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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934:

☒		Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934:
		For the fiscal year ended: January 2, 2022

☐		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934:
		For the transition period from:

For the fiscal year ended: January 3, 2021

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934:

For the transition period from:

000-50081

(Commission File Number)

Uniroyal Global Engineered Products, Inc.

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of incorporation or organization)

65-1005398

(I.R.S. employer identification number)

1800 2nd ~~Street~~StreetSuite ~~Suite~~ 970

Sarasota, ~~Florida~~Florida34236 ~~34236~~

(Address of principal executive offices)

(941) 906-8580

(Registrant’s telephone number)

Securities registered under Section 12(b) of the Act: None.

Securities registered under Section 12(g) of the Act: Common Stock, $0.001 par value per share.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o ☐ No þ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. o Yes ☐ No ☒

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

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

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

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

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

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes o ☐ No þ☒

As of July 54, ~~2020~~2021, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $1,~~427~~807,~~268~~872.

As of March 116, ~~2021~~2022, the registrant had 3,412,186 shares of ordinary common stock, $0.001 par value and 323,820 shares of Class B Common Stock, $0.001 par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Uniroyal Global Engineered Products, Inc. definitive ~~2021~~ 2022 Proxy Statement, to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended January 32, ~~2021~~2022, are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

		Page
Part I
Item 1	Business	4
Item 1A	Risk Factors	10
Item 1B	Unresolved Staff Comments	10
Item 2	Properties	10
Item 3	Legal Proceedings	10
Item 4	Mine Safety Disclosures	10
Part II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	11
Item 6	~~Selected Financial Data~~Reserved	12
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	21
Item 8	Financial Statements	22
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	58
Item 9A	Controls and Procedures	58
Item 9B	Other Information	59
Part III
Item 10	Directors, Executive Officers and Corporate Governance	59
Item 11	Executive Compensation	60
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	60
Item 13	Certain Relationships and Related Transactions, and Director Independence	60
Item 14	Principal Accounting Fees and Services	60
Part IV
Item 15	Exhibits, Financial Statements Schedules	61
Signature Page		62
Index to Exhibits		64

Table of Contents

PART I

Note regarding forward-looking statements:

Except for statements of historical fact, certain information contained herein constitutes forward-looking statements including, without limitation, statements containing the words “believes,” “anticipates,” “intends,” “expects,” and words of similar import, as well as all references to future results. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or achievements of Uniroyal Global Engineered Products, Inc. to be materially different from any future results or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the following: risks involved in implementing our business strategy, our ability to obtain financing on acceptable terms, competition, our ability to manage growth, pricing and availability of equipment, materials and inventories, performance issues with suppliers, economic growth, the Company’s ability to successfully integrate acquired operations, currency fluctuations, risks of technological change, the effectiveness of cost-reduction plans, our dependence on key personnel, our ability to protect our intellectual property rights, risks of new technology and new products, and government regulation. All forward-looking statements are qualified in their entirety by this cautionary statement, and the Company undertakes no obligation to revise or update any such forward-looking statements to reflect events, developments or circumstances after the date hereof.

ITEM 1.

BUSINESS

On November 10, 2014, Uniroyal Global Engineered Products, Inc. (“Uniroyal Global”, the “Company”, “we”, “our”, or “us”) ~~acquired~~ 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 Uniroyal Global (Europe) Limited (“UGEL”, formerly known as Engineered Products Acquisition Limited (“EPAL”)), the holding company for Uniroyal Global Limited (“UGL”, formerly known as Wardle Storeys (Earby) Limited (“Wardle Storeys”)), a European manufacturer of textured coatings ~~and polymer films~~. Management of the acquired entities was not altered in the acquisitions.

Uniroyal Global made the acquisition of Uniroyal through a newly formed subsidiary, UEP Holdings, LLC (“UEPH”), to which it contributed certain of its assets and liabilities as part of the organization of that subsidiary. The aggregate purchase consideration paid for 100% of the outstanding equity of Uniroyal was preferred ownership interests issued by UEPH having an aggregate face value of $35 million. In a separate transaction, Uniroyal Global also purchased UGEL for aggregate consideration of 100 shares of Uniroyal Global’s Common Stock and Uniroyal Global’s guaranty of outstanding UGEL preferred stock retained by the seller having a face value of £12,518,240 (approximately $20 million at closing).

OnWe ~~January~~are 27a manufacturer and seller of vinyl coated fabric products that have excellent high performance characteristics and capabilities and derive our revenue principally through our subsidiaries Uniroyal and Uniroyal Global Limited. Our coated fabric products are durable, ~~2020~~stain resistant, ~~the~~easily ~~Company~~processed, ~~announced~~cost-effective aand ~~one-for-five~~better ~~reverse~~performing ~~stock~~than ~~split~~traditional ~~(“reverse~~leather ~~stock~~or ~~split”)~~fabric oncoverings. Our ~~its~~products ~~common~~are ~~stock~~frequently used in applications that ~~became~~require rigorous ~~effective~~performance oncharacteristics ~~February~~such 24as automotive and non-automotive transportation, ~~2020.~~ ~~All~~certain ~~share~~indoor/outdoor furniture, commercial and ~~per~~hospitality ~~share~~seating, ~~amounts~~health ~~reflect~~care ~~the~~facilities ~~effect~~and ofathletic equipment. In the ~~reverse~~automotive ~~stock~~industry ~~split.~~our ~~The~~products ~~amounts~~are used primarily in ~~common~~seating, ~~stock~~door panels, head and ~~additional~~arm rests, security shades and trim components, including instrument panels, door casings, seating, ~~paid~~gear lever, steering column gaiters, headliners and load space covers. Non-automotive applications include stadium seating, outdoor seating for utility and sports vehicles, and sheeting used in ~~capital~~medical ~~were~~and ~~adjusted~~toxic ashazard ofprotection, ~~the~~personal ~~effective~~protection, ~~date~~moisture barriers, stroller and nursery equipment, and decorative surface applications. The names of ~~the~~our ~~reverse~~primary ~~stock~~brands ~~split~~include Naugahyde®, BeautyGard®, Flame Blocker™, Spirit Millennium®, Ambla®, Amblon®, Velbex®, Cirroflex®, Plastolene® and Vynide®.

We are a manufacturer and seller of vinyl coated fabric products that have excellent high performance characteristics and capabilities and derive our revenue principally through our subsidiaries Uniroyal and Uniroyal Global Limited. Our coated fabric products are durable, stain resistant, easily processed, cost-effective and better performing than traditional leather or fabric coverings. Our products are frequently used in applications that require rigorous performance characteristics such as automotive and non-automotive transportation, certain indoor/outdoor furniture, commercial and hospitality seating, healthcare facilities and athletic equipment. In the automotive industry our products are used primarily in seating, door panels, head and arm rests, security shades and trim components, including instrument panels, door casings, seating, gear lever and steering column gaiters, headliners and load space covers. Non-automotive applications include outdoor seating for utility and sports vehicles, and sheeting used in medical and toxic hazard protection, personal protection, moisture barriers, stroller and nursery equipment, and decorative surface applications. Our primary brands names include Naugahyde®, BeautyGard®, Flame Blocker™, Spirit Millennium®, Ambla®, Amblon®, Velbex®, Cirroflex®, Plastolene® and Vynide®.

We are the successor to a long line of businesses that have manufactured vinyl coated fabrics. Our best known brand, Naugahyde,is the product of many improvements on an original rubber-coated fabric developed a century ago in Naugatuck, Connecticut. We design, manufacture and market a wide selection of vinyl coated fabric products under a portfolio of recognized brand names. We believe that our business has continued to be a leading supplier in its marketplace because of our ability to provide specialized materials with high performance characteristics often customized to the end-user specifications and complemented by comprehensive technical and customer support.

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Our Principal Products and Their Markets

Our vinyl coated fabric products have undergone considerable evolution and today are distinguished by superior performance in a wide variety of applications as alternatives to leather, cloth and other synthetic fabric coverings. Our standard product lines consist of more than 525 SKUs with combinations of colors, textures, patterns and other properties. Our products are differentiated by unique protective top finishes and surface print capabilities. Additional process capabilities include embossing grains and patterns, and rotogravure and registered printing, which imparts five color character prints as well as non-registered prints, lamination and panel cutting.

Our vinyl coated fabric products have various high performance characteristics and capabilities. They are durable, stain resistant, easily processed, more cost-effective and ~~better~~ better performing than traditional leather or fabric coverings. Our products are frequently used in applications that require rigorous ~~performance~~ performance characteristics such as automotive and non-automotive transportation, certain indoor/outdoor furniture, commercial and hospitality seating, health ~~healthcare~~care facilities and athletic equipment. We manufacture materials in a wide range of colors and textures. They can be hand or machine sewn, laminated to an underlying structure, thermoformed to cover various substrates or made into a variety of shapes for diverse end-uses. We are a long-established supplier to the global automotive industry and manufacture products for interior trim components from floor to headliner which are produced to meet specific component production requirements such as cut and sew, vacuum forming/covering, compression molding, and high frequency welding. Some products are supplied with micro perforations, which are necessary on most compression molding processes. Materials can also be combined with polyurethane or polypropylene and foam laminated by either flame or hot melt adhesive for seating, fascia and door applications.

The automotive sector, which includes trucks, represented approximately 56 58.18% of our total sales in ~~2020~~2021. Our products are ~~used~~ primarily used in the following automotive applications:

seating

door panels

head and arm rests

security shades

components

The ~~non-automotive transportation~~industrial sector represented 2241.92% of our 2021 ~~2020~~ sales and ~~primarily~~includes ~~consists of seating~~ products for ~~original equipment manufacturers of non-automotive and light truck vehicles in~~ the following ~~five categories~~customers:

· ~~personal~~original ~~watercraft,~~equipment ~~ATV’s,~~manufacturers ~~snowmobiles,~~of ~~golf~~non-automotive ~~carts~~vehicles

local furniture shops, smaller furniture manufacturers and companies serving the hospitality and marine markets

companies serving the health care, child care, fitness and industrial equipment markets

The industrial sector includes seating products for the following categories:

personal watercraft, ATV’s, snowmobiles and golf carts

light and heavy industrial equipment and agricultural equipment (tractors, bulldozers)

· recreational vehicles, ~~vans~~ and motor homes

· heavy and medium trucks

mass transit (trains, buses)

~~The~~· ~~distribution market sector represented approximately 11.1% of our 2020 sales and consists primarily of sales of the standard Naugahyde and Ambla product lines to local furniture shops~~stadiums, ~~smaller~~restaurants ~~furniture manufacturers~~ and ~~companies serving the hospitality and marine markets for refurbishing and replacement. The sales organization employed to service this market is a network of approximately 65 distributor locations.~~hotels

airports and medical offices

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~~The~~Products ~~contract~~are ~~sector~~developed and marketed based upon the performance characteristics required by end-users. For example, ~~which~~for ~~represented~~recreational ~~approximately~~products used outdoors, such as boats, personal watercraft, 9golf carts and snowmobiles, a product designed primarily for durability and weatherability is used.9% We also manufacture a line of ~~our~~products called ~~2020~~BeautyGard®, ~~sales~~with water-based topcoats that contain agents to protect against bacterial and fungal microorganisms and can withstand repeated cleaning, ~~includes~~a ~~contract~~necessity in the restaurant and health care industries. These topcoats are environmentally friendlier than solvent-based topcoats. The line is widely used in hospitals and other health care facilities. Flame and smoke retardant vinyl coated fabrics are used for a variety of commercial and institutional furniture~~/upholstery,~~ ~~marine~~applications, ~~healthcare~~including hospitals, ~~child~~restaurants and residential care centers and seats for school buses, trains and ~~industrial~~aircraft. ~~equipment~~We are also beginning to manufacture and stock products without flame retardant chemical additives to meet new manufacturing requirements.

Products are developed and marketed based upon the performance characteristics required by end-users. For example, for recreational products used outdoors, such as boats, personal watercraft, golf carts and snowmobiles, a product designed primarily for durability and weatherability is used. We also manufacture a line of products called BeautyGard®, with water-based topcoats that contain agents to protect against bacterial and fungal microorganisms and can withstand repeated cleaning, a necessity in the restaurant and health care industries. These topcoats are environmentally friendlier than solvent-based topcoats. The line is widely used in hospitals and other healthcare facilities. Flame and smoke retardant vinyl coated fabrics are used for a variety of commercial and institutional furniture applications, including hospitals, restaurants and residential care centers and seats for school buses, trains and aircraft. We are also beginning to manufacture products without flame retardant chemical additives to meet additional customer requirements.

We produce vinyl coated fabrics and laminated composites through a continuous cast or spread coating manufacturing process. The continuous cast method yields a material with a soft finish, deep grain pattern, wide temperature tolerance range and high malleability factor for thermoforming. In addition, we possess plastisol-compounding capability, a variety of proprietary formulations and highly versatile finishing processes. We believe that our products are differentiated in the market by unique protective topcoat finishes and adhesive back coats, as well as five color register and rotogravure printing, which imparts multiple features, character prints and non-registered prints. We also have the in-house capability to perform transfer printing as well as micro-perforation, which provides product breathability.

We seek to ensure that every product fully meets customer requirements of specifications, reliability and performance.

We believe that we maintain our market leadership position through a strong research and development effort that provides strong product development capability. This yields enhanced ~~product~~ product characteristics, lower cost of material combinations and new proprietary product formulations. We estimate that approximately 19 24.31% of our sales relate to products developed to customer specifications.

Our Stoughton, Wisconsin facility achieved ISO 9001:2008 status in 1999 and has renewed it annually since then. In addition, the facility achieved IATF 16949:2016 status in 2018. Our U.K. facility achieved ISO TS 16949 status in 2004 and is approved to the European Council Directive 96/98 EX on Marine Equipment as amended for Module D Production Quality.

We hold no patents but maintain certain of our process technologies as trade secrets.

Our Distribution Methods

Products are developed and marketed based upon the performance characteristics required by our end-users. We currently serve customers world-wide with 11 full-time sales persons in offices in Sarasota, Florida, Detroit, Michigan, and Earby, Lancashire, one exclusive agent in Italy, and an extensive distributor network in the U.S., the United Kingdom, Scandinavia, France, Germany and Hong Kong. ~~11.1% of our worldwide sales in 2020 were made through distributors.~~ The industrial business is supported mainly from stock and via a catalogue and website.

We maintain a principal website at www.uniroyalglobal.com. We maintain websites for our U.S. non-automotive products at www.naugahyde.com and for our global/non-U.S. products at www.uniroyalglobal.co.uk and www.ambla.com.

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Competition

We compete primarily on the basis of design, style, color, product breadth and quality, as well as price and customer service.

The global vinyl coated fabrics market is ~~highly~~ highly fragmented due to the requirements of various market segments. The uses of vinyl coated fabrics are very diverse and include automotive, non-automotive transportation, furniture, industrial, protective clothing, medical furniture, wall coverings, book coverings, ~~non-automotive transportation and~~ awnings and tents.

The following table sets forth product applications in the markets in which we actively compete domestically and our primary competitors in those markets.

Markets	Key Uses	Primary Competitors
Automotive	Interior components Seating applications Security shades	Canadian General-Tower Limited Continental AG ~~Hornschuch Group GmbH~~ Vulcaflex S.p.A. Haartz Corporation Griffine SA Morbern, Inc.
Transportation and Contract	ATV/snowmobile/PWC/golf carts Heavy/light equipment RVs/motor homes	Canadian General-Tower Limited Continental AG ~~Hornschuch Group GmbH~~ Vulcaflex S.p.A. Morbern, Inc. Spradling International Inc.
Distribution	Approximately 65 distributor and reseller locations	OMNOVA Solutions Inc. Spradling International Inc. ~~Hornschuch~~Continental ~~Group~~AG ~~GmbH~~ Morbern, Inc.
Contract	Office/contract/institutional furniture Restaurant booth Health care Marine	OMNOVA Solutions Inc. Morbern, Inc. ~~Hornschuch~~Continental ~~Group~~AG ~~GmbH~~ Alcor Gislaved Folie AB Griffine Enduction Spradling International Inc.
Other	Home furnishings/dinettes	Spradling International Inc.

Raw Materials

The principal raw materials for our coated fabrics are casting paper, knit fabric, PVC plastic resins, pigments and plasticizers. We have multiple sources for most of these materials. We believe that in the few instances where we have a sole supplier we can re-engineer around the sole-sourced materials if necessary with minimal effort and cost.

Concentration of Customers

NoOne ~~one~~of ~~customer~~our ~~accounts~~customers accounted for 10% or more of our consolidated revenues. ~~Our~~in ~~top~~2021 25with ~~customers account for approximately 64~~11.16% of our ~~total~~net ~~global~~ sales. Our ~~largest~~top ~~customer contributed~~25 8customers accounted for approximately 62.09% toof our ~~net~~total global sales ~~in 2020~~.

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Trademarks and Material Contracts

Under the standard Naugahyde and Ambla product lines, we own the following proprietary brands and trademarks among others:

Naugahyde^®

All-American^®

BeautyGard^®

Chameá™

Flame Blocker™

Naugaform^®

NaugaSoft^®

NaugaSylk™

Spirit Millennium^®

Ambla^®

Amblon^®

Cirroflex^®

Plastolene^®

Velbex^®

Vynide^®

Human Capital Resources

We believe that we maintain a stable, experienced and productive workforce, currently employing approximately ~~302~~294 employees.

Most of our employees who are involved in the production process are located at manufacturing facilities in Stoughton, Wisconsin and Earby, England. The production employees at the Stoughton, Wisconsin facility are represented by Local 1207 of the United Steel Workers (formerly P.A.C.E.). The term of the collective bargaining agreement for Stoughton represented employees extends to March 2023. Most of the employees at our Earby, England facility are represented by Unite. The collective bargaining agreement with Unite does not specify a termination date.

Twelve executive and corporate employees work in our executive office in Sarasota, Florida.

Effect of Existing or Probable Government Regulations on Our Business

Our manufacturing processes are subject to increasingly stringent regulation by environmental, health and safety authorities. It is difficult to predict future changes in environmental, health and safety regulations on our future financial results. Continued compliance could result in significant increases in capital expenditures and operating costs. Any increase in these costs, or unanticipated liabilities, arising out of a release of regulated material, discovery of previously unknown conditions, more aggressive enforcement actions or new requirements, could adversely affect our financial results.

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Research and Development

We are actively engaged in research and development programs designed to develop new products, manufacturing processes, systems and technologies, while reducing costs to customers and enhancing existing product lines. We believe that investment in research and development has been an important factor in establishing and maintaining our competitive position in many of the specialized niche markets in which our products are sold. Product performance capabilities and characteristics are continually adjusted to meet customer needs.

In-house design and innovative product development are key features of our business. Our in-house design studio enables us to develop new designs, colors and patterns for customers and then deliver them in prototype sample form or by computer-aided design (CAD).

We have access to a vast range of leather and grain styles, prints and surface effects, which are constantly evolving and increasing. Further trends are captured and expressed in our own concept work and exclusive designs are developed from customer requests. Our CAD systems allow fast creation and display of design innovation. “Drape” software enables computer generated designs to be shown in situ in interiors of vehicles or other applications before the expense of production is incurred. A silicone cast surface-modeling system permits the transfer of material surface finishes, including leather and fabrics, onto vinyl foils for customer review before investment in tooling. Diverse production systems and equipment create an extensive automotive product range. Anti-stain and anti-squeak finish (ASF) are examples of product developments providing customers with cost reduction and material performance enhancements.

Compliance with Environmental Laws

We believe that we are in substantial compliance with applicable environmental laws and regulations. We have not needed to make any material expenditure to maintain such compliance during the past two fiscal years.

We aim to comply with all existing regulatory legislation at European, national and local levels and adopt a positive stance in anticipating future, more stringent regulatory requirements. We endeavor to minimize waste throughout the production facilities with better utilization of raw materials, energy and water and to prevent at the source the emission of pollutants into the environment. We are committed to continual improvements in environmental performance. For example, we plan to invest approximately £75,000 ($103,000) in energy-saving LED lighting at our U.K. production facility in 2022.

Coronavirus

~~During~~The ~~the first quarter of 2020, the World Health Organization declared the novel~~ coronavirus pandemic (“COVID-19”) ~~outbreak a public health emergency.~~ ~~There~~and ~~have~~its ~~been~~current ~~mandates~~disruption ~~from~~of ~~international,~~the ~~federal,~~supply ~~state~~chain ~~and~~has ~~local~~had ~~authorities~~an ~~requiring~~impact ~~forced~~on ~~closures~~markets ofwe ~~various~~serve ~~schools, businesses~~ and ~~other~~our ~~facilities~~operations and ~~organizations~~liquidity. ~~These~~Since ~~forced~~COVID-19 is ~~closures~~a ~~have~~continually ~~negatively~~evolving ~~impacted~~situation, ~~our~~we ~~business. Primarily due~~cannot topredict the ~~negative~~long-term impact ~~that~~it ~~COVID-19~~will ishave ~~having~~ on the ~~global~~ economy, weor ~~began~~our tobusiness. ~~experience~~The aimpact ~~decline in sales during the~~could ~~latter~~have ~~part~~a ofmaterial ~~March~~adverse ~~2020.~~effect Inon ~~order~~our tofinancial ~~mitigate~~position, ~~the~~results ~~effect~~ of ~~the~~operations ~~decrease~~and incash ~~revenue~~flows, wewhich ~~are~~may ~~managing~~require ~~our~~us ~~costs,~~to ~~which~~obtain ~~included~~additional ~~initially~~financing. ~~reducing~~We ~~staff~~continue atto ~~our~~pursue ~~U.S.~~supplementary ~~manufacturing~~cash ~~facility~~flow ~~and~~opportunities, ~~furloughing~~which ~~the~~have ~~entire~~included ~~production~~loans ~~staff~~through at the ~~U.K.~~Paycheck ~~facility~~Protection ~~beginning~~Program ~~in late March. During June 2020~~(“PPP”), wereimbursed ~~had~~costs ~~some~~under ~~employees~~the ~~return~~Coronavirus toJob ~~work~~Retention asScheme ~~our~~(“CJRS”), ~~U.K.~~debt ~~facility~~refinancing ~~started~~with ~~limited~~PNC ~~production~~Business Credit of(“PNC”), ~~vinyl products~~loans ~~based~~from onthe ~~orders~~automotive itlenders, ~~was~~and ~~receiving~~forgiveness ~~from~~of ~~its~~accrued ~~customers~~dividends. WeFor ~~brought~~further ~~back~~discussion, ~~additional~~see ~~production workers as incoming orders~~“Liquidity ~~increased~~and ~~during~~Sources ~~the third quarter~~ of ~~2020.~~Capital” ~~All~~under ~~employees~~Item ~~returned~~7 toand ~~work~~Notes as8, ~~demand~~9 ~~for~~and ~~our~~13 ~~products continued~~ to ~~improve in~~ the ~~fourth~~ ~~quarter~~consolidated ~~and~~financial ~~into the first quarter of 2021 although it was well below normalized levels~~statements.

Additionally, we have applied for loans under programs offered by the governmental agencies in the United States and in the United Kingdom and have found other supplementary cash flow opportunities to provide further liquidity.

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 an extended period of time or should the effects of the coronavirus continue to spread, the impact could have a material adverse effect on our financial position, results of operations and cash flows which may require that we obtain additional financing.

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Available Information

~~The~~We ~~address for~~provide ~~the Company’s web site is www.uniroyalglobal.com on which it makes available,~~printed ~~free~~copies of ~~charge,~~our ~~its~~ Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to the foregoing upon asrequest ~~soon~~to asUniroyal ~~reasonably~~Global ~~practicable~~Engineered ~~after~~Products, ~~these~~Inc., ~~reports~~Attn: ~~are~~Secretary, ~~electronically~~1800 ~~filed~~2nd ~~with~~Street, orSuite ~~furnished~~970, toSarasota, ~~the~~FL ~~SEC~~34236. In addition, these reports and documents may be accessed on the SEC’s web site at www.sec.gov.

ITEM 1A.

RISK FACTORS

Not applicable.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

We lease our production facility in Stoughton, Wisconsin (near Madison). The term of the lease extends to October 31, 2033 with an option to renew the lease for an additional five years. This facility consists of an approximately 230,000 square foot building with production, laboratory and administrative office space and a warehouse. Our lease includes several nearby buildings used for storage. Major equipment at the production facility includes two cast coating lines, five rotogravure printers, three paper reconditioning machines, three standard embossers, one GAP embosser, one micro-perforator, nine inspection stations including duplex with automatic data collection, bulk material handling systems and warehouse bar coding and locator systems. Laboratory facilities at the Stoughton facility replicate the production floor capabilities and enhance our research and development capability.

We also lease our production facility in ~~West~~ West Craven Business Park, Earby, Barnoldswick, Lancashire, England. The term of the lease extends to March 3, 2039. This facility consists of approximately 250,000 square feet. Major equipment at the production facility includes various compound department mixers and holding tanks, three coating lines, four gravure printers, one water based printer, one embosser, two laminators, one airing-off/relaxer, one perforating process, two paneling machines, and ~~four~~eleven inspection frames.

Our executive and sales offices occupy approximately 9,010 square feet of premises in Sarasota, Florida under a lease that extends to May 31, 2023.

ITEM 3.

LEGAL PROCEEDINGS

From time to time we may be a party to or be involved with legal proceedings, governmental investigations or inquiries, claims or litigation that are related to our business. We are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business or financial condition 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~~We ~~Company~~ fully cooperated with the HSE ~~investigation~~ investigation and, atnegotiated ~~this time, intends to negotiate~~ a plea based on the legal advice provided to ~~it to date~~us. Based on this legal advice, ~~the~~we ~~Company~~believed ~~believes~~ that £150,000 ($193,000) was is a reasonable estimate of the fine to be imposed and, accordingly, recorded an accrual for this charge for the year ended January 3, 2021. The related expense was recorded in general and administrative expenses in the accompanying Consolidated Statement of Operations for the year ended January 3, 2021.

In April 2021, a fine of £120,000 ($164,933) was imposed on us related to this matter. At the end of the second quarter of 2021, we began making monthly payments for this fine in order to have it paid in full by the October 2022 due date. The accrual related to the fine was £69,356 ($93,484) and £150,000 ($204,737) as of January 2, 2022 and January 3, 2021, respectively, and was included in accrued expenses and other liabilities in the accompanying consolidated balance sheets. In addition, a fee of £5,463 ($7,509) to reimburse the HSE for legal expenses was paid in May 2021.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our Common Stock trades on the OTCQB Market under the symbol UNIR.

OnAs ~~January~~of ~~27,~~March ~~2020~~10, ~~the~~2022 ~~Company~~there ~~announced a~~were ~~one-for-five~~681 ~~reverse stock split (“reverse stock split”) on its common stock that became effective on February 24,~~stockholders ~~2020. All share and per share amounts reflect the effect~~ of ~~the~~record ~~reverse stock split. The amounts in common stock and additional paid-in capital were adjusted as~~ of ~~the~~our ~~effective~~Common ~~date of the reverse stock split~~Stock.

As of March 1, 2021 there were 687 stockholders of record of our Common Stock.

We believe that there are presently approximately six market makers for our Common Stock. When stock is traded in the public market, characteristics of depth, liquidity and orderliness of the market may depend upon the existence of market makers as well as the presence of willing buyers and sellers. We do not know if these or other market makers will continue to make a market in our Common Stock. Further, the trading volume in our Common Stock has historically been both sporadic and light.

Currently, the payment by ~~the~~us ~~Company~~ of dividends on ~~its~~ our Common Stock rests within the sole discretion of ~~its~~our Board of Directors. The payment of dividends will depend upon our earnings, our capital requirements and our financial condition, as well as other relevant factors. ~~The~~We ~~Company~~have ~~has~~ not been required to or declared any cash dividends since ~~its~~our inception, and ~~has~~have no present intention of paying any cash dividends on ~~its~~our Common Stock in the foreseeable future.

Transfer Agent

The Transfer Agent for ~~the~~our Common Stock of ~~the Company~~ is Continental Stock Transfer and Trust Company, 17 Battery Place, New York, NY 10004.

Recent Sales of Unregistered Securities

None.

~~There~~We ~~were~~made no repurchases ~~by the Company~~ of ~~its~~our securities during the fourth quarter of fiscal ~~2020~~2021.

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ITEM 6. ~~SELECTED FINANCIAL DATA~~[RESERVED]

Not applicable.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business Description

We are a leading provider of manufactured vinyl coated fabrics. Our best known brand, Naugahyde, is the product of many improvements on rubber-coated fabrics developed a century ago in Naugatuck, Connecticut. We design, manufacture and market a wide selection of vinyl coated fabric products under a portfolio of recognized brand names. We believe that our business has continued to be a leading supplier in its marketplace because of our ability to provide specialized materials with performance characteristics customized to the end-user specifications, complemented by technical and customer support for the use of our products in manufacturing.

