| Summary of Significant Accounting Policies | 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 weeks ended January 22, 2021 and January 24, 2020 have been prepared in conformity with the accounting principles described
in the Company’s Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended October 30, 2020 (the “Annual
Report”) 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. 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 global novel coronavirus pandemic (“COVID-19” or “pandemic”)
on our condensed consolidated financial statements. The business disruptions associated with the Pandemic had a significant impact
on our consolidated condensed financial statements for the twelve-week period ended January 22, 2021. Due to restrictions associated
with the pandemic, consumers went out less and consumed more food at home purchasing lower-margin items like groceries from essential
stores that remained open during the health crisis. The Company sales increased as a result of strong consumer demand for food
items during the twelve-week period ended January 22, 2021. We expect these events to have future business impacts, the extent
of which is uncertain and largely subject to whether the severity worsens, or the duration of current business shutdowns continue.
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. The October 30, 2020 balance sheet amounts
within these interim condensed consolidated financial statements were derived from the audited fiscal year 2020 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, advertising
and other expenses and notes payable. The carrying amount of these instruments approximate fair market value due to their short-term
maturity or market interest rates. As of January 22, 2021, the Company had accounts held with nationally recognized financial institutions
in excess of the Federal Deposit Insurance Corporation insurance coverage limit. 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. 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 twelve weeks ended
January 22, 2021 and January 24, 2020, respectively.
Wal-Mart (1) Dollar General
Sales AR Sales AR
January 22, 2021 36.5 % 7.3 % 13.7 % 24.1 %
January 24, 2020 36.4 % 34.2 % 7.4 % 21.3 % * = No other customer accounted for more than
20% of AR or 10% of consolidated sales for the twelve weeks ended January 22, 2021 or the twelve weeks ended January 24, 2020. (1) = Wal-Mart accounts receivable represented
a lower percentage of sales as of January 22, 2021 due to accelerated payments on outstanding accounts receivable. Revenue recognition Revenues are recognized in accordance with
Accounting Standards Codification (“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, 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 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. Leases Leases are recognized in accordance with Accounting
Standards Update (“ASU”) 2016-02 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, packaging, or processing
product, renting equipment and parking vehicles. We analyze our agreements to evaluate whether or not a lease exists by determining
what assets exist for which we control 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 for use by our Snack Food Product segment direct store delivery route system are not costly to relocate,
contain no significant leasehold improvements, no degree of integration over leased assets, orders can be fulfilled by another
route storage unit interchangeably, no specialized assets exist, market price is paid for storage units and there is no guarantee
of debt. Finance lease assets are recorded within property,
plant and equipment, net of accumulated depreciation and amortization. The Company’s lease of long-haul trucks used in its
Frozen Food Products segment qualifies as a finance lease. Finance lease liabilities are recorded as a separate line item on the
Condensed 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. Financial statement reclassification Certain financial statement reclassifications
have been recorded in 2020 to conform to the current year presentation of operating income and income before taxes. Subsequent events Management has evaluated events subsequent
to January 22, 2021 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. As previously reported, on March 16, 2020,
Bridgford Food Processing Corporation (“BFPC”), a wholly-owned subsidiary of the Company, entered into a Purchase and
Sale Agreement with CRG Acquisition, LLC (“CRG”), pursuant to which BFPC agreed to sell to CRG, pursuant to the terms
and conditions set forth in the CRG Purchase Agreement, a parcel of land including an approximate 156,000 square foot four-story
industrial food processing building located at 170 N. Green Street in Chicago, Illinois (the “Property”). The purchase
price for the Property is $60,000 subject to a due diligence period and certain closing adjustments and prorations, and is conditioned
upon, among other customary closing conditions, CRG receiving zoning and other governmental approvals necessary for the construction
and development of a mixed-use project on the Property in accordance with certain development plans to be approved by the City
of Chicago. The cost basis of the Property was insignificant. On January 29, 2021, the Company executed the
fifth amendment to the CRG Purchase Agreement, dated as of February 1, 2021 of the CRG Purchase Agreement. Under the original terms
and conditions of the CRG Purchase Agreement, the closing of the sale of the Property to CRG would occur on the date that is thirty
(30) days after CRG’s receipt of the necessary zoning approvals, but in any event no earlier than October 31, 2020 and no
later than March 31, 2021. The first amendment dated as of April 10, 2020 extended the inspection period to June 1, 2020. The second
amendment dated as of June 1, 2020 extended the inspection period to July 31, 2020, zoning period to February 1, 2021 and closing
date to February 5, 2021. The third amendment dated July 31, 2020 further extended the inspection period to October 31, 2020, zoning
period to April 30, 2021 and closing date to May 6, 2021. The fourth amendment dated November 2, 2020 further extended the inspection
period to February 1, 2021, the zoning period to August 2, 2021 and closing date to August 31, 2021. The fifth amendment dated
February 1, 2021 further extended the inspection period to May 1, 2021, the zoning period to November 1, 2021 and closing date
to December 1, 2021. The escrow account for the transaction has received $1,350 in earnest money through January 22, 2021. We have
received a total of $450 in total which is non-refundable earnest money through January 22, 2021 which is thus not part of restricted
cash. An additional $200 of non-refundable earnest money had been received as of March 2, 2021, bringing that total to $650, and
the total amount of earnest money deposited in the escrow account since the inception of the CRG Purchase Agreement increased to
$1,650 as of February 1, 2021. On February 15, 2021, our line of credit with
Wells Fargo Bank, N.A. was increased to $15,000 with an unused commitment fee of 0.25% of the available loan amount. The amended
line of credit expires March 1, 2022. Under the terms of this line of credit, we may borrow up to $15,000 at an interest rate equal
to the bank’s prime rate or LIBOR plus 1.5%. The Company borrowed $2,000 under this line of credit during the first quarter
of fiscal 2021 and had $2,000 borrowings outstanding as of January 22, 2021. 1 Based on Management’s review, no other
material events were identified that require adjustment to the financial statements or additional disclosure. 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 January 22, 2021 or January 24, 2020. |
