| Summary of Significant Accounting Policies | NOTE 1 - Summary of Significant Accounting Policies Description of the Business Uniroyal Global Engineered Products, Inc. (the “Company”)
is primarily engaged in the development, manufacturing and distribution of vinyl coated fabrics primarily for use in transportation,
residential, hospitality, health care, office furniture and automotive applications. The Company’s customers are located
primarily throughout North America and Europe. On April 29, 2015, the Board of Directors adopted an amendment
to the Articles of Incorporation to change the Company’s name from Invisa, Inc. to Uniroyal Global Engineered Products, Inc.
On June 25, 2015, the stockholders approved the amendment. The amended and restated Articles of Incorporation were filed with the
Nevada Secretary of State and became effective on July 15, 2015. On November 10, 2014, the Company acquired all of the ownership
interests in Uniroyal Engineered Products, LLC (“Uniroyal”), a U.S. manufacturer of textured coatings, and all of the
ordinary common stock of Engineered Products Acquisition Limited (“EPAL”), the holding company for Wardle Storeys (Earby)
Limited (“Wardle Storeys”), a European manufacturer of textured coatings and polymer films. The Company made the acquisition of Uniroyal through its newly
formed subsidiary, UEP Holdings, LLC (“UEPH”). The aggregate purchase consideration paid for 100% of the outstanding
equity of Uniroyal was preferred ownership interests issued by UEPH having a liquidation preference of $35 million. See Note 13
for a description of the preferred units issued. In a separate transaction, the Company purchased EPAL for 100
shares of the Company’s Common Stock and the Company’s guaranty of outstanding EPAL preferred stock retained by the
seller, having a liquidation preference of £12,518,240 (approximately $20 million at closing). These
preferred shares were entitled to a fixed cumulative preferential dividend of £625,912 per annum payable quarterly (approximately
$1,000,000 at the date of the transaction). On November 24, 2015, the liquidation preference was changed from £12,518,240
to €17,699,314 (approximately $18,851,539) and the payment of the quarterly dividend from £156,478 to €221,241
(approximately $235,644). These conversions were based on the exchange rates on November 24, 2015. As a result of beneficial ownership between the principal owner
of the Company and the seller of Uniroyal and EPAL, the seller controls in excess of 80% of the Company’s voting rights in
all matters to come before the Company’s shareholders. As a result of this common ownership, the November 10, 2014 transaction
was treated as a combination between entities under common control and was accounted for in a manner similar to the pooling-of-interest
method. The recognized assets and liabilities were transferred at their carrying amounts at the date of the transaction. Further,
the companies were also combined retrospectively for prior year comparative information to the extent permitted. In December 2016, the Company changed the name of EPAL to Uniroyal
Global (Europe) Limited (“UGEL”) and the name of Wardle Storeys to Uniroyal Global Limited (“UGL”). The Company and its subsidiaries use a 52/53-week fiscal year
ending on the Sunday nearest to December 31. The years ended December 29, 2019 and December 30, 2018 were both 52-week years.
The Company’s U.K. subsidiaries use the calendar year end of December 31. The activity of the U.K. subsidiaries that occurs
on the days that do not coincide with the Company’s year-end is not material since there generally is no production or sales
during that period. Basis of Presentation The consolidated financial statements include the accounts
of the Company and its subsidiaries and are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
All intercompany transactions have been eliminated. The Company manages its operations on a consolidated, integrated basis in
order to optimize its equipment and facilities and to effectively service its global customer base, and concludes that it operates
in a single business segment. On January 27, 2020, the Company announced a one-for-five reverse
stock split on its common stock that became effective on February 24, 2020. Share and per share amounts have been adjusted to give
effect to the reverse stock split. Adjusted for the reverse stock split, basic and diluted loss per share were $0.58 for the year
ended December 29, 2019 and $0.50 for the year ended December 30, 2018. The amounts in common stock
and additional paid-in capital will be adjusted as of the effective date of the one-for-five reverse stock split. For purposes of comparability, certain reclassifications have
been made to amounts previously reported to conform with the current period presentation. Cash and Cash Equivalents The Company defines cash and cash equivalents as highly liquid,
short-term investments with a maturity at the date of acquisition of three months or less. The Company maintains cash in bank accounts which, at times,
exceeds federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to
any significant credit risks. Accounts Receivable Accounts receivable are recorded net of an allowance for doubtful
accounts, returns and discounts of $411,376 and $283,560 as of December 29, 2019 and December 30, 2018, respectively. Accounts
receivable are recorded when obligations under the terms of a contract with a customer are satisfied, which includes the control
of products transferring to the customer. See Note 22 for further discussion. On an ongoing basis, the Company evaluates its accounts receivable
based on individual customer circumstances, historical write-offs and collections, and current industry and customer credit conditions,
and adjusts its allowance for doubtful accounts accordingly. The Company’s policy regarding write-offs and collection efforts
varies based on individual customer circumstances. Past due accounts receivable are determined based on individual customer credit
terms. Customer Rebates The Company records customer rebates as a reduction of net sales.