Our vinyl coated fabric products have undergone considerable evolution and today are distinguished by superior performance in a wide variety of applications as alternatives to leather, cloth and other synthetic fabric coverings. Our standard product lines consist of more than 525 SKUs with combinations of colors, textures, patterns and other properties. Our products are differentiated by unique protective top finishes and transfer print capabilities. Additional process capabilities include embossing grains and patterns, and rotogravure printing, which imparts five color character prints and non-registered prints, lamination and panel cutting.

Our vinyl coated fabric products have various high performance characteristics and capabilities. They are durable, stain resistant, easily processed, more cost-effective and better ~~performing~~ performing than traditional leather or fabric coverings. Our products are frequently used in applications that require rigorous performance characteristics such as automotive and non-automotive transportation, certain indoor/outdoor furniture, commercial and hospitality seating, health ~~healthcare~~care facilities and athletic equipment. We manufacture materials in a wide range of colors and textures. They can be hand or machine sewn, laminated to an underlying structure, thermoformed to cover various substrates or made into a variety of shapes for diverse end-uses. We are a long-established supplier to the global automotive industry and manufacture products for interior soft trim components from floor to headliner, which are produced to meet specific component production requirements such as cut and sew, vacuum forming/covering, compression molding, and high frequency welding. Some products are supplied with micro perforations, which are necessary on most compression molding processes. Materials can also be combined with polyurethane or polypropylene foam laminated with either flame or hot melt adhesive for seating, fascia and door applications.

Products are developed and marketed based upon the performance characteristics required by end-users. For example, for recreational products used outdoors, such as boats, personal watercraft, golf carts and snowmobiles, a product designed primarily for water-based durability and weatherability is used. We also manufacture a a line of products called BeautyGard®, with water-based topcoats that contain agents to protect against bacterial and fungal micro-organisms and can withstand repeated cleaning, a necessity in the restaurant and health care industries. These topcoats are environmentally friendlier than solvent-based topcoats. The line is widely used in hospitals and other ~~healthcare~~ health care facilities. Flame and smoke retardant vinyl coated fabrics are used for a variety of commercial and institutional furniture applications, including hospitals, restaurants and residential care centers and seats for school buses, trains and aircraft.

We currently conduct our operations in manufacturing facilities that are located in Stoughton, Wisconsin and Earby, England.

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Overview

On November 10, 2014, we acquired through our subsidiary UEP Holdings LLC (“UEPH”) all of the ownership interests in Uniroyal Engineered Products, LLC (“Uniroyal”), and acquired directly all of the ordinary common stock of Uniroyal Global (Europe) Limited (“UGEL”, formerly known as Engineered Products Acquisition Limited (“EPAL”)), the holding company for Uniroyal Global Limited (formerly known as Wardle Storeys (Earby) Limited (“Wardle Storeys”)).

OnWe ~~January~~and ~~27,~~our ~~2020,~~subsidiaries weuse ~~announced~~ a ~~one~~52/53-~~for-five~~week ~~reverse stock~~fiscal ~~split~~year ~~(“reverse~~ending ~~stock~~on ~~split”)~~the onSunday ~~our~~nearest ~~common~~to ~~stock~~December ~~that~~31. ~~became~~The ~~effective~~year onended ~~February~~January 242, ~~2020.~~2022 ~~All~~was ~~share~~a ~~and~~52-week ~~per~~year ~~share amounts~~whereas ~~reflect~~ the ~~effect~~year ofended ~~the~~January ~~reverse~~3, 2021 ~~stock~~was ~~split~~a 53-week year. ~~The~~Our ~~amounts~~U.K. insubsidiaries ~~common~~use ~~stock~~the ~~and~~calendar ~~additional~~year ~~paid-in~~end ~~capital~~of ~~were~~December ~~adjusted as~~31. The activity of the ~~effective~~U.K. ~~date~~subsidiaries ofthat occurs on the ~~reverse~~days ~~stock~~that ~~split~~do not coincide with our year-end is not material.

WeOur ~~and~~Earby, ~~our~~England ~~subsidiaries~~operation’s ~~use a 52/53-week fiscal year ending~~functional oncurrency is the ~~Sunday~~British ~~nearest~~Pound toSterling ~~December~~(“Pound ~~31.~~Sterling”) ~~The~~and ~~year~~has ~~ended~~sales ~~January~~and 3,purchases ~~2021~~transactions ~~was~~that aare ~~53-week~~denominated ~~year~~in currencies ~~whereas~~other than the ~~year~~Pound ~~ended December 29~~Sterling, ~~2019 was~~principally athe ~~52-week year~~Euro. ~~Our~~Approximately ~~U.K.~~30% ~~subsidiaries~~of ~~use~~our ~~the~~global ~~calendar~~revenues ~~year~~and ~~end~~33% of ~~December~~our ~~31.~~global ~~The~~raw ~~activity of the U.K. subsidiaries that~~material ~~occurs~~purchases onare ~~the~~derived ~~days~~from ~~that~~these doEuro ~~not coincide with our year-end is not material~~transactions.

~~Our~~The ~~Earby,~~average ~~England~~year-to-date ~~operation’s~~exchange ~~functional~~rate ~~currency~~for is the ~~British~~ Pound Sterling ~~(“Pound~~to ~~Sterling”)~~the ~~and~~U.S. ~~has~~Dollar ~~sales~~was approximately 7.0% higher and ~~purchases~~the ~~transactions~~average ~~that~~exchange ~~are~~rate ~~denominated~~for inthe ~~currencies other~~Euro ~~than~~to the Pound Sterling, ~~principally~~was ~~the~~approximately 3.4% ~~Euro~~lower in 2021 compared to 2020. ~~Approximately~~These ~~27%~~exchange rate changes had the effect of ~~our~~increasing ~~global~~net ~~revenues~~sales ~~and~~by ~~32%~~approximately of$1,625,000 for the year ended January 2, 2022. The overall currency effect on our ~~global~~net ~~raw~~loss ~~material purchases~~was ~~are~~a ~~derived~~positive ~~from~~amount ~~these~~of ~~Euro~~approximately ~~transactions~~$253,000 for the year ended January 2, 2022.

The ~~average year-to-date exchange rate for the Pound Sterling to the~~ U.SK. ~~Dollar~~exit ~~was~~from ~~approximately 0.7% higher and~~ the ~~average~~European ~~exchange~~Union ~~rate~~on ~~for the Euro to the Pound Sterling was approximately~~January ~~1.2%~~31, ~~higher in~~ 2020, ~~compared~~commonly referred to ~~2019.~~as ~~These~~Brexit, ~~exchange~~caused ~~rate~~minimal ~~changes~~disruption ~~had~~to ~~the~~our ~~effect~~operations ofduring ~~increasing net sales by approximately $410,000 for~~ the year ended January 32, ~~2021~~2022. ~~The~~However, any ~~overall~~impact ~~currency~~from ~~effect~~Brexit on our ~~net~~business ~~loss~~and ~~allocable~~operations toover ~~common~~the ~~shareholders~~long ~~was~~term awill ~~positive amount~~depend, ofin ~~approximately $51~~part,~~000~~ ~~for~~on the ~~year~~outcome ~~ended~~of ~~January~~tariff, 3tax treaties, trade, ~~2021~~regulatory, and other negotiations the U.K. conducts.

The ~~U.K.~~coronavirus ~~exit~~pandemic ~~from~~(“COVID-19”) and ~~the~~its ~~European~~current ~~Union~~disruption onof ~~January~~the ~~31,~~supply ~~2020,~~chain ~~commonly referred to as Brexit,~~ has ~~caused,~~had ~~and~~an ~~may~~impact ~~continue~~on tomarkets ~~cause,~~we ~~uncertainty~~serve inand ~~the~~our ~~global~~operations ~~markets~~and liquidity. ~~Political~~We ~~and~~continue ~~regulatory responses~~ to pursue ~~the~~supplementary ~~withdrawal~~cash ~~are~~flow ~~still developing~~opportunities, ~~and~~which wehave ~~are~~included inloans through the ~~process~~Paycheck ofProtection ~~assessing~~Program ~~the~~(“PPP”), ~~impact~~reimbursed costs ~~that~~under the ~~withdrawal~~Coronavirus ~~may~~Job ~~have~~Retention onScheme ~~our~~(“CJRS”), ~~business as~~debt ~~more~~refinancing ~~information~~with ~~becomes~~PNC ~~available.~~Business ~~Any~~Credit ~~impact~~(“PNC”), loans from ~~Brexit on our business and operations over~~ the ~~long~~automotive ~~term will depend~~lenders, ~~in part,~~and onforgiveness ~~the outcome~~ of ~~tariff,~~accrued ~~tax~~dividends. ~~treaties,~~See ~~trade,~~“Liquidity ~~regulatory,~~ and ~~other~~Sources ~~negotiations~~of ~~the~~Capital” ~~U.K.~~below ~~conducts~~for further discussion.

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 our business. Primarily due to the negative impact that COVID-19 is having on the global economy, we 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, we are managing our costs, which included initially reducing staff at our U.S. manufacturing facility and furloughing the entire production staff at the U.K. facility beginning in late March. During June 2020, we had some employees return to work as our U.K. facility started limited production of vinyl products based on orders it was receiving from its customers. We brought back additional production workers as incoming orders increased during the third quarter of 2020. All employees returned to work as demand for our products continued to improve in the fourth quarter and into the first quarter of 2021 although it was well below normalized levels.

As described below, we have applied for loans under programs offered by the governmental agencies in the United States and in the United Kingdom and have found other supplementary cash flow opportunities to provide further liquidity.

For the U.S. operations, during the second quarter of 2020 we 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 us at any time prior to maturity with no prepayment penalties. Loan payments have been deferred pending loan forgiveness from the SBA.

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~~All~~Year orEnded aJanuary ~~portion of the loan may be forgiven by the SBA for costs we incurred for payroll~~2, ~~rent,~~2022 ~~utilities~~Compared ~~and all other allowable expenses during the 24-week period that began April 13, 2020. We 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 we have met~~ the ~~PPP eligibility criteria for forgiveness and has concluded that the loan~~ ~~represents,~~Year inEnded 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,” we have 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. ~~We submitted our application for loan forgiveness to One Community Bank in November 2020.~~

~~Also~~The ~~for~~following ~~the~~table ~~U.S.~~sets ~~operations~~forth, infor ~~December~~the ~~2020~~year weended January ~~received $~~2,~~432,353 in~~ ~~funds~~2022 ~~from~~(“year ~~Wells~~ended ~~Fargo~~2021”) ~~Capital Finance, LLC through the Main Street Lending Program established by the Federal Reserve Board. The loan matures in November 2025~~ and ~~bears~~January ~~an interest rate of~~ 3~~.00%~~, ~~above LIBOR. We are required to make monthly interest payments beginning in December~~ 2021 ~~with any deferred interest from the first~~ (“year ofended ~~the loan added to principal. In addition~~2020”), wecertain ~~are~~operational ~~required~~data ~~to make annual principal payments in November 2023, 2024 and 2025 in increments of 15%,~~including ~~15%~~their ~~and~~respective ~~70%~~percentage of ~~the~~net ~~principal, respectively. The loan may be prepaid by us at any time prior to maturity with no prepayment penalties.~~sales:

Additionally for the U.S. operations, during the first quarter of 2021 we received a $2.0 million Second Draw PPP loan. This loan has the same general terms as our first PPP loan.

	Year Ended
	January 2, 2022					January 3, 2021					Change			% Change

Net Sales	$	71,704,995		100.0	%	$	60,218,355		100.0	%	$	11,486,640			19.1	%
Cost of Goods Sold		62,786,884		87.6	%		52,437,754		87.1	%		10,349,130			19.7	%
Gross Profit		8,918,111		12.4	%		7,780,601		12.9	%		1,357,510			14.6	%
Operating Expenses:
Selling		3,015,016		4.2	%		3,040,685		5.0	%		(25,669	)		-0.8	%
General and administrative		6,125,583		8.5	%		6,720,969		11.2	%		(595,386	)		-8.9	%
Research and development		1,293,908		1.8	%		980,695		1.6	%		313,213			31.9	%
Total Operating Expenses		10,434,507		14.6	%		10,742,349		17.8	%		(307,842	)		-2.9	%
Operating Loss		(1,516,396	)	-2.1	%		(2,961,748	)	-4.9	%		1,445,352			-48.8	%
Interest expense		(1,640,999	)	-2.3	%		(1,581,907	)	-2.6	%		(59,092	)		3.7	%
Funding from Paycheck Protection Program		2,000,000		2.8	%		2,217,500		3.7	%		(217,500	)		-9.8	%
Other income (expense)		188,011		0.3	%		(173,214	)	-0.3	%		361,225			<-100	%
Loss before Tax Provision (Benefit)		(969,384	)	-1.4	%		(2,499,369	)	-4.2	%		1,529,985			-61.2	%
Tax provision (benefit)		732,994		1.0	%		(1,275,743	)	-2.1	%		2,008,737			<-100	%
Net Loss		(1,702,378	)	-2.4	%		(1,223,626	)	-2.0	%		(478,752	)		39.1	%
Extinguishment of preferred stock dividend payable		6,145,463		8.6	%		-		0.0	%		6,145,463			-
Preferred stock dividend		(2,167,605	)	-3.0	%		(3,209,841	)	-5.3	%		1,042,236			-32.5	%
Net Income (Loss) Allocable to Common Shareholders	$	2,275,480		3.2	%	$	(4,433,467	)	-7.4	%	$	6,708,947			<-100	%

For the U.K. operations, during the year ended January 3, 2021 we recorded reimbursed costs of approximately $1,569,000 under the Coronavirus Job Retention Scheme (“CJRS”) set up by the U.K. government to help employers pay the wages of those employees who would otherwise have been laid off during the coronavirus outbreak but under the CJRS were furloughed instead. This program reimbursed us for up to 80% of the compensation expense plus national insurance and certain benefits paid to the furloughed employees, resulting in lower salary expense for us. While the employees were on furlough, the compensation paid to them was limited to the amount reimbursed by the CJRS. We recorded the reimbursed amounts as reductions to the associated expenses.

Additionally for the U.K. operations, during the second half of 2020 we received $1,225,911 in loans from our principal shareholder and $3,268,664 in loans from automotive lenders. These funds provided additional working capital to meet various short-term cash needs.

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 our financial position, results of operations and cash flows which may require that we obtain additional financing.

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Year Ended January 3, 2021 Compared to the Year Ended December 29, 2019

The following table sets forth, for the year ended January 3, 2021 (“year ended 2020”) and December 29, 2019 (“year ended 2019”), certain operational data including their respective percentage of net sales:

	Year Ended
	January 3, 2021				December 29, 2019				Change			% Change
Net Sales	$	60,218,355		100.0%	$	91,136,244		100.0%	$	(30,917,889	)	-33.9%
Cost of Goods Sold		52,437,754		87.1%		76,174,406		83.6%		(23,736,652	)	-31.2%
Gross Profit		7,780,601		12.9%		14,961,838		16.4%		(7,181,237	)	-48.0%
Operating Expenses:
Selling		3,040,685		5.0%		4,300,730		4.7%		(1,260,045	)	-29.3%
General and administrative		6,720,969		11.2%		6,047,734		6.6%		673,235		11.1%
Research and development		980,695		1.6%		1,634,385		1.8%		(653,690	)	-40.0%
Other operating expenses		-		0.0%		343,003		0.4%		(343,003	)	-100.0%
Total Operating Expenses		10,742,349		17.8%		12,325,852		13.5%		(1,583,503	)	-12.8%
Operating (Loss) Income		(2,961,748	)	-4.9%		2,635,986		2.9%		(5,597,734	)	<-100%
Interest expense		(1,581,907	)	-2.6%		(2,036,248	)	-2.2%		454,341		-22.3%
Funding from Paycheck Protection Program		2,217,500		3.7%		-		0.0%		2,217,500		-
Other (expense) income		(173,214	)	-0.3%		258,486		0.3%		(431,700	)	<-100%
(Loss) Income before Tax Provision		(2,499,369	)	-4.2%		858,224		0.9%		(3,357,593	)	<-100%
Tax benefit		(1,275,743	)	-2.1%		(103,199	)	-0. 1%		(1,172,544	)	>100%
Net (Loss) Income		(1,223,626	)	-2.0%		961,423		1. 1%		(2,185,049	)	<-100%
Preferred stock dividend		(3,209,841	)	-5.3%		(3,126,496	)	-3.4%		(83,345	)	2.7%
Net Loss Allocable to Common Shareholders	$	(4,433,467	)	-7.4%	$	(2,165,073	)	-2.4%	$	(2,268,394	)	>100%

Revenue

Total revenue for the year ended ~~2020~~2021 ~~decreased~~ increased $3011,~~917~~486,~~889~~ 640 or 3319.91% to $6071,~~218~~704,~~355~~995 from $9160,~~136~~218,~~244~~355 for the year ended ~~2019~~2020. ~~There~~The ~~was~~lower amount for the year ended 2020 reflected the negative effect of COVID-19, which primarily occurred during the second quarter of 2020. The increase in revenue included a favorable currency effect of approximately $~~410~~1,625,000 ~~on total revenue~~.

For the year ended ~~2020~~2021 compared to the year ended ~~2019~~ 2020, ~~U.S.~~ automotive sales ~~decreased~~for 45our U.7%K. ~~and~~operations ~~European~~increased ~~automotive sales decreased 37~~7.16% (excluding the currency adjustment). ~~This~~and ~~significant decrease~~automotive ~~was~~sales ~~principally~~for ~~due~~our toU.S. ~~the~~operations increased ~~COVID-19 pandemic~~24.3%, ~~where~~which ~~most~~reflects of the ~~Company’s~~negative ~~customers~~effect inof ~~this~~COVID-19 ~~market~~on ~~and~~prior ~~the~~year ~~OEMs that~~sales. ~~use~~However, the ~~Company’s~~year-over-year ~~products~~growth inwas ~~their automobiles, shut down production lines or their entire production facilities at~~negatively ~~the~~impacted ~~end~~by ofsupply ~~the~~chain ~~first~~issues ~~quarter~~experienced ~~2020~~by ~~and continued into~~ the ~~second~~OEM’s ~~quarter~~that ~~2020~~use asour ~~the~~automotive ~~pandemic~~products, ~~continued.~~which ~~The~~lead ~~automotive~~to ~~market~~temporary ~~began~~intermittent toshutdowns ~~improve at the end~~ of ~~the second quarter as most of the customers and OEMs were restarting~~ their production ~~facilities.~~lines ~~Due to~~beginning ~~the continuing improvement~~ in the ~~automotive market and the Company retaining all of its programs, the Company’s sales activity increased significantly in the third quarter of 2020 as compared to the~~ second quarter of ~~2020~~2021. ~~The~~We ~~increase~~are inencouraged ~~sales continued~~that asautomotive ~~revenues~~sales inimproved when comparing the fourth quarter of ~~2020~~2021 ~~were~~with ~~higher than in~~ the third quarter of ~~2020~~2021. ~~However, they have not yet reached the run-rate of the period prior to the onset of COVID-19.~~

Additionally, sales for the industrial sector increased ~~decreased 23~~21.94% (2420.15% before the currency effect) ~~primarily~~mostly due to aan ~~decline~~increase in ~~the~~our U.S. ~~contract~~operations ~~market.~~(primarily ~~The~~in ~~negative~~the ~~impact~~contract ~~of COVID-19 on the~~market) ~~global~~as ~~economy~~well ~~was~~as ~~a major factor~~ in ~~the~~our ~~overall~~U.K. ~~decline~~operations. inAs ~~sales~~discussed above, ~~particularly~~these toincreases ~~our~~reflect ~~customers in~~ the ~~hospitality~~negative ~~and~~effect ~~healthcare sectors,~~of ~~which~~COVID-19 ~~principally~~on ~~began~~our ~~during~~prior ~~the~~year ~~latter part of March 2020~~operations.

Also impacting 2020 revenue to a lesser degree, the Company in August 2019, decommissioned and shut down equipment in the U.K. that manufactured calender product for both the automotive and industrial market. The Company had built sufficient inventory of this product to service its customers for several months after the shutdown. During the years ended 2020 and 2019, the Company sold $1,665,811 and $4,858,032, respectively, of calender product primarily to the automotive market.

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Gross Profit

Total gross profit for the year ended ~~2020~~2021 ~~decreased~~ increased $71,~~181~~357,~~237~~ 510 or 4814.06% to $78,~~780~~918,~~601~~111 from $147,~~961~~780,~~838~~601 for the year ended ~~2019~~2020. The gross profit ~~percentage~~amount ~~was 12.9% of sales~~ for the year ended 2020 ~~compared~~reflected tothe negative 16impact of COVID-19.4% ~~for~~Manufacturing ~~the~~costs ~~year~~were ~~ended~~reduced ~~2019.~~by ~~Gross~~the ~~profit~~CJRS ~~amount~~reimbursement of $130,000 and ~~percentage~~$1,309,000 ~~were~~for ~~negatively~~the ~~impacted~~years byended 2021 ~~the~~and ~~effect~~2020, respectively, for salaries of ~~COVID-19~~furloughed employees. ~~However,~~ asExcluding ~~with~~the ~~sales~~CJRS reimbursement, gross profit would have increased $2,316,510. ~~significantly~~In inaddition, the ~~third~~increase ~~quarter~~in ofgross ~~2020~~profit aswas ~~compared~~partially tooffset ~~the~~by ~~second~~an ~~quarter~~unfavorable currency effect of approximately $60,000. ~~2020~~The ~~and~~gross ~~continued~~profit topercentage ~~increase~~was in12.4% ~~the~~of ~~fourth~~sales ~~quarter~~for ofthe ~~2020~~year asended 2021 compared to ~~the~~12.9% ~~third~~for ~~quarter~~the ofyear ended 2020. The gross profit ~~percentage~~and ~~also~~percentage ~~increased~~for ~~significantly~~the inyear ~~the~~ended ~~third~~2021 ~~quarter~~were ofnegatively ~~2020~~impacted asby ~~compared~~supply tochain ~~the~~issues, ~~second~~as ~~quarter~~discussed ofabove, ~~2020~~as ~~but~~well ~~declined~~as inhigher ~~the~~costs ~~fourth~~of raw ~~quarter~~materials ofand ~~2020~~freight. asTo ~~compared~~offset toraw ~~the~~material ~~third~~price ~~quarter~~increases, ofwe ~~2020~~increased ~~primarily~~prices ~~due~~on tomost ~~higher~~product ~~costs~~categories ~~related~~in toseveral ~~production~~of ~~inefficiencies.~~our ~~During~~markets ~~the~~three ~~year~~times ~~ended~~in ~~2020~~2021 with effective dates in March, ~~manufacturing~~July ~~costs~~and ~~were~~December ~~reduced~~of ~~approximately~~2021. $1However,~~309,000~~ ~~due~~we tohave ~~reimbursements~~not ~~through~~realized the ~~CJRS~~full ~~for~~positive ~~the~~impact ~~salaries~~ of the ~~furloughed~~most ~~employees~~recent increase yet. InWe ~~addition,~~expect ~~there~~some ~~was~~additional aprice ~~favorable~~increases ~~currency~~on ~~effect~~other ofselect ~~approximately~~products ~~$103,000~~to onbe ~~gross~~implemented ~~profit~~in 2022 for further offset to raw material price increases.

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Operating Expenses

Selling expenses for the year ended ~~2020~~2021 decreased $125,~~260,045~~ 669 or 290.38% to $3,~~040~~015,~~685~~016 from $43,~~300~~040,~~730~~685 for the year ended ~~2019~~2020. ~~Due~~Selling toexpenses ~~lower~~were ~~sales~~reduced $7,000 ~~activity~~and ~~primarily~~$99,000 asfor athe ~~result~~years ofended ~~COVID-19, selling~~2021 ~~expenses~~and ~~such~~2020, ~~as commission~~respectively, ~~travel~~due ~~and~~to ~~entertainment~~the ~~were~~CJRS ~~reduced~~reimbursement. inExcluding ~~2020.~~the InCJRS ~~addition~~reimbursement, ~~the~~selling expenses ~~Company~~would ~~was~~have ~~reimbursed~~decreased ~~approximately~~ $99117,~~000~~669. ~~through~~The ~~the~~decrease ~~CJRS~~in ~~for~~selling ~~the~~expenses ~~wages~~was ofpartially ~~furloughed~~offset ~~employees~~by ~~resulting~~an in$84,000 ~~lower~~unfavorable ~~salary~~currency ~~expense~~effect. The ~~Also~~lower ~~contributing~~amount tofor the ~~lower selling~~year ~~expenses~~ended in2021 ~~2020~~ was ~~the~~primarily ~~2019~~due ~~closure~~to ofa ~~the~~decline ~~calender~~in ~~product~~employment ~~line~~costs ~~and~~for the ~~elimination~~U.S. ofoperations ~~its~~partially ~~applicable~~offset by ~~employment~~the ~~and commission~~increase ~~costs~~in the U.K. ~~There~~operations ~~was~~due ato ~~$19,000~~greater ~~unfavorable~~sales ~~currency~~activity (as the negative effect ~~that~~of ~~partially~~COVID-19 ~~offset~~decreased ~~the~~this ~~decrease~~activity induring 2020) ~~selling~~and ~~expenses~~the CJRS reimbursement.

General and administrative expenses for the year ended ~~2020 increased~~2021 decreased $~~673~~595,~~235~~386 or 118.19% to $6,~~720~~125,~~969~~583 from $6,~~047~~720,~~734~~969 for the year ended ~~2019~~2020. ~~This~~General ~~increase~~and ~~was~~administrative expenses ~~primarily~~were ~~due~~reduced to$5,000 ~~costs~~and $35,000 for ~~cash~~ ~~management~~the ~~consulting~~years ~~services~~ended ~~provided~~2021 and 2020, respectively, due to the ~~Company~~CJRS reimbursement. Excluding the CJRS reimbursement, general and aadministrative ~~charge~~expenses ~~relating~~would tohave adecreased ~~legal~~$625,386. ~~proceeding~~The decrease in ~~the~~general ~~U.K.,~~and asadministrative ~~previously~~expenses ~~discussed~~was inpartially ~~Item~~offset 3by a $100,000 unfavorable currency effect. ~~Partially~~The ~~offsetting~~decrease from the ~~increase~~year ~~were~~ended ~~wages~~2020 ofwas ~~approximately~~primarily ~~$35,000~~due ~~that~~to ~~were~~lower ~~reimbursed~~costs for ~~through~~cash management consulting services provided to us and a charge relating to the ~~CJRS. Included~~legal proceeding in the ~~increase~~U.K. that was expensed in 2020. ~~general~~See ~~and~~Note ~~administrative~~1 ~~expenses~~to ~~was~~the anconsolidated ~~unfavorable~~financial ~~currency~~statements ~~effect~~for offurther ~~$10,000~~discussion.

Research and development expenses for the year ended ~~2020~~2021 ~~decreased~~ increased $~~653~~313,~~690~~213 or 4031.09% to $~~980~~1,~~695~~293,908 from $1980,~~634,385~~695 for the year ended ~~2019~~2020. ~~The~~Research ~~decrease~~and ~~was~~development ~~principally~~expenses ~~due~~were toreduced $8,000 aand ~~decline~~$126,000 infor ~~activities attributable~~the toyears ~~the~~ended ~~COVID-19~~2021 ~~pandemic~~and ~~including~~2020, ~~lower~~respectively, ~~development~~due ~~costs~~to ~~for~~the ~~new~~CJRS ~~trials~~reimbursement. Excluding the CJRS reimbursement, research and ~~wages~~development ofexpenses ~~approximately~~would have increased $~~126~~195,~~000~~213. ~~that were~~The ~~reimbursed~~increase ~~through~~in ~~the~~research ~~CJRS.~~and ~~There~~development ~~was~~expenses included a $345,000 unfavorable currency effect. ~~that~~The ~~partially~~increase ~~offset~~from the ~~decrease~~year inended ~~research~~2020 was primarily due to more activity including qualifying raw material ~~and~~substitutions ~~development~~as ~~expenses~~a result of supply constraints.

~~There~~Operating were no other operating expenses for the year ended 2020 and $343,003 for the year ended 2019. The amount for 2019 was cost incurred by the Company as part of a restructuring plan to reduce inefficiencies at its U.K. facility.Loss

Operating ~~Income~~loss ~~(Loss)~~for the year ended 2021 was $1,516,396 compared to $2,961,748 for the year ended 2020. The $1,445,352 or 48.8% smaller operating loss for the year ended 2021 compared to the year ended 2020 was due to the combination of higher gross profit and lower operating expenses. The operating loss percentage was -2.1% of sales for the year ended 2021 compared to -4.9% for the year ended 2020.

Operating loss for the year ended 2020 was $2,961,748 compared to operating income of $2,635,986 for the year ended 2019, a decrease of $5,597,734. The decrease was due to the decline in gross profit partially offset by the decrease in operating expenses, which included the $343,003 non-recurring restructuring charge in 2019. The operating loss percentage was -4.9% of sales for the year ended 2020 compared to the operating income percentage of 2.9% for the year ended 2019.

