0001214659-17-004833.txt : 20170807 0001214659-17-004833.hdr.sgml : 20170807 20170807165502 ACCESSION NUMBER: 0001214659-17-004833 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 69 CONFORMED PERIOD OF REPORT: 20170702 FILED AS OF DATE: 20170807 DATE AS OF CHANGE: 20170807 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC. CENTRAL INDEX KEY: 0001172706 STANDARD INDUSTRIAL CLASSIFICATION: TEXTILE MILL PRODUCTS [2200] IRS NUMBER: 651005398 STATE OF INCORPORATION: NV FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-50081 FILM NUMBER: 171012171 BUSINESS ADDRESS: STREET 1: 1800 2ND STREET STREET 2: SUITE 970 CITY: SARASOTA STATE: FL ZIP: 34236 BUSINESS PHONE: (941) 906-8580 MAIL ADDRESS: STREET 1: 1800 2ND STREET STREET 2: SUITE 970 CITY: SARASOTA STATE: FL ZIP: 34236 FORMER COMPANY: FORMER CONFORMED NAME: INVISA INC DATE OF NAME CHANGE: 20020507 10-Q 1 r8217010q.htm
   

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
For the quarterly period ended July 2, 2017
 
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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    
 
 
(Do not check if 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 ☑
 
As of August 1, 2017, the issuer had 17,078,928 shares of ordinary Common Stock, $0.001 par value, and 1,619,102 shares of Class B Common Stock, $0.001 par value, outstanding.
 

 
1

 
UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC.
 
Form 10-Q
Table of Contents
 
 
 
Page
 
 
 
Cautionary Note Regarding Forward-Looking Statements
 
 
 
 
 
PART I.  FINANCIAL INFORMATION
 
 
 
 
 
4
 
 
 
 
 
 
4
 
 
5
 
 
6
 
 
7
 
 
8
 
 
9
 
 
 
 
 
17
 
 
 
 
 
22
 
 
 
 
 
23
 
 
 
 
PART II.  OTHER INFORMATION
 
 
 
 
 
 
 24
 
 
 
 
 
 24
 
 
 
 
 
 24
 
 
 
 
 
 24
 
 
 
 
 
 24
 
 
 
 
 
 24
 
 
 
 
 
 25
 
 
 
 
 
25
 
 
 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,” 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, risks of technological change, currency fluctuations, our dependence on key personnel, our ability to protect our intellectual property rights, risks relating to customer plans and commitments, the pricing and availability of equipment, materials and inventory, the Company’s ability to successfully integrate acquired operations, 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.
 
 
Part 1 - FINANCIAL INFORMATION

Item 1 - Financial Statements

Uniroyal Global Engineered Products, Inc.
Consolidated Balance Sheets

   
(Unaudited)
       
             
             
ASSETS
 
July 2, 2017
   
January 1, 2017
 
CURRENT ASSETS
           
Cash and cash equivalents
 
$
1,103,761
   
$
1,321,586
 
Accounts receivable, net
   
17,161,964
     
14,555,463
 
Inventories, net
   
19,296,911
     
17,046,171
 
Other current assets
   
1,357,898
     
1,183,932
 
Related party receivable
   
24,750
     
25,456
 
Total Current Assets
   
38,945,284
     
34,132,608
 
PROPERTY AND EQUIPMENT, NET
   
14,756,079
     
13,611,494
 
OTHER ASSETS
               
Intangible assets
   
3,224,341
     
3,133,564
 
Goodwill
   
1,079,175
     
1,079,175
 
Other long-term assets
   
6,903,506
     
6,665,375
 
Total Other Assets
   
11,207,022
     
10,878,114
 
TOTAL ASSETS
 
$
64,908,385
   
$
58,622,216
 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
CURRENT LIABILITIES
               
