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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☑		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 3, 2021
For the quarterly period ended April 3, 2022
☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________

Commission file number: 000-50081

UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC.

(Name of registrant as specified in its charter)

Nevada		65-1005398
(State or Other Jurisdiction of Organization)		(IRS Employer Identification Number)

1800 2nd Street, Suite 970

Sarasota, FL 34236

(Address of principal executive offices)

(941) 906-8580

(Issuer’s telephone number)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ☒ ☑ No ☐

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ ☑ No ☐

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 ☐ Accelerated filer ☐ Non-accelerated filer ☒☑ Smaller reporting company ☒☑ Emerging growth company ☐

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. ☐

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

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

As of ~~November~~May 92, ~~2021~~2022, the issuer 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.

UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC.

Form 10-Q

Table of Contents

	~~Page~~	Page
Cautionary Note Regarding Forward-Looking Statements	3	1
PART I.FINANCIAL INFORMATION
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements	4
Item 1.	Financial Statements	2
~~Consolidated Balance Sheets~~	4Consolidated Balance Sheets	2
~~Consolidated Statements of Operations~~	5Consolidated Statements of Operations	3
Consolidated Statements of Comprehensive Income (Loss)	6
	Consolidated Statements of Comprehensive (Loss) Income	4
~~Consolidated Statements of Changes in Stockholders’ Equity~~	7Consolidated Statements of Changes in Stockholders’ Equity	5
~~Consolidated Statements of Cash Flows~~	8Consolidated Statements of Cash Flows	6
~~Notes to Consolidated Financial Statements~~	9Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	27
Signatures		28

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	32
Signatures		33

Table of Contents

CAUTIONARY 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.

Table of Contents

~~Part~~PART 1 - FINANCIAL INFORMATION

~~Item~~ITEM 1 - Financial Statements

Uniroyal Global Engineered Products, Inc.

Consolidated Balance Sheets

	(Unaudited)
ASSETS	~~October~~April 3, ~~2021~~2022			January 32, ~~2021~~2022
CURRENT ASSETS
Cash and cash equivalents	$	~~633~~324,~~833~~499		$	1444,~~656,882~~973
Accounts receivable, net		1011,~~102~~692,~~981~~484			108,~~114~~561,~~819~~227
Inventories, net		2024,~~257~~142,~~905~~917			1721,~~952~~840,~~850~~404
Other current assets		2,~~359~~503,~~596~~150			12,~~841~~196,~~153~~322
Related party receivable		4134,~~263~~766			~~907~~453
Total Current Assets		3338,~~395~~697,~~578~~816			3133,~~566~~043,~~611~~379
PROPERTY AND EQUIPMENT, NET		1716,~~191~~437,~~409~~509			1817,~~491~~047,~~122~~606
OPERATING LEASE RIGHT-OF-USE ASSETS, NET		5,~~781~~367,~~541~~004			65,~~242~~626,~~736~~542
OTHER ASSETS
Intangible assets		3,~~352~~277,~~407~~356			3,~~388~~336,~~357~~068
Goodwill		1,079,175			1,079,175
Other long-term assets		54,~~394~~463,~~829~~198			4,~~679~~322,~~990~~855
Total Other Assets		98,~~826~~819,~~411~~729			98,~~147~~738,~~522~~098
TOTAL ASSETS	$	6669,~~194~~322,~~939~~058		$	6564,~~447~~455,~~991~~625
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Checks issued in excess of bank balance	$	96242,~~921~~011		$	~~275~~76,~~297~~134
Lines of credit		1721,~~807~~443,~~174~~596			17,~~760~~816,~~583~~919
Current maturities of long-term debt		23,~~915~~489,~~352~~646			12,~~432~~365,~~301~~905
Current maturities of finance lease liabilities		~~240~~165,~~257~~828			~~257~~210,~~298~~007
Accounts payable		711,~~621~~379,~~352~~971			78,~~344~~959,~~785~~467
Accrued expenses and other liabilities		43,~~753~~829,~~242~~926			73,~~987~~658,~~333~~612
Current maturities of related party finance lease liabilities		~~162~~172,~~662~~278			~~149~~167,~~366~~389
Current portion of postretirement benefit liability - health and life		~~162~~169,~~977~~749			~~162~~169,~~977~~749
Total Current Liabilities		3340,~~759~~893,~~937~~005			3533,~~369~~424,~~940~~182
LONG-TERM LIABILITIES
Long-term debt, less current portion		65,~~188~~273,~~313~~656			76,~~338~~854,~~762~~257
Finance lease liabilities, less current portion		6621,~~649~~288			~~235~~36,~~116~~372
Operating lease liabilities, less current portion		5,~~518~~158,~~920~~797			5,~~893~~391,~~268~~395
Related party finance lease liabilities, less current portion		2,~~385~~300,~~925~~866			2,~~504~~344,~~404~~239
Long-term debt to related parties		4,216,566			4,216,566
Postretirement benefit liability - health and life, less current portion		2,~~672~~572,~~936~~371			2,~~713~~583,~~585~~610
Other long-term liabilities		~~681~~937,~~391~~735			~~807~~960,~~190~~526
Total Long-Term Liabilities		2120,~~730~~481,~~700~~279			2322,~~708~~386,~~891~~965
Total Liabilities		5561,~~490~~374,~~637~~284			5955,~~078~~811,~~831~~147
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 October 3, 2021 and January 3, 2021		3,736			3,736
Common stock, 95,000,000 shares authorized ($.001 par value) 3,736,006 shares issued and outstanding as of April 3, 2022 and January 2, 2022		3,736			3,736
Additional paid-in capital		35,290,590			35,290,590
Accumulated deficit		(2427,~~340~~004,546	)		(2826,~~734~~459,~~670~~190	)
Accumulated other comprehensive loss		(1,~~330~~422,~~303~~831	)		(1,271,~~321~~483	)
Total Stockholders' Equity		107,~~704~~947,~~302~~774			68,~~369~~644,~~160~~478
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	6669,~~194~~322,~~939~~058		$	6564,~~447~~455,~~991~~625

See accompanying notes to the consolidated financial statements.

Table of Contents

Uniroyal Global Engineered Products, Inc.

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended						~~Nine Months Ended~~
	October 3, 2021			October 4, 2020			October 3, 2021			October 4, 2020
	April 3, 2022			April 4, 2021
NET SALES	$	1620,~~385~~070,~~914~~551		$	1521,~~171~~896,~~898~~001		$	~~56,031,150~~		$	~~43,528,393~~
COST OF GOODS SOLD		1417,~~430~~405,~~915~~495			1318,~~114~~658,~~967~~664			~~49,017,021~~			~~37,931,227~~
Gross Profit		12,~~954~~665,~~999~~056			23,~~056~~237,~~931~~337			~~7,014,129~~			~~5,597,166~~
OPERATING EXPENSES:
Selling		~~681~~724,~~397~~321			~~778~~898,~~699~~712			~~2,414,847~~			~~2,278,279~~
General and administrative		1,~~555~~800,~~660~~218			1,~~957~~579,~~486~~027			~~4,574,175~~			~~4,834,011~~
Research and development		~~307~~389,~~283~~108			~~198~~327,~~182~~458			~~966,706~~			~~704,239~~
OPERATING EXPENSES		2,544,340			2,934,367			7,955,728			7,816,529
Total Operating Expenses		2,913,647			2,805,197
Operating Loss		(589,341	)		(877,436	)		(941,599	)		(2,219,363	)
Operating (Loss) Income		(248,591	)		432,140
OTHER INCOME (EXPENSE):
OTHER (EXPENSE) INCOME:
Interest expense		(~~430~~438,~~177~~508	)		(~~367~~403,~~454~~746	)		~~(1,217,861~~	)		~~(1,215,771~~	)
Funding from Paycheck Protection Program		-			33838,~~824~~864			~~2,000,000~~			~~2,217,500~~
Other (expense) income		(714,~~381~~396	)		85206,~~753~~304			~~157,978~~			~~(185,417~~	)
Net Other (Expense) Income		(~~437~~452,~~558~~904	)		~~(247~~641,~~877~~422	)		~~940,117~~			~~816,312~~
LOSS BEFORE TAX BENEFIT		(1,026,899	)		(1,125,313	)		(1,482	)		(1,403,051	)
(LOSS) INCOME BEFORE TAX (BENEFIT) PROVISION		(701,495	)		1,073,562
TAX BENEFIT		(202,925	)		(111,318	)		(409,548	)		(404,141	)
TAX (BENEFIT) PROVISION		(156,139	)		37,561
NET (LOSS) INCOME		(~~823~~545,~~974~~356	)		(1,~~013~~036,~~995~~001	)		~~408,066~~			~~(998,910~~	)
Extinguishment of preferred stock dividend payable		6,158,311			-			6,158,311			-
Preferred stock dividend		-			(816,414	)
Preferred stock dividend		(539,866	)		(808,638	)		(2,172,253	)		(2,396,479	)
NET (LOSS) INCOME ALLOCABLE TO COMMON SHAREHOLDERS	$	(545,356	)	$	219,587
NET INCOME (LOSS) ALLOCABLE TO COMMON SHAREHOLDERS	$	4,794,471		$	(1,822,633	)	$	4,394,124		$	(3,395,389	)
(LOSS) EARNINGS PER COMMON SHARE:
EARNINGS (LOSS) PER COMMON SHARE:
Basic and Diluted	$	(0.15	)	$	0.06
Basic and Diluted	$	1.28		$	(0.49	)	$	1.18		$	(0.91	)
WEIGHTED AVERAGE SHARES OUTSTANDING:
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and Diluted		3,736,006			3,736,006
Basic and Diluted		3,736,006			3,736,006			3,736,006			3,736,006

See accompanying notes to the consolidated financial statements.

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Uniroyal Global Engineered Products, Inc.

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

(Unaudited)

	Three Months Ended						~~Nine Months Ended~~
	October 3, 2021			October 4, 2020			October 3, 2021			October 4, 2020
	April 3, 2022			April 4, 2021
NET (LOSS) INCOME	$	(~~823~~545,~~974~~356	)	$	(1,~~013~~036,~~995~~001	)	$	~~408,066~~		$	~~(998,910~~	)
OTHER COMPREHENSIVE (LOSS) INCOME:
Foreign currency translation adjustment		(~~103~~151,348	)		~~235~~56,~~736~~174			~~(58,982~~	)		~~(112,180~~	)
OTHER COMPREHENSIVE (LOSS) INCOME		(103,348	)		235,736			(58,982	)		(112,180	)
OTHER COMPREHENSIVE (LOSS) INCOME		(151,348	)		56,174
COMPREHENSIVE (LOSS) INCOME		(~~927~~696,~~322~~704	)		~~(778~~1,~~259~~092,175	)		~~349,084~~			~~(1,111,090~~	)
Extinguishment of preferred stock dividend payable		6,158,311			-			6,158,311			-
Preferred stock dividend		-			(816,414	)
Preferred stock dividend		(539,866	)		(808,638	)		(2,172,253	)		(2,396,479	)
COMPREHENSIVE (LOSS) INCOME TO COMMON SHAREHOLDERS	$	(696,704	)	$	275,761
COMPREHENSIVE INCOME (LOSS) TO COMMON SHAREHOLDERS	$	4,691,123		$	(1,586,897	)	$	4,335,142		$	(3,507,569	)

See accompanying notes to the consolidated financial statements.

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Uniroyal Global Engineered Products, Inc.

Consolidated Statements of Changes in Stockholders’ ' Equity

(Unaudited)