Interest Expense

Interest expense for the year ended ~~2020~~2021 ~~decreased~~ increased $~~454~~59,~~341~~ 092 or ~~22.~~3.7% to $1,~~581~~640,~~907~~999 from $21,~~036~~581,~~248~~907 for the year ended ~~2019~~2020. The ~~decrease~~increase ~~was~~in ~~primarily~~interest ~~due~~expense tofor ~~lower~~the ~~interest~~U.K. ~~rates~~operations, ~~on LIBOR~~which ~~and~~included ~~prime~~amortization ~~during~~of debt issuance costs related to the ~~year~~debt ~~ended~~refinancing ~~2020~~with ~~compared~~PNC, towas partially offset by the ~~year~~decrease ~~ended~~in ~~2019~~interest expense for the U.S. operations.

Funding from Paycheck Protection Program:

~~For~~Funding from the ~~year~~PPP ~~ended~~of ~~2020~~$2,000,000 (from the Second Draw PPP Loan) for the year ended 2021 and $2,217,500 ~~funding~~ (from the First Draw PPP is Loan) for the ~~amount~~year ofended ~~debt~~2020, ~~forgiveness~~were ~~that~~the proceeds from the ~~Company~~PPP ~~expects~~loans tothat we ~~receive~~used ~~from~~during ~~the~~those ~~SBA~~periods for allowable expenses under the ~~CARES~~PPP. ~~Act~~All ~~for~~of ~~eligible~~the ~~costs~~First ~~incurred by~~and ~~the~~Second ~~Company,~~Draw asPPP ~~previously~~Loans ~~discussed~~were forgiven in June 2021 and August 2021, respectively.

Other Income (Expense)

Other ~~expense~~income for the year ended ~~2020~~2021 was $~~173~~188,~~214 compared~~011 compared to other ~~income~~expense of $~~258~~173,~~486~~214 for the year ended ~~2019~~2020. Included in other income (expense) are the currency gains and losses recognized on foreign currency transactions and the change in the fair value of financial assets and liabilities that are denominated in Euros as as these currencies fluctuated during the year. ~~Also included in other income (expense) are gains and losses from the change in fair values on the Company’s foreign currency exchange contracts.~~

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~~Tax~~Income ~~Benefit~~Taxes

For the year ended ~~2020~~2021, the tax ~~benefit~~provision was $1732,~~275,743~~994 compared to a tax benefit of $~~103~~1,~~199~~275,743 for the year ended ~~2019~~2020. The tax ~~benefit~~provision for ~~2020~~the ~~was~~year ~~principally~~ended ~~attributable~~2021 toand the ~~results~~tax ~~of the U.S. operations,~~benefit ~~while~~for the ~~tax~~year ~~benefit~~ended ~~for~~2020 ~~2019~~were ~~was~~ principally attributable to the results of the U.~~K. operations partially offset by a tax provision for the U.~~S. operations.

Based on management’s review at January 3 2, ~~2021~~2022 and ~~December 29~~January 3, ~~2019~~2021, it was determined that athere ~~valuation~~is ~~allowance~~uncertainty ~~for~~as to the ~~Company’s~~realization ~~deferred~~of ~~tax~~a ~~assets~~portion ~~was~~of ~~not~~the ~~required~~federal ~~since~~and itstate ~~was~~net ~~more~~operating ~~likely~~loss ~~than~~carryforwards ~~not~~and, ~~that~~as ~~the~~a ~~deferred~~result, ~~tax~~a ~~assets~~valuation ~~would~~allowance bewas ~~realized~~established against them.

Preferred Stock Dividend

~~The~~Pursuant to the terms of ~~the~~their acquisitions, ~~in November 2014 resulted in the issuance of~~ preferred ownership units/stock of UEPH and UGEL were issued to the sellers. These preferred units/stock (collectively “preferred shares”) have carried quarterly dividend requirements on a total value of $55,000,000 at rates ranging from 5% to 8%. The dividend rate on the Series B ~~UEP~~UEPH ~~Holdings~~ preferred units which started at 5.5% ~~increases~~increased by 0.5% on the anniversary of the issuance upand tois anow at the maximum of 8.0%. 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.

Quarterly preferred dividend payments were deferred beginning with the three months ended December 29, 2019 through the three months ended October 3, 2021. During the third quarter of 2021, the owners of the preferred shares (“preferred shareholders”) agreed to an amendment to the documents that govern the dividends (“amended documents”) whereby the accrued dividends were forgiven. In addition, under the amended documents the preferred shareholders are no longer entitled to a quarterly dividend until such time as the Company declares a dividend payable.

We accounted for the dividend forgiveness as an extinguishment of debt between related parties per ASC 470, “Debt”. As a result, the total balance of accrued dividends of approximately $6,100,000 was derecognized as of October 3, 2021. The amendments to remove the entitlement of a quarterly 5%, 8% and €221,241 (approximately $261,657) dividend (“entitlement amendments”) relating to the preferred shares were considered not significant and, therefore, were considered a modification rather than an extinguishment per ASC 470. The entitlement amendments were considered not significant since the change in the fair values of the preferred shares after the amendments compared to the fair values of the preferred shares immediately before the amendments was less than 10% as management determined that the entitlement amendments resulted in a reduction of fair value of the preferred shares. Per ASC 718, “Compensation – Stock Compensation”, the reduction of fair value of the preferred shares in this modification had no accounting impact (i.e., recognition of a gain).

Liquidity and Sources of Capital

Cash, as it is needed, is provided by using ~~the Company’s~~our lines of credit. These lines provide for a total borrowing commitment in excess of $4429,000,000 subject to the underlying borrowing ~~base~~ base specified in the agreements. Of the total outstanding borrowings of $17,~~760~~816,~~583~~919 at January 32, ~~2021~~2022, ~~$14~~for the U.6S. operations, $6.0 million of the lines bears interest at ~~LIBOR or~~ the Eurodollar rate plus ~~a range of 1~~2.9525% toand 2$5.~~45%,~~4 ~~depending~~million onbears interest at the ~~underlying~~Wells ~~borrowing base,~~Fargo orCapital Finance, LLC’s atprime ~~our~~rate ~~option,~~(3.25% at ~~the~~January ~~bank's~~2, ~~prime~~2022) orand, ~~base~~for ~~lending~~the ~~rate~~U.K. ~~and~~operations, $36.24 million bears interest at the ~~bank’s~~Bank ~~prime~~of orEngland ~~base~~Base Rate ~~lending~~plus ~~rate which was 3~~2.25% ~~at January~~ -3~~, 2021~~.00%. The lines provided additional availability of approximately $~~4.1~~466,000 ~~million~~ and, combined with UEP'’s and UGL'’s total cash balances, liquidity was approximately $~~5.7~~904,000 ~~million~~ at January 32, ~~2021~~2022. We plan to use this availability and cash provided by operating activities to finance our cash needs for fiscal ~~2021~~ 2022. The balances due under the lines of credit are recorded as current liabilities on the consolidated balance sheets.

As apreviously ~~result~~stated, of the coronavirus pandemic (“COVID-19”) ~~pandemic,~~and ~~sales~~its current disruption of the ~~Company's products~~supply ~~are~~chain ~~lower~~has ~~than~~had ~~expected.~~an ~~This~~impact ~~has~~on ~~had~~markets we serve and our operations and liquidity. Since COVID-19 is a ~~negative~~continually ~~impact~~evolving onsituation, we cannot predict the ~~Company's~~long-term ~~working~~impact ~~capital~~it ~~which~~will ~~could~~have ~~affect~~on ~~its~~the ~~ability~~economy or our business. toThe ~~borrow~~impact ~~using~~could ~~the~~have ~~Company's~~a ~~lines~~material ofadverse ~~credit.~~effect Toon ~~increase~~our ~~its~~financial ~~liquidity~~position, asresults ~~previously~~of ~~discussed,~~operations ~~the~~and ~~Company~~cash ~~has~~flows, ~~applied~~which ~~for loans~~may ~~under~~require ~~programs~~us to ~~offered~~obtain byadditional ~~the~~financing. ~~governmental~~As ~~agencies~~discussed inbelow, ~~the~~we ~~United~~continue ~~States~~to ~~and~~pursue insupplementary ~~the~~cash ~~United~~flow ~~Kingdom~~opportunities.

~~For~~Through the Paycheck Protection Program (“PPP”) administered by the U.S. ~~operations,~~Small ~~early~~Business inAdministration (“SBA”) under the ~~second~~Coronavirus ~~quarter~~Aid, ofRelief, ~~2020~~and Economic Security Act (“the ~~Company~~CARES Act”), our U.S. operations received $2,~~217~~000,~~500~~000 in(“Second ~~funds~~Draw ~~through~~PPP ~~the~~Loan”) ~~Paycheck~~and ~~Protection~~$2,217,500 ~~Program~~(“First Draw ~~administered~~PPP byLoan”) ~~the~~in ~~United~~March ~~States~~2021 ~~Small~~and ~~Business Administration.~~in ~~The~~April ~~Company~~2020, ~~believes~~respectively, ~~that~~in ~~all~~funds offrom ~~this~~One ~~debt~~Community ~~will~~Bank. beWe ~~forgiven;~~used itall ~~submitted~~proceeds ~~its~~from ~~application~~these PPP loans for ~~loan~~allowable ~~forgiveness~~ expenses (as defined in ~~November~~the ~~2020.~~PPP ~~Also~~loans) and applied for forgiveness of the ~~U.S.~~PPP ~~operations,~~loans in ~~December~~accordance ~~2020~~with the ~~Company~~terms of ~~received~~the ~~$2,432,353~~CARES inAct. ~~funds~~In ~~from~~June ~~Wells~~2021 ~~Fargo~~and ~~Capital Finance~~August 2021, ~~LLC~~we ~~through~~were ~~the~~notified ~~Main~~that ~~Street~~all ~~Lending~~of ~~Program~~our ~~established~~First byand ~~the~~Second ~~Federal~~Draw ~~Reserve~~PPP ~~Board.~~Loans, ~~Additionally~~respectively, ~~for~~were ~~the U~~forgiven.~~S. operations,~~ ~~during~~See ~~the~~Note ~~first~~9 ~~quarter~~to ~~of 2021~~ the ~~Company~~consolidated ~~received~~financial astatements ~~$2.0~~for ~~million~~further ~~Second Draw PPP loan~~discussion.

In the U.K., during the year ended 2020 the Company recorded £1,253,000 ($1,569,000) in funding available under the Coronavirus Job Retention Scheme which reimbursed the Company for the compensation expense paid to furloughed employees. Additionally for the U.K. operations, during the second half of 2020 the Company received $1,225,911 in loans from its principal shareholder and $3,268,664 in loans from automotive lenders. These funds provided more working capital to meet various short-term cash needs.16

~~The~~Table ~~Company~~of continues to attempt to manage its operating costs to match the reduced sales volume. We believe that the increasing sales activities combined with the funding from nontraditional sources (U.S. and U.K. governments and automotive lenders) will be sufficient to provide for short-term cash needs. However, there can be no assurance that additional financing will be available on favorable terms, if at all.Contents

~~The~~For ~~ratio~~our ofU.K. ~~current~~operations, ~~assets~~during tothe ~~current~~years ~~liabilities~~ended January 2, ~~including~~2022 and January 3, 2021, we recorded reimbursed costs of approximately $150,000 and $1,569,000, respectively, under the ~~amount~~Coronavirus ~~due~~Job ~~under~~Retention ~~our~~Scheme ~~lines~~(“CJRS”) established by the U.K. government to help employers pay the salaries of ~~credit,~~those ~~was~~employees 0who would otherwise have been laid off during the coronavirus outbreak but under the CJRS were furloughed instead.89 atThe ~~both~~much lower reimbursed costs for the year ended January 32, ~~2021~~2022 reflected that employees were furloughed significantly less than in the prior year. This program reimbursed us for up to 80% of the compensation expense plus national insurance and ~~December~~certain 29benefits paid to the furloughed employees, ~~2019~~resulting in lower salary expense for us. While the employees were on furlough, the compensation paid to them was limited to the amount reimbursed by the CJRS. We recorded the reimbursed amounts as reductions to the associated expenses.

~~Cash~~Also ~~balances~~for ~~increased~~our $1U.K. operations,~~057,201,~~ ~~before~~in ~~the~~June ~~effects~~2021 ofits bank ~~currency~~lending facilities with Lloyds Bank Commercial Finance Limited (“Lloyds”) were refinanced with PNC Business Credit (“PNC”). ~~translation~~PNC ofprovided ~~$86,093,~~us additional availability by expanding the borrowing base to $1include eligible equipment. This transaction was accounted for as a debt extinguishment per Accounting Standards Codification (“ASC”) 470,~~656~~ “Debt”,~~882~~ under which the existing Lloyds debt was derecognized and the new PNC debt was recorded at ~~January~~fair 3,value. ~~2021~~A ~~from~~loss of £46,813 ($~~513~~64,~~588~~342) atwas ~~December~~recognized ~~29,~~on ~~2019. Of~~this transaction and is recorded in general and administrative expenses in the ~~above~~consolidated ~~noted~~statement ~~amounts,~~of operations for the year ended January $12,~~621,692~~ ~~and~~2022. Debt issuance costs of £247,114 ($~~498~~333,~~007~~081) related to this transaction were ~~held~~capitalized. ~~outside~~These ~~the~~capitalized Ucosts are being amortized over 36 months.S. byWe ~~our~~classified ~~foreign~~these ~~subsidiaries~~debt asissuance ofcosts ~~January~~within 3,other ~~2021~~long-term assets in the accompanying consolidated balance sheet. See Notes 8 and ~~December~~9 ~~29,~~to ~~2019,~~the ~~respectively~~consolidated financial statements for further discussion.

Additionally for our U.K. operations, during 2021 we received the second installment of loans of $411,796 from the automotive lenders per the original loan agreement. These amounts are due to be repaid in the first quarter of 2023. In addition, the amounts due to be repaid at the end of the third and fourth quarters of 2021 (each approximately $162,500) from the first installment of loans from the automotive lenders were deferred until the third and fourth quarters of 2022, respectively.

Also to provide liquidity, quarterly preferred dividend payments on UEPH Series A and Series B preferred units and UGEL preferred stock (collectively “preferred shares”) were deferred beginning with the three months ended December 29, 2019 through the three months ended October 3, 2021. During the third quarter of 2021, the owners of these preferred shares (“preferred shareholders”) agreed to an amendment to the documents that govern the dividends (“amended documents”) whereby the accrued dividends were forgiven. As a result, the total balance of accrued dividends of approximately $6,100,000 was derecognized as of October 3, 2021. Additionally, under the amended documents, the preferred shareholders are no longer entitled to a quarterly dividend until such time as we declare a dividend payable. See Note 13 to the consolidated financial statements for further discussion.

The ratio of current assets to current liabilities, including the amount due under our lines of credit, was 0.99 at January 2, 2022 and 0.89 at January 3, 2021.

Cash balances decreased $1,218,759, before the effects of currency translation of $6,850, to $444,973 at January 2, 2022 from $1,656,882 at January 3, 2021. Of the above noted amounts, $226,612 and $1,621,692 were held outside the U.S. by our foreign subsidiaries as of January 2, 2022 and January 3, 2021, respectively.

Cash used in operations was $1,525,215 and $992,158 for the years ended 2021 and 2020, respectively. For 2021, cash used in operations was primarily due to the net loss of $1,702,378, changes in working capital of $(1,515,589), and changes in other assets and liabilities of $(23,466), partially offset by adjustments for non-cash items of $1,716,218. For 2020, cash used in operations was primarily due to the net loss of $1,223,626 and adjustments for non-cash items of $(1,069,834), offset by changes in working capital of $1,156,536 and changes in other assets and liabilities of $144,766.

For the year ended 2021, cash used in investing activities was $1,280,112 compared to $1,417,623 for the year ended 2020. During 2021 and 2020, cash used in investing activities was principally for purchases of machinery and equipment at our manufacturing locations and payments made for company-owned key man life insurance premiums. For the year ended January 2, 2022, we made payments of $194,808 on our company owned life insurance policies. For the year ended January 3, 2021, we obtained $130,000 in loans against the cash value of our company owned life insurance policies and are shown net of payments of $178,771 on the life insurance policies in the consolidated statements of cash flows.

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Cash ~~used~~provided inby ~~operations~~financing activities was $~~992~~1,~~158~~586,568 and $3,466,982 for the ~~year~~years ended 2021 and 2020 as, ~~compared~~respectively. toImpacting cash ~~provided~~flows byfrom ~~operations~~financing activities were proceeds from issuance of long-term debt of $42,~~659~~411,~~527~~796 ~~for~~($2,000,000 through the ~~year~~Paycheck ~~ended~~Protection ~~2019.~~Program ~~For~~and ~~2020~~$411,796, ~~cash~~net ~~used~~of intranslation ~~operations~~adjustment ~~was~~of ~~primarily~~$(48,745), ~~due~~from toautomotive lenders) for the year ended 2021 and $7,725,092 ($2,217,500 through the Paycheck Protection Program, $3,268,664, net ~~loss~~of translation adjustment of $1(193,~~223~~425),~~626~~ from automotive lenders, and ~~adjustments~~$2,432,353 through the Main Street Lending Program) for ~~non-~~the year ended 2020. Also impacting cash ~~items~~flows from financing activities for the years ended 2021 and 2020 were net advances on lines of credit of $(1931,~~069~~759 and net payments of $3,~~834)~~074,286, ~~offset~~respectively. by The changes in the lines of credit reflect the funding of working capital. Payments of $1,~~156~~115,~~536~~788 and $1,478,630 were also made during the years ended 2021 and ~~changes~~2020, inrespectively, ~~other~~on ~~assets~~long-term debt (excluding debt extinguishment) and finance lease liabilities. ofFor the year ended 2021, payments were $~~144~~1,~~766.~~476,713 ~~For~~and ~~2019~~proceeds were $2,313,181 ~~cash~~relating ~~provided~~to bythe ~~operations~~extinguishment ~~was~~of ~~primarily~~existing ~~due~~long-term todebt ~~adjustments~~and ~~for~~recognition ~~non~~of new long-~~cash~~term ~~items~~debt, ofrespectively, while payments were $27,~~444~~330,~~326~~745 and proceeds were $6,522,040 relating ~~changes~~to inthe ~~working~~extinguishment ~~capital~~of an existing line of ~~$1,355,358,~~credit and ~~net~~recognition ~~income~~of a new line of credit, respectively. Also included for the year ended 2021 were payments for capitalized debt issuance costs of $~~961~~339,~~423,~~643. ~~offset~~For bythe ~~changes~~year inended ~~other~~2020, ~~assets~~proceeds ~~and~~of ~~liabilities~~$1,225,911 (net of translation adjustment of $(~~101~~72,~~580~~544)) were received from and payments of $675,000 were made on subordinated secured promissory notes to our majority shareholder. In addition, proceeds of $200,000 were received from a short-term advance from our majority shareholder during the year ended 2020 and was repaid in the same period.

~~Cash~~Our ~~used~~credit inagreements ~~investing~~contain ~~activities~~customary ~~was $1,417,623 for the year~~affirmative ~~ended~~and ~~2020~~negative ~~as compared to $1,894,296 for the year ended 2019~~covenants. ~~During~~We ~~2020~~were ~~and 2019, cash used~~ in ~~investing~~compliance ~~activities~~with ~~was principally for purchases of machinery and equipment at~~ our ~~manufacturing~~debt ~~locations~~covenants ~~and~~as ~~payments~~of ~~made~~January ~~for~~2, ~~company-owned~~2022 ~~key man life insurance premiums. For the year ended 2020~~ and ~~2019,~~through the ~~payments~~date ~~made for the life insurance premiums were net~~ of ~~proceeds~~filing ~~from policy loans~~ of ~~$130,000~~this ~~and $249,051, respectively~~report.

For the year ended 2020, cash provided by financing activities was $3,466,982 compared to cash used in financing activities of $3,298,592 for the year ended 2019. Impacting cash flows from financing activities were proceeds from issuance of long-term debt of $7,725,092 ($2,217,500 through the Paycheck Protection Program, $3,268,664, net of translation adjustment of $193,425, from automotive lenders, and $2,432,353 through the Main Street Lending Program) for the year ended 2020 and $604,935 for the year ended 2019. In addition, there were no preferred dividend payments during the year ended 2020 compared to $3,114,592 during the year ended 2019. As previously stated, 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. Also impacting cash flows from financing activities for the year ended 2020 and 2019 were net payments on lines of credit of $3,074,286 and net advances on lines of credit of $891,022, respectively. The changes in the lines of credit reflect the funding of working capital. Additionally during the years ended 2020 and 2019, our majority shareholder provided $1,425,911 (net of translation adjustment of $72,544) and $1,350,000, respectively, in financing in the form of subordinated secured promissory notes. Payments on these notes were $875,000 and $675,000 during 2020 and 2019, respectively.

Our credit agreements contain customary affirmative and negative covenants. We were in compliance with our debt covenants as of January 3, 2021 and through the date of filing of this report.

We currently have several on-going capital projects that are important to our long-term strategic goals. Machinery and equipment will also be added as needed to increase capacity or enhance operating efficiencies in our manufacturing plants. We will use a combination of financing arrangements to provide the necessary capital. We believe that our existing resources, including cash on hand and our credit facilities, together with cash generated from operations and additional bank borrowings, will be sufficient to fund our cash flow requirements through at least the next twelve months. However, there can be no assurance that additional financing will be available on favorable terms, if at all.

We have no off balance sheet arrangements.

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Critical Accounting Policies, Judgments and Estimates

The U.S. Securities and Exchange Commission ("SEC") requires companies to provide additional disclosure and commentary on their most critical accounting policies. The SEC has defined the most critical accounting policies as the ones that are most important to the portrayal of a company's financial condition and operating results, and requires management to make its most significant estimates and judgments in the preparation of its consolidated financial statements. On an on-going basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances. Management believes that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions under different future circumstances. Our critical accounting policies are described below.

Revenue Recognition

Revenue is recognized when obligations under the terms of a contract with a customer are satisfied, which includes the control of products transferring to the customer. 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. Revenue is measured as the amount of consideration we expect to receive in exchange for products transferred to the customer. 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.

Accounts Receivable

On an ongoing basis, we evaluate our accounts receivable based on individual customer circumstances, historical write-offs and collections, and current industry and customer credit conditions, and adjust the allowance for doubtful accounts accordingly. Our 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.

Inventories

We value inventory at the lower of cost using the first-in, first-out (FIFO) method, or market. To determine the cost of inventory, we allocate 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.

We assess the recoverability of inventory and record a provision for obsolescence based upon specifically identified, discontinued or obsolete items, or a percentage of quantities on hand compared with historical and forecasted usage and sales levels. These assessments, which require management’s judgments and estimates, reduce inventories to their estimated net realizable value.

Finite-Lived Long-Lived Assets

Finite-lived long-lived assets consist of property, equipment and other intangible assets, which excludes goodwill and trademarks since they are considered to have indefinite useful lives. Property, equipment and other intangible assets are amortized using the straight-line method over their estimated useful life. These finite-lived long-lived assets are reviewed 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.

Goodwill and Intangible Indefinite-Lived Assets

Goodwill and trademarks are indefinite-lived assets and are not amortized unless, for trademarks, we determine that their useful lives are no longer indefinite. These indefinite-lived assets are reviewed for impairment at least annually or whenever events or changes in business circumstances (“triggering events”) 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.

In considering whether ~~the~~any triggering events ~~caused~~had occurred byto indicate that the ~~COVID-19~~carrying ~~pandemic should~~amount beof ~~considered~~our aassets ~~triggering~~may ~~event~~not be fully recoverable, we used a qualitative assessment methodology and ~~determined~~concluded that it was not more likely than not that the fair value of our assets was less than the carrying amount as of January 2, 2022. We also performed a quantitative analysis using a discounted cash flow approach and determined that the fair value of our assets exceeded the carrying value as of January 2, ~~therefore~~2022. Based on these results, we concluded that no impairment charge was necessary as of January 32, ~~2021~~2022.

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Income Tax

We file income tax returns in the United States as a C-Corporation, and in several state jurisdictions and in the United Kingdom. Our 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. We made the acquisition of Uniroyal through UEPH, a limited liability company, which issued preferred ownership interests to the sellers that provide for quarterly dividends. Uniroyal’s taxable income is allocated entirely to UEPH as its sole member and since it is a pass-through entity, this income less the dividends paid to the sellers of Uniroyal is reported on our tax return. The taxable income applicable to the dividends for the preferred ownership interests is reported to the sellers who report it on their respective individual tax returns.

We follow 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 basis 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 or liability each period. We have federal net operating loss carryforwards of approximately $1516.74 million as of January 32, ~~2021~~2022, of ~~which~~ which $11.7 million expire in years beginning ~~2022~~2023 through 2034 and $4.07 million may be carried forward indefinitely. We have state net operating loss carryforwards of approximately $14.12 million as of January 32, ~~2021~~2022, which also expire beginning ~~2022~~2023 through 2034. Additionally, we have foreign net operating loss carryforwards of approximately $2.8 million as of January 32, ~~2021~~2022, which have no expiration date. As a result of the federal and state loss carryforwards, we have deferred tax assets of $45,~~900~~370,~~595~~903, ~~net~~which ofhave a ~~valuation~~ valuation allowance against them of $~~828~~2,~~411~~106,027 as of January 32, ~~2021~~2022.

We reduce our 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 our valuation allowance determinations, we consider all available positive and negative evidence affecting specific ~~deferred~~ deferred tax assets, including our 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. Management has determined that there is uncertainty as to the realization of a portion of the federal and state net operating loss ~~carryforward~~carryforwards and has established a valuation allowance against ~~a portion of the state net operating loss carryforward~~them.

Foreign Currency Translation

The financial position and results of operations of our 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~~ accounts are translated at the historical rate for the date they were recognized. Revenues and expenses are translated at the weighted ~~average~~ average exchange rates during the year. The resulting translation gains and losses on assets and liabilities are recorded in accumulated ~~other~~ other comprehensive loss, and are excluded from net income until realized through a sale or liquidation of the ~~investment~~foreign subsidiaries. Transaction gains and losses generated from the remeasurement of assets and liabilities denominated in currencies other than the functional ~~currency~~ currency of our foreign operations are included in other income (expense) in the accompanying consolidated statements of operations.

Fair Value of Financial Instruments

Our short-term financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and lines of credit. We adjust 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. We believe that the carrying values of these short-term financial instruments approximate their estimated fair values.

The fair value of our 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, we take into account its risk of nonperformance. We believe that the carrying value of our long-term debt approximates its estimated fair value.

Table of Contents

Postretirement and Postemployment Benefit Liabilities

We provide certain health care and life insurance benefits for substantially all employees (active or retired) who were employed prior to February 20, 1987. In calculating our plan obligations and related expense, we make various assumptions and estimates. These assumptions include discount rates, mortality rates, retirement rates, termination rates and other factors. While we believe that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect our obligations and future expense.

Recent Accounting Standards

See Note 1 to the consolidated financial statements for a discussion on accounting standards that we adopted during ~~2020~~2021 and on those recently issued but not yet required to be adopted.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Not applicable

Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 215)

To the Board of Directors and Stockholders of

Uniroyal Global Engineered Products, Inc. ~~and subsidiaries~~

Sarasota, Florida

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Uniroyal Global Engineered Products, Inc. ~~and subsidiaries~~ (the "“Company"”) as of January 32, ~~2021~~2022 and ~~December~~January 293, ~~2019~~2021, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders' equity and cash flows for the 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 January 32, ~~2021~~2022 and ~~December 29~~January 3, ~~2019~~2021, and the results of their operations and cash flows for the years then ended 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 ~~audits~~audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. ~~The~~Our ~~Company~~audits isincluded ~~not~~performing ~~required~~procedures to ~~have,~~assess ~~nor~~the ~~were~~risks weof ~~engaged~~material misstatement of the financial statements, whether due to ~~perform~~error or fraud, an ~~audit~~and ofperforming ~~its~~procedures ~~internal~~that ~~control~~respond ~~over~~to ~~financial~~those ~~reporting~~risks. AsSuch ~~part~~procedures ofincluded ~~our~~examining, ~~audits~~on wea ~~are~~test ~~required~~basis, toevidence ~~obtain~~regarding anthe ~~understanding~~amounts ~~of internal~~and ~~control~~disclosures ~~over~~in the consolidated financial ~~reporting~~statements. ~~but~~Our ~~not~~audits ~~for~~also included evaluating the ~~purpose~~accounting ofprinciples ~~expressing~~used anand ~~opinion~~significant onestimates ~~the~~made ~~effectiveness~~by ofmanagement, as well as evaluating the ~~Company's internal~~overall ~~control~~presentation ~~over~~of the consolidated financial ~~reporting~~statements. ~~Accordingly,~~We webelieve ~~express~~that noour ~~such~~audits provide a reasonable basis for our opinion.

