UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~April 15,~~July 08, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ____

Commission file ~~number~~number: 000-02396

A red and white sign

Description automatically generated with medium confidence

BRIDGFORD FOODS CORPORATION

(Exact name of registrant as specified in its charter)

Texas		95-1778176
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		identification number)

1707 S. Good-Latimer Expressway		75226
(Address of principal executive offices)		(Zip code)

(714) 526-5533

(Registrant’s telephone number, including area code)

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		BRID		Nasdaq Global Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

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

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

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

As of ~~June 3,~~August 19, 2022, the registrant had 9,076,832shares of common stock outstanding.

BRIDGFORD FOODS CORPORATION

FORM 10-Q QUARTERLY REPORT

INDEX

References to “Bridgford Foods” or the “Company” contained in this Quarterly Report on Form 10-Q (this “Report”) refer to Bridgford Foods Corporation.

	Page
Part I. Financial Information	3

Item 1. Financial Statements	3

a. Condensed Consolidated Balance Sheets as of ~~April 15,~~July 8, 2022 (unaudited) and October 29, 2021	3

b. Condensed Consolidated Statements of Operations for the twelve and ~~twenty-four~~thirty-six weeks ended ~~April 15,~~July 8, 2022 (unaudited), and ~~April 16,~~July 9, 2021 (unaudited)	4

c. Condensed Consolidated Statements of Shareholders’ Equity for the twelve and ~~twenty-four~~thirty-six weeks ended ~~April 15,~~July 8, 2022 (unaudited), and ~~April 16,~~July 9, 2021 (unaudited)	5

d. Condensed Consolidated Statements of Cash Flows for the ~~twenty-four~~thirty-six weeks ended ~~April 15,~~July 8, 2022 (unaudited), and ~~April 16,~~July 9, 2021 (unaudited)	6

e. Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3. Quantitative and Qualitative Disclosures about Market Risk	26

Item 4. Controls and Procedures	26

Part II. Other Information	27

Item 1A. Risk Factors	27

Item 6. Exhibits	28

Signatures	29

Items 1 and 2 through 5 of Part II have been omitted because they are not applicable with respect to the Company and/or the current reporting period.

2 of 29

Part I. Financial Information

Item 1. a.

BRIDGFORD FOODS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)


		April 15, 2022			October 29, 2021		July 8, 2022			October 29, 2021
	(unaudited)						(unaudited)
ASSETS

Current assets:

Cash and cash equivalents	$	6,858		$	-		$	20,109		$	-
Restricted cash		-			375			-			375
Accounts receivable, less allowance for doubtful accounts of $117 and $127, respectively, and promotional allowances of $5,147 and $2,869, respectively		24,554			24,384
Accounts receivable, less allowance for doubtful accounts of $227 and $127, respectively, and promotional allowances of $3,076 and $2,869, respectively								31,089			24,384
Inventories, net		40,935			36,771			42,022			36,771
Refundable income taxes		5,731			6,156			5,524			6,156
Prepaid expenses and other current assets		1,241			2,571			1,164			2,571
Total current assets		79,319			70,257			99,908			70,257

Property, plant and equipment, net of accumulated depreciation and amortization of $67,657 and $64,527, respectively		70,357			72,886
Property, plant and equipment, net of accumulated depreciation and amortization of $69,043 and $64,527, respectively								69,040			72,886
Other non-current assets		12,647			13,647			11,646			13,647
Total assets	$	162,323		$	156,790		$	180,594		$	156,790

LIABILITIES AND SHAREHOLDERS’ EQUITY
				��
Current liabilities:

Accounts payable	$	12,229		$	12,388		$	12,010		$	12,388
Accrued payroll, advertising, and other expenses		6,147			6,890			6,913			6,890
Income taxes payable		98			98			17,316			98
Current notes payable - equipment		3,446			1,065			995			1,065
Other current liabilities		6,973			5,178			2,991			5,178
Total current liabilities		28,893			25,619			40,225			25,619

Long-term notes payable - equipment		38,596			36,004			4,164			36,004
Deferred income taxes, net		3,400			3,400			3,400			3,400
Other non-current liabilities		15,344			16,789			15,417			16,789
Total liabilities		86,233			81,812			63,206			81,812

Contingencies and commitments (Note 3)		-			-			-

Shareholders’ equity:
Preferred stock, without par value; authorized – 1,000,000 shares; issued and outstanding – NaN		-			-			-			-
Common stock, $1.00 par value; authorized – 20,000,000 shares; issued and outstanding – 9,076,832 and 9,076,832 shares, respectively		9,134			9,134			9,134			9,134
Capital in excess of par value		8,298			8,298			8,298			8,298
Retained earnings		75,364			74,252			116,662			74,252
Accumulated other comprehensive loss		(16,706	)		(16,706	)		(16,706	)		(16,706	)
Total shareholders’ equity		76,090			74,978			117,388			74,978
Total liabilities and shareholders’ equity	$	162,323		$	156,790		$	180,594		$	156,790

See accompanying notes to Condensed Consolidated Financial Statements.

3 of 29

Item 1. b.

BRIDGFORD FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share amounts)

													July 8, 2022			July 9, 2021			July 8, 2022			July 9, 2021
	12 weeks ended						24 weeks ended						12 weeks ended						36 weeks ended
	April 15, 2022			April 16, 2021			April 15, 2022			April 16, 2021			July 8, 2022			July 9, 2021			July 8, 2022			July 9, 2021

Net sales	$	59,986		$	50,477		$	124,072		$	105,170		$	59,519		$	56,538		$	183,591		$	161,708
Cost of products sold		43,304			39,890			90,997			80,032			42,498			44,527			133,495			124,559

Gross margin		16,682			10,587			33,075			25,138			17,021			12,011			50,096			37,149

Selling, general and administrative expenses		15,178			12,906			29,909			26,881			15,220			14,144			45,129			41,025
Gain on sale of property, plant, and equipment		-			(8	)		(18	)		(82	)		(57,645	)		(296	)		(57,663	)		(378	)
Operating income (loss)		1,504			(2,311	)		3,184			(1,661	)		59,446			(1,837	)		62,630			(3,498	)

Other income (expense)
Interest expense		(318	)		(319	)		(615	)		(638	)		(261	)		(253	)		(876	)		(891	)
Cash surrender value (loss) gain		10			322			(1,000	)		1,848			(1,001	)		153			(2,001	)		2,001
Total other income (expense)		(308	)		3			(1,615	)		1,210			(1,262	)		(100	)		(2,877	)		1,110

Income (loss) before taxes		1,196			(2,308	)		1,569			(451	)		58,184			(1,937	)		59,753			(2,388	)
Provision for (benefit on) income taxes		391			(535	)		457			(142	)		16,886			(527	)		17,343			(669	)

Net income (loss)	$	805		$	(1,773	)	$	1,112		$	(309	)	$	41,298		$	(1,410	)	$	42,410		$	(1,719	)

Basic earnings (loss) per share	$	0.09		$	(0.20	)	$	0.12		$	(0.03	)	$	4.55		$	(0.16	)	$	4.67		$	(0.19	)

Shares used to compute basic earnings (loss) per share		9,076,832			9,076,832			9,076,832			9,076,832			9,076,832			9,076,832			9,076,832			9,076,832

See accompanying notes to Condensed Consolidated Financial Statements.

4 of 29

Item 1. c.

BRIDGFORD FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

2436 weeks ended ~~April 16,~~July 9, 2021, and ~~April 15,~~July 8, 2022

(unaudited)

(in thousands)

	Shares			Amount		Capital in excess of par value		Retained earnings			Accumulated other comprehensive loss			Total shareholders’ equity		Shares		Amount		Capital in excess of par value		Retained earnings			Accumulated other comprehensive loss			Total shareholders’ equity
Balance, October 30, 2020		9,076	$	9,134	$	8,298	$	79,755		$	(25,941	)	$	71,246			9,076	$	9,134	$	8,298	$	79,755		$	(25,941	)	$	71,246
Net loss		-		-		-		(309	)		-			(309	)		-		-		-		(1,719	)		-			(1,719	)
Balance, April 16, 2021		9,076	$	9,134	$	8,298	$	79,446		$	(25,941	)	$	70,937
Balance, July 9, 2021																	9,076	$	9,134	$	8,298	$	78,036		$	(25,941	)	$	69,527

	Shares		Amount		Capital in excess of par value		Retained earnings		Accumulated other comprehensive loss			Total shareholders’ equity		Shares		Amount		Capital in excess of par value		Retained earnings		Accumulated other comprehensive loss			Total shareholders’ equity
Balance, October 29, 2021		9,076	$	9,134	$	8,298	$	74,252	$	(16,706	)	$	74,978		9,076	$	9,134	$	8,298	$	74,252	$	(16,706	)	$	74,978
Net income		-		-		-		1,112		-			1,112		-		-		-		42,410		-			42,410
Balance, April 15, 2022		9,076	$	9,134	$	8,298	$	75,364	$	(16,706	)	$	76,090
Balance, July 8, 2022															9,076	$	9,134	$	8,298	$	116,662	$	(16,706	)	$	117,388

BRIDGFORD FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

12 weeks ended ~~April 16,~~July 9, 2021, and ~~April 15,~~July 8, 2022

(unaudited)

(in thousands)

	Shares		Amount		Capital in excess of par value		Retained earnings			Accumulated other comprehensive loss			Total shareholders’ equity			Shares		Amount		Capital in excess of par value		Retained earnings			Accumulated other comprehensive loss			Total shareholders’ equity
Balance, January 22, 2021		9,076	$	9,134	$	8,298	$	81,219		$	(25,941	)	$	72,710
Balance, April 16, 2021																	9,076	$	9,134	$	8,298	$	79,446		$	(25,941	)	$	70,937
Net loss		-		-		-		(1,773	)		-			(1,773	)		-		-		-		(1,410	)		-			(1,410	)
Balance, April 16, 2021		9,076	$	9,134	$	8,298	$	79,446		$	(25,941	)	$	70,937
Balance, July 9, 2021																	9,076	$	9,134	$	8,298	$	78,036		$	(25,941	)	$	69,527

	Shares		Amount		Capital in excess of par value		Retained earnings		Accumulated other comprehensive loss			Total shareholders’ equity		Shares		Amount		Capital in excess of par value		Retained earnings		Accumulated other comprehensive loss			Total shareholders’ equity
Balance, January 21, 2022		9,076	$	9,134	$	8,298	$	74,559	$	(16,706	)	$	75,285
Balance, April 15, 2022															9,076	$	9,134	$	8,298	$	75,364	$	(16,706	)	$	76,090
Net income		-		-		-		805		-			805		-		-		-		41,298		-			41,298
Net income/loss		-		-		-		805		-			805
Balance, April 15, 2022		9,076	$	9,134	$	8,298	$	75,364	$	(16,706	)	$	76,090
Net income (Loss)															-		-		-		41,298		-			41,298
Balance, July 8, 2022															9,076	$	9,134	$	8,298	$	116,662	$	(16,706	)	$	117,388

See accompanying notes to Condensed Consolidated Financial Statements.

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Item 1. d.

BRIDGFORD FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

							July 8, 2022			July 9, 2021
	24 weeks ended						36 weeks ended
	April 15, 2022			April 16, 2021			July 8, 2022			July 9, 2021
Cash flows from operating activities:

Net income (loss)	$	1,112		$	(309	)	$	42,410		$	(1,719	)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization		3,158			3,026			4,588			4,425
(Recoveries on) provision for losses on accounts receivable		(10	)		96
Provision for losses on accounts receivable								100			46
Increase in promotional allowances		2,278			1,791			207			742
Gain on sale of property, plant, and equipment		(18	)		(82	)		(57,663	)		(378	)

Changes in operating assets and liabilities:

Accounts receivable, net		(2,438	)		3,450			(7,012	)		(24	)
Inventories, net		(4,164	)		(1,810	)		(5,251	)		(5,221	)
Prepaid expenses and other current assets		1,330			(394	)		1,407			(9	)
Refundable income taxes		425			(393	)		632			2,433
Other non-current assets		1,000			(1,850	)		2,001			(2,001	)
Accounts payable		(159	)		(122	)		(378	)		1,994
Accrued payroll, advertising, and other expenses		(743	)		(903	)		23			587
Current portion of non-current liabilities		1,774			770
Non-current liabilities		(1,272	)		(1,739	)
Other current liabilities								(2,181	)		9
Income taxes payable								17,218			-
Other non-current liabilities								(1,089	)		(1,455	)

Net cash provided by operating activities		2,273			1,531
Net cash used in operating activities								(4,988	)		(571	)

Cash flows from investing activities:
Proceeds from sale of property, plant, and equipment		18			98			60,034			128
Additions to property, plant, and equipment		(629	)		(5,755	)		(3,112	)		(6,842	)

Net cash used in investing activities		(611	)		(5,657	)
Net cash provided by (used in) investing activities								56,922			(6,714	)

Cash flows from financing activities:
Payment of lease and right of use obligations		(151	)		(207	)		(288	)		(319	)
Proceeds from borrowings under revolving credit facilities								6,000			6,000
Repayment of borrowings under revolving credit facilities								(18,000	)		-
Proceeds from bank borrowings		6,000			2,000			-			-
Repayments of bank borrowings		(1,028	)		(2,194	)		(19,912	)		(3,223	)

Net cash provided by (used in) financing activities		4,821			(401	)
Net cash (used in) provided by financing activities								(32,200	)		2,458

Net increase (decrease) in cash and cash equivalents and restricted cash		6,483			(4,527	)		19,734			(4,827	)

Cash and cash equivalents and restricted cash at beginning of period		375			5,427			375			5,427

Cash and cash equivalents and restricted cash at end of period	$	6,858		$	900		$	20,109		$	600

Supplemental disclosure of cash flow information:

Cash paid for income taxes	$	37		$	118		$	73		$	121
Cash paid for interest	$	615		$	637		$	876		$	890

See accompanying notes to Condensed Consolidated Financial Statements.

