 17,884 |   |   |   | 12.2 | % |   |   | 12.0 | % |
| 2002   |   |                 | 304,370 |   |   |   | (11.1 | )% |   |   | 21,703 |   |   |   | 1.8 | % |   |   | 7.1 | % |   |   | 124,127 |   |   |   | (16.8 | )% |   |   | 18,039 |   |   |   | 0.9 | % |   |   | 14.5 | % |
| 2003   |   |                 | 240,180 |   |   |   | (21.1 | )% |   |   | 12,411 |   |   |   | (42.8 | )% |   |   | 5.2 | % |   |   | 87,265 |   |   |   | (29.7 | )% |   |   | 10,584 |   |   |   | (41.3 | )% |   |   | 12.1 | % |
| 2004   |   |                 | 232,824 |   |   |   | (3.1 | )% |   |   | 10,772 |   |   |   | (13.2 | )% |   |   | 4.6 | % |   |   | 88,958 |   |   |   | 1.9 | % |   |   | 8,912 |   |   |   | (15.8 | )% |   |   | 10.0 | % |
| 2005   |   |                 | 246,750 |   |   |   | 6.0 | % |   |   | 10,648 |   |   |   | (1.2 | )% |   |   | 4.3 | % |   |   | 105,508 |   |   |   | 18.6 | % |   |   | 9,905 |   |   |   | 11.1 | % |   |   | 9.4 | % |
| 2006   |   |                 | 206,822 |   |   |   | (16.2 | )% |   |   | 8,261 |   |   |   | (22.4 | )% |   |   | 4.0 | % |   |   | 86,748 |   |   |   | (17.8 | )% |   |   | 7,774 |   |   |   | (21.5 | )% |   |   | 9.0 | % |
| 2007   |   |                 | 163,761 |   |   |   | (20.8 | )% |   |   | 7,378 |   |   |   | (10.7 | )% |   |   | 4.5 | % |   |   | 69,115 |   |   |   | (20.3 | )% |   |   | 6,568 |   |   |   | (15.5 | )% |   |   | 9.5 | % |
| 2008   |   |                 | 135,338 |   |   |   | (17.4 | )% |   |   | 6,076 |   |   |   | (17.6 | )% |   |   | 4.5 | % |   |   | 58,145 |   |   |   | (15.9 | )% |   |   | 5,789 |   |   |   | (11.9 | )% |   |   | 10.0 | % |

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|                                                                                          |   | For      the Year Ended December 31, |
|-----------------------------------------------------------------------------------------------|--------|--------------------------------------|
|                                                                                          |   | 2008                                 |   | 2007 |   | 2006 |
| Statement      of Operations Data:                                                            |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                                                                                       |   | $                                    | 164,405 |   |   |   | 100.0 | % |   | $ | 206,884 |   |   |   | 100.0 | % |   | $ | 224,602 |   |   |   | 100.0 | % |
| Cost      of sales                                                                            |   |                                 | 134,507 |   |   |   | 81.8 |   |   |   | 181,920 |   |   |   | 87.9 |   |   |   | 189,175 |   |   |   | 84.2 |   |
| Gross      profit                                                                             |   |                                 | 29,898 |   |   |   | 18.2 |   |   |   | 24,964 |   |   |   | 12.1 |   |   |   | 35,427 |   |   |   | 15.8 |   |
| Selling,      general and administrative                                                      |   |                                 | 26,992 |   |   |   | 16.4 |   |   |   | 34,684 |   |   |   | 16.8 |   |   |   | 36,201 |   |   |   | 16.1 |   |
| Restructuring      and impairment charges                                                     |   |                                 | -- |   |   |   | -- |   |   |   | 267 |   |   |   | 0.1 |   |   |   | -- |   |   |   | -- |   |
| Operating      income (loss)                                                                  |   |                                 | 2,906 |   |   |   | 1.8 |   |   |   | (9,987 | ) |   |   | (4.8 | ) |   |   | (774 | ) |   |   | (0.3 | ) |
| Other      income (expense):                                                                  |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      expense                                                                         |   |                                 | (488 | ) |   |   | (0.3 | ) |   |   | (672 | ) |   |   | (0.3 | ) |   |   | (1,150 | ) |   |   | (0.5 | ) |
| Other,      net                                                                               |   |                                 | 501 |   |   |   | 0.3 |   |   |   | 314 |   |   |   | 0.1 |   |   |   | 1,298 |   |   |   | 0.5 |   |
|                                                                                          |   |                                 | 13 |   |   |   | -- |   |   |   | (358 | ) |   |   | (0.2 | ) |   |   | 148 |   |   |   | -- |   |
| Income      (loss) before income taxes and equity in earnings of equity-method      investees |   |                                 | 2,919 |   |   |   | 1.8 |   |   |   | (10,345 | ) |   |   | (5.0 | ) |   |   | (626 | ) |   |   | (0.3 | ) |
| Income      tax provision (benefit)                                                           |   |                                 | (61 | ) |   |   | -- |   |   |   | (221 | ) |   |   | (0.1 | ) |   |   | 665 |   |   |   | 0.3 |   |
| Equity      in earnings of equity-method investees                                            |   |                                 | 96 |   |   |   | 0.1 |   |   |   | 971 |   |   |   | 0.5 |   |   |   | 805 |   |   |   | 0.4 |   |
| Income      (loss) from continuing operations                                                 |   |                                 | 3,076 |   |   |   | 1.9 |   |   |   | (9,153 | ) |   |   | (4.4 | ) |   |   | (486 | ) |   |   | (0.2 | ) |
| Income      from discontinued operations, net of income taxes                                 |   |                                 | 273 |   |   |   | 0.1 |   |   |   | 634 |   |   |   | 0.3 |   |   |   | 658 |   |   |   | 0.3 |   |
| Net      income (loss)                                                                        |   | $                                    | 3,349 |   |   |   | 2.0 | % |   | $ | (8,519 | ) |   |   | (4.1 | )% |   | $ | 172 |   |   |   | 0.1 | % |
|                                                                                          |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                             |   | For      the Year Ended December 31, |
|--------------------------------------------------|--------|--------------------------------------|
|                                             |   | 2008                                 |   | 2007 |   | 2006 |
| Operating      Summary Data:                     |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Floor      shipments:                            |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| HUD-Code                                         |   |                                 | 6,076 |   |   |   | 96.0 | % |   |   | 7,378 |   |   |   | 91.0 | % |   |   | 8,261 |   |   |   | 90.8 | % |
| Modular                                          |   |                                 | 253 |   |   |   | 4.0 |   |   |   | 729 |   |   |   | 9.0 |   |   |   | 840 |   |   |   | 9.2 |   |
| Total      floor shipments                       |   |                                 | 6,329 |   |   |   | 100.0 | % |   |   | 8,107 |   |   |   | 100.0 | % |   |   | 9,101 |   |   |   | 100.0 | % |
|                                             |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Home      shipments:                             |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Single-section                                   |   |                                 | 1,566 |   |   |   | 39.8 | % |   |   | 1,460 |   |   |   | 30.7 | % |   |   | 1,669 |   |   |   | 31.2 | % |
| Multi-section                                    |   |                                 | 2,372 |   |   |   | 60.2 |   |   |   | 3,300 |   |   |   | 69.3 |   |   |   | 3,678 |   |   |   | 68.8 |   |
| Wholesale      home shipments                    |   |                                 | 3,938 |   |   |   | 100.0 |   |   |   | 4,760 |   |   |   | 100.0 |   |   |   | 5,347 |   |   |   | 100.0 |   |
| Shipments      to company-owned retail locations |   |                                 | (21 | ) |   |   | (0.5 | ) |   |   | (43 | ) |   |   | (0.9 | ) |   |   | (157 | ) |   |   | (2.9 | ) |
| MEMA/FEMA      shipments                         |   |                                 | (292 | ) |   |   | (7.4 | ) |   |   | (358 | ) |   |   | (7.5 | ) |   |   | (419 | ) |   |   | (7.8 | ) |
| Shipments      to independent retailers          |   |                                 | 3,625 |   |   |   | 92.1 | % |   |   | 4,359 |   |   |   | 91.6 | % |   |   | 4,771 |   |   |   | 89.3 | % |
| Retail      home shipments                       |   |                                 | 22 |   |   |   | 0.5 |   |   |   | 45 |   |   |   | 0.9 |   |   |   | 169 |   |   |   | 3.1 |   |
| Home      shipments other than MEMA/FEMA         |   |                                 | 3,647 |   |   |   | 92.6 |   |   |   | 4,404 |   |   |   | 92.5 |   |   |   | 4,940 |   |   |   | 92.4 |   |
|                                             |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital      expenditures                        |   | $                                    | 380 |   |   |   |   |   |   | $ | 2,177 |   |   |   |   |   |   | $ | 1,995 |   |   |   |   |   |
| Home      manufacturing facilities (operating)   |   |                                 | 5 |   |   |   |   |   |   |   | 5 |   |   |   |   |   |   |   | 7 |   |   |   |   |   |
| Independent      exclusive dealer locations      |   |                                 | 50 |   |   |   |   |   |   |   | 62 |   |   |   |   |   |   |   | 71 |   |   |   |   |   |

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|                                                     |   | As      of December 31, |
|----------------------------------------------------------|--------|-------------------------|
|                                                     |   | 2008                    |   | 2007 |   | 2006 |
| Cash,      cash equivalents, and certificates of deposit |   | $                       | 31,198 |   |   | $ | 22,043 |   |   | $ | 25,967 |   |
| Working      capital                                     |   | $                       | 24,662 |   |   | $ | 20,906 |   |   | $ | 25,347 |   |
| Current      ratio                                       |   |                    | 1.9      to 1 |   |   |   | 1.6      to 1 |   |   |   | 1.8      to 1 |   |
| Long-term      debt                                      |   | $                       | 959 |   |   | $ | 3,678 |   |   | $ | 4,512 |   |
| Ratio      of long-term debt to equity                   |   |                    | <      0.1 to 1 |   |   |   | 0.1      to 1 |   |   |   | 0.1      to 1 |   |
| Installment      loan portfolio                          |   | $                       | 3,543 |   |   | $ | 9,844 |   |   | $ | 12,265 |   |

| (a) | a      total of $5,887 due to net income excluding certain non-cash items,      including depreciation, provision for credit and accounts receivable      losses, stock-based compensation, gain on disposal of property, plant and      equipment, and other, net (equity in earnings of equity-method      investees), |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | a      decrease in inventory totaling $5,184,and |
|-----|--------------------------------------------------|

| (d) | offset      by an increase in accounts receivable of $(373),  and |
|-----|-------------------------------------------------------------------|

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| (e) | decreases      in accounts payable ($2,057), amounts payable under dealer incentive      programs ($841), accrued compensation and related withholdings ($359), and      other assets and liabilities ($2,550), which generally represent timing      differences in payments. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (a) | a      total of $6,278 due to the net loss excluding certain non-cash items,      including depreciation, provision for credit and accounts receivable      losses, stock-based compensation, loss on disposal of property, plant and      equipment, impairment charge and other, net (equity in earnings of      equity-method investees), |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | an      increase in accounts receivable of $723 due primarily to outstanding MEMA      invoices at year-end, |
|-----|--------------------------------------------------------------------------------------------------------------|

| (c) | an      increase in inventory, net of the impact from the sale of two retail      locations in March 2007 totaling $522,and |
|-----|-----------------------------------------------------------------------------------------------------------------------------|

| (e) | offset      by increases in accounts payable ($972), amounts payable under dealer      incentive programs ($578), accrued compensation and related withholdings      ($155), and other assets and liabilities ($666), which generally represent      timing differences in payments. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (a) | a      decrease in accounts receivable of $37,554 from collection of receivables      related to FEMA disaster reliefhomes, |
|-----|-----------------------------------------------------------------------------------------------------------------------------|

