BRIDGFORD FOODS CORP 10-K

Item 9A. Controls and Procedures Evaluation of disclosure controls and procedures Disclosure controls and procedures are designed to help ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules, regulations and forms, and that such information is collected and communicated to our management, including our Chairman of the Board and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation and under the supervision of our Chairman of the Board and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Report. Based on this evaluation, the Chairman of the Board and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report. Our management, including our Chairman of the Board and Chief 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 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. 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. 17 We maintain and evaluate a system of internal accounting controls, and a program 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 our independent registered public accounting firm. 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 Statement of Auditing Standards No. 16 (Communication with Audit Committees). In addition, the Audit Committee and the independent registered public accounting firm have discussed the independent registered public accounting firm’s independence from our Company and its management, including the matters in the written disclosures required by Public Company Accounting Oversight Board Rule 3526 “Communicating with Audit Committees Concerning Independence”. Remediation of previously reported material weakness As reported in the Company’s Form 10-K for year ended October 28, 2022, management previously identified a material weakness in internal control over financial reporting due to the failure to timely report to accounting a change in lease terms from a month-to-month lease to a five-year term lease. A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness warranted the attention of the Audit Committee and those charged with governance. Management implemented a remediation plan with steps that improved our internal control over financial reporting, including modifying the design of the related internal controls to include verbal communication with plant managers on a quarterly basis, and expanding notification to Operating Committee members which include key plant managers for feedback on any additional information on new contractual arrangements for revenue, leases or other types of agreements impacting accounting. In the case of the lease misstatement, we believe the failure to notify management was a one-time oversight and not indicative of a pattern or continuing weakness in the proper functioning of the controls. The Company’s management, under the oversight of the Audit Committee, executed the remediation steps discussed above and, as a result determined that, as of November 3, 2023, such material weakness has been remediated. Completion of remediation does not provide assurance that our remediation or other controls will continue to operate properly or remain adequate. The enhanced controls have operated for a sufficient period of time and management has concluded, through testing, that the related controls are effective. However, we cannot be certain that other such material weaknesses and control deficiencies will not occur in the future. If material weaknesses are identified in the future, or we are not able to comply with requirements of Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner, our reported financial results could be materially misstated or we could be subject to investigations or sanctions by regulatory authorities, which would require additional financial and management resources and the value of our common stock could decline. Section 404 of the Sarbanes-Oxley Act of 2002 In order to comply with the Sarbanes-Oxley Act of 2002, we have undertaken and continue a comprehensive effort, which includes the documentation and review of our internal controls. In order to comply with the Sarbanes-Oxley Act, we centralized most accounting and many administrative functions in an effort to control the cost of maintaining our control systems. The Dodd-Frank Wall Street Reform and Consumer Protection Act permanently exempts smaller reporting companies with less than $75 million in public float, such as the Company, from the requirement to obtain an external audit on the effectiveness of internal financial reporting controls provided in Section 404(b) of the Sarbanes-Oxley Act. As a result, an attestation report on internal controls over financial reporting by an independent registered public accounting firm has not been presented. Section 404(a) is still effective for smaller reporting companies and requires the disclosure of management attestations on internal controls over financial reporting as set forth below. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. 18 Management conducted an evaluation of the effectiveness of the internal controls over financial reporting based on the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control-Integrated Framework (2013) and related illustrative documents as an update to Internal Control-Integrated Framework (1992). Management determined that the 17 principles were present and functioning during its assessment of the effectiveness of our internal controls. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting for our fiscal year ended November 3, 2023. Based on management’s assessment and the above-referenced criteria, management believes that the internal control over financial reporting was effective as of November 3, 2023. Changes in Internal Control over Financial Reports As described above, during fiscal year 2023 we took steps to remediate the material weakness in our internal control over financial reporting that we identified and existed at the end of fiscal year 2022. Other than in connection with the remediation process described above, no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the last quarter of fiscal year ended November 3, 2023 that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information Not applicable. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 19 PART III Item 10. Directors, Executive Officers, and Corporate Governance The information required by this item will be included in our definitive proxy statement on Schedule 14A related to our 2024 annual meeting of stockholders (the “Proxy Statement), which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Exchange Act not later than 120 days after the end of our fiscal year ended November 3, 2023, and is incorporated herein by reference. Item 11. Executive Compensation The information required by this item will be included in the Proxy Statement and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item will be included in the Proxy Statement and is incorporated herein by reference. Equity Compensation Plan Information Not applicable, as we do not have any compensation plans under which our equity securities are authorized for issuance. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item will be included in the Proxy Statement and is incorporated herein by reference. Item 14. Principal Accountant Fees and Services The information required by this item will be included in the Proxy Statement is incorporated herein by reference. 