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Item 1. e.

BRIDGFORD FOODS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(dollars in thousands)

Note 1 – Summary of Significant Accounting Policies:

The unaudited Condensed Consolidated Financial Statements of Bridgford Foods Corporation (the “Company”, “we”, “our”, “us”) for the twelve and ~~twenty-four~~thirty-six weeks ended ~~April 15,~~July 8, 2022 and ~~April 16,~~July 9, 2021 have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X, and include all adjustments considered necessary by management for a fair presentation of the interim periods. This Report should be read in conjunction with the Annual Report on Form 10-K for the fiscal year ended October 29, 2021 (the “Annual Report”). Due to seasonality and other factors, interim results are not necessarily indicative of the results for the full year. Recent accounting pronouncements and their effect on the Company are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Report.

We have considered the impact of federal, state, and local government actions related to the COVID-19 pandemic on our Consolidated Financial Statements. The business disruptions associated with the pandemic had a significant negative impact on our Consolidated Financial Statements for the fiscal year ended October 29, 2021, and minimal impact during the twelve and ~~twenty-four~~thirty-six weeks ended ~~April 15,~~July 8, 2022. We expect these events to have future business impacts, the extent of which is uncertain and largely subject to whether the severity worsens. These impacts could include but may not be limited to risks and uncertainty related to shifts in demand between sales channels, market volatility, constraints in our supply chain, our ability to operate production facilities and worker availability. These unknowns may subject the Company to future risks related to long-lived asset impairments, increased reserves for uncollectible accounts, price and availability of ingredients and raw materials used in our products and adjustments to reflect the market value of our inventory.

The October 29, 2021, balance sheet amounts within these interim Condensed Consolidated Financial Statements were derived from the audited fiscal year 2021 financial statements included in the Annual Report.

The preparation of Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported revenues and expenses during the reporting periods. Some of the estimates needed to be made by management include the allowance for doubtful accounts, promotional and returns allowances, inventory reserves, the estimated useful lives of property, plant and equipment, and the valuation allowance for the Company’s deferred tax assets. Actual results could materially differ from these estimates. Amounts estimated related to liabilities for self-insured workers’ compensation, employee healthcare and pension benefits are especially subject to inherent uncertainties and these estimated liabilities may ultimately settle at amounts which vary from our current estimates. Market conditions and the volatility in stock markets may cause significant changes in the measurement of our pension fund liabilities and the performance of our life insurance policies in future periods.

Financial instruments that subject the Company to credit risk consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued payroll, and notes payable. The carrying amount of these instruments approximate fair market value due to their short-term maturity or market interest rates. At times, the Company had accounts held with nationally recognized financial institutions in excess of the Federal Deposit Insurance Corporation insurance coverage limit. As of ~~April 15,~~July 8, 2022, the Company did not have a book overdraft. When applicable, book overdrafts are recorded as a liability in accounts payable on the Condensed Consolidated Balance Sheet. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk with regard to its cash and cash equivalents. The Company grants payment terms to a significant number of customers that are diversified over a wide geographic area. The Company monitors the payment histories of its customers and maintains an allowance for doubtful accounts which is reviewed for adequacy on a quarterly basis. The Company does not require collateral from its customers.

Comprehensive income or loss

Comprehensive income or loss consists of net income and additional minimum pension liability adjustments. There were no differences between net income (loss) and comprehensive income (loss) during the twelve and ~~twenty-four~~thirty-six weeks ended ~~April 15,~~July 8, 2022, or ~~April 16,~~July 9, 2021.

Customer Concentration > 20% of AR or >10% of Sales

The table below shows customers that accounted for more than 20% of consolidated accounts receivable (“AR”) or 10% of consolidated sales for the ~~twenty-four~~thirty-six weeks ended ~~April 15,~~July 8, 2022, and ~~April 16,~~July 9, 2021, respectively.

Schedule of Customer Concentration

Walmart ⁽¹⁾ Dollar General
Sales AR Sales AR
April 15, 2022 31.4 % 4.4 % 17.7 % 38.1 %
April 16, 2021 37.6 % 5.7 % 14.0 % 13.5 %

	Walmart ⁽¹⁾						Dollar General
	Sales			AR			Sales			AR
July 8, 2022		30.8	%		19.8	%		18.2	%		32.3	%
July 9, 2021		37.3	%		5.7	%		14.7	%		45.7	%

(1)	Walmart accounts receivable represented a ~~lower~~higher percentage of sales as of ~~April 15,~~July 8, 2022, due to terminating the accelerated payments on outstanding accounts ~~receivable.~~receivable on July 1, 2022.

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The table below shows customers that accounted for more than 20% of consolidated accounts receivable or 10% of consolidated sales for the twelve weeks ended ~~April 15,~~July 8, 2022, and ~~April 16,~~July 9, 2021, respectively.

Walmart ⁽¹⁾ Dollar General
Sales AR Sales AR
April 15, 2022 30.5 % 4.4 % 19.6 % 38.1 %
April 16, 2021 38.7 % 5.7 % 14.2 % 13.5 %

	Walmart ⁽¹⁾						Dollar General
	Sales			AR			Sales			AR
July 8, 2022		29.4	%		19.8	%		19.2	%		32.3	%
July 9, 2021		36.7	%		5.7	%		16.1	%		45.7	%

(1)	Walmart accounts receivable represented a ~~lower~~higher percentage of sales as of ~~April 15,~~July 8, 2022, due to terminating the accelerated payments on outstanding accounts ~~receivable.~~receivable on July 1, 2022.

Revenue recognition

Revenues are recognized in accordance with Accounting Standards Codification (“ASC”) Topic 606 – Contracts with Customers upon passage of title to the customer, typically upon product pick-up, shipment, or delivery to customers. Products are delivered to customers primarily through our own long-haul fleet, common carrier, or through a Company-owned direct store delivery system.

The Company recognizes revenue for the sale of the product at the point in time when our performance obligation has been satisfied and control of the product has transferred to our customer, which generally occurs upon shipment, pickup or delivery to a customer based on terms of the sale. Contracts with customers are typically short-term in nature with completion of a single performance obligation. Product is sold to foodservice, retail, institutional and other distribution channels. Shipping and handling that occurs after the customer has obtained control of the product is recorded as a fulfillment cost rather than an additional performance obligation. Costs paid to third party brokers to obtain contracts are recognized as part of selling expenses. Other sundry items in context of the contract are also recognized as selling expense. Any taxes collected on behalf of the government are excluded from net revenue.

We record revenue at the transaction price which is measured as the amount of consideration we anticipate receiving in exchange for providing product to our customers. Revenue is recognized as the net amount estimated to be received after deducting estimated or known amounts including variable consideration for discounts, trade allowances, consumer incentives, coupons, volume-based incentives, cooperative advertising, product returns and other such programs. Promotional allowances, including customer incentive and trade promotion activities, are recorded as a reduction to sales based on amounts estimated being due to customers, based primarily on historical utilization and redemption rates. Estimates are reviewed regularly until incentives or product returns are realized and the result of any such adjustments are known. Promotional allowances deducted from sales for the twelve weeks ended ~~April 15,~~July 8, 2022, and ~~April 16,~~July 9, 2021, were $~~3,862~~3,287 and $~~3,191~~2,822, respectively. Promotional allowances deducted from sales for the ~~twenty-four~~thirty-six weeks ended ~~April 15,~~July 8, 2022, and ~~April 16,~~July 9, 2021, were $~~7,366~~10,652 and $~~6,273~~9,095, respectively.

Leases

Leases are recognized in accordance with Accounting Standards Codification 842 and Accounting Standards Update (“ASU”) 2016-02 Leases (“ASC 842”) which requires a lessee to recognize assets and liabilities with lease terms of more than twelve months ~~months.~~. We lease or rent property for such operations as storing inventory and equipment. We analyze our agreements to evaluate whether or not a lease exists by determining what assets exist for which we control usage for a period of time in exchange for consideration. In the event a lease exists, we classify it as a finance or operating lease and record a right-of-use (“ROU”) asset and the corresponding lease liability at the inception of the lease. In the case of month-to-month lease or rental agreements with terms of twelve months or less, we made an accounting policy election to not recognize lease assets and liabilities and record them on a straight-line basis over the lease term. The storage units rented on a month-to-month basis for use by our Snack Food Product segment direct store delivery route system are not costly to relocate and contain no significant leasehold improvements or degree of integration over leased assets. Orders can be fulfilled by another route storage unit interchangeably. No specialized assets exist in the rental storage units. Market price is paid for storage units. No guarantee of debt is made.

~~Finance and~~ ROU lease assets are recorded within property, plant and equipment, net of accumulated depreciation and amortization. The Company’s leases of long-haul trucks used in its Frozen Food Products segment qualify as finance leases. Finance lease liabilities are recorded under other liabilities, the consolidated balance sheets reflecting both the current and long-term obligation. The classification as a finance or operating lease determines whether the recognition, measurement and presentation of expenses and cash flows are considered operating or financing.

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~~Financial statement reclassification~~

~~Certain financial statement reclassifications have been recorded in 2021 to conform to the current year presentation of operating income and income before taxes.~~

Subsequent events

Management has evaluated events subsequent to ~~April 15,~~July 8, 2022, through the date that the accompanying Condensed Consolidated Financial Statements were filed with the Securities and Exchange Commission for transactions and other events which may require adjustments of and/or disclosure in such financial statements.

~~For further information regarding subsequent events, please refer to Note 7 – Subsequent Events.~~

~~8 of 29~~

Based on Management’s review, no other material events were identified that require adjustment to the financial statements or additional ~~disclosure.~~disclosure except as disclosed in Note 7 - Subsequent Events.

Basic earnings per share

Basic earnings per share are calculated based on the weighted average number of shares outstanding for all periods presented. No stock options, warrants, or other potentially dilutive convertible securities were outstanding as of ~~April 15,~~July 8, 2022, or ~~April 16,~~July 9, 2021.

Note 2 – Inventories, net:

Inventories are comprised of the following at the respective period ends:

Schedule of Inventories

	April 15, 2022		October 29, 2021		July 8, 2022		October 29, 2021
Meat, ingredients, and supplies	$	9,868	$	7,278	$	11,393	$	7,278
Work in progress		3,229		2,911		2,782		2,911
Finished goods		27,838		26,582		27,847		26,582
Inventories, net	$	40,935	$	36,771	$	42,022	$	36,771

Inventories are valued at the lower of cost (which approximates actual cost on a first-in, first-out basis) or net realizable value. Inventories include the cost of raw materials, labor, and manufacturing overhead. We regularly review inventory quantities on hand and write down any excess or obsolete inventories to net realizable value. An inventory reserve is created when potentially slow-moving or obsolete inventories are identified in order to reflect the appropriate inventory value. Changes in economic conditions, production requirements, and lower than expected customer demand could result in additional obsolete or slow-moving inventory that cannot be sold or must be sold at reduced prices and could result in additional reserve provisions. We reduced our net realizable value reserve by $~~2,159~~2,214 during the ~~twenty-four~~thirty-six weeks ended ~~April 15,~~July 8, 2022, to recognize inventory sell through of products already reserved in inventory as of year-end October 29, 2021. We maintain a net realizable reserve of $~~194~~139 as of ~~April 15,~~July 8, 2022, and $2,353 as of October 29, 2021, on products in inventory after determining that the market value on some meat products could not cover the costs associated with completion and sale of the product.

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Note 3 – Contingencies and ~~Commitments:~~Commitments:

The Company leases warehouse and/or office facilities throughout the United States through month-to-month rental agreements. In the case of month-to-month lease or rental agreements with terms of 12 months or less, the Company made an accounting policy election to not recognize lease assets and liabilities and record them on a straight-line basis over the lease term. For further information regarding our lease accounting policy, please refer to Note 1 – Summary of Significant Accounting Policies — Leases.

The Company leases three long-haul trucks received during fiscal year 2019. The six-year leases for these trucks expire in ~~2025~~2025.. Amortization of equipment as a finance lease was $3755 during the ~~twenty-four~~thirty-six weeks ended ~~April 15,~~July 8, 2022. The Company leased one long-haul truck for $40 received during fiscal year 2021, and that lease term is two years.

The Company performed a detailed analysis and determined that the only indication of a long-term lease in addition to transportation leases for long-haul trucks was the warehouse lease with Hogshed Ventures, LLC. A right-of-use asset and corresponding liability for warehouse storage space was recorded for $494 for Hogshed Ventures, LLC for 40th Street in Chicago, Illinois, as of ~~April 15,~~July 8, 2022. We lease this space under a non-cancelable operating lease. This lease does not have significant rent escalation holidays, concessions, leasehold improvement incentives or other build-out clauses. Further this lease does not contain contingent rent ~~provisions~~provisions.. This lease terminates on June 30, 2023. This lease includes both lease (e.g., fixed rent) and non-lease components (e.g., real estate taxes, insurance, common-area, and other maintenance costs). The non-lease components are deemed to be executory costs and are included in the minimum lease payments used to determine the present value of the operating lease obligation and related right-of-use asset.