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| (b) | an      inventory decrease of $5,048, which represents finished homes we delivered      in early 2006 to FEMA, and |
|-----|--------------------------------------------------------------------------------------------------------------------|

| (c) | the      net purchase of installment contracts of$1,925, |
|-----|----------------------------------------------------------|

| (d) | offset      by decreases in accounts payable ($4,073), amounts payable under dealer      incentive programs ($4,046), accrued compensation and related withholdings      ($3,456), and other assets and liabilities ($3,505), all of which      decreased primarily as a result of the FEMA activity at the end of 2005      that did not recur in 2006. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Tangible      Net Worth           |   | Interest      Rate    |
|-----------------------------------|--------|-----------------------|
| above      $62,000                |   | Prime      less 0.50% |
| $62,000      –      $56,500 |   | Prime                 |
| $56,500      –      $38,000 |   | Prime      plus 0.75% |
| below      $38,000                |   | Prime      plus 1.25% |

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|                                            |   | Payments      Due by Period |
|-------------------------------------------------|--------|-----------------------------|
| Description      (a)                            |   | Total                       |   | Less      than 1 year |   | 1-3      years |   | 4-5      years |   | After      5 years |
| Industrial      development revenue bond issues |   | $                           | 1,155 |   |   | $ | 655 |   |   | $ | 365 |   |   | $ | 135 |   |   | $ | -- |   |
| Real      estate term loan                      |   |                        | 490 |   |   |   | 42 |   |   |   | 145 |   |   |   | 115 |   |   |   | 188 |   |
| Capital      lease obligation                   |   |                        | 21 |   |   |   | 10 |   |   |   | 11 |   |   |   | -- |   |   |   | -- |   |
| Interest                                        |   |                        | 209 |   |   |   | 57 |   |   |   | 96 |   |   |   | 36 |   |   |   | 20 |   |
| Operating      lease obligations                |   |                        | 324 |   |   |   | 310 |   |   |   | 14 |   |   |   | -- |   |   |   | -- |   |
| Total      contractual cash obligations         |   | $                           | 2,199 |   |   | $ | 1,074 |   |   | $ | 631 |   |   | $ | 286 |   |   | $ | 208 |   |

| (a) | The      liability for uncertain tax positions, which totaled $255 at December 31,      2008, has been excluded from the above table because we are unable to      determine the periods in which these liabilities will be    paid. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                            |   | Payments      Due by Period |
|---------------------------------|--------|-----------------------------|
|                            |   | Total                       |   | Less      than 1 year |   | 1-3      years |   | 4-5      years |   | After      5 years |
| Repurchase      obligations (1) |   | $                           | 45,000 |   |   | $ | 12,100 |   |   | $ | 32,900 |   |   | $ | -- |   |   | $ | -- |   |
| Letters      of credit (2)      |   |                        | 3,773 |   |   |   | 3,773 |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| Total      commitments          |   | $                           | 48,773 |   |   | $ | 15,873 |   |   | $ | 32,900 |   |   | $ | -- |   |   | $ | -- |   |

| (1) | For      a complete description of the contingent repurchase obligation, see      Critical Accounting Estimates – Reserve for Repurchase Commitments.      Although the commitments outstanding at December 31, 2008 have a finite      life, these commitments are continually replaced as we continue to sell      our manufactured homes to dealers under repurchase and other recourse      agreements with lending institutions which have provided wholesale floor      plan financing to dealers. The cost (net recoveries) of these contingent      repurchase obligations to us was $126 (2008), $(181) (2007) and $430      (2006). We have a reserve for repurchase commitments of $1,141 (2008) and      $1,131 (2007) based on prior experience and an evaluation of dealers’      current financial conditions. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | We      have provided letters of credit to providers of certain of our surety      bonds and insurance policies. While the current letters of credit have a      finite life, they are subject to renewal at different amounts based on the      requirements of the insurance carriers. The outstanding letters of credit      reduce amounts available under our Credit Facility. We have recorded      insurance expense based on anticipated losses related to these      policies. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (1) | We      estimate the fair value of the non-contingent portion of our      manufacturer’s inventory repurchase commitment under the provisions of FIN      45 when a home is shipped to dealers whose floor plan financing includes      our repurchase commitment. The fair value of the inventory repurchase      agreement has been estimated on a “pooled dealer” approach based on the      creditworthiness of the independent dealers, as determined by the floor      plan institution, and is derived using an income approach. Specifically,      the fair value of the inventory repurchase agreement is determined by      calculating the net present value of the difference in (a) the interest      cost to carry the inventory over the maximum repurchase liability period      at the prevailing floor plan note interest rate and (b) the interest cost      to carry the inventory over the maximum repurchase liability period at the      interest rate of a similar type loan without a manufacturer’s repurchase      agreement in force. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (2) | We      estimate the contingent obligation to make future payments under our      manufacturer’s inventory repurchase commitment for the same pool of      commitments as used in the fair value calculation above and record the      greater of the two calculations. This SFAS No. 5 contingent obligation is      estimated using historical loss factors, including the frequency of      repurchases and the losses we experienced for repurchased      inventory. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Item 7A: Quantitative And Qualitative Disclosures About MarketRisk

|                                                                                                                                                                                     |   | Assumed      Annual Principal Cash Flows |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|
| (dollars      in thousands)                                                                                                                                                              |   | 2009                                     |   | 2010 |   | 2011 |   | 2012 |   | 2013 |   | Thereafter |   | Total |   | Fair      Value |
| Installment      loan portfolio (a)                                                                                                                                                      |   | $                                        | 1,337 |   |   | $ | 51 |   |   | $ | 57 |   |   | $ | 63 |   |   | $ | 70 |   |   | $ | 1,965 |   |   | $ | 3,543 |   |   | $ | 3,010 |   |
| (weighted      average interest rate – 9.1%)                                                                                                                                       |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (a)We      have recorded an allowance for credit losses of $604, primarily based upon      management's assessment of historical experience factors and current      economicconditions. |

|                                                |   | Expected      Principal Maturity Dates |
|-----------------------------------------------------|--------|----------------------------------------|
| (dollars      in thousands)                         |   | 2009                                   |   | 2010 |   | 2011 |   | 2012 |   | 2013 |   | Thereafter |   | Total |   | Fair      Value |
| Notes      payable and long-term debt               |   | $                                      | 707 |   |   | $ | 171 |   |   | $ | 168 |   |   | $ | 182 |   |   | $ | 190 |   |   | $ | 248 |   |   | $ | 1,666 |   |   | $ | 1,672 |   |
| (weighted      average interest rate – 4.53%) |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

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|   | · | changes      in the availability of wholesale (dealer) financing, including the      modification and/or termination of programs by national floor plan      lenders; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | changes      in the availability of retail (consumer)  financing; |
|--------|--------|-------------------------------------------------------------------|

|   | · | the      cyclical and seasonal nature of the manufactured housing industry and the      economy generally; |
|--------|--------|------------------------------------------------------------------------------------------------------------|

|   | · | the      severe and continuing downturn in the manufactured housing      industry; |
|--------|--------|------------------------------------------------------------------------------------|

|   | · | limitations      in our ability to pursue our businessstrategy; |
|--------|--------|-----------------------------------------------------------------|

|   | · | changes      in demographic trends, consumer preferences and our business      strategy; |
|--------|--------|------------------------------------------------------------------------------------------|

|   | · | changes      and volatility in interest rates and the availability of      capital; |
|--------|--------|-------------------------------------------------------------------------------------|

|   | · | changes      in level of industry retailinventories; |
|--------|--------|------------------------------------------------------|

|   | · | the      ability to attract and retain quality independent dealers in a competitive      environment, including any impact from the consolidation of independent      dealers; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      ability to attract and retain executive officers and other key      personnel; |
|--------|--------|-----------------------------------------------------------------------------------------|

|   | · | the      ability to produce modular and HUD-code products within the same      manufacturing plants; |
|--------|--------|------------------------------------------------------------------------------------------------------|

|   | · | the      ability to substantially grow our modular  business; |
|--------|--------|---------------------------------------------------------------|

|   | · | competition; |
|--------|--------|--------------|

|   | · | contingent      repurchase and guarantyobligations; |
|--------|--------|-----------------------------------------------------|

|   | · | uncertainties      regarding our retail financingactivities; |
|--------|--------|--------------------------------------------------------------|

|   | · | the      potential unavailability of and price increases for raw      materials; |
|--------|--------|----------------------------------------------------------------------------------|

|   | · | the      potential unavailability of manufactured housing  sites; |
|--------|--------|-------------------------------------------------------------------|

|   | · | regulatory      constraints; |
|--------|--------|------------------------------|

|   | · | the      potential for additional warrantyclaims; |
|--------|--------|---------------------------------------------------|

|   | · | litigation,      including formaldehyde-related regulation and litigation;    and |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | the      potential for deficiencies in internal controls over financial reporting      or in disclosure controls andprocedures. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

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Item 8: Financial Statements And Supplementary Data