20 PART IV Item 15. Exhibits and Financial Statement Schedules (a)(1) Financial Statements . The following documents are filed as a part of this Report: Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 23 ) 24 Consolidated Balance Sheets as of November 3, 2023, and October 28, 2022 26 Consolidated Statements of Operations for the fiscal years ended November 3, 2023, and October 28, 2022 27 Consolidated Statements of Comprehensive Income for the fiscal years ended November 3, 2023, and October 28, 2022 28 Consolidated Statements of Shareholders’ Equity for the fiscal years ended November 3, 2023, and October 28, 2022 29 Consolidated Statements of Cash Flows for the fiscal years ended November 3, 2023, and October 28, 2022 30 Notes to Consolidated Financial Statements 31 (2) Financial Statement Schedules Not applicable for a smaller reporting company. (3) Exhibits (a) The exhibits below are filed herewith or incorporated herein by reference . Incorporated by Reference Exhibit Number Exhibit Description Form File No. Exhibit Filing Date Filed Herewith 3.1 Restated Articles of Incorporation, as amended. 10-K 000-02396 3.4 01/18/19 3.2 Amended and Restated Bylaws. 10-K/A 000-02396 3.7 02/09/18 4.1 Description of Capital Stock of the Registrant 10-K 000-02396 4.1 01/15/21 10.1* Bridgford Foods Corporation Defined Benefit Pension Plan. 10-K 000-02396 10.1 01/18/19 10.2* Bridgford Foods Corporation Supplemental Executive Retirement Plan. 10-K 000-02396 10.2 01/18/19 10.3* Bridgford Foods Corporation Deferred Compensation Savings Plan. 10-K 000-02396 10.3 01/18/19 10.4* Consulting Agreement, dated August 12, 2019, between the Registrant and Allan L. Bridgford Sr. 8-K 000-02396 10.1 08/16/19 10.5 Purchase and Sale Agreement dated March 16, 2020 between Bridgford Food Processing Corporation and CRG Acquisition, LLC. 8-K 000-02396 10.1 03/19/20 10.6* Consulting Agreement dated February 2, 2023, between the Registrant and Raymond F. Lancy. 8-K 000-02396 10.1 02/02/23 21.1 Subsidiaries of the Registrant. 10-K 000-02396 21.1 01/15/21 24.1 Power of Attorney (included as part of the signature page). X 31.1 Certification of Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 31.2 Certification of Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 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). X 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). X 101.INS Inline XBRL Instance Document. X 101.SCH Inline XBRL Taxonomy Extension Schema Document. X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. X 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. X 104 Cover Page Interactive Data File (embedded within the Inline XBRL Document contained in Exhibit 101). * Each of these Exhibits constitutes a management contract, compensatory plan or arrangement. Item 16. Form 10-K Summary Not applicable. 21 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 By: /s/ MICHAEL W. BRIDGFORD Michael W. Bridgford Chairman of the Board Date: January 26, 2024 22 POWER OF ATTORNEY We, the undersigned directors and officers of Bridgford Foods Corporation, do hereby constitute and appoint Michael W. Bridgford and Cindy Matthews-Morales, or either of them, with full power of substitution and resubstitution, our true and lawful attorneys and agents, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, or their substitutes, may deem necessary or advisable to enable said corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission in connection with this Annual Report on Form 10-K, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments; and we do hereby ratify and confirm all that the said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ MICHAEL W. BRIDGFORD. Chairman of the Board (Principal Executive Officer) January 26, 2024 Michael W. Bridgford /s/ CINDY MATTHEWS-MORALES Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) January 26, 2024 Cindy Matthews-Morales /s/ RAYMOND F. LANCY Director January 26, 2024 Raymond F. Lancy /s/ BARON R. H. BRIDGFORD II President January 26, 2024 Baron R. H. Bridgford II /s/ ALLAN L. BRIDGFORD SR. Director January 26, 2024 Allan L. Bridgford Sr. /s/ WILLIAM L. BRIDGFORD Vice President and Director January 26, 2024 William L. Bridgford /s/ JOHN V. SIMMONS Vice President and Director January 26, 2024 John V. Simmons /s/ TODD C. ANDREWS Director January 26, 2024 Todd C. Andrews /s/ D. GREGORY SCOTT Director January 26, 2024 D. Gregory Scott /s/ KEITH A. ROSS Director January 26, 2024 Keith A. Ross /s/ MARY SCHOTT Director January 26, 2024 Mary Schott 23 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Bridgford Foods Corporation Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Bridgford Foods Corporation and its subsidiaries (the “Company”) as of November 3, 2023 and October 28, 2022, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows, for each of the fiscal years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of November 3, 2023 and October 28, 2022, and the results of its operations and its cash flows for each of the two fiscal years in the period ended November 3, 2023 and October 28, 2022, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. Net Revenue - Reserves for Promotional Allowances Critical Audit Matter Description As described in Note 1 to the consolidated financial statements, contracts with customers often include some form of variable consideration in the form of discounts, trade allowances, consumer incentives, coupons, volume-based incentives, cooperative advertising, product returns and other such programs. Promotional allowances are treated as a reduction in revenue when the related revenue is recognized and are recorded at the estimated amount of credit expected to be issued to customers, based primarily on historical utilization and redemption rates. We identified the estimation of reserves for promotional allowances by management as a critical audit matter because the inputs and assumptions utilized by management in estimating these reserves, including consistency of historical data and contract pricing, require significant judgment and create a high degree of estimation uncertainty. Consequently, auditing these assumptions requires subjective auditor judgment. 24 How We Addressed the Matter in Our Audit The primary procedures we performed to address this critical audit matter included: ● Obtaining an understanding of management’s processes and controls over calculating the reserves for promotional allowances, including understanding relevant significant inputs and assumptions. ● Performing substantive analytical procedures surrounding the reserves for promotional allowances by performing an independent calculation of the allowance by using historical data and assumptions. ● Evaluating the reasonableness of key inputs and assumptions relevant to the reserve for promotional allowances, including contractual pricing and rebate arrangements with customers and historical allowance data, which were compared to source documents, and performed sensitivity analysis over key inputs and significant assumptions. ● Testing the accuracy, completeness, validity of the underlying data used in schedules calculating the reserve for promotional allowances. ● Review of applicable disclosures. We have served as the Company’s auditor since 2009. /s/ Baker Tilly US, LLP Irvine, California January 26, 2024 25 BRIDGFORD FOODS CORPORATION CONSOLIDATED BALANCE SHEETS As of November 3, 2023, and October 28, 2022 (in thousands, except share and per share amounts) November 3, 2023 October 28, 2022 ASSETS Current assets: Cash and cash equivalents $ 15,708 $ 16,333 Accounts receivable, less allowance for doubtful accounts of $ 248 and $ 177 , respectively, and promotional allowances of $ 2,093 and $ 2,771 , respectively 28,593 34,541 Inventories, net 40,573 40,533 Refundable income taxes 2,168 1,201 Prepaid expenses and other current assets 435 321 Total current assets 87,477 92,929 Property, plant and equipment, net of accumulated depreciation and amortization of $ 73,397 and $ 