																		Additional					Accumulated Other				Total
		UEPH Series A				UEPH Series B				UGEL Preferred				Common Stock					Additional Paid In		Accumulated				Accumulated Other Comprehensive			Total Stockholders'
	UEPH Series A				UEPH Series B				UGEL Preferred				Common Stock					Paid In		Accumulated				Comprehensive			Stockholders'
		Units		Amount		Units		Amount		Shares		Amount		Shares		Amount			Capital		Deficit				Loss			Equity
	Units		Amount		Units		Amount		Shares		Amount		Shares		Amount			Capital		Deficit				Loss			Equity
For the Three Months Ended
For the Three Months Ended October 4, 2020
April 4, 2021
Balance July 5, 2020		200,000	$	617,571		150,000	$	463,179		50	$	75		3,736,006	$	3,736		$	35,290,590	$	(25,873,959	)		$	(1,645,355	)	$	8,855,837
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		-		-		-		-		-		-		-		-			-		(1,013,995	)			-			(1,013,995	)
Net income		-		-		-		-		-		-		-		-			-		1,036,001				-			1,036,001
Other comprehensive income		-		-		-		-		-		-		-		-			-		-				235,736			235,736
Other comprehensive income		-		-		-		-		-		-		-		-			-		-				56,174			56,174
Preferred stock dividend		-		-		-		-		-		-		-		-			-		(808,638	)			-			(808,638	)
Preferred stock dividend		-		-		-		-		-		-		-		-			-		(816,414	)			-			(816,414	)
Balance October 4, 2020		200,000	$	617,571		150,000	$	463,179		50	$	75		3,736,006	$	3,736		$	35,290,590	$	(27,696,592	)		$	(1,409,619	)	$	7,268,940
Balance April 4, 2021		200,000	$	617,571		150,000	$	463,179		50	$	75		3,736,006	$	3,736		$	35,290,590	$	(28,515,083	)		$	(1,215,147	)	$	6,644,921
For the Three Months Ended October 3, 2021
For the Three Months Ended
Balance July 4, 2021		200,000	$	617,571		150,000	$	463,179		50	$	75		3,736,006	$	3,736		$	35,290,590	$	(29,135,017	)		$	(1,226,955	)	$	6,013,179
April 3, 2022
Net income		-		-		-		-		-		-		-		-			-		(823,974	)			-			(823,974	)
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
Other comprehensive loss		-		-		-		-		-		-		-		-			-		-				(103,348	)		(103,348	)
Net loss		-		-		-		-		-		-		-		-			-		(545,356	)			-			(545,356	)
Extinguishment of preferred stock dividend payable		-		-		-		-		-		-		-		-			-		6,158,311				-			6,158,311
Other comprehensive loss		-		-		-		-		-		-		-		-			-		-				(151,348	)		(151,348	)
Preferred stock dividend		-		-		-		-		-		-		-		-			-		(539,866	)			-			(539,866	)
Balance April 3, 2022		200,000	$	617,571		150,000	$	463,179		50	$	75		3,736,006	$	3,736		$	35,290,590	$	(27,004,546	)		$	(1,422,831	)	$	7,947,774
Balance October 3, 2021		200,000	$	617,571		150,000	$	463,179		50	$	75		3,736,006	$	3,736		$	35,290,590	$	(24,340,546	)		$	(1,330,303	)	$	10,704,302
For the Nine Months Ended October 4, 2020
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 income		-		-		-		-		-		-		-		-			-		(998,910	)			-			(998,910	)
Other comprehensive loss		-		-		-		-		-		-		-		-			-		-				(112,180	)		(112,180	)
Preferred stock dividend		-		-		-		-		-		-		-		-			-		(2,396,479	)		-				(2,396,479	)
Adjustment for a 1-for-5 reverse stock split		-		-		-		-		-		-		-		(14,944	)		14,944		-				-			-
Balance October 4, 2020		200,000	$	617,571		150,000	$	463,179		50	$	75		3,736,006	$	3,736		$	35,290,590	$	(27,696,592	)		$	(1,409,619	)	$	7,268,940
For the Nine Months Ended October 3, 2021
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 income		-		-		-		-		-		-		-		-			-		408,066				-			408,066
Other comprehensive income		-		-		-		-		-		-		-		-			-		-				(58,982	)		(58,982	)
Extinguishment of preferred stock dividend payable		-		-		-		-		-		-		-		-			-		6,158,311				-			6,158,311
Preferred stock dividend		-		-		-		-		-		-		-		-			-		(2,172,253	)			-			(2,172,253	)
Balance October 3, 2021		200,000	$	617,571		150,000	$	463,179		50	$	75		3,736,006	$	3,736		$	35,290,590	$	(24,340,546	)		$	(1,330,303	)	$	10,704,302

See accompanying notes to the consolidated financial statements.

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Uniroyal Global Engineered Products, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	Three Months Ended
CASH FLOWS FROM OPERATING ACTIVITIES	~~October~~April 3, ~~2021~~2022			~~October~~April 4, ~~2020~~2021
Net income (loss)	$	408,066		$	(998,910	)
Net (loss) income	$	(545,356	)	$	1,036,001
Adjustments to reconcile net income to net cash flows from operating activities:
Adjustments to reconcile net (loss) income to net cash flows from operating activities:
Depreciation and amortization		1569,~~814,134~~138			1619,~~757,012~~375
Deferred tax benefit		(409,548	)		(406,113	)
Deferred tax (benefit) provision		(156,139	)		37,062
Amortization of debt issuance costs		2930,~~125~~163			-6,633
Amortization of intangible assets		19,899			11,250
Loss on disposal of property and equipment		7,396			23,083
Loss on disposal of property and equipment		33,404			3,871
Funding from Paycheck Protection Program recognized as income		-			(838,864	)
Funding from Paycheck Protection Program recognized as income		(2,000,000	)		(2,217,500	)
Deferred interest on loan from Main Street Lending Program		-			24,242
Deferred interest on loan from Main Street Lending Program		63,589			-
Noncash lease adjustment		23,391			24,060
Loss on debt extinguishment		64,768			-
Noncash lease adjustment		72,420			66,591
Changes in assets and liabilities:
Accounts receivable		6(3,~~873~~290,761	)		1(3,~~862~~048,~~403~~143	)
Inventories		(2,~~388~~526,~~568~~727	)		1(784,~~029,195~~585	)
Other current assets		(~~542~~362,~~098~~850	)		(99176,~~857~~348	)
Related party receivable		(4034,~~356~~313	)		(3729,~~556~~366	)
Other long-term assets		18(1,~~256~~914	)		(511,~~492~~500	)
Accounts payable		~~289~~2,~~208~~543,264			~~(784~~1,~~890~~032,380	)
Accrued expenses and other liabilities		~~782~~236,~~789~~696			~~803~~280,~~544~~844
Postretirement benefit liability - health and life		(4011,~~649~~239	)		(1612,~~899~~508	)
Other long-term liabilities		(5,139	)		-
Cash used in operating activities		(3,519,251	)		(1,794,634	)
Cash (used in) provided by operating activities		(1,823,827	)		966,649
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(~~609~~186,~~047~~177	)		(1202,~~200,045~~778	)
Payments on life insurance policies, net of proceeds from policy loans		(134,678	)		28,787
Payments on life insurance policies		(11,941	)		(49,901	)
Cash used in investing activities		(~~743~~198,~~725~~118	)		(1252,~~171,258~~679	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in checks issued in excess of bank balance		~~(178~~165,~~376~~877	)		(~~184~~166,~~181~~621	)
Payments on line of credit relating to debt extinguishment		(7,379,356	)		-
Net advances on lines of credit		3,843,578			782,781
Advances on line of credit relating to debt extinguishment		6,565,288			-
Payments on long-term debt		(347,642	)		(314,631	)
Net advances (payments) on lines of credit - other		892,278			(1,913,809	)
Proceeds from issuance of long-term debt - Paycheck Protection Program		-			2,000,000
Payments on long-term debt relating to debt extinguishment		(1,486,504	)		-
Proceeds from issuance of long-term debt - other		38,290			-
Payments on long-term debt - other		(719,957	)		(899,690)
Payments on finance lease liabilities		(59,262	)		(72,812	)
Proceeds from issuance of long-term debt - Paycheck Protection Program		2,000,000			2,217,500
Payments on related party obligations		(38,483	)		(34,302	)
Proceeds from issuance of long-term debt - automotive lenders		137,815			1,519,861
Cash provided by financing activities		3,602,358			2,194,415
Proceeds from issuance of long-term debt relating to debt extinguishment		2,328,520			-
Net change in cash and cash equivalents		(115,011	)		147,102
Payments for capitalized debt issuance costs		(341,895	)		-
Cash and cash equivalents - beginning of period		444,973			1,656,882
Payments on finance lease liabilities		(197,579	)		(289,948	)
Effects of currency translation on cash and cash equivalents		(5,463	)		16,520
Proceeds from finance lease liabilities		11,986			-
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	324,499		$	1,820,504
Proceeds from related party obligations		-			983,958
Payments on related party obligations		(105,183	)		(968,801	)
Cash provided by financing activities		1,527,037			464,890
Net change in cash and cash equivalents		(1,040,515	)		260,281
Cash and cash equivalents - beginning of period		1,656,882			513,588
Effects of currency translation on cash and cash equivalents		17,466			(5,995	)
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	633,833		$	767,874

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

See accompanying notes to the consolidated financial statements.

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UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC.

Notes to Consolidated Financial Statements

~~October~~April 3, ~~2021~~2022

(Unaudited)

1. Basis of Presentation and Summary of Significant Accounting Policies

Uniroyal Global Engineered Products, Inc. (the “Company,” “Uniroyal Global,” “we,” or “us”) owns all of the ownership interests in Uniroyal Engineered Products, LLC (“Uniroyal”), a U.S. manufacturer of textured coatings, and its holding company, UEP Holdings, LLC (“UEPH”), 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 Wardle Storeys (Earby) Limited (“Wardle Storeys”), a European manufacturer of textured coatings.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared based upon U.S. Securities and Exchange Commission rules that permit reduced disclosure for interim periods. Therefore, they do not include all information and footnote disclosures necessary for a complete presentation of the Company’s financial position, results of operations and cash flows, in conformity with generally accepted accounting principles. Uniroyal Global filed audited consolidated financial statements as of and for the fiscal years ended January 32, ~~2021~~2022 and ~~December~~January 293, ~~2019~~ 2021 which included all information and notes necessary for such complete presentation in conjunction with its ~~2020~~2021 Annual Report on Form 10-K.

The results of operations for the interim period ended ~~October~~April 3, ~~2021~~2022 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended January 32, ~~2021~~2022, which are contained in the Company’s ~~2020~~2021 Annual Report on Form 10-K.

The Company and its subsidiaries use a 52/53-week fiscal year ending on the Sunday nearest to December 31. The current year ending January 21, ~~2022~~2023 isand ~~a 52-week year whereas~~ the prior year ended January 32, ~~2021~~2022 ~~was~~are ~~a 53~~52-week ~~year~~years. The Company’s U.K. subsidiaries use the calendar year end of December 31. The activity of the U.K. subsidiaries that occurs on the days that do not coincide with the Company’s year-end is not material. Both the three months ended October 3, 2021 and October 4, 2020 were 13-week periods while the nine months ended October 3, 2021 was a 39-week period and the nine months ended October 4, 2020 was a 40-week period.

The accompanying unaudited interim consolidated financial statements contain all adjustments (consisting of normal recurring items) which are, in the opinion of management, necessary for a fair presentation of the Company’s financial position as of ~~October~~April 3, ~~2021~~2022 and the results of operations, comprehensive ~~income~~ (loss) income and cash flows for the interim periods ended ~~October~~April 3, ~~2021~~2022 and ~~October~~April 4, ~~2020~~2021.

The unaudited interim consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company uses the U.S. dollar as the reporting currency for financial reporting. The financial position and results of operations of the Company’s U.K.-based operations are measured using the British Pound Sterling as the functional currency. See Note 4 – “Foreign Currency Translation” for additional discussion.

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

Significant Accounting Policies

For a discussion of Uniroyal Global’s significant accounting policies, refer to Note 1 – “Basis of Presentation and Summary of Significant Accounting Policies” to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended January 32, ~~2021~~2022.

Table of Contents

Coronavirus (COVID-19) Impact Update

The ~~current~~ coronavirus pandemic (“COVID-19”) and its related disruption of the supply chain has had an impact on markets the Company serves, ~~and~~ its operations and liquidity. Since COVID-19 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 Company continues to pursue supplementary cash flow opportunities, as discussed briefly below and in more detail in Notes 89 –and 10.

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 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~~the PPP ~~loans~~loan for allowable expenses (as defined in the PPP ~~loans~~loan) and applied for forgiveness of the PPP ~~loans~~loan 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,~~Loan ~~respectively,~~was ~~were~~ forgiven. See Note 9 for further discussion.

For the ~~U.K.~~remaining ~~operations,~~nine ~~during the third quarter~~ months of ~~2021~~fiscal ~~and~~year ~~2020,~~2022 ~~the Company recorded reimbursed costs of approximately $49,000~~ and ~~$474,000, respectively, and during~~ the first ~~nine~~three months of ~~2021~~fiscal ~~and~~year ~~2020~~2023, the Company’s ~~recorded~~majority ~~reimbursed~~shareholder ~~costs~~waived ofthe ~~approximately~~interest ~~$150,000~~ expense and ~~$1,560,000,~~associated ~~respectively,~~payments ~~under~~on the ~~Coronavirus~~Company’s ~~Job~~related ~~Retention~~party ~~Scheme~~finance ~~(“CJRS”)~~leases ~~set~~with uphim byand the ~~U.K.~~Company’s ~~government~~$2,000,000 tosenior ~~help~~subordinated promissory ~~employers~~notes ~~pay~~issued ~~the~~to ~~salaries of those employees who would otherwise have been laid off during the coronavirus outbreak but under the CJRS were furloughed instead~~him. ~~The~~See ~~much~~Note ~~lower~~10 ~~reimbursed costs~~ for ~~the~~further ~~third~~discussion. ~~quarter~~In ~~and~~addition, ~~first~~executive ~~nine~~officers ~~months~~ of ~~2021~~the ~~reflected~~Company ~~that~~agreed ~~employees~~to ~~were~~a ~~furloughed~~reduction in ~~significantly~~their ~~less~~salaries ~~than~~over in the same ~~periods~~time ~~of 2020~~period. ~~This~~The ~~program~~total ~~reimbursed~~amount ~~the Company for up to 80%~~ of ~~the~~cost ~~compensation~~savings ~~expense~~will ~~plus~~be ~~national~~approximately ~~insurance and certain benefits paid to the furloughed employees~~$731,000 ~~resulting in lower salary expense~~ for ~~the~~fiscal ~~Company.~~year ~~While~~2022 ~~the employees were on furlough~~and $244,000 ~~the~~for ~~compensation~~fiscal ~~paid~~year to2023 ~~them~~which ~~was~~will ~~limited~~provide toadditional ~~the~~liquidity ~~amount reimbursed by the CJRS. The Company recorded the reimbursed amounts as reductions~~ to the ~~associated expenses~~Company.