|                                     |   | FourthQuarter                                         |   | ThirdQuarter |   | SecondQuarter |   | FirstQuarter |   | Totals |
|------------------------------------------|--------|-------------------------------------------------------|--------|--------------|--------|---------------|--------|--------------|--------|--------|
|                                     |   | (dollars      in thousands, except per share amounts) |
| 2008                                     |   |                                                  |   |         |   |          |   |         |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue      (as originally reported)    |   | $                                                     | 27,631 |         |   | $             | 39,012 |         |   | $      | 51,090 |   |   | $ | 49,516 |   |   | $ | 167,249 |   |
| Discontinued      operations             |   |                                                  | (585)  |         |   |          | (687   | )            |   |   | (737 | ) |   |   | (835 | ) |   |   | (2,844 | ) |
| Revenue      (as adjusted)               |   |                                                  | 27,046 |         |   |          | 38,325 |         |   |   | 50,353 |   |   |   | 48,681 |   |   |   | 164,405 |   |
|                                     |   |                                                  |   |         |   |          |   |         |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      profit                        |   |                                                  | 7,420  |         |   |          | 7,379  |         |   |   | 9,643 |   |   |   | 8,300 |   |   |   | 32,742 |   |
| Discontinued      operations             |   |                                                  | (585)  |         |   |          | (687   | )            |   |   | (737 | ) |   |   | (835 | ) |   |   | (2,844 | ) |
| Gross      profit (as adjusted)          |   |                                                  | 6,835  |         |   |          | 6,692  |         |   |   | 8,906 |   |   |   | 7,465 |   |   |   | 29,898 |   |
|                                     |   |                                                  |   |         |   |          |   |         |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income (loss)                   |   |                                                  | 2,161  |         |   |          | (168   | )            |   |   | 1,238 |   |   |   | 118 |   |   |   | 3,349 |   |
| Basic      net income (loss) per share   |   |                                                  | 0.12   |         |   |          | (0.01  | )            |   |   | 0.07 |   |   |   | 0.01 |   |   |   | 0.18 |   |
| Diluted      net income (loss) per share |   | $                                                     | 0.12   |         |   | $             | (0.01  | )            |   | $      | 0.07 |   |   | $ | 0.01 |   |   | $ | 0.18 |   |
|                                     |   |                                                  |   |         |   |          |   |         |   |   |   |   |   |   |   |   |   |   |   |   |
| 2007                                     |   |                                                  |   |         |   |          |   |         |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue      (as originally reported)    |   | $                                                     | 53,167 |         |   | $             | 51,703 |         |   | $      | 62,809 |   |   | $ | 42,902 |   |   | $ | 210,581 |   |
| Discontinued      operations             |   |                                                  | (926   | )            |   |          | (870   | )            |   |   | (1,044 | ) |   |   | (857 | ) |   |   | (3,697 | ) |
| Revenue      (as adjusted)               |   |                                                  | 52,241 |         |   |          | 50,833 |         |   |   | 61,765 |   |   |   | 42,045 |   |   |   | 206,884 |   |
|                                     |   |                                                  |   |         |   |          |   |         |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      profit                        |   |                                                  | 7,995  |         |   |          | 6,049  |         |   |   | 8,637 |   |   |   | 5,980 |   |   |   | 28,661 |   |
| Discontinued      operations             |   |                                                  | (926   | )            |   |          | (870   | )            |   |   | (1,044 | ) |   |   | (857 | ) |   |   | (3,697 | ) |
| Gross      profit (as adjusted)          |   |                                                  | 7,069  |         |   |          | 5,179  |         |   |   | 7,593 |   |   |   | 5,123 |   |   |   | 24,964 |   |
|                                     |   |                                                  |   |         |   |          |   |         |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss                            |   |                                                  | (1,017 | )            |   |          | (2,742 | )            |   |   | (869 | ) |   |   | (3,891 | ) |   |   | (8,519 | ) |
| Basic      net loss per share            |   |                                                  | (0.06  | )            |   |          | (0.15  | )            |   |   | (0.05 | ) |   |   | (0.21 | ) |   |   | (0.46 | ) |
| Diluted      net loss per share          |   | $                                                     | (0.06  | )            |   | $             | (0.15  | )            |   | $      | (0.05 | ) |   | $ | (0.21 | ) |   | $ | (0.46 | ) |

| Management’s      Report on Internal Control Over Financial Reporting         |   |   | 31     |   |
|-------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Report      of Independent Registered Public Accounting Firm                        |   |   | 32     |   |
| Consolidated      Balance Sheets                                                    |   |   | 33     |   |
| Consolidated      Statements of Operations                                          |   |   | 34     |   |
| Consolidated      Statements of Stockholders’ Equity                          |   |   | 35     |   |
| Consolidated      Statements of Cash Flows                                          |   |   | 36     |   |
| Notes      to Consolidated Financial Statements                                     |   |   | 37     |   |
| Schedule-                                                                           |   |   |   |   |
| II      -  Valuation and Qualifying Accounts                              |   |   | 50     |   |
| Schedule      I, III, IV and V have been omitted because they are not      required |   |   |   |   |

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|                                                                                                                                                                    |   | 2008   |   | 2007   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| ASSETS                                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Current      assets:                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents                                                                                                                                          |   | $      | 31,198 |   |   | $ | 22,043 |   |
| Accounts      receivable, less allowance for losses of $162 (2008) and $106      (2007)                                                                                 |   |   | 2,946  |   |   |   | 6,208 |   |
| Installment      contracts receivable held for resale (discontinued    operations)                                                                                      |   |   | 1,311  |   |   |   | 5,688 |   |
| Inventories                                                                                                                                                             |   |   | 15,353 |   |   |   | 20,537 |   |
| Other      current assets                                                                                                                                               |   |   | 839    |   |   |   | 3,754 |   |
| Property      held for sale                                                                                                                                             |   |   | 1,537  |   |   |   | 1,583 |   |
| Total      current assets                                                                                                                                               |   |   | 53,184 |   |   |   | 59,813 |   |
| Property,      plant and equipment:                                                                                                                                     |   |   |   |   |   |   |   |   |
| Land                                                                                                                                                                    |   |   | 3,162  |   |   |   | 3,223 |   |
| Buildings      and improvements                                                                                                                                         |   |   | 31,403 |   |   |   | 32,094 |   |
| Machinery      and equipment                                                                                                                                            |   |   | 28,705 |   |   |   | 29,188 |   |
|                                                                                                                                                                    |   |   | 63,270 |   |   |   | 64,505 |   |
| Less      accumulated depreciation and amortization                                                                                                                     |   |   | 39,112 |   |   |   | 38,264 |   |
| Property,      plant and equipment, net                                                                                                                                 |   |   | 24,158 |   |   |   | 26,241 |   |
| Installment      contracts receivable, less allowance for credit losses of $604 (2008)      and $725 (2007)                                                   |   |   | 1,528  |   |   |   | 3,264 |   |
| Other      assets                                                                                                                                                       |   |   | 1,925  |   |   |   | 2,059 |   |
| Total      assets                                                                                                                                                       |   | $      | 80,795 |   |   | $ | 91,377 |   |
|                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| LIABILITIES      AND STOCKHOLDERS’ EQUITY                                                                                                                         |   |   |   |   |   |   |   |   |
| Current      liabilities:                                                                                                                                               |   |   |   |   |   |   |   |   |
| Current      portion of long-term debt                                                                                                                                  |   | $      | 707    |   |   | $ | 834 |   |
| Note      payable under retail floor plan agreement                                                                                                                     |   |   | 253    |   |   |   | 510 |   |
| Accounts      payable                                                                                                                                                   |   |   | 2,663  |   |   |   | 4,720 |   |
| Amounts      payable under dealer incentives                                                                                                                            |   |   | 2,778  |   |   |   | 3,619 |   |
| Estimated      warranties                                                                                                                                               |   |   | 10,100 |   |   |   | 11,720 |   |
| Accrued      insurance                                                                                                                                                  |   |   | 4,348  |   |   |   | 5,158 |   |
| Accrued      compensation and related withholdings                                                                                                                      |   |   | 2,487  |   |   |   | 2,846 |   |
| Reserve      for repurchase commitments                                                                                                                                 |   |   | 1,141  |   |   |   | 1,131 |   |
| Progress      billings                                                                                                                                                  |   |   | --     |   |   |   | 3,546 |   |
| Other      accrued expenses                                                                                                                                             |   |   | 2,508  |   |   |   | 3,384 |   |
| Total      current liabilities                                                                                                                                          |   |   | 26,985 |   |   |   | 37,468 |   |
| Long-term      debt, less current portion                                                                                                                               |   |   | 959    |   |   |   | 3,678 |   |
| Other      long-term liabilities                                                                                                                                        |   |   | 255    |   |   |   | 247 |   |
| Total      liabilities                                                                                                                                                  |   |   | 28,199 |   |   |   | 41,393 |   |
|                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Commitments      and contingencies (Note 12)                                                                                                                            |   |   |   |   |   |   |   |   |
|                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Stockholders’      equity:                                                                                                                                        |   |   |   |   |   |   |   |   |
| Series      A Junior Participating Preferred stock, $0.01 par value; 200,000      shares authorized, none issued                                              |   |   | --     |   |   |   | -- |   |
| Preferred      stock, $0.01 par value; 300,000 shares authorized, none    issued                                                                                        |   |   | --     |   |   |   | -- |   |
| Common      stock, $0.10 par value; 50,000,000 shares authorized; 19,412,880 shares      issued; 17,598,380 (2008) shares and 18,429,580 (2007) shares      outstanding |   |   | 1,941  |   |   |   | 1,941 |   |
| Additional      paid-in capital                                                                                                                                         |   |   | 59,152 |   |   |   | 59,126 |   |
| Deferred      compensation                                                                                                                                              |   |   | (17    | )      |   |   | (185 | ) |
| Accumulated      deficit                                                                                                                                                |   |   | (3,767 | )      |   |   | (7,116 | ) |
| Treasury      stock, at cost; 1,814,500 (2008) shares and 983,300 (2007)      shares                                                                                    |   |   | (4,713 | )      |   |   | (3,782 | ) |
| Total      stockholders’ equity                                                                                                                                   |   |   | 52,596 |   |   |   | 49,984 |   |
|                                                                                                                                                                    |   | $      | 80,795 |   |   | $ | 91,377 |   |

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|                                                                                                                               |   | 2008   |    | 2007   |   | 2006   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Revenue                                                                                                                            |   | $      | 164,405 |   |   | $      | 206,884 |   |   | $ | 224,602 |   |
| Cost      of sales                                                                                                                 |   |   | 134,507 |   |   |   | 181,920 |   |   |   | 189,175 |   |
| Gross      profit                                                                                                                  |   |   | 29,898  |   |   |   | 24,964 |   |   |   | 35,427 |   |
| Selling,      general and administrative expenses                                                                                  |   |   | 26,992  |   |   |   | 34,684 |   |   |   | 36,201 |   |
| Restructuring      and impairment charges                                                                                          |   |   | --      |   |   |   | 267 |   |   |   | -- |   |
| Operating      income (loss)                                                                                                       |   |   | 2,906   |   |   |   | (9,987 | ) |   |   | (774 | ) |
| Other      income (expense):                                                                                                       |   |   |    |   |   |   |   |   |   |   |   |   |
| Interest      expense                                                                                                              |   |   | (488    | )      |   |   | (672 | ) |   |   | (1,150 | ) |
| Other,      net                                                                                                                    |   |   | 501     |   |   |   | 314 |   |   |   | 1,298 |   |
|                                                                                                                               |   |   | 13      |   |   |   | (358 | ) |   |   | 148 |   |
| Income      (loss) from continuing operations before income taxes and      equity in earnings of equity-method investees |   |   | 2,919   |   |   |   | (10,345 | ) |   |   | (626 | ) |
| Income      tax provision (benefit)                                                                                                |   |   | (61     | )      |   |   | (221 | ) |   |   | 665 |   |
| Equity      in earnings of equity-method investees                                                                                 |   |   | 96      |   |   |   | 971 |   |   |   | 805 |   |
| Income      (loss) from continuing operations                                                                                      |   |   | 3,076   |   |   |   | (9,153 | ) |   |   | (486 | ) |
| Income      from discontinued operations, net of income tax provision of      $159 (2008), $392 (2007) and $355 (2006)        |   |   | 273     |   |   |   | 634 |   |   |   | 658 |   |
| Net      income (loss)                                                                                                             |   | $      | 3,349   |   |   | $      | (8,519 | ) |   | $ | 172 |   |
|                                                                                                                               |   |   |    |   |   |   |   |   |   |   |   |   |
| Income      (loss) per share:                                                                                                      |   |   |    |   |   |   |   |   |   |   |   |   |
| Basic:                                                                                                                             |   |   |    |   |   |   |   |   |   |   |   |   |
| From      continuing operations                                                                                                    |   | $      | 0.17    |   |   | $      | (0.50 | ) |   | $ | (0.03 | ) |
| From      discontinued operations                                                                                                  |   |   | 0.01    |   |   |   | 0.04 |   |   |   | 0.04 |   |
| Net      income (loss)                                                                                                             |   | $      | 0.18    |   |   | $      | (0.46 | ) |   | $ | 0.01 |   |
| Weighted      average shares outstanding                                                                                           |   |   | 18,342  |   |   |   | 18,378 |   |   |   | 18,335 |   |
| Diluted:                                                                                                                           |   |   |    |   |   |   |   |   |   |   |   |   |
| From      continuing operations                                                                                                    |   | $      | 0.17    |   |   | $      | (0.50 | ) |   | $ | (0.03 | ) |
| From      discontinued operations                                                                                                  |   |   | 0.01    |   |   |   | 0.04 |   |   |   | 0.04 |   |
| Net      income (loss)                                                                                                             |   | $      | 0.18    |   |   | $      | (0.46 | ) |   | $ | 0.01 |   |
| Weighted      average shares outstanding                                                                                           |   |   | 18,353  |   |   |   | 18,378 |   |   |   | 18,470 |   |