~~Our~~Critical ~~audits~~Audit ~~included~~Matters 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~~audit ~~Matters~~matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.

~~Critical~~/s/ ~~audit~~Frazier ~~matters~~& are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challengingDeeter, ~~subjective,~~ orLLC ~~complex judgments. We determined that there were no critical audit matters.~~

~~/s/~~We ~~Frazier~~have &served ~~Deeter,~~as ~~LLC~~the Company's auditor since 2010.

WeTampa, ~~have~~Florida ~~served as the Company's auditor since 2010.~~

~~Tampa~~April 1, ~~Florida~~2022

~~April 1, 2021~~22

22Table of Contents

~~Table~~Uniroyal ofGlobal ~~Contents~~Engineered Products, Inc.

~~Uniroyal~~Consolidated ~~Global~~Balance ~~Engineered~~Sheets ~~Products, Inc.~~

Consolidated Balance Sheets

ASSETS	January 2, 2022			January 3, 2021
CURRENT ASSETS
Cash and cash equivalents	$	444,973		$	1,656,882
Accounts receivable, net		8,561,227			10,114,819
Inventories, net		21,840,404			17,952,850
Other current assets		2,196,322			1,841,153
Related party receivable		453			907
Total Current Assets		33,043,379			31,566,611

PROPERTY AND EQUIPMENT, NET		17,047,606			18,491,122
OPERATING LEASE RIGHT-OF-USE ASSETS, NET		5,626,542			6,242,736

OTHER ASSETS
Intangible assets		3,336,068			3,388,357
Goodwill		1,079,175			1,079,175
Other long-term assets		4,322,855			4,679,990
Total Other Assets		8,738,098			9,147,522

TOTAL ASSETS	$	64,455,625		$	65,447,991

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Checks issued in excess of bank balance	$	76,134		$	275,297
Lines of credit		17,816,919			17,760,583
Current maturities of long-term debt		2,365,905			1,432,301
Current maturities of finance lease liabilities		210,007			257,298
Accounts payable		8,959,467			7,344,785
Accrued expenses and other liabilities		3,658,612			7,987,333
Current maturities of related party finance lease liabilities		167,389			149,366
Current portion of postretirement benefit liability - health and life		169,749			162,977
Total Current Liabilities		33,424,182			35,369,940

LONG-TERM LIABILITIES
Long-term debt, less current portion		6,854,257			7,338,762
Finance lease liabilities, less current portion		36,372			235,116
Operating lease liabilities, less current portion		5,391,395			5,893,268
Related party finance lease liabilities, less current portion		2,344,239			2,504,404
Long-term debt to related parties		4,216,566			4,216,566
Postretirement benefit liability - health and life, less current portion		2,583,610			2,713,585
Other long-term liabilities		960,526			807,190
Total Long-Term Liabilities		22,386,965			23,708,891
Total Liabilities		55,811,147			59,078,831

STOCKHOLDERS' EQUITY
Preferred units, Series A UEP Holdings, LLC, 20,000,000 units authorized; 200,000 units issued and outstanding ($100 issue price)		617,571			617,571
Preferred units, Series B UEP Holdings, LLC, 15,000,000 units authorized; 150,000 units issued and outstanding ($100 issue price)		463,179			463,179
Preferred stock, Uniroyal Global (Europe) Limited, 50 shares issued and outstanding ($1.51 stated value)		75			75
Common stock, 95,000,000 shares authorized ($.001 par value) 3,736,006 shares issued and outstanding as of January 2, 2022 and January 3, 2021		3,736			3,736
Additional paid-in capital		35,290,590			35,290,590
Accumulated deficit		(26,459,190	)		(28,734,670	)
Accumulated other comprehensive loss		(1,271,483	)		(1,271,321	)
Total Stockholders' Equity		8,644,478			6,369,160

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	64,455,625		$	65,447,991

ASSETS	January 3, 2021 (1)			December 29, 2019
CURRENT ASSETS
Cash and cash equivalents	$	1,656,882		$	513,588
Accounts receivable, net		10,114,819			11,662,325
Inventories, net		17,952,850			19,116,542
Other current assets		1,841,153			930,015
Related party receivable		907			-
Total Current Assets		31,566,611			32,222,470
PROPERTY AND EQUIPMENT, NET		18,491,122			19,103,319
OPERATING LEASE RIGHT-OF-USE ASSETS		6,242,736			6,607,963
OTHER ASSETS
Intangible assets		3,388,357			3,263,781
Goodwill		1,079,175			1,079,175
Other long-term assets		4,679,990			3,489,313
Total Other Assets		9,147,522			7,832,269
TOTAL ASSETS	$	65,447,991		$	65,766,021
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Checks issued in excess of bank balance	$	275,297		$	332,141
Lines of credit		17,760,583			20,530,773
Current maturities of long-term debt		1,432,301			1,238,541
Current maturities of finance lease liabilities		257,298			364,872
Accounts payable		7,344,785			9,232,119
Accrued expenses and other liabilities		7,987,333			3,890,367
Related party obligation		149,366			608,517
Current portion of postretirement benefit liability - health and life		162,977			155,803
Total Current Liabilities		35,369,940			36,353,133
LONG-TERM LIABILITIES
Long-term debt, less current portion		7,338,762			2,892,242
Finance lease liabilities, less current portion		235,116			492,613
Operating lease liabilities, less current portion		5,893,268			6,106,568
Related party finance lease liabilities, less current portion		2,504,404			2,646,970
Long-term debt to related parties		4,216,566			3,190,655
Postretirement benefit liability - health and life, less current portion		2,713,585			2,592,023
Other long-term liabilities		807,190			715,308
Total Long-Term Liabilities		23,708,891			18,636,379
Total Liabilities		59,078,831			54,989,512
STOCKHOLDERS' EQUITY
Preferred units, Series A UEP Holdings, LLC, 200,000 units issued and outstanding ($100 issue price)		617,571			617,571
Preferred units, Series B UEP Holdings, LLC, 150,000 units issued and outstanding ($100 issue price)		463,179			463,179
Preferred stock, Uniroyal Global (Europe) Limited, 50 shares issued and outstanding ($1.51 stated value)		75			75
Common stock, 95,000,000 shares authorized ($.001 par value) 3,736,006 shares issued and outstanding as of January 3, 2021 and December 29, 2019		3,736			18,680
Additional paid-in capital		35,290,590			35,275,646
Accumulated deficit		(28,734,670	)		(24,301,203	)
Accumulated other comprehensive loss		(1,271,321	)		(1,297,439	)
Total Stockholders' Equity		6,369,160			10,776,509
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	65,447,991		$	65,766,021

See accompanying notes to the consolidated financial statements.

(1) The amounts in common stock and additional paid-in capital were adjusted to reflect the one-for-five reverse stock split ("reverse stock split") as of February 24, 2020, the effective date of the reverse stock split. See Note 1 for additional information.23

~~See~~Table ~~accompanying~~of ~~notes to the consolidated financial statements.~~Contents

23Uniroyal Global Engineered Products, Inc.

~~Table~~Consolidated Statements of ~~Contents~~Operations

Uniroyal Global Engineered Products, Inc.

	Years Ended

	January 2, 2022			January 3, 2021

NET SALES	$	71,704,995		$	60,218,355

COST OF GOODS SOLD		62,786,884			52,437,754

Gross Profit		8,918,111			7,780,601

OPERATING EXPENSES:
Selling		3,015,016			3,040,685
General and administrative		6,125,583			6,720,969
Research and development		1,293,908			980,695
Total Operating Expenses		10,434,507			10,742,349

Operating Loss		(1,516,396	)		(2,961,748	)

OTHER INCOME (EXPENSE):
Interest expense		(1,640,999	)		(1,581,907	)
Funding from Paycheck Protection Program		2,000,000			2,217,500
Other income (expense)		188,011			(173,214	)
Net Other Income		547,012			462,379

LOSS BEFORE TAX PROVISION (BENEFIT)		(969,384	)		(2,499,369	)

TAX PROVISION (BENEFIT)		732,994			(1,275,743	)

NET LOSS		(1,702,378	)		(1,223,626	)

Extinguishment of preferred stock dividend payable		6,145,463			-
Preferred stock dividend		(2,167,605	)		(3,209,841	)

NET INCOME (LOSS) ALLOCABLE TO COMMON SHAREHOLDERS	$	2,275,480		$	(4,433,467	)

EARNINGS (LOSS) PER COMMON SHARE:
Basic and Diluted	$	0.61		$	(1.19	)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and Diluted		3,736,006			3,736,006

~~Consolidated~~See ~~Statements~~accompanying ofnotes ~~Operations~~to the consolidated financial statements.

	Years Ended
	January 3, 2021			December 29, 2019
NET SALES	$	60,218,355		$	91,136,244
COST OF GOODS SOLD		52,437,754			76,174,406
Gross Profit		7,780,601			14,961,838
OPERATING EXPENSES:
Selling		3,040,685			4,300,730
General and administrative		6,720,969			6,047,734
Research and development		980,695			1,634,385
Other operating expenses		-			343,003
OPERATING EXPENSES		10,742,349			12,325,852
Operating (Loss) Income		(2,961,748	)		2,635,986
OTHER INCOME (EXPENSE):
Interest and other debt related expense		(1,581,907	)		(2,036,248	)
Funding from Paycheck Protection Program		2,217,500			-
Other (expense) income		(173,214	)		258,486
Net Other Income (Expense)		462,379			(1,777,762	)
(LOSS) INCOME BEFORE TAX PROVISION		(2,499,369	)		858,224
TAX BENEFIT		(1,275,743	)		(103,199	)
NET (LOSS) INCOME		(1,223,626	)		961,423
Preferred stock dividend		(3,209,841	)		(3,126,496	)
NET LOSS ALLOCABLE TO COMMON SHAREHOLDERS	$	(4,433,467	)	$	(2,165,073	)
LOSS PER COMMON SHARE:
Basic and Diluted	$	(1.19	)	$	(0.58	)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and Diluted		3,736,006			3,736,742

~~See~~Table ~~accompanying~~of ~~notes to the consolidated financial statements.~~Contents

24Uniroyal Global Engineered Products, Inc.

~~Table~~Consolidated Statements of ~~Contents~~Comprehensive Income (Loss)

Uniroyal Global Engineered Products, Inc.

	Years Ended

	January 2, 2022			January 3, 2021

NET LOSS	$	(1,702,378	)	$	(1,223,626	)

OTHER COMPREHENSIVE (LOSS) INCOME:
Minimum benefit liability adjustment		77,524			(160,356	)
Foreign currency translation adjustment		(77,686	)		186,474
OTHER COMPREHENSIVE (LOSS) INCOME		(162	)		26,118

COMPREHENSIVE LOSS		(1,702,540	)		(1,197,508	)

Extinguishment of preferred stock dividend payable		6,145,463			-
Preferred stock dividend		(2,167,605	)		(3,209,841	)

COMPREHENSIVE INCOME (LOSS) TO COMMON SHAREHOLDERS	$	2,275,318		$	(4,407,349	)

~~Consolidated~~See ~~Statements~~accompanying ofnotes ~~Comprehensive~~to ~~Loss~~the consolidated financial statements.

	Years Ended
	January 3, 2021			December 29, 2019
NET (LOSS) INCOME	$	(1,223,626	)	$	961,423
OTHER COMPREHENSIVE INCOME (LOSS):
Minimum benefit liability adjustment		(160,356	)		(830,899	)
Foreign currency translation adjustment		186,474			236,105
OTHER COMPREHENSIVE INCOME (LOSS)		26,118			(594,794	)
COMPREHENSIVE (LOSS) INCOME		(1,197,508	)		366,629
Preferred stock dividend		(3,209,841	)		(3,126,496	)
COMPREHENSIVE LOSS TO COMMON SHAREHOLDERS	$	(4,407,349	)	$	(2,759,867	)

~~See~~Table ~~accompanying~~of ~~notes to the consolidated financial statements.~~Contents

25Uniroyal Global Engineered Products, Inc.

~~Table~~Consolidated Statements of ~~Contents~~Changes in Stockholders' Equity

~~Uniroyal~~For ~~Global~~the ~~Engineered~~Years ~~Products~~Ended January 2, ~~Inc.~~2022 and January 3, 2021

Consolidated Statements of Changes in Stockholders' Equity

	UEPH Series A				UEPH Series B				UGEL Preferred				Common Stock					Additional Paid In		Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Units		Amount		Units		Amount		Shares		Amount		Shares		Amount			Capital		Deficit			Loss			Equity
Balance December 29, 2019		200,000	$	617,571		150,000	$	463,179		50	$	75		3,736,006	$	18,680		$	35,275,646	$	(24,301,203	)	$	(1,297,439	)	$	10,776,509
Net loss		-		-		-		-		-		-		-		-			-		(1,223,626	)		-			(1,223,626	)
Other comprehensive income		-		-		-		-		-		-		-		-			-		-			26,118			26,118
Preferred stock dividend		-		-		-		-		-		-		-		-			-		(3,209,841	)		-			(3,209,841	)
Adjustment for a 1-for-5 reverse stock split		-		-		-		-		-		-		-		(14,944	)		14,944		-			-			-
Balance January 3, 2021		200,000		617,571		150,000		463,179		50		75		3,736,006		3,736			35,290,590		(28,734,670	)		(1,271,321	)		6,369,160
Net loss		-		-		-		-		-		-		-		-			-		(1,702,378	)		-			(1,702,378	)
Other comprehensive loss		-		-		-		-		-		-		-		-			-		-			(162	)		(162	)
Extinguishment of preferred stock dividend payable		-		-		-		-		-		-		-		-			-		6,145,463			-			6,145,463
Preferred stock dividend		-		-		-		-		-		-		-		-			-		(2,167,605	)		-			(2,167,605	)
Balance January 2, 2022		200,000	$	617,571		150,000	$	463,179		50	$	75		3,736,006	$	3,736		$	35,290,590	$	(26,459,190	)	$	(1,271,483	)	$	8,644,478

~~For~~See ~~the~~accompanying ~~Years~~notes ~~Ended~~to ~~January~~the 3,consolidated ~~2021~~financial ~~and~~statements. ~~December 29, 2019~~

	UEPH Series A				UEPH Series B				UGEL Preferred				Common Stock						Additional Paid In			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Units		Amount		Units		Amount		Shares		Amount		Shares			Amount			Capital			Deficit			Loss			Equity
Balance December 30, 2018		200,000	$	617,571		150,000	$	463,179		50	$	75		3,738,006		$	18,690		$	35,244,770		$	(22,136,130	)	$	(702,645	)	$	13,505,510
Net income		-		-		-		-		-		-		-			-			-			961,423			-			961,423
Other comprehensive loss		-		-		-		-		-		-		-			-			-			-			(594,794	)		(594,794	)
Stock-based compensation expense		-		-		-		-		-		-		-			-			44,166			-			-			44,166
Treasury shares purchased at cost and retired		-		-		-		-		-		-		(2,000	)		(10	)		(13,290	)		-			-			(13,300	)
Preferred stock dividend		-		-		-		-		-		-		-			-			-			(3,126,496	)		-			(3,126,496	)
Balance December 29, 2019		200,000	$	617,571		150,000	$	463,179		50	$	75		3,736,006		$	18,680		$	35,275,646		$	(24,301,203	)	$	(1,297,439	)	$	10,776,509
Net loss		-		-		-		-		-		-		-			-			-			(1,223,626	)		-			(1,223,626	)
Other comprehensive income		-		-		-		-		-		-		-			-			-			-			26,118			26,118
Preferred stock dividend		-		-		-		-		-		-		-			-			-			(3,209,841	)		-			(3,209,841	)
Adjustment for a 1-for-5 reverse stock split (1)		-		-		-		-		-		-		-			(14,944	)		14,944			-			-			-
Balance January 3, 2021		200,000	$	617,571		150,000	$	463,179		50	$	75		3,736,006		$	3,736		$	35,290,590		$	(28,734,670	)	$	(1,271,321	)	$	6,369,160

~~(1)~~Table ~~The amounts in common stock and additional paid-in capital were adjusted to reflect the one-for-five reverse stock split ("reverse stock split") as~~ of ~~February 24, 2020, the effective date of the reverse stock split. See Note 1 for additional information.~~Contents

~~See~~Uniroyal ~~accompanying~~Global ~~notes~~Engineered toProducts, ~~the consolidated financial statements~~Inc.

26Consolidated Statements of Cash Flows

Table of Contents

	Years Ended

CASH FLOWS FROM OPERATING ACTIVITIES	January 2, 2022			January 3, 2021

Net loss	$	(1,702,378	)	$	(1,223,626	)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization		2,385,241			2,358,001
Deferred tax provision (benefit)		976,706			(1,319,778	)
Amortization of debt issuance costs		53,057			-
Amortization of intangible assets		26,532			15,948
Loss on disposal of property and equipment		37,967			3,871
Funding from Paycheck Protection Program recognized as income		(2,000,000	)		(2,217,500	)
Deferred interest on loan from Main Street Lending Program		76,447			-
Loss on debt extinguishment		64,342			-
Noncash lease adjustment		95,926			89,624
Changes in assets and liabilities:
Accounts receivable		1,516,925			1,882,167
Inventories		(3,990,961	)		1,414,782
Other current assets		(383,197	)		(834,868	)
Related party receivable		454			(907	)
Other long-term assets		25,007			175,693
Accounts payable		1,653,901			(2,064,395	)
Accrued expenses and other liabilities		(312,711	)		759,757
Postretirement benefit liability - health and life		(45,680	)		(31,620	)
Other long-term liabilities		(2,793	)		693
Cash used in operating activities		(1,525,215	)		(992,158	)

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(1,085,304	)		(1,368,852	)
Payments on life insurance policies, net of proceeds from policy loans		(194,808	)		(48,771	)
Cash used in investing activities		(1,280,112	)		(1,417,623	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net change in checks issued in excess of bank balance		(199,163	)		(56,844	)
Payments on line of credit relating to debt extinguishment		(7,330,745	)		-
Advances on line of credit relating to debt extinguishment		6,522,040			-
Net advances (payments) on lines of credit - other		931,759			(3,074,286	)
Payments on long-term debt relating to debt extinguishment		(1,476,713	)		-
Payments on long-term debt - other		(857,723	)		(1,115,425	)
Proceeds from issuance of long-term debt - Paycheck Protection Program		2,000,000			2,217,500
Proceeds from issuance of long-term debt - automotive lenders		411,796			3,075,239
Proceeds from issuance of long-term debt - Main Street Lending Program		-			2,432,353
Proceeds from issuance of long-term debt relating to debt extinguishment		2,313,181			-
Payments for capitalized debt issuance costs		(339,643	)		-
Payments on finance lease liabilities		(258,065	)		(363,205	)
Proceeds from finance lease liabilities		11,986			-
Proceeds from related party obligations		-			1,353,367
Payments on related party obligations		(142,142	)		(1,001,717	)
Cash provided by financing activities		1,586,568			3,466,982
Net change in cash and cash equivalents		(1,218,759	)		1,057,201
Cash and cash equivalents - beginning of year		1,656,882			513,588
Effects of currency translation on cash and cash equivalents		6,850			86,093

CASH AND CASH EQUIVALENTS - END OF YEAR	$	444,973		$	1,656,882

~~Uniroyal~~See ~~Global~~Note ~~Engineered~~2 ~~Products,~~for ~~Inc~~noncash transactions and supplemental disclosure of cash flow information.

~~Consolidated~~See ~~Statements~~accompanying ofnotes ~~Cash~~to ~~Flows~~the consolidated financial statements.

	Years Ended
CASH FLOWS FROM OPERATING ACTIVITIES	January 3, 2021			December 29, 2019
Net (loss) income	$	(1,223,626	)	$	961,423
Adjustments to reconcile net (loss) income to net cash flows from operating activities:
Depreciation		2,358,001			2,354,650
Stock-based compensation expense		-			44,166
Deferred tax (benefit) expense		(1,319,778	)		252,690
Amortization of intangible assets		15,948			16,667
Loss on disposal of property and equipment		3,871			74,681
Noncash postretirement benefit - health and life		-			(294,468	)
Funding from Paycheck Protection Program recognized as income		(2,217,500	)		-
Noncash lease adjustment		89,624			(4,060	)
Changes in assets and liabilities:
Accounts receivable		1,882,167			990,417
Inventories		1,414,782			588,802
Other current assets		(834,868	)		58,309
Related party receivable		(907	)		20,118
Other long-term assets		175,693			141,166
Accounts payable		(2,064,395	)		(300,897	)
Accrued expenses and other liabilities		759,757			(1,391	)
Postretirement benefit liability - health and life		(31,620	)		(29,592	)
Other long-term liabilities		693			(213,154	)
Cash (used in) provided by operating activities		(992,158	)		4,659,527
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(1,368,852	)		(1,966,200	)
Payments on life insurance policies, net of proceeds from policy loans		(48,771	)		71,904
Cash used in investing activities		(1,417,623	)		(1,894,296	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in checks issued in excess of bank balance		(56,844	)		(523,069	)
Net (payments) advances on lines of credit		(3,074,286	)		891,022
Payments on long-term debt		(1,115,425	)		(1,069,904	)
Proceeds from issuance of long-term debt - Paycheck Protection Program		2,217,500			-
Proceeds from issuance of long-term debt - automotive lenders		3,075,239			-
Proceeds from issuance of long-term debt - Main Street Lending Program		2,432,353			-
Proceeds from issuance of long-term debt - other		-			604,935
Payments on finance lease liabilities		(363,205	)		(641,300	)
Proceeds from related party obligations		1,353,367			1,350,000
Payments on related party obligations		(1,001,717	)		(782,384	)
Payment of related party preferred stock dividends		-			(3,114,592	)
Purchase and retirement of treasury stock		-			(13,300	)
Cash provided by (used in) financing activities		3,466,982			(3,298,592	)
Net change in cash and cash equivalents		1,057,201			(533,361	)
Cash and cash equivalents - beginning of period		513,588			1,028,841
Effects of currency translation on cash and cash equivalents		86,093			18,108
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	1,656,882		$	513,588

~~See~~Table ~~Note 2 for noncash transactions and supplemental disclosure~~ of ~~cash flow information.~~Contents

~~See~~UNIROYAL ~~accompanying~~GLOBAL ~~notes~~ENGINEERED toPRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of and for the ~~consolidated~~Years ~~financial~~Ended ~~statements.~~January 2, 2022 and January 3, 2021

27NOTE 1 - Basis of Presentation and Summary of Significant Accounting Policies

~~Table~~ Description of ~~Contents~~the Business

~~UNIROYAL~~Uniroyal ~~GLOBAL~~Global ~~ENGINEERED~~Engineered ~~PRODUCTS~~Products, ~~INC~~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.

~~NOTES~~On TONovember ~~CONSOLIDATED~~10, ~~FINANCIAL~~2014, ~~STATEMENTS~~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.

AsThe Company made the acquisition of ~~and~~Uniroyal through its newly formed subsidiary, UEP Holdings, LLC (“UEPH”). The aggregate purchase consideration paid for 100% of the ~~Years~~outstanding ~~Ended~~equity ~~January~~of 3,Uniroyal ~~2021~~was ~~and~~preferred ~~December 29,~~ownership ~~2019~~interests issued by UEPH having a liquidation preference of $35 million. See Note 13 for a description of the preferred units issued.

~~NOTE~~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 ~~Basis~~the date of ~~Presentation~~the transaction). On November 24, 2015, the liquidation preference was changed from £12,518,240 to €17,699,314 (approximately $18,851,539) and ~~Summary~~the payment of ~~Significant~~the ~~Accounting~~quarterly ~~Policies~~dividend from £156,478 to €221,241 (approximately $235,644). These conversions were based on the exchange rates on November 24, 2015.

~~Description~~As a result of beneficial ownership between the ~~Business~~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.

~~Uniroyal~~In ~~Global~~December ~~Engineered Products~~2016, ~~Inc. (~~the “Company”) ischanged ~~primarily engaged in~~ the ~~development,~~name ~~manufacturing and distribution~~ of ~~vinyl~~EPAL ~~coated~~to ~~fabrics~~Uniroyal ~~mainly~~Global ~~for~~(Europe) ~~use~~Limited in(“UGEL”) ~~transportation, residential, hospitality, health care, office furniture~~ and ~~automotive~~the ~~applications.~~name ~~The~~of ~~Company’s~~Wardle ~~customers~~Storeys ~~are~~to ~~located~~Uniroyal ~~primarily~~Global ~~throughout North~~Limited ~~America and Europe~~(“UGL”).

OnThe ~~April~~Company ~~29,~~and ~~2015,~~its ~~the~~subsidiaries ~~Board~~use ofa ~~Directors~~52/53-week ~~adopted~~fiscal anyear ~~amendment~~ending toon the ~~Articles of~~Sunday ~~Incorporation~~nearest to ~~change~~December ~~the~~31. ~~Company’s~~The ~~name~~year ~~from~~ended ~~Invisa~~January 2, ~~Inc.~~2022 towas ~~Uniroyal~~a ~~Global~~52-week ~~Engineered~~year ~~Products,~~whereas ~~Inc.~~the Onyear ~~June~~ended 25January 3, ~~2015,~~ ~~the~~2021 ~~stockholders~~was ~~approved~~a ~~the~~53-week ~~amendment~~year. The ~~amended~~Company’s ~~and~~U.K. ~~restated~~subsidiaries ~~Articles~~use ofthe ~~Incorporation~~calendar ~~were~~year ~~filed~~end ~~with~~of ~~the~~December ~~Nevada~~31. ~~Secretary~~ The activity of ~~State~~the ~~and~~U.K. ~~became~~subsidiaries ~~effective~~that occurs on ~~July~~the ~~15,~~days ~~2015~~that do not coincide with the Company’s year-end is not material.

On ~~November~~Basis ~~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.Presentation

The ~~Company~~consolidated ~~made~~financial statements include the ~~acquisition~~accounts of ~~Uniroyal~~the ~~through~~Company and its ~~newly~~subsidiaries ~~formed~~and ~~subsidiary, UEP~~are ~~Holdings,~~prepared ~~LLC~~in accordance with accounting principles generally accepted in the United States of America (“~~UEPH~~GAAP”). All intercompany transactions have been eliminated. The ~~aggregate~~Company ~~purchase~~manages ~~consideration~~its ~~paid~~operations ~~for~~on ~~100%~~a ofconsolidated, ~~the~~integrated ~~outstanding~~basis ~~equity~~in oforder ~~Uniroyal was~~to ~~preferred~~optimize ~~ownership~~its ~~interests~~equipment ~~issued~~and byfacilities ~~UEPH~~and ~~having~~to aeffectively ~~liquidation~~service ~~preference~~its ofglobal ~~$35~~customer ~~million.~~base, ~~See~~and ~~Note~~concludes 13that ~~for~~it aoperates ~~description of~~in ~~the~~a ~~preferred~~single ~~units~~business ~~issued~~segment.

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. 28

AsTable ~~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.Contents

InUNIROYAL ~~December~~GLOBAL ~~2016~~ENGINEERED PRODUCTS, ~~the~~INC. ~~Company~~NOTES ~~changed~~TO ~~the~~CONSOLIDATED ~~name~~FINANCIAL ofSTATEMENTS ~~EPAL~~As toof ~~Uniroyal Global (Europe) Limited (“UGEL”)~~ and for the ~~name~~Years ofEnded ~~Wardle~~January ~~Storeys~~2, to2022 ~~Uniroyal~~and ~~Global~~January ~~Limited~~3, ~~(“UGL”).~~2021

~~The~~For ~~Company~~purposes ~~and~~of ~~its~~comparability, ~~subsidiaries~~certain ~~use~~reclassifications ahave ~~52/53-week~~been ~~fiscal~~made ~~year~~to ~~ending~~amounts onpreviously ~~the Sunday~~reported ~~nearest~~ to ~~December~~conform 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~~current ~~year-end~~period ~~is not material~~presentation.

~~Basis~~ ofCoronavirus ~~Presentation~~(COVID-19) Impact Update

The ~~consolidated~~coronavirus ~~financial~~pandemic ~~statements~~(“COVID-19”) ~~include~~and ~~the~~its ~~accounts~~current disruption of the supply chain has had an impact on markets the Company serves and its ~~subsidiaries~~operations and ~~are~~liquidity. ~~prepared~~Since inCOVID-19 ~~accordance~~is ~~with~~a ~~U.S.~~continually ~~Generally~~evolving ~~Accepted~~situation, ~~Accounting~~the ~~Principles~~Company ~~(GAAP).~~cannot ~~All~~predict ~~intercompany transactions~~the long-term impact it will have ~~been~~on ~~eliminated~~the economy or the Company’s business. The impact could have a material adverse effect on the Company’s ~~manages~~financial ~~its~~position, results of operations onand acash ~~consolidated~~flows, ~~integrated~~which ~~basis~~may inrequire ~~order~~the Company to ~~optimize its~~obtain ~~equipment~~additional ~~and~~financing. ~~facilities~~The ~~and~~Company continues to ~~effectively~~pursue ~~service~~supplementary ~~its~~cash ~~global~~flow ~~customer base~~opportunities, ~~and~~as ~~concludes~~discussed ~~that~~briefly itbelow ~~operates~~and in amore ~~single~~detail ~~business segment~~in Notes 8, 9 and 13.