This lease does not provide an implicit rate and we estimated our incremental interest rate to be approximately 1.6%. We used our estimated incremental borrowing rate and other information available at the lease commencement date in determining the present value of the lease payments.

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The following is a schedule by years of future minimum lease payments for transportation leases and right-of-use assets:

Schedule of Future Minimum Lease Payments

Fiscal Year Financing
Obligations
2022 $ 338
2023 381
2024 101
2025 70
Later Years -
Total Minimum Lease Payments(a) $ 890
Less: Amount representing executory costs (48 )
Less: Amount representing interest(b) (6 )
Present value of future minimum lease payments(c) $ 836

Fiscal Year	Financing Obligations
2022	$	193
2023		381
2024		101
2025		70
Later Years		-
Total Minimum Lease Payments(a)	$	745
Less: Amount representing executory costs		(42	)
Less: Amount representing interest(b)		(5	)
Present value of future minimum lease payments(c)	$	698

(a)	Minimum payments exclude contingent rentals based on actual mileage and adjustments of rental payments based on the Consumer Price Index.
(b)	Amount necessary to reduce net minimum lease payments to present value calculated at the Company’s incremental borrowing rate at the inception of the leases.
(c)	Reflected in Part I. Financial Information, Item 1. a. of the Condensed Consolidated Balance Sheets as current and noncurrent obligations under capital leases of $~~164~~166 and $~~178~~160, and right-of-use assets of $~~383~~354 and $~~111~~18, respectively as of ~~April 15,~~July 8, 2022.

The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters is not expected to have a material adverse effect on the Company’s consolidated financial position or results of operations.

Most flour purchases are made at market price with contracts. However, the Company may purchase bulk flour at current market prices under short-term (30 - 120 days) fixed price contracts during the normal course of business. Under these arrangements, the Company is obligated to purchase specific quantities at fixed prices, within the specified contract period. These contracts provide for potential price increases if agreed quantities are not purchased within the specified contract period. The contracts are not material. These contracts are typically settled within a month’s time and no significant contracts remain open at the close of the quarterly or annual reporting period. No significant contracts remained unfulfilled on ~~April 15,~~July 8, 2022. The Company does not participate in the commodity futures market or hedging to limit commodity exposure.

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Note 4 – Segment Information:

The Company has 2 reportable operating segments: Frozen Food Products (the processing and distribution of frozen food products) and Snack Food Products (the processing and distribution of meat and other convenience foods).

We evaluate each segment’s performance based on revenues and operating income. Selling, general and administrative (“SG&A”) expenses include corporate accounting, information systems, human resource management and marketing, which are managed at the corporate level. These activities are allocated to each operating segment based on revenues and/or actual usage. Assets managed at the corporate level are not attributable to each operating segment and thus have been included as “other” in the accompanying segment information.

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The following segment information is presented for the twelve weeks ended ~~April 15,~~July 8, 2022, and ~~April 16,~~July 9, 2021, respectively.

Schedule of Segment Reporting Information, by Segment


Segment Information
Twelve weeks Ended April 15, 2022	Frozen Food Products			Snack Food Products		Other		Totals
Twelve weeks Ended July 8, 2022										Frozen Food Products			Snack Food Products		Other			Totals
Sales	$	12,477		$	47,509	$	-	$	59,986	$	11,713		$	47,806	$	-		$	59,519
Cost of products sold		8,649			34,655		-		43,304		8,752			33,746		-			42,498
Gross margin		3,828			12,854		-		16,682		2,961			14,060		-			17,021
SG&A		3,286			11,892		-		15,178		3,451			11,769		-			15,220
Operating income		542			962		-		1,504
Gain on sale of property, plant, and equipment											(16	)		-		(57,629	)		(57,645	)
Operating (loss) income											(474	)		2,291		57,629			59,446

Total assets	$	14,484		$	121,521	$	26,318	$	162,323	$	13,719		$	128,294	$	38,581		$	180,594
Additions to PP&E	$	(54	)	$	303	$	-	$	249	$	799		$	1,684	$	-		$	2,483

Twelve weeks Ended April 16, 2021		Frozen Food Products			Snack Food Products			Other		Totals
Twelve weeks Ended July 9, 2021												Frozen Food Products			Snack Food Products			Other		Totals
Sales	$	8,854		$	41,623		$	-	$	50,477		$	8,321		$	48,217		$	-	$	56,538
Cost of products sold		6,399			33,491			-		39,890			5,858			38,669			-		44,527
Gross margin		2,455			8,132			-		10,587			2,463			9,548			-		12,011
SG&A		2,607			10,299			-		12,906			2,682			11,462			-		14,144
Gain on sale of property, plant, and equipment		6			(14	)		-		(8	)		(84	)		(212	)		-		(296	)
Operating loss		(158	)		(2,153	)		-		(2,311	)		(135	)		(1,702	)		-		(1,837	)

Total assets	$	10,559		$	115,409		$	26,611	$	152,579		$	10,613		$	122,850		$	23,694	$	157,157
Additions to PP&E	$	51		$	2,556		$	-	$	2,607		$	35		$	1,052		$	-	$	1,087

The following segment information is presented for the ~~twenty-four~~thirty-six weeks ended ~~April 15,~~July 8, 2022, and ~~April 16,~~July 9, 2021, respectively.

Twenty-four weeks Ended April 15, 2022		Frozen Food Products		Snack Food Products			Other		Totals
Thirty-six weeks Ended July 8, 2022											Frozen Food Products			Snack Food Products			Other			Totals
Sales	$	24,843	$	99,229		$	-	$	124,072		$	36,556		$	147,035		$	-		$	183,591
Cost of products sold		17,500		73,497			-		90,997			26,252			107,243			-			133,495
Gross margin		7,343		25,732			-		33,075			10,304			39,792			-			50,096
SG&A		6,373		23,536			-		29,909			9,824			35,305			-			45,129
Gain on sale of property, plant, and equipment		-		(18	)		-		(18	)		(16	)		(18	)		(57,629	)		(57,663	)
Operating income		970		2,214			-		3,184
Operating (loss) income												496			4,505			(57,629	)		62,630

Total assets	$	14,484	$	121,521		$	26,318	$	162,323		$	13,719		$	128,294		$	38,581		$	180,594
Additions to PP&E	$	6	$	623		$	-	$	629		$	805		$	2,307		$	-		$	3,112

Twenty-four weeks Ended April 16, 2021		Frozen Food Products			Snack Food Products			Other		Totals
Thirty-six weeks Ended July 9, 2021												Frozen Food Products			Snack Food Products			Other		Totals
Sales	$	18,118		$	87,052		$	-	$	105,170		$	26,438		$	135,270		$	-	$	161,708
Cost of products sold		12,838			67,194			-		80,032			18,695			105,864			-		124,559
Gross margin		5,280			19,858			-		25,138			7,743			29,406			-		37,149
SG&A		5,415			21,466			-		26,881			8,097			32,928			-		41,025
Gain on sale of property, plant, and equipment		(27	)		(55	)		-		(82	)		(111	)		(267	)		-		(378	)
Operating loss		(108	)		(1,553	)		-		(1,661	)		(243	)		(3,255	)		-		(3,498	)

Total assets	$	10,559		$	115,409		$	26,611	$	152,579		$	10,613		$	122,850		$	23,694	$	157,157
Additions to PP&E	$	121		$	5,634		$	-	$	5,755		$	156		$	6,686		$	-	$	6,842

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The following information further disaggregates our sales to customers by major distribution channel and customer type for the twelve weeks and thirty-six weeks ended ~~April 15,~~July 8, 2022, and ~~April 16,~~July 9, 2021, respectively.

Schedule of Disaggregates Our Sales to Customers

Twelve weeks Ended ~~April 15,~~July 8, 2022

Distribution Channel	Retail (a)		Foodservice (b)		Totals		Retail (a)		Foodservice (b)		Totals
Direct store delivery	$	31,065	$	-	$	31,065	$	29,914	$	-	$	29,914
Direct customer warehouse		16,444		-		16,444		17,892		-		17,892
Total Snack Food Products		47,509		-		47,509		47,806		-		47,806

Distributors		1,576		10,901		12,477		1,205		10,508		11,713
Total Frozen Food Products		1,576		10,901		12,477		1,205		10,508		11,713

Totals	$	49,085	$	10,901	$	59,986	$	49,011	$	10,508	$	59,519

Twelve weeks Ended ~~April 16,~~July 9, 2021

Distribution Channel	Retail (a)		Foodservice (b)		Totals		Retail (a)		Foodservice (b)		Totals
Direct store delivery	$	31,482	$	-	$	31,482	$	33,739	$	-	$	33,739
Direct customer warehouse		10,141		-		10,141		14,478		-		14,478
Total Snack Food Products		41,623		-		41,623		48,217		-		48,217

Distributors		1,827		7,027		8,854		1,290		7,031		8,321
Total Frozen Food Products		1,827		7,027		8,854		1,290		7,031		8,321

Totals	$	43,450	$	7,027	$	50,477	$	49,507	$	7,031	$	56,538

(a)	Includes sales to food retailers, such as grocery retailers, warehouse club stores, and internet-based retailers.
(b)	Includes sales to foodservice distributors, restaurant operators, hotel chains and noncommercial foodservice establishments such as schools, convenience stores, healthcare facilities and the military.

Twenty-four weeks Ended April 15, 2022 Distribution Channel	Retail (a)		Foodservice (b)		Totals
Thirty-six weeks Ended July 8, 2022 Distribution Channel							Retail (a)		Foodservice (b)		Totals
Direct store delivery	$	67,694	$	-	$	67,694	$	97,608	$	-	$	97,608
Direct customer warehouse		31,535		-		31,535		49,427		-		49,427
Total Snack Food Products		99,229		-		99,229		147,035		-		147,035

Distributors		4,515		20,328		24,843		5,720		30,836		36,556
Total Frozen Food Products		4,515		20,328		24,843		5,720		30,836		36,556

Totals	$	103,744	$	20,328	$	124,072	$	152,755	$	30,836	$	183,591

Twenty-four weeks Ended April 16, 2021 Distribution Channel	Retail (a)		Foodservice (b)		Totals
Thirty-six weeks Ended July 9, 2021 Distribution Channel							Retail (a)		Foodservice (b)		Totals
Direct store delivery	$	67,174	$	-	$	67,174	$	100,914	$	-	$	100,914
Direct customer warehouse		19,878		-		19,878		34,356		-		34,356
Total Snack Food Products		87,052		-		87,052		135,270		-		135,270

Distributors		4,797		13,321		18,118		6,086		20,352		26,438
Total Frozen Food Products		4,797		13,321		18,118		6,086		20,352		26,438

Totals	$	91,849	$	13,321	$	105,170	$	141,356	$	20,352	$	161,708

(a)	Includes sales to food retailers, such as grocery retailers, warehouse club stores, and internet-based retailers.

(b)	Includes sales to foodservice distributors, restaurant operators, hotel chains and noncommercial foodservice establishments such as schools, convenience stores, healthcare facilities and the military

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Note 5 – Income Taxes:

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating loss (“NOL”) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before January 1, ~~2021~~2021.. In addition, the CARES Act allows NOLs incurred in taxable years beginning after December 31, 2017, and before January 1, 2021, to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company has filed a federal income tax return for tax year 2018 and 2019 (fiscal year 2019 and 2020) and carried back a taxable loss of $34,405 to tax years 2013 (fiscal 2014), 2014 (fiscal year 2015), 2015 (fiscal year 2016), 2016 (fiscal year 2017) and 2018 (fiscal year 2019).

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law. Among other significant changes, the Tax Act reduced the corporate federal income tax rate from ~~35%~~35% to 21%. The carryback of NOLs from tax years 2018 and 2019 under the CARES Act to pre-Tax Act years generated an income tax benefit due to the differential in income tax rates which was recorded in fiscal year ~~2020~~2020..

The Company’s effective tax rate was ~~32.7~~29.0% and ~~23.2~~28.0% for the ~~second~~third quarter of fiscal 2022 and 2021, respectively. The effective tax rate for the ~~second~~third quarter of fiscal 2022 reflects the impact of $16,427 of tax expense related to tax on the gain on sale of a land parcel in Chicago, Illinois. The effective tax rate for the third quarter of fiscal year 2022 was also impacted by such items as non-deductible meals and entertainment, non-taxable gains and losses on life insurance policies and state income taxes.

As of ~~April 15,~~July 8, 2022, the Company has a federal NOL carry forward of approximately $10,336 and state NOL carry forwards of approximately $8,109.

Our federal income tax returns are open to audit under the statute of limitations for the fiscal years 2018 through 2020. We are subject to income tax in California and various other state taxing jurisdictions. Our state income tax returns are open to audit under the statute of limitations for the fiscal years 2017 through 2020.