Checks issued in excess of bank balance
 
$
717,220
   
$
679,494
 
Lines of credit
   
18,024,806
     
16,799,592
 
Current maturities of long-term debt
   
1,007,494
     
851,988
 
Current maturities of capital lease obligations
   
381,316
     
368,718
 
Accounts payable
   
10,263,688
     
7,331,213
 
Accrued expenses
   
4,457,360
     
3,645,526
 
Related party obligation
   
373,779
     
371,161
 
Current portion of postretirement benefit liability - health and life
   
158,527
     
158,527
 
Total Current Liabilities
   
35,384,190
     
30,206,219
 
LONG-TERM LIABILITIES
               
Long-term debt, less current portion
   
2,108,442
     
1,994,910
 
Capital lease obligations, less current portion
   
709,007
     
856,171
 
Related party lease financing obligations
   
2,158,080
     
2,162,151
 
Long-term debt to related parties
   
2,643,150
     
2,826,907
 
Postretirement benefit liability - health and life, less current portion
   
2,878,079
     
2,883,684
 
Other long-term liabilities
   
793,089
     
792,027
 
Total Long-Term Liabilities
   
11,289,847
     
11,515,850
 
Total Liabilities
   
46,674,037
     
41,722,069
 
STOCKHOLDERS' EQUITY
               
Preferred units, Series A UEP Holdings, LLC, 200,000 units issued
and outstanding ($100 issue price)
   
617,571
     
617,571
 
Preferred units, Series B UEP Holdings, LLC, 150,000 units issued
and outstanding ($100 issue price)
   
463,179
     
463,179
 
Preferred stock, Uniroyal Global (Europe) Limited, 50 shares
issued and outstanding ($1.51 stated value)
   
75
     
75
 
Common stock, 95,000,000 shares authorized ($.001 par value)
18,698,030 and 18,727,782 shares issued and outstanding as of
July 2, 2017 and January 1, 2017, respectively
   
18,698
     
18,728
 
Additional paid-in capital
   
34,760,729
     
34,653,894
 
Accumulated deficit
   
(16,489,572
)
   
(17,174,814
)
Accumulated other comprehensive loss
   
(1,136,332
)
   
(1,678,486
)
Total Stockholders' Equity
   
18,234,348
     
16,900,147
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
64,908,385
   
$
58,622,216
 

See accompanying notes to the consolidated financial statements
 
 
Uniroyal Global Engineered Products, Inc.
Consolidated Statements of Operations
(Unaudited)
 
   
Three Months Ended
   
Six Months Ended
 
             
   
July 2, 2017
   
July 3, 2016
   
July 2, 2017
   
July 3, 2016
 
                         
NET SALES
 
$
26,077,549
   
$
27,333,869
   
$
51,835,978
   
$
52,301,464
 
                                 
COST OF GOODS SOLD
   
20,740,966
     
20,674,715
     
41,123,248
     
39,915,850
 
                                 
Gross Profit
   
5,336,583
     
6,659,154
     
10,712,730
     
12,385,614
 
                                 
OPERATING EXPENSES:
                               
Selling
   
1,325,397
     
1,390,339
     
2,610,344
     
2,772,982
 
General and administrative
   
1,929,780
     
2,179,088
     
3,751,246
     
4,220,922
 
Research and development
   
437,104
     
475,313
     
970,958
     
903,842
 
OPERATING EXPENSES
   
3,692,281
     
4,044,740
     
7,332,548
     
7,897,746
 
                                 
Operating Income
   
1,644,302
     
2,614,414
     
3,380,182
     
4,487,868
 
                                 
OTHER INCOME (EXPENSE):
                               
Interest and other debt related expense
   
(408,794
)
   
(421,225
)
   
(798,650
)
   
(838,413
)
Other income (expense)
   
(92,379
)
   
(88,564
)
   
6,875
     
(262,060
)
Net Other Expense
   
(501,173
)
   
(509,789
)
   
(791,775
)
   
(1,100,473
)
                                 
INCOME BEFORE TAX PROVISION
   
1,143,129
     
2,104,625
     
2,588,407
     
3,387,395
 
                                 
TAX PROVISION
   
191,343
     
198,134
     
425,929
     
327,900
 
                                 
NET INCOME
   
951,786
     
1,906,491
     
2,162,478
     
3,059,495
 
                                 
Preferred stock dividend
   
(737,320
)
   
(724,765
)
   