~~Also~~In ~~for~~addition, under amended documents that govern the ~~U.K.~~preferred ~~operations~~stock dividends, inthe ~~June~~preferred ~~2021~~shareholders ~~its~~are ~~bank~~no ~~lending~~longer ~~facilities~~entitled ~~with~~to ~~Lloyds~~a ~~Bank~~quarterly ~~Commercial~~dividend ~~Finance~~until ~~Limited~~such ~~(“Lloyds”)~~time as the Company declares a dividend payable. To preserve cash, quarterly preferred dividends were ~~refinanced~~not ~~with~~declared ~~PNC~~on ~~Business~~UEPH ~~Credit~~Series ~~(“PNC”).~~A ~~PNC~~and ~~provided~~Series B ~~the~~preferred ~~Company~~units ~~additional~~and ~~availability~~UGEL bypreferred ~~expanding~~stock ~~its~~during ~~borrowing~~the ~~base~~three tomonths ~~include~~ended ~~eligible~~April ~~equipment~~3, 2022. ~~See~~Also ~~Notes~~to 8preserve ~~and~~cash, 9quarterly ~~for~~preferred ~~further~~dividend payments ~~discussion.~~were deferred beginning with the three months ended December 29, 2019 through the three months ended April 4, 2021.

Additionally, 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. 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.

The Company accounted for the dividend forgiveness as an extinguishment of debt between related parties per Accounting Standards Codification (“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 $265,000) 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).

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Legal Proceedings

OnIn ~~October~~April 12021, ~~2020~~a fine of £120,000 ($166,026) was imposed on the ~~Health~~Company ~~and~~related ~~Safety~~to ~~Executive~~an ~~(“HSE”),~~incident ~~the~~in ~~government~~which ~~agency~~an ~~responsible~~employee ~~for~~was injured in the ~~enforcement~~course of ~~health~~his ~~and~~employment. ~~safety~~At ~~law~~the end inof the ~~U.K.~~second quarter of 2021, ~~charged~~the ~~our~~Company ~~U.K.~~began ~~subsidiary,~~making ~~Uniroyal~~monthly ~~Global~~payments ~~Limited,~~for ~~with~~this anfine ~~offense~~in ~~under~~order to have it paid in full by the ~~Health~~October 2022 due date. The accrual related to the fine was £46,856 ($61,543) and ~~Safety~~£69,356 at($93,484) ~~Work~~as ~~etc.~~of ~~Act~~April ~~1974~~3, ~~arising~~2022 ~~from~~and anJanuary 2, ~~August~~2022, ~~2019~~respectively, ~~incident~~and was included in ~~which~~accrued anexpenses ~~employee~~and ~~was~~other ~~injured~~liabilities in the ~~course~~accompanying ofconsolidated ~~his~~balance ~~employment~~sheets.

~~The~~2. ~~Company~~Noncash ~~fully~~Transactions ~~cooperated with the HSE investigation~~ and ~~negotiated~~Supplemental aDisclosure ~~plea based on legal advice provided to it. Per this legal advice, the Company believed that £150,000 ($193,000) was a reasonable estimate~~ of ~~the~~Cash ~~fine~~Flow ~~to be imposed and, accordingly, recorded an accrual for this charge in 2020.~~Information

InThe ~~April~~following ~~2021,~~is asupplemental ~~fine~~disclosure of ~~£120,000~~cash paid ~~($166,026) was imposed on the Company related to this matter. At the end of the second quarter of 2021, the Company began making monthly payments~~ for ~~this fine in order to have it paid in full by~~ the ~~October~~three ~~2022~~months due date. The accrual related to the fine was £91,856 ($124,401) and £150,000 ($204,737) as of October 3, 2021 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 ($7,558) to reimburse the HSE for legal expenses was paid in May 2021. ended:

2.Noncash Transactions and Supplemental Disclosure of Cash Flow Information

	April 3, 2022		April 4, 2021

Interest	$	439,424	$	397,515

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 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, 2021.8

~~For~~Table ~~the nine months 2021, the Company made payments~~ of $134,678 on its company owned life insurance policies. During the third quarter of 2020, the Company obtained $130,000 in loans against the cash value of its company owned life insurance policies and are shown net of payments of $101,213 on the life insurance policies in the consolidated statements of cash flows. These loans have a weighted average interest rate of 3.65% and can be repaid at any time.Contents

3. ~~The~~Fair ~~following~~Value ~~is supplemental disclosure~~ of ~~cash~~Financial ~~paid for the nine months ended:~~ Instruments

		October 3, 2021				October 4, 2020
Interest		$	1,138,425			$	1,272,124

3.Fair Value of Financial Instruments

The Company’s short-term financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and lines of credit. The Company adjusts the carrying value of financial instruments denominated in other currencies such as cash, accounts receivable, accounts payable and lines of credit using the appropriate exchange rates at the balance sheet date. The Company believes that the carrying values of these short-term financial instruments approximate their estimated fair values.

The fair value of the Company’s long-term debt is estimated based on current rates for similar instruments with the same remaining maturities. In determining the current interest rates for similar instruments, the Company takes into account its risk of nonperformance. The Company believes that the carrying value of its long-term debt approximates its estimated fair value.

~~The~~For ~~Company~~the ~~uses~~three ~~foreign~~months ~~currency~~ended ~~exchange~~April ~~contracts~~3, 2022, ~~which~~there ~~are~~have ~~recorded~~been atno ~~their~~changes ~~estimated fair values~~ in the ~~accompanying~~application ~~consolidated balance sheets. The fair values~~ of ~~the~~valuation ~~currency~~methods ~~exchange~~applied ~~contracts~~to ~~are~~similar ~~based~~assets ~~upon observable market transactions of spot~~ and ~~forward rates~~liabilities.

~~For~~4. ~~the~~Foreign ~~nine~~Currency ~~months ended October 3, 2021, there have been no changes in the application of valuation methods applied to similar assets and liabilities.~~ Translation

11The financial position and results of operations of the Company’s foreign subsidiaries are measured using the local currency as the functional currency. Assets and liabilities of operations denominated in foreign currencies are translated into U.S. dollars at exchange rates in effect at the balance sheet date, while the capital accounts are translated at the historical rate for the date they were recognized. Revenues and expenses are translated at the weighted average exchange rates during the year. The resulting translation gains and losses on assets and liabilities are recorded in accumulated other comprehensive loss and are excluded from net income until realized through a sale or liquidation of the foreign subsidiaries. Transaction gains and losses generated from the remeasurement of assets and liabilities denominated in currencies other than the functional currency of the Company’s foreign operations are included in other (expense) income in the accompanying consolidated statements of operations.

~~Table~~5. ~~of Contents~~Inventories

4.Foreign Currency Translation

The financial position and results of operations of the Company’s foreign subsidiaries are measured using the local currency as the functional currency. Assets and liabilities of operations denominated in foreign currencies are translated into U.S. dollars at exchange rates in effect at the balance sheet date, while the capital accounts are translated at the historical rate for the date they were recognized. Revenues and expenses are translated at the weighted average exchange rates during the reporting period. The resulting translation gains and losses on assets and liabilities are recorded in accumulated other comprehensive loss and are excluded from net income until realized through a sale or liquidation of the investment. Transaction gains and losses generated from the remeasurement of assets and liabilities denominated in currencies other than the functional currency of the Company’s foreign operations are included in other income (expense) in the accompanying consolidated statements of operations.

5.Inventories

Inventories consist of the following:

	October 3, 2021			January 3, 2021
	April 3, 2022			January 2, 2022
Raw materials	$	7,~~436~~325,~~695~~007		$	57,~~193~~595,~~919~~155
Work-in-process		56,~~017~~769,~~046~~864			45,~~281~~501,~~035~~493
Finished goods		1012,~~113~~359,~~997~~676			1011,~~594~~043,~~088~~667
		22,567,738			20,069,042
		26,454,547			24,140,315
Less: Allowance for inventory obsolescence		(2,~~309~~311,~~833~~630	)		(2,~~116~~299,~~192~~911	)
Total Inventories, net	$	2024,~~257~~142,~~905~~917		$	1721,~~952~~840,~~850~~404

6. Other Long-term Assets

Other long-term assets consist of the following:

	October 3, 2021		January 3, 2021
	April 3, 2022		January 2, 2022
Deferred tax asset, net	$	43,~~364~~422,~~830~~999	$	43,~~072~~264,~~184~~876
Life insurance policies, net of policy loans		~~320~~392,~~160~~230		~~185~~380,~~482~~289
Debt issuance costs		~~306~~250,~~157~~816		-281,049
Other		~~403~~397,~~682~~153		~~422~~396,~~324~~641
Total Other Long-term Assets	$	54,~~394~~463,~~829~~198	$	4,~~679~~322,~~990~~855

~~7.Other Long-term Liabilities~~9

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7.	Other Long-term Liabilities

Other long-term liabilities consist of the following:

	October 3, 2021		January 3, 2021
	April 3, 2022		January 2, 2022
Deferred tax liability	$	~~680~~934,~~476~~472	$	~~801~~957,~~136~~263
Other		~~915~~3,263		63,~~054~~263
Total Other Long-term Liabilities	$	~~681~~937,~~391~~735	$	~~807~~960,~~190~~526

128. Lines of Credit

The Company’s Uniroyal subsidiary has available a $15,000,000 revolving line of credit financing agreement with Wells Fargo Capital Finance, LLC (“Uniroyal Line of Credit”), which matures on June 15, 2023. Interest is payable monthly at the Eurodollar rate plus 2.25% or Wells Fargo Capital Finance, LLC's prime rate (“WF Prime”) at the Company's election on outstanding balances up to $6,000,000 and WF Prime on amounts in excess of $6,000,000. The line of credit weighted average interest rate including unused facility fees was approximately 3.41% as of April 3, 2022. 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 of April 3, 2022.

The outstanding balance on the Uniroyal Line of Credit was $12,635,149 and $11,400,409 as of April 3, 2022 and January 2, 2022, 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 April 3, 2022, the Uniroyal Line of Credit provided additional availability of approximately $394,000 and, combined with its total cash balance of $111,728, Uniroyal had liquidity of approximately $506,000 as of April 3, 2022.

UGL has available an £11,000,000 (approximately $14.4 million) revolving line of credit financing agreement with PNC Business Credit (‘‘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 2.72% as of April 3, 2022. 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 UGL’s assets and includes certain financial and restrictive covenants. The Company was in compliance with these covenants as of April 3, 2022 except for the ratio of Earnings before interest, taxes, depreciation and amortization (“EBITDA”) to debt service charges, which was less than the required minimum of 1.15 to 1. PNC Business Credit is in the process of reviewing an amendment to revise the covenant calculation to more closely align with the current business environment.

The outstanding balance on the UGL Line of Credit was £6,706,359 and £4,760,432 ($8,808,447 and $6,416,510) as of April 3, 2022 and January 2, 2022, 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 and inventories at April 3, 2022, the UGL Line of Credit provided additional availability of approximately $121,000 and, combined with its total cash balance of $205,067, UGL had liquidity of approximately $326,000 as of April 3, 2022.

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89.~~Lines~~ ofLong-term ~~Credit~~Debt

The Company's Uniroyal subsidiary has available a $15,000,000 revolving line of credit financing agreement with Wells Fargo Capital Finance, LLC (“Uniroyal Line of Credit”), which matures on June 15, 2023. Interest is payable monthly at the Eurodollar rate plus 2.25% or Wells Fargo Capital Finance, LLC's prime rate (“WF Prime”) at the Company's election on outstanding balances up to $6,000,000 and WF Prime on amounts in excess of $6,000,000. The effective interest rate including unused facility fees was 3.25% as of October 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 of October 3, 2021.

The outstanding balance on the Uniroyal Line of Credit was $10,934,201 and $9,204,572 as of October 3, 2021 and January 3, 2021, 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 October 3, 2021, the Uniroyal Line of Credit provided additional availability of approximately $536,000 and, combined with its total cash balance of $411,928, Uniroyal had liquidity of approximately $948,000 as of October 3, 2021.

In June 2021, UGL’s bank lending facilities with Lloyds Bank Commercial Finance Limited (“Lloyds”), including its revolving line of 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. A loss of £46,813 ($64,768) was recognized on this transaction and is recorded in general and administrative expenses in the consolidated statement of operations for the nine months ended October 3, 2021. Debt issuance costs of £247,114 ($341,895) related to this transaction were capitalized. These capitalized costs are being amortized over 36 months. The balance of these debt issuance costs was £226,063 ($306,157) as of October 3, 2021. The Company has classified these debt issuance costs within other long-term assets in the accompanying consolidated balance sheet.

UGL has available £11,000,000 (approximately $14.9 million) under the revolving line of credit financing agreement with PNC Business Credit (‘‘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 effective interest rate was 2.54% as of October 3, 2021. 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 October 3, 2021.

The outstanding balance on the New UGL Line of Credit was £5,074,919 ($6,872,973) as of October 3, 2021 and on the Old UGL Line of Credit was £6,268,526 ($8,556,011) as of January 3, 2021. The Company has classified the outstanding balance on its line of credit within current liabilities in the accompanying consolidated balance sheets. Based upon eligible accounts receivable, inventories and equipment at October 3, 2021, the New UGL Line of Credit provided additional availability of approximately $227,000 and, combined with its total cash balance of $216,524, UGL had liquidity of approximately $444,000 as of October 3, 2021.