28Through 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 Company’s U.S. operations received $2,000,000 (“Second Draw PPP Loan”) and $2,217,500 (“First Draw PPP Loan”) in March 2021 and in April 2020, respectively, in funds from One Community Bank. The Company used all proceeds from these PPP loans for allowable expenses (as defined in the PPP loans) and applied for forgiveness of the PPP loans in accordance with the terms of the CARES Act. In June 2021 and August 2021, the Company was notified that all of its First and Second Draw PPP Loans, respectively, were forgiven. See Note 9 for further discussion.

~~Table~~For the U.K. operations, during the years ended January 2, 2022 and January 3, 2021, the Company recorded reimbursed costs of ~~Contents~~approximately $150,000 and $1,569,000, respectively, under the Coronavirus Job Retention Scheme (“CJRS”) established by the U.K. government to help employers pay the salaries of those employees who would otherwise have been laid off during the coronavirus outbreak but under the CJRS were furloughed instead. The much lower reimbursed costs for the year ended January 2, 2022 reflected that employees were furloughed significantly less than in the prior year. This program reimbursed the Company for up to 80% of the compensation expense plus national insurance and certain benefits paid to the furloughed employees, resulting in lower salary expense for the Company. While the employees were on furlough, the compensation paid to them was limited to the amount reimbursed by the CJRS. The Company recorded the reimbursed amounts as reductions to the associated expenses.

~~UNIROYAL~~Also ~~GLOBAL~~for ~~ENGINEERED~~the ~~PRODUCTS~~U.K. operations, ~~INC~~in June 2021 its bank lending facilities with Lloyds Bank Commercial Finance Limited (“Lloyds”) were refinanced with PNC Business Credit (“PNC”). PNC provided the Company additional availability by expanding its borrowing base to include eligible equipment. See Notes 8 and 9 for further discussion.

~~NOTES~~Additionally, TOquarterly ~~CONSOLIDATED~~preferred ~~FINANCIAL~~dividend ~~STATEMENTS~~payments on UEPH Series A and Series B preferred units and UGEL preferred stock (collectively “preferred shares”) were deferred beginning with the three months ended December 29, 2019 through the three months ended October 3, 2021. During the third quarter of 2021, the owners of these preferred shares (“preferred shareholders”) agreed to an amendment to the documents that govern the dividends (“amended documents”) whereby the accrued dividends were forgiven. As a result, the total balance of accrued dividends of approximately $6,100,000 was derecognized as of October 3, 2021. In addition, under the amended documents the preferred shareholders are no longer entitled to a quarterly dividend until such time as the Company declares a dividend payable. See Note 13 for further discussion.

~~As of and for the Years Ended January 3, 2021 and December~~ 29~~, 2019~~

~~For~~Table ~~purposes~~ of ~~comparability, certain reclassifications have been made to amounts previously reported to conform with the current period presentation.~~Contents

~~One-~~UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of and for~~-Five~~ ~~Reverse~~the ~~Stock~~Years ~~Split~~Ended January 2, 2022 and January 3, 2021

On ~~January~~Legal 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.Proceedings

~~Coronavirus~~From ~~(COVID-19)~~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:

~~During~~On ~~the~~October ~~first~~1, ~~quarter of~~ 2020, the ~~World~~ Health ~~Organization~~and ~~declared~~Safety ~~the novel~~Executive ~~coronavirus~~ (“~~COVID-19~~HSE”) ~~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~~government ~~business.~~agency ~~Primarily~~responsible ~~due~~for to the ~~negative~~enforcement ~~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~~health ~~2020.~~and Insafety ~~order~~law ~~to mitigate the effect of the decrease~~ in ~~revenue,~~ the ~~Company is managing its costs, which included initially reducing staff at its~~ U.SK., ~~manufacturing facility~~charged ~~and~~our ~~furloughing the entire production staff at the~~ U.K. ~~facility~~subsidiary, ~~beginning~~Uniroyal inGlobal ~~late~~Limited, ~~March.~~with ~~During~~an ~~June~~offense ~~2020,~~under the ~~Company had~~Health ~~some~~and ~~employees~~Safety ~~return~~at toWork ~~work as its U~~etc.K. ~~facility~~Act ~~started~~1974 ~~limited~~arising ~~production of vinyl products based on orders it was receiving~~ from ~~its~~an ~~customers.~~August ~~The~~2019 ~~Company~~incident ~~brought~~in ~~back~~which ~~additional~~an ~~production~~employee ~~workers~~was asinjured ~~incoming~~in ~~orders increased during~~ the ~~third~~course ~~quarter~~ of ~~2020.~~his ~~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~~employment.

AsThe ~~described~~Company ~~below~~fully cooperated with the HSE investigation and negotiated a plea based on the legal advice provided to it. Per this legal advice, the Company ~~has~~believed ~~applied~~that ~~for~~£150,000 ~~loans~~($193,000) ~~under~~was ~~programs~~a ~~offered by~~reasonable estimate of the ~~governmental~~fine ~~agencies~~to inbe imposed and, accordingly, recorded an accrual for this charge for the ~~United~~year ~~States~~ended January 3, 2021. The related expense was recorded in general and administrative expenses in the ~~United~~accompanying ~~Kingdom~~Consolidated ~~and~~Statement ~~has~~of ~~found~~Operations ~~other~~for ~~supplementary~~the ~~cash~~year ~~flow~~ended ~~opportunities to~~January ~~provide~~3, ~~further liquidity~~2021.

~~For~~In ~~the~~April ~~U.S. operations~~2021, ~~during~~a ~~the~~fine ~~second quarter~~ of ~~2020~~£120,000 ~~the Company received~~ ($2164,~~217,500~~933) inwas ~~funds~~imposed ~~from~~on ~~One~~the ~~Community~~Company ~~Bank~~related ~~(formerly~~to ~~Oregon~~this ~~Community~~matter. ~~Bank)~~At ~~through~~ the ~~Paycheck~~end ~~Protection~~of ~~Program (“PPP”) administered by~~ the ~~U.S.~~second ~~Small~~quarter ~~Business~~of ~~Administration~~2021, ~~(“SBA”) under~~ the ~~Coronavirus~~Company ~~Aid,~~began ~~Relief, and~~making ~~Economic~~monthly ~~Security~~payments ~~Act~~for ~~(“the~~this ~~CARES~~fine ~~Act”).~~in ~~The~~order ~~loan~~to ~~matures~~have onit ~~April~~paid ~~13,~~in ~~2022~~full ~~and~~by ~~bears~~the anOctober ~~interest~~2022 ~~rate~~due ~~of 1~~date.~~0%. Monthly~~ ~~payments~~The ofaccrual ~~principal~~related ~~and~~to ~~interest~~the ~~were~~fine ~~required~~was to£69,356 ~~begin~~($93,484) onand ~~November~~£150,000 13($204,737) ~~2020~~as ~~based~~of onJanuary ~~the~~2, ~~amount~~2022 ~~that~~and ~~was~~January ~~outstanding on~~3, ~~October~~2021, 13respectively, ~~2020~~and inwas ~~order~~included toin ~~fully~~accrued ~~amortize~~expenses ~~the~~and ~~loan~~other byliabilities ~~April~~in ~~13,~~the ~~2022.~~accompanying ~~The~~consolidated ~~loan~~balance ~~may~~sheets. beIn ~~prepaid~~addition, bya ~~the~~fee ~~Company~~of at£5,463 ~~any~~($7,509) ~~time prior~~ to ~~maturity~~reimburse ~~with~~the noHSE ~~prepayment~~for ~~penalties.~~legal ~~Loan~~expenses ~~payments~~was ~~have~~paid ~~been~~in ~~deferred~~May ~~pending loan forgiveness from the SBA~~2021.

~~All~~ orCash ~~a portion of the loan may be forgiven by the SBA for costs the Company incurred for payroll, rent, utilities~~ and ~~all~~Cash 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.Equivalents

~~Also~~The ~~for the U.S. operations, in December 2020 the~~ Company ~~received~~defines ~~$2,432,353 in~~cash ~~funds~~and ~~from~~cash ~~Wells~~equivalents ~~Fargo~~as ~~Capital~~highly ~~Finance~~liquid, ~~LLC~~short-term ~~through~~investments 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~~a ~~deferred~~maturity ~~interest~~at ~~from~~ the ~~first~~date ~~year~~ of ~~the~~acquisition ~~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%,~~three ~~15%~~months ~~and~~or ~~70% of the principal, respectively~~less. ~~The loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties.~~

~~Additionally~~The ~~for~~Company ~~the~~maintains ~~U.S.~~cash ~~operations~~in bank accounts which, ~~during~~at ~~the~~times, ~~first~~exceeds ~~quarter~~federally ofinsured ~~2021~~limits. ~~the~~ The Company ~~received~~has anot ~~$2.0~~experienced ~~million~~any ~~Second~~losses ~~Draw~~in ~~PPP~~such ~~loan.~~accounts ~~This~~and ~~loan~~believes ~~has~~it ~~the~~is ~~same~~not ~~general~~exposed ~~terms as~~to ~~the~~any ~~Company’s~~significant ~~first~~credit ~~PPP loan~~risks.

2930

Table of Contents

UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of and for the Years Ended January 2, 2022 and January 3, 2021

~~NOTES~~ TOAccounts ~~CONSOLIDATED FINANCIAL STATEMENTS~~Receivable

AsAccounts receivable are recorded net of ~~and~~an allowance for ~~the~~doubtful ~~Years~~accounts, ~~Ended~~returns and discounts of $1,018,763 and $940,474 as of January 2, 2022 and January 3, 2021, ~~and~~respectively. ~~December 29~~Accounts receivable are recorded when obligations under the terms of a contract with a customer are satisfied, ~~2019~~which includes the control of products transferring to the customer. See Note 21 for further discussion.

~~For~~On ~~the~~an ~~U.K.~~ongoing ~~operations~~basis, ~~during~~ the ~~year~~Company ~~ended~~evaluates ~~January~~its 3,accounts ~~2021~~receivable ~~the~~based ~~Company recorded~~on ~~reimbursed~~individual ~~costs~~customer ~~of approximately $1~~circumstances,~~569,000~~ ~~under~~historical ~~the~~write‑offs ~~Coronavirus~~and ~~Job~~collections, ~~Retention Scheme~~and ~~(“CJRS”)~~current ~~set~~industry upand bycustomer ~~the~~credit ~~U.K.~~conditions, ~~government~~and toadjusts ~~help~~its ~~employers~~allowance ~~pay~~for ~~the~~doubtful ~~wages~~accounts ~~of those employees who would otherwise have been laid off during the coronavirus outbreak but under the CJRS were furloughed instead~~accordingly. ~~This~~The ~~program reimbursed the~~ Company ~~for~~’s uppolicy toregarding ~~80%~~write‑offs ~~of the compensation expense plus national insurance~~ and ~~certain~~collection ~~benefits~~efforts ~~paid~~varies tobased ~~the furloughed employees, resulting in lower salary expense for the Company. While the employees were~~ on ~~furlough,~~individual ~~the~~customer ~~compensation paid to them was limited to the amount reimbursed by the CJRS~~circumstances. ~~The~~Past ~~Company~~due ~~recorded~~accounts ~~the~~receivable ~~reimbursed~~are ~~amounts~~determined asbased ~~reductions~~on toindividual ~~the~~customer ~~associated~~credit ~~expenses~~terms.

~~Additionally~~ ~~for~~Customer the U.K. operations, during the second half of 2020 the Company received $1,225,911 in loans from its principal shareholder and $3,268,664 in loans from automotive lenders. These funds provided additional working capital to meet various short-term cash needs.Rebates

~~While~~The ~~the~~Company ~~closures~~records ~~and~~customer ~~limitations~~rebates onas ~~movement,~~a ~~domestically~~reduction ~~and internationally, are expected to be temporary due to the COVID-19 outbreak, the duration~~ of ~~the~~net ~~supply chain disruption and related financial impact cannot be estimated at this time~~sales. ~~Should~~Accounts ~~the~~receivable ~~closures~~are ~~continue~~recorded ~~for~~net ~~a more extended period~~ of ~~time~~an orallowance ~~should~~for ~~the~~customer ~~effects~~rebates of ~~the coronavirus~~$0 ~~continue~~and ~~to spread~~$131,868 ~~the~~as ~~impact~~of ~~could~~January ~~have a material adverse effect on the Company’s financial position~~2, ~~results of~~2022 ~~operations~~ and ~~cash~~January ~~flows~~3, ~~which~~2021, ~~may require that the Company obtain additional financing~~respectively.

~~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.Inventories

~~Legal~~Inventories ~~Proceedings~~are valued at the lower of cost using the first‑in, first‑out (FIFO) method, or net realizable value. 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.

~~From~~The ~~time to time, the~~ Company ~~may~~and beits asubsidiaries ~~party~~have topolicies ~~claims,~~which ~~proceedings,~~are ~~and lawsuits~~consistently ~~related~~applied to ~~products,~~maintain ~~services,~~reserves ~~contracts,~~for ~~employment,~~obsolescence ~~environmental,~~based ~~safety,~~on ~~intellectual~~specific ~~property~~identification, ~~and~~discontinued ~~other~~or ~~matters. The~~obsolete ~~ultimate resolution of such claims~~items, ~~proceedings,~~or ~~and lawsuits is inherently unpredictable and, as~~ a ~~result,~~percentage ~~the Company’s estimates~~ of ~~liability, if any, are subject to change. Actual results could differ materially from~~ the ~~Company’s~~amount ~~estimates, and~~on anhand ~~unfavorable~~based ~~resolution of any matter could have a material adverse effect~~ on ~~the~~inventory ~~financial~~aging ~~condition,~~compared ~~results~~with ofhistorical ~~operations~~ and~~/or~~ ~~cash~~forecasted ~~flows~~usage ofand ~~the~~sales ~~Company~~levels. ~~The~~These ~~Company~~inventory ~~does~~recoverability ~~not~~assessments ~~believe,~~reduce ~~based~~inventories ~~on the information currently available~~ to ~~it,~~their ~~that~~estimated ~~the~~net ~~ultimate resolution~~realizable ofvalue. ~~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~~Property ~~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.Equipment

~~The~~Property ~~Company~~and ~~fully~~equipment ~~cooperated~~are ~~with~~stated ~~the HSE investigation and,~~ at ~~this~~cost. ~~time, intends~~Major toexpenditures ~~negotiate~~for aproperty ~~plea~~and ~~based~~equipment onare ~~the legal advice provided to it to date~~capitalized. ~~Based on this legal advice~~Maintenance, ~~the Company believes that £150~~repairs,~~000~~ ~~($193,000)~~and isminor arefurbishments ~~reasonable~~are ~~estimate~~expensed ofas ~~the~~incurred. ~~fine~~When toassets beare ~~imposed~~disposed ~~and~~of, ~~accordingly, recorded~~their ancosts ~~accrual~~and ~~for this charge. The~~ related ~~expense~~accumulated ~~was~~depreciation ~~recorded~~are inremoved ~~general~~from ~~and administrative expenses in~~ the ~~accompanying Consolidated~~accounts ~~Statement~~and ofresulting ~~Operations~~gains ~~for~~or ~~the~~losses ~~year~~are ~~ended~~included ~~January~~in ~~3, 2021~~income.

~~Cash~~Property and ~~Cash~~equipment ~~Equivalents~~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.

~~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.~~Leases

The Company ~~maintains~~determines ~~cash~~if an arrangement is a lease at inception. Operating leases are included in ~~bank~~operating ~~accounts~~lease ~~which~~right-of-use assets, atnet, ~~times~~accrued expenses and other liabilities, ~~exceeds~~and ~~federally insured~~operating ~~limits~~lease liabilities, less current portion in the accompanying consolidated balance sheets. ~~The~~Finance ~~Company~~leases ~~has~~are ~~not~~included ~~experienced~~in ~~any~~property ~~losses~~and equipment, net, current maturities of finance lease liabilities, and finance lease liabilities, less current portion in ~~such~~the ~~accounts~~accompanying consolidated balance sheets while related party finance leases are included in property and ~~believes~~equipment, itnet, iscurrent ~~not~~maturities ~~exposed~~of torelated ~~any~~party ~~significant~~finance ~~credit risks~~lease liabilities, and related party finance lease liabilities, less current portion in the accompanying consolidated balance sheets.

30Right-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 15 for further discussion.

~~Table of Contents~~31

~~UNIROYAL~~Table ~~GLOBAL~~of ~~ENGINEERED PRODUCTS, INC.~~Contents

UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of and for the Years Ended January 2, 2022 and January 3, 2021

As ofCash ~~and~~Surrender ~~for~~Value ~~the~~of ~~Years~~Insurance ~~Ended January 3, 2021 and December 29, 2019~~Policies

~~Accounts~~Cash ~~Receivable~~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 $971,130 and $776,323 as of January 2, 2022 and January 3, 2021, respectively. The Company has obtained loans against the cash value of certain of these insurance policies. At both January 2, 2022 and January 3, 2021, these insurance policy loans totaled $590,841, and had a weighted average interest rate of 3.63%. 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. The cash value of the insurance policies, net of policy loans, is included in other long‑term assets in the accompanying consolidated balance sheets.

~~Accounts~~ ~~receivable~~Impairment ~~are recorded net~~ of anFinite-Lived ~~allowance~~Long-Lived 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.Assets

OnThe anCompany ~~ongoing~~reviews ~~basis~~long‑lived assets, ~~the~~including ~~Company~~property, ~~evaluates~~equipment, ~~its~~and ~~accounts~~intangible ~~receivable~~assets, ~~based~~for ~~on individual~~impairment ~~customer~~at ~~circumstances,~~least ~~historical~~annually ~~write-offs~~or ~~and~~whenever ~~collections,~~events ~~and~~or ~~current~~changes ~~industry~~in ~~and~~business ~~customer~~circumstances ~~credit~~indicate ~~conditions, and~~that ~~adjusts~~the ~~its~~carrying ~~allowance~~amount ~~for~~of ~~doubtful~~an ~~accounts~~asset ~~accordingly~~may not be fully recoverable. ~~The~~An ~~Company’s~~impairment ~~policy~~loss ~~regarding~~would ~~write-offs~~be ~~and~~recognized ~~collection~~when ~~efforts varies~~the ~~based~~estimated onfuture ~~individual~~cash ~~customer~~flows ~~circumstances.~~from ~~Past~~the ~~due~~use ~~accounts~~of ~~receivable~~the asset are ~~determined~~less ~~based~~than onthe ~~individual~~carrying ~~customer~~amount ~~credit terms~~of that asset. There were no impairment losses recognized in the years ended January 2, 2022 or January 3, 2021.

~~Customer~~ ~~Rebates~~Goodwill and Intangible Indefinite-Lived Assets

~~The~~Goodwill ~~Company~~represents ~~records~~the ~~customer~~excess ~~rebates~~of asthe apurchase ~~reduction~~price over the estimated fair value of identifiable net ~~sales~~assets acquired. ~~Accounts receivable~~Trademarks are recorded ~~net~~at ofestimated anfair ~~allowance~~value ~~for~~at ~~customer~~the ~~rebates~~date they were acquired in certain business acquisitions. To the extent it has been determined that the carrying value of ~~$131,868~~the assets associated with goodwill or trademarks is not recoverable and ~~$77~~is in excess of its fair value,~~337~~ an impairment loss is recognized. Impairment is reviewed at least annually. No impairment loss was deemed necessary as of January 32, ~~2021~~2022 ~~and~~or ~~December~~January 293, ~~2019, respectively~~2021.

~~Inventories~~ Income Taxes

~~Inventories~~The Company follows Accounting Standards Codification (“ASC”) 740, “Income Taxes” for recording the provision for income taxes. Deferred tax assets and liabilities are ~~valued~~computed atbased upon the ~~lower~~difference between the financial statement and income tax bases of ~~cost~~assets and liabilities (temporary differences) using the ~~first-in,~~enacted ~~first-out (FIFO)~~marginal ~~method,~~tax rate applicable when the related asset or ~~market~~liability is expected to be realized or settled. ToDeferred ~~determine~~income ~~the~~tax ~~cost~~expenses ofor ~~inventory,~~benefits are based on the changes in the asset or liability each period. The Company ~~allocates~~reduces ~~fixed~~its ~~expense~~deferred totax ~~the~~assets ~~costs~~by ofa ~~production~~valuation ~~based on~~allowance ~~the~~if ~~normal~~it ~~capacity,~~is ~~which~~more ~~refers~~likely tothan not that some portion or all of a ~~range~~deferred tax asset will not be realized. The ultimate realization of ~~production~~deferred ~~levels~~tax ~~and~~assets is ~~considered~~dependent upon the ~~production~~generation ~~expected~~of tofuture betaxable ~~achieved~~income ~~over a~~during ~~number~~the of periods ~~under~~in ~~normal~~which ~~circumstances,~~temporary ~~taking~~differences ~~into~~are ~~account~~deductible. In making its valuation allowance determinations, the ~~loss~~Company ofconsiders ~~capacity~~all ~~resulting~~available ~~from~~positive ~~planned~~and ~~maintenance.~~negative ~~Fixed overhead~~evidence ~~costs~~affecting ~~allocated~~specific todeferred ~~each~~tax ~~unit~~assets, ofincluding ~~production~~past ~~should~~and ~~not~~anticipated ~~increase~~future ~~due~~performance, tothe ~~abnormally~~reversal ~~low~~of ~~production.~~deferred ~~Those~~tax ~~excess~~liabilities, ~~costs~~the ~~are recognized~~length asof acarryback ~~current~~and ~~period~~carryforward ~~expense~~periods, and the implementation of tax planning strategies.

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.32

~~Property~~Table ~~and~~of ~~Equipment~~Contents

~~Property~~UNIROYAL ~~and~~GLOBAL ~~equipment~~ENGINEERED ~~are~~PRODUCTS, ~~stated at cost~~INC. ~~Major~~NOTES ~~expenditures~~TO ~~for~~CONSOLIDATED ~~property and~~FINANCIAL ~~equipment~~STATEMENTS ~~are~~As ~~capitalized.~~of ~~Maintenance, repairs,~~ and ~~minor~~for ~~refurbishments~~the ~~are~~Years ~~expensed~~Ended asJanuary ~~incurred. When assets are disposed of~~2, ~~their~~2022 ~~costs~~ and ~~related~~January ~~accumulated~~3, ~~depreciation are removed from the accounts and resulting gains or losses are included in income.~~2021

~~Property~~The ~~and~~tax ~~equipment~~effects from an uncertain tax position are ~~depreciated~~recognized ~~using~~in the ~~straight-line~~financial ~~method~~statements ~~over their~~only ~~estimated~~if ~~useful~~the ~~lives~~position is more likely than not to be sustained on audit, based on the technical merits of the position. ~~For~~The ~~income~~Company recognizes the financial statement benefit of a tax ~~reporting~~position ~~purposes~~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, ~~depreciation~~the amount recognized in the financial statements is ~~calculated~~the ~~using~~largest ~~both~~benefit ~~applicable~~that ~~straight-line methods~~has ~~and~~a ~~accelerated~~greater ~~methods~~than or50 ~~capital~~percent ~~allowances~~likelihood ~~based~~of onbeing realized upon ultimate settlement with the ~~various~~relevant ~~taxing~~tax ~~jurisdictions’~~authority. ~~approved~~The ~~methods~~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.

~~Leases~~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 ~~determines~~does ifnot anhave ~~arrangement is~~ a ~~lease~~history atof ~~inception.~~repatriating ~~Operating leases~~a ~~are~~significant ~~included~~portion inof ~~operating~~its ~~lease~~foreign ~~right-of-use~~cash. ~~assets~~However, ~~accrued~~if ~~expenses~~it ~~and~~decided ~~other~~to ~~liabilities,~~repatriate ~~and~~these ~~operating~~foreign ~~lease~~amounts ~~liabilities in~~to ~~the~~fund ~~accompanying consolidated balance sheets~~U.S. ~~Finance leases are included in property and equipment~~operations, ~~current~~the ~~maturities~~Company ofwould ~~finance lease~~not ~~liabilities,~~be ~~and~~required ~~finance~~to ~~lease~~pay ~~liabilities,~~any ~~less~~additional ~~current~~U.S. ~~portion~~tax ~~in the accompanying consolidated balance sheets while~~ related ~~party~~ ~~finance~~to ~~leases~~these ~~are~~amounts ~~included~~since inthe ~~property~~Company ~~and~~previously ~~equipment,~~recorded ~~related~~a ~~party~~one-time ~~obligation,~~transition ~~and~~tax ~~related~~on ~~party~~deemed ~~finance~~repatriation ~~lease~~of ~~liabilities in~~deferred ~~the~~foreign ~~accompanying consolidated balance sheets~~income.

~~Right-of-use~~The ~~assets represent the~~ Company’'s ~~right~~tax toreturns ~~use an underlying asset~~ for ~~the~~tax ~~lease~~years ~~term~~2018 and ~~lease~~thereafter ~~liabilities~~are ~~represent~~subject ~~the Company’s obligation~~ to ~~make~~examination ~~lease~~by ~~payments~~taxing ~~arising from the lease~~authorities. ~~Generally,~~The ~~lease~~Company ~~right-of-use~~records ~~assets~~interest and ~~liabilities~~penalties ~~are~~associated ~~recognized~~with atuncertain ~~the~~tax ~~beginning~~positions ~~date~~related ofto athese ~~lease~~tax ~~based~~filings onas ~~the~~interest ~~present value of lease payments over the lease term~~expense. ~~The~~No ~~Company~~such ~~uses~~expense ~~its~~was ~~incremental~~recorded ~~borrowing~~for ~~rate based on information that is available at~~ the ~~beginning~~years ~~date~~ended ofJanuary a2, ~~lease~~2022 toand ~~determine~~January ~~the~~3, ~~present value of lease payments~~2021, 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~~does ~~may~~not ~~include~~believe ~~options to extend or terminate a lease when~~ it ishas ~~reasonably~~any ~~certain~~uncertain ~~that~~tax ~~the Company will exercise that option~~positions. ~~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.~~

31 Fair Value of Financial Instruments

~~Table~~The Company’s short-term financial instruments consist of ~~Contents~~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.

~~UNIROYAL~~The ~~GLOBAL~~fair ~~ENGINEERED~~value ~~PRODUCTS~~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, ~~INC~~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.

~~NOTES~~For TOthe ~~CONSOLIDATED~~fiscal ~~FINANCIAL~~year ~~STATEMENTS~~ended January 2, 2022, there have been no changes in the application of valuation methods applied to similar assets and liabilities.

~~As of and for the Years Ended January 3, 2021 and December 29, 2019~~33

~~Cash~~Table ~~Surrender Value~~ of ~~Insurance Policies~~Contents

~~Cash~~UNIROYAL ~~surrender~~GLOBAL ~~value~~ENGINEERED ofPRODUCTS, ~~insurance policies is valued at the cash surrender value of the contract as determined by the life insurance company~~INC. ~~The~~NOTES ~~cash~~TO ~~value~~CONSOLIDATED ofFINANCIAL ~~the~~STATEMENTS ~~insurance~~As ~~policies totaled $776,323 and $597,551 as~~ of ~~January 3, 2021~~ and ~~December~~for ~~29, 2019, respectively. The Company has obtained loans against~~ the ~~cash~~Years ~~value~~Ended ~~of certain of these insurance policies. At~~ January 32, ~~2021~~2022 and ~~December~~January ~~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. The cash value of the insurance policies, net of policy loans, is included in other long-term assets in the accompanying consolidated balance sheets.2021

~~Impairment~~The ofCompany ~~Finite-Lived~~follows ~~Long-Lived~~GAAP ~~Assets~~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.

~~The~~Fair ~~Company~~value ~~reviews~~is ~~long-lived~~the ~~assets,~~price ~~including~~that ~~property,~~would ~~equipment,~~be ~~and intangible~~received ~~assets,~~to ~~for~~sell ~~impairment~~an atasset ~~least annually~~ or ~~whenever~~paid ~~events~~to ortransfer ~~changes~~a liability in ~~business~~an ~~circumstances~~orderly ~~indicate~~transaction ~~that~~between ~~the~~market ~~carrying amount~~participants ofat anthe ~~asset~~measurement ~~may not be fully recoverable~~date. AnThe ~~impairment~~fair ~~loss~~value ~~would~~hierarchy beranks ~~recognized when~~ the ~~estimated~~quality ~~future~~and ~~cash~~reliability ~~flows~~of ~~from~~ the ~~use~~information ofused ~~the~~to ~~asset~~determine ~~are~~fair ~~less~~values. ~~than~~Assets ~~the~~and ~~carrying~~liabilities ~~amount~~measured, ofreported ~~that~~and/or ~~asset.~~disclosed ~~There~~at ~~were~~fair novalue ~~impairment~~will ~~losses~~be ~~recognized~~classified inand ~~the~~disclosed ~~years~~in ~~ended January~~one 3,of ~~2021~~the orfollowing ~~December~~three ~~29, 2019.~~categories:

Goodwill and Intangible Indefinite-Lived Assets

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.