(1,477,236
)
   
(1,443,666
)
                                 
NET INCOME AVAILABLE TO COMMON
  SHAREHOLDERS
 
$
214,466
   
$
1,181,726
   
$
685,242
   
$
1,615,829
 
                                 
EARNINGS PER COMMON SHARE:
                               
Basic
 
$
0.01
   
$
0.06
   
$
0.04
   
$
0.09
 
Diluted
 
$
0.01
   
$
0.06
   
$
0.04
   
$
0.09
 
WEIGHTED AVERAGE SHARES OUTSTANDING:
                               
Basic
   
18,704,024
     
18,838,608
     
18,713,625
     
18,851,014
 
Diluted
   
18,809,598
     
18,893,949
     
18,810,191
     
18,906,355
 
 
See accompanying notes to the consolidated financial statements
 
 
Uniroyal Global Engineered Products, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)

   
Three Months Ended
   
Six Months Ended
 
             
   
July 2, 2017
   
July 3, 2016
   
July 2, 2017
   
July 3, 2016
 
                         
NET INCOME
 
$
951,786
   
$
1,906,491
   
$
2,162,478
   
$
3,059,495
 
                                 
OTHER COMPREHENSIVE INCOME (LOSS):
                               
Minimum benefit liability adjustment
   
-
     
(1,173
)
   
-
     
(2,346
)
Foreign currency translation adjustment
   
397,035
     
(633,195
)
   
542,154
     
(919,204
)
OTHER COMPREHENSIVE INCOME (LOSS)
   
397,035
     
(634,368
)
   
542,154
     
(921,550
)
                                 
COMPREHENSIVE INCOME
   
1,348,821
     
1,272,123
     
2,704,632
     
2,137,945
 
                                 
Preferred stock dividend
   
(737,320
)
   
(724,765
)
   
(1,477,236
)
   
(1,443,666
)
                                 
COMPREHENSIVE INCOME TO COMMON
 SHAREHOLDERS
 
$
611,501
   
$
547,358
   
$
1,227,396
   
$
694,279
 

See accompanying notes to the consolidated financial statements
 
 
Uniroyal Global Engineered Products, Inc.
Consolidated Statement of Changes in Stockholders' Equity
For the Six Months Ended July 2, 2017
(Unaudited)

   
UEPH Series A
   
UEPH Series B
   
EPAL Preferred
   
Common Stock
                         
   
Units
   
Amount
   
Units
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
Additional
Paid In
Capital
   
Accumulated
Deficit
   
Accumu-
lated Other
Compre-
hensive
Income
   
Total Equity
 
Balance January 1, 2017
   
200,000
   
$
617,571
     
150,000
   
$
463,179
     
50
   
$
75
     
18,727,782
   
$
18,728
   
$
34,653,894
   
$
(17,174,814
)
 
$
(1,678,486
)
 
$
16,900,147
 
Net Income
                                                                           
2,162,478
             
2,162,478
 
Other comprehensive income
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
542,154
     
542,154
 
Stock-based compensation expense
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
206,645
     
-
     
-
     
206,645
 
Purchase and retire treasury shares at cost
   
-
     
-
     
-
     
-
     
-
     
-
     
(29,752
)
   
(30
)
   
(99,810
)
   
-
     
-
     
(99,840
)
Preferred stock dividend
                                                                           
(1,477,236
)
           
(1,477,236
)
Balance July 2, 2017
   
200,000
   
$
617,571
     
150,000
   
$
463,179
     
50
   
$
75
     
18,698,030
   
$
18,698
   
$
34,760,729
   
$
(16,489,572
)
 
$
(1,136,332
)
 
$
18,234,348
 

See accompanying notes to the consolidated financial statements
 
 
Uniroyal Global Engineered Products, Inc.
Consolidated Statements of Cash Flows
(Unaudited)

   
Six Months Ended
 
       
CASH FLOWS FROM OPERATING ACTIVITIES
 
July 2, 2017
   
July 3, 2016
 
             
Net income
 
$
2,162,478
   
$
3,059,495
 
Adjustments to reconcile net income to net cash flows from operating activities:
               