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9.Long-term Debt

Long-term debt consists of the following:

	Interest Rate	~~October~~April 3, ~~2021~~2022			January 32, ~~2021~~2022
Notes Payable
Wells Fargo Capital Finance, LLC	WF Prime	$	~~523~~366,~~667~~567		$	~~785~~471,~~501~~299
Lloyds Bank Commercial Finance Limited (1)	4.43%		-			51,905
Automotive lenders	0.0%		3,538,929			3,631,715
Lloyds Bank Commercial Finance Limited (1)	4.87%		-			156,422
Wells Fargo Capital Finance, LLC	LIBOR+3.00%		2,508,800			2,508,800
Automotive lenders (2)	0.0%		3,378,148			3,268,664
			6,414,296			6,611,814
Wells Fargo Capital Finance, LLC	LIBOR+3.00%		2,495,942			2,432,353
			6,397,757			6,694,845
Equipment Financing Obligations
Kennet Equipment Leasing Limited	10.90%		-			23,960
Regents Capital Corporation	6.20%-7.36%		294,578			339,859
Regents Capital Corporation	6.20%-7.24%		426,618			678,329
PNC Business Credit	BoE Base + 3.00%		2,054,428			2,268,489
Lloyds Bank Commercial Finance Limited (1)	3.95%		-			1,373,929
			2,349,006			2,608,348
PNC Business Credit (1)	BoE Base + 3.00%		2,279,290			-
Total			8,763,302			9,220,162
			2,705,908			2,076,218
Less: Current portion			(3,489,646	)		(2,365,905	)
Total			9,103,665			8,771,063
Long-term portion		$	5,273,656		$	6,854,257
Less: Current portion			(2,915,352	)		(1,432,301	)
Long-term Portion		$	6,188,313		$	7,338,762

(1)

In June 2021, UGL’s long-term debt with Lloyds Bank Commercial Finance Limited was refinanced with PNC Business Credit. The loan is payable in monthly principal installments of £33,000 ($45,657) beginning January 2022 with the remaining principal due May 2024. The loan is secured by certain equipment.

(2)

In September 2021, the Company received $137,815 related to the second installment of loans from the automotive lenders per the original loan agreement. The remainder of the second installment of loans of approximately $260,000 was received in October 2021. 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.

Paycheck Protection Program Loan

~~Paycheck~~In ~~Protection~~March ~~Program~~2021, ~~Loans~~the Company’s U.S. operations received $2,000,000 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 was scheduled to mature in March 2026 and bore an interest rate of 1.0%. The loan may be prepaid at any time prior to maturity with no prepayment penalties.

InAll ~~March~~or ~~2021~~a ~~and~~portion inof ~~April~~the ~~2020,~~loan may be forgiven by the ~~Company’s~~SBA ~~U.S.~~for ~~operations~~costs ~~received~~the ~~$2,000,000~~Company ~~and~~incurred $2for payroll,~~217,500,~~ ~~respectively~~rent, inutilities ~~funds~~and ~~from~~all ~~One~~other ~~Community~~allowable ~~Bank~~expenses ~~through~~during the ~~Paycheck~~24-week period ~~Protection~~that ~~Program~~began ~~(“PPP”)~~March ~~administered~~1, ~~by the U~~2021.S. ~~Small~~The ~~Business~~Company ~~Administration~~used ~~(“SBA”)~~all ~~under~~proceeds from the ~~Coronavirus~~loan ~~Aid,~~to ~~Relief,~~maintain payroll and ~~Economic~~make ~~Security~~payments ~~Act~~for ~~(“the~~lease, ~~CARES~~utility and ~~Act”)~~other allowable expenses. ~~The~~In ~~$2,000,000~~accordance ~~loan~~with ~~(“Second~~International ~~Draw~~Accounting ~~PPP~~Standards ~~Loan~~(“IAS”) ~~matures~~20, in“Accounting ~~March~~for ~~2026~~Government Grants and ~~the~~Disclosure $2of Government Assistance,~~217,500~~” ~~loan~~the ~~(“First~~Company ~~Draw~~recognized the funding from the PPP ~~Loan”)~~as ~~matures~~grant inincome of $838,864 for the three months ended April ~~2022~~4, ~~and~~2021. ~~each~~This ~~bears~~amount anis ~~interest~~included ~~rate~~as a component of ~~1.0%.~~net ~~The~~other ~~loans~~(expense) ~~may~~income bein ~~prepaid~~the atconsolidated ~~any~~statement of ~~time~~operations ~~prior~~for tothe ~~maturity~~three ~~with~~months noended ~~prepayment~~April ~~penalties~~4, 2021.

~~All~~In orAugust a2021, ~~portion of~~ the ~~loans~~Company ~~may~~was notified ~~be forgiven~~ by the SBA ~~for costs the Company incurred for payroll, rent, utilities and all other allowable expenses during the 24-week period~~ that ~~began 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 (“IAS”) 20, “Accounting for Government Grants and Disclosure of ~~Government~~its ~~Assistance,” the Company recognized the funding from the~~ PPP asLoan ~~grant~~was ~~income of $2,000,000 for the nine months ended October 3, 2021 and $33,824 and $2,217,500 for the three and nine months ended October 4, 2020, respectively~~forgiven. ~~These amounts are included as a component of net other income (expense) in the consolidated statements of operations.~~

~~In June 2021 and August 2021, the Company was notified that all of its First and Second Draw PPP Loans, respectively, were forgiven.~~ 11

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10. Related Party Obligations

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

	Interest Rate	~~October~~April 3, ~~2021~~2022		January 32, ~~2021~~2022
Senior subordinated promissory note	9.25%	$	2,000,000	$	2,000,000
Senior subordinated promissory notes	9.25%	$	2,000,000	$	2,000,000
Senior secured promissory note	10.00%		765,655		765,655
Subordinated secured promissory note	8.00%		225,000		225,000
Subordinated secured promissory note	0.00%		1,225,911		1,225,911
Long-term debt to related parties		$	4,216,566	$	4,216,566

The above notes were issued to the Company’s majority shareholder. The first three notes above were amended on March 2625, ~~2021~~2022 to change the maturity date to January 15, ~~2023~~2024. No other terms of the notes were changed. Interest expense on these notes was $~~254~~79,~~894~~616 and $~~239~~95,~~982~~033 for the ~~nine~~three months ended April ~~October~~ 3, ~~2021~~2022 and ~~October~~April 4, ~~2020~~2021, respectively. Accrued interest ~~related to these notes~~ of $23,~~786~~367 and $4723,~~573~~786 related to these notes was included in accrued expenses and other liabilities in the accompanying consolidated balance sheets as of ~~October~~April 3, ~~2021~~2022 and January 32, ~~2021~~2022, respectively.

~~For~~The ~~the~~Company ~~nine~~has ~~months~~finance ~~2020,~~leases ~~proceeds~~under which ofit ~~$783,958~~leases ~~were~~its ~~received~~main ~~from~~U.S. manufacturing facility and ~~payments~~certain ofother ~~$675,000~~property ~~were~~from ~~made~~a onrelated ~~subordinated~~party ~~secured~~lessor ~~promissory~~entity, ~~notes~~owned toby ~~our~~the Company’s majority shareholder. ~~Proceeds~~These related party finance leases expire at various dates from October 2023 through October 2033. Related party finance leases are included in property and equipment, net, current maturities of ~~$200~~related party finance lease liabilities,~~000~~ ~~were~~and ~~received~~related party ~~from~~finance alease ~~short~~liabilities, less current portion in the accompanying consolidated balance sheets. There were no new right-~~term~~of-use assets ~~advance~~obtained ~~from~~in ~~our~~exchange ~~majority~~for ~~shareholder~~related ~~during~~party ~~the~~finance ~~first~~lease ~~nine~~obligations for the three months ofended ~~2020~~April ~~which~~3, ~~was~~2022 ~~repaid~~and inApril 4, 2021. The Company has security deposits aggregating $267,500 held by the ~~same~~lessor ~~period~~entity.

The ~~Company~~components ~~has~~of ~~finance~~lease ~~leases~~expense ~~under which it leases its main U.S. manufacturing facility and certain other property from a related party lessor entity that is owned by~~ for 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. There were no new right-of-use assets obtained in exchange for ~~related party finance lease obligations for~~ the three ~~and nine~~ months ended ~~October~~April 3, ~~2021~~2022 and ~~October~~April 4, ~~2020.~~2021 are as follows:

The components of lease expense for the related party finance leases for the three and nine months ended October 3, 2021 and October 4, 2020 are as follows:

	Three Months Ended
	April 3, 2022		April 4, 2021
Finance lease expense:
Amortization of right-of-use assets	$	41,794	$	41,794
Interest on lease liabilities		100,130		103,299
Total finance lease expense	$	141,924	$	145,093

	Three Months Ended				Nine Months Ended
	October 3, 2021		October 4, 2020		October 3, 2021		October 4, 2020
Finance lease expense:
Amortization of right-of-use assets	$	41,794	$	41,794	$	125,382	$	125,382
Interest on lease liabilities		100,281		104,685		306,126		315,993
Total finance lease expense	$	142,075	$	146,479	$	431,508	$	441,375

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Cash paid for amounts included in the measurement of related party finance lease liabilities for the three ~~and nine~~ months ended ~~October~~April 3, ~~2021~~2022 and ~~October~~April 4, ~~2020~~2021 are as follows:

Three Months Ended

~~Nine Months Ended~~

October 3, 2021

October 4, 2020

October 3, 2021

October 4, 2020

April 3, 2022

April 4, 2021

Operating cash flows from finance leases

100,~~281~~130

~~104~~103,~~685~~299

~~306,126~~

~~315,993~~

Financing cash flows from finance leases

3538,~~827~~483

3134,~~914~~302

~~105,183~~

~~93,801~~

Supplemental balance sheet and other information regarding related party finance leases are as follows:

	October 3, 2021			January 3, 2021
	April 3, 2022			January 2, 2022
Finance leases:
Property and equipment, net	$	1,~~915~~831,~~299~~710		$	21,~~040~~873,~~681~~504
Current maturities of finance lease liabilities	$	~~162~~172,~~662~~278		$	~~149~~167,~~366~~389
Finance lease liabilities, less current portion		2,~~385~~300,~~925~~866			2,~~504~~344,~~404~~239
Total finance lease liabilities	$	2,~~548~~473,~~587~~144		$	2,~~653~~511,~~770~~628
Weighted average remaining lease term		10.73 years			1110.25 years
Weighted average discount rate		16.~~90%~~93	%		16.~~77%~~95	%

Maturities of related party finance lease liabilities as of ~~October~~April 3, ~~2021~~2022 are as follows:

	Totals
Due in one year or less	$	~~561~~196,~~911~~672
Due after one year through two years		~~557~~523,~~862~~777
Due after two years through three years		~~478~~469,~~381~~141
Due after three years through four years		~~471~~473,~~228~~329
Due after four years through five years		~~475~~477,~~437~~558
Thereafter		32,~~234~~994,~~403~~916
Total lease payments		5,~~779~~135,~~222~~393
Less: Interest		(32,~~230~~662,~~635~~249	)
Total related party finance lease liabilities	$	2,~~548~~473,~~587~~144

~~Quarterly~~The ~~preferred~~lower ~~dividend~~amount ~~payments~~that onis ~~preferred~~due ~~units~~in one ~~and~~year ~~preferred~~or ~~stock~~less ~~(collectively~~in ~~“preferred~~the ~~shares”)~~above ~~were~~table ~~deferred~~reflects ~~beginning with~~ the ~~three~~interest ~~months~~expense ~~ended~~that ~~December~~was ~~29,~~waived ~~2019~~by ~~through~~ the ~~three~~Company’s ~~months~~majority ~~ended~~shareholder ~~October~~for ~~3, 2021. During~~ the remaining ~~third~~nine ~~quarter~~months of ~~2021,~~fiscal ~~the~~year ~~owners~~2022 ofand the ~~preferred~~first ~~shares~~three ~~(“preferred~~months ~~shareholders”)~~of ~~agreed~~fiscal toyear an2023. ~~amendment~~The toCompany’s ~~the~~majority ~~documents~~shareholder ~~that~~also waived ~~govern~~ the ~~dividends~~interest ~~(“amended~~expense ~~documents”)~~on ~~whereby~~ the ~~accrued dividends were forgiven. As a result, the total balance of accrued dividends of approximately~~ $62,~~100~~000,000 ~~was~~senior ~~derecognized~~subordinated aspromissory ofnotes ~~October~~over ~~3, 2021. In addition, under~~ the ~~amended~~same ~~documents the preferred shareholders are no longer entitled to a quarterly dividend until such~~ time ~~as the Company declares a dividend payable~~period. The ~~preferred~~total ~~shares~~amount ~~are~~of ~~primarily~~cost savings ~~owned~~will bybe ~~the~~approximately ~~Company’s~~$446,000 ~~majority~~for ~~shareholder.~~fiscal ~~See~~year ~~Note~~2022 1and $148,000 for ~~further~~fiscal ~~discussion.~~year 2023.

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11. Leases

The Company has operating leases for equipment and office facilities and finance leases for equipment. These leases expire at various dates from ~~October~~April ~~2021~~2022 through March 2039. Operating leases are included in operating lease right-of-use assets, net, accrued expenses and other liabilities, and operating lease liabilities, less current portion in the accompanying consolidated balance sheets. Finance leases are included in property and equipment, net, current maturities of finance lease liabilities, and finance lease liabilities, less current portion in the accompanying consolidated balance sheets. For the three and nine months ended October 3, 2021, there were $11,986 of new right-of-use assets obtained in exchange for finance lease obligations and $0 obtained in exchange for operating lease obligations. There were no new right-of-use assets obtained in exchange for lease obligations for the three ~~and nine~~ months ended ~~October~~April 3, 2022 and April 4, ~~2020~~2021.