~~Goodwill~~The ~~represents~~asset’s ~~the~~or ~~excess~~liability’s offair ~~the~~value ~~purchase~~measurement ~~price~~level ~~over~~within the ~~estimated~~ fair ~~value~~ ~~of identifiable net assets acquired. Trademarks are recorded at estimated fair~~ value athierarchy ~~the~~is ~~date~~based ~~they~~on ~~were acquired in certain business acquisitions. To~~ the ~~extent~~lowest itlevel ~~has~~of ~~been~~any ~~determined~~input that ~~the~~is ~~carrying~~significant ~~value~~to of the ~~assets associated with goodwill or trademarks is not recoverable and is in excess of its~~ fair value, anmeasurement. ~~impairment~~Valuation ~~loss~~techniques isapplied ~~recognized.~~need ~~Impairment~~to ismaximize ~~reviewed~~the atuse ~~least~~of ~~annually. No~~observable ~~impairment~~inputs ~~loss~~and ~~was~~minimize ~~deemed~~the ~~necessary~~use as of ~~January~~unobservable ~~3, 2021 or December 29, 2019~~inputs.

~~Income~~ ~~Taxes~~Foreign Currency Translation

The ~~Company~~financial ~~follows~~position ~~ASC~~and ~~740~~results ~~Income~~of ~~Taxes~~operations ~~for~~of ~~recording~~ the ~~provision~~Company’s ~~for~~foreign ~~income taxes.~~subsidiaries ~~Deferred tax assets and liabilities~~ are ~~computed~~measured ~~based~~using ~~upon~~ the ~~difference~~local ~~between~~currency as the ~~financial~~functional ~~statement~~currency. ~~and~~Assets ~~income tax bases of assets~~ and liabilities ~~(temporary~~of ~~differences)~~operations ~~using~~denominated ~~the~~in ~~enacted~~foreign ~~marginal~~currencies ~~tax~~are ~~rate~~translated ~~applicable~~into ~~when~~U.S. ~~the~~dollars ~~related~~at ~~asset~~exchange ~~or liability~~rates isin ~~expected~~effect toat bethe ~~realized~~balance orsheet ~~settled.~~date, ~~Deferred~~while ~~income~~the ~~tax~~capital ~~expenses~~accounts ~~or benefits~~ are ~~based~~translated onat the ~~changes~~historical inrate for the ~~asset or~~date ~~liability~~they ~~each~~were ~~period~~recognized. ~~The~~Revenues ~~Company~~and ~~reduces~~expenses ~~its~~are ~~deferred~~translated ~~tax~~at ~~assets~~the byweighted aaverage ~~valuation~~exchange ~~allowance~~rates ifduring itthe isyear. ~~more~~The ~~likely~~resulting ~~than~~translation ~~not~~gains ~~that some~~and ~~portion~~losses oron ~~all~~assets ofand aliabilities ~~deferred~~are ~~tax~~recorded ~~asset~~in ~~will~~accumulated ~~not~~other becomprehensive ~~realized.~~loss ~~The~~and ~~ultimate~~are ~~realization~~excluded offrom ~~deferred~~net ~~tax~~income ~~assets~~until isrealized ~~dependent upon~~through ~~the~~a ~~generation~~sale ofor ~~future~~liquidation ~~taxable~~of ~~income during~~ the ~~periods~~foreign ~~in which temporary differences are deductible~~subsidiaries. InTransaction ~~making~~gains ~~its~~and ~~valuation allowance~~losses ~~determinations,~~generated from the ~~Company~~remeasurement ~~considers~~of ~~all~~assets ~~available positive~~ and ~~negative~~liabilities ~~evidence~~denominated ~~affecting~~in ~~specific~~currencies ~~deferred~~other ~~tax~~than ~~assets, including~~the ~~past~~functional ~~and~~currency ~~anticipated~~of ~~future performance,~~ the ~~reversal~~Company’s offoreign ~~deferred~~operations ~~tax~~are ~~liabilities,~~included ~~the~~in ~~length~~other ofincome ~~carryback~~(expense) ~~and~~in ~~carryforward periods,~~the ~~and~~accompanying ~~the~~consolidated ~~implementation~~statements of ~~tax planning strategies~~operations.

32 Estimates

~~Table~~The preparation of ~~Contents~~the consolidated financial statements and related disclosures in conformity with GAAP 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.

~~UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC.~~34

~~NOTES~~Table TOof ~~CONSOLIDATED FINANCIAL STATEMENTS~~Contents

UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of and for the Years Ended January 32, ~~2021~~2022 and ~~December 29~~January 3, ~~2019~~2021

~~The~~ ~~tax~~Revenue 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.Recognition

The Company ~~files~~derives ~~income~~its ~~tax~~revenues ~~returns~~primarily infrom the ~~United~~manufacture ~~States as a C-Corporation,~~ and insale ~~several~~of ~~state~~vinyl ~~jurisdictions~~coated ~~and~~fabrics. inRevenues ~~the~~are ~~United~~recognized ~~Kingdom.~~when ~~The~~control ~~Company’s~~of ~~U.S.~~these ~~operating~~products ~~subsidiary, Uniroyal,~~ is atransferred ~~limited liability company (LLC) for federal and state income tax purposes and as such, its income, losses, and credits pass through~~ to ~~its~~ ~~members.~~the ~~Uniroyal~~Company’s ~~taxable income is allocated entirely to UEPH~~customers, ain ~~limited~~an ~~liability~~amount ~~corporation,~~that asreflects ~~its sole member. As~~ the ~~sole~~consideration ~~member of UEPH,~~ the Company ~~then~~expects ~~receives~~to ~~this~~be ~~income~~entitled ~~allocation~~to ~~less~~in ~~the~~exchange ~~dividends~~for ~~paid~~those ~~on the preferred ownership interests held by the former owners of Uniroyal~~products.

The Company ~~does~~has ~~not~~identified ~~have~~customer apurchase ~~history~~orders as contracts. The contract specifies the transaction price which is based on the amount of ~~repatriating~~consideration athe ~~significant~~Company ~~portion~~ expects to receive in exchange for transferring control of ~~its~~a ~~foreign~~product ~~cash~~to the customer. ~~However,~~The ifCompany itdoes ~~decided~~not tohave ~~repatriate~~multiple ~~these~~performance ~~foreign~~obligations ~~amounts~~requiring it to ~~fund~~allocate Ua transaction price.S The performance obligation under the contract is the delivery of products. ~~operations,~~The performance obligation is satisfied and revenue is recognized when the Company ~~would~~transfers ~~not be~~control ~~required~~of tothe ~~pay~~products ~~any~~to ~~additional~~its Ucustomers.S. ~~tax~~For ~~related~~Uniroyal, tothis ~~these~~generally ~~amounts~~occurs ~~since~~when products are shipped and, for UGL, this generally occurs when the ~~Company~~customer ~~previously~~accepts ~~recorded~~delivery aeither ~~one-time~~at ~~transition tax~~the onCompany’s ~~deemed~~U.K. ~~repatriation~~facility ofor ~~deferred~~at ~~foreign~~a ~~income~~mutually agreed upon location.

~~The~~However, if the Company's ~~tax~~has ~~returns~~an ~~for~~enforceable ~~tax~~right ~~years~~to ~~2017~~payment ~~and~~when ~~thereafter~~the ~~are~~customer ~~subject~~is contractually required to ~~examination~~ byaccept ~~taxing~~delivery ~~authorities.~~of ~~The~~any ~~Company~~remaining ~~records~~product ~~interest~~at ~~and~~the ~~penalties~~end ~~associated~~of ~~with~~a ~~uncertain~~contract, ~~tax~~but ~~positions~~collectability ~~related~~of ~~to these~~the ~~tax~~revenue ~~filings~~is asuncertain, ~~interest~~revenue ~~expense.~~recognition Nowould ~~such~~occur ~~expense~~upon ~~was~~agreement ~~recorded~~even ~~for~~if the ~~years~~product ~~ended~~is ~~January~~not 3,delivered ~~2021~~to ~~and~~the ~~December~~customer ~~29,~~and ~~2019, since~~there ~~the~~is ~~Company~~no ~~does~~alternative ~~not~~use ~~believe~~of itthe ~~has~~product ~~any~~for ~~uncertain~~the ~~tax positions~~Company.

~~Fair~~See ~~Value~~Note of21 ~~Financial~~for ~~Instruments~~further discussion.

~~The~~ ~~Company’s~~Variable 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.Consideration

The ~~fair~~nature ~~value~~ of the Company’s ~~long-term~~business ~~debt~~gives isrise ~~estimated~~to ~~based~~variable ~~on current~~consideration, ~~rates~~including ~~for~~rebates, ~~similar~~allowances ~~instruments~~and ~~with~~returns ~~the~~that ~~same~~generally ~~remaining~~decrease ~~maturities. In determining~~ the ~~current~~transaction ~~interest rates for similar instruments~~price, ~~the~~which ~~Company~~reduces ~~takes~~revenue. ~~into~~These ~~account~~various ~~its~~amounts ~~risk~~are ofgenerally ~~nonperformance.~~credited ~~The~~to ~~Company~~the ~~believes~~customer, ~~that~~based ~~the~~on ~~carrying~~achieving ~~value~~certain levels of ~~its~~sales ~~long-term debt~~activity ~~approximates~~and ~~its~~product ~~estimated fair value~~returns.

~~The~~Variable ~~Company~~consideration ~~uses~~is ~~foreign~~estimated ~~currency~~at ~~exchange~~the ~~contracts~~most ~~which~~likely ~~are~~amount ~~recorded~~that ~~at their~~is ~~estimated~~expected ~~fair~~to ~~values~~be earned. Estimated amounts are included in the ~~accompanying~~transaction ~~consolidated~~price ~~balance~~to ~~sheets.~~the ~~The~~extent ~~fair~~it ~~values~~is ofprobable that a significant reversal will not occur or when the ~~currency~~uncertainty ~~exchange~~associated ~~contracts~~ with the variable consideration is resolved. Estimates of variable consideration are based upon ~~observable~~historical ~~market~~experience ~~transactions~~and ofknown ~~spot~~trends and ~~forward~~recorded ~~rates~~in the same period in which the related revenue is recognized.

~~For~~ ~~the~~Customer ~~fiscal~~Claims ~~year ended January 3, 2021, there have been no changes in the application of valuation methods applied to similar assets~~ and ~~liabilities.~~Implied Warranties

33The Company does not have any formal warranty programs but generally will provide product warranties related to manufacturing defects and specific performance standards for its products. The estimate for potential returns is based upon historical experience and an allowance for potential returns is recorded as contra revenue and within accounts receivable. The allowance for potential customer returns was $399,893 and $774,674 as of January 2, 2022 and January 3, 2021, respectively.

~~Table~~ ofShipping ~~Contents~~and Handling Costs

~~UNIROYAL~~Shipping ~~GLOBAL~~and ~~ENGINEERED~~handling ~~PRODUCTS,~~costs ~~INC~~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.

~~NOTES~~ ~~TO CONSOLIDATED FINANCIAL STATEMENTS~~Advertising

AsAdvertising ofcosts, other than promotional materials, are charged to expense as incurred. Promotional materials are expensed as they are distributed. Advertising expense was $96,983 and $80,523 for the ~~Years~~years ~~Ended~~ended January 2, 2022 and January 3, 2021, respectively. As of January 2, 2022 and ~~December 29~~January 3, ~~2019~~2021, $71,951 and $92,820, respectively, of promotional materials were included in other long‑term assets in the accompanying consolidated financial statements.

~~The~~ ~~Company~~Research ~~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.~~Development

~~Fair~~Research ~~value~~and isdevelopment ~~the~~costs ~~price~~are ~~that~~charged ~~would be received~~ to ~~sell~~expense anas ~~asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date~~incurred. ~~The~~Research ~~fair~~and ~~value~~development ~~hierarchy~~expense ~~ranks the~~was ~~quality~~$1,293,908 and ~~reliability~~$980,695 offor the ~~information~~years ~~used~~ended toJanuary ~~determine~~2, ~~fair~~2022 ~~values. Assets~~ and ~~liabilities~~January ~~measured~~3, ~~reported~~2021, ~~and/or disclosed~~respectively. ~~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.~~35

~~Level~~Table 2of ~~- Observable market based inputs or unobservable inputs that are corroborated by market data. Inputs to the valuation methodology include:~~Contents

>UNIROYAL ~~quoted~~GLOBAL ~~prices~~ENGINEERED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of and for ~~similar~~the ~~assets~~Years orEnded ~~liabilities~~January in2, ~~active~~2022 ~~markets;~~and January 3, 2021

> ~~quoted~~Earnings ~~prices~~Per ~~for identical or similar assets or liabilities in inactive markets;~~Share

>The ~~inputs~~Company ~~other~~calculates ~~than~~basic ~~quoted~~net ~~prices~~income ~~that~~per ~~are~~common ~~observable~~share ~~for~~by dividing net income after the ~~asset~~deduction of preferred stock or ~~liability;~~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.

> ~~inputs~~Environmental ~~that are derived principally from or corroborated by observable market data by correlation or other means.~~Matters

~~Level~~The 3Company’s -policy ~~Unobservable~~is ~~inputs~~to ~~that~~conduct ~~are~~its ~~unobservable~~businesses with due regard for the preservation and protection of the environment. Management is not ~~corroborated~~aware byof ~~market~~any ~~data~~environmental matters relating to its operations that could materially affect liquidity, capital resources, or the financial condition of the Company.

~~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.Liquidity

~~Foreign~~During ~~Currency~~the ~~Translation~~years ended January 2, 2022 and January 3, 2021, the Company incurred operating losses of $1,516,396 and $2,961,748, respectively, and net losses of $1,702,378 and $1,223,626, respectively. In addition, for the years ended January 2, 2022 and January 3, 2021, net cash used in operating activities was $1,525,215 and $992,158, respectively. The worldwide pandemic resulting from COVID-19 and the related disruption of the supply chain has had an impact on markets the Company serves, its operations and liquidity. Since the COVID-19 pandemic is a continually evolving situation, the Company cannot predict the long-term impact it will have on the economy or the Company’s business. The impact could have a material adverse effect on the Company’s financial position, results of operations, and cash flows, which may require the Company to obtain additional financing.

~~The~~Management ~~financial~~believes ~~position~~that ~~and results of operations of~~ the Company’s ~~foreign subsidiaries~~existing 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 dateresources, ~~while~~including ~~the~~cash 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~~hand and ~~liabilities~~credit ~~are~~facilities, ~~recorded~~together inwith ~~accumulated other~~projected ~~comprehensive~~cash ~~loss and are excluded from net income until realized through a sale or liquidation of the investment. Transaction gains and losses~~ generated from ~~the~~operations ~~remeasurement of assets~~ and ~~liabilities~~additional ~~denominated~~bank inborrowings, ~~currencies~~will ~~other~~be ~~than~~sufficient ~~the~~to ~~functional currency~~fund ofits ~~the~~cash ~~Company’s~~flow ~~foreign~~requirements ~~operations~~for ~~are~~at ~~included~~least ~~in other expense in~~ the ~~accompanying~~next ~~consolidated~~twelve ~~statements of operations~~months.

~~Estimates~~ Recent Accounting Standards

~~The~~In ~~preparation~~June of2020, the ~~consolidated~~American ~~financial~~Institute ~~statements~~of ~~and~~Certified ~~related~~Public ~~disclosures~~ Accountants in ~~conformity~~conjunction with Uthe Financial Accounting Standards Board developed Technical Question and Answer (“TQA”) 3200.S.18, ~~generally~~“Borrower ~~accepted~~Accounting ~~accounting~~for ~~principles~~a ~~requires~~Forgivable ~~management~~Loan Received Under the Small Business Administration Paycheck Protection Program”, which is intended to ~~make~~provide ~~estimates~~clarification ~~and~~on ~~judgments~~how ~~that~~to ~~affect~~ account for loans received from the ~~reported~~PPP. ~~amounts~~TQA of3200.18 ~~assets~~states ~~and~~that ~~liabilities~~an entity may account for PPP loans under ASC 470, ~~revenues~~“Debt” or, if the entity is expected to meet PPP eligibility criteria and ~~expenses~~the PPP loan is expected to be forgiven, ~~and~~the ~~related~~entity ~~disclosures~~may ofaccount ~~contingent~~for ~~assets~~the loans under IAS 20, “Accounting for Government Grants and ~~liabilities~~Disclosure of Government Assistance”. On anThe ~~on-going~~Company ~~basis,~~elected ~~management~~to ~~evaluates~~account ~~estimates~~for ~~and~~PPP ~~assumptions~~loan ~~based~~proceeds ~~upon~~under ~~historical~~IAS ~~experience~~20 ~~and~~as ~~various~~allowed ~~other~~by ~~factors and~~TQA ~~circumstances~~3200.18. ~~Management~~Since ~~believes~~the Company expected that the ~~estimates~~$2,000,000 ~~and~~Second ~~assumptions~~Draw ~~are~~PPP ~~reasonable~~Loan ~~under~~and the ~~circumstances; however~~$2,217,500 ~~actual results~~First ~~may~~Draw ~~vary~~PPP ~~from~~Loan ~~these~~would ~~estimates~~be forgiven (and ~~assumptions~~subsequently ~~under~~were ~~different~~forgiven ~~future~~in ~~circumstances~~August 2021 and June 2021, respectively), it recorded the funds as grant income under IAS 20.

34On November 17, 2021, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance” (“ASU 2021-10”). ASU 2021-10 requires disclosures that increase the transparency of transactions with a government accounted for by applying a grant or contribution accounting model by analogy. These required disclosures include information about the nature of the transactions, significant terms and conditions of the transactions, and the effect of those transactions on an entity’s financial statements. The Company adopted ASU 2021-10 on January 2, 2022. Since the amendments in this update only include disclosure requirements, the adoption of ASU 2021-10 for the year ending January 2, 2022 did not have a significant effect on the Company’s consolidated financial position, results of operations and cash flows.

~~Table of Contents~~36

~~UNIROYAL~~Table ~~GLOBAL~~of ~~ENGINEERED PRODUCTS, INC.~~Contents

UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of and for the Years Ended January 2, 2022 and January 3, 2021

As ofSubsequent ~~and for the Years Ended January 3, 2021 and December 29, 2019~~Events

~~Revenue~~The ~~Recognition~~Company has evaluated subsequent events through April 1, 2022 for events requiring recording or disclosure in the January 2, 2022 consolidated financial statements. On February 24, 2022, Russia invaded Ukraine, which has created volatility and disruption in certain sectors of the global economy, including issues with supply chains and increased energy costs. Although the Company does not have any customers or direct suppliers in Ukraine, the negative impact on the global economy from the conflict in Ukraine could adversely impact the Company’s business. The extent and duration of the military action and resulting market disruptions, and related financial impact, cannot be estimated at this time. Should the military action continue for an extended period of time, the impact could have a material adverse effect on the Company’s financial position, results of operations and cash flows.

WeNOTE ~~derive~~2 ~~our~~- ~~revenues~~Noncash ~~primarily~~Transactions ~~from the manufacture~~ and ~~sale~~Supplemental ofDisclosure ~~vinyl coated fabrics. Revenues are recognized when control~~ of ~~these~~Cash ~~products~~Flow ~~is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products.~~Information

~~The~~Quarterly ~~Company~~preferred ~~has~~dividend ~~identified~~payments ~~customer~~on ~~purchase~~UEPH ~~orders~~Series asA ~~contracts.~~and ~~The~~Series ~~contract specifies~~B ~~the~~preferred ~~transaction~~units ~~price~~and ~~which~~UGEL ispreferred ~~based~~stock on(collectively ~~the~~“preferred ~~amount~~shares”) ofwere ~~consideration~~deferred ~~the~~beginning ~~Company~~with ~~expects~~the tothree ~~receive~~months inended ~~exchange~~December ~~for~~29, ~~transferring control~~2019 ofthrough ~~a product to~~ the ~~customer.~~three ~~The~~months ~~Company~~ended ~~does~~October ~~not~~3, ~~have multiple performance obligations requiring it to allocate a transaction price~~2021. ~~The~~During ~~performance~~the ~~obligation~~third ~~under~~quarter ~~the~~of ~~contract~~2021, is the ~~delivery~~owners of ~~products.~~these ~~The~~preferred ~~performance~~shares ~~obligation~~agreed isto ~~satisfied~~an ~~and~~amendment ~~revenue is~~to ~~recognized~~the ~~when~~documents ~~the~~that ~~Company~~govern ~~transfers~~the ~~control~~dividends ofwhereby the ~~products~~accrued todividends ~~its~~were ~~customers~~forgiven. ~~For~~As ~~Uniroyal,~~a ~~this generally occurs when products are shipped and~~result, ~~for UGL, this generally occurs when~~ the ~~customer~~total ~~accepts~~balance ~~delivery~~of ~~either~~accrued atdividends ~~the~~of ~~Company’s~~approximately ~~U.K.~~$6,100,000 ~~facility or~~was atderecognized aas ~~mutually~~of ~~agreed~~October ~~upon~~3, ~~location~~2021.

~~However~~For the year ended January 2, if2022, the Company ~~has~~made anpayments ~~enforceable~~of ~~right~~$194,808 toon ~~payment~~its ~~when~~company owned life insurance policies. For the ~~customer is~~year ~~contractually~~ended ~~required~~January to3, ~~accept~~2021, ~~delivery~~the ofCompany ~~any~~obtained ~~remaining~~$130,000 ~~product~~in atloans against the ~~end~~cash value of aits ~~contract,~~company ~~but~~owned ~~collectability~~life insurance policies and are shown net of ~~the~~payments ~~revenue is~~of ~~uncertain~~$178,771 ~~revenue~~on ~~recognition~~the ~~would~~life ~~occur~~insurance ~~upon~~policies ~~agreement~~in ~~even~~the ifconsolidated ~~the~~statements ~~product~~of iscash ~~not~~flows. ~~delivered~~These toloans ~~the~~have ~~customer~~a weighted average interest rate of 3.65% and can be repaid at any time.

~~See~~ ~~Note~~The 22following is supplemental disclosure of cash paid for ~~further~~the ~~discussion.~~years ended:

Variable Consideration

	January 2, 2022		January 3, 2021

Interest	$	1,496,167	$	1,595,346

~~The~~NOTE ~~nature~~3 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.Inventories

~~Variable~~ ~~consideration~~Inventories isconsist 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~~following: ~~period in which the related revenue is recognized.~~

Customer Claims and Implied Warranties

	January 2, 2022			January 3, 2021

Raw materials	$	7,595,155		$	5,193,919
Work-in-process		5,501,493			4,281,035
Finished goods		11,043,667			10,594,088
		24,140,315			20,069,042

Less: Allowance for inventory obsolescence		(2,299,911	)		(2,116,192	)

Total Inventories, net	$	21,840,404		$	17,952,850

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.37

~~Shipping~~Table ~~and~~of ~~Handling Costs~~Contents

~~Shipping~~UNIROYAL ~~and~~GLOBAL ~~handling~~ENGINEERED ~~costs~~PRODUCTS, ~~charged~~INC. toNOTES ~~customers~~TO ~~and~~CONSOLIDATED ~~the~~FINANCIAL ~~costs~~STATEMENTS ~~incurred~~As ~~by the~~of ~~Company are netted. Shipping~~ and ~~handling~~for ~~costs incurred by~~ the ~~Company~~Years ~~for~~Ended ~~purchases~~January ~~are~~2, ~~included~~2022 inand ~~cost~~January of3, ~~goods sold.~~2021

~~Advertising~~NOTE 4 - Property and Equipment

~~Advertising~~ ~~costs,~~The ~~other~~major ~~than~~categories ~~promotional~~of ~~materials,~~property ~~are~~and ~~charged~~equipment ~~to expense as incurred. Promotional materials~~ are ~~expensed~~summarized as ~~they~~follows: 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 and $87,707, respectively, of promotional materials were included in other long-term assets in the accompanying consolidated financial statements.

Research and Development

	Depreciable Lives	January 2, 2022			January 3, 2021
Building and building improvements	8 – 25 yrs.	$	1,458,233		$	1,441,432
Machinery and equipment	8 - 10 yrs.		32,411,520			31,633,706
Computer equipment	3 - 10 yrs.		1,580,034			1,569,881
Furniture and fixtures	7 - 10 yrs.		202,164			203,362
Real estate under lease	20 yrs.		2,565,914			2,565,914
Construction-in-progress	-		145,972			241,195

Total Property and Equipment			38,363,837			37,655,490

Less: Accumulated depreciation			(21,316,231	)		(19,164,368	)

Property and Equipment, net		$	17,047,606		$	18,491,122

~~Research~~NOTE ~~and~~5 ~~development~~- ~~costs~~Intangible ~~are charged to expense as incurred. Research and development expense was $980,695 and $1,634,385 for the years ended January 3, 2021 and December 29, 2019, respectively.~~Assets

35 Intangible assets are summarized as follows:

Table of Contents

	Amortizable Lives	January 2, 2022		January 3, 2021

Trademarks and trade names	Indefinite	$	3,268,401	$	3,294,158
Other	5 years		67,667		94,199

Total Intangible Assets		$	3,336,068	$	3,388,357

~~UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC.~~38

~~NOTES~~Table TOof ~~CONSOLIDATED FINANCIAL STATEMENTS~~Contents

UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of and for the Years Ended January 32, ~~2021~~2022 and ~~December 29~~January 3, ~~2019~~2021

~~Earnings~~NOTE ~~Per~~6 ~~Share~~- Other Long-term Assets

~~The~~ ~~Company~~Other ~~calculates~~long-term ~~basic~~assets ~~net~~consist ~~income per common share by dividing net income after the deduction~~ of ~~preferred stock or preference dividends by~~ the ~~weighted~~following: 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

	January 2, 2022		January 3, 2021

Deferred tax asset, net	$	3,264,876	$	4,072,184
Life insurance policies, net of policy loans		380,289		185,482
Debt issuance costs		281,049		-
Other		396,641		422,324

Total Other Long-term Assets	$	4,322,855	$	4,679,990

~~The~~NOTE ~~Company’s~~7 ~~policy~~- isOther toLong-term 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.Liabilities

~~Recent~~ ~~Accounting~~Other ~~Standards~~long-term liabilities consist of the following:

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.

	January 2, 2022		January 3, 2021

Deferred tax liability	$	957,263	$	801,136
Other		3,263		6,054

Total Other Long-term Liabilities	$	960,526	$	807,190

OnNOTE ~~December~~8 ~~18, 2019, the Financial Accounting Standards Board issued a new standard, ASU No. 2019~~-~~12,~~ ~~“Income~~Lines 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. The Company adopted this standard on January 4, 2021. Management believes that the adoption of this standard for the year ending January 2, 2022 will not have a significant effect on the Company’s consolidated financial position, results of operations and cash flows.Credit

InThe ~~June~~Company's ~~2020,~~Uniroyal ~~the~~subsidiary ~~American~~has ~~Institute~~available ofa ~~Certified~~$15,000,000 ~~Public~~revolving ~~Accountants in~~line ~~conjunction~~of ~~with~~credit ~~the~~financing ~~Financial~~agreement ~~Accounting~~with ~~Standards~~Wells ~~Board~~Fargo ~~developed~~Capital ~~Technical~~Finance, ~~Question~~LLC ~~and Answer~~ (“~~TQA~~Uniroyal Line of Credit”) ~~3200.18~~, ~~“Borrower Accounting~~which ~~for~~matures aon ~~Forgivable~~June ~~Loan~~15, ~~Received~~2023. ~~Under~~Interest ~~the~~is ~~Small~~payable ~~Business~~monthly ~~Administration~~at ~~Paycheck~~the ~~Protection~~Eurodollar ~~Program”,~~rate ~~which~~plus is2.25% ~~intended to~~or ~~provide~~Wells ~~clarification~~Fargo onCapital ~~how~~Finance, toLLC's ~~account~~prime ~~for~~rate ~~loans~~(“WF ~~received~~Prime”) ~~from~~at the ~~PPP.~~Company's ~~TQA~~election ~~3200.18~~on ~~states~~outstanding ~~that~~balances anup ~~entity~~to ~~may~~$6,000,000 ~~account~~and ~~for~~WF ~~PPP~~Prime ~~loans under~~on ~~ASC~~amounts ~~470,~~in ~~“Debt”~~excess orof $6,000,000. ifThe ~~the~~line ~~entity~~of iscredit ~~expected~~weighted toaverage ~~meet~~interest ~~PPP~~rate ~~eligibility~~including ~~criteria~~unused ~~and~~facility ~~the~~fees ~~PPP~~was ~~loan~~approximately is3.53% ~~expected~~as toof beJanuary ~~forgiven~~2, ~~the~~ ~~entity~~2022. ~~may~~Borrowings ~~account~~on ~~for~~ the ~~loans~~line ~~under~~of ~~IAS~~credit ~~20,~~are ~~“Accounting~~subject ~~for~~to ~~Government~~the ~~Grants~~underlying ~~and~~borrowing ~~Disclosure~~base ofspecified ~~Government~~in ~~Assistance”~~the agreement. The ~~Company~~underlying ~~has~~borrowing ~~elected~~base tois ~~account~~currently ~~for~~determined ~~PPP~~based ~~loan~~upon ~~proceeds~~eligible ~~under~~accounts ~~IAS~~receivable, 20inventories asand ~~allowed by TQA 3200~~equipment.~~18.~~ ~~Although~~The ~~the~~line ~~Company~~of ~~anticipates~~credit ~~forgiveness of~~is ~~the~~secured ~~entire~~by ~~amount~~substantially all of ~~the~~Uniroyal's ~~PPP~~assets ~~loan,~~and noincludes ~~assurances~~certain ~~can~~financial beand ~~provided~~restrictive ~~that~~covenants. ~~the~~The Company ~~will~~was ~~obtain~~in ~~forgiveness~~compliance ofwith ~~the~~these ~~PPP~~covenants ~~loan~~as inof ~~whole or~~January in2, ~~part~~2022.