Note 6 – Equipment Notes Payable and Financial Arrangements:

Revolving Credit Facility

We maintain a revolving line of credit with Wells Fargo Bank, N.A. that extends to March 1, 2023. As of year-end October 29, 2021, under the terms of this line of credit, we could borrow up to $15,000 at an interest rate equal to the bank’s prime rate or LIBOR plus 2.0%. The line of credit has an unused commitment fee of 0.25% of the available loan amount. The line of credit is presented under non-current liabilities at October 29, 2021, in the accompanying condensed consolidated balance sheets. On December 1, 2021, Wells Fargo Bank, N.A. expanded our line of credit to $25,000 through June 15, 2022, upon which time the credit limit ~~will return~~returned to $15,000 for the balance of the term. Under the terms of this ~~expanded~~ line of credit, we ~~may~~have the right to borrow up to $~~25,000~~15,000 at an interest rate equal to the bank’s prime rate or secured overnight financing rate (“SOFR”) plus 2.0%. The former benchmark interest rate of LIBOR for our line of credit has been transitioned to SOFR which could impact the cost of credit and alter the value of debt and loans. We borrowed $2,000 under this line of credit on December 2, 2020, $2,000 on April 27, 2021, $2,000 on July 1, 2021, $3,000 on July 19, 2021, $3,000 on October 15, 2021, $2,000 on November 1, 2021, $2,000 on December 16, 2021, and $2,000 on January 24, 2022, for a combined total of $18,000 as. The line revolving of ~~April 15, 2022.~~credit with Wells Fargo Bank, N.A. was paid off on June 7, 2022, using $18,000 in proceeds from the gain on the sale of a land parcel in Chicago. Refer to Note 8-Gain on Sale Of Property, Plant and Equipment.

Equipment Notes Payable

On December 26, 2018, we entered into a master collateral loan and security agreement with Wells Fargo Bank, N.A. (the “Original Wells Fargo Loan Agreement”) for up to $15,000 in equipment financing which was amended and expanded as detailed below. We subsequently entered into additional master collateral loan and security agreements with Wells Fargo Bank, N.A. on each of; April 18, 2019, December 19, 2019, March 5, 2020, and April 17, 2020 (the Original Wells Fargo Loan Agreement and the subsequent agreements collectively referred to as the “Wells Fargo Loan Agreements”). Pursuant to the Wells Fargo Loan Agreements, we owe the amounts as stated in the table ~~below.~~below on the following page.

Bridge Loan

On August 30, 2021, we entered into a loan commitment note for a bridge loan of up to $25,000 ~~which we~~with the plan ~~to use~~the proceeds to pay off the existing equipment loans as they come out of the lock out period and may be prepaid (dates detailed in the table ~~below).~~on the following page. The outstanding principal balances of the bridge loan ~~shall be~~became due and payable in full on the earlier of the following dates (1) August 31, 2023, or (2) one Federal Reserve business day after the closing of the real estate transactions contemplated under the Purchase and Sale Agreement dated March 16, 2020, as amended, between Bridgford Food Processing Corporation and CRG Acquisition, LLC (the “CRG Purchase ~~Agreement. As of April 15, 2022, we~~Agreement”). We prepaid $~~18,651~~18,653 in equipment loans ~~(equipment~~(including equipment loans 4.13%, 3.98%, 3.70% and 3.29% in the table ~~below)~~on the following page) utilizing proceeds from the new bridge loan. The Company evaluated the exchange under ASC 470 and determined that the exchange should be treated as a debt modification prospectively. The Company accounted for this transaction as a debt modification and did not incur any gain or loss relating to the modification. The debt modification did not meet the greater than ten percent test and was deemed not substantial. We prepaid and terminated the bridge loan and related loan commitment note on June 2, 2022, using $18,653 in proceeds from the gain on the sale of a land parcel in Chicago pursuant to the CRG Purchase Agreement.

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The following table reflects major components of our line of credit and borrowing agreements as of ~~April 15,~~July 8, 2022, and October 29, 2021, respectively.

Schedule of Line of Credit and Borrowing Agreements

April 15, 2022 October 29, 2021

Revolving credit facility $ 18,000 $ 12,000
Equipment notes:
3.70% note due 12/21/26, out of lockout 12/23/21 - 2,901
3.29% note due 03/05/27, out of lockout 03/06/22 - 5,951
3.68% note due 04/16/27, out of lockout 04/17/22 5,391 5,888
SOFR plus 2.00% bridge loan due 08/31/23 18,651 10,329
Total debt 42,042 37,069
Less current debt (3,446 ) (1,065 )
Total long-term debt $ 38,596 $ 36,004

On June 2, 2022, we prepaid our outstanding balance under the bridge loan and terminated the loan commitment note and plan to repay the outstanding balance under our revolving credit facility, which facility continues in effect per its terms to March 1, 2023. Refer to Note 7 - Subsequent Events for further information.

	July 8, 2022			October 29, 2021

Revolving credit facility	$	-		$	12,000
Equipment notes:
3.70% note due 12/21/26, out of lockout 12/23/21		-			2,901
3.29% note due 03/05/27, out of lockout 03/06/22		-			5,951
3.68% note due 04/16/27, out of lockout 04/17/22		5,159			5,888
SOFR plus 2.00% bridge loan due 08/31/23		-			10,329
Total debt		5,159			37,069
Less current debt		(995	)		(1,065	)
Total long-term debt	$	4,164		$	36,004

Loan Covenants

The Wells Fargo Loan Agreements collectively contain various affirmative and negative covenants that limit the use of funds and define other provisions of the loan. The main financial covenants are listed below:

	●	Total Liabilities divided by Tangible Net Worth not greater than 2.5 to 1.0 at each fiscal quarter,
	●	Quick Ratio not less than ~~.85~~0.85 to 1.0 at each fiscal quarter end,
	●	Net Income After Taxes not less than $500 on a quarterly basis, and
	●	Capital Expenditures less than $5,000.

As of ~~April 15,~~July 8, 2022, the Company was in compliance with all covenants under the Wells Fargo Loan Agreements.

Note 7 – Subsequent ~~Events:~~Events:

On ~~May 16,~~July 19, 2022, the Company received a $~~575~~5,117 payment of income tax receivable from the ~~IRS.~~Internal Revenue Service.

Note 8 – Gain on Sale of Property, Plant and Equipment:

On June 1, 2022, Bridgford Food Processing Corporation ~~a California corporation and a wholly-owned subsidiary of the Company (“BFPC”),~~ and CRG Acquisition, LLC (“CRG”), completed the real estate transaction (the “Sale Transaction”) set forth in the CRG Purchase ~~and Sale Agreement dated March 16, 2020 (as amended to date, the “CRG Purchase Agreement”).~~Agreement. Pursuant to the terms of the CRG Purchase Agreement, CRG acquired a parcel of land from ~~BFPC~~the Company including an approximate 156,000 square foot four-story industrial food processing building located at 170 N. Green Street in Chicago, Illinois. The purchase price for the Sale Transaction was $60,000, less $2,100 previously received by ~~BFPC~~the Company as non-refundable earnest money, and subject to certain closing adjustments as set forth in the CRG Purchase Agreement. The Company recorded a gain on sale of property, plant and equipment of $57,663 in the third quarter of fiscal 2022. The effective tax rate for the third quarter of fiscal 2022 reflects the impact of $16,427 of tax expense related to tax on the gain on sale of a property, plant and equipment.

In connection with the closing of the Sale Transaction, ~~BFPC~~the Company paid an aggregate of $1,200 in broker commissions, including ~~$300~~$300 to KR6, Inc., an entity controlled by Keith Ross (a member of the Company’s Board of Directors). ~~BFPC~~On June 2, 2022, the Company used approximately $~~19,000~~18,653 of the Sale Transaction proceeds to repay and terminate the bridge loan commitment note dated August 30, 2021, with Wells Fargo Bank, N.A. ~~and plans to use approximately~~On June 7, 2022, the Company used $18,000 of such proceeds to repay the outstanding balance under ~~our~~its revolving credit facility with Wells Fargo Bank, N.A., which revolver line continues in effect per its terms to March 1, 2023.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(dollars in thousands)

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements included within in this Report, and the information and documents incorporated by reference with this Report, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Report or incorporated by reference into this Report are forward-looking statements. These statements include, among other things, any predictions of earnings, revenues, expenses or other financial items; plans or expectations with respect to our business strategy; statements concerning industry trends; statements regarding anticipated demand for our products, or the products of our competitors; statements relating to manufacturing forecasts; statements relating to forecasts of our liquidity position or available cash resources; statements regarding the anticipated impact of the global novel coronavirus (“COVID-19”) pandemic; statements regarding operational challenges, including as a result of global supply chain disruptions and labor shortages; statements regarding inflationary pressures and the resulting impact on our results of operations; statements regarding new regulations related to federal income tax and the impact on our financial statements and cash flow; statements regarding the impact of the adoption of recent accounting pronouncements on our business; and statements relating to the assumptions underlying any of the foregoing. Throughout this Report, we have attempted to identify forward-looking statements by using words such as “may,” “believe,” “will,” “could,” “project,” “anticipate,” “expect,” “estimate,” “should,” “continue,” “potential,” “plan,” “forecasts,” “goal,” “seek,” “intend,” other forms of these words or similar words or expressions or the negative thereof (although not all forward-looking statements contain these words).

Such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions; the impact of the COVID-19 pandemic on our production facilities, supply chain, consumer demand, and cost of products sold, the impact of competitive products and pricing; success of operating initiatives; development and operating costs; advertising and promotional efforts; adverse publicity; acceptance of new product offerings; consumer trial and frequency; changes in business strategy or development plans; availability, terms and deployment of capital; availability of qualified personnel; commodity, labor, and employee benefit costs; changes in, or failure to comply with, government regulations; weather conditions; construction schedules; and other factors referenced in this Report as well as in our other filings with the Securities and Exchange Commission (the “SEC”). In addition, actual results may differ as a result of additional risks and uncertainties of which we are currently unaware or which we do not currently view as material to our business. We have based our forward-looking statements on our current expectations and projections about trends affecting our business and industry and other future events. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Assumptions relating to budgeting, marketing, and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic revisions based on actual experience and business developments, the impact of which may cause us to alter our marketing, capital expenditure or other budgets, which may in turn affect our business, financial position, results of operations and cash flows. The reader is therefore cautioned not to place undue reliance on forward-looking statements contained herein and to consider other risks detailed more fully in our Annual Report on Form 10-K for the fiscal year ended October 29, 2021 (the “Annual Report”) as well as our other filings with the SEC with the understanding that our future results may be materially different from what we currently expect. The forward-looking statements we make speak only as of the date on which they are made. We expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations. If we do update or correct any forward-looking statements, readers should not conclude that we will make additional updates or corrections.

COVID-19

We are monitoring and responding to the evolving nature of state and local government actions related to the COVID-19 pandemic and its impact on each of our production plant locations and our customer base. We coordinate with our local managers for the primary purpose of maintaining the health and safety of our team members, ensuring our ability to operate our processing facilities, and maintaining the liquidity of our business. We continue to experience multiple challenges related to the pandemic. These challenges may continue to increase our operating costs and negatively impact our sales volumes.

During the ~~second~~third quarter of fiscal year 2022, the Frozen Food Products segment has continued to see a lessening of pandemic related restrictions on food service venues. In our Frozen Food Products segment, the recent sales volume increases in foodservice have been sufficient to offset the losses in retail and as a result, we experienced increased unit sales volume during fiscal year 2022 to date in this segment. Our Snack Food Products segment has experienced continued commodity cost increases caused in part by supply and demand constraints related to reopening the economy from pandemic restrictions. The cost of significant meat commodities increased approximately ~~$3,652~~$2,186 and the cost of purchased flour increased approximately ~~$290~~$508 during the ~~second~~third twelve weeks of fiscal year 2022 compared to the same period in fiscal year 2021.

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● Team Members – The health and safety of our team members is our top priority. To protect our team members, we have implemented safety measures recommended by the Centers for Disease Control and Prevention and the Occupational Safety and Health Administration in our facilities and have implemented social distancing, temperature checks of team members, increased efforts to deep clean and sanitize facilities, the use of protective face coverings in certain environments, and making protective face coverings and other protective equipment available to team members. We encourage team members who feel sick to stay at home and provide relaxed attendance policies in some instances. We continue to explore and implement additional ways to promote social distancing in our production facilities by creating additional breakroom space and allowing extra time between shifts to reduce interaction of team members, as well as erecting dividers between workstations or increasing the space between workers on the production floor.

● Customers and Production – The most significant impact from business shutdowns relates to channel shifts and lower production in our Frozen Food Products segment. We are committed to doing our best to ensure the continuity of our business and the availability of our products to customers. Since the second quarter of fiscal 2021, we have continued to see a shift in demand from our retail to our foodservice sales channels as schools and in-dining restaurants reopened across the country. Our production capabilities, including our large scale and geographic proximities, allow us to adapt some of our facilities to the changing demand by shifting certain amounts of production from retail to foodservice. In addition, our production facilities have experienced varying levels of production impacts, including reduced volumes and worker absenteeism, and we may continue to experience these impacts.

● Supply Chain – Our supply chain has stayed largely intact. Although we have experienced some minor disruptions, these events have not significantly impacted our production to date. We have experienced volatility in commodity inputs, in part due to impacts caused by COVID-19 related business disruptions, and we expect this volatility to continue, which may impact our future input costs. Commodity costs increased approximately ~~$3,942~~$13,001 during the ~~second quarter~~first thirty-six weeks of fiscal year 2022 compared to the same ~~quarter~~period in fiscal year 2021.

● Insurance and CARES Act – Although we maintain insurance policies for various risks, we believe most COVID-19 impacts will not be covered by these policies. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferral of the employer portion of social security payments, and expanded income tax net operating loss carryback provisions. While we continue to examine the potential impacts of these actions, we anticipate new regulations related to federal income tax will have a significant impact on our financial statements and cash flow. Late in the second quarter of fiscal 2020 we began implementing the deferral of the employer portion of social security payments and intend to continue this deferral for the duration of its availability which will have a favorable impact on short-term liquidity. The remaining deferral amount as of ~~April 15,~~July 8, 2022, is approximately $758 due on December 31, 2022.