70,968 , respectively 67,487 71,830 Other non-current assets 12,034 11,589 Total assets $ 166,998 $ 176,348 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 7,201 $ 13,658 Accrued payroll, advertising, and other expenses 6,404 7,853 Income taxes payable 256 224 Current notes payable – equipment 1,045 1,089 Current right-of-use leases payable 1,120 1,054 Other current liabilities 1,955 2,975 Total current liabilities 17,981 26,853 Long-term notes payable – equipment, bridge loan and revolving credit facility 2,786 3,824 Deferred income taxes, net 8,342 8,972 Lont-term right of use leases payable 2,450 3,420 Executive retirement plans 4,745 4,852 Other non-current liabilities 1,159 2,102 Total long-term liabilities 19,482 23,170 Total liabilities 37,463 50,023 Contingencies and commitments (Notes 3, 5 and 6) - - Shareholders’ equity: Preferred stock, without par value; Authorized - 1,000,000 shares; issued and outstanding – none - - Common stock, $ 1.00 par value; Authorized - 20,000,000 shares; issued and outstanding – 9,076,832 shares 9,134 9,134 Capital in excess of par value 8,298 8,298 Retained earnings 122,792 119,318 Accumulated other comprehensive loss ( 10,689 ) ( 10,425 ) Total shareholders’ equity 129,535 126,325 Total liabilities and shareholders’ equity $ 166,998 $ 176,348 See accompanying notes to consolidated financial statements. 26 BRIDGFORD FOODS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS For the fiscal years ended November 3, 2023, and October 28, 2022 (in thousands, except share and per share amounts) November 3, 2023 October 28, 2022 (53 Weeks) (52 Weeks) Net sales $ 251,636 $ 265,898 Cost of products sold 181,279 193,837 Gross margin 70,357 72,061 Selling, general and administrative expenses 65,567 65,235 Loss (gain) on sale of property, plant and equipment 161 ( 57,745 ) Operating income 4,629 64,571 Other (expense) income Interest expense ( 579 ) ( 1,107 ) Cash surrender value gain (loss) 445 ( 2,057 ) Total other (expense) income ( 134 ) ( 3,164 ) Income before taxes 4,495 61,407 Provision for income taxes 1,021 16,341 Net income $ 3,474 $ 45,066 Basic earnings per share $ 0.38 $ 4.96 Shares used to compute basic earnings per share 9,076,832 9,076,832 See accompanying notes to consolidated financial statements. 27 BRIDGFORD FOODS CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the fiscal years ended November 3, 2023, and October 28, 2022 (in thousands) November 3, 2023 October 28, 2022 (53 Weeks) (52 Weeks) Net income $ 3,474 $ 45,066 Other comprehensive income from defined benefit plans 1,255 6,910 Other postretirement benefit plans: Actuarial (loss) gain ( 1,229 ) 1,151 Other comprehensive (loss) income from other postretirement benefit plans, net ( 1,229 ) 1,151 Other comprehensive income, before taxes 26 8,061 Tax benefit on other comprehensive income ( 290 ) ( 1,780 ) Change in other comprehensive income, net of tax ( 264 ) 6,281 Comprehensive income, net of tax $ 3,210 $ 51,347 See accompanying notes to consolidated financial statements. 28 BRIDGFORD FOODS CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY For the fiscal years ended November 3, 2023, and October 28, 2022 (in thousands) 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 Net income - - - 45,066 - 45,066 Net change in defined benefit plans and other benefit plans, net of tax - - - - 6,281 6,281 Balance, October 28, 2022 9,076 $ 9,134 $ 8,298 $ 119,318 $ ( 10,425 ) $ 126,325 Balance 9,076 $ 9,134 $ 8,298 $ 119,318 $ ( 10,425 ) $ 126,325 Net income - - - 3,474 - 3,474 Net change in defined benefit plans and other benefit plans, net of tax - - - - ( 264 ) ( 264 ) Balance, November 3, 2023 9,076 $ 9,134 $ 8,298 $ 122,792 $ ( 10,689 ) $ 129,535 Balance 9,076 $ 9,134 $ 8,298 $ 122,792 $ ( 10,689 ) $ 129,535 See accompanying notes to consolidated financial statements. 29 BRIDGFORD FOODS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS For the fiscal years ended November 3, 2023, and October 28, 2022 (in thousands) November 3, 2023 October 28, 2022 (53 Weeks) (52 Weeks) Cash flows from operating activities: Net income $ 3,474 $ 45,066 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 6,558 6,682 Provision for losses on accounts receivable 147 57 Reduction in promotional allowances ( 679 ) ( 98 ) Loss (gain on) sale of property, plant and equipment 161 ( 57,745 ) Deferred income taxes, net ( 631 ) 5,070 Changes in operating assets and liabilities: Accounts receivable, net 6,480 ( 10,116 ) Inventories, net ( 40 ) ( 3,762 ) Prepaid expenses and other current assets ( 114 ) 2,250 Refundable income taxes ( 967 ) 4,955 Other non-current assets ( 444 ) ( 11 ) Accounts payable ( 6,457 ) 1,270 Accrued payroll, advertising and other expenses ( 1,449 ) 963 Income taxes payable 32 126 Current portion of non-current liabilities ( 879 ) ( 1,880 ) Non-current liabilities ( 1,207 ) ( 657 ) Net cash provided by (used in) operating activities 3,985 ( 7,830 ) Cash flows from investing activities: Proceeds from sale of property, plant and equipment 227 60,115 Changes in escrow balance - - Additions to property, plant and equipment ( 2,603 ) ( 3,770 ) Net cash (used in) provided by investing activities ( 2,376 ) 56,345 Cash flows from financing activities: Payment of financing lease obligations ( 1,151 ) ( 400 ) Proceeds from bank borrowings - 6,000 Repayments of bank borrowings ( 1,083 ) ( 38,157 ) Net cash used in financing activities ( 2,234 ) ( 32,557 ) Net (decrease) increase in cash and cash equivalents ( 625 ) 15,958 Cash and cash equivalents and restricted cash at beginning of year 16,333 375 Cash and cash equivalents and restricted cash at end of year $ 15,708 $ 16,333 Supplemental disclosure of cash flow information: Cash paid for income taxes $ 2,587 $ 13,345 Cash paid for interest $ 579 $ 1,107 See accompanying notes to consolidated financial statements. 30 BRIDGFORD FOODS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands except share and per share amounts, time periods, ratios and percentages) NOTE 1 - The Company and Summary of Significant Accounting Policies : Bridgford Foods Corporation was organized in 1952. We originally began operations in 1932 as a retail meat market in San Diego, California and evolved into a meat wholesaler for hotels and restaurants, a distributor of frozen food products, a processor and packer of meat, and a manufacturer and distributor of frozen food products for sale on a retail and wholesale basis. We, including our subsidiaries, are primarily engaged in the manufacturing, marketing, and distribution of an extensive line of frozen, refrigerated, and snack food products throughout the United States. The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All inter-company transactions and balances have been eliminated. Use of estimates and assumptions The preparation of financial statements in conformity with generally accepted accounting principles 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, as well as the reported revenues and expenses during the respective reporting periods. Actual results could differ from those estimates. Amounts estimated related to liabilities for pension benefits, self-insured workers’ compensation and employee healthcare benefits are subject to inherent uncertainties and these estimated liabilities may ultimately settle at amounts which may vary from current estimates. Other areas with underlying estimates include realization of deferred tax assets, cash surrender or contract value of life insurance policies, promotional allowances and the allowance for doubtful accounts and inventory reserves. Management believes its current estimates are reasonable and based on the best information available at the time. Subsequent events