| Basis of Presentation and Summary of Significant Accounting Policies | NOTE 1 – Basis of Presentation and 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 mainly 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 year ended January 3, 2021 was a 53-week year whereas the year ended December 29, 2019 was a
52-week year. 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. 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. For purposes of comparability, certain reclassifications have been made to
amounts previously reported to conform with the current period presentation. One-for-Five Reverse Stock Split On January 27, 2020, the Company announced a one-for-five reverse stock split
(“reverse stock split”) on its common stock that became effective on February 24, 2020. All share and per share amounts
reflect the effect of the reverse stock split. The amounts in common stock and additional paid-in capital were adjusted as of the
effective date of the reverse stock split. Coronavirus (COVID-19) During the first quarter of 2020, 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 have negatively impacted the Company’s business. Primarily due to the negative impact that COVID-19 is having
on the global economy, the Company began to experience a decline in sales during the latter part of March 2020. In order to mitigate
the effect of the decrease in revenue, the Company is managing its costs, which included initially reducing staff at its U.S. manufacturing
facility and furloughing the entire production staff at the U.K. facility beginning in late March. During June 2020, the Company
had some employees return to work as its U.K. facility started limited production of vinyl products based on orders it was receiving
from its customers. The Company brought back additional production workers as incoming orders increased during the third quarter
of 2020. All employees returned to work as demand for the Company’s products continued to improve in the fourth quarter although
it was well below normalized levels. As described below, the Company has applied for loans under programs offered
by the governmental agencies in the United States and in the United Kingdom and has found other supplementary cash flow opportunities
to provide further liquidity. For the U.S. operations, during the second quarter of 2020 the Company received
$2,217,500 in funds from One Community Bank (formerly Oregon Community Bank) through the Paycheck Protection Program
(“PPP”) administered by the U.S. Small Business Administration (“SBA”) under the Coronavirus Aid, Relief,
and Economic Security Act (“the CARES Act”). The loan matures on April 13, 2022 and bears an interest rate of 1.0%.
Monthly payments of principal and interest were required to begin on November 13, 2020 based on the amount that was outstanding
on October 13, 2020 in order to fully amortize the loan by April 13, 2022. The loan may be prepaid by the Company at any time prior
to maturity with no prepayment penalties. Loan payments have been deferred pending loan forgiveness from the SBA. All or a portion of the loan may be forgiven by the SBA for costs the Company
incurred for payroll, rent, utilities and all other allowable expenses during the 24-week period that began April 13, 2020. The
Company used all proceeds from the loan to maintain payroll and make payments for lease, utility and other allowable expenses. As a
result, management believes that the Company has met the PPP eligibility criteria for forgiveness and has concluded that the loan
represents, in substance, a government grant that is expected to be forgiven. As such, in accordance with International Accounting
Standards (“IAS”) 20, “Accounting for Government Grants and Disclosure of Government Assistance,” the
Company has recognized the entire loan amount as grant income, which is included in net other income (expense) in the consolidated
statement of operations for the year ended January 3, 2021. The Company submitted its application for loan forgiveness to One
Community Bank in November 2020. Also for the U.S. operations, in December 2020 the Company received $2,432,353
in funds from Wells Fargo Capital Finance, LLC through the Main Street Lending Program established
by the Federal Reserve Board. The loan matures in November 2025 and bears an interest rate of 3.00% above LIBOR. The Company is
required to make monthly interest payments beginning in December 2021 with any deferred interest from the first year of the loan
added to principal. In addition, the Company is required to make annual principal payments in November 2023, 2024 and 2025 in increments
of 15%, 15% and 70% of the principal, respectively. The loan may be prepaid by the Additionally for the U.S. operations, during the first quarter of 2021 the
Company received a $ 2.0 For the U.K. operations, during the year ended January 3, 2021 the Company
recorded reimbursed costs of approximately $1,569 ,000 Additionally for the U.K. operations, during the second half of 2020 the Company
received $ 1,225,911 3,268,664
While the closures and limitations on movement, domestically and internationally,
are expected to be temporary due to the COVID-19 outbreak, the duration of the supply chain disruption and related financial impact
cannot be estimated at this time. Should the closures continue for a more 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 which may require that the Company obtain additional financing. The payment of dividends for the year ended January 3, 2021 and the three
months ended December 29, 2019 was deferred to preserve cash and provide additional liquidity. As of January 3, 2021 and December
29, 2019, accrued dividends of $4,019,905 and $788,599, respectively, were included in accrued expenses and other liabilities in
the accompanying consolidated balance sheets. 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 other than the following: On October 1, 2020, the Health and Safety Executive (“HSE”), the
government agency responsible for the enforcement of health and safety law in the U.K., charged our U.K. subsidiary, Uniroyal Global
Limited, with an offense under the Health and Safety at Work etc. Act 1974 arising from an August 2019 incident in which an employee
was injured in the course of his employment. The Company fully cooperated with the HSE investigation and, at this time,