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|                                                                                                |   | Common      Stock |       | Additional      paid-in capital |   | Deferred      compensation |   | Retained      earnings (accumulated deficit) |   | Treasury      stock |   | Total  |
|-----------------------------------------------------------------------------------------------------|--------|-------------------|------------|---------------------------------|--------|----------------------------|--------|----------------------------------------------|--------|---------------------|--------|--------|
|                                                                                                |   | Shares            |       | Amount                          |   |                       |   |                                         |   |
| Balance,      January 1, 2006                                                                       |   |              | 19,285,705 |                            |   | $                          | 1,929  |                                         |   | $                   | 58,275 |   |   | $ | -- |   |   | $ | 1,423 |   |   | $ | (3,782 | ) |   | $ | 57,845 |   |
| Stock      options exercised                                                                        |   |              | 42,175     |                            |   |                       | 4      |                                         |   |                | 144    |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 148 |   |
| Stock-based      compensation                                                                       |   |              | --         |                            |   |                       | --     |                                         |   |                | 235    |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 235 |   |
| Net      income                                                                                     |   |              | --         |                            |   |                       | --     |                                         |   |                | --     |   |   |   | -- |   |   |   | 172 |   |   |   | -- |   |   |   | 172 |   |
| Balance,      December 31, 2006                                                                     |   |              | 19,327,880 |                            |   |                       | 1,933  |                                         |   |                | 58,654 |   |   |   | -- |   |   |   | 1,595 |   |   |   | (3,782 | ) |   |   | 58,400 |   |
| Cumulative      effect of adoption of accounting policy related to uncertainty in income      taxes |   |              | --         |                            |   |                       | --     |                                         |   |                | --     |   |   |   | -- |   |   |   | (192 | ) |   |   | -- |   |   |   | (192 | ) |
| Adjusted      balance, January 1, 2007                                                              |   |              | 19,327,880 |                            |   |                       | 1,933  |                                         |   |                | 58,654 |   |   |   | -- |   |   |   | 1,403 |   |   |   | (3,782 | ) |   |   | 58,208 |   |
| Stock      options exercised                                                                        |   |              | 15,000     |                            |   |                       | 1      |                                         |   |                | 49     |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 50 |   |
| Restricted      stock awards                                                                        |   |              | 70,000     |                            |   |                       | 7      |                                         |   |                | 294    |   |   |   | (301 | ) |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| Stock-based      compensation                                                                       |   |              | --         |                            |   |                       | --     |                                         |   |                | 129    |   |   |   | 116 |   |   |   | -- |   |   |   | -- |   |   |   | 245 |   |
| Net      loss                                                                                       |   |              | --         |                            |   |                       | --     |                                         |   |                | --     |   |   |   | -- |   |   |   | (8,519 | ) |   |   | -- |   |   |   | (8,519 | ) |
| Balance,      December 31, 2007                                                                     |   |              | 19,412,880 |                            |   |                       | 1,941  |                                         |   |                | 59,126 |   |   |   | (185 | ) |   |   | (7,116 | ) |   |   | (3,782 | ) |   |   | 49,984 |   |
| Stock-based      compensation                                                                       |   |              | --         |                            |   |                       | --     |                                         |   |                | 26     |   |   |   | 168 |   |   |   | -- |   |   |   | -- |   |   |   | 194 |   |
| Purchase      of 831,200 shares of treasury stock                                                   |   |              | --         |                            |   |                       | --     |                                         |   |                | --     |   |   |   | -- |   |   |   | -- |   |   |   | (931 | ) |   |   | (931 | ) |
| Net      income                                                                                     |   |              | --         |                            |   |                       | --     |                                         |   |                | --     |   |   |   | -- |   |   |   | 3,349 |   |   |   | -- |   |   |   | 3,349 |   |
| Balance,      December 31, 2008                                                                     |   |              | 19,412,880 |                            |   | $                          | 1,941  |                                         |   | $                   | 59,152 |   |   | $ | (17 | ) |   | $ | (3,767 | ) |   | $ | (4,713 | ) |   | $ | 52,596 |   |

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|                                                                                                         |   | 2008   |    | 2007   |   | 2006   |
|--------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Operating      activities:                                                                                   |   |   |    |   |   |   |   |   |   |   |   |   |
| Net      income (loss)                                                                                       |   | $      | 3,349   |   |   | $      | (8,519 | ) |   | $ | 172 |   |
| Adjustments      to reconcile net income (loss) to net cash provided by (used in) operating      activities: |   |   |    |   |   |   |   |   |   |   |   |   |
| Depreciation                                                                                                 |   |   | 2,095   |   |   |   | 2,156 |   |   |   | 2,299 |   |
| Deferred      income taxes                                                                                   |   |   | --      |   |   |   | -- |   |   |   | 1,314 |   |
| Stock-based      compensation                                                                                |   |   | 194     |   |   |   | 245 |   |   |   | 235 |   |
| Provision      for credit and accounts receivable losses                                                     |   |   | 433     |   |   |   | 218 |   |   |   | 114 |   |
| Loss      (gain) on sale of property, plant and equipment                                                    |   |   | (87     | )      |   |   | 45 |   |   |   | (293 | ) |
| Impairment      charge                                                                                       |   |   | --      |   |   |   | 91 |   |   |   | -- |   |
| Other,      net                                                                                              |   |   | (97     | )      |   |   | (971 | ) |   |   | (1,195 | ) |
| Installment      contracts purchased for resale                                                              |   |   | (31,808 | )      |   |   | (53,853 | ) |   |   | (42,664 | ) |
| Sale      of installment contracts purchased for resale                                                      |   |   | 35,431  |   |   |   | 53,347 |   |   |   | 44,589 |   |
| Principal      collected on installment contracts purchased for resale                                       |   |   | 38      |   |   |   | 80 |   |   |   | 221 |   |
| Changes      in assets and liabilities:                                                                      |   |   |    |   |   |   |   |   |   |   |   |   |
| Accounts      receivable, net                                                                                |   |   | (373    | )      |   |   | (723 | ) |   |   | 37,554 |   |
| Inventories                                                                                                  |   |   | 5,184   |   |   |   | (522 | ) |   |   | 5,048 |   |
| Accounts      payable                                                                                        |   |   | (2,057  | )      |   |   | 972 |   |   |   | (4,073 | ) |
| Amounts      payable under dealer incentives                                                                 |   |   | (841    | )      |   |   | 578 |   |   |   | (4,046 | ) |
| Accrued      compensation and related withholdings                                                           |   |   | (359    | )      |   |   | 155 |   |   |   | (3,456 | ) |
| Other      assets and liabilities                                                                            |   |   | (2,550  | )      |   |   | 666 |   |   |   | (3,505 | ) |
| Net      cash provided by (used in) operating activities                                                     |   |   | 8,552   |   |   |   | (6,035 | ) |   |   | 32,314 |   |
| Investing      activities:                                                                                   |   |   |    |   |   |   |   |   |   |   |   |   |
| Proceeds      from dispositions of property, plant and equipment                                             |   |   | 109     |   |   |   | 71 |   |   |   | 1,555 |   |
| Capital      expenditures                                                                                    |   |   | (351    | )      |   |   | (2,177 | ) |   |   | (1,995 | ) |
| Notes      and installment contracts purchased for investment                                                |   |   | (600    | )      |   |   | (1,145 | ) |   |   | (326 | ) |
| Sale      of installment contracts purchased for investment                                                  |   |   | 4,414   |   |   |   | -- |   |   |   | -- |   |
| Principal      collected on notes and installment contracts purchased for      investment                    |   |   | 640     |   |   |   | 1,582 |   |   |   | 845 |   |
| Other      investing activities                                                                              |   |   | 454     |   |   |   | 3,756 |   |   |   | 1,075 |   |
| Net      cash provided by investing activities                                                               |   |   | 4,666   |   |   |   | 2,087 |   |   |   | 1,154 |   |
| Financing      activities:                                                                                   |   |   |    |   |   |   |   |   |   |   |   |   |
| Net      repayment on note payable under revolving line of credit                                            |   |   | --      |   |   |   | -- |   |   |   | (17,750 | ) |
| Net      borrowings (repayment) on note payable under retail floor plan      agreement                       |   |   | (257    | )      |   |   | 1,200 |   |   |   | (887 | ) |
| Payments      on long-term debt                                                                              |   |   | (2,875  | )      |   |   | (1,226 | ) |   |   | (3,391 | ) |
| Purchase      of treasury stock                                                                              |   |   | (931    | )      |   |   | -- |   |   |   | -- |   |
| Proceeds      from exercise of stock options                                                                 |   |   | --      |   |   |   | 50 |   |   |   | 148 |   |
| Net      cash provided by (used in) financing activities                                                     |   |   | (4,063  | )      |   |   | 24 |   |   |   | (21,880 | ) |
| Net      increase (decrease) in cash and cash equivalents                                                    |   |   | 9,155   |   |   |   | (3,924 | ) |   |   | 11,588 |   |
| Cash      and cash equivalents at beginning of period                                                        |   |   | 22,043  |   |   |   | 25,967 |   |   |   | 14,379 |   |
| Cash      and cash equivalents at end of period                                                              |   | $      | 31,198  |   |   | $      | 22,043 |   |   | $ | 25,967 |   |
|                                                                                                         |   |   |    |   |   |   |   |   |   |   |   |   |
| Supplemental      disclosures:                                                                               |   |   |    |   |   |   |   |   |   |   |   |   |
| Cash      paid for (received from):                                                                          |   |   |    |   |   |   |   |   |   |   |   |   |
| Interest                                                                                                     |   | $      | 419     |   |   | $      | 713 |   |   | $ | 1,126 |   |
| Income      taxes                                                                                            |   | $      | 49      |   |   | $      | (857 | ) |   | $ | 1,454 |   |
| Non-cash      investing and financing activities:                                                            |   |   |    |   |   |   |   |   |   |   |   |   |
| Note      received on sale of property, plant and equipment                                                  |   | $      | 392     |   |   | $      | -- |   |   | $ | -- |   |
| Property,      plant and equipment acquired through capital lease      transactions                          |   | $      | 29      |   |   | $      | -- |   |   | $ | -- |   |
| Retail      assets sold for assumption of note payable, net of note receivable of      $447                  |   | $      | --      |   |   | $      | 1,793 |   |   | $ | -- |   |