Management has evaluated events subsequent to November 3, 2023, through the date the accompanying consolidated financial statements were filed with the Securities and Exchange Commission for transactions and other events that may require adjustment of and/or disclosure in such financial statements. Based on management’s review, no material subsequent events were identified that require adjustment to the consolidated financial statements or additional disclosure. Accounts Receivable Accounts receivables are recorded at net realizable value. The value is presented net of allowance for doubtful accounts and promotional incentives. Our accounts receivable consists mainly of trade receivables from customer sales. We evaluate the collectability of our accounts receivable based on several factors. The provision for doubtful accounts receivable is based on historical trends and current collectability risk. Our provision for doubtful accounts was $ 248 and $ 177 as of November 3, 2023, and October 28, 2022, respectively. Concentrations of credit risk Our credit risk is diversified across a broad range of customers and geographic regions. Losses due to credit risk have recently been immaterial. The carrying amount of cash equivalents, accounts and other receivables, accounts payable and accrued liabilities approximate fair market value due to the short maturity of these instruments. We maintain cash balances at financial institutions, which may at times exceed the amounts insured by the Federal Deposit Insurance Corporation. Management does not believe there is significant credit risk associated with these financial institutions. Sales to Wal-Mart® comprised 29.1 % of revenues in fiscal year 2023 and 26.5 % of total accounts receivable was due from Wal-Mart® as of November 3, 2023. Sales to Wal-Mart® comprised 29.8 % of revenues in fiscal year 2022 and 26.1 % of total accounts receivable was due from Wal-Mart® as of October 28, 2022. Sales to Dollar General® comprised 16.3 % of revenues in fiscal year 2023 and 20.5 % of total accounts receivable was due from Dollar General® as of November 3, 2023. Sales to Dollar General® comprised 16.9 % of revenues in fiscal year 2022 and 19.9 % of total accounts receivable was due from Dollar General® as of October 28, 2022. Business segments The Company and its subsidiaries operate in two business segments - the processing and distribution of frozen foods products, and the processing and distribution of snack food products. See Note 7 for further information. 31 Fiscal year We maintain our accounting records on a 52-53-week fiscal basis ending on the Friday closest to October 31. As part of the regular accounting cycle, fiscal year 2023 included 53 weeks and fiscal year 2022 included 52 weeks. Revenues 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. Products are delivered to customers primarily through our own long-haul fleet, common carrier or through a Company owned direct store delivery system. These delivery costs, $ 7,190 and $ 6,661 for fiscal years 2023 and 2022, respectively, are included in selling, general and administrative expenses in the accompanying consolidated financial statements. Shipping and handling that occurs after the customer has obtained control of the product is recorded as a fulfillment cost rather than an additional assured service. 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 to receive 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 fiscal years 2023 and 2022 were $ 17,256 and $ 15,762 , respectively. Advertising expenses Advertising and other promotional expenses are recorded as selling, general and administrative expenses. Advertising expenses for fiscal years 2023 and 2022 were $ 2,822 and $ 2,603 , respectively. Cash and cash equivalents We consider all investments with original maturities of three months or less to be cash equivalents. Cash equivalents include money market funds and treasury bills. Cash and cash equivalents totaled $ 15,708 as of November 3, 2023 all of which were held at Wells Fargo Bank N.A. Restricted cash The Company had no restricted cash as of November 3, 2023 and October 28, 2022, respectively. Fair value measurements We classify levels of inputs to measure the fair value of financial assets as follows: ● Level 1 inputs: Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date. ● Level 2 inputs: Level 2 inputs are from other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. ● Level 3 inputs: Level 3 inputs are unobservable and should be used to measure fair value to the extent that observable inputs are not available. The hierarchy noted above requires us to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. The Company does not have any assets or liabilities measured at fair value on a recurring or non-recurring basis for the fiscal years ended November 3, 2023, and October 28, 2022, except for pension plan investments (See Note 3). 32 Inventories 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. The Company recorded a net realizable value reserve of $ 513 and $ 131 at November 3, 2023 and October 28, 2022, respectively, after determining that the market value on some meat products was less than the costs associated with completion and sale of the product. Property, plant, and equipment Property, plant, and equipment are carried at cost less accumulated depreciation. Major renewals and improvements are charged to the asset accounts while the cost of maintenance and repairs is charged to expense as incurred. When assets are sold or otherwise disposed of, the cost and accumulated depreciation are removed from the respective accounts and the resulting gain or loss is credited or charged to income. Depreciation is computed on a straight-line basis over 10 to 20 years for buildings and improvements, 5 to 10 years for machinery and equipment, and 3 to 5 years for transportation equipment. We built a processing plant from the ground up and as such have attributed long useful lives accordingly to these types of assets employed at the new facility in Chicago. The Company incurred interest costs of $ 579 and $ 1,107 for fiscal year 2023 and 2022, respectively, all of which were recorded as interest expense in relation to equipment at the production facility in Chicago. We test long-lived assets for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If an impairment is indicated, we measure the fair value of assets to determine if and when adjustments are recorded. Leases Leases are recognized in accordance with ASC Topic 842 Leases (“ASC 842”) which requires a lessee to recognize assets and liabilities with lease terms of more than 12 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 12 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 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. Operating leases are recorded as a right-of-use assets under property, plant and equipment and the corresponding liability is recorded under other liabilities. The consolidated balance sheets reflect 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. Life insurance policies We record the cash surrender value 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. The cash surrender value is included in other non-current assets in the accompanying Consolidated Balance Sheets. Expected proceeds from life insurance are recorded under prepaid expenses and other current assets (refer to Note 2 – Composition of Certain Financial Statement Captions). Income taxes Deferred taxes are provided for items whose financial and tax bases differ. A valuation allowance is provided against deferred tax assets when it is expected that it is more likely than not that the related asset will not be fully realized. The determination as to whether or not a deferred tax asset can be fully realized is subject to a significant degree of judgment, based at least partially upon a projection of future taxable income, which takes into consideration past and future trends in profitability, customer demand, supply costs, and multiple other factors, which are inherently difficult to predict. We provide tax accruals for federal, state, and local exposures relating to audit results, tax planning initiatives and compliance responsibilities. The development of these accruals requires judgments about tax issues, potential outcomes, and timing. (See Note 4 for further information). Although the outcome of these tax audits is uncertain, in management’s opinion adequate provisions for income taxes have been made for potential liabilities emanating from these reviews. If actual outcomes differ materially from these estimates, they could have a material impact on our results of operations. 