The components of lease expense for the three ~~and nine~~ months ended ~~October~~April 3, ~~2021~~2022 and ~~October~~April 4, ~~2020~~2021 are as follows:

Three Months Ended

~~Nine Months Ended~~

October 3, 2021

October 4, 2020

October 3, 2021

October 4, 2020

April 3, 2022

April 4, 2021

Operating lease expense

~~256~~240,~~638~~647

~~249~~253,~~069~~945

~~763,344~~

~~746,045~~

Finance lease expense:

Amortization of right-of-use assets

1815,~~037~~961

4924,~~803~~982

~~62,662~~

~~158,658~~

Interest on lease liabilities

32,~~650~~678

75,~~090~~267

~~13,302~~

~~24,441~~

Total finance lease expense

2118,~~687~~639

5630,~~893~~249

~~75,964~~

~~183,099~~

Cash paid for amounts included in the measurement of lease liabilities for the three ~~and nine~~ months ended ~~October~~April 3, ~~2021~~2022 and ~~October~~April 4, ~~2020~~2021 are as follows:

Three Months Ended

~~Nine Months Ended~~

October 3, 2021

October 4, 2020

October 3, 2021

October 4, 2020

April 3, 2022

April 4, 2021

Operating cash flows from operating leases

~~336~~235,~~853~~697

~~249~~292,~~920~~219

~~815,983~~

~~670,267~~

Operating cash flows from finance leases

32,~~650~~678

75,~~090~~267

~~13,302~~

~~24,441~~

Financing cash flows from finance leases

6059,~~062~~262

7172,~~720~~812

~~197,579~~

~~289,948~~

Supplemental balance sheet and other information related to operating leases are as follows:

	October 3, 2021			January 3, 2021
	April 3, 2022			January 2, 2022
Operating leases:
Operating lease right-of-use assets, net	$	5,~~781~~367,~~541~~004		$	65,~~242~~626,~~736~~542
Accrued expenses and other liabilities	$	423,720		$	440,386
Operating lease liabilities, current portion (1)	$	410,282		$	419,001
Operating lease liabilities, less current portion		5,~~518~~158,~~920~~797			5,~~893~~391,~~268~~395
Total operating lease liabilities	$	5,~~942~~569,~~640~~079		$	65,~~333~~810,~~654~~396
Weighted average remaining lease term		15.648 years			15.754 years
Weighted average discount rate		7.~~33%~~37	%		7.~~26%~~35	%

17(1) Included in accrued expenses and other liabilities in the consolidated balance sheets.

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Supplemental balance sheet and other information related to finance leases are as follows:

	October 3, 2021			January 3, 2021
	April 3, 2022			January 2, 2022
Finance leases:
Property and equipment, net	$	~~929~~895,~~318~~872		$	1911,~~084,394~~833
Current maturities of finance lease liabilities	$	~~240~~165,~~257~~828		$	~~257~~210,~~298~~007
Finance lease liabilities, less current portion		6621,~~649~~288			~~235~~36,~~116~~372
Total finance lease liabilities	$	~~306~~187,~~906~~116		$	~~492~~246,~~414~~379
Weighted average remaining lease term		10.396 years			1.814 years
Weighted average discount rate		4.6887	%		4.5675	%

Maturities of operating and finance lease liabilities as of ~~October~~April 3, ~~2021~~2022 are as follows:

	Operating Leases			Finance Leases
Due in one year or less	$	~~845~~808,~~016~~424		$	~~249~~170,~~718~~533
Due after one year through two years		~~730~~591,~~981~~404			5915,~~096~~505
Due after two years through three years		~~544~~512,~~702~~045			43,~~823~~262
Due after three years through four years		~~527~~512,~~972~~045			3,000
Due after four years through five years		~~527~~512,~~972~~045			21,~~752~~251
Thereafter		76,~~358~~880,~~883~~865			-
Total lease payments		109,~~535~~816,~~526~~828			~~319~~193,~~389~~551
Less: Interest		(4,~~592~~247,~~886~~749	)		(126,~~483~~435	)
Total	$	5,942,640		$	306,906
Total lease liabilities	$	5,569,079		$	187,116

1812. Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss for the three months ended April 3, 2022 and April 4, 2021 were as follows:

	Minimum Benefit Liability Adjustments			Foreign Currency Translation Adjustment			Total

Balance at January 3, 2021	$	(154,662	)	$	(1,116,659	)	$	(1,271,321	)

Other comprehensive income		-			56,174			56,174

Balance at April 4, 2021	$	(154,662	)	$	(1,060,485	)	$	(1,215,147	)

Balance at January 2, 2022	$	(77,138	)	$	(1,194,345	)	$	(1,271,483	)

Other comprehensive loss		-			(151,348	)		(151,348	)

Balance at April 3, 2022	$	(77,138	)	$	(1,345,693	)	$	(1,422,831	)

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1213.~~Accumulated~~ ~~Other~~(Loss) ~~Comprehensive~~Income ~~Loss~~per Common Share

Due ~~The~~to ~~changes~~the net loss allocable to common shareholders for the three months ended April 3, 2022, the calculations of basic and diluted loss per share were the same since including options (as provided under the Company’s 2015 Stock Option Plan) to purchase shares of the Company’s common stock in ~~accumulated~~the ~~other~~calculation ~~comprehensive~~of diluted loss per share would have been anti-dilutive. However, if diluted earnings per share had been reported for the three months ended ~~October~~April 3, ~~2021~~2022, ~~and~~the ~~October~~calculation would have excluded options to purchase 124,050 shares of common stock because the options’ weighted average exercise price of $14.05 per share was greater than the average market price of the common shares. The calculation of diluted earnings per share for the three months ended April 4, ~~2020~~2021 ~~were~~excluded asoptions ~~follows:~~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.

	Minimum Benefit Liability Adjustments			Foreign Currency Translation Adjustment			Total
Balance at July 5, 2020	$	5,694		$	(1,651,049	)	$	(1,645,355	)
Other comprehensive income		-			235,736			235,736
Balance at October 4, 2020	$	5,694		$	(1,415,313	)	$	(1,409,619	)
Balance at July 4, 2021	$	(154,662	)	$	(1,072,293	)	$	(1,226,955	)
Other comprehensive loss		-			(103,348	)		(103,348	)
Balance at October 3, 2021	$	(154,662	)	$	(1,175,641	)	$	(1,330,303	)

14.

Revenue

The changes in accumulated other comprehensive loss for the nine months ended October 3, 2021 and October 4, 2020 were as follows:

	Minimum Benefit Liability Adjustments			Foreign Currency Translation Adjustment			Total
Balance at December 29, 2019	$	5,694		$	(1,303,133	)	$	(1,297,439	)
Other comprehensive loss		-			(112,180	)		(112,180	)
Balance at October 4, 2020	$	5,694		$	(1,415,313	)	$	(1,409,619	)
Balance at January 3, 2021	$	(154,662	)	$	(1,116,659	)	$	(1,271,321	)
Other comprehensive loss		-			(58,982	)		(58,982	)
Balance at October 3, 2021	$	(154,662	)	$	(1,175,641	)	$	(1,330,303	)

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13.Income (Loss) per Common Share

The calculations of diluted earnings per share for the three and nine months ended October 3, 2021 excluded options (as provided under the Company’s 2015 Stock Option Plan) to purchase 133,050 shares of common stock because the options’ weighted average exercise price of $14.04 per share was greater than the average market prices of the common shares. Due to the net loss allocable to common shareholders for the three and nine months ended October 4, 2020, the calculations of basic and diluted loss per share were the same since including options to purchase shares of the Company’s common stock in the calculations of diluted loss per share would have been anti-dilutive. However, if diluted earnings per share had been reported for the three and nine months ended October 4, 2020, the calculations would have excluded options to purchase 151,800 shares of common stock because the options’ weighted average exercise price of $14.02 per share was greater than the average market prices of the common shares.

14.Revenue

The Company recognizes revenue and related accounts receivable 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 the Company expects to receive in exchange for products transferred to the customer.

The following table sets forth revenue disaggregated by the Company’s automotive and industrial sectors for the three ~~and nine~~ months ended ~~October~~April 3, ~~2021~~2022 and ~~October~~ April 4, ~~2020~~2021:

Three Months Ended

~~Nine Months Ended~~

October 3, 2021

October 4, 2020

October 3, 2021

October 4, 2020

April 3, 2022

April 4, 2021

Revenue by sector:

Automotive

811,~~710~~917,~~220~~231

914,~~064~~022,~~735~~402

~~32,867,633~~

~~24,866,376~~

Industrial

78,~~675~~153,~~694~~320

67,~~107~~873,~~163~~599

~~23,163,517~~

~~18,662,017~~

Total Revenue

1620,~~385~~070,~~914~~551

1521,~~171~~896,~~898~~001

~~56,031,150~~

~~43,528,393~~

The following table sets forth revenue disaggregated by the geographic locations of the Company’s customers for the three ~~and nine~~ months ended ~~October~~April 3, ~~2021~~2022 and April ~~October~~ 4, ~~2020~~2021:

Three Months Ended

~~Nine Months Ended~~

October 3, 2021

October 4, 2020

October 3, 2021

October 4, 2020

April 3, 2022

April 4, 2021

Revenue by customer location:

North America

910,~~347~~249,~~903~~943

710,~~562~~166,~~196~~297

~~29,245,296~~

~~23,714,242~~

Europe

68,~~083~~297,~~425~~226

610,~~529~~303,~~779~~440

~~23,564,685~~

~~17,139,460~~

Asia

~~754~~1,~~881~~034,131

~~885~~1,~~984~~281,196

~~2,763,902~~

~~2,214,264~~

Other

~~199~~489,~~705~~251

~~193~~145,~~939~~068

~~457,267~~

~~460,427~~

Total Revenue

1620,~~385~~070,~~914~~551

1521,~~171~~896,~~898~~001

~~56,031,150~~

~~43,528,393~~

15. Subsequent Events

The Company has evaluated subsequent events occurring through ~~November~~May 1613, ~~2021~~2022 for events requiring recording or disclosure in the ~~October~~April 3, ~~2021~~2022 consolidated financial statements. There Aswere ~~previously~~no ~~stated,~~material inevents ~~October~~or ~~2021~~transactions ~~the~~occurring ~~Company~~during ~~received~~this ~~approximately~~period ~~$260,000~~requiring asrecognition ~~part~~or ~~of the second installment of loans from automotive lenders per the original loan agreement~~disclosure. ~~These amounts are due to be repaid in the first quarter of 2023.~~

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Item 2.

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 a 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 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 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 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 by 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 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 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.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses, and related ~~disclosures~~ disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and assumptions based upon historical ~~experience~~ experience and various other factors and circumstances. We believe that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions under different future circumstances. For further discussion of our significant accounting policies, refer to Note 1 – “Basis of Presentation and Summary of Significant Accounting Policies” to the consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies, Judgments and Estimates” in our Annual Report on Form 10-K for the fiscal year ended January 32, ~~2021~~2022.

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Table of Contents

Overview:

We and our subsidiaries use a 52/53-week fiscal year ending on the Sunday nearest to December 31. The current year ending January 21, ~~2022~~2023 isand ~~a 52-week year whereas~~ the prior year ended January 3 2, ~~2021~~2022 are ~~was a 53~~52-week ~~year~~years. Our 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 our year-end is not material. Both the three months ended October 3, 2021 and October 4, 2020 were 13-week periods while the nine months ended October 3, 2021 was a 26-week period and the nine months ended October 4, 2020 was a 27-week period.

Our Earby, England operation’s functional currency is the British Pound Sterling (“Pound Sterling”) and has sales and purchases transactions that are denominated in ~~currencies~~ currencies other than the Pound Sterling, principally the Euro. Approximately 3026% of our global revenues and 33% of our global raw material ~~purchases~~ purchases are derived from these Euro transactions.

The average year-to-date exchange rate for the Pound Sterling to the U.S. Dollar was approximately 82.8% ~~higher~~lower and the average exchange rate for the Euro to the Pound Sterling was approximately 2 4.4% lower in ~~2021~~2022 compared to ~~2020~~2021. These exchange rate changes had the effect of ~~increasing~~decreasing net sales by approximately $1515,~~841,~~000 for ~~the~~ ~~nine~~the three months ended ~~October~~April 3, ~~2021~~2022. The overall currency effect on our net ~~income~~loss was a negative amount of approximately $~~148~~44,000 for the ~~nine~~three months ended ~~October~~April 3, ~~2021~~2022.

The ~~current~~ coronavirus pandemic (“COVID-19”) and its related disruption of the supply chain has had an impact on markets we serve, ~~and~~ our operations and liquidity. Since COVID-19 is a continually evolving situation, we cannot predict the long-term impact it will have on the economy or our business. The impact could have a material adverse effect on our financial position, results of operations and cash flows, which may require us to obtain additional financing. ~~As discussed below, we continue to pursue supplementary cash flow opportunities.~~

~~Through~~We ~~the~~continue ~~Paycheck~~to ~~Protection~~pursue ~~Program (“PPP”)~~supplementary ~~administered~~cash byflow ~~the~~opportunities, ~~U.S.~~which ~~Small~~have ~~Business~~included ~~Administration~~loans ~~(“SBA”)~~through ~~under~~ the ~~Coronavirus~~Paycheck ~~Aid,~~Protection ~~Relief,~~Program ~~and Economic Security Act~~ (“~~the CARES Act~~PPP”)~~, our U~~.S. ~~operations~~Also ~~received~~to ~~$2,000,000~~preserve ~~(“Second~~cash and ~~Draw~~provide ~~PPP~~additional ~~Loan”) and $2~~liquidity,~~217,500~~ ~~(“First Draw~~our ~~PPP~~majority ~~Loan”)~~shareholder inwaived ~~March~~the ~~2021~~interest ~~and~~expense inon ~~April~~certain ~~2020,~~related-party ~~respectively,~~debt inand ~~funds~~our ~~from~~executive officers ~~One~~agreed ~~Community~~to ~~Bank.~~a Wereduction ~~used~~in ~~all~~their ~~proceeds~~salaries. ~~from~~In ~~these PPP~~addition, ~~loans~~no ~~for~~quarterly ~~allowable~~preferred ~~expenses~~dividends ~~(as~~were ~~defined~~declared in the ~~PPP~~three ~~loans)~~months ~~and~~ended April ~~applied~~3, ~~for~~2022, ~~forgiveness~~while ofquarterly ~~the~~preferred ~~PPP~~dividend ~~loans~~payments inwere ~~accordance~~deferred beginning with the ~~terms of~~three ~~the~~months ~~CARES~~ended ~~Act.~~December ~~In June 2021 and August 2021~~29, we2019 ~~were~~through the ~~notified~~three ~~that~~months ~~all~~ended ofApril ~~our First and Second Draw PPP Loans~~4, ~~respectively, were forgiven~~2021. See ~~Note~~“Liquidity 9and toSources ~~the~~of ~~consolidated~~Capital” ~~financial~~below ~~statements~~ for further discussion.