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| 1. | BASIS      OF PRESENTATION AND SIGNIFICANT ACCOUNTING  POLICIES |
|----|-----------------------------------------------------------------|

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|                                                       |   | 2008   |    | 2007   |   | 2006   |
|------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Balance,      beginning of period                          |   | $      | 11,720  |   |   | $      | 11,900 |   |   | $ | 13,190 |   |
| Provision      for warranties issued in the current period |   |   | 10,760  |   |   |   | 12,632 |   |   |   | 12,407 |   |
| Adjustments      for warranties issued in prior periods    |   |   | (1,031  | )      |   |   | 1,210 |   |   |   | 234 |   |
| Payments                                                   |   |   | (11,349 | )      |   |   | (14,022 | ) |   |   | (13,931 | ) |
| Balance,      end of period                                |   | $      | 10,100  |   |   | $      | 11,720 |   |   | $ | 11,900 |   |

----

Table of Contents

|                                                                                                                                                   |   | 2008   |   | 2007   |   | 2006   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Income      (loss) from continuing operations                                                                                                          |   | $      | 3,076  |   |   | $      | (9,153 | ) |   | $ | (486 | ) |
| Income      from discontinued operations                                                                                                               |   |   | 273    |   |   |   | 634 |   |   |   | 658 |   |
| Net      income (loss)                                                                                                                                 |   | $      | 3,349  |   |   | $      | (8,519 | ) |   | $ | 172 |   |
|                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average shares outstanding (in      thousands):                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                                                  |   |   | 18,342 |   |   |   | 18,378 |   |   |   | 18,335 |   |
| Effect      of potential common stock from the exercise of stock    options                                                                            |   |   | 11     |   |   |   | -- |   |   |   | 135 |   |
| Diluted                                                                                                                                                |   |   | 18,353 |   |   |   | 18,378 |   |   |   | 18,470 |   |
|                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      (loss) per share:                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic:                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| From      continuing operations                                                                                                                        |   | $      | 0.17   |   |   | $      | (0.50 | ) |   | $ | (0.03 | ) |
| From      discontinued operations                                                                                                                      |   |   | 0.01   |   |   |   | 0.04 |   |   |   | 0.04 |   |
| Net      income (loss)                                                                                                                                 |   | $      | 0.18   |   |   | $      | (0.46 | ) |   | $ | 0.01 |   |
| Diluted:                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| From      continuing operations                                                                                                                        |   | $      | 0.17   |   |   | $      | (0.50 | ) |   | $ | (0.03 | ) |
| From      discontinued operations                                                                                                                      |   |   | 0.01   |   |   |   | 0.04 |   |   |   | 0.04 |   |
| Net      income (loss)                                                                                                                                 |   | $      | 0.18   |   |   | $      | (0.46 | ) |   | $ | 0.01 |   |
| Weighted      average option shares excluded from computation of diluted loss per share      because their effect is anti-dilutive (in      thousands) |   |   | 541    |   |   |   | 889 |   |   |   | 1,160 |   |

----

Table of Contents

| 2. | RESTRUCTURING      CHARGES |
|----|----------------------------|

| 3. | DISCONTINUED      OPERATIONS |
|----|------------------------------|

|                                                                 |   | 2008   |   | 2007   |   | 2006   |
|----------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Revenue                                                              |   | $      | 2,844  |   |   | $      | 3,697 |   |   | $ | 3,323 |   |
| Income      from discontinued operations before income tax provision |   |   | 432    |   |   |   | 1,026 |   |   |   | 1,013 |   |

| 4. | INSTALLMENT      CONTRACTS RECEIVABLE |
|----|---------------------------------------|

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Table of Contents

| Years      ending December 31, |   |   |
|--------------------------------|--------|--------|
| 2009                           |   | $      | 1,337 |   |
| 2010                           |   |   | 51 |   |
| 2011                           |   |   | 57 |   |
| 2012                           |   |   | 63 |   |
| 2013                           |   |   | 70 |   |
| Thereafter                     |   |   | 1,965 |   |
|                           |   | $      | 3,543 |   |

|                             |   | 2008   |   | 2007   |   | 2006   |
|----------------------------------|--------|--------|--------|--------|--------|--------|
| Balance,      beginning of year  |   | $      | 725    |   |   | $      | 841 |   |   | $ | 968 |   |
| Provision      for credit losses |   |   | 343    |   |   |   | 227 |   |   |   | 145 |   |
| Charge      offs, net            |   |   | (464   | )      |   |   | (343 | ) |   |   | (272 | ) |
| Balance,      end of year        |   | $      | 604    |   |   | $      | 725 |   |   | $ | 841 |   |

| 5. | INVENTORIES |
|----|-------------|

|                   |   | 2008   |   | 2007   |
|------------------------|--------|--------|--------|--------|
| Raw      materials     |   | $      | 11,469 |   |   | $ | 11,967 |   |
| Work-in-process        |   |   | 942    |   |   |   | 1,263 |   |
| Finished      goods    |   |   | 2,942  |   |   |   | 7,307 |   |
| Total      inventories |   | $      | 15,353 |   |   | $ | 20,537 |   |

| 6. | IMPAIRMENT      CHARGES |
|----|-------------------------|

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Table of Contents

| 7. | CREDIT      ARRANGEMENTS |
|----|--------------------------|

| Tangible      Net Worth           |   | Interest      Rate    |
|-----------------------------------|--------|-----------------------|
| above      $62,000                |   | Prime      less 0.50% |
| $62,000      –      $56,500 |   | Prime                 |
| $56,500      –      $38,000 |   | Prime      plus 0.75% |
| below      $38,000                |   | Prime      plus 1.25% |

----

Table of Contents

| Years      ending December 31,            |   |   |
|-------------------------------------------|--------|--------|
| 2009                                      |   | $      | 707 |   |
| 2010                                      |   |   | 171 |   |
| 2011                                      |   |   | 168 |   |
| 2012                                      |   |   | 182 |   |
| 2013                                      |   |   | 190 |   |
| Thereafter                                |   |   | 248 |   |
| Total                                     |   |   | 1,666 |   |
| Less      current portion                 |   |   | 707 |   |
| Long-term      debt, less current portion |   | $      | 959 |   |

| 8. | STOCKHOLDERS’      EQUITY |
|----|---------------------------------|

| 9. | STOCK-BASED      COMPENSATION |
|----|-------------------------------|

| a. | The      2005 Incentive Compensation Plan (the “2005 Plan”) provides for both      incentive stock options and non-qualified stock options to key employees.      The 2005 Plan also provides for stock appreciation rights and awards of      both restricted stock and performance shares. Awards are granted at prices      and terms determined by the compensation committee of the Board of      Directors. The term for awards granted under the 2005 Plan cannot exceed      ten years from the date of grant. Upon adoption of the 2005 Plan, our 1996      Key Employee Stock Incentive Plan (the “1996 Plan”) was terminated.      However, the termination of the 1996 Plan did not affect any options which      were outstanding and unexercised under that Plan. A total of 1,500,000      shares of common stock are authorized for issuance under the 2005 Plan. As      of December 31, 2008, shares authorized for grant and available to be      granted under the 2005 Plan totaled 1,430,000  shares. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b. | The      2005 Non-Employee Directors Stock Option Plan (the “2005 Directors Plan”)      provides for the issuance of up to 500,000 shares of our common stock,      which is reserved for grant to non-employee directors. Options are granted      upon the director’s initial election and automatically on an annual basis      thereafter at fair market value on the date of such grant. Stock option      grants become exercisable at a rate of 1/12th of the shares subject to the      stock option on each monthly anniversary of the date of grant. Except in      the case of death, disability, or retirement, options granted under the      2005 Directors Plan expire ten years from the date of grant. Upon adoption      of the 2005 Directors Plan, the 1993 Non-employee Director Plan (the “1993      Plan”) was terminated. However, the termination of the 1993 Plan did not      affect any options which were outstanding and unexercised under that Plan.      As of December 31, 2008, shares available to be granted under the 2005      Directors Plan totaled 425,000shares. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

|                                          |   |                            |      | Options      Outstanding |
|-----------------------------------------------|--------|---------------------------------|-----------|--------------------------|
|                                          |   | Shares      Available for Grant |      | Number      of Shares    |   | Weighted      Average Exercise Price |
| Balance      at December 31, 2005             |   |                            | 1,518,834 |                     |   |   | 1,738,672 |   |   | $ | 9.26 |   |
| Plan      shares expired                      |   |                            | (46,341   | )                        |   |   | -- |   |   |   | -- |   |
| Granted      at fair value                    |   |                            | (35,000   | )                        |   |   | 35,000 |   |   |   | 6.45 |   |
| Stock      awards                             |   |                            | (70,000   | )                        |   |   | -- |   |   |   | -- |   |
| Exercised                                     |   |                            | --        |                     |   |   | (42,175 | ) |   |   | 3.53 |   |
| Canceled                                      |   |                            | 357,684   |                     |   |   | (357,684 | ) |   |   | 13.30 |   |
| Balance      at December 31, 2006             |   |                            | 1,725,177 |                     |   |   | 1,373,813 |   |   |   | 8.32 |   |
| Plan      shares expired                      |   |                            | (383,392  | )                        |   |   | -- |   |   |   | -- |   |
| Granted      at fair value                    |   |                            | (30,000   | )                        |   |   | 30,000 |   |   |   | 4.16 |   |
| Exercised                                     |   |                            | --        |                     |   |   | (15,000 | ) |   |   | 3.36 |   |
| Canceled                                      |   |                            | 558,215   |                     |   |   | (558,215 | ) |   |   | 10.46 |   |
| Balance      at December 31, 2007             |   |                            | 1,870,000 |                     |   |   | 830,598 |   |   |   | 6.81 |   |
| Plan      shares expired                      |   |                            | (321,675  | )                        |   |   | -- |   |   |   | -- |   |
| Granted      at fair value                    |   |                            | (30,000   | )                        |   |   | 30,000 |   |   |   | 1.93 |   |
| Canceled                                      |   |                            | 336,675   |                     |   |   | (336,675 | ) |   |   | 9.77 |   |
| Balance      at December 31, 2008             |   |                            | 1,855,000 |                     |   |   | 523,923 |   |   | $ | 4.64 |   |
| Options      exercisable at December 31, 2008 |   |                            |      |                     |   |   | 521,838 |   |   | $ | 4.65 |   |
| Options      exercisable at December 31, 2007 |   |                            |      |                     |   |   | 828,096 |   |   | $ | 6.82 |   |
| Options      exercisable at December 31, 2006 |   |                            |      |                     |   |   | 1,371,311 |   |   | $ | 8.32 |   |

|                          |   |   | Options      Outstanding |    | Options      Exercisable                         |
|-------------------------------|--------|--------|--------------------------|---------|--------------------------------------------------|
| Range      of Exercise Prices |   |   | Number      Outstanding  |    | Weighted      Average Remaining Contractual Life |   | Weighted      Average Exercise Price |   | Number      Exercisable |   | Weighted      Average Exercise Price |
| $1.69      – $3.03      |   |   |                     | 73,675  |                                             |   |   | 5.42 |   |   | $ | 2.29 |   |   |   | 71,590 |   |   | $ | 2.30 |   |
| $3.04      – $3.94      |   |   |                     | 268,200 |                                             |   |   | 2.89 |   |   |   | 3.45 |   |   |   | 268,200 |   |   |   | 3.45 |   |
| $3.95      – $5.51      |   |   |                     | 68,698  |                                             |   |   | 4.67 |   |   |   | 4.39 |   |   |   | 68,698 |   |   |   | 4.39 |   |
| $5.52      – $11.00     |   |   |                     | 113,350 |                                             |   |   | 1.59 |   |   |   | 9.11 |   |   |   | 113,350 |   |   |   | 9.11 |   |
| $1.69      – $11.00     |   |   |                     | 523,923 |                                             |   |   | 3.20 |   |   | $ | 4.64 |   |   |   | 521,838 |   |   | $ | 4.65 |   |