33 Stock-based compensation We measure and recognize compensation expenses for all share-based payments to employees, including grants of employee stock options, in the financial statements based on the fair value at the date of the grant. We have not issued, awarded, granted, or entered into any stock-based payment agreements since April 29, 1999, and no such expense was recognized in fiscal years 2023 and 2022. Comprehensive income or loss Comprehensive income or loss consists of net income and additional minimum pension liability adjustments net of taxes. 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 year 2020. We have analyzed all lease transactions during fiscal years 2020 and 2021 and the first and second quarters of fiscal year 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 there were two significant long-term leases which are the leases with Hogshed Ventures, LLC and Racine Partners 4333 LLC. The accounting treatment of theses leases for warehouse storage included establishing a right-of-use asset and the 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 and with Racine Partners 4333 LLC during the fourth quarter of fiscal year 2022. The application of this pronouncement resulted in additional disclosures detailing our lease arrangements. The Company adopted this guidance during the first quarter of fiscal year 2020 and it did not have a material impact on our consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (ASC 326), which provides guidance on measurement of credit losses on financial instruments. This ASU adds a current expected credit loss impairment model to GAAP that is based on expected losses rather than incurred losses whereby a broader range of reasonable and supportable information is required to be utilized in order to derive credit loss estimates. The effective date of the new guidance as amended by ASU No. 2019-10 is fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company analyzed the impact of adopting this standard and does not expect the adoption to have a material impact on its Consolidated Financial Statements as it has been our policy to estimate and record credit losses on trade accounts receivable. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting – Improvements to Reportable Segments Disclosures . The amendments enhance disclosures of significant segment expenses by requiring to disclose significant segment expenses regularly provided to the chief operating decision maker (CODM), extend certain annual disclosures to interim periods, and permit more than one measure of segment profit or loss to be reported under certain conditions. The amendments are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption of the amendment is permitted, including adoption in any interim periods for which financial statements have not been issued. The Company is currently evaluating the guidance and its impact to the financial statements. 34 NOTE 2 - Composition of Certain Financial Statement Captions : Schedule of Composition of Certain Financial Statement November 3, 2023 October 28, 2022 Inventories, net: Meat, ingredients, and supplies $ 12,244 $ 10,242 Work in process 1,507 2,432 Finished goods 26,822 27,859 Inventories, net $ 40,573 $ 40,533 Prepaid expenses and other current assets Prepaid insurance 274 79 Prepaid other 161 242 Prepaid expenses and other current assets $ 435 $ 321 Property, plant and equipment, net: Land $ 3,799 $ 3,799 Buildings and improvements 24,173 26,134 Machinery and equipment 97,554 97,664 Finance leased trucks 355 553 Transportation equipment 10,078 9,940 Right of use assets 3,515 4,456 Construction in process 1,410 252 Property, plant and equipment, gross 140,884 142,798 Accumulated depreciation and amortization ( 73,397 ) ( 70,968 ) Property, plant and equipment, net $ 67,487 $ 71,830 Other non-current assets: Cash surrender value benefits $ 12,029 $ 11,584 Other 5 5 Other non-current assets $ 12,034 $ 11,589 Accrued payroll, advertising, and other expenses: Payroll, vacation, payroll taxes and employee benefits $ 4,610 $ 5,412 Accrued advertising and broker commissions 732 1,305 Property taxes 444 501 Other 618 635 Accrued payroll, advertising, and other expenses $ 6,404 $ 7,853 Current portion of non-current liabilities (Notes 3 and 6): Executive retirement plans $ 249 $ 133 Incentive compensation 1,582 1,746 Finance lease obligation 62 202 Customer deposits and escrow 26 26 Deferred payroll taxes current - 766 Postretirement healthcare benefits 36 102 Current portion of non-current liabilities $ 1,955 $ 2,975 Other non-current liabilities (Note 3): Defined benefit retirement plan $ ( 1,885 ) $ ( 551 ) Incentive compensation 2,266 1,913 Finance lease obligation 28 135 Postretirement healthcare benefits 750 605 Other non-current liabilities $ 1,159 $ 2,102 35 NOTE 3 - Retirement and Other Benefit Plans : Noncontributory-Trusteed Defined Benefit Retirement Plans for Sales, Administrative, Supervisory and Certain Other Employees We have noncontributory-trusteed defined benefit retirement plans for sales, administrative, supervisory, and certain other employees. In the third quarter of fiscal year 2006, we froze future benefit accruals under these plans for employees classified within the administrative, sales or supervisory job classifications or within any non-bargaining class. The benefits under these plans are primarily based on years of service and compensation levels. The funding policy of the plans requires contributions which are at least equal to the minimum required contributions needed to avoid a funding deficiency. The measurement date for the plans is our fiscal year end. Net pension income consisted of the following: Schedule of Net Pension Cost November 3, 2023 October 28, 2022 (53 Weeks) (52 Weeks) Service cost $ 57 $ 127 Interest cost 2,688 1,772 Expected return on plan assets ( 3,439 ) ( 4,336 ) Amortization of unrecognized loss 615 1,210 Net pension income $ ( 79 ) $ ( 1,227 ) Net pension costs and benefit obligations are determined using assumptions as of the beginning of each fiscal year. Weighted average assumptions for each fiscal year are as follows: Schedule of Assumptions Used November 3, 2023 October 28, 2022 Discount rate 5.96 % 5.44 % Rate of increase in salary levels N/A N/A Expected return on plan assets 7.00 % 7.00 % The benefit obligation, plan assets, and funded status of these plans as of the fiscal years ended are as follows: Schedule of Changes in Projected Benefit Obligations November 3, 2023 October 28, 2022 (53 Weeks) (52 Weeks) Change in plan assets: Fair value of the plans’ assets - beginning of year $ 50,649 $ 63,295 Actual return on the plans’ assets 2,394 ( 10,476 ) Benefits paid ( 2,358 ) ( 2,170 ) Fair value of the plans’ assets - end of year $ 50,685 $ 50,649 Change in benefit obligations: Benefit obligations - beginning of year $ 50,098 $ 70,882 Service cost 57 127 Interest cost 2,688 1,772 Actuarial loss ( 1,686 ) ( 20,513 ) Benefits paid ( 2,357 ) ( 2,170 ) Benefit obligations - end of year 48,800 50,098 Funded status of the plans 1,885 551 Unrecognized net actuarial loss 7,216 8,470 Net amount recognized $ 9,101 $ 9,021 We perform an internal rate of return analysis when making the discount rate selection. The discount rates were based on FTSE Pension Discount Curve (formerly Citibank) as of November 3, 2023, and October 28, 2022, respectively. The plans’ assets are primarily invested in marketable equity securities, corporate and government debt securities and are administered by an investment management company. The plans’ long-term return on assets is based on the weighted average of the plans’ investment allocation as of the measurement date and the published historical returns for those types of asset categories, taking into consideration inflation rate forecasts. No expected employer contribution to the plans in fiscal year 2024 is planned. For fiscal year 2023, our actuary used mortality tables from the Pri-2012 Total Dataset Mortality Table with MP-2021 Scaling. The expected rate of return on the plans’ assets remained the same at 7.00 % effective for fiscal years 2023 and 2022, respectively. 36 The actual and target allocation for the plans’ assets are as follows: Schedule of Allocation of Plan Assets Asset Class 2023 Target Asset Allocation 2022 Target Asset Allocation Large Cap Equities 21.7 % 23.0 % 22.6 % 23.0 % Mid Cap Equities 0.0 % 0.0 % 0.0 % 0.0 % Small Cap Equities 9.5 % 9.0 % 9.7 % 9.0 % International (equities only) 26.9 % 27.0 % 25.9 % 25.0 % Fixed Income 36.0 % 37.0 % 35.9 % 37.0 % Cash and other 5.9 % 4.0 % 5.9 % 6.0 % Total 100.0 % 100.0 % 100.0 % 100.0 % The fair value of our pension plans’ assets as of November 3, 2023, and the level under which fair values were determined, using the hierarchy described in Note 1, is as follows: Schedule of Fair Value of Pension Plan Assets 2023 Level 1 Level 2 Level 3 Total Total plan assets $ 50,685 - - $ 50,685 The fair value of our pension plan assets as of October 28, 2022, and the level under which fair values were determined, using the hierarchy described in Note 1, is as follows: 2022 Level 1 Level 2 Level 3 Total Total plan assets $ 50,649 - - $ 50,649 Expected payments for pension benefits are as follows: Schedule of Expected Payments for Pension Benefits Fiscal Years Pension Benefits 2024 $ 3,258 2025 $ 3,370 2026 $ 3,466 2027 $ 3,561 2028 $ 3,614 2029-2033 $ 18,364 Executive Retirement Plans Non-Qualified Deferred Compensation Effective January 1, 1991, we adopted a deferred compensation savings plan for certain key employees. Under this arrangement, selected employees contribute a portion of their annual compensation to the plan. We contribute an amount to each participant’s account by computing an investment return equal to Moody’s Average Seasoned Bond Rate plus 2 %. Employees receive vested amounts upon death, termination, or attainment of retirement age. No benefit expense was recorded under this plan for fiscal years 2023 and 2022. Supplemental Executive Retirement Plan Retirement benefits otherwise available to certain key executives under the Primary Benefit Plan have been limited by the effects of the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) and the Tax Reform Act of 1986 (“TRA”). To offset the loss of retirement benefits associated with TEFRA and TRA, the Company has adopted a non-qualified “makeup” benefit plan (the “Supplemental Executive Retirement Plan”). Benefits will be provided under the Supplemental Executive Retirement Plan in an amount equal to 60 % of each participant’s final average earnings minus any pension benefits and primary insurance amounts available to them under Social Security. However, in all cases the benefits are capped at $ 120,000 per year for Allan L. Bridgford. Benefits provided under this plan for William L. Bridgford and Raymond F. Lancy are calculated at 50 % of final average earnings, capped at $ 200,000 per year, without offsets for other pension or Social Security benefits. Benefits payable related to these plans and included in the accompanying consolidated financial statements were $ 4,994 and $ 4,985 as of November 3, 2023, and October 28, 2022, respectively. The benefit payable is recorded as $ 249 and $ 133 under current liabilities and $ 4,745 and $ 4,852 under non-current liabilities as of November 3, 2023 and October 28, 2022, respectively. In connection with these arrangements, we are the beneficiary of life insurance policies on the lives of certain key employees and retirees. The aggregate cash surrender value of these policies, included in non-current assets, was $ 12,029 and $ 11,584 as of November 3, 2023, and October 28, 2022, respectively. The net periodic pension income for fiscal year 2023 was $ 1,057 caused by the change in pension discount rate from fiscal year 2022 to fiscal year 2023. 37 Expected payments for executive postretirement benefits are as follows: Schedule of Expected Payments for Pension Benefits Fiscal Years Executive Postretirement Benefits 2024 $ 533 2025 $ 533 2026 $ 533 2027 $ 533 2028 $ 532 2029-2032 $ 2,612 Incentive Compensation Plan for Certain Key Executives We provide an incentive compensation plan for certain key executives, which is based upon our pretax income. The payment of these amounts is generally deferred over three or five -year periods. The total amount payable related to this arrangement was $ 3,848 and $ 3,659 as of November 3, 2023, and October 28, 2022, respectively. Future payments are approximately $ 1,582 , $ 1,531 , $ 694 , $ 33 , and $ 8 for fiscal years 2024 through 2028, respectively. Postretirement Healthcare Benefits for Selected Executive Employees We provide postretirement health care benefits for selected executive employees. Net periodic postretirement healthcare (benefit) cost is determined using assumptions as of the beginning of each fiscal year, except for the total actual benefit payments and the discount rate used to develop the net periodic postretirement benefit expense, which is determined at the end of the fiscal year. Net periodic postretirement healthcare cost (benefit) consisted of the following: Schedule Net Periodic Post-retirement Healthcare (benefit) Cost November 3, 2023 October 28, 2022 (53 Weeks) (52 Weeks) Interest cost $ 22 $ 13 Amortization of actuarial gain ( 17 ) ( 10 ) Service cost 4 - Net periodic postretirement healthcare cost $ 9 $ 3 Weighted average assumptions for the fiscal years ended November 3, 2023, and October 28, 2022, are as follows: Schedule of Health Care Cost Trend Rates 2023 2022 Discount rate 5.96 % 5.44 % Medical trend rate next year 7.50 % 6.50 % Ultimate trend rate 5.00 % 5.00 % Year ultimate trend rate is achieved 2028 2026 The table below shows the estimated effect of a 1% increase in healthcare cost trend rate on the following: Schedule of Effect of One-Percentage-Point Change in Assumed Health Care Cost Trend Rates 2023 2022 Interest cost plus service cost $ 5 $ 2 Accumulated postretirement healthcare obligation $ 106 $ 65 The table below shows the estimated effect of a 1% decrease in healthcare cost trend rate on the following: Schedule of Effect of One-Percentage-Point Change in Assumed Health Care Cost Trend Rates 2023 2022 Interest cost plus service cost $ ( 4 ) $ ( 1 ) Accumulated postretirement healthcare obligation $ ( 84 ) $ ( 55 ) 38 The healthcare obligation and funded status of this plan as of the fiscal years ended are as follows: Schedule of Net Funded Status 2023 