~~Subsequent~~The ~~Events~~outstanding balance on the Uniroyal Line of Credit was $11,400,409 and $9,204,572 as of January 2, 2022 and January 3, 2021, respectively. The Company has classified the outstanding balance on the line of credit within current liabilities in the accompanying consolidated balance sheets. Based upon eligible accounts receivable, inventories and equipment at January 2, 2022, the Uniroyal Line of Credit provided additional availability of approximately $192,000 and, combined with its total cash balance of $211,828, Uniroyal had liquidity of approximately $404,000 as of January 2, 2022.

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 January 3, 2021 consolidated financial statements. There were no material events or transactions occurring during this period requiring recognition or disclosure other than the following:39

AsTable ~~previously stated, during the first quarter~~ of ~~2021 the Company received a $2.0 million Second Draw PPP loan. This loan has the same general terms as the Company’s first PPP loan.~~Contents

36UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of and for the Years Ended January 2, 2022 and January 3, 2021

~~Table~~In June 2021, UGL’s bank lending facilities with Lloyds Bank Commercial Finance Limited (“Lloyds”), including its revolving line of ~~Contents~~credit (“Old UGL Line of Credit”), were refinanced with PNC Business Credit (“PNC”). PNC provided the Company additional availability by expanding its borrowing base to include eligible equipment. This transaction was accounted for as a debt extinguishment per ASC 470, “Debt”, under which the existing Lloyds debt was derecognized and the new PNC debt was recorded at fair value. The existing Lloyds debt that was derecognized included the Old UGL Line of Credit of £5,333,627 ($7,330,745) and all term debt held by Lloyds, including notes payable and a financing obligation aggregating £1,027,598 ($1,476,713). The new PNC Business Credit debt that was recorded included a revolving line of credit financing agreement with PNC (“New UGL Line of Credit”) of £4,745,238 ($6,522,040) and a new term loan of £1,683,000 ($2,313,181). See Note 9 for information on the Lloyds and PNC long-term debt.

~~UNIROYAL~~A ~~GLOBAL~~loss ~~ENGINEERED~~of ~~PRODUCTS~~£46,813 ~~INC~~($64,342) was recognized on this transaction and is recorded in general and administrative expenses in the consolidated statement of operations for the year ended January 2, 2022. Debt issuance costs of £247,114 ($333,081) related to this transaction were capitalized. These capitalized costs are being amortized over 36 months. The balance of these debt issuance costs was £208,512 ($281,049) as of January 2, 2022. The Company has classified these debt issuance costs related to the refinanced line of credit within other long-term assets in the accompanying consolidated balance sheet.

~~NOTES~~UGL TOhas ~~CONSOLIDATED~~available ~~FINANCIAL~~£11,000,000 ~~STATEMENTS~~(approximately $14.8 million) under the revolving line of credit financing agreement with PNC (‘‘New UGL Line of Credit”), which is subject to a three-month notice by either party after a minimum term of three years. Interest is payable monthly at the Bank of England Base Rate (“BoE Base”) plus 2.25%-3.00%. The line of credit weighted average interest rate was approximately 2.35% as of January 2, 2022. Borrowings on the New UGL Line of Credit are subject to the underlying borrowing base specified in the agreement. The underlying borrowing base is currently determined based upon eligible accounts receivable, inventories and equipment. The line of credit is secured by substantially all of UGL’s assets and includes certain financial and restrictive covenants. The Company was in compliance with these covenants as of January 2, 2022.

AsThe outstanding balance on the New UGL Line of Credit was £4,760,432 ($6,416,510) as of January 2, 2022 and ~~for~~on the ~~Years~~Old ~~Ended~~UGL Line of Credit was £6,268,526 ($8,556,011) as of January 3, 2021. The Company has classified the outstanding balance on the line of credit within current liabilities in the accompanying consolidated balance sheets. Based upon eligible accounts receivable, inventories and ~~December 29~~equipment at January 2, ~~2019~~2022, the New UGL Line of Credit provided additional availability of approximately $274,000 and, combined with its total cash balance of $226,612, UGL had liquidity of approximately $500,000 as of January 2, 2022.

~~NOTE 2 - Noncash Transactions and Supplemental Disclosure of Cash Flow Information~~40

~~During~~Table ~~the year ended January 3, 2021, the Company recorded funding from the Paycheck Protection Program~~ of $2,217,500, which is the amount of debt forgiveness that it expects to receive for the loan it made through the Paycheck Protection Program. Although the Company has not been legally released from this amount of the loan, management concluded that there was reasonable assurance that the Company had substantially met the terms for forgiveness, including using all proceeds from the loan for eligible costs (as defined under the Paycheck Protection Program). The Company submitted its application for loan forgiveness in November 2020.Contents

~~During~~UNIROYAL ~~the~~GLOBAL ~~year~~ENGINEERED ~~ended December 29~~PRODUCTS, ~~2019,~~INC. ~~the~~NOTES ~~Company~~TO ~~entered~~CONSOLIDATED ~~into~~FINANCIAL ~~several equipment~~STATEMENTS ~~financing~~As ~~obligations with an aggregate fair value~~ of ~~$379,126,~~and ~~which are accounted~~ for asthe ~~capital~~Years ~~assets.~~Ended ~~The~~January ~~fair~~2, ~~value was~~2022 ~~added to property~~ and ~~equipment~~January ~~and~~3, ~~a corresponding amount to related party finance lease liabilities or long-term debt.~~2021

~~The~~NOTE ~~Company~~9 ~~adopted ASU No. 2016~~-~~02,~~ “Leases” on December 31, 2018. Under this new standard, the Company was required to record on its balance sheet previously unrecorded operating leases based on the present value of remaining lease payments. Per this new standard, the Company recorded operating lease rightLong-~~of-use~~term ~~(“ROU”) assets and operating lease liabilities of $6,799,271 on its consolidated balance sheet as of December 31, 2018.~~Debt

~~During~~ ~~the~~Long-term ~~third~~debt ~~quarter~~consists of ~~2020 and 2019,~~ the ~~Company~~following: obtained $130,000 and $249,051, respectively, in loans against the cash value of its company owned life insurance policies and are shown net of payments of $178,771 and $177,147, respectively, on the life insurance policies in the consolidated statements of cash flows. These loans have a weighted average interest rate of 3.65% and 3.66%, respectively, and can be repaid at any time.

The following is supplemental disclosure of cash paid for the years ended:

	January 2, 2022		January 3, 2021

Notes Payable
Uniroyal term loans with Wells Fargo Capital Finance, LLC, monthly interest only payments at the Eurodollar rate plus 2.25% or Wells Fargo Bank, National Association’s prime rate. The term loans' effective interest rate was 3.25% as of January 2, 2022. Monthly principal balances are reduced by $26,183 each month resulting in a conversion, or increase, of the same amount in the line of credit each month. Term loans mature in June 2023 and are secured by substantially all of Uniroyal’s assets and include certain financial and restrictive covenants.	$	471,299	$	785,501

Note payable to Lloyds Bank Commercial Finance Limited payable in monthly installments of £1,148 ($1,578) including interest and principal at a rate of 4.43%. The loan was secured by certain equipment and the remaining principal was due August 2023. The loan was refinanced with PNC Business Credit in June 2021.		-		51,905

Notes payable to Lloyds Bank Commercial Finance Limited payable in monthly installments of £1,756-£3,932 ($2,414-$5,404) including interest and principal at a rate of 4.87%. The loans were secured by certain equipment and the remaining principal was due April 2022-October 2022. The loans were refinanced with PNC Business Credit in June 2021.		-		156,422

Notes payable to automotive lenders at 0% payable in increasing quarterly installments beginning March 2022 with the remaining principal due March 2023. The loans are secured by substantially all of the Company’s assets subject to the notes’ subordination to the line of credit and equipment financing obligation with PNC Business Credit. (1)		3,631,715		3,268,664

Note payable to Wells Fargo Capital Finance, LLC at a rate of 3.00% above LIBOR with monthly interest payments beginning in December 2021and annual principal payments in November 2023, 2024 and 2025 in increments of 15%, 15% and 70% of principal, respectively.		2,508,800		2,432,353

		6,611,814		6,694,845

		January 3, 2021				December 29, 2019
Interest		$	1,595,346			$	1,987,522

~~NOTE~~Table 3of ~~- Inventories~~Contents

~~Inventories~~UNIROYAL ~~consist~~GLOBAL ENGINEERED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of and for the ~~following:~~Years Ended January 2, 2022 and January 3, 2021

	January 3, 2021			December 29, 2019
Equipment Financing Obligations
Raw materials	$	5,193,919		$	5,430,125
Financing obligation to Kennet Equipment Leasing payable in monthly installments of £16,636 ($22,865) including interest and principal at a rate of 10.9%. The loan matured in May 2021 and was secured by certain equipment.		-			23,960
Work-in-process		4,281,035			4,677,987
Financing obligation to Regents Capital Corporation payable in monthly installments of $3,256-$6,669 including interest and principal at rates of 6.20%-7.24% with the remaining principal due February 2022–February 2024. The loans are secured by certain equipment.		339,859			678,329
Finished goods		10,594,088			10,922,947
Financing obligation to Lloyds Bank Commercial Finance Limited payable in monthly installments of £21,878 $(30,069) including interest and principal at a rate of 3.95%. The loan was secured by certain equipment and was to mature in February 2025. The loan was refinanced with PNC Business Credit in June 2021.		-			1,373,929
		20,069,042			21,031,059
Financing obligation to PNC Business Credit payable in monthly principal installments of £33,000 ($45,356) beginning January 2022 with the remaining principal due May 2024. The loan is at the Bank of England base rate plus 3.00% and is secured by certain equipment.		2,268,489			-
Less: Allowance for inventory obsolescence		(2,116,192	)		(1,914,517	)
		2,608,348			2,076,218
Total Inventories, net	$	17,952,850		$	19,116,542
Total		9,220,162			8,771,063
Less: Current portion		(2,365,905	)		(1,432,301	)
Long-term portion	$	6,854,257		$	7,338,762

37(1) During 2021, the Company received the second installment of loans of £299,610 ($411,796) from the automotive lenders per the original loan agreement. These amounts are due to be repaid in the first quarter of 2023. In addition, the amounts due to be repaid at the end of the third and fourth quarters of 2021 (each approximately $162,500) from the first installment of loans from the automotive lenders were deferred until the third and fourth quarters of 2022, respectively.

~~Table of Contents~~42

~~UNIROYAL~~Table ~~GLOBAL~~of ~~ENGINEERED PRODUCTS, INC.~~Contents

UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of and for the Years Ended January 2, 2022 and January 3, 2021

As ofPrincipal ~~and~~requirements on long‑term debt for ~~the~~years ~~Years~~ending ~~Ended~~after January 32, ~~2021~~ ~~and~~2022 ~~December~~are ~~29,~~as ~~2019~~follows:

NOTE 4 - Property and Equipment

	Totals

2022	$	2,365,905
2023		3,574,740
2024		1,576,870
2025		1,702,647

Total	$	9,220,162

~~The~~Paycheck ~~major~~Protection ~~categories~~Program ~~of property and equipment are summarized as follows:~~Loans

	Depreciable Lives	January 3, 2021			December 29, 2019
Building and building improvements	8 – 25 yrs.	$	1,441,432		$	1,419,495
Machinery and equipment	8 - 10 yrs.		31,633,706			30,396,418
Computer equipment	3 - 10 yrs.		1,569,881			1,498,668
Furniture and fixtures	7 - 10 yrs.		203,362			199,508
Real estate under lease	20 yrs.		2,565,914			2,565,914
Construction-in-progress	-		241,195			9,109
Total Property and Equipment			37,655,490			36,089,112
Less: Accumulated depreciation			(19,164,368	)		(16,985,793	)
Property and Equipment, net		$	18,491,122		$	19,103,319

In March 2021 and in April 2020, the Company’s U.S. operations received $2,000,000 and $2,217,500, respectively, in funds from One Community Bank through the PPP administered by the U.S. Small Business Administration under the Coronavirus Aid, Relief, and Economic Security Act. The $2,000,000 loan (“Second Draw PPP Loan”) was scheduled to mature in March 2026 and the $2,217,500 loan (“First Draw PPP Loan”) was scheduled to mature in April 2022, and each bore an interest rate of 1.0%. The loans may be prepaid at any time prior to maturity with no prepayment penalties.

~~NOTE~~All 5or a portion of the loans may be forgiven by the SBA for costs the Company incurred for payroll, rent, utilities and all other allowable expenses during the 24-week ~~Intangible~~period ~~Assets~~that began March 1, 2021 for the Second Draw PPP Loan and April 13, 2020 for the First Draw PPP Loan. The Company used all proceeds from the loans to maintain payroll and make payments for lease, utility and other allowable expenses. In accordance with International Accounting Standards 20, “Accounting for Government Grants and Disclosure of Government Assistance,” the Company recognized the funding from the PPP as grant income of $2,000,000 for the year ended January 2, 2022 and $2,217,500 for the year ended January 3, 2021, respectively. These amounts are included as a component of net other income in the consolidated statements of operations.

~~Intangible~~In ~~assets~~June ~~are~~2021 ~~summarized~~and asAugust ~~follows:~~2021, the Company was notified that all of its First and Second Draw PPP Loans, respectively, were forgiven.

	Amortizable Lives	January 3, 2021		December 29, 2019
Trademarks and trade names	Indefinite	$	3,294,158	$	3,211,281
Other	5 years		94,199		52,500
Total Intangible Assets		$	3,388,357	$	3,263,781

38Table of Contents

~~Table~~UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of ~~Contents~~and for the Years Ended January 2, 2022 and January 3, 2021

~~UNIROYAL~~NOTE ~~GLOBAL~~10 ~~ENGINEERED~~- ~~PRODUCTS, INC.~~Related Party Obligations

~~NOTES~~ TOLong-term ~~CONSOLIDATED~~debt ~~FINANCIAL~~to ~~STATEMENTS~~related parties consists of the following:

As of and for the Years Ended January 3, 2021 and December 29, 2019

	January 2, 2022		January 3, 2021

Senior subordinated promissory notes issued to the Company’s majority shareholder; monthly interest only payments at 9.25%; principal payment of $2,000,000 due on January 15, 2023. The senior subordinated promissory notes are secured by substantially all of Uniroyal’s assets subject to the notes' subordination to the line of credit and term loans with Wells Fargo Capital Finance, LLC.	$	2,000,000	$	2,000,000

Senior secured promissory note issued to the Company’s majority shareholder; quarterly interest payments at 10%; principal payment of $765,655 due on January 15, 2023. The note is secured by substantially all of Uniroyal’s assets subject to the note’s subordination to the line of credit and term loans with Wells Fargo Capital Finance, LLC.		765,655		765,655

Subordinated secured promissory note issued to the Company’s majority shareholder; quarterly interest payments at 8%; principal payment of $225,000 due on January 15, 2023. The note is secured by substantially all of UGL’s assets subject to the note’s subordination to the line of credit and equipment financing obligation with PNC Business Credit.		225,000		225,000

Subordinated secured promissory notes issued to the Company’s majority shareholder at 0%; principal payment of $1,225,911 due on April 5, 2023. The notes are secured by substantially all of UGL’s assets subject to the notes’ subordination to the line of credit and equipment financing obligation with PNC Business Credit.		1,225,911		1,225,911

Total Long-term Debt to Related Parties	$	4,216,566	$	4,216,566

~~NOTE~~The 6total –amount ~~Other~~of ~~Long-~~long‑term ~~Assets~~debt to related parties of $4,216,566 is due in 2023.

~~Other~~Interest ~~long-term~~expense ~~assets~~on ~~consist~~these notes was $319,516 and $310,358 for the year ended January 2, 2022 and January 3, 2021, respectively. Accrued interest of $23,786 and $47,573 related to these notes was included in accrued expenses and other liabilities in the ~~following:~~accompanying consolidated balance sheets as of January 2, 2022 and January 3, 2021, respectively.

	January 3, 2021		December 29, 2019
Deferred tax asset, net	$	4,072,184	$	2,694,550
Other		607,806		794,763
Total Other Long-term Assets	$	4,679,990	$	3,489,313

For the year ended January 3, 2021, proceeds of $1,225,911 were received from and payments of $675,000 were made on subordinated secured promissory notes to our majority shareholder. Proceeds of $200,000 were received from a short-term advance from our majority shareholder during the first three months of 2020 which was repaid in the same period.

~~NOTE 7 – Other Long-term Liabilities~~44

~~Other~~Table ~~long-term liabilities consist~~ of ~~the following:~~Contents

	January 3, 2021		December 29, 2019
Deferred tax liability	$	801,136	$	709,945
Other		6,054		5,363
Total Other Long-term Liabilities	$	807,190	$	715,308

UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Years Ended January 2, 2022 and January 3, 2021

~~NOTE~~The 8Company -has ~~Lines~~finance leases under which it leases its main U.S. manufacturing facility and certain other property from a related party lessor entity, owned by the Company’s majority shareholder. These related party finance leases expire at various dates from October 2023 through October 2033. There were no new right-of-use ~~Credit~~assets obtained in exchange for related party finance lease obligations for the years ended January 2, 2022 and January 3, 2021. The Company has security deposits aggregating $267,500 held by the lessor entity.

The ~~Company’s~~components ~~Uniroyal subsidiary has available a $30,000,000 revolving line~~ of ~~credit~~lease ~~financing~~expense ~~agreement~~for ~~with~~the ~~Wells~~related ~~Fargo~~party ~~Capital~~finance ~~Finance,~~leases ~~LLC~~for ~~(“Uniroyal Line of Credit”), which matures on June 15, 2023. Interest is payable monthly at~~ the ~~Eurodollar~~years ~~rate~~ended ~~plus~~January 2~~.25% or Wells Fargo Capital Finance~~, ~~LLC's~~2022 ~~prime rate at the Company's election on outstanding balances up to $6,000,000~~ and ~~prime rate on amounts in excess of $6,000,000. The line of credit weighted average interest rate including unused facility fees was approximately 3.85% as of~~ January 3, 2021. ~~Borrowings on the line of credit~~ are subject to the underlying borrowing base specified in the agreement. The underlying borrowing base is currently determined based upon eligible accounts receivable, inventories and equipment. The line of credit is secured by substantially all of Uniroyal's assets and includes certain financial and restrictive covenants. The Company was in compliance with these covenants as offollows: ~~January 3, 2021.~~

The outstanding balance on the Uniroyal Line of Credit was $9,204,572 and $10,328,913 as of January 3, 2021 and December 29, 2019, respectively. The Company has classified the outstanding balance on this line of credit within current liabilities in the accompanying consolidated balance sheets. Based upon eligible accounts receivable, inventories and equipment at January 3, 2021, the Uniroyal Line of Credit provided additional availability of approximately $2,691,000 as of January 3, 2021.

	Years Ended
	January 2, 2022		January 3, 2021
Finance lease expense:
Amortization of right-of-use assets	$	167,177	$	167,177
Interest on lease liabilities		408,597		420,008
Total finance lease expense	$	575,774	$	587,185

~~The~~ ~~Company’s~~Cash ~~UGL~~paid ~~subsidiary~~for ~~has~~amounts ~~available~~included ain ~~£10,500,000 (approximately~~the ~~$14.3~~measurement ~~million) revolving line~~ of ~~credit~~related ~~financing agreement with Lloyds Bank Commercial Finance Limited (“UGL Line of Credit”), which is subject to a six-month notice by either~~ party. ~~The~~finance ~~line has~~lease ~~several~~liabilities ~~tranches~~for ~~based on currency or underlying security. Interest is payable monthly at~~ the ~~base~~years ~~rate~~ended ~~(U.K.~~January ~~LIBOR or Lloyds Bank Base Rate as published) plus 1.95% to~~ 2~~.45%~~, ~~depending~~2022 onand ~~the tranche. The line of credit weighted average interest rate was approximately 2.32% as of~~ January 3, 2021. ~~Borrowings on the line of credit~~ are subject to the underlying borrowing base specified in the agreement. The underlying borrowing base is currently determined based upon eligible accounts receivable and inventories. The line of credit is secured by substantially all of the subsidiary's assets and includes certain financial and restrictive covenants. The Company was in compliance with these covenants as offollows: ~~January 3, 2021.~~

	Years Ended
	January 2, 2022		January 3, 2021
Operating cash flows from finance leases	$	408,597	$	420,008
Financing cash flows from finance leases	$	142,142	$	126,717

~~Table of Contents~~45

~~UNIROYAL~~Table ~~GLOBAL~~of ~~ENGINEERED PRODUCTS, INC.~~Contents

UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of and for the Years Ended January 2, 2022 and January 3, 2021

As ofSupplemental balance sheet and ~~for~~other ~~the~~information ~~Years~~regarding ~~Ended~~related ~~January~~party ~~3, 2021~~finance ~~and~~leases ~~December~~are ~~29,~~as ~~2019~~follows:

The outstanding balance on the UGL Line of Credit was £6,268,526 and £7,787,002 ($8,556,011 and $10,201,860) as of January 3, 2021 and December 29, 2019, respectively. The Company has classified the outstanding balance on this line of credit within current liabilities in the accompanying consolidated balance sheets. Based upon eligible accounts receivable and inventories at January 3, 2021, the UGL Line of Credit provided additional availability of approximately $1.4 million and, combined with its total cash balance of $1,621,692, UGL had liquidity of approximately $3.0 million as of January 3, 2021.

	January 2, 2022			January 3, 2021
Finance leases:
Property and equipment, net	$	1,873,504		$	2,040,681
Current maturities of finance lease liabilities	$	167,389		$	149,366
Finance lease liabilities, less current portion		2,344,239			2,504,404
Total finance lease liabilities	$	2,511,628		$	2,653,770
Weighted average remaining lease term		10.5 years			11.2 years
Weighted average discount rate		16.95	%		16.77	%

~~NOTE~~ 9Maturities -of ~~Long-term~~related ~~Debt~~party finance lease liabilities as of January 2, 2022 are as follows:

Long-term debt consists of the following:

	Totals
2022	$	562,927
2023		546,476
2024		468,098
2025		472,275
2026		476,494
Thereafter		3,115,015
Total lease payments		5,641,285
Less: Interest		(3,129,657	)
Total related party finance lease liabilities	$	2,511,628

	January 3, 2021		December 29, 2019
Notes Payable
Uniroyal term loans with Wells Fargo Capital Finance, LLC, monthly interest only payments at the Eurodollar rate plus 2.25% or Wells Fargo Bank, National Association’s prime rate. The term loans' weighted average interest rate was approximately 3.85% as of January 3, 2021. Monthly principal balances are reduced by $26,183 each month resulting in a conversion, or increase, of the same amount in the line of credit each month. Term loans mature in June 2023 and are secured by substantially all of the Company's assets and include certain financial and restrictive covenants.	$	785,501	$	1,099,700
Note payable to Lloyds Bank Commercial Finance Limited payable in monthly installments of £1,148 ($1,474) including interest and principal at a rate of 4.43% with the remaining principal due August 2023. The loan is secured by certain equipment.		51,905		60,971
Notes payable to Lloyds Bank Commercial Finance Limited payable in monthly installments of £1,756-£3,932 ($2,255- $5,049) including interest and principal at a rate of 4.87% with the remaining principal due April 2022-October 2022. The loans are secured by certain equipment.		156,422		217,211
Notes payable to automotive lenders at 0% payable in increasing quarterly installments beginning September 2021 with the remaining principal due March 2023. The loans are secured by substantially all of the Company’s assets subject to the notes’ subordination to the line of credit and term loans with Lloyds Bank Commercial Finance Limited.		3,268,664		-
Note payable to Wells Fargo Capital Finance, LLC at a rate of 3.00% above LIBOR with monthly interest payments beginning in December 2021and annual principal payments in November 2023, 2024 and 2025 in increments of 15%, 15% and 70% of principal, respectively.		2,432,353		-
		6,694,845		1,377,882

Quarterly preferred dividend payments on UEPH Series A and Series B preferred units and UGEL preferred stock (collectively “preferred shares”) were deferred beginning with the three months ended December 29, 2019 through the three months ended October 3, 2021. During the third quarter of 2021, the owners of the preferred shares agreed to an amendment to the documents that govern the dividends whereby the accrued dividends were forgiven. As a result, the total balance of accrued dividends of approximately $6,100,000 was derecognized as of October 3, 2021. The preferred shares are primarily owned by the Company’s majority shareholder. See Note 13 for further discussion.

40At the end of the first quarter of 2022, the Company’s majority shareholder waived the interest expense on the related party finance leases and the $2,000,000 senior subordinated promissory notes for the remaining nine months of fiscal year 2022 and the first three months of fiscal year 2023. In addition, executive officers of the Company agreed to a reduction in their salaries over the same time period. The total amount of cost savings will be approximately $731,000 for fiscal year 2022 and $244,000 for fiscal year 2023 which will provide additional liquidity to the Company.

~~Table of Contents~~46

~~UNIROYAL~~Table ~~GLOBAL~~of ~~ENGINEERED PRODUCTS, INC.~~Contents

UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of and for the Years Ended January 2, 2022 and January 3, 2021

AsNOTE of11 ~~and~~- ~~for~~Income ~~the Years Ended January 3, 2021 and December 29, 2019~~Taxes

Equipment Financing Obligations
Financing obligation to Kennet Equipment Leasing payable in monthly installments of £16,636 ($21,363) including interest and principal at a rate of 10.9%. The loan matures in May 2021 and is secured by certain equipment.		23,960			238,514
Financing obligation to Regents Capital Corporation payable in monthly installments of $3,256-$6,669 including interest and principal at rates of 6.20%-7.24% with the remaining principal due February 2022–February 2024. The loans are secured by certain equipment.		678,329			994,830
Financing obligation to Lloyds Bank Commercial Finance Limited payable in monthly installments of £21,878 $(28,094) including interest and principal at a rate of 3.95%. The loan matures in February 2025 and is secured by certain equipment.		1,373,929			1,519,557
		2,076,218			2,752,901
Total		8,771,063			4,130,783
Less: Current portion		(1,432,301	)		(1,238,541	)
Long-term portion	$	7,338,762		$	2,892,242

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. The Company made the acquisition of Uniroyal through UEPH, a limited liability corporation, which issued preferred ownership interests to the sellers that provide for quarterly dividends. Uniroyal’s taxable income is allocated entirely to UEPH as its sole member and since it is a pass-through entity, this income less the dividends paid to the sellers of Uniroyal is reported on the Company’s tax return. The taxable income applicable to the dividends for the preferred ownership interests is reported to the sellers who report it on their respective individual tax returns.

~~Principal~~As ~~requirements~~previously ondiscussed, ~~long-term~~the ~~debt~~quarterly ~~for~~dividend ~~years~~payments ~~ending~~were ~~after January~~deferred beginning with the three months ended December 29, 2019 through the three months ended October 3, 2021. During the third quarter of 2021, the owners of the preferred shares agreed to an amendment to the documents that govern the dividends whereby the accrued dividends were forgiven. As a result, the total balance of accrued dividends of approximately $6,100,000 was derecognized as of October 3, 2021. In addition, under the amended documents, the preferred shareholders are no longer entitled to a quarterly dividend until such time as ~~follows:~~the Company declares a dividend payable. See Note 13 for further discussion.