● Liquidity – Operations ~~provided $2,273~~used $4,988 in operating cash flows during the ~~twenty-four-weeks~~thirty-six-weeks ended ~~April 15,~~July 8, 2022. AsWe received $55,388 in net proceeds on June 1, 2022, from the closing of ~~that date,~~the sale of real property located at 170 N. Green Street in Chicago pursuant to the terms of the Purchase and Sale Agreement dated March 16, 2020, as amended, between Bridgford Food Processing Corporation and CRG Acquisition, LLC (“the CRG Purchase Agreement”). On December 1, 2021, we ~~had approximately $50,246 of net working capital and $7,000 available~~expanded the maximum borrowing under our ~~expanded~~ revolving line of credit with Wells Fargo Bank, N.A. ~~On December 1, 2021, we expanded the revolving line of credit~~ to $25,000 ~~until~~from $15,000. The credit limit returned to $15,000 on June 15, 2022 ~~upon which the credit limit will return to $15,000~~ for the balance of the ~~term.~~term to March 1, 2023. The line of credit was paid off on June 7, 2022, using $18,000 in proceeds from the sale of 170 N. Green Street. As of July 8, 2022, we had approximately $59,958 of net working capital and $15,000 available under our revolving line of credit with Wells Fargo Bank, N.A. We entered into a bridge loan with Wells Fargo Bank, N.A. on August 30, 2021, for up to $25,000 of which we used $18,653 to pay off and prepay the existing equipment loans as they came out of the lock out period and could be prepaid. We prepaid and terminated the bridge loan on June 2, 2022, using $18,653 in proceeds from the sale of 170 N. Green Street. As of July 8, 2022, we have $995 of current debt remaining on equipment loans. Refer to Note 6 – Equipment Notes Payable and Financial Arrangements of the Notes to the Condensed Consolidated Financial Statements included within this Report for further information. Commodity price volatility or increases could adversely impact our business, financial condition including liquidity, and results of operations. Despite higher commodity costs, we may not be able to increase our product prices in a timely manner or sufficiently to offset increased commodity costs due to consumer price sensitivity, pricing in relation to competitors and the reluctance of retailers to accept the price increase. We received $2,205 from a life insurance receivable during the second quarter of fiscal 2022. Higher product prices could potentially lower demand for our product and decrease volume. As of April 15, 2022, we have $39 of current debt on equipment loans. We entered into a bridge loan with Wells Fargo Bank, N.A. on August 30, 2021, for up to $25,000 which we plan to use to pay off the existing equipment loans as they come out of the lock out period and may be prepaid. As of April 15, 2022, we paid off $18,651 in equipment loans utilizing proceeds from the new bridge loan. Management believes there are various options available to generate additional liquidity to repay debt or fund operations such as mortgaging real estate, should that be necessary. Our ability to increase liquidity will depend upon, among other things, our business plans, performance of operating divisions, economic conditions of capital markets, or circumstances related to the COVID-19 global pandemic. If we are unable to increase liquidity through mortgaging real estate, or generate positive cash flow necessary to fund operations, we may not be able to compete successfully, which could negatively impact our business, operations, and financial condition. Combined with the cash expected to be generated from the Company’s operations and income tax refunds due of ~~$5,646 partially offset by payment~~$5,524 of which $5,117 in income tax refunds were received on ~~deferral of social security taxes,~~July 19, 2022, we anticipate that we will maintain sufficient liquidity to operate our business for at least the next twelve months. We will continue to monitor the impact of COVID-19 on our liquidity and, if necessary, take action to preserve liquidity and ensure that our business can operate during these uncertain times. In connection with our sale of certain real estate on June 1, 2022, we plan to repay our outstanding balance under the line of credit and prepaid our outstanding balance under our bridge loan and terminated such loan. Refer to Note 7 - Subsequent Events of the Notes to Consolidated Financial Statements included in this Report for further information.

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Critical Accounting Policies and Management Estimates

The preparation of Condensed Consolidated Financial Statements in conformity with generally accepted accounting principles in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the respective reporting periods. Some of the estimates needed to be made by management include the allowance for doubtful accounts, promotional and returns allowances, inventory reserves, the estimated useful lives of property and equipment, and the valuation allowance for the Company’s deferred tax assets. Actual results could materially differ from these estimates. We determine the amounts to record based on historical experience and various other assumptions that we view as reasonable under the circumstances and consider all relevant available information. The results of this analysis form the basis for our conclusion as to the value of assets and liabilities that are not readily available from other independent sources. Amounts estimated related to liabilities for self-insured workers’ compensation, employee healthcare and pension benefits are especially subject to inherent uncertainties and these estimated liabilities may ultimately settle at amounts which vary from our current estimates.

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Current accounting principles require that our pension benefit obligation be measured using an internal rate of return (“IRR”) analysis to be included in the discount rate selection process. The IRR calculation for the Retirement Plan for Employees of Bridgford Foods Corporation is measured annually and based on the Citigroup Pension Discount Rate. The Citigroup Pension Discount Rate as of ~~April 30,~~July 31, 2022, was ~~4.21%~~4.13% as compared to 2.77% as of October 31, 2021. The discount rate applied can significantly affect the value of the projected benefit obligation as well as the net periodic benefit cost.

Our credit risk is diversified across a broad range of customers and geographic regions. Losses due to credit risk have recently been immaterial. The provision for doubtful accounts receivable is based on historical trends and current collection risk. We have significant receivables with a couple of large, well-known customers which, although historically secure, could be subject to material risk should these customers’ operations suddenly deteriorate. We monitor these customers closely to minimize the risk of loss.

Customer Concentration > 20% of AR or >10% of Sales

Walmart ⁽¹⁾ Dollar General
Sales AR Sales AR
April 15, 2022 31.4 % 4.4 % 17.7 % 38.1 %
April 16, 2021 37.6 % 5.7 % 14.0 % 13.5 %

	Walmart ⁽¹⁾						Dollar General
	Sales			AR			Sales			AR
July 8, 2022		30.8	%		19.8	%		18.2	%		32.3	%
July 9, 2021		37.3	%		5.7	%		14.7	%		45.7	%

~~(1) Walmart accounts receivable represented a lower percentage of sales as of April 15, 2022, due to accelerated payments on outstanding accounts receivable.~~

(1)	Walmart accounts receivable represented a higher percentage of sales as of July 8, 2022, due to terminating the accelerated payments on outstanding accounts receivable on July 1, 2022.

Walmart ⁽¹⁾ Dollar General
Sales AR Sales AR
April 15, 2022 30.5 % 4.4 % 19.6 % 38.1 %
April 16, 2021 38.7 % 5.7 % 14.2 % 13.5 %

	Walmart ⁽¹⁾						Dollar General
	Sales			AR			Sales			AR
July 8, 2022		29.4	%		19.8	%		19.2	%		32.3	%
July 9, 2021		36.7	%		5.7	%		16.1	%		45.7	%

(1)	Walmart accounts receivable represented a ~~lower~~higher percentage of sales as of ~~April 15,~~July 8, 2022, due to terminating the accelerated payments on outstanding accounts ~~receivable.~~receivable on July 1, 2022.

Revenues are recognized in accordance with ASC 606 – Contracts with Customers upon passage of title to the customer, typically upon product pick-up, shipment, or delivery to customers. Products are delivered to customers primarily through our own long-haul fleet or through a Company owned direct store delivery system.

We record the cash surrender or contract value for life insurance policies as an adjustment of premiums paid in determining the expense or income to be recognized under the contract for the period.

We provide tax reserves for federal, state, local and international exposures relating to audit results, tax planning initiatives and compliance responsibilities. The development of these reserves requires judgments about tax issues, potential outcomes, and timing, and is a subjective estimate. Although the outcome of these tax audits is uncertain, in management’s opinion adequate provisions for income taxes have been made for potential liabilities, if any, resulting from these reviews. Actual outcomes may differ materially from these estimates.

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We assess the recoverability of our long-lived assets on a quarterly basis or whenever adverse events or changes in circumstances or business climate indicate that expected undiscounted future cash flows related to such long-lived assets may not be sufficient to support the net book value of such assets. If undiscounted cash flows are not sufficient to support the recorded assets, we recognize an impairment to reduce the carrying value of the applicable long-lived assets to their estimated fair value.

We participate in “multiemployer” pension plans administered by labor unions on behalf of their employees. We pay monthly contributions to union trust funds, a portion of which is used to fund pension benefit obligations to plan participants. The contribution amount may change depending upon the ability of participating companies to fund these pension liabilities as well as the actual and expected returns on pension plan assets. Should we withdraw from the union and cease participation in a union plan, federal law could impose a penalty for additional contributions to the plan. The penalty would be recorded as an expense in the consolidated statement of operations. The ultimate amount of the withdrawal liability is dependent upon several factors including the funded status of the plan and contributions made by other participating companies.

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We are subject to the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the “PPACA”). Requirements of the law include the removal of the lifetime limits on active and retiree medical coverage, expanding dependent coverage to age 26 and the elimination of pre-existing conditions that may impact other postretirement benefits costs. The PPACA law also includes a potential excise tax on the value of benefits that exceed a pre-defined limit. Fortunately, this potential tax has been indefinitely deferred and we do not see significant financial exposure from the so called “Cadillac Tax”. Finally, the PPACA includes provisions that require employers to offer health benefits to all full-time employees (defined as 30 hours per week). The health coverage must meet minimum standards for the actuarial value of the benefits offered and employee affordability. We believe that the current administration seems more likely to enhance the scope and coverage associated with PPACA than to repeal or significantly change this law. The recent legislative packages related to pandemic relief included some minor provisions that will impact health benefits in the future. These changes most prominently focus on the impact of surprise balance bills from out-of-network providers. When these changes become law in 2022, the Bridgford Foods benefit plan will be modified accordingly. At this point in time, we believe that our current plans meet the existing requirements. We will continue to assess the accounting implications of the PPACA and its impact on our financial position and results of operations as more legislative and interpretive guidance becomes available. The potential future effects and cost of complying with the provisions of the PPACA are not determinable at this time.

Overview of Reporting Segments

We operate in two business segments – the processing and distribution of frozen food products (the Frozen Food Products segment), and the processing and distribution of snack food products (the Snack Food Products segment). For information regarding the separate financial performance of the business segments refer to Note 4 — Segment Information of the Notes to the Condensed Consolidated Financial Statements included in this Report. We manufacture and distribute an extensive line of food products, including biscuits, bread dough items, roll dough items, dry sausage products and beef jerky.

Frozen Food Products Segment

Our Frozen Food Products segment primarily manufactures and distributes biscuits, bread dough items, roll dough items and shelf stable sandwiches. All items within this segment are considered similar products and have been aggregated at this level. Our frozen food business covers the United States. Products produced by the Frozen Food Products segment are generally supplied to food service and retail distributors who take title to the product upon shipment receipt through company leased long-haul vehicles. In addition to regional sales managers, we maintain a network of independent food service and retail brokers covering most of the United States. Brokers are compensated on a commission basis. We believe that our broker relationships, in close cooperation with our regional sales managers, are a valuable asset providing significant new product and customer opportunities. Regional sales managers perform several significant functions for us, including identifying and developing new business opportunities and providing customer service and support to our distributors and end purchasers through the effective use of our broker network.

Snack Food Products Segment

Our Snack Food Products segment primarily distributes products manufactured by us. All items within this segment are considered similar products and have been aggregated at this level. The dry sausage division includes products such as jerky, meat snacks, sausage, and pepperoni products. Our Snack Food Products segment sells approximately 170 different items through a direct store delivery network serving approximately 19,000 supermarkets, mass merchandise and convenience retail stores located in 49 states. These customers are comprised of large retail chains and smaller “independent” operators.

Products produced or distributed by the Snack Food Products segment are supplied to customers through either direct-store-delivery or direct delivery to customer warehouses. Product delivered using the Company-owned fleet direct to the store is considered a direct-store-delivery. In this case, we provide the service of setting up and maintaining the display and stocking our products. Products delivered to customer warehouses are distributed to the retail store and stocked by the customer where it is then resold to the end consumer.

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Results of Operations for the Twelve Weeks Ended ~~April 15,~~July 8, 2022, and ~~April 16,~~July 9, 2021

Net Sales-Consolidated

Net sales increased by ~~$9,509 (18.8%~~$2,981 (5.3%) to ~~$59,986~~$59,519 in the ~~second~~third twelve-week period of the 2022 fiscal year compared to the same twelve-week period in fiscal year 2021. The changes in net sales were comprised as follows:

Impact on Net Sales-Consolidated	%		$			%		$
Selling price per pound		11.0		5,967			10.8		6,505
Unit sales volume in pounds		8.6		4,697			-4.8		(2,904	)
Returns activity		-0.6		(485	)		-0.3		(186	)
Promotional activity		-0.2		(670	)		-0.4		(434	)
Increase in net sales		18.8		9,509			5.3		2,981

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Net Sales-Frozen Food Products Segment

Net sales in the Frozen Food Products segment increased by ~~$3,623 (40.9%~~$3,392 (40.8%) to ~~$12,477~~$11,713 in the ~~second~~third twelve-week period of the 2022 fiscal year compared to the same twelve-week period in fiscal year 2021. The changes in net sales were comprised as follows:

Impact on Net Sales-Frozen Food Products	%		$			%		$
Selling price per pound		7.4		744			10.1		934
Unit sales volume in pounds		34.0		3,432			33.3		3,070
Returns activity		-0.1		(23	)		0.6		47
Promotional activity		-0.4		(530	)		-3.2		(659	)
Increase in net sales		40.9		3,623			40.8		3,392

The increase in net sales for the twelve-week period ended ~~April 15,~~July 8, 2022, primarily relates to higher unit sales volume in pounds due to the ongoing reopening of the economy from COVID-19 pandemic related restrictions and to a lesser extent higher selling prices per pound implemented during July ~~2021.~~2021 and May 2022. Other institutional Frozen Food Products sales, including sheet dough and rolls, increased ~~48%~~41% by volume and retail sales volume decreased by ~~12%~~3%. Demand is gradually returning in the foodservice sales channel as schools and in-dining restaurants are starting to reopen across the country after experiencing closures in response to the COVID-19 pandemic. Returns activity ~~increased~~decreased compared to the same twelve-week period in the 2021 fiscal year. Promotional activity was higher as a percentage of sales.