Accounts receivable are recorded net of an allowance for customer rebates of $77,337 and $90,288 as of December 29, 2019 and December
30, 2018, respectively. Inventories Inventories are valued at the lower of cost using the first-in,
first-out (FIFO) method, or market. The Company and its subsidiaries have policies which are consistently applied to maintain reserves
for obsolescence based on specific identification, discontinued or obsolete items, or a percentage of the amount on hand based
on inventory aging compared with historical and forecasted usage and sales levels. These inventory recoverability assessments reduce
inventories to their estimated net realizable value. Property and Equipment Property and equipment are stated at cost. Major expenditures
for property and equipment are capitalized. Maintenance, repairs, and minor refurbishments are expensed as incurred. When assets
are disposed of, their costs and related accumulated depreciation are removed from the accounts and resulting gains or losses are
included in income. Property and equipment are depreciated using the straight-line
method over their estimated useful lives. For income tax reporting purposes, depreciation is calculated using both applicable straight-line
methods and accelerated methods or capital allowances based on the various taxing jurisdictions’ approved methods. Leases The Company determines if an arrangement is a lease at inception.
Operating leases are included in operating lease right-of-use assets, accrued expenses and other liabilities, and operating lease
liabilities in the accompanying consolidated balance sheet at December 29, 2019. There is no comparable information for operating
leases at December 30, 2018 since the Company adopted Accounting Standards Update No. 2016-02, “Leases” on December
31, 2018 and elected to recognize operating lease right-of-use assets and operating lease liabilities at the adoption date. See
“Recent Accounting Standards” below for further discussion. Finance lease right-of-use assets are included in property
and equipment, current maturities of finance lease liabilities, and finance lease liabilities, less current portion in the accompanying
consolidated balance sheets at December 29, 2019 and December 30, 2018. Right-of-use assets represent the Company’s right to use
an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising
from the lease. Generally, lease right-of-use assets and liabilities are recognized at the beginning date of a lease based on the
present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on information that
is available at the beginning date of a lease to determine the present value of lease payments, since its leases generally do not
provide an implicit rate. The implicit rate is used when readily determinable. The Company excludes leases with terms of 12 months
or less. The terms of the Company’s leases may include options to extend or terminate a lease when it is reasonably certain
that the Company will exercise that option. The Company’s lease agreements with lease and non-lease components are generally
accounted for on a combined basis. See Note 16 for further discussion. Cash Surrender Value of Insurance Policies Cash surrender value of insurance policies is valued at the
cash surrender value of the contract as determined by the life insurance company. The cash value of the insurance policies totaled
$597,551 and $420,404 as of December 29, 2019 and December 30, 2018, respectively. The Company
has obtained loans against the cash value of certain of these insurance policies. At December 29, 2019 and December 30, 2018, these
insurance policy loans totaled $460,841 and $211,790, respectively, and had a weighted average interest rate of 3.63% and 3.59%,
respectively. The increase in the amount of insurance policy loans was due to $249,051 in loans obtained by the Company during
the third quarter of 2019. Interest is accrued quarterly. Each loan (and applicable accrued interest) can be repaid at any time.