	Totals
2021	$	1,432,301
2022		3,334,322
2023		1,513,521
2024		724,384
2025		1,766,535
Total	$	8,771,063

Under the CARES Act, the Internal Revenue Code was amended to provide relief and supportive measures for taxpayers impacted by COVID-19. The key components of these amendments are as follows: eliminating taxable income limitation for certain net operating losses and permitting carryback net operating losses arising in 2018, 2019 and 2020 to five prior tax years; accelerating refunds of previously generated Alternative Minimum Tax credits; increasing business interest limitation from 30% to 50% of adjusted taxable income; and amending depreciation for qualified improvement property (“QIP”) to 15-year property for QIP placed in service after December 31, 2017. The Company considered the various potential income tax provisions and deemed that there were no material impacts to the income tax provisions for the years ended January 2, 2022 and January 3, 2021.

41Additionally, in December 2020, Congress passed the Consolidated Appropriations Act which provides that loans received and subsequently forgiven under the PPP would not be taxable and that PPP-funded expenses would be deductible. Some states have not conformed to the Federal treatment. Since the Company expected that the $2,000,000 Second Draw PPP Loan and the $2,217,500 First Draw PPP Loan would be forgiven (and subsequently were forgiven in August 2021 and June 2021, respectively), it recorded the funds as grant income under IAS 20, and excluded this income for tax purposes for the years ended January 2, 2022 and January 3, 2021, respectively.

~~Table~~ ofThe ~~Contents~~following is information on the provision (benefit) for income taxes for the years ended January 2, 2022 and January 3, 2021:

UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC.

	January 2, 2022			January 3, 2021
Current
Federal	$	-		$	-
State, net		-			220,544
Foreign		(243,712	)		(176,509	)
Total current income tax (benefit) provision		(243,712	)		44,035
Deferred
Federal		847,915			(1,346,818	)
State		(40,606	)		(30,813	)
Foreign		169,397			57,853
Total deferred income tax provision (benefit)		976,706			(1,319,778	)
Total income tax provision (benefit)	$	732,994		$	(1,275,743	)

~~NOTES~~The TOfederal ~~CONSOLIDATED~~benefit ~~FINANCIAL~~of ~~STATEMENTS~~$428,398 for the year ended January 2, 2022 was adjusted by an increase in the valuation allowance of $1,276,313. There was no comparable adjustment to the federal benefit for the year ended January 3, 2021. The state tax benefit of $41,909 and state tax expense of $199,978 for the years ended January 2, 2022 and January 3, 2021, respectively, were reduced by a change in the valuation allowance in the amounts of $1,303 and $10,248, respectively.

AsIncome tax expense differs from the amount computed by applying the federal statutory income tax rate to income before income taxes. The effective income tax rate is computed as the total of federal, state and foreign taxes as a percentage of income before taxes. The Company has calculated an effective income tax expense rate of 75.6% and an effective income tax benefit rate of 51.0% for the ~~Years~~years ~~Ended~~ended January 32, ~~2021~~ 2022 and ~~December~~January 293, ~~2019~~2021, respectively.

~~NOTE 10 - Related Party Obligations~~47

~~Long-term~~Table ~~debt to related parties consists~~ of ~~the following:~~Contents

	January 3, 2021		December 29, 2019
Senior subordinated promissory notes issued to the Company’s majority shareholder; monthly interest only payments at 9.25%; principal payment of $2,000,000 due on January 15, 2022. The senior subordinated promissory notes are secured by substantially all of the Company’s assets subject to the notes' subordination to the line of credit and term loans with Wells Fargo Capital Finance, LLC.	$	2,000,000	$	2,000,000
Senior secured promissory note issued to the Company’s majority shareholder; quarterly interest payments at 10%; principal payment of $765,655 due on January 15, 2022. The note is secured by substantially all of the Company’s assets subject to the note’s subordination to the line of credit and term loans with Wells Fargo Capital Finance, LLC.		765,655		765,655
Subordinated secured promissory note issued to the Company’s majority shareholder; quarterly interest payments at 8%; principal payment of $225,000 due on January 15, 2022. The note is secured by substantially all of the Company’s assets subject to the note’s subordination to the line of credit and term loans with Wells Fargo Capital Finance, LLC.		225,000		225,000
Subordinated secured promissory note issued to the Company’s majority shareholder; quarterly interest payments at 8%; principal payment of $200,000 due on January 15, 2021. The note was secured by substantially all of the Company’s assets subject to the note’s subordination to the line of credit and term loans with Wells Fargo Capital Finance, LLC.		-		200,000
Subordinated secured promissory notes issued to the Company’s majority shareholder at 0%; principal payment of $1,225,911 due on April 5, 2023. The notes are secured by substantially all of the Company’s assets subject to the notes’ subordination to the line of credit and term loans with Lloyds Bank Commercial Finance Limited.		1,225,911		-
Total		4,216,566		3,190,655
Less: Current portion		-		-
Total Long-term Debt to Related Parties	$	4,216,566	$	3,190,655

UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Years Ended January 2, 2022 and January 3, 2021

42 The following is a reconciliation of the income tax at the U.S. federal statutory tax rate with the income tax at the effective tax rate for the years ended January 2, 2022 and January 3, 2021:

Table of Contents

	January 2, 2022			January 3, 2021

Income tax benefit at statutory rates	$	(203,570	)	$	(524,867	)

Foreign tax rate differential		17,569			18,417
Funding from Paycheck Protection Program not taxable		(420,000	)		(465,675	)
U.K. Research and development credit		(172,915	)		(130,777	)
Effect of change in U.K. tax rate on deferred items		217,101			137,631
Prior year true-up		(3,742	)		(324,994	)
State tax benefits		(31,594	)		(37,772	)
Valuation allowance		1,277,616			10,248
Other		52,529			42,046
Income tax expense (benefit)	$	732,994		$	(1,275,743	)

Effective income tax expense (benefit) rate		75.6	%		(51.0	)%

~~UNIROYAL~~ ~~GLOBAL~~The ~~ENGINEERED~~following ~~PRODUCTS, INC.~~table summarizes the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	January 2, 2022			January 3, 2021

Deferred tax assets:
Net operating loss carry forward	$	5,309,574		$	4,757,408
Section 163j interest limitation		527,635			270,713
UEPH basis adjustments		569,429			569,429
Total deferred tax assets		6,406,638			5,597,550
Valuation allowance		(2,106,027	)		(828,411	)
Total deferred tax assets, net		4,300,611			4,769,139
Deferred tax liabilities:
Trademarks		(509,600	)		(382,510	)
Deferred gain		(238,826	)		(183,801	)
Capital allowances		(1,244,572	)		(931,780	)
Total deferred tax liabilities		(1,992,998	)		(1,498,091	)
Net deferred tax assets	$	2,307,613		$	3,271,048

AsTotal deferred tax assets as of January 2, 2022 and January 3, 2021 of $6,406,638 and $5,597,550, respectively, includes $5,370,903 and $4,900,595, respectively, of carryforwards related to U.S. net operating losses and $1,035,735 and $696,955, respectively, of carryforwards resulting from U.K. losses. The $5,370,903 and $4,900,595 of deferred tax assets for U.S. losses and the ~~Years~~$2,106,027 ~~Ended~~and $828,411 of valuation allowances against them as of January 2, 2022 and January 3, 2021, respectively, are included in other long-term assets. The $1,035,735 and ~~December~~$696,955 29of deferred tax assets for U.K. losses are netted with deferred tax liabilities of $1,992,998 ~~2019~~and $1,498,091, which are all related to U.K. tax. These amounts net to total deferred tax liabilities of $957,263 and $801,136, which are included in other long-term liabilities in the accompanying consolidated balance sheets as of January 2, 2022 and January 3, 2021, respectively

~~Principal~~The ~~requirements~~Company onhas ~~long-term~~federal ~~debt~~net tooperating ~~related~~loss ~~parties for~~carryforwards of approximately $16.4 million as of January 2, 2022, of which $11.7 million expire in years ~~ending~~beginning ~~after~~2023 through 2034 and $4.7 million may be carried forward indefinitely. The Company has state net operating loss carryforwards of approximately $14.2 million as of January 32, ~~2021~~2022, ~~are~~which also expire in years beginning 2023 through 2034. Additionally, the Company has foreign net operating loss carryforwards of approximately $2.8 million as ~~follows:~~of January 2, 2022, which have no expiration date.

	Totals
2021	$	-
2022		2,990,655
2023		1,225,911
Total	$	4,216,566

~~The~~Table ~~Company~~of has finance leases under which it leases its main U.S. manufacturing facility and certain other property from a related party lessor entity, owned by the Company’s majority shareholder. These related party finance leases expire at various dates from October 2023 through October 2033. The Company has security deposits aggregating $267,500 held by the lessor entity.Contents

~~The~~UNIROYAL ~~components~~GLOBAL ofENGINEERED ~~lease~~PRODUCTS, ~~expense~~INC. ~~for~~NOTES ~~the~~TO ~~related~~CONSOLIDATED ~~party~~FINANCIAL ~~finance leases~~STATEMENTS As of and for the ~~years~~Years ~~ended~~Ended January 32, ~~2021~~2022 and ~~December~~January 293, ~~2019 are as follows:~~2021

	Years Ended
	January 3, 2021		December 29, 2019
Finance lease expense:
Amortization of right-of-use assets	$	167,177	$	165,594
Interest on lease liabilities		420,008		427,680
Total finance lease expense	$	587,185	$	593,274

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. Management has determined that there is uncertainty as to the realization of a portion of the federal and state net operating loss carryforwards and has established a valuation allowance against them.

~~Cash~~NOTE ~~paid~~12 ~~for~~- ~~amounts~~Postretirement ~~included in the measurement of related party finance lease liabilities for the years ended January 3, 2021~~ and ~~December~~Postemployment ~~29,~~Benefit ~~2019 are as follows:~~Liabilities

	Years Ended
	January 3, 2021		December 29, 2019
Operating cash flows from finance leases	$	420,008	$	427,680
Financing cash flows from finance leases	$	126,717	$	107,383

Postretirement Benefit Liability - Health and Life

~~Right-of-use~~The ~~assets~~Company ~~obtained~~provides certain health care and life insurance benefits for substantially all employees (active or retired) who were employed prior to February 20, 1987. Accounting standards for postretirement benefits require an employer to: (a) recognize in ~~exchange~~its statement of financial position an asset for ~~related~~a ~~party~~plan’s ~~finance lease~~overfunded ~~obligations~~status or a liability for ~~the~~a ~~years~~plan’s ~~ended~~underfunded ~~January~~status; 3,(b) ~~2021~~measure a plan’s assets and ~~December~~its ~~29,~~obligations ~~2019~~that ~~are~~determine its funded status as ~~follows:~~of the end of the employer’s fiscal year (with limited exceptions); and (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. Those changes will be reported in comprehensive income of a business entity.

	Years Ended
	January 3, 2021		December 29, 2019
Finance leases	$	-	$	190,000

The accumulated postretirement benefit obligation, plan assets and accrued postretirement liability as of the plan's measurement date were as follows:

	January 2, 2022			January 3, 2021

Postretirement Benefit Liability - Health and Life	$	2,676,221		$	2,721,900
Less: Plan assets		-			-

Accrued postretirement benefit cost		2,676,221			2,721,900
Unrecognized net loss		77,138			154,662

Accumulated postretirement benefit obligation		2,753,359			2,876,562

Less: Current portion		(169,749	)		(162,977	)

Long-term Portion	$	2,583,610		$	2,713,585

~~Table~~For the years ended January 2, 2022 and January 3, 2021, the net postretirement benefit expense for the plan was comprised of ~~Contents~~interest cost of $54,504 and $74,758, respectively, on the projected benefit obligation. In addition, the postretirement benefit liability adjustment in other comprehensive income consisted of net actuarial gain of $77,524 for the year ended January 2, 2022 and net actuarial loss of $160,356 for the year ended January 3, 2021.

~~UNIROYAL~~At ~~GLOBAL~~January ~~ENGINEERED~~2, ~~PRODUCTS~~2022, ~~INC~~ there was $77,138 of unrecognized net actuarial losses in accumulated other comprehensive loss that had not yet been recognized as a component of net periodic benefit costs. At January 2, 2022, there was no amount of net actuarial losses in accumulated other comprehensive loss that was expected to be recognized as a component of net periodic benefit costs during 2022.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~49

AsTable of ~~and for the Years Ended January 3, 2021 and December 29, 2019~~Contents

~~Supplemental~~UNIROYAL ~~balance~~GLOBAL ~~sheet~~ ENGINEERED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of and ~~other~~for ~~information~~the ~~regarding~~Years ~~related~~Ended ~~party~~January ~~finance~~2, ~~leases~~2022 ~~are~~and asJanuary ~~follows:~~3, 2021

	January 3, 2021			December 29, 2019
Finance leases:
Property and equipment, net	$	2,040,681		$	2,207,858
Current maturities of finance lease liabilities	$	149,366		$	133,517
Finance lease liabilities, less current portion		2,504,404			2,646,970
Total finance lease liabilities	$	2,653,770		$	2,780,487
Weighted average remaining lease term		11.2 years			12.0 years
Weighted average discount rate		16.77	%		16.62	%

The significant assumptions used in determining the accumulated postretirement benefit obligation and net periodic benefit cost are as follows:

Maturities of related party finance lease liabilities as of January 3, 2021 are as follows:

	January 2, 2022	January 3, 2021
Health Care Cost Trend Rates:
2021	4.00%	4.00%
Thereafter	4.00%	4.00%
Discount rate	2.38%	1.95%
Measurement Date	January 2, 2022	January 3, 2021

	Totals
2021	$	558,873
2022		554,794
2023		546,476
2024		468,098
2025		472,275
Thereafter		3,591,508
Total lease payments		6,192,024
Less: Interest		(3,538,254	)
Total related party finance lease liabilities	$	2,653,770

In addition to the significant assumptions listed above, other assumptions used in determining the accumulated postretirement benefit obligation and net periodic benefit cost are retirement and termination probabilities and mortality estimates. The Company assumes that employees participating in the plan will continue to participate during retirement. The Company also assumes that employees not participating in the plan will not participate in the plan prior to or during retirement.

~~The~~ ~~current~~Employer ~~portion~~and ofemployee ~~the~~contributions ~~related~~to ~~party~~the ~~finance~~plan ~~lease~~were ~~liabilities~~ $100,183 and ~~related~~$807, ~~party~~respectively, ~~short-term~~during ~~subordinated~~the ~~secured~~year ~~promissory~~ended ~~notes~~January ~~are~~2, ~~combined~~2022 and $106,377 and $7,777, respectively, during the year ended January 3, 2021. Contributions to the plan are ~~shown~~made ineach ~~current~~year ~~liabilities~~based ason ~~related party~~estimated ~~obligation~~benefit ~~which~~payments ~~consists~~to be paid out of the ~~following~~plan. Estimated benefit payments from the plan for each of the next five years, and in the aggregate for the five years thereafter, are as follows:

	January 3, 2021		December 29, 2019
2022	$	169,749
Current portion of related party finance lease liabilities	$	149,366	$	133,517
2023		170,296
Related party subordinated secured promissory note, interest at 10%		-		350,000
2024		168,868
Related party subordinated secured promissory note, interest at 10%		-		125,000
2025		169,443
Related Party Obligation	$	149,366	$	608,517
2026		169,251
2027 - 2031		821,453
Total	$	1,669,060

InPostemployment ~~January~~Benefit ~~2020,~~Liability ~~the Company’s majority shareholder advanced $200,000 to the Company. This advance was repaid in February 2020. During 2019, the Company issued $1,150,000 of short~~-~~term~~ ~~subordinated secured promissory notes to the Company’s majority shareholder of which $675,000 was repaid in 2019 and the remainder of $475,000 in 2020. The notes were at a rate of 10%.~~Severance

44The Company provides certain severance benefits for substantially all union employees who began their employment prior to 1986. Accounting standards for postemployment benefits require the Company to accrue the estimated cost of future severance payments during the years the employees provide services. The accrued postemployment benefit liability as of January 2, 2022 and January 3, 2021 was $3,261 and $6,054, respectively, and is included in other long-term liabilities in the accompanying consolidated balance sheets. The accrued postemployment benefit liability was determined using discount rates of 2.38% and 1.95% as of January 2, 2022 and January 3, 2021, respectively.

~~Table of Contents~~50

~~UNIROYAL~~Table ~~GLOBAL~~of ~~ENGINEERED PRODUCTS, INC.~~Contents

UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of and for the Years Ended January 2, 2022 and January 3, 2021

AsNOTE of13 ~~and~~- ~~for the Years Ended January 3, 2021 and December 29, 2019~~Equity

~~NOTE~~ 11The –following ~~Income~~table ~~Taxes~~summarizes the Company’s common stock outstanding by class.

	January 2, 2022		January 3, 2021
Ordinary Common Stock		3,412,186		3,412,186
Class B Common Stock		323,820		323,820
Total		3,736,006		3,736,006

~~Under~~The ~~the~~Company's ~~CARES~~Class ~~Act,~~B ~~the~~Common ~~Internal~~Stock ~~Revenue~~(“Class ~~Code~~B”) ~~was~~has ~~amended~~the same entitlement to ~~provide relief~~dividends ~~and~~as ~~supportive~~they ~~measures~~may be declared for ~~taxpayers~~the ~~impacted~~ordinary bycommon ~~COVID-19~~stock. The ~~key~~holder ~~components~~ of ~~these~~Class ~~amendments~~B ~~are~~was asthe ~~follows:~~holder ~~eliminating taxable~~of ~~income~~UGEP ~~limitation~~preferred ~~for~~stock ~~certain~~that ~~net~~was ~~operating~~converted ~~losses~~to ~~and~~Class ~~permitting~~B ~~carryback~~on ~~net~~December ~~operating~~30, ~~losses~~2015. ~~arising~~The inClass ~~2018,~~B ~~2019~~does ~~and~~not ~~2020 to~~have ~~five~~any ~~prior~~preference ~~tax~~with ~~years;~~respect ~~accelerating~~to ~~refunds~~holders of ~~previously~~other ~~generated~~equity ~~Alternative~~interests ~~Minimum~~in ~~Tax~~the ~~credit;~~Company ~~increasing~~in ~~business~~the ~~interest~~event ~~limitation from~~of ~~30%~~any toliquidation, ~~50%~~dissolution ofor ~~adjusted~~winding ~~taxable~~up ~~income;~~of ~~and~~the ~~amending~~Company. ~~depreciation~~Each ~~for~~share ~~qualified~~of ~~improvement~~Class ~~property~~B ~~(“QIP”)~~has tothe ~~15-year property~~right ~~for~~to ~~QIP~~22 ~~placed~~votes inon ~~service~~matters ~~after~~that ~~December~~come ~~31,~~before ~~2017~~the shareholders. ~~The~~Each ~~Company~~share ~~considered~~of ~~the~~Class ~~various~~B ~~potential~~is ~~income~~convertible ~~tax~~into ~~provisions~~one ~~and~~share ~~deemed that~~of ~~there~~ordinary ~~were~~common nostock ~~material~~at ~~impacts~~any totime. ~~the~~The ~~income~~shares ~~tax~~of ~~provisions~~Class ~~for~~B ~~the~~are ~~year~~not ~~ended~~registered ~~January~~and 3,do ~~2021~~not trade in the open market.

Additionally, in December 2020, Congress passed the Consolidated Appropriations Act which provides that loans received and subsequently forgiven under the PPP would not be taxable and that PPP-funded expenses are also deductible. Some states have not conformed to the Federal treatment. Since the Company expects that the $2,217,500 million loan it received under the PPP to be forgiven, it recorded the funds as grant income under IAS 20, and excluded this income for tax purposes for the year ended January 3, 2021. Acquisition

On November 10, 2014, the Company acquired Uniroyal and UGEL, the holding company for UGL. Pursuant to the acquisition of Uniroyal, 200,000 units of Series A preferred units and 150,000 units of Series B preferred units of UEP Holdings, LLC, a wholly-owned subsidiary of the Company, were issued to the former owners of Uniroyal. Each of the UEP Holdings Series A and Series B preferred units have an issue price of $100 per unit or a total face value of $20,000,000 and $15,000,000, respectively. Prior to an amendment to the document that governs the UEPH Series A and Series B preferred units (discussed below), the owners of these preferred units were entitled to a preferred return in the form of quarterly dividends. The ~~following~~UEPH isSeries ~~information~~A preferred units were entitled to a preferred return of an amount per annum equal to five percent (5.00%) of the issue price of such UEPH Series A preferred unit. The UEPH Series B preferred units were entitled to a preferred return of an amount per annum equal to five and one half percent (5.50%) of the issue price of such UEPH Series B preferred unit, increasing by one half percent (0.50%) on the ~~benefit~~first ~~for~~anniversary ~~income~~of ~~taxes for~~the effective date and by an additional one half percent (0.50%) on each successive anniversary of the ~~years~~effective ~~ended~~date thereafter, up to a maximum of eight percent (8.00%) on the fifth anniversary of the effective date. As of January 32, ~~2021~~2022, the preferred return percentage of the UEPH Series B preferred units was 8.0%. The UEPH Series A and ~~December~~B ~~29,~~preferred ~~2019:~~units are primarily owned by the Company’s majority shareholder.

	January 3, 2021			December 29, 2019
Current
Federal	$	-		$	-
State, net		220,544			3,570
Foreign		(176,509	)		(359,459	)
Total current income tax provision (benefit)		44,035			(355,889	)
Deferred
Federal		(1,346,818	)		201,756
State		(30,813	)		3,328
Foreign		57,853			47,606
Total deferred income tax (benefit) provision		(1,319,778	)		252,690
Total income tax benefit	$	(1,275,743	)	$	(103,199	)

In a separate transaction, the Company also purchased all of the outstanding 50 common shares of UGEL, a U.K. limited company, for 100 shares of its common stock and its guaranty of outstanding UGEL preferred stock retained by the seller, having a liquidation preference of €17,699,314 (approximately $20,046,243). As part of the transaction, 50 shares of the UGEL common stock held by the seller had been converted and reclassified as preferred shares. Prior to an amendment to the document that governs the UGEL preferred stock (discussed below), the owner of this preferred stock was entitled to a quarterly dividend payment of €221,241 (approximately $261,657). These shares of preferred stock are owned by the Company’s majority shareholder.

~~The state provisions of $199,978 and $~~51,012 for the years ended January 3, 2021 and December 29, 2019, respectively, were reduced by a change in the valuation allowance in the amounts of $10,248 and $44,114, respectively. The benefit for income taxes differs from the amount computed by applying the federal statutory income tax rate to income before income taxes. The Company’s effective income tax rate, computed as the total of federal, state and foreign taxes as a percentage of income before taxes, was negative 51.0% and negative 12.0% for the years ended January 3, 2021 and December 29, 2019, respectively.

45Table of Contents

~~Table~~UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of ~~Contents~~and for the Years Ended January 2, 2022 and January 3, 2021

~~UNIROYAL~~Quarterly ~~GLOBAL~~preferred ~~ENGINEERED~~dividend ~~PRODUCTS~~payments on UEPH Series A and Series B preferred units and UGEL preferred stock (collectively “preferred shares”) were deferred beginning with the three months ended December 29, ~~INC~~2019 through the three months ended October 3, 2021. During the third quarter of 2021, the owners of the preferred shares (“preferred shareholders”) agreed to an amendment to the documents that govern the dividends (“amended documents”) whereby the accrued dividends were forgiven. In addition, under the amended documents, the preferred shareholders are no longer entitled to a quarterly dividend until such time as the Company declares a dividend payable.

~~NOTES~~The TOCompany ~~CONSOLIDATED~~accounted ~~FINANCIAL~~for ~~STATEMENTS~~the dividend forgiveness as an extinguishment of debt between related parties per ASC 470, “Debt”. As a result, the total balance of accrued dividends of approximately $6,100,000 was derecognized as of October 3, 2021. The amendments to remove the entitlement of a quarterly 5%, 8% and €221,241 (approximately $261,657) dividend (“entitlement amendments”) relating to the preferred shares were considered not significant and, therefore, were considered a modification rather than an extinguishment per ASC 470. The entitlement amendments were considered not significant since the change in the fair values of the preferred shares after the amendments compared to the fair values of the preferred shares immediately before the amendments was less than 10% as management determined that the entitlement amendments resulted in a reduction of fair value of the preferred shares. Per ASC 718, “Compensation – Stock Compensation”, the reduction of fair value of the preferred shares in this modification had no accounting impact (i.e., recognition of a gain).

AsNOTE of14 ~~and~~- ~~for~~Income ~~the~~(Loss) ~~Years~~Per ~~Ended~~Common ~~January 3, 2021 and December 29, 2019~~Share

The ~~following~~calculation isof adiluted ~~reconciliation~~earnings ofper share for the ~~income~~year ~~tax~~ended atJanuary 2, 2022 excluded options (as provided under the UCompany’s 2015 Stock Option Plan) to purchase 133,050 shares of common stock because the options’ weighted average exercise price of $14.~~S. federal~~04 ~~statutory~~per ~~tax~~share ~~rate~~was ~~with~~greater than the ~~income~~average ~~tax~~market atprice of the ~~effective~~common ~~tax~~shares. ~~rate~~Due to the net loss allocable to common shareholders for the ~~years~~year ended January 3, 2021, the calculations of basic and ~~December~~diluted 29loss per share were the same since including options to purchase shares of the Company’s common stock in the calculation of diluted loss per share would have been anti-dilutive. However, ~~2019:~~if diluted earnings per share had been reported for the year ended January 3, 2021, the calculation would have excluded options to purchase 139,300 shares of common stock because the options’ weighted average exercise price of $14.02 per share was greater than the average market price of the common shares.

	January 3, 2021			December 29, 2019
Income tax (benefit) provision at statutory rates	$	(524,867	)	$	180,227
Foreign tax rate differential		18,417			22,122
Funding from Paycheck Protection Program not taxable		(465,675	)		-
UEPH preference dividend		-			(210,753	)
U.K. Research and development credit		(130,777	)		(171,130	)
Effect of change in U.K. tax rate on deferred items		137,631			7,514
Prior year true-up		(324,994	)		61,923
State tax (benefits) provisions		(37,772	)		51,012
Valuation allowance		10,248			(44,114	)
Other		42,046			-
Income tax benefit	$	(1,275,743	)	$	(103,199	)
Effective income tax rate		(51.0	)%		(12.0	)%

~~The~~Table ~~following table summarizes the tax effects~~ of ~~temporary differences that give rise to significant portions of the deferred tax assets and liabilities:~~Contents

	January 3, 2021			December 29, 2019
Deferred tax assets:
Net operating loss carryforward	$	5,597,550		$	3,872,437
Valuation allowance		(828,411	)		(740,818	)
Total deferred tax assets, net		4,769,139			3,131,619
Deferred tax liabilities:
Trademarks		(382,510	)		(336,817	)
Deferred gain		(183,801	)		(157,850	)
Capital allowances		(931,780	)		(652,347	)
Total deferred tax liabilities		(1,498,091	)		(1,147,014	)
Net deferred tax assets	$	3,271,048		$	1,984,605

UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Years Ended January 2, 2022 and January 3, 2021

~~Deferred~~NOTE ~~tax~~15 assets as of January 3, 2021 and December 29, 2019 include $4,900,595 and $3,435,368, respectively, of carryforwards related to U.S. net operating losses and $696,955 and $437,069, respectively, of carryforwards resulting from U.K. losses. The $4,900,595 and $3,435,368 of deferred tax assets for U.S. losses, net of valuation allowances of $828,411 and $740,818 as of January 3, 2021 and December 29, 2019, respectively, are included in other long-~~term~~ assets. The $696,955 and $437,069 of deferred tax assets for U.K. losses are netted with deferred tax liabilities, which are all related to U.K. tax. Total net deferred tax liabilities of $801,136 and $709,945 are included in other long-term liabilities in the accompanying consolidated balance sheets as of January 3, 2021 and December 29, 2019, respectively.Leases

The Company has ~~federal net~~ operating ~~loss~~leases ~~carryforwards~~for ofequipment ~~approximately $15.7~~and ~~million~~office asfacilities ~~of January 3, 2021, of which $11.7 million expire in years beginning 2022 through 2034~~ and ~~$4.0~~finance ~~million~~leases ~~may~~for ~~be carried forward indefinitely~~equipment. ~~The~~These ~~Company~~leases ~~has~~expire ~~state~~at ~~net~~various ~~operating~~dates ~~loss~~from ~~carryforwards of approximately $14.1 million as of~~ January ~~3, 2021, which also expire in years beginning~~ 2022 through ~~2034.~~March ~~Additionally, the Company has foreign net operating loss carryforwards of approximately $2~~2039.~~8 million as of January 3, 2021, which have no expiration date.~~

46 The components of lease expense for the years ended January 2, 2022 and January 3, 2021 are as follows:

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	Years Ended
	January 2, 2022	January 3, 2021

Operating lease expense	$

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