2022 Change in accumulated postretirement healthcare obligation: Healthcare obligation - beginning of year $ 426 $ 530 Interest cost 22 13 Service cost 3 - Actuarial gain (loss) 230 ( 105 ) Benefits paid ( 32 ) ( 12 ) Healthcare obligation – end of year $ 649 $ 426 Funded status of the plans 649 426 Unrecognized net actuarial gain 33 ( 215 ) Unrecognized amounts recorded in other comprehensive income ( 33 ) 215 Postretirement healthcare liability $ 649 $ 426 Expected payments for the postretirement benefits are as follows: Schedule of Expected Payments for Pension Benefits Fiscal Years Postretirement Healthcare Benefits 2024 $ 36 2025 $ 37 2026 $ 37 2027 $ 37 2028-2032 $ 177 401(K) Plan for Sales, Administrative, Supervisory and Certain Other Employees During the fiscal year ended November 3, 2006, we implemented a qualified 401(K) retirement plan (the “401K Plan”) for our sales, administrative, supervisory, and certain other employees. During fiscal years 2023 and 2022, we made total employer contributions to the 401K Plan in the amounts of $ 887 and $ 893 , respectively. NOTE 4 - Income Taxes : The provision for (benefit on) income taxes include the following: Schedule of Provision (Benefit) for Taxes on Income November 3, 2023 October 28, 2022 (53 Weeks) (52 Weeks) Current: Federal $ 1,660 $ 10,574 State ( 8 ) 2,264 Current tax expense benefit 1,652 12,838 Deferred: Federal ( 530 ) 2,609 State ( 101 ) 894 Deferred tax expense benefit ( 631 ) 3,503 Provision (benefit) for income taxes $ 1,021 $ 16,341 39 The total tax benefit differs from the expected amount computed by applying the statutory federal income tax rate to income before income taxes as follows: Schedule of Tax Provision Differs from Statutory Federal Income Tax Rate November 3, 2023 October 28, 2022 (53 Weeks) (52 Weeks) Provision for federal income taxes at the applicable statutory rate $ 944 $ 12,895 (Decrease) increase in provision resulting from state income taxes, net of federal income tax benefit ( 86 ) 2,458 Non-taxable life insurance loss (gain) ( 93 ) 427 Other, net 256 561 Provision for income taxes $ 1,021 $ 16,341 Deferred income taxes result from differences in the basis of assets and liabilities for tax and accounting purposes. Schedule of Deferred Income Taxes Results from Differences in Bases of Assets and Liabilities November 3, 2023 October 28, 2022 Receivables allowance $ 64 $ 48 Returns allowance 167 142 Inventory packaging reserve 299 145 Inventory overhead capitalization 571 628 Employee benefits 726 848 Other ( 30 ) 143 State taxes payable (receivable) 232 275 Incentive compensation 824 733 Pension and health care benefits 924 1,318 Depreciation ( 12,342 ) ( 13,440 ) Net operating loss carry-forward and credits 322 287 Valuation allowance established against state NOL ( 99 ) ( 99 ) Deferred income taxes, net $ ( 8,342 ) $ ( 8,972 ) Management is required to evaluate whether a valuation allowance should be established against its deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. Realization of deferred tax assets is dependent upon taxable income in prior carryback years, estimates of future taxable income, tax planning strategies, and reversals of existing taxable temporary differences. Management is required to evaluate whether a valuation allowance should be established against its deferred tax assets based on the consideration of all available evidence using a “more likely than not” standard. Realization of deferred tax assets is dependent upon taxable income in prior carryback years, estimates of future taxable income, tax planning strategies, and reversals of existing taxable temporary differences. As of November 3, 2023, the Company did not have any valuation allowance against its federal net deferred tax assets. Management reevaluated the need for a valuation allowance at the end of 2022 and determined that some of its California NOL may not be utilized. Therefore, a valuation allowance of $ 99 has been retained for such portion of the California NOL. As of November 3, 2023, the Company had net operating loss carryforwards of approximately $ 0 for federal and $ 5,000 for state purposes. The state loss carryforwards will expire at various dates through 2040 . In July 2006, the FASB issued guidance to clarify the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This interpretation prescribed a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance also discussed derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The cumulative effect, if any, of applying this guidance is to be reported as an adjustment to the opening balance of retained earnings in the year of adoption. The provisions of this guidance have been incorporated into ASC 740-10. As of November 3, 2023, we have provided a liability of $ 314 to unrecognized tax benefits related to various federal and state income tax matters. $ 76 of this liability will reduce our effective income tax rate if the asset is recognized in future reporting periods. We have not identified any new unrecognized tax benefits. As of October 28, 2022, we have provided a liability of $ 299 to unrecognized tax benefits related to various federal and state income tax matters. None of this liability will reduce our effective income tax rate if the asset is recognized in future reporting periods. 40 A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows: Schedule of Reconciliation of Unrecognized Tax Benefits November 3, 2023 October 28, 2022 (53 Weeks) (52 Weeks) Balance at beginning of year $ 299 $ 173 Additions based on tax positions related to the current year 16 126 Additions for tax positions of prior years 16 - Balance at end of year $ 331 $ 299 We recognize any future accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of November 3, 2023, we had approximately $ 40 in accrued interest and penalties which is included as a component of the $ 331 unrecognized tax benefit noted above. Our federal income tax returns are open to audit under the statute of limitations for the years ended October 31, 2020, through 2022. 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 years ended October 31, 2019, through 2022. We do not anticipate a significant change to the total amount of unrecognized tax benefits within the next 12 months. 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, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before January 1, 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 (fiscal year 2019) and has carried back a taxable loss of $ 9,919 to tax years 2014 (fiscal year 2015) and 2015 (fiscal year 2016). Furthermore, the Company also carried back $ 21,687 of net operating loss from 2019 (fiscal year 2020) against any remaining taxable income of tax year 2015 (fiscal year 2016) and taxable income of tax years 2016 (fiscal year 2017) and 2017 (fiscal year 2018). The carryback of net operating losses will also release $ 358 of research & development credits, which will become available for utilization in future years. On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “Tax Act”). Among other significant changes, the Tax Act reduced the corporate federal income tax rate from 35% to 21%. The carryback of NOLs from tax years 2018 and 2019 under the CARES Act to pre-Tax Act years has generated an income tax benefit of $ 3,091 due to the difference in income tax rates. The release of research and development credits has generated an income tax benefit of $ 358 . These income tax benefits have been recorded in the income tax provision for fiscal year 2020 . The effective tax rate was 22.7 % and 26.6 % for fiscal years 2023 and 2022, respectively. The effective tax rate for fiscal year 2022 was impacted by the rate differential on NOL