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Table of Contents

|                         |   | 2008           |   |   | 2007           |   |   | 2006           |   |
|------------------------------|--------|----------------|--------|--------|----------------|--------|--------|----------------|--------|
| Dividend      yield          |   |           | --     | %      |           |   | --     | %              |   |   | -- | % |
| Expected      volatility     |   |           | 52.10  | %      |           |   | 59.23  | %              |   |   | 60.80 | % |
| Risk      free interest rate |   |           | 3.28   | %      |           |   | 4.68   | %              |   |   | 5.04 | % |
| Expected      lives          |   | 5.1      years |   |   | 5.0      years |   |   | 4.6      years |   |

| 10. | INCOME      TAXES |
|-----|-------------------|

|                                                             |   | 2008   |   | 2007   |   | 2006   |
|------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Continuing      operations:                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Current:                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal                                                          |   | $      | (83    | )      |   | $      | (230 | ) |   | $ | (644 | ) |
| State                                                            |   |   | 79     |   |   |   | 3 |   |   |   | 43 |   |
|                                                             |   |   | (4     | )      |   |   | (227 | ) |   |   | (601 | ) |
| Deferred:                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal                                                          |   |   | 1,173  |   |   |   | (2,790 | ) |   |   | 522 |   |
| State                                                            |   |   | 511    |   |   |   | (278 | ) |   |   | (183 | ) |
| Change      in valuation allowance                               |   |   | (1,741 | )      |   |   | 3,074 |   |   |   | 927 |   |
|                                                             |   |   | (57    | )      |   |   | 6 |   |   |   | 1,266 |   |
| Provision      (benefit) for income taxes, continuing operations |   |   | (61    | )      |   |   | (221 | ) |   |   | 665 |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Discontinued      operations:                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Current:                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal                                                          |   |   | 94     |   |   |   | 335 |   |   |   | 253 |   |
| State                                                            |   |   | 8      |   |   |   | 63 |   |   |   | 54 |   |
|                                                             |   |   | 102    |   |   |   | 398 |   |   |   | 307 |   |
| Deferred:                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal                                                          |   |   | 48     |   |   |   | (6 | ) |   |   | 40 |   |
| State                                                            |   |   | 9      |   |   |   | -- |   |   |   | 8 |   |
|                                                             |   |   | 57     |   |   |   | (6 | ) |   |   | 48 |   |
| Provision      for income taxes, discontinuing operations        |   |   | 159    |   |   |   | 392 |   |   |   | 355 |   |
| Provision      for income taxes                                  |   | $      | 98     |   |   | $      | 171 |   |   | $ | 1,020 |   |

|                                                            |   | 2008   |   | 2007   |
|-----------------------------------------------------------------|--------|--------|--------|--------|
| Balance,      beginning of period                               |   | $      | 247    |   |   | $ | 231 |   |
| Increase      as a result of tax positions taken in prior years |   |   | 8      |   |   |   | 16 |   |
| Balance,      end of period                                     |   | $      | 255    |   |   | $ | 247 |   |

----

Table of Contents

|                                                                   |   | 2008   |   | 2007   |   | 2006   |
|------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Income      tax provision (benefit) at expected federal income taxrate |   | $      | 1,207  |   |   | $      | (2,922 | ) |   | $ | 417 |   |
| State      income tax provision (benefit), net of federal tax effect   |   |   | 577    |   |   |   | (235 | ) |   |   | 17 |   |
| Change      in valuation allowance                                     |   |   | (1,741 | )      |   |   | 3,074 |   |   |   | 927 |   |
| Non-deductible      operating expenses                                 |   |   | 106    |   |   |   | 140 |   |   |   | 117 |   |
| Expiration      of carryforward items                                  |   |   | 25     |   |   |   | 85 |   |   |   | -- |   |
| Return      to provision adjustments                                   |   |   | (72    | )      |   |   | (83 | ) |   |   | (291 | ) |
| Change      in liability for tax contingencies                         |   |   | --     |   |   |   | -- |   |   |   | (174 | ) |
| Other                                                                  |   |   | (4     | )      |   |   | 112 |   |   |   | 7 |   |
| Total                                                                  |   | $      | 98     |   |   | $      | 171 |   |   | $ | 1,020 |   |

|                                     |   | 2008   |   | 2007   |
|------------------------------------------|--------|--------|--------|--------|
| Current      differences:                |   |   |   |   |   |   |   |   |
| Warranty      expense                    |   | $      | 3,777  |   |   | $ | 4,010 |   |
| Inventory      capitalization            |   |   | 941    |   |   |   | 1,340 |   |
| Allowance      for losses on receivables |   |   | 300    |   |   |   | 465 |   |
| Accrued      expenses                    |   |   | 2,245  |   |   |   | 2,454 |   |
| Repurchase      commitments              |   |   | 448    |   |   |   | 294 |   |
|                                     |   |   | 7,711  |   |   |   | 8,563 |   |
| Less      valuation allowance            |   |   | 7,711  |   |   |   | 8,563 |   |
| Totals                                   |   | $      | --     |   |   | $ | -- |   |
|                                     |   |   |   |   |   |   |   |   |

----

Table of Contents

|                                                        |   | 2008   |   | 2007   |
|-------------------------------------------------------------|--------|--------|--------|--------|
| Non-current      differences:                               |   |   |   |   |   |   |   |   |
| Depreciation      and basis differential of acquired assets |   | $      | 753    |   |   | $ | 1,025 |   |
| Net      operating loss and other carryforwards             |   |   | 7,419  |   |   |   | 8,037 |   |
| Goodwill                                                    |   |   | 4      |   |   |   | 6 |   |
| Other                                                       |   |   | 155    |   |   |   | 152 |   |
|                                                        |   |   | 8,331  |   |   |   | 9,220 |   |
| Less      valuation allowance                               |   |   | 8,331  |   |   |   | 9,220 |   |
| Totals                                                      |   | $      | --     |   |   | $ | -- |   |

| Years      ending December 31, |   | Federal |   | State  |
|--------------------------------|--------|---------|--------|--------|
| 2009                           |   | $       | --     |   |   | $ | 105 |   |
| 2010                           |   |    | 437    |   |   |   | -- |   |
| 2011                           |   |    | --     |   |   |   | 276 |   |
| 2012                           |   |    | --     |   |   |   | 273 |   |
| 2013                           |   |    | --     |   |   |   | 123 |   |
| 2019                           |   |    | --     |   |   |   | 46 |   |
| 2020                           |   |    | --     |   |   |   | 14,668 |   |
| 2021                           |   |    | --     |   |   |   | 4,946 |   |
| 2022                           |   |    | --     |   |   |   | 8,926 |   |
| 2023                           |   |    | --     |   |   |   | 9,548 |   |
| 2024                           |   |    | --     |   |   |   | 3,070 |   |
| 2025                           |   |    | --     |   |   |   | 103 |   |
| 2026                           |   |    | --     |   |   |   | 6,346 |   |
| 2027                           |   |    | 9,504  |   |   |   | 11,300 |   |
| 2028                           |   |    | --     |   |   |   | 437 |   |

| 11. | EMPLOYEE      BENEFIT PLANS |
|-----|-----------------------------|

| 12. | COMMITMENTS      AND CONTINGENCIES |
|-----|------------------------------------|

----

Table of Contents

| a. | Under      the repurchase agreements described in Note 1, we were contingently liable      at December 31, 2008, to financial institutions providing inventory      financing for retailers of our products up to a maximum of approximately      $45,000 in the event we must perform under the repurchase commitments. We      recorded an estimated liability of $1,141 and $1,131 at December 31, 2008      and December 31, 2007, respectively, related to these commitments.      Activity in the reserve for repurchase commitments was as      follows: |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                            |   | 2008   |   | 2007   |   | 2006   |
|-----------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Balance,      beginning of period                                                                               |   | $      | 1,131  |   |   | $      | 1,513 |   |   | $ | 1,270 |   |
| Reduction      for payments made on inventory purchases                                                         |   |   | (220   | )      |   |   | (252 | ) |   |   | (197 | ) |
| Recoveries      for inventory repurchase                                                                        |   |   | 94     |   |   |   | 51 |   |   |   | 10 |   |
| Accrual      for guarantees issued during the period                                                            |   |   | 1,128  |   |   |   | 1,334 |   |   |   | 2,173 |   |
| Reduction      to pre-existing guarantees due to declining obligations or expired      guarantees               |   |   | (1,353 | )      |   |   | (1,607 | ) |   |   | (2,045 | ) |
| Changes      to the accrual for pre-existing guarantees for those dealers deemed to be      probable of default |   |   | 361    |   |   |   | 92 |   |   |   | 302 |   |
| Balance,      end of period                                                                                     |   | $      | 1,141  |   |   | $      | 1,131 |   |   | $ | 1,513 |   |

| b. | Under      the insurance plans described in Note 1, we were contingently liable at      December 31, 2008 for future retrospective premium adjustments. We      recorded an estimated liability of $4,079 at December 31, 2008 and $4,274      at December 31, 2007 related to these contingent  claims. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c. | Litigation      is subject to uncertainties and we cannot predict the probable outcome or      the amount of liability of individual litigation matters with any level of      assurance. We are engaged in various legal proceedings that are incidental      to and arise in the course of our business. Certain of the cases filed      against us and other companies engaged in businesses similar to ours      allege, among other things, breach of contract and warranty, product      liability, personal injury and fraudulent, deceptive or collusive      practices in connection with their businesses. These kinds of suits are      typical of suits that have been filed in recent years, and they sometimes      seek certification as class actions, the imposition of large amounts of      compensatory and punitive damages and trials by jury. Our liability under      some of this litigation is covered in whole or in part by insurance.      Anticipated legal fees and other losses, in excess of insurance coverage,      associated with these lawsuits are accrued at the time such cases are      identified or when additional information is available such that losses      are probable and reasonably estimable. In our opinion, the ultimate      liability, if any, with respect to the proceedings in which we are      currently involved is not presently expected to have a material adverse      effect on our results of operations, financial position or liquidity. We      used the services of a law firm in which a partner is a former director.      We paid legal fees to this firm of $237 (2008), $212 (2007), and $292      (2006). |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d. | We      have provided letters of credit totaling $3,773 as of December 31, 2008 to      providers of certain of our surety bonds and insurance policies. While the      current letters of credit have a finite life, they are subject to renewal      at different amounts based on the requirements of the insurance carriers.      We have recorded insurance expense based on anticipated losses related to      these policies. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13. | EQUITY      METHOD INVESTEES |
|-----|------------------------------|