Net Sales-Snack Food Products Segment

Net sales in the Snack Food Products segment ~~increased~~decreased by ~~$5,886 (14.1%~~$411 (0.9%) to ~~$47,509~~$47,806 in the ~~second~~third twelve-week period of the 2022 fiscal year compared to the same twelve-week period in fiscal year 2021. The changes in net sales were comprised as follows:

Impact on Net Sales-Snack Food Products	%		$			%		$
Selling price per pound		11.8		5,223			11.0		5,571
Unit sales volume in pounds		2.9		1,265			-11.8		(5,974	)
Returns activity		-0.8		(462	)		-0.5		(233	)
Promotional activity		0.2		(140	)		0.4		225
Increase in net sales		14.1		5,886
Decrease in net sales							-0.9		(411	)

Net sales of Snack Food Products ~~increased~~decreased partially due to ~~higher selling prices per pound and to a lesser extent higher~~lower unit sales volume in pounds through our direct store delivery distribution channel partially offset by higher selling prices per pound during the ~~second~~third quarter of fiscal year 2022. We believe demand decreased primarily due to inflationary pressures on consumer spending habits. The weighted average selling price per pound increased compared to the same twelve-week period in the prior fiscal year due to selling price increases and reductions in packaging size. Returns activity was higher compared to the same twelve-week period in the 2021 fiscal year. Promotional offers decreased as a percentage of sales due to higher sales to high-volume, low-promotion customers.

Cost of Products Sold and Gross Margin-Consolidated

Cost of products sold ~~increased~~decreased by ~~$3,414 (8.6%~~$2,029 (4.6%) to ~~$43,304~~$42,498 in the ~~second~~third twelve-week period of the 2022 fiscal year compared to the same twelve-week period in fiscal year 2021. The gross margin increased from ~~21.0%~~21.2% to ~~27.8%~~28.6% during the ~~second~~third twelve-weeks of fiscal year 2022.

Change in Cost of Products Sold by Segment	$		%		Commodity $ Increase		$			%		Commodity $ Increase
Frozen Food Products Segment		2,250		5.7		290		2,894			6.5		508
Snack Food Products Segment		1,164		2.9		3,652		(4,923	)		-11.1		2,186
Total		3,414		8.6		3,942		(2,029	)		-4.6		2,694

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Cost of Products Sold-Frozen Food Products Segment

Cost of products sold in the Frozen Food Products segment increased by ~~$2,250 (35.2%~~$2,894 (49.4%) to ~~$8,649~~$8,752 in the ~~second~~third twelve-week period of the 2022 fiscal year compared to the same twelve-week period in fiscal year 2021. ~~Unit sales volume and gross overhead including hourly wages and benefits has increased which resulted in an increase to the cost of products sold.~~ The cost of purchased flour increased approximately ~~$290~~$508 in the ~~second~~third twelve-week period of fiscal year 2022 compared to the same twelve-week period in fiscal year 2021. Increased unit sales volume and gross overhead including hourly wages and benefits has increased as a result of labor shortages and continued upward pressures on wages as a result of inflation. In our Frozen Food Products segment, the volume increases in foodservice were not enough to mitigate an increase in overhead per case of product.

Cost of Products Sold-Snack Food Products Segment

Cost of products sold in the Snack Food Products segment ~~increased~~decreased by ~~$1,164 (3.5%~~$4,923 (12.7%) to ~~$34,655~~$33,746 in the ~~second~~third twelve-week period of the 2022 fiscal year compared to the same twelve-week period in fiscal year 2021 due to ~~higher standard costs partially offset by~~lower cost for production materials and lower sales ~~volume. Meat commodity costs continued to rise during the second quarter of the 2022 fiscal year, significantly adding to the increase~~volume in ~~cost of products sold.~~our direct store delivery distribution channel. The cost of significant meat commodities increased approximately ~~$1,164~~$2,186 in the ~~second~~third twelve-week period of fiscal year 2022 compared to the same period in fiscal year 2021. We reduced our net realizable value reserve of ~~$150~~$55 during the twelve weeks ended ~~April 15,~~July 8, 2022, to recognize inventory sold through on products already reserved in inventory as of year-end October 29, 2021. We maintain a net realizable reserve of ~~$194~~$139 on products as of ~~April 15,~~July 8, 2022, after determining that the market value on some meat products could not cover the costs associated with completion and sale of the product.

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Selling, General and Administrative Expenses-Consolidated

Selling, general and administrative expenses (“SG&A”) increased by ~~$2,272 (17.6%~~$1,076 (7.6%) to ~~$15,178~~$15,220 in the ~~second~~third twelve-week period of fiscal year 2022 compared to the same twelve-week period in the prior fiscal year. The table below summarizes the significant expense increases (decreases) included in this category:

	12 Weeks Ended					Expense			12 Weeks Ended						Expense
	April 15, 2022			April 16, 2021		Increase (Decrease)			July 8, 2022			July 9, 2021			Increase (Decrease)
Wages and bonus	$	6,504		$	5,001	$	1,503		$	6,245		$	5,762		$	483
Pension (income) expense		(367	)		193		(560	)
Product advertising		2,438			2,199		239			2,488			2,210			278
Fuel		558			385		173			666			400			266
Vehicle repairs and maintenance		354			192		162
Pension (income) expense										(71	)		191			(262	)
Provision for bad debt										111			(50	)		161
Other SG&A		5,691			4,936		755			5,781			5,631			150
Total - SG&A	$	15,178		$	12,906	$	2,272		$	15,220		$	14,144		$	1,076

Higher sales commissions resulted in higher wages and bonus expenses in the ~~second~~third twelve weeks of the 2022 fiscal year compared to the same period in the prior year. Costs for product advertising increased mainly as a result of higher payments under brand licensing agreements in the Snack Food Products segment during the third twelve-week period of fiscal 2022. The increase in fuel expense was driven by per gallon fuel price increases compared to the prior year as a result of higher cost trends in petroleum markets. The decrease in pension expense was a result of an increase in pension plan assets caused by performance of the underlying markets that support them as well as higher pension discount rates resulting in lower liabilities. ~~Costs for product advertising increased mainly as a result of higher payments under brand licensing agreements in the Snack Food Products segment during the second twelve-week period of fiscal 2022.~~ The increase in ~~fuel~~the provision for bad debt expense was ~~driven by per gallon fuel price increases compared to~~mainly the ~~prior year as a~~ result of ~~higher cost trends in petroleum markets. Repairs and maintenance~~estimated losses on ~~vehicles have increased compared to the prior year period mainly due to an aging fleet.~~older balances. None of the changes individually or as a group of expenses in “Other SG&A” were significant enough to merit separate disclosure. The major components comprising the increase of “Other SG&A” expenses were higher ~~healthcare cost, insurance premiums, postage expense~~storage fees, travel expenses, utilities, vehicle repairs and ~~sales and lease tax audit fees.~~other taxes.

Selling, General and Administrative Expenses-Frozen Food Products Segment

SG&A expenses in the Frozen Food Products segment increased by ~~$679 (26.0%~~$769 (28.7%) to ~~$3,286~~$3,451 in the ~~second~~third twelve-week period of fiscal year 2022 compared to the same twelve-week period in the prior fiscal year. The overall increase in SG&A expenses was due to higher wages and bonuses, broker commission costs and fuel, partially offset by lower pension expense.

Selling, General and Administrative Expenses-Snack Food Products Segment

SG&A expenses in the Snack Food Products segment increased by ~~$1,593 (15.5%~~$307 (2.7%) to ~~$11,892~~$11,769 in the ~~second~~third twelve-week period of fiscal year 2022 compared to the same twelve-week period in the prior fiscal year. Most of the increase was due to higher wages and bonuses, fuel, product advertising, increased fees paid under brand licensing agreements and higher fleet vehicle repairs and maintenance partially offset by lower pension expense.

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Income Taxes-Consolidated

Income tax for the twelve weeks ended ~~April 15,~~July 8, 2022, and ~~April 16,~~July 9, 2021, respectively, was as follows:

	April 15, 2022			April 16, 2021			July 8, 2022			July 9, 2021
Provision for income taxes	$	391		$	(535	)	$	16,886		$	(527	)

Effective tax rate		32.7	%		23.2	%		29.0	%		27.2	%

We recorded a provision for income taxes of ~~$391~~$16,886 for the twelve-week period ended ~~April 15,~~July 8, 2022, related to federal and state taxes, based on the Company’s expected annual effective tax rate. The effective tax rate for the third quarter of fiscal 2022 reflects the impact of $16,427 of tax expense related to tax on the gain on the sale of a land parcel in Chicago, Illinois, discussed in Note 5. – Income Taxes of the Notes to the Condensed Consolidated Financial Statements included in this Report. The effective income tax rate differed from the applicable mixed statutory rate of approximately 26.4% due to non-deductible meals and entertainment, non-taxable gains and losses on life insurance policies, and state income taxes.

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Results of Operations for the ~~Twenty-Four~~Thirty-Six Weeks Ended ~~April 15,~~July 8, 2022, and ~~April 16,~~July 9, 2021

Net Sales-Consolidated

Net sales increased by ~~$18,902 (18.0%~~$21,883 (13.5%) to ~~$124,072~~$183,591 in the ~~twenty-four-week~~thirty-six-week period ended ~~April 15,~~July 8, 2022, compared to the same period in fiscal year 2021. The changes in net sales were comprised as follows:

Impact on Net Sales-Consolidated	%		$			%		$
Selling price per pound		12.7		14,314			11.8		20,425
Unit sales volume in pounds		5.4		6,100			2.1		3,590
Returns activity		-0.2		(357	)		-0.2		(542	)
Promotional activity		0.1		(1,155	)		-0.2		(1,590	)
Increase in net sales		18.0		18,902			13.5		21,883

Net Sales-Frozen Food Products Segment

Net sales in the Frozen Food Products segment increased by ~~$6,725 (37.1%~~$10,118 (38.3%) to ~~$24,843~~$36,556 in the ~~twenty-four-week~~thirty-six-week period ended ~~April 15,~~July 8, 2022, compared to the same ~~twenty-four-week~~thirty-six-week period in fiscal year 2021. The changes in net sales were comprised as follows:

Impact on Net Sales-Frozen Food Products	%		$			%		$
Selling price per pound		7.0		1,446			8.0		2,369
Unit sales volume in pounds		30.5		6,258			31.4		9,338
Returns activity		0.1		(3	)		0.2		44
Promotional activity		-0.5		(976	)		-1.3		(1,633	)
Increase in net sales		37.1		6,725			38.3		10,118

The increase in net sales for the ~~twenty-four-week~~thirty-six-week period ended ~~April 15,~~July 8, 2022, primarily relates to higher unit sales volume in pounds coupled with a higher selling price per pound. The increase in net sales was primarily driven by a significant increase in volume to institutional customers and an increase in selling prices due to price increases implemented during the fourth quarter of fiscal ~~2021.~~2021 and second quarter of fiscal 2022. Other institutional Frozen Food Products sales, including sheet dough and rolls, increased ~~52%~~48% by volume ~~while~~and retail sales volume ~~remained consistent.~~decreased 4%. Demand has shifted from retail to foodservice sales channels as schools and in-dining restaurants have started to reopen in response to the lifting of restrictions caused by the COVID-19 pandemic. Returns activity decreased compared to the same ~~twenty-four-week~~thirty-six-week period in the 2021 fiscal year. Promotional activity was higher as a percentage of ~~sales.~~sales due to increased sales to high-promotion customers.

Net Sales-Snack Food Products Segment

Net sales in the Snack Food Products segment increased by ~~$12,177 (14.0%~~$11,765 (8.7%) to ~~$99,229~~$147,035 in the ~~twenty-four-week~~thirty-six-week period ended ~~April 15,~~July 8, 2022, compared to the same ~~twenty-four-week~~thirty-six-week period in fiscal year 2021. The changes in net sales were comprised as follows:

Impact on Net Sales-Snack Food Products	%		$			%		$
Selling price per pound		14.0		12,868			12.6		18,055
Unit sales volume in pounds		-0.2		(158	)		-4.0		(5,748	)
Returns activity		-0.2		(354	)		-0.3		(587	)
Promotional activity		0.4		(179	)		0.4		45
Increase in net sales		14.0		12,177			8.7		11,765

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Net sales of Snack Food Products increased due to higher ~~sales through our direct store delivery distribution channel during the first twenty-four weeks of fiscal year 2022. The weighted~~ average selling ~~price~~prices per pound ~~increased~~ compared to the same ~~twenty-four-week~~thirty-six week period in the prior fiscal ~~year due to price~~year. Price increases were implemented in response to record high meat commodity input costs. Unit sales volume in pounds ~~remained consistent with the prior year comparable twenty-four-week period.~~through our direct store delivery distribution channel decreased due to lower demand caused by inflationary pressures on consumer spending habits. Returns activity was ~~slightly lower~~higher compared to the same ~~twenty-four-week~~thirty-six-week period in the 2021 fiscal year. Promotional offers ~~increased~~decreased due to ~~higher~~lower sales to high-volume, high-promotion customers.