For the U.K. operations, during the third quarter of 2021 and 2020, we recorded reimbursed costs of approximately $49,000 and $474,000, respectively, and during the first nine months of 2021 and 2020 we recorded reimbursed costs of approximately $150,000 and $1,560,000, respectively, under the Coronavirus Job Retention Scheme (“CJRS”) set up 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 third quarter and first nine months of 2021 reflected that employees were furloughed significantly less than in the same periods of 2020. 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.20

Also for the U.K. operations, in June 2021 its bank lending facilities with Lloyds Bank Commercial Finance Limited (“Lloyds”) were refinanced with PNC Business Credit (“PNC”). PNC provided us additional availability by expanding its borrowing base to include eligible equipment. This transaction was accounted for as a debt extinguishment per Accounting Standards Codification (“ASC”) 470, “Debt”, under which the existing Lloyds debt was derecognized and the new PNC debt was recorded at fair value. A loss of £46,813 ($64,768) was recognized on this transaction and is recorded in general and administrative expenses in the consolidated statement of operations for the nine months ended October 3, 2021. Debt issuance costs of £247,114 ($341,895) related to this transaction were capitalized. These capitalized costs are being amortized over 36 months. The Company has classified these debt issuance costs within other long-term assets in the accompanying consolidated balance sheet. See Notes 8 and 9 to the consolidated financial statements for further discussion.

Additionally for the U.K. operations, in September 2021 we received $137,815 related to the second installment of loans from the automotive lenders per the original loan agreement. The remainder of the second installment of loans of approximately $260,000 was received in October 2021. 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

Three Months Ended ~~October~~April 3, ~~2021~~2022 Compared to the Three Months Ended ~~October~~ April 4, ~~2020~~2021

The following table sets forth, for the three months ended ~~October~~ April 3, ~~2021~~2022 (“three months ~~2021~~2022”) and ~~October~~April 4, ~~2020~~2021 (“three months ~~2020~~2021”), certain operational data including their respective percentage of net sales:

	Three Months Ended
	October 3, 2021					October 4, 2020					Change			% Change
	April 3, 2022							April 4, 2021						Change			% Change
Net Sales	$	1620,~~385~~070,~~914~~551		~~100.0%~~	100.0	$%	~~15,171,898~~	$	21,896,001	~~100.0%~~	$	~~1,214,016~~100.0	%	~~8.0%~~$	(1,825,450	)		-8.3	%
Cost of Goods Sold		1417,~~430~~405,~~915~~495		~~88.1%~~	86.7	%	~~13,114,967~~		18,658,664	~~86.4%~~		~~1,315,948~~85.2	%	~~10.0%~~	(1,253,169	)		-6.7	%
Gross Profit		12,~~954~~665,~~999~~056		~~11.9%~~	13.3	%	~~2,056,931~~		3,237,337	~~13.6%~~		~~(101,932~~14.8	)%	~~-5.0%~~	(572,281	)		-17.7	%
Operating Expenses:
Selling		~~681~~724,~~397~~321		~~4.2%~~	3.6	%	~~778,699~~		898,712	~~5.1%~~		~~(97,302~~4.1	)%	~~-12.5%~~	(174,391	)		-19.4	%
General and administrative		1,~~555~~800,~~660~~218		~~9.5%~~	9.0	%	~~1,957,486~~		1,579,027	~~12.9%~~		~~(401,826~~7.2	)%	~~-20.5%~~	221,191			14.0	%
Research and development		~~307~~389,~~283~~108		~~1.9%~~	1.9	%	~~198,182~~		327,458	~~1.3%~~		~~109,101~~1.5	%	~~55.1%~~	61,650			18.8	%
Total Operating Expenses		2,~~544~~913,~~340~~647		~~15.5%~~	14.5	%	~~2,934,367~~		2,805,197	~~19.3%~~		~~(390,027~~12.8	)%	~~-13.3%~~	108,450			3.9	%
Operating Loss		(589,341	)	-3.6%			(877,436	)		-5.8%		288,095		-32.8%
Operating (Loss) Income		(248,591	)		-1.2	%			432,140			2.0	%		(680,731	)		<-100	%
Interest expense		(~~430~~438,~~177~~508	)	~~-2.6%~~	-2.2	%	~~(367,454~~	)	(403,746	~~-2.4%~~)		~~(62,723~~-1.8	)%	~~17.1%~~	(34,762	)		8.6	%
Funding from Paycheck Protection Program		-		~~0.0%~~	0.0	%	~~33,824~~		838,864	~~0.2%~~		~~(33,824~~3.8	)%	~~-100%~~	(838,864	)		-100	%
Other (expense) income		(714,~~381~~396	)	~~0.0%~~	-0.1	%	~~85,753~~		206,304	~~0.6%~~		~~(93,134~~0.9	)%	~~<-100%~~	(220,700	)		<-100	%
Loss before Tax Benefit		(1,026,899	)	-6.3%			(1,125,313	)		-7.4%		98,414		-8.7%
(Loss) Income before Tax (Benefit) Provision		(701,495	)		-3.5	%			1,073,562			4.9	%		(1,775,057	)		<-100	%
Tax benefit		(202,925	)	-1.2%			(111,318	)		-0.7%		(91,607	)	82.3%
Tax (benefit) provision		(156,139	)		-0.8	%			37,561			0.2	%		(193,700	)		<-100	%
Net Loss		(823,974	)	-5.0%			(1,013,995	)		-6.7%		190,021		-18.7%
Net (Loss) Income		(545,356	)		-2.7	%			1,036,001			4.7	%		(1,581,357	)		<-100	%
Extinguishment of preferred stock dividend payable		6,158,311		37.6%			-			0.0%		6,158,311		-
Preferred stock dividend		-			0.0	%			(816,414	)		-3.7	%		816,414			-100	%
Preferred stock dividend		(539,866	)	-3.3%			(808,638	)		-5.3%		268,772		-33.2%
Net (Loss) Income Allocable to Common Shareholders	$	(545,356	)		-2.7	%		$	219,587			1.0	%	$	(764,943	)		<-100	%
Net Income (Loss) Allocable to Common Shareholders	$	4,794,471		29.3%		$	(1,822,633	)		-12.0%	$	6,617,104		<-100%

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Revenue:

Total revenue for the three months ~~2021~~2022 ~~increased~~ decreased $1,~~214~~825,~~016~~ 450 or 8.03% to $1620,~~385~~070,~~914~~551 compared to $1521,~~171~~896,~~898~~001 for the three months ~~2020~~2021. The ~~increase~~decrease in revenue included aan ~~favorable~~unfavorable currency ~~effect~~ effect of approximately $~~155~~515,000. ~~However,~~Sales ~~sales~~ in the ~~third~~first quarter of ~~2021~~2022 ~~declined~~increased $14,~~363~~396,~~321~~706 or 728.71% compared to the ~~second~~fourth quarter of 2021. Revenue for the three months 2022 reflects the impact of all of the price increases we implemented in 2021 due to higher costs of raw materials. To offset raw material price increases, we increased prices on most product categories in several of our markets three times in 2021 (effective dates in March, July and December of 2021) and in March 2022. We expect some additional price increases on other select products to be implemented during 2022 to further offset raw material price increases.

For the three months ~~2021~~2022 compared to the three months ~~2020~~2021, automotive sales declined 315.90% ~~primarily~~ due to a decline in sales of 14.4% (excluding the currency adjustment) and 9.1% for our U.K. ~~operations,~~ ~~which~~and ~~was partially offset by a 10.2% increase in automotive sales for our~~ U.S. operations, respectively. ~~Supply~~The supply chain issues currently being experienced by the OEM’s that use our automotive products has ~~lead~~led to temporary shutdowns of their production lines, which ~~negatively~~has ~~impacted~~had ~~our~~a ~~sales,~~negative ~~particularly at~~impact on our Usales.K. ~~operations~~Since ~~since~~these supply chain issues began during the ~~majority~~first quarter of ~~their~~2021, ~~business~~they ishad ina ~~the~~much ~~automotive~~greater ~~sector.~~impact ~~These~~on ~~supply~~our ~~chain~~sales ~~issues~~for ~~were~~the ~~also~~three ~~the~~months ~~primary reason~~2022 than on our sales for the three 14months 2021.1% ~~decline~~Automotive insales ~~automotive~~have ~~sales~~increased ~~when~~27.7% ~~comparing~~compared to the ~~third~~fourth quarter of 2021 ~~with~~due ~~the~~to ~~second~~shutdowns ~~quarter~~becoming ofless ~~2021~~prevalent and our price increases.

Additionally for the three months ~~2021~~2022 compared to the three months ~~2020~~2021, sales for the industrial sector increased 253.76% (254.320% before the currency effect) ~~mostly~~primarily due to an increase in our U.S. operations ~~(primarily in the~~ contract market~~) as well as in our U~~.K. ~~operations.~~ Sales for the industrial sector increased ~~slightly~~28.5% when ~~comparing~~ compared to the ~~third~~fourth quarter of 2021 ~~with~~due to ~~the~~growth ~~second~~in ~~quarter~~orders offrom ~~2021~~existing and new customers and our price increases.

Gross Profit:

Total gross profit for the three months ~~2021~~2022 decreased $~~101~~572,~~932~~ 281 or 517.07% to $12,~~954~~665,~~999~~056 compared to $23,~~056~~237,~~931~~337 for the three months ~~2020. Impacting the decrease was the CJRS reimbursement of $47,000 and $370,000 for the three months~~ 2021 ~~and 2020, respectively, for salaries of furloughed employees, which reduced manufacturing costs~~. ~~Excluding~~ ~~the~~The ~~CJRS reimbursement, gross profit would have increased $221,068. In addition, the~~ decrease in gross profit included an unfavorable currency effect of approximately $8794,000. The gross profit percentage was 1113.93% of sales for the three months ~~2021~~2022 compared to 1314.68% for the three months ~~2020~~2021. The gross profit and percentage for the three months ~~2021~~2022 were negatively impacted by supply chain issues, as discussed above, as well as higher costs of raw materials, freight and ~~freight~~power. ToAs ~~offset~~previously ~~raw material price increases~~discussed, we increased prices onin ~~most product categories during the first quarter of~~ 2021 ~~and~~(effective atdates in ~~the~~March, ~~beginning~~July and ~~end~~December of ~~the third quarter of~~ 2021) and in ~~several of~~March ~~our~~2022 ~~markets.~~to ~~However,~~offset weraw ~~have~~material ~~not~~price ~~realized the full impact of the~~ increases ~~yet~~. Both the gross profit amount and percentage for the ~~third~~ first quarter of ~~2021~~2022 improved when compared to the ~~second~~fourth quarter of 2021 gross profit amount and percentage of $1,~~821~~903,~~793~~982 and 10 12.31%, ~~respectively,~~ ~~as lower costs more than offset the reduction in sales~~respectively.

Operating Expenses:

Selling expenses for the three months ~~2021~~2022 decreased $97174,~~302~~ 391 or 1219.54% to $~~681~~724,~~397~~321 from $~~778~~898,~~699~~712 for the three months ~~2020. Selling expenses were not reduced for the three months~~ 2021 ~~but were reduced $43,000 for the three months 2020 due to the CJRS reimbursement~~. ~~Excluding the CJRS reimbursement, selling expenses would have decreased $140,302.~~The decrease in selling expenses ~~was~~included ~~partially offset by~~ a $920,000 ~~unfavorable~~favorable currency effect. When comparing the ~~third~~ first quarter of ~~2021~~2022 with the ~~second~~fourth quarter of 2021, selling expenses ~~decreased~~increased $~~153~~124,~~341~~152 or 1820.47%. The decrease from the three months ~~2020~~ 2021 was primarily due to alower ~~decline~~commissions infrom ~~employment costs for the~~ U.~~S. operations partially offset by the increase in the U.~~K. ~~operations (mainly~~automotive programs due to ~~the~~UGL’s ~~CJRS~~lower ~~reimbursement)~~automotive sales while the ~~decrease~~increase from the ~~second~~fourth quarter of 2021 was primarily due to ~~lower~~higher commissions from U.K. automotive programs due to UGL’s higher automotive sales.