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Table of Contents

|                                   |   | 2008   |   | 2007   |   | 2006   |
|----------------------------------------|--------|--------|--------|--------|--------|--------|
| Combined      group:                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      sheet:                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Current      assets                    |   | $      | 3,093  |   |   | $      | 3,742 |   |   | $ | 12,418 |   |
| Non-current      assets                |   |   | 1,961  |   |   |   | 2,227 |   |   |   | 6,479 |   |
| Current      liabilities               |   |   | 397    |   |   |   | 611 |   |   |   | 2,030 |   |
| Non-current      liabilities           |   |   | 544    |   |   |   | 831 |   |   |   | 2,974 |   |
| Income      Statement:                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      sales                         |   |   | 16,204 |   |   |   | 51,251 |   |   |   | 75,537 |   |
| Gross      profit                      |   |   | 3,930  |   |   |   | 10,497 |   |   |   | 11,285 |   |
| Income      from continuing operations |   |   | 416    |   |   |   | 3,161 |   |   |   | 1,259 |   |
| Net      income                        |   |   | 416    |   |   |   | 3,161 |   |   |   | 1,259 |   |
|                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| WoodPerfect,      Ltd:                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      sheet:                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Current      assets                    |   |   | --     |   |   |   | -- |   |   |   | 7,033 |   |
| Non-current      assets                |   |   | --     |   |   |   | -- |   |   |   | 3,232 |   |
| Current      liabilities               |   |   | --     |   |   |   | -- |   |   |   | 1,480 |   |
| Non-current      liabilities           |   |   | --     |   |   |   | -- |   |   |   | 156 |   |
| Income      Statement:                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      sales                         |   |   | --     |   |   |   | 29,905 |   |   |   | 47,553 |   |
| Gross      profit                      |   |   | --     |   |   |   | 4,938 |   |   |   | 5,954 |   |
| Income      from continuing operations |   |   | --     |   |   |   | 1,576 |   |   |   | 1,463 |   |
| Net      income                        |   |   | --     |   |   |   | 1,576 |   |   |   | 1,463 |   |

| 14. | CONCENTRATION      OF CREDIT RISK |
|-----|-----------------------------------|

| 15. | SUBSEQUENT      EVENT |
|-----|-----------------------|

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|                                              |   | Balance      at Beginning of Year |   |   | Additions      Charged to Cost and Expenses |   |   | Deductions |   |   | Balance      at End of Year |   |
|---------------------------------------------------|--------|-----------------------------------|--------|--------|---------------------------------------------|--------|--------|------------|--------|--------|-----------------------------|--------|
|                                              |   |                              |   |   |                                        |   |   |       |   |   |                        |   |
| Allowance      for losses on accounts receivable: |   |                              |   |   |                                        |   |   |       |   |   |                        |   |
| Year      Ended December 31, 2008                 |   | $                                 | 106    |   |                                        | $      | 90     |       |   | $      | (34                         | )      |   | $ | 162 |   |
| Year      Ended December 31, 2007                 |   | $                                 | 78     |   |                                        | $      | 28     |       |   | $      | --                          |   |   | $ | 106 |   |
| Year      Ended December 31, 2006                 |   | $                                 | 56     |   |                                        | $      | 22     |       |   | $      | --                          |   |   | $ | 78 |   |
|                                              |   |                              |   |   |                                        |   |   |       |   |   |                        |   |   |   |   |   |
| Deferred      tax asset valuation allowance:      |   |                              |   |   |                                        |   |   |       |   |   |                        |   |   |   |   |   |
| Year      Ended December 31, 2008                 |   | $                                 | 17,783 |   |                                        | $      | --     |       |   | $      | (1,741                      | )      |   | $ | 16,042 |   |
| Year      Ended December 31, 2007                 |   | $                                 | 14,709 |   |                                        | $      | 3,074  |       |   | $      | --                          |   |   | $ | 17,783 |   |
| Year      Ended December 31, 2006                 |   | $                                 | 13,782 |   |                                        | $      | 927    |       |   | $      | --                          |   |   | $ | 14,709 |   |

Item 9: Changes In And Disagreements With Accountants On AccountingAnd Financial Disclosure

Item 9A: Controls And Procedures

Item 9B: Other Information

Item 10: Directors, Executive Officers And CorporateGovernance

Item 11: Executive Compensation

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Item 12: Security Ownership Of Certain Beneficial Owners AndManagement And Related Stockholder Matters

|                                                        |   | (a)                                                                                                   |    |   | (b)                                                                              |   |   | (c)                                                                                                                                                        |   |
|-------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|---------|--------|----------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Plan      Category                                          |   | Number      of securities to be issued upon exercise of outstanding options, warrants      and rights |    |   | Weighted-average      exercise price of outstanding options, warrants and rights |   |   | Number      of securities remaining available for future issuance under equity      compensation plans (excluding securities reflected in column      (a)) |   |
| Equity      compensation plans approved by stockholders     |   |                                                                                                  | 506,923 |   |                                                                             | $      | 4.68   |                                                                                                                                                       |   |   | 1,855,000 |   |
| Equity      compensation plans not approved by stockholders |   |                                                                                                  | 17,000  |   |                                                                             | $      | 3.40   |                                                                                                                                                       |   |   | -- |   |
| Total                                                       |   |                                                                                                  | 523,923 |   |                                                                             | $      | 4.64   |                                                                                                                                                       |   |   | 1,855,000 |   |

Item 13: Certain Relationships And Related Transactions, AndDirector Independence

Item 14: Principal Accountants Fees And Services

Item 15: Exhibits And Financial Statement Schedules

| (a)    |   | 1.       The financial statements contained in this report and the page on which      they may be found are as follows:                   |   |   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|   |   |                                                                                                                                           |   |   |
|   |   | Financial Statement      Description                                                                                                           |   | Page   |
|   |   | Report      of Independent Registered Public Accounting Firm                                                                                   |   | 32     |
|   |   | Consolidated      Balance Sheets as of December 31, 2008 and 2007                                                                              |   | 33     |
|   |   | Consolidated      Statements of Operations for years ended December 31, 2008, 2007, and      2006                                              |   | 34     |
|   |   | Consolidated      Statements of Stockholders’ Equity for years ended December 31, 2008,      2007, and 2006                              |   | 35     |
|   |   | Consolidated      Statements of Cash Flows for years ended December 31, 2008, 2007, and      2006                                              |   | 36     |
|   |   | Notes      to Consolidated Financial Statements                                                                                                |   | 37     |
|   |   |                                                                                                                                           |   |   |
|   |   | 2.       The financial statement schedule required to be filed with this report and      the page on which it may be found is as follows: |   |   |
|   |   |                                                                                                                                           |   |   |
|   |   | No.           Schedule      Description                                                 |   | Page   |
|   |   | II           Valuation      and Qualifying Accounts                                     |   | 50     |

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|   |   |                                                                                                                                                                                                                                                                     |   |   |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|   |   | 3.       The exhibits required to be filed with this report are listed below. We      will furnish upon request any of the exhibits listed upon the receipt of      $15.00 per exhibit, plus $0.50 per page, to cover the cost to us of      providing the exhibit. |   |   |

| Exhibit |   | Description                                                                                                                                                                                                                                                                                                                                                       |
|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1     |   | Our      Composite Amended and Restated Certificate of Incorporation (incorporated      by reference to Exhibit 3(a) to our Annual Report on Form 10-K for the      year ended December 31, 1998)                                                                                                                                                            |
| 3.2     |   | The      Certificate of Designation of Series A Junior Participating Preferred      Stock of Cavalier Homes, Inc. as filed with the Office of the Delaware      Secretary of State on October 24, 1996 (incorporated by reference to      Exhibit A to Exhibit 4 to our Registration Statement on Form 8-A filed on      October 30, 1996)                   |
| 3.3     |   | Our      Amended and Restated By-laws (incorporated by reference to Exhibit 3(b) to      our registration of securities on Form 8K/A filed on March 3,      2004)                                                                                                                                                                                            |
| 4.1     |   | Articles      four, six, seven, eight and nine of our Amended and Restated Certificate      of Incorporation, as amended, included in Exhibit 3(a) above                                                                                                                                                                                                     |
| 4.2     |   | Article      II, Sections 2.1 through 2.18; Article III, Sections 3.1 and 3.2; Article      IV, Sections 4.1 and 4.3; Article VI, Sections 6.1 through 6.5; Article      VIII, Sections 8.1 and 8.2; and Article IX of our Amended and Restated      By-laws, included in Exhibit 3(c) above                                                                 |
| 10.1    |   | Lease      Agreement dated April 1, 1999, between Crisp County-Cordele Industrial      Development Authority and Cavalier Industries, Inc. regarding the lease of      the manufacturing facility located in Cordele, Georgia (incorporated by      reference to Exhibit 10(j) to our Annual Report on Form 10-K for the year      ended December 31, 1999)  |
| 10.2    |   | Amended      and Restated Revolving and Term Loan Agreement, dated as of March 31,      2000, by and among the Company, First Commercial Bank and certain      subsidiaries of the Company (incorporated by reference to Exhibit 10(b) to      our Quarterly Report on Form 10-Q for the quarter ended March 31,      2000)                                  |
| 10.2(a) |   | First      Amendment to Amended and Restated Revolving and Term Loan Agreement, dated      as of September 29, 2000, between us and First Commercial Bank      (incorporated by reference to Exhibit 10(a) to our Quarterly Report on      Form 10-Q for the quarter ended September 30, 2000)                                                               |
| 10.2(b) |   | Second      Amendment to Amended and Restated Revolving and Term Loan Agreement, dated      as of May 4, 2001, between us and First Commercial Bank (incorporated by      reference to Exhibit 10(c) to our Quarterly Report on Form 10-Q for the      quarter ended March 31, 2001)                                                                         |
| 10.2(c) |   | Second      Modification to Amended and Restated Revolving Note, dated as of June 21,      2002, between us and First Commercial Bank (incorporated by reference to      Exhibit 10(a) to our Quarterly Report on Form 10-Q for the quarter ended      June 29, 2002)                                                                                        |
| 10.2(d) |   | Third      Amendment to Amended and Restated Revolving and Term Loan Agreement, dated      as of June 21, 2002, between us and First Commercial Bank (incorporated by      reference to Exhibit 10(b) to our Quarterly Report on Form 10-Q for the      quarter ended June 29, 2002)                                                                         |
| 10.2(e) |   | Third      Modification to Amended and Restated Revolving Note, dated as of October      25, 2002, between us and First Commercial Bank (incorporated by reference      to Exhibit 10(c) to our Quarterly Report on Form 10-Q for the quarter      ended September 28, 2002)                                                                                 |
| 10.2(f) |   | Fourth      Amendment to Amended and Restated Revolving and Term Loan Agreement, dated      as of October 25, 2002, between us and First Commercial Bank (incorporated      by reference to Exhibit 10(d) to our Quarterly Report on Form 10-Q for the      quarter ended September 28, 2002)                                                                |