Cost of Products Sold and Gross Margin-Consolidated

Cost of products sold increased by ~~$10,965 (13.7%~~$8,936 (7.2%) to ~~$90,997~~$133,495 in the ~~twenty-four-week~~thirty-six-week period ended ~~April 15,~~July 8, 2022, year compared to the same ~~twenty-four-week~~thirty-six-week period in fiscal year 2021. The gross margin increased from ~~23.9%~~23.0% to ~~26.7%~~27.3% during the 2022 period.

Change in Cost of Products Sold by Segment	$		%		Commodity $ Increase		$		%		Commodity $ Increase
Frozen Food Products Segment		4,662		5.8		726		7,557		6.1		1,234
Snack Food Products Segment		6,303		7.9		9,580		1,379		1.1		11,767
Total		10,965		13.7		10,306		8,936		7.2		13,001

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Cost of Products Sold-Frozen Food Products Segment

Cost of products sold in the Frozen Food Products segment increased by ~~$4,662 (36.3%~~$7,557 (40.4%) to ~~$17,500~~$26,252 in the ~~first twenty-four-week~~thirty-six-week period of the 2022 fiscal year compared to the same ~~twenty-four-week~~thirty-six-week period in fiscal year 2021. ~~Increased~~Higher commodity costs, increased volume and changes in product mix were the primary contributing factors to this increase. The cost of purchased flour increased approximately ~~$726~~$1,234 in the ~~first twenty-four-week~~thirty-six-week period of fiscal year 2022 compared to the same ~~twenty-four-week~~thirty-six-week period in fiscal year 2021. In our Frozen Food Products segment, the volume increases in foodservice coupled with inflationary pressures on cost have increased the cost of productions materials, direct production labor and gross overhead.

Cost of Products Sold-Snack Food Products Segment

Cost of products sold in the Snack Food Products segment increased by ~~$6,303 (9.4%~~$1,379 (1.3%) to ~~$73,497~~$107,243 in the ~~first twenty-four-week~~thirty-six-week period of the 2022 fiscal year compared to the same ~~twenty-four-week~~thirty-six-week period in fiscal year 2021 due to a substantial increase in sales volume. Meat commodity costs ~~started to rise~~purchased at high prices during the fourth quarter of fiscal year 2021 and into the first ~~and second~~two quarters of ~~the 2021~~ fiscal year ~~significantly adding~~2022 added to the increase in cost of products ~~sold.~~sold through the third quarter of fiscal year 2022. Higher depreciation on processing equipment impacted the cost of products sold. The cost of significant meat commodities increased approximately ~~$9,580~~$11,767 in the ~~first twenty-four-week~~thirty-six-week period of fiscal year 2022 compared to the same period in fiscal year 2021. As a result, a net realizable value reserve of ~~$194~~$139 was recorded after determining that the market value on some meat products was less than the costs associated with completion and sale of the product.

Selling, General and Administrative Expenses-Consolidated

Selling, general and administrative expenses increased by ~~$3,028 (11.3%~~$4,104 (10.0%) to ~~$29,909~~$45,129 in the ~~twenty-four-week~~thirty-six-week period ended ~~April 15,~~July 8, 2022, compared to the same ~~twenty-four-week~~thirty-six-week period in the prior fiscal year. The table below summarizes the significant expense increases (decreases) included in this category:

	24 Weeks Ended					Expense			36 Weeks Ended					Expense
	April 15, 2022			April 16, 2021		Increase (Decrease)			July 8, 2022			July 9, 2021		Increase (Decrease)
Wages and bonus	$	13,102		$	11,493	$	1,609		$	19,348		$	17,255	$	2,093
Pension (income) expense		(176	)		383		(559	)		(247	)		574		(821	)
Product advertising		4,274			3,758		516			6,153			5,384		769
Fuel		1,045			723		322			1,711			1,123		588
Vehicle repairs and maintenance		596			419		177			938			649		289
Storage unit rent										1,608			1,338		270
Other SG&A		11,068			10,105		963			15,618			14,702		916
Total - SG&A	$	29,909		$	26,881	$	3,028		$	45,129		$	41,025	$	4,104

Higher sales commissions resulted in higher wages and bonus expenses in the ~~first twenty-four~~thirty-six weeks of the 2022 fiscal year compared to the same period in the prior year. The decrease in pension expense was a result of an increase in pension plan assets caused by performance of the underlying markets that support them as well as higher pension discount rates resulting in lower liability. Costs for product advertising increased mainly as a result of higher payments under brand licensing agreements in the Snack Food Products segment during the ~~twenty-four~~thirty-six weeks ended ~~April 15,~~July 8, 2022. The increase in fuel expense was driven by per gallon fuel price increases compared to the prior year as a result of higher cost trends in petroleum markets. Repairs and maintenance on vehicles have increased compared to the prior year period mainly due to an aging fleet. Rent for storage units that house inventory increased due to inflationary price pressure. None of the changes individually or as a group of expenses in “Other SG&A” were significant enough to merit separate disclosure. The major components comprising the increase of “Other SG&A” expenses were higher display rack cost, travel expense, healthcare ~~cost, vacation~~ expense and insurance premiums ~~and travel expenses,~~ partially offset by lower ~~provisions for bad debt.~~telephone expense.

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Selling, General and Administrative Expenses-Frozen Food Products Segment

SG&A expenses in the Frozen Food Products segment increased by ~~$958 (17.7%~~$1,727 (21.3%) to ~~$6,373~~$9,824 in the ~~first twenty-four-week~~thirty-six-week period of fiscal year 2022 compared to the same ~~twenty-four-week~~thirty-six-week period in the prior fiscal year. The overall increase in SG&A expenses was due to higher sales volume and corresponding increased wages and bonus and product advertising partially offset by lower pension expense.

Selling, General and Administrative Expenses-Snack Food Products Segment

SG&A expenses in the Snack Food Products segment increased by ~~$2,070 (9.6%~~$2,377 (7.2%) to ~~$23,536~~$35,305 in the ~~first twenty-four-week~~thirty-six-week period of fiscal year 2022 compared to the same ~~twenty-four-week~~thirty-six-week period in the prior fiscal year. Most of the increase was due to higher sales volume and corresponding increased wages and bonus and product advertising.

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Income Taxes-Consolidated

Income tax for the ~~twenty-four~~thirty-six weeks ended ~~April 15,~~July 8, 2022 and ~~April 16,~~July 9, 2021, respectively, was as follows:

	April 15, 2022			April 16, 2021			July 8, 2022			July 9, 2021
Provision for (benefit on) income taxes	$	457		$	(142	)	$	17,343		$	(669	)

Effective tax rate		29.1	%		31.5	%		29.0	%		28.0	%

We recorded a tax provision of ~~$457~~$17,343 for the ~~twenty-four-week~~thirty-six-week period ended ~~April 15,~~July 8, 2022, related to federal and state taxes, based on the Company’s expected annual effective tax rate. The effective tax rate for the third quarter of fiscal 2022 reflects the impact of $16,427 of tax expense related to tax on the gain on the sale of a land parcel in Chicago, Illinois, discussed in Note 5. – Income Taxes of the Notes to the Condensed Consolidated Financial Statements included within this Report. The effective income tax rate differed from the applicable mixed statutory rate of approximately 26.4% due to non-deductible meals and entertainment, non-taxable gains and losses on life insurance policies and state income taxes.

Liquidity and Capital Resources

The principal source of our operating cash flow is cash receipts from the sale of our products, net of costs to manufacture, store, market and deliver such products. We normally fund our operations from cash balances and cash flow generated from operations. We received $60,000 in proceeds on June 1, 2022, from the closing of the sale of real property located at 170 N. Green Street in Chicago pursuant to the terms of the CRG Purchase Agreement. We borrowed $2,000 under our line of credit with Wells Fargo Bank, N.A. on December 2, 2020, $2,000 on April 27, 2021, $2,000 on July 1, 2021, $3,000 on July 19, 2021, $3,000 on October 15, 2021, $2,000 on November 1, 2021, $2,000 on December 16, 2021, and $2,000 on January 24, 2022, for a combined total of $18,000. The line of credit was paid off on June 7, 2022, using $18,000 in proceeds from the sale of real property at 170 N. Green Street. The revolving line of credit continues in effect per its terms to March 1, 2023. We entered into a bridge loan with Wells Fargo Bank, N.A. on August 30, 2021, for up to $25,000, of which we used $18,653 to pay off a portion of our existing equipment loans as they came out of ~~April 15, 2022.~~the lock out period and could be prepaid. We prepaid and terminated the bridge loan on June 2, 2022, using $18,653 in proceeds from the sale of real property at 170 N. Green Street. As of July 8, 2022, we had $995 of current debt on equipment loans, $59,958 of net working capital and $15,000 available under our revolving line of credit with Wells Fargo Bank, N.A. Refer to Note 6 – Equipment Notes Payable and Financial Arrangements of the Notes to the Condensed Consolidated Financial Statements included within this Report for further information.

Despite higher commodity costs, we may not be able to increase our product prices in a timely manner or sufficiently to offset increased commodity costs due to consumer price sensitivity, pricing in relation to competitors and the reluctance of retailers to accept the price increase. Higher product prices could potentially lower demand for our product and decrease volume. As of April 15, 2022, we had $39 of current debt on equipment loans. We entered into a bridge loan with Wells Fargo Bank, N.A. on August 30, 2021, for up to $25,000, which we plan to use to pay off the existing equipment loans as they come out of the lock out period and may be prepaid. As of April 15, 2022, we paid off $18,651 in equipment loans utilizing proceeds from the new bridge loan.

Management believes there are various options available to generate additional liquidity to repay debt or fund operations such as mortgaging real estate, should that be necessary. Our ability to increase liquidity will depend upon, among other things, our business plans, the performance of operating divisions and economic conditions of capital markets, or circumstances related to the COVID-19 global pandemic. If we are unable to increase liquidity through mortgaging real estate, or generate positive cash flow necessary to fund operations, we may not be able to compete successfully, which could negatively impact our business, operations, and financial condition. Combined with the cash expected to be generated from the Company’s operations and income tax refunds due of ~~$5,646,~~$5,799, of which $5,117 in income tax refunds were received on July 19, 2022, we anticipate that we will maintain sufficient liquidity to operate our business for at least the next twelve months. We will continue to monitor the impact of COVID-19 on our liquidity and, if necessary, take action to preserve liquidity and ensure that our business can operate during these uncertain times.

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In connection with our sale of certain real estate on June 1, 2022, we plan to repay our outstanding balance under the line of credit and prepaid our outstanding balance under our bridge loan and terminated such loan. Refer to Note 7 - Subsequent Events of the Notes to Consolidated Financial Statements included in this Report for further information.

Cash flows from operating activities for the ~~twenty-four~~thirty-six weeks ended:

	April 15, 2022			April 16, 2021			July 8, 2022			July 9, 2021
Net income (loss)	$	1,112		$	(309	)	$	42,410		$	(1,719	)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		3,158			3,026			4,588			4,425
(Recoveries on) provision for losses on accounts receivable		(10	)		96
Provision for losses on accounts receivable								100			46
Increase in promotional allowances		2,278			1,791			207			742
Gain on sale of property, plant, and equipment		(18	)		(82	)		(57,663	)		(378	)
Changes in operating working capital		(4,247	)		(2,991	)		5,370			(3,687	)
Net cash provided by operating activities	$	2,273		$	1,531
Net cash (used in) provided by operating activities							$	(4,988	)	$	(571	)

For the ~~twenty-four~~thirty-six weeks ended ~~April 15,~~July 8, 2022, net cash ~~provided by~~used in operating activities was ~~$2,273, $742~~$4,988, $4,417 more cash ~~provided~~used than during the same period in fiscal year 2021. The net increase in cash ~~provided~~used by operating activities primarily relates to ~~net income~~a gain on sale of ~~$1,112, increase in promotional allowance~~property, plant and equipment of ~~$2,278, partially offset by~~$57,663, an increase in accounts receivable of ~~$2,438, an increase in inventories of $4,164~~$7,012 and an increase in ~~non-current liabilities~~inventory of ~~$1,272.~~$5,251 partially offset by net income of $42,410. During the ~~twenty-four-week~~thirty-six-week period ended ~~April 15,~~July 8, 2022, we did not contribute towards our defined benefit pension plan. Plan funding strategies may be adjusted depending upon economic conditions, investment options, tax deductibility, or recent legislative changes in funding requirements.