Any loan (or interest) outstanding at the time of settlement will reduce the proceeds payable under the policies. On April 1, 2018, the Company’s majority
shareholder purchased the company owned life insurance policy on his life. The policy had a net value of $128,399 based on the
cash surrender value of $578,490 and a policy loan outstanding in the amount of $450,091. After his assumption of a related party
demand note payable in the amount of $125,000, the balance due of $3,399 was paid on April 17, 2018. Impairment of Finite-Lived Long-Lived
Assets The Company reviews long-lived assets, including property, equipment,
and intangible assets, for impairment at least annually or whenever events or changes in business circumstances indicate that the
carrying amount of an asset may not be fully recoverable. An impairment loss would be recognized when the estimated future cash
flows from the use of the asset are less than the carrying amount of that asset. During the fourth quarter of 2018, the Company
recorded a $510,230 impairment charge for assets used in the calender operations at the Company’s U.K. subsidiary. The Company
decided that it would de-commission the equipment and no longer offer the calendered product after determining that these operations
could not be economically modernized. See Note 23 for additional information. Goodwill and Intangible Indefinite-Lived
Assets Goodwill represents the excess of the purchase price over the
estimated fair value of identifiable net assets acquired. Trademarks are recorded at estimated fair value at the date they were
acquired in certain business acquisitions. To the extent it has been determined that the carrying value of the assets associated
with goodwill or trademarks is not recoverable and is in excess of its fair value, an impairment loss is recognized. Impairment
is reviewed at least annually. No impairment loss was deemed necessary as of December 29, 2019 or December 30, 2018. Income Taxes The Company follows ASC 740 Income Taxes for recording the
provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement
and income tax bases of assets and liabilities (temporary differences) using the enacted marginal tax rate applicable when the
related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes
in the asset or liability each period. The Company reduces its deferred tax assets by a valuation allowance if it is more likely
than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible. In
making its valuation allowance determinations, the Company considers all available positive and negative evidence affecting specific
deferred tax assets, including past and anticipated future performance, the reversal of deferred tax liabilities, the length of
carryback and carryforward periods, and the implementation of tax planning strategies. The tax effects from an uncertain tax position are recognized
in the financial statements only if the position is more likely than not to be sustained on audit, based on the technical merits
of the position. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant
tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than
not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood
of being realized upon ultimate settlement with the relevant tax authority. The Company does not believe there is any uncertainty
with respect to its tax positions which would result in a material change to the financial statements. The Company files income tax returns in the United States as
a C-Corporation, and in several state jurisdictions and in the United Kingdom. The Company’s subsidiary, Uniroyal, is a limited
liability company (LLC) for federal and state income tax purposes and as such, its income, losses, and credits pass through to
its members. Uniroyal’s taxable income is allocated entirely to UEPH, a limited liability corporation, as its sole member.
As the sole member of UEPH, the Company then receives this income allocation less the dividends paid on the preferred ownership
interests held by the former owners of Uniroyal. The Company's tax returns for tax years 2016 and thereafter
are subject to examination by taxing authorities. The Company records interest and penalties associated with uncertain tax positions
related to these tax filings as interest expense. For the years ended December 29, 2019 and December 30, 2018, the Company has
recorded no expense for interest or penalties. Derivatives The Company recognizes all of its derivative instruments as
either assets or liabilities in the consolidated balance sheet at fair value. The accounting for changes in the fair value of a
derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, as
to whether the hedge is a cash flow hedge or a fair value hedge. The Company incurs foreign currency risk on sales and purchases
denominated in other currencies, primarily the British Pound Sterling and the Euro. Foreign currency exchange contracts are used
by the Company principally to limit the exchange rate fluctuations of the Euro. The Euro risk is partially limited due to natural
cash flow offsets. Currency exchange contracts are purchased for approximately 25% of the net risk. These contracts are not designated
as cash flow hedges for accounting purposes. Changes in fair value of these contracts are reported in other expense in the accompanying
consolidated statements of operations. The fair values of the contracts at December 29, 2019 and December 30, 2018 were a net asset
of $22,025 included in other current assets and a net liability of $26,814 included in other current liabilities, respectively. Fair Value of Financial Instruments The Company’s short-term financial instruments consist
of cash and cash equivalents, accounts receivable, accounts payable and lines of credit. The Company adjusts the carrying value
of financial assets denominated in other currencies such as cash, accounts receivable, accounts payable and lines of credit using
the appropriate exchange rates at the balance sheet date. The Company believes that the carrying values of these short-term financial
instruments approximate their estimated fair values. The fair value of the Company’s long-term debt is estimated
based on current rates for similar instruments with the same remaining maturities. In determining the current interest rates for
similar instruments, the Company takes into account its risk of nonperformance. The Company believes that the carrying value of