intends to negotiate a plea based on the legal advice provided to it to date. Based on this legal advice, the Company believes
that £ 150,000 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 $940,474 and $693,265 as of January 3, 2021 and December 29, 2019, 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 $ 131,868 Inventories Inventories are valued at the lower of cost using the first-in, first-out
(FIFO) method, or market. To determine the cost of inventory, the Company allocates fixed expense to the costs of production based
on the normal capacity, which refers to a range of production levels and is considered the production expected to be achieved over
a number of periods under normal circumstances, taking into account the loss of capacity resulting from planned maintenance. Fixed
overhead costs allocated to each unit of production should not increase due to abnormally low production. Those excess costs are
recognized as a current period expense. 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 sheets. Finance leases 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 while related
party finance leases are included in property and equipment, related party obligation, and related party finance lease liabilities
in the accompanying consolidated balance sheets. 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 Notes 10 and 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 $ 776,323
The Company has
obtained loans against the cash value of certain of these insurance policies. At January 3, 2021 and December 29, 2019, these insurance
policy loans totaled $590,841 and $460,841, respectively, and had a weighted average interest rate of 3.63%. The increase in the
amount of insurance policy loans was due to $130,000 in loans obtained by the Company during the third quarter of 2020. 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. 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. There were no impairment losses recognized in the years ended
January 3, 2021 or December 29, 2019. 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 January 3, 2021 or December 29, 2019. 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 U.S. operating 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 does not have a history of repatriating a significant portion
of its foreign cash. However, if it decided to repatriate these foreign amounts to fund U.S. operations, the Company would not
be required to pay any additional U.S. tax related to these amounts since the Company previously recorded a one-time transition
tax on deemed repatriation of deferred foreign income. The Company's tax returns for tax years 2017 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. No such expense was recorded for the years ended January 3, 2021 and December 29, 2019,
since the Company does not believe it has any uncertain tax positions. 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 instruments
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 January 3, 2021, 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 applied 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 the consolidated financial statements and related disclosures
in conformity with U.S. generally accepted accounting principles requires management to make estimates and judgments that affect
the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.
On an on-going basis, management evaluates estimates and assumptions based upon historical experience and various other factors
and circumstances. Management believes that the estimates and assumptions are reasonable under the circumstances; however, actual
results may vary from these estimates and assumptions under different future circumstances. Revenue Recognition We derive our revenues primarily from the manufacture and sale of vinyl coated
fabrics. Revenues are recognized when control of these products is transferred to our customers, in an amount that reflects the
consideration we expect to be entitled to in exchange for those products. The Company has identified customer purchase orders as contracts. 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. Variable Consideration The nature of our business gives rise to variable consideration, including
rebates, allowances and returns that generally decrease the transaction price, which reduces revenue. These various amounts are
generally credited to the customer, based on achieving certain levels of sales activity and product returns. Variable consideration is estimated at the most likely amount that is expected
to be earned. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal
will not occur or when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration
are estimated based upon historical experience and known trends and recorded in the same period in which the related revenue is
recognized. Customer Claims and Implied Warranties The Company does not have any formal warranty programs. We generally will provide
product warranties related to manufacturing defects and specific performance standards for our products. We estimate the potential returns
based upon historical experience and record an allowance for potential returns as contra revenue and within accounts receivable. The
allowance for potential customer returns was $774,674 and $401,808 as of January 3, 2021 and December 29, 2019, respectively. 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. Advertising Advertising costs, other than promotional materials, are charged to expense
as incurred. Promotional materials are expensed as they are distributed. Advertising expense was $80,523 and $136,161 for the years
ended January 3, 2021 and December 29, 2019, respectively. As of January 3, 2021 and December 29, 2019, $ 92,820 Research and Development Research and development costs are charged to expense as incurred. Research
and development expense was $ 980,695 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. 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 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. Since this standard
only revises disclosure requirements, the adoption of this standard for the year ending January 3, 2021 did not have a significant
effect on the Company’s consolidated financial position, results of operations and cash flows. 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 recogn |