General and administrative expenses for the three months ~~2021 decreased~~2022 increased $~~401~~221,~~826~~191 or 2014.50% to $1,~~555~~800,~~660~~218 from $1,~~957~~579,~~486~~027 for the three months ~~2020. General and administrative expenses were reduced $1,000 and $15,000 for the three months~~ 2021 ~~and 2020, respectively, due to the CJRS reimbursement~~. ~~Excluding the CJRS reimbursement, general and administrative expenses would have decreased $415,826.~~ The ~~decrease~~increase in general and administrative expenses was partially offset by a $2513,000 ~~unfavorable~~favorable currency effect. When comparing the ~~third~~first quarter of ~~2021~~2022 with the ~~second~~fourth quarter of 2021, general and administrative expenses increased $~~116~~248,~~172~~810 or 816.10%. ~~The~~Both ~~decrease~~the increase from the three months ~~2020~~2021 ~~was~~and ~~primarily due to lower costs related to cash management consulting services provided to us while~~ the ~~increase from the second~~ fourth quarter of 2021 ~~was~~were ~~primarily~~ due to ~~higher~~increases ~~costs related~~in tovarious ~~these~~expenses, ~~services. The decrease from~~ the ~~three~~most ~~months~~significant ~~2020~~of ~~was~~which ~~also due to a charge relating to the legal proceeding in the U.K. that~~ was ~~expensed~~higher ininsurance ~~2020~~costs.

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Table of Contents

Research and development expenses for the three months ~~2021~~ 2022 increased $~~109~~61,~~101~~650 or 5518.18% to $~~307~~389,~~283~~108 from $~~198~~327,~~182~~458 for the three months ~~2020~~2021. ~~Research~~The increase in research and development expenses was ~~were~~partially ~~reduced~~offset ~~$1,000 and~~by a $465,000 ~~for~~favorable ~~the~~currency ~~three~~effect. ~~months~~When ~~2021~~comparing ~~and~~the ~~2020,~~first ~~respectively,~~quarter ~~due~~of to2022 ~~the~~with ~~CJRS reimbursement. Excluding~~ the ~~CJRS~~fourth ~~reimbursement,~~quarter ~~research and~~of ~~development expenses would have increased $64~~2021,~~101. The increase in~~ research and development expenses ~~included~~increased a $1061,~~000 unfavorable~~906 ~~currency~~or ~~effect~~18.9%. ~~The~~Both the increase from the three months ~~2020~~2021 ~~was~~and ~~primarily~~the ~~due~~fourth toquarter ~~more~~of ~~activity including qualifying raw material~~2021 ~~substitutions~~were primarily due to ~~supply~~more ~~constraints.~~activity ~~When~~including ~~comparing~~ the ~~third~~testing ~~quarter~~and ofqualification ~~2021 with the second quarter~~ of ~~2021,~~raw ~~research~~material ~~and~~substitutions ~~development expenses~~as ~~decreased~~a ~~$24,682~~result orof ~~7.4%~~supply ~~as qualifying activity declined~~constraints.

Operating Loss:

Operating loss for the three months ~~2021~~2022 was $~~589~~248,~~341 compared~~591 compared to operating income of $~~877~~432,~~436~~140 for the three months ~~2020 and $784~~2021,~~398~~ ~~for~~a ~~the~~decrease ~~second quarter~~ of ~~2021~~$680,731. The ~~smaller~~decrease ~~operating~~was ~~loss~~due ~~for~~to the ~~three~~combination ~~months 2021~~of ~~compared to~~ the ~~three~~decline ~~months~~in ~~2020~~gross ~~was~~profit ~~due~~and to3.9% ~~lower~~increase in operating expenses. ~~more~~The ~~than~~operating ~~offsetting~~loss for the ~~decline~~fourth inquarter ~~gross~~of ~~profit~~2021 was $574,797. The smaller operating loss for the three months ~~2021~~2022 compared to the ~~second~~fourth quarter of 2021 was due to ~~the combination of~~ higher gross profit ~~and~~more ~~lower~~than ~~operating~~offsetting the increase in operating expenses. The operating loss percentage was -31.62% of sales for the three months ~~2021~~2022 compared to -52.80% for the three months ~~2020~~2021 and -43.47% for the ~~second~~fourth quarter of 2021.

Interest Expense:

Interest expense for the three months ~~2021~~2022 increased $6234,~~723~~ 762 or 178.16% to $~~430~~438,~~177~~508 from $~~367~~403,~~454~~746 for the three months ~~2020~~2021. The increase was primarily due to debt issuances and ~~capitalized debt issuance costs,~~ the amortization of ~~which~~capitalized ~~began~~debt inissuance ~~the third quarter of 2021~~costs, partially offset by debt repayments.

Funding from Paycheck Protection Program:

Funding from the PPP of $33838,~~824~~864 ~~(from the First Draw PPP Loan)~~ for the three months ~~2020~~2021 were the proceeds from the PPP ~~loans~~loan that we used during the period for allowable expenses under the PPP. As previously discussed, all of the ~~First and Second Draw~~ PPP ~~Loans~~Loan ~~were~~was forgiven in ~~June 2021 and~~ August 2021~~, respectively~~.

Other (Expense) Income:

Other expense for the three months ~~2021~~2022 was $(714,~~381~~396) ~~compared~~ compared to other income of $85206,~~753~~304 for the three months ~~2020~~2021. Included in other (expense) income 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 these currencies fluctuated during the period.

Income Taxes:

We file income tax returns in the United States as a C-Corporation, and in several state jurisdictions and in the United Kingdom. Our 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. We ~~made~~acquired ~~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 do not have a history of repatriating a significant portion of our foreign cash. However, if we decided to repatriate these foreign amounts to fund U.S. operations, we would not be required to pay any additional U.S. tax related to these amounts since we previously recorded a one-time transition tax on deemed repatriation of deferred foreign income.

The tax benefit for the three months ~~2021~~2022 was $~~202~~156,~~925~~139 compared to a tax provision of $~~111~~37,~~318~~561 for the three months ~~2020~~2021. The tax benefit for the three months ~~2021~~2022 was ~~attributable~~principally attributable to the results of ~~both~~ the U.S. ~~and U.K.~~ operations while the tax ~~benefit~~provision for the three months ~~2020~~2021 was ~~principally~~ attributable to the results of the U.K. operations partially offset by the results of the U.S. operations.

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Table of Contents

Preferred Stock Dividend:

Pursuant to the terms of their acquisitions, ~~the issuance of~~ preferred ownership units/stock of ~~UEP~~UEPH ~~Holdings, LLC~~ 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 5.0% to 8.0%. The dividend rate on the Series B ~~UEP~~UEPH ~~Holdings~~ preferred units which started at 5.5% increased by 0.5% on the anniversary of the issuance and is now at the maximum of 8.0%.

~~Quarterly~~Under ~~preferred~~amended ~~dividend~~documents ~~payments~~that ~~were~~govern ~~deferred~~the ~~beginning~~dividends, ~~with~~ the ~~three~~preferred ~~months~~shareholders ~~ended~~are ~~December~~no ~~29,~~longer ~~2019~~entitled ~~through~~to ~~the~~a ~~three~~quarterly ~~months~~dividend ~~ended~~until ~~October~~such 3,time ~~2021.~~as ~~During~~ the ~~third~~Company ~~quarter~~declares ofa ~~2021,~~dividend ~~the owners~~payable. ofTo ~~the~~preserve ~~preferred~~cash, ~~shares~~quarterly (“preferred ~~shareholders”)~~dividends ~~agreed~~were tonot andeclared ~~amendment~~on toUEPH ~~the~~Series ~~documents~~A ~~that~~and ~~govern~~Series ~~the~~B ~~dividends~~preferred ~~(“amended documents”)~~units ~~whereby~~and UGEL preferred stock during the ~~accrued~~three ~~dividends~~months ~~were~~ended ~~forgiven~~April 3, 2022. In addition, ~~under~~quarterly ~~the amended documents the~~ preferred ~~shareholders~~dividend ~~are no~~payments ~~longer~~were ~~entitled~~deferred tobeginning awith ~~quarterly~~the ~~dividend~~three months ~~until~~ended ~~such~~December ~~time~~29, as2019 through the ~~Company~~three ~~declares~~months aended ~~dividend~~April ~~payable~~4, 2021.

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 the quarterly dividends (“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 we 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).

Table of Contents

Nine Months Ended October 3, 2021 Compared to the Nine Months Ended October 4, 2020

The following table sets forth, for the nine months ended October 3, 2021 (“nine months 2021”) and October 4, 2020 (“nine months 2020”), certain operational data including their respective percentage of net sales:

	Nine Months Ended
	October 3, 2021				October 4, 2020				Change			% Change
Net Sales	$	56,031,150		100.0%	$	43,528,393		100.0%	$	12,502,757		28.7%
Cost of Goods Sold		49,017,021		87.5%		37,931,227		87.1%		11,085,794		29.2%
Gross Profit		7,014,129		12.5%		5,597,166		12.9%		1,416,963		25.3%
Operating Expenses:
Selling		2,414,847		4.3%		2,278,279		5.2%		136,568		6.0%
General and administrative		4,574,175		8.2%		4,834,011		11.1%		(259,836	)	-5.4%
Research and development		966,706		1.7%		704,239		1.6%		262,467		37.3%
Total Operating Expenses		7,955,728		14.2%		7,816,529		18.0%		139,199		1.8%
Operating Loss		(941,599	)	-1.7%		(2,219,363	)	-5.1%		1,277,764		-57.6%
Interest expense		(1,217,861	)	-2.2%		(1,215,771	)	-2.8%		(2,090	)	0.2%
Funding from Paycheck Protection Program		2,000,000		3.6%		2,217,500		5.1%		(217,500	)	-9.8%
Other income (expense)		157,978		0.3%		(185,417	)	-0.4%		343,395		<-100%
Loss before Tax Benefit		(1,482	)	0.0%		(1,403,051	)	-3.2%		1,401,569		-99.9%
Tax benefit		(409,548	)	-0.7%		(404,141	)	-0.9%		(5,407	)	1.3%
Net Income (Loss)		408,066		0.7%		(998,910	)	-2.3%		1,406,976		<-100%
Extinguishment of preferred stock dividend payable		6,158,311		11.0%		-		0.0%		6,158,311		-
Preferred stock dividend		(2,172,253	)	-3.9%		(2,396,479	)	-5.5%		224,226		-9.4%
Net Income (Loss) Allocable to Common Shareholders	$	4,394,124		7.8%	$	(3,395,389	)	-7.8%	$	7,789,513		<-100%

Revenue:

Total revenue for the nine months 2021 increased $12,502,757 or 28.7% to $56,031,150 from $43,528,393 for the nine months 2020. The lower amount for the nine months 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 $1,841,000.

For the nine months 2021 compared to the nine months 2020, automotive sales for our U.K. operations increased 23.7% (excluding the currency adjustment) and automotive sales for our U.S. operations increased 26.5% due to the negative effect that COVID-19 had primarily on the second quarter of 2020. However, the year-to-date growth was negatively impacted by supply chain issues experienced by the OEM’s that use our automotive products, which lead to temporary shutdowns of their production lines during the second and third quarters of 2021.

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Additionally, sales for the industrial sector increased 24.1% (22.8% before the currency effect) mostly due to an increase in our U.S. operations (primarily in the contract market) as well as in our U.K. operations. As discussed above, COVID-19 had a negative effect on our operations primarily during the second quarter of 2020.

Gross Profit:

Total gross profit for the nine months 2021 increased $1,416,963 or 25.3% to $7,014,129 from $5,597,166 for the nine months 2020. The gross profit amount for the nine months 2020 reflected the negative impact of COVID-19. Impacting the increase was the CJRS reimbursement of $130,000 and $1,304,000 for the nine months 2021 and 2020, respectively, for salaries of furloughed employees, which reduced manufacturing costs. Excluding the CJRS reimbursement, gross profit would have increased $2,590,963. In addition, the increase in gross profit was partially offset by an unfavorable currency effect of approximately $67,000. The gross profit percentage was 12.5% of sales for the nine months 2021 compared to 12.9% for the nine months 2020. The gross profit and percentage for the nine months 2021 were negatively impacted by supply chain issues, as discussed above, as well as higher costs of raw materials and freight. To offset raw material price increases, we increased prices on most product categories during the first quarter of 2021 and at the beginning and end of the third quarter of 2021 in several of our markets. However, we have not realized the full impact of the increases yet.

Operating Expenses:

Selling expenses for the nine months 2021 increased $136,568 or 6.0% to $2,414,847 from $2,278,279 for the nine months 2020. Selling expenses were reduced $7,000 and $99,000 for the nine months 2021 and 2020, respectively, due to the CJRS reimbursement. Excluding the CJRS reimbursement, selling expenses would have increased $44,568. The increase in selling expenses included a $100,000 unfavorable currency effect. The higher amount for the nine months 2021 reflected increased selling-related expenses due to greater sales activity as the negative effect of COVID-19 decreased this activity during 2020, but was partially offset by the slowing of sales activity beginning in the second quarter of 2021.

General and administrative expenses for the nine months 2021 decreased $259,836 or 5.4% to $4,574,175 from $4,834,011 for the nine months 2020. General and administrative expenses were reduced $5,000 and $35,000 for the nine months 2021 and 2020, respectively, due to the CJRS reimbursement. Excluding the CJRS reimbursement, general and administrative expenses would have decreased $289,836. The decrease in general and administrative expenses was partially offset by an unfavorable currency effect of $94,000. The decrease from the nine months 2020 was primarily due to lower costs for cash management consulting services provided to us and a charge relating to the legal proceeding in the U.K. that was expensed in 2020.

Research and development expenses for the nine months 2021 increased $262,467 or 37.3% to $966,706 from $704,239 for the nine months 2020. Research and development expenses were reduced $8,000 and $122,000 for the nine months 2021 and 2020, respectively, due to the CJRS reimbursement. Excluding the CJRS reimbursement, research and development expenses would have increased $148,467. The increase in research and development expenses included a $40,000 unfavorable currency effect. The increase from the nine months 2020 was primarily due to more activity including qualifying raw material substitutions due to supply constraints.