its long-term debt approximates its estimated fair value. The Company uses foreign currency exchange contracts which are
recorded at their estimated fair values in the accompanying consolidated balance sheets. The fair values of the currency exchange
contracts are based upon observable market transactions of spot and forward rates. For the fiscal year ended December 29, 2019, there have been
no changes in the application of valuation methods applied to similar assets and liabilities. The Company follows accounting principles generally accepted
in the United States of America for measuring, reporting, and disclosing fair value. These standards apply to all assets and liabilities
that are measured, reported, and/or disclosed on a fair value basis. Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy
ranks the quality and reliability of the information used to determine fair values. Assets and liabilities measured, reported and/or
disclosed at fair value will be classified and disclosed in one of the following three categories: Level 1 - Inputs
to the valuation methodology are unadjusted quoted market prices for identical assets in active markets that the Company has the
ability to access. Level 2 - Observable
market based inputs or unobservable inputs that are corroborated by market data. Inputs to the valuation methodology include:
> quoted prices for similar assets or liabilities in active markets;
> quoted prices for identical or similar assets or liabilities in inactive markets;
> inputs other than quoted prices that are observable for the asset or liability;
> inputs that are derived principally from or corroborated by observable market data by correlation
or other means. Level 3
- Unobservable inputs that are unobservable and not corroborated by market data. The asset’s or liability’s fair value measurement
level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Foreign Currency Translation The financial position and results of operations of the Company’s
foreign subsidiaries are measured using the local currency as the functional currency. Assets and liabilities of operations denominated
in foreign currencies are translated into U.S. dollars at exchange rates in effect at the balance sheet date, while the capital
accounts are translated at the historical rate for the date they were recognized. Revenues and expenses are translated at the weighted
average exchange rates during the year. The resulting translation gains and losses on assets and liabilities are recorded in accumulated
other comprehensive loss and are excluded from net income until realized through a sale or liquidation of the investment. Transaction
gains and losses generated from the remeasurement of assets and liabilities denominated in currencies other than the functional
currency of the Company’s foreign operations are included in other expense in the accompanying consolidated statements of
operations. Estimates The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates. Revenue Recognition The revenue recognition process begins when the Company receives
a purchase order submitted by a customer. This represents the point in time at which a contract with the customer exists. The contract
specifies the transaction price which is based on the amount of consideration the Company expects to receive in exchange for transferring
control of a product to the customer. The Company does not have multiple performance obligations requiring it to allocate a transaction
price. The performance obligation under the contract is the delivery of products. The performance obligation is satisfied and revenue
is recognized when the Company transfers control of the products to its customers. For Uniroyal, this generally occurs when products
are shipped and, for UGL, this generally occurs when the customer accepts delivery either at the Company’s U.K. facility
or at a mutually agreed upon location. However, if the Company has an enforceable right to payment when the customer is contractually
required to accept delivery of any remaining product at the end of a contract, but collectability of the revenue is uncertain,
revenue recognition would occur upon agreement even if the product is not delivered to the customer. See Note 22 for further discussion. Based on historical results and analysis, we estimate and calculate
provisions for customer rebates and sales returns and allowances and record these estimated amounts as an offset to revenue in
the same period the related revenue is recognized. Shipping and Handling Costs Shipping and handling costs charged to customers and the costs
incurred by the Company are netted. Shipping and handling costs incurred by the Company for purchases are included in cost of goods
sold. Warranties The Company warrants that the materials and workmanship of its
products will meet customer specifications. The Company estimates its accrued warranty expenses based upon prior warranty claims
experience. Accrued warranty expenses were not material as of December 29, 2019 and December 30, 2018. Advertising Advertising costs, other than promotional materials, are charged
to expense as incurred. Promotional materials are expensed as they are distributed. Advertising expense was $136,161 and $185,496
for the years ended December 29, 2019 and December 30, 2018, respectively. As of December 29, 2019 and December 30, 2018, $87,707
and $113,927, respectively, of promotional materials were included in other long-term assets in the accompanying consolidated financial
statements. Research and Development Research and development costs are charged to expense as incurred.
Research and development expense was $1,634,385 and $1,653,234 for the years ended December 29, 2019 and December 30, 2018, respectively. Earnings Per Share The Company calculates basic net income per common share by
dividing net income after the deduction of preferred stock or preference dividends by the weighted average number of common shares
outstanding. The calculation of diluted net income per share is consistent with that of basic net income per common share but gives
effect to all potential common shares (that is, securities underlying options, warrants or convertible securities) that were outstanding
during the period, unless the effect is anti-dilutive. Legal Proceedings From time to time, the Company may be a party to claims, proceedings,
and lawsuits related to products, services, contracts, employment, environmental, safety, intellectual property, and other matters.