Our cash conversion cycle (defined as days of inventory and trade receivables less days of trade payables outstanding) was equal to 7280 days for the ~~twenty-four-week~~thirty-six-week period ended ~~April 15,~~July 8, 2022. The cash conversion cycle was 5998 days for the ~~twenty-four-week~~thirty-six-week period ended ~~April 16,~~July 9, 2021. The ~~increase~~decrease in the cash conversion cycle was mainly due to ~~an increase in~~lower days ~~sales outstanding~~payable in accounts ~~receivable~~payable and to a lesser extent increased average days in inventory. We ~~continued to accelerate~~have discontinued accelerating payments on outstanding accounts receivable from ~~WalMart for approximately $8,976.~~Walmart as of July 1, 2022.

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For the ~~twenty-four~~thirty-six weeks ended ~~April 15,~~July 9, 2021, net cash ~~provided by~~used in operating activities was ~~$1,531~~$571 and primarily relates to ~~a decrease in accounts receivable of $3,450 partially offset by a net loss of $389,~~ an increase in inventories of ~~$1,810,~~$5,221, a net loss of $1,719 and an increase in other non-current assets of ~~$1,850 and an increase in non-current liabilities~~$2,001 partially offset by receipt of ~~$1,739.~~refundable income taxes from the IRS of $3,407. During the ~~twenty-four-week~~thirty-six-week period ended ~~April 15,~~July 9, 2021, we did not contribute towards our defined benefit pension plan.

Cash flows from investing activities for the ~~twenty-four~~thirty-six weeks ended:

	April 15, 2022			April 16, 2021			July 8, 2022			July 9, 2021
Proceeds from sale of property, plant, and equipment	$	18		$	98		$	60,034		$	128
Additions to property, plant, and equipment		(629	)		(5,755	)		(3,112	)		(6,842	)
Net cash used in investing activities	$	(611	)	$	(5,657	)
Net cash provided by (used in) investing activities							$	56,922		$	(6,714	)

Expenditures for property, plant and equipment include the acquisition of equipment, upgrading of facilities to maintain operating efficiency and investments in cost effective technologies to lower costs. In general, we capitalize the cost of additions and improvements and expense the cost for repairs and maintenance. We received $60,000 in proceeds on June 1, 2022, from the closing of the real estate transaction for the property located at 170 N. Green Street in Chicago, pursuant to the terms of the CRG Purchase Agreement. We may also capitalize costs related to improvements that extend the life, increase the capacity, or improve the efficiency of existing machinery and equipment. Specifically, capitalization of upgrades of facilities to maintain operating efficiency include acquisitions of machinery and equipment used on packaging lines and refrigeration equipment used to process food products.

The table below highlights additions to property, plant and equipment for the ~~twenty-four~~thirty-six weeks ended:

	April 15, 2022			April 16, 2021		July 8, 2022		July 9, 2021
Changes in projects in process	$	(140	)	$	4,753	$	2,349	$	4,244
Building improvements		-			8		-		8
Direct store delivery and sales vehicles		372			465		437		1,223
Packaging lines		159			-		159		-
Computer software and hardware		23			-
Temperature control							7		-
Processing equipment		184			458		134		1,296
Furniture and fixtures		31			71		26		71
Additions to property, plant, and equipment	$	629		$	5,755	$	3,112	$	6,842

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Cash flows from financing activities for the ~~twenty-four~~thirty-six weeks ended:

	April 15, 2022			April 16, 2021			July 8, 2022			July 9, 2021
Payment of lease and right of use obligations	$	(151	)	$	(207	)	$	(288	)	$	(319	)
Proceeds from bank borrowings		6,000			2,000			-			6,000
Repayments of bank borrowings		(1,028	)		(2,194	)		(31,912	)		(3,223	)
Net cash provided by (used in) financing activities	$	4,821		$	(401	)
Net cash (used in) provided by financing activities							$	(32,200	)	$	2,458

Our stock repurchase program was approved by our Board of Directors in November 1999 and was expanded in June 2005. Under the stock repurchase program, we are authorized, at the discretion of management and our Board of Directors, to purchase up to an aggregate of 2,000,000 shares of our common stock on the open market. As of ~~April 15,~~July 8, 2022, 120,113 shares remained authorized for repurchase under the program.

Revolving Credit Facility

We maintain a revolving line of credit with Wells Fargo Bank, N.A. that extends through March 1, 2023. As of year-end October 29, 2021, under the terms of this line of credit, we could borrow up to $15,000 at an interest rate equal to the bank’s prime rate or LIBOR plus 2.0%. The line of credit has an unused commitment fee of 0.25% of the available loan amount. The line of credit is presented under non-current liabilities in the consolidated balance sheets. On December 1, 2021, Wells Fargo Bank, N.A. expanded our line of credit to $25,000 through June 15, 2022, ~~upon~~at which time the credit limit ~~will return~~returned to $15,000 for the balance of the term. Under the terms of this ~~expanded~~ line of credit, we may borrow up to ~~$25,000~~$15,000 at an interest rate equal to the bank’s prime rate or secured overnight financing rate (“SOFR”) plus 2.0%. The former benchmark interest rate of LIBOR for our line of credit has been transitioned to SOFR which could impact the cost of credit and alter the value of debt and loans. We borrowed $2,000 under this line of credit on December 2, 2020, $2,000 on April 27, 2021, $2,000 on July 1, 2021, $3,000 on July 19, 2021, $3,000 on October 15, 2021, $2,000 on November 1, 2021, and $2,000 on December 26, 2021, and $2,000 on January 24, 2022, for a combined total of $18,000. The revolving line of credit with Wells Fargo Bank, N.A. was paid off on June 7, 2022, using $18,000 asin proceeds from the sale of ~~April 15, 2022.~~a land parcel in Chicago.

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Equipment Notes Payable

Bridge Loan

On August 30, 2021, we entered into a loan commitment note for a bridge loan of up to $25,000 ~~which we~~with the plan to use the proceeds to pay off the existing equipment loans as they come out of the lock out period and may be prepaid (dates detailed in the table below). The outstanding principal balances of the bridge loan ~~shall be~~became due and payable in full on the earlier of the following dates (1) August 31, 2023, or (2) one Federal Reserve business day after the closing of the real estate transactions contemplated under ~~that certain~~the CRG Purchase ~~and Sale Agreement dated March 16, 2020, as amended, between Bridgford Foods Processing Corporation and CRG Acquisition, LLC. As of April 15, 2022, we~~Agreement. We prepaid ~~$18,651~~$18,653 in equipment loans (equipment loans 4.13%, 3.98%, 3.70% and 3.29% in the table below) utilizing proceeds from the new bridge loan. The Company evaluated the exchange under ASC 470 and determined that the exchange should be treated as a debt modification prospectively. The Company accounted for this transaction as a debt modification and did not incur any gain or loss relating to the modification. The debt modification did not meet the greater than ten percent test and was deemed not substantial. We prepaid and terminated the bridge loan and related loan commitment note on June 2, 2022, using $18,653 in proceeds from the sale of a land parcel in Chicago pursuant to the CRG Purchase Agreement.

The following table reflects major components of our line of credit and borrowing agreements as of ~~April 15,~~July 8, 2022, and October 29, ~~2021.~~2021, respectively.

	April 15, 2022			October 29, 2021			July 8, 2022			October 29, 2021

Revolving credit facility	$	18,000		$	12,000		$	-		$	12,000
Equipment notes:
3.70% note due 12/21/26, out of lockout 12/23/21		-			2,901			-			2,901
3.29% note due 03/05/27, out of lockout 03/06/22		-			5,951			-			5,951
3.68% note due 04/16/27, out of lockout 04/17/22		5,391			5,888			5,159			5,888
SOFR plus 2.00% bridge loan due 08/31/23		18,651			10,329			-			10,329
Total debt		42,042			37,069			5,159			37,069
Less current debt		(3,446	)		(1,065	)		(995	)		(1,065	)
Total long-term debt	$	38,596		$	36,004		$	4,164		$	36,004

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On June 2, 2022, we prepaid our outstanding balance under the bridge loan and terminated the loan commitment note and plan to repay the outstanding balance under our revolving credit facility. Refer to Note 7 - Subsequent Events of the Notes to Consolidated Financial Statements included in this Report for further information.

Loan Covenants

	●	Total Liabilities divided by Tangible Net Worth not greater than 2.5 to 1.0 at each fiscal quarter,
	●	Quick Ratio not less than ~~.85~~0.85 to 1.0 at each fiscal quarter end,
	●	Net Income After Taxes not less than $500 on a quarterly basis, and
	●	Capital Expenditures less than $5,000.

As of ~~April 15,~~July 8, 2022, the Company was in compliance with all covenants under the Wells Fargo Loan Agreements.

All of our operating segments have been impacted by inflation, including higher costs for labor, freight, and specific materials. We expect this trend to continue through the remainder of fiscal year 2022. Management is of the opinion that the Company’s financial position and its capital resources are sufficient to provide for its operating needs and capital expenditures for the remainder of fiscal year 2022.

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Recently issued accounting pronouncements and regulations

In February 2016, the FASB issued ASU 2016-02, “Leases”, which requires a lessee to recognize assets and liabilities with lease terms of more than twelve months. Both capital and operating leases are to be recognized on the balance sheet. The guidance is effective for annual reporting periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, which was our first quarter of fiscal 2020. We have analyzed all lease transactions during fiscal year 2020 and 2021 and the first and second quarters of fiscal 2022. The Company elected not to reassess expired contracts or adjust comparative periods. The Company determined that no change to current accounting treatment is warranted for most transactions due to the underlying nature of our leases. In the case of month-to-month lease or rental agreements with terms of twelve months or less, the Company made an accounting policy election to not recognize lease assets and liabilities. The Company performed a detailed analysis and determined that the only significant indication of a long-term lease was its lease with Hogshed Ventures, LLC. The accounting treatment of this lease for warehouse storage included establishing a right-of-use asset and corresponding liability was recorded for the Company’s lease with Hogshed Ventures, LLC for property located at 40th Street in Chicago during the fourth quarter of fiscal 2020. The application of this pronouncement resulted in additional disclosures detailing our lease arrangements. The Company adopted this guidance during the first quarter of fiscal 2020 and it did not have a material impact on our consolidated financial statements.

Off-Balance Sheet Arrangements

We are not engaged in any “off-balance sheet arrangements” within the meaning of Item 303(b) of Regulation S-K.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable to a smaller reporting company.

Item 4. Controls and Procedures

Our management, with the participation and under the supervision of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Report. Based on this evaluation, the principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this Report in their design and operation to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management and recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms and were accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

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The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

We maintain and evaluate a system of internal accounting controls, and a program of internal auditing designed to provide reasonable assurance that our assets are protected and that transactions are performed in accordance with proper authorization and are properly recorded. This system of internal accounting controls is continually reviewed and modified in response to evolving business conditions and operations and to recommendations made by the independent registered public accounting firm. On May 14, 2013, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) published Internal Control-Integrated Framework (2013) (the “2013 Framework”) and related illustrative documents as an update to Internal Control-Integrated Framework (1992) (the “1992 Framework”). The Company has adopted the 2013 Framework this fiscal year and has determined that the 17 principles are present and functioning during our assessment of the effectiveness of internal controls. We have established a code of conduct. Our management believes that the accounting and internal control systems provide reasonable assurance that assets are safeguarded, and financial information is reliable.

The Audit Committee of the Board of Directors meets regularly with our financial management and counsel, and with the independent registered public accounting firm engaged by us. Internal accounting controls and the quality of financial reporting are discussed during these meetings. The Audit Committee has discussed with the independent registered public accounting firm matters required to be discussed by the auditing standards adopted or established by the Public Company Accounting Oversight Board. In addition, the Audit Committee and the independent registered public accounting firm have discussed the independent registered public accounting firm’s independence from the Company and its management, including the matters in the written disclosures required by Public Company Accounting Oversight Board Rule 3526 “Communication with Audit Committees Concerning Independence”.

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There have been no changes in our internal controls over financial reporting that occurred during the fiscal quarter ended ~~April 15,~~July 8, 2022, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Part II. Other Information

Item 1A. Risk Factors

The risk factors listed in Part I “Item 1A. Risk Factors” in the Annual Report should be considered with the information provided elsewhere in this Report, which could materially adversely affect our business, financial condition, or results of operations. Except as set forth below, there have been no material changes to the risk factors as previously disclosed in the Annual Report.

We have considered the impact of federal, state, and local government actions related to the COVID-19 pandemic on our Condensed Consolidated Financial Statements. These business disruptions, in addition to any impacts already experienced, have not had a significant impact on our Condensed Consolidated Financial Statements for the twelve weeks ended ~~April 15,~~July 8, 2022. There may be a future business impact, the extent of which is uncertain and largely subject to whether the severity worsens or what restrictions are implemented by the government.

These impacts could include but may not be limited to risks and uncertainty related to shifts in demand between sales channels, market volatility, constraints in our supply chain, our ability to operate production facilities and worker availability. These unknowns may subject the company to future risks related to long-lived asset impairments, increased reserves for uncollectible accounts, the price and availability of ingredients and raw materials used in our products and adjustments to reflect the market value of our inventory.

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Item 6. Exhibits

Incorporated by Reference

Exhibit Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

Filed Herewith

31.1

Certification of Principal Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Principal Executive Officer).

32.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Principal Financial Officer).

101.INS

Inline XBRL Instance Document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as Inline XBRL and Contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

	BRIDGFORD FOODS CORPORATION
	(Registrant)

Dated: ~~June 3,~~August 19, 2022	By:	/s/ Raymond F. Lancy
		Raymond F. Lancy
		Chief Financial Officer
		(Duly Authorized Officer, Principal Financial and Accounting Officer)

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