Operating Loss:

Operating loss for the nine months 2021 was $941,599 compared to $2,219,363 for the nine months 2020. The smaller operating loss for the nine months 2021 compared to the nine months 2020 was due to higher gross profit partially offset by higher operating expenses. The operating loss percentage was -1.7% of sales for the nine months 2021 compared to -5.1% for the nine months 2020.

Interest Expense:

Interest expense for the nine months 2021 decreased $2,090 or 0.2% to $1,217,861 from $1,215,771 for the nine months 2020. The decline in interest expense for the U.S. operations offset the increase in interest expense for the U.K. operations, which included amortization of debt issuance costs related to the PNC debt.

Funding from Paycheck Protection Program:

Funding from the PPP of $2,000,000 (from the Second Draw PPP Loan) for the nine months 2021 and $2,217,500 (from the First Draw PPP Loan) for the nine months 2020, were the proceeds from the PPP loans that we used during those periods for allowable expenses under the PPP. As previously discussed, all of the First and Second Draw PPP Loans were forgiven in June 2021 and August 2021, respectively.

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Other Income (Expense):

Other income for the nine months 2021 was $157,978 compared to other expense of $(185,417) for the nine months 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 these currencies fluctuated during the period.

Income Taxes:

We file income tax returns in the United States as a C-Corporation, and in several state jurisdictions and in the United Kingdom. Our 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. 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.

The tax benefit for the nine months 2021 was $409,548 compared to $404,141 for the nine months 2020. The tax benefits for the nine months 2021 and 2020 were principally attributable to the results of the U.S. operations.

Preferred Stock Dividend:

Pursuant to the terms of their acquisitions, the issuance of preferred ownership units/stock of UEP Holdings, LLC 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 5.0% to 8.0%. The dividend rate on the Series B UEP Holdings preferred units which started at 5.5% increased by 0.5% on the anniversary of the issuance and is now at the maximum of 8.0%.

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.

Liquidity and Sources of Capital

Cash, as it is needed, is provided by using our lines of credit. These lines provide for a total borrowing commitment ofin ~~approximately~~excess of $3029,000,000 subject to the underlying borrowing base specified in the agreements. Of the total outstanding borrowings of $1721,~~807~~443,~~174~~596 at ~~October~~April 3, ~~2021~~2022, for the U.S. operations, $6.0 million of the lines bears interest at the Eurodollar rate plus 2.25% and $46.96 million bears interest at the Wells Fargo Capital Finance, LLC’s ~~prime~~ prime rate (3.2550% at ~~October~~April 3, ~~2021~~2022) and, for the U.K. operations, $68.98 million bears interest at the Bank of England Base Rate plus 2.25%-3.00%. The lines provided additional availability of approximately $~~764~~514,000 and, combined with UEP’s and UGL’s total cash balances, liquidity was approximately $~~1.4~~831,000 ~~million~~ at ~~October~~April 3, ~~2021~~2022. We plan to use this availability and cash provided by operating activities to finance our cash needs for the remaining months of fiscal ~~2021~~2022 and future periods. The balances due under the lines of credit are recorded as as current liabilities on the consolidated balance sheets.

29As previously stated, the coronavirus pandemic (“COVID-19”) and its related disruption of the supply chain has had an impact on markets we serve and our operations and liquidity. Since COVID-19 is a continually evolving situation, we cannot predict the long-term impact it will have on the economy or our business. The impact could have a material adverse effect on our financial position, results of operations and cash flows, which may require us to obtain additional financing. As discussed below, we continue to pursue supplementary cash flow opportunities.

Through the PPP administered by the U.S. Small Business Administration (“SBA”) under the Coronavirus Aid, Relief, and Economic Security Act (“the CARES Act”), our U.S. operations received $2,000,000 in March 2021 in funds from One Community Bank. We used all proceeds from the PPP loan for allowable expenses (as defined in the PPP loan) and applied for forgiveness of the PPP loan in accordance with the terms of the CARES Act. In August 2021, we were notified that all of our PPP Loan was forgiven. See Note 9 to the consolidated financial statements for further discussion.

For the remaining nine months of fiscal year 2022 and the first three months of fiscal year 2023, our majority shareholder waived the interest expense on our related party finance leases with him and our $2,000,000 senior subordinated promissory notes issued to him. See Note 10 to the consolidated financial statements for further discussion. In addition, our executive officers 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 us additional liquidity.

Also to preserve cash, quarterly preferred dividends were not declared on UEPH Series A and Series B preferred units and UGEL preferred stock during the three months ended April 3, 2022, while quarterly preferred dividend payments were deferred beginning with the three months ended December 29, 2019 through the three months ended April 4, 2021.

The ratio of current assets to current liabilities, including the amount due under our lines of credit, was 0.95 at April 3, 2022 and 0.99 at January 2, 2022.

Cash balances decreased $115,011 before the effects of currency translation of $(5,463) to $324,499 at April 3, 2022 from $444,973 at January 2, 2022. Of the above noted amounts, $205,067 and $226,612 were held outside the U.S. by our foreign subsidiaries as of April 3, 2022 and January 2, 2022, respectively.

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~~The~~Cash ~~ratio~~used ofin ~~current~~operations ~~assets~~was $3,519,251 for the three months 2022 compared to ~~current~~$1,794,634 ~~liabilities~~for the three months 2021. For the three months 2022, ~~including~~cash used in operations was primarily due to changes in working capital of $(3,434,691), the ~~amount~~net ~~due~~loss ~~under~~of ~~our~~545,356 ~~lines~~and changes in other assets and liabilities of ~~credit~~$(13,153), ~~was~~offset by ~~0.99~~adjustments atfor ~~October~~non-cash 3items of $473,949. For the three months 2021, cash used in operations was primarily due to changes in working capital of $(2,725,218), adjustments for non-cash items of $(104,409) and ~~0.89~~changes atin ~~January~~other 3assets and liabilities of $(1,008), ~~2021~~offset by net income of $1,036,001.

Cash ~~balances~~used ~~decreased~~in investing activities was $1198,~~040,515~~118 for ~~before~~ the ~~effects~~three ofmonths ~~currency translation~~2022 ofcompared ~~$17,466~~ to $~~633~~252,~~833~~679 atfor ~~October~~the 3,three months 2021. ~~from~~During ~~$1,656,882~~2022 atand ~~January 3~~2021, ~~2021.~~cash Ofused ~~the~~in ~~above~~investing ~~noted~~activities ~~amounts,~~was principally ~~$216,524~~for ~~and~~purchases ~~$1,621,692 were~~of ~~held~~machinery ~~outside~~and ~~the~~equipment ~~U.S.~~at by our ~~foreign~~manufacturing ~~subsidiaries~~locations asand ofpayments ~~October~~made 3,for ~~2021~~company-owned ~~and~~key ~~January~~man 3,life ~~2021, respectively~~insurance premiums.

~~Cash~~For ~~used in operations was $1,823,827 for~~ the ~~nine~~three months ~~2021 compared~~2022, to cash provided by ~~operations~~financing activities ofwas $~~966~~3,~~649~~602,358 ~~for~~compared ~~the~~to ~~nine~~$2,194,415 ~~months~~for ~~2020. For~~ the ~~nine~~three months 2021,. Impacting cash ~~used~~flows infrom ~~operations~~financing ~~was~~activities ~~primarily due~~for tothe ~~changes~~three months in2022 ~~working~~and ~~capital~~2021 ofwere ~~$(1,892,152),~~net ~~adjustments~~advances ~~for~~on ~~non-cash~~lines ~~items~~of credit of $~~(312~~3,~~209)~~843,578 and $782,781, respectively. The changes in ~~other~~the ~~assets~~lines ~~and~~of ~~liabilities~~credit ofreflect ~~$(27,532)~~the ~~offset~~funding byof ~~net~~working ~~income~~capital. Additionally, payments of $~~408~~406,~~066.~~904 ~~For~~and $387,443 were made during the ~~nine~~three months ~~2020,~~2022 ~~cash~~and ~~provided~~2021, respectively, byon ~~operations~~long-term ~~was~~debt ~~primarily~~and ~~due~~finance tolease ~~changes~~liabilities. inImpacting ~~working capital~~cash offlows ~~$2,772,839~~from ~~offset~~financing byactivities for the ~~net~~three ~~loss~~months of2021 were ~~$998,910,~~proceeds ~~adjustments~~from ~~for~~issuance ~~non~~of long-~~cash~~term ~~items~~debt of $~~(784~~2,~~889)~~000,000 ~~and~~through ~~changes~~the inPaycheck ~~other~~Protection ~~assets and liabilities of $(22,391)~~Program.

~~Cash~~Our ~~used~~credit inagreements ~~investing~~contain ~~activities~~customary affirmative ~~was~~and ~~$743,725~~negative ~~for~~covenants. ~~the~~We ~~nine months~~were ~~2021~~in ~~compared~~compliance towith ~~$1,171,258~~our ~~for~~debt ~~the~~covenants ~~nine~~as ~~months~~of ~~2020.~~April ~~During~~3, ~~2021~~2022 and ~~2020,~~through ~~cash~~the ~~used~~date inof ~~investing~~filing of ~~activities~~this ~~was~~report ~~principally~~except for ~~purchases~~ UGL’s ratio of ~~machinery~~Earnings before interest, taxes, depreciation and ~~equipment~~amortization at(“EBITDA”) ~~our~~to ~~manufacturing~~debt ~~locations~~service charges, ~~and~~which ~~payments~~was ~~made~~less ~~for~~than ~~company-owned~~the ~~key~~required ~~man~~minimum ~~life~~of ~~insurance~~1.15 ~~premiums~~to 1. ~~For~~ ~~the~~PNC ~~nine~~Business ~~months~~Credit ~~2020,~~is in the ~~payments~~process ~~made~~of ~~for~~reviewing ~~the~~an ~~life~~amendment ~~insurance~~to ~~premiums~~revise the ~~were~~covenant ~~offset~~calculation byto ~~proceeds~~more ~~from~~closely ~~policy~~align ~~loans~~with ofthe ~~$130,000~~current business environment.

For the nine months 2021, cash provided by financing activities was $1,527,037 compared to cash provided by financing activities of $464,890 for the nine months 2020. Impacting cash flows from financing activities for the nine months 2021 and 2020 were proceeds from issuance of long-term debt of $2,000,000 and $2,217,500, respectively, through the Paycheck Protection Program. Also impacting cash flows from financing activities for the nine months 2021 and 2020 were net advances on lines of credit of $892,278 and net payments of $1,913,809, respectively. The changes in the lines of credit reflect the funding of working capital. Payments of $917,536 and $1,189,638 were also made during the nine months 2021 and 2020, respectively, on long-term debt (excluding debt extinguishment) and finance lease liabilities. For the nine months 2021, payments were $1,486,504 and proceeds were $2,328,520 relating to the extinguishment of existing long-term debt and recognition of new long-term debt, respectively, while payments were $7,379,356 and proceeds were $6,565,288 relating to the extinguishment of an existing line of credit and recognition of a new line of credit, respectively. Also included for the nine months 2021 were payments for capitalized debt issuance costs of $341,895. For the nine months 2021 and 2020, proceeds from issuance of long-term debt from automotive lenders were $137,815 and $1,545,538 (net of translation adjustment of $(25,677)). Also for the nine months 2020, proceeds of $783,958 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 nine months of 2020 which was repaid in the same period.

Our credit agreements contain customary affirmative and negative covenants. We were in compliance with our debt covenants as of October 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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Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4.

Controls and Procedures

The Company maintains “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, Chief Financial Officer, and Board of Directors, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives, and we necessarily are required to apply our judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of ~~October~~April 3, ~~2021~~ 2022 and concluded that our disclosure controls and procedures were effective as of ~~October~~April 3, ~~2021~~2022.

Changes in Internal Controls over Financial Reporting

During the ~~nine~~three months ended ~~October~~April 3, ~~2021~~2022, there were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the ~~Exchange~~ Exchange Act) that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. As discussed in Item 9A of the Company’s Annual Report on Form 10-K for the year ended January 2, 2022, management evaluated the effectiveness of the design and operation of its disclosure controls and procedures and concluded that the Company’s disclosure controls and procedures were not effective because of a material weakness in its internal control over financial reporting. The material weakness has been remediated as a result of changes to the Company’s internal control over financial reporting that was implemented by management.

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PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

None.

Item 1A.

Risk Factors

Not applicable.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

None.

Item 6.

Exhibits

(a)

Exhibits.

Exhibit No.		Description
10.69*		Amendment to Senior Secured Promissory Note dated March 25, 2022
31.1 *		Chief Executive Officer Certification Pursuant to Securities Exchange Act Rules 13a-14(a)
31.2 *		Chief Financial Officer Certification Pursuant to Securities Exchange Act Rules 13a-14(a)
32.1 *		Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350
32.2 *		Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350
101		Inline Interactive Data File
101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.CAL * +		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF * +		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB * +		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE * +		Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.SCH * +		Inline XBRL Taxonomy Extension Schema Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

_______________

*	Filed herewith.

+	In accordance with Rule 406T of Regulation S-T, this information is deemed not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC.
Dated: November 16, 2021	By:	/s/ Howard R. Curd
Dated: May 13, 2022	By:	/s/ Howard R. Curd
		Howard R. Curd Chief Executive Officer

Dated: November 16, 2021	By:	/s/ Edmund C. King
Dated: May 13, 2022	By:	/s/ Edmund C. King
		Edmund C. King Chief Financial Officer

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