The ultimate resolution of such claims, proceedings, and lawsuits is inherently unpredictable and, as a result, the Company’s
estimates of liability, if any, are subject to change. Actual results could differ materially from the Company’s estimates,
and an unfavorable resolution of any matter could have a material adverse effect on the financial condition, results of operations
and/or cash flows of the Company. The Company does not believe, based on the information currently available to it, that the ultimate
resolution of any currently pending matters will have a material effect on the consolidated financial condition, results of operations,
or cash flows of the Company. Environmental Matters The Company’s policy is to conduct its businesses with
due regard for the preservation and protection of the environment. Management is not aware of any environmental matters relating
to its operations that could materially affect liquidity, capital resources, or the financial condition of the Company. Recent Accounting Standards On February 25, 2016, the Financial
Accounting Standards Board issued a new standard, (“ASU”)
No. 2016-02, “Leases,” on July 30, 2018, it issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements”
and Under
the new guidance, a lessee is required to recognize right-of-use assets and lease liabilities for leases with lease terms of more
than 12 months. Consistent with previous U.S. generally accepted accounting principles (“GAAP”), the recognition, measurement,
and presentation of expenses and cash flows arising from a lease by a lessee primarily depends on its classification as a finance
or operating lease. However, unlike previous GAAP, which required only finance leases to be recognized on the balance sheet, the
new ASU requires both types of leases to be recognized on the balance sheet. The Company adopted this standard on December 31,
2018. On January 26, 2017, the Financial Accounting Standards Board
issued a new standard, ASU No. 2017-04, “Intangibles – Goodwill and Other – Simplifying the Test for Goodwill
Impairment.” The new standard modifies the concept of impairment from the condition that exists when the carrying amount
of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its
fair value. The Company adopted this standard on December 29, 2019. The adoption of this standard for the year ending December
29, 2019 did not have a significant effect on the Company’s consolidated financial position, results of operations and cash
flows. On August 28, 2018, the Financial Accounting Standards Board
issued a new standard, ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure
Requirements for Fair Value Measurement.” The new standard modifies the disclosure requirements on fair value measurements
in Topic 820, “Fair Value Measurement.” Certain requirements were removed such as the amount of and reasons for transfers
between Level 1 and Level 2 of the fair value hierarchy, certain requirements were modified and certain disclosures were added
such as the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3
fair value measurements held at the end of the reporting period. The Company adopted this standard
on December 30, 2019. On December 18, 2019, the Financial Accounting Standards Board
issued a new standard, ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This
new guidance simplifies the accounting for income taxes by removing certain exceptions such as the exception to the incremental
approach for intraperiod tax allocation when there is a loss from continuing operations and income/gain from other items; and the
exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated
loss for the year. The new guidance also simplifies the accounting for income taxes under certain circumstances such as requiring
that an entity recognize a franchise tax that is partially based on income as an income-based tax and account for any incremental
amount incurred as a non-income-based tax; requiring that an entity evaluate when a step up in the tax basis of goodwill should
be considered part of a business combination in which the book goodwill was originally recognized and when it should be considered
a separate transaction; and requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual
effective tax rate computation in the interim period that includes the enactment date. This standard will be effective for the
Company on January 4, 2021. The Company is currently evaluating the effects this standard will have, if any, on its consolidated
financial position, results of operations and cash flows. Subsequent Events The Company has evaluated subsequent events occurring through
the date that the financial statements were available to be issued, for events requiring recording or disclosure in the December
29, 2019 consolidated financial statements. There were no material events or transactions occurring during this period requiring
recognition or disclosure other than the following: On January 27, 2020, the Company announced a one-for-five reverse
stock split on its common stock that became effective on February 24, 2020. Share and per share amounts have been adjusted to give
effect to the reverse stock split. Adjusted for the reverse stock split, basic and diluted loss per share were $0.58 for the year
ended December 29, 2019 and $0.50 for the year ended December 30, 2018. The amounts in common stock
and additional paid-in capital will be adjusted as of the effective date of the one-for-five reverse stock split. Subsequent to year-end 2019, the World Health Organization declared
the novel coronavirus (COVID-19) outbreak a public health emergency. There have been mandates from international, federal,
state and local authorities requiring forced closures of various schools, businesses and other facilities and organizations. These
forced closures could negatively impact the Company’s business. While the closures and limitations on movement, domestically
and internationally, are expected to be temporary, the duration of the supply chain disruption, and related financial impact, cannot
be estimated at this time. Should the closures continue for an extended period of time or should the effects of the coronavirus
continue to spread, the impact could have a material adverse effect on the Company’s financial position, results of operations
and cash flows. |