carryback available under the CARES Act discussed in the paragraphs above. In addition, the effective tax rates for fiscal years 2023 and 2022 were impacted by such items as non-deductible meals and entertainment, non-taxable gains and losses on life insurance policies and state income taxes. NOTE 5 - Line of Credit and Borrowing Agreements : The following table reflects major components of our revolving credit facility and borrowing agreements as of November 3, 2023, and October 28, 2022, respectively. Schedule of Line of Credit and Borrowing agreements November 3, 2023 October 28, 2022 Revolving credit facility $ - $ - Equipment notes: 3.68 % note due 04/16/27 , out of lockout 04/17/22 3,831 4,913 Total debt 3,831 4,913 Less current debt ( 1,045 ) ( 1,089 ) Total long-term debt $ 2,786 $ 3,824 41 Revolving Credit Facility On November 30, 2023, we entered into a fifth amendment to the credit agreement with Wells Fargo Bank, N.A. dated March 1, 2018, as amended, and also executed a revolving line of credit note pursuant to the amendment. The revolving line of credit note replaces the existing note that expired by its terms on November 30, 2023. Under the terms of this amendment and the revolving line of credit note, we may borrow up to $ 7,500 from time to time up to November 30, 2024, at an interest rate equal to (a) the daily simple secured overnight financing rate plus 2.0%, or if unavailable, (b) the prime rate, in each case as determined by the bank. The line of credit has an unused commitment fee of 0.35 % of the available loan amount, payable on a quarterly basis . Amounts may be repaid and reborrowed during the term of the note. Accrued interest is payable on the first day of each month and the outstanding principal balance and remaining interest are due and payable on November 30, 2024. 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 above. Bridge Loan On August 30, 2021, we entered into a loan commitment note for a bridge loan of up to $ 25,000 to obtain capital to pay off the existing equipment loans as they came out of the lock out period and could be prepaid. The outstanding principal balances of the bridge loan became due and payable in full 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”). We prepaid $ 18,653 in equipment loans 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. Loan Covenants The Wells Fargo Loan Agreements and the credit agreement contain various affirmative and negative covenants that limit the use of funds and define other provisions of the loans. The main financial covenants are listed below: ● Total Liabilities divided by Tangible Net Worth not greater than 2.0 to 1.0 at each fiscal quarter end, ● Quick Ratio not less than 1.25 to 1.0 at each fiscal quarter end, ● Fixed Charge Coverage Ratio not less than 1.25 to 1.0 at the end of the fiscal quarter end. As of November 3, 2023, the Company was in compliance with all covenants under the Wells Fargo Loan Agreements and the credit agreement. Aggregate contractual maturities of debt in future fiscal years are as follows as of November 3, 2023. Schedule of Aggregate Contractual Maturities of Debt in Future Fiscal Years Fiscal Years Debt Payable 2024 $ 1,045 2025 $ 1,083 2026 $ 1,124 2027 $ 580 42 NOTE 6- Contingencies and 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 – Leases. The Company leases three long-haul trucks received during fiscal year 2019. The six-year leases for these trucks expire in 2025 . Amortization of equipment under capital lease was $ 96 in 2023. The Company leased one long-haul truck for $ 40 during fiscal year 2023, and that lease term is two years . The Company performed a detailed analysis and determined that the only indications of long-term leases in addition to transportation leases for long-haul trucks were Hogshed Ventures, LLC and Racine Partners 4333 LLC. A right-of-use asset and corresponding liability for warehouse storage space was recorded for $ 238 for Hogshed Ventures, LLC for 40th Street in Chicago, Illinois, and $ 3,276 for Racine Partners 4333 LLC for 43 rd Street as of November 3, 2023. We lease these spaces under non-cancelable operating leases. These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives or other build-out clauses. Further these leases do not contain contingent rent provisions. The lease with Hogshed Ventures LLC terminates on June 30, 2023 . The lease with Racine Partners 4333 LLC terminates on May 31, 2027. These leases include 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 assets. This Hogshed Ventures LLC 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. 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 2024 $ 1,230 2025 937 2026 996 2027 518 Later Years - Total minimum lease payments(a) (a) $ 3,681 Less: Amount representing executory costs ( 20 ) Less: Amount representing interest(b) (b) ( 1 ) Present value of future minimum lease payments(c) (c) $ 3,660 (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 Note 2, as current and noncurrent obligations under capital leases of $ 62 and $ 28 , respectively, and right-of-use assets of $ 1,120 and $ 2,450 , respectively. 43 NOTE 7 - Segment Information : We have two reportable operating segments, Frozen Food Products (the processing and distribution of frozen 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 expenses include corporate accounting, information systems, human resources and marketing management at the corporate level. These activities are allocated to each operating segment based on revenues and/or actual usage. The following segment information is for the fiscal years ended November 3, 2023 (53 weeks) and October 28, 2022 (52 weeks): Schedule of Segment Reporting Information, by Segment Segment Information 2023 Frozen Food Products Snack Food Products Other Totals Net sales $ 57,638 $ 193,998 $ - $ 251,636 Cost of products sold 43,180 138,099 - 181,279 Gross margin 14,458 55,899 - 70,357 SG&A 14,443 51,124 - 65,567 Loss on sale of property, plant, and equipment 75 86 - 161 Operating (loss) income $ ( 60 ) $ 4,689 $ - $ 4,629 Total assets $ 15,241 $ 121,725 $ 30,032 $ 166,998 Additions to PP&E $ 493 $ 2,110 $ - $ 2,603 Segment Information 2022 Frozen Food Products Snack Food Products Other Totals Net sales $ 56,254 $ 209,644 $ - $ 265,898 Cost of products sold 41,100 152,737 - 193,837 Gross margin 15,154 56,907 - 72,061 SG&A 14,614 50,621 - 65,235 Gain on sale of property, plant, and equipment ( 16 ) ( 100 ) ( 57,629 ) ( 57,745 ) Operating income (loss) $ 556 $ 6,386 $ 57,629 $ 64,571 Total assets $ 16,327 $ 130,704 $ 29,317 $ 176,348 Additions to PP&E $ 1,106 $ 2,664 $ - $ 3,770 The following information further disaggregates our sales to customers by major distribution channel and customer type for the fiscal years ended November 3, 2023, and October 28, 2022, respectively. Schedule of Disaggregates Our Sales to Customers 2023 Distribution Channel Retail (a) Foodservice (b) Totals Direct store delivery $ 130,497 $ - $ 130,497 Direct customer warehouse 63,501 - 63,501 Total Snack Food Products 193,998 - 193,998 Distributors 8,397 49,241 57,638 Total Frozen Food Products 8,397 49,241 57,638 Total Net Sales $ 217,852 $ 49,241 $ 251,636 (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. 44 2022 Distribution Channel Retail (a) Foodservice (b) Totals Direct store delivery $ 138,220 $ - $ 138,220 Direct customer warehouse 71,424 - 71,424 Total Snack Food Products 209,644 - 209,644 Distributors 8,208 48,046 56,254 Total Frozen Food Products 8,208 48,046 56,254 Total Net Sales $ 217,852 $ 48,046 $ 265,898 (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. NOTE 8 - Unaudited Interim Financial Information : Not applicable for a smaller reporting company. 45