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| Exhibit |   | Description                                                                                                                                                                                                                                                                                                                           |
|---------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.2(g) |   | Fourth      Modification to Amended and Restated Revolving Note, dated as of August 6,      2003, between us and First Commercial Bank (incorporated by reference to      Exhibit 10(a) to our Quarterly Report on Form 10-Q for the quarter ended      June 28, 2003)                                                           |
| 10.2(h) |   | Fifth      Amendment to Amended and Restated Revolving and Term Loan Agreement, dated      as of August 6, 2003, between us and First Commercial Bank (incorporated      by reference to Exhibit 10(b) to our Quarterly Report on Form 10-Q for the      quarter ended June 28, 2003)                                            |
| 10.2(i) |   | Sixth      Amendment to Amended and Restated Revolving and Term Loan Agreement, dated      as of  October 26, 2004, between us and First Commercial Bank      (incorporated by reference to Exhibit 10(c) to our Quarterly Report on      Form 10-Q for the quarter ended September 25, 2004)                          |
| 10.2(j) |   | Seventh      Amendment to Amended and Restated Revolving and Term Loan Agreement, dated      as of October 25, 2005, between us and First Commercial Bank (incorporated      by reference to Exhibit 99.1 to our Report on Form 8-K filed on October      31, 2005)                                                              |
| 10.2(k) |   | Eighth      Amendment to Amended and Restated Revolving and Term Loan Agreement, dated      as of December 6, 2005, between us and First Commercial Bank (incorporated      by reference to Exhibit 99.1 to our Report on Form 8-K filed on December      7, 2005)                                                               |
| 10.2(l) |   | Ninth      Amendment to Amended and Restated Revolving and Term Loan Agreement, dated      as of May 23, 2006, between us and First Commercial Bank (incorporated by      reference to Exhibit 99.1 to our Report on Form 8-K filed on May 25,      2006)                                                                        |
| 10.2(m) |   | Tenth      Amendment to Amended and Restated Revolving and Term Loan Agreement, dated      as of February 21, 2007, between us and First Commercial Bank      (incorporated by reference to Exhibit 99.1 to our Report on Form 8-K filed      on February 21, 2007)                                                              |
| 10.2(n) |   | Eleventh      Amendment to Amended and Restated Revolving and Term Loan Agreement, dated      as of June 26, 2007, between us and First Commercial Bank (incorporated by      reference to Exhibit 10.1 to our Report on Form 8-K filed on June 27,      2007)                                                                   |
| 10.2(o) |   | Twelfth      Amendment to Amended and Restated Revolving and Term Loan Agreement, dated      as of February 22, 2008, between us and First Commercial Bank      (incorporated by reference to Exhibit 10.2(o) to our Annual Report on Form      10-K for the year ended December 31, 2007)                                       |
| 10.2(p) |   | Continuing      Guaranty Agreement between First Commercial Bank and Cavalier Homes, Inc.,      dated March 31, 2000, relating to guaranty of payments of Cavalier      Acceptance Corporation (incorporated by reference to Exhibit 10(c) to our      Quarterly Report on Form 10-Q for the quarter ended March 31,      2000)  |
| 10.2(q) |   | Guaranty      Agreement, dated as of August 6, 2003, between us and First Commercial      Bank (incorporated by reference to Exhibit 10(d) to our Quarterly Report      on Form 10-Q for the quarter ended June 28, 2003)                                                                                                        |
| 10.2(r) |   | Real      Estate Note, dated as of August 6, 2003, between us and First Commercial      Bank (incorporated by reference to Exhibit 10(c) to our Quarterly Report      on Form 10-Q for the quarter ended June 28, 2003)                                                                                                          |
| 10.2(s) |   | Amended      and Restated Real Estate Note, dated as of September 26, 2003, between us      and First Commercial Bank (incorporated by reference to Exhibit 10(a) to      our Quarterly Report on Form 10-Q for the quarter ended September 27,      2003)                                                                       |
| 10.2(t) |   | Amendment      to Real Estate Term Note, effective as of September 30, 2008, between us      and First Commercial Bank (incorporated by reference to Exhibit 10.1 to      our Quarterly Report on Form 10-Q for the quarter ended September 27,      2008)                                                                       |
| 10.2(u) |   | Revolving      Note, under the Amended and Restated Revolving and Term Loan Agreement,      dated as of December 6, 2005, between us and First Commercial Bank      (incorporated by reference to Exhibit 10(y) to our Annual Report on Form      10-K for the year ended December 31, 2005)                                     |

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| Exhibit     |   | Description                                                                                                                                                                                                                                                              |
|-------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.3*       |   | Cavalier      Homes, Inc. 1996 Key Employee Stock Incentive Plan (incorporated by      reference to an Appendix to our definitive Proxy Statement for the Annual      Meeting of Stockholders held May 15, 1996)                                                    |
| 10.3(a)*    |   | Amendment      to Cavalier Homes, Inc. 1996 Key Employee Stock Incentive Plan      (incorporated by reference to Exhibit 10(i) to our Quarterly Report on      Form 10-Q for the quarter ended March 28, 1997)                                                      |
| 10.3(b)*    |   | Amendment      to Cavalier Homes, Inc. 1996 Key Employee Stock Incentive Plan, effective      December 30, 1997 (incorporated by reference to Exhibit 10(j) to our      Annual Report on Form 10-K for the year ended December 31,      1997)                       |
| 10.3(c)*    |   | Amendment      to Cavalier Homes, Inc. 1996 Key Employee Stock Incentive Plan, effective      January 23, 1998 (incorporated by reference to Exhibit 10(k) to our Annual      Report on Form 10-K for the year ended December 31, 1997)                             |
| 10.3(d)*    |   | Amendment      to Cavalier Homes, Inc. Key 1996 Employee Stock Incentive Plan, effective      October 20, 1998 (incorporated by reference to Exhibit 10(l) to our Annual      Report on Form 10-K for the year ended December 31, 1998)                             |
| 10.4*       |   | Cavalier      Homes, Inc. 1993 Amended and Restated Nonemployee Directors Stock Option      Plan, (incorporated by reference to an Appendix to our definitive Proxy      Statement for the Annual Meeting of Stockholders held May 15,      1996)                   |
| 10.4(a)*    |   | Amendment      to Cavalier Homes, Inc. 1993 Amended and Restated Nonemployee Directors      Plan (incorporated by reference to Exhibit 10(i) to our Annual Report on      Form 10-K for the year ended December 31, 1996)                                           |
| 10.4(b)*    |   | Amendment      to Cavalier Homes, Inc. 1993 Amended and Restated Nonemployee Directors      Plan (incorporated by reference to Exhibit 10(n) to our Annual Report on      Form 10-K for the year ended December 31, 1997)                                           |
| 10.5*       |   | Cavalier      Homes, Inc. 2005 Incentive Compensation Plan (incorporated by reference to      an Appendix to our definitive Proxy Statement for the Annual Meeting of      Stockholders held May 24, 2005)                                                          |
| 10.6*       |   | Cavalier      Homes, Inc. 2005 Non-Employee Directors Stock Option Plan (incorporated by      reference to an Appendix to our definitive Proxy Statement for the Annual      Meeting of Stockholders held May 24, 2005)                                             |
| 10.7*       |   | Form      of Stock Option Agreement between us and Thomas A. Broughton, III, dated      January 29, 2002 (incorporated by reference to Exhibit 4(e) to our      Registration Statement on Form S-8, Registration No.      333-90652)                                |
| 10.8        |   | Form      of Indemnification Agreement by and between Cavalier Homes, Inc. and each      member of our Board of Directors (incorporated by reference to Exhibit      10(a) to our Quarterly Report on Form 10-Q for the quarter ended September      25, 1998)      |
| 10.9        |   | Inventory      Security Agreement and Power of Attorney, dated as of July 13, 2004,      between us and 21st Mortgage Company (incorporated by reference to Exhibit      10(a) to our Quarterly Report on Form 10-Q for the quarter ended September      25, 2004)  |
| 21†   |   | Subsidiaries      of the Registrant                                                                                                                                                                                                                                 |
| 23†   |   | Consent      of Independent Registered Public Accounting Firm – Carr, Riggs &      Ingram, LLC                                                                                                                                                            |
| 31.1† |   | Certification      of principal executive officer pursuant to Exchange Act Rule 13a-15(e) or      15d-15(e)                                                                                                                                                         |
| 31.2† |   | Certification      of principal financial officer pursuant to Exchange Act Rule 13a-15(e) or      15d-15(e)                                                                                                                                                         |
| 32†   |   | Certification      of Chief Executive Officer  and Chief Financial Officer pursuant      to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the      Sarbanes-Oxley Act of 2002                                                                  |

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SIGNATURES

|                         | CAVALIER      HOMES, INC.                  |
|------------------------------|--------------------------------------------|
|                         | (Registrant)                               |
|                         |                                       |
| Date:      February 19, 2009 | /s/      BOBBY TESNEY                      |
|                         | Bobby      Tesney                          |
|                         | President      and Chief Executive Officer |
|                         |                                       |

| Signature                         |   | Title                                                         |   | Date                   |
|-----------------------------------|--------|---------------------------------------------------------------|--------|------------------------|
|                              |   |                                                          |   |                   |
| /s/      BOBBY TESNEY             |   | Director,      President and Chief Executive Officer          |   | February      19, 2009 |
| Bobby      Tesney                 |   |                                                          |   |                   |
|                              |   |                                                          |   |                   |
| /s/      MICHAEL R. MURPHY        |   | Chief      Financial Officer and Principal Accounting Officer |   | February      19, 2009 |
| Michael      R. Murphy            |   |                                                          |   |                   |
|                              |   |                                                          |   |                   |
| /s/      BARRY DONNELL            |   | Chairman      of the Board and Director                       |   | February      19, 2009 |
| Barry      Donnell                |   |                                                          |   |                   |
|                              |   |                                                          |   |                   |
| /s/      THOMAS A. BROUGHTON, III |   | Director                                                      |   | February      19, 2009 |
| Thomas      A. Broughton, III     |   |                                                          |   |                   |
|                              |   |                                                          |   |                   |
| /s/      LEE ROY JORDAN           |   | Director                                                      |   | February      19, 2009 |
| Lee      Roy Jordan               |   |                                                          |   |                   |
|                              |   |                                                          |   |                   |
| /s/      J. DON WILLIAMS          |   | Director                                                      |   | February      19, 2009 |
| J.      Don Williams              |   |                                                          |   |                   |

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| ExhibitNumber |   | Description                                                                                                                                     |
|---------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|
|          |   |                                                                                                                                            |
| 21            |   | Subsidiaries      of the Registrant                                                                                                             |
|          |   |                                                                                                                                            |
| 23            |   | Consent      of Independent Registered Public Accounting Firm – Carr, Riggs &      Ingram, LLC                                        |
|          |   |                                                                                                                                            |
| 31.1          |   | Certification      of principal executive officer pursuant to Exchange Act Rule 13a-15(e) or      15d-15(e).                                    |
| 31.2          |   | Certification      of principal financial officer pursuant to Exchange Act Rule 13a-15(e) or      15d-15(e).                                    |
|          |   |                                                                                                                                            |
| 32            |   | Certification      of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to      Section 906 of the Sarbanes-Oxley Act of2002. |

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