                 
Depreciation
   
849,968
     
860,977
 
Stock-based compensation expense
   
206,645
     
165,565
 
Amortization of intangible assets
   
10,002
     
10,002
 
Loss on disposal of property and equipment
   
835
     
2,744
 
Noncash postemployment health and life benefit
   
-
     
(2,346
)
Changes in assets and liabilities:
               
Accounts receivable
   
(2,059,187
)
   
(2,820,250
)
Inventories
   
(1,854,617
)
   
(1,471,097
)
Other current assets
   
(118,244
)
   
540,611
 
Related party receivable
   
28,507
     
(48,921
)
Other long-term assets
   
(10,387
)
   
(86,992
)
Accounts payable
   
2,609,639
     
1,571,067
 
Accrued expenses
   
666,371
     
311,406
 
Postretirement benefit liability - health and life
   
(5,605
)
   
2,463
 
Other long-term liabilities
   
(38,380
)
   
53,691
 
Cash provided by operating activities
   
2,448,025
     
2,148,415
 
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Capital expenditures
   
(955,496
)
   
(698,485
)
Net payments on life insurance policies
   
(223,761
)
   
(176,377
)
Cash used in investing activities
   
(1,179,257
)
   
(874,862
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Checks issued in excess of bank balance, net
   
37,726
     
337,115
 
Net advances on line of credit
   
622,911
     
1,085,914
 
Payments on long-term debt
   
(259,569
)
   
(165,390
)
Payments on capital lease obligations
   
(194,782
)
   
(249,336
)
Payments on related party obligation
   
(185,209
)
   
(1,303,504
)
Payment of preferred stock dividends
   
(1,455,942
)
   
(1,174,463
)
Purchase and retirement of treasury stock
   
(99,840
)
   
(175,649
)
Cash used in Financing Activities
   
(1,534,705
)
   
(1,645,313
)
Net change in cash and cash equivalents
   
(265,937
)
   
(371,760
)
Cash and cash equivalents - beginning of period
   
1,321,586
     
1,910,112
 
Effects of currency translation on cash and cash equivalents
   
48,112
     
(68,749
)
                 
CASH AND CASH EQUIVALENTS - END OF PERIOD
 
$
1,103,761
   
$
1,469,603
 

For noncash transactions and supplement disclosure of cash flow information see Note 2.

See accompanying notes to the consolidated financial statements
 
 
UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC.
 
Notes to Consolidated Financial Statements
July 2, 2017
(Unaudited) 
 
 
1.
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 Uniroyal Global Engineered Products, Inc.’s financial position, results of operations and cash flows, in conformity with generally accepted accounting principles. Uniroyal Global Engineered Products, Inc. (the “Company,” “Uniroyal Global,” “we,” or “us”) filed audited consolidated financial statements as of and for the fiscal years ended January 1, 2017 and January 3, 2016 which included all information and notes necessary for such complete presentation in conjunction with its 2016 Annual Report on Form 10-K/A.
 
The results of operations for the interim period ended July 2, 2017 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 1, 2017, which are contained in the Company’s 2016 Annual Report on Form 10-K/A.

The Company owns all of the ownership interests in Uniroyal Engineered Products, LLC (“Uniroyal”) and its holding company UEP Holdings, LLC (“UEPH”), a U.S. manufacturer of textured coatings, and all of the ordinary common stock of Uniroyal Global (Europe) Limited (“UGEL”) formerly known as Engineered Products Acquisition Limited (“EPAL”), the holding company for Uniroyal Global Limited (“UGL”) formerly Wardle Storeys (Group) Limited (“Wardle Storeys”), a European manufacturer of textured coatings and polymer films.
 
The Company and its subsidiaries have adopted a 52/53-week fiscal year ending on the Sunday nearest to December 31. The current year ending December 31, 2017 and the prior year ended January 1, 2017 are 52-week years.
 
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 statement of the Company’s financial position as of July 2, 2017 and the results of operations, comprehensive income and cash flows for the interim periods ended July 2, 2017 and July 3, 2016.
 
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 US dollar as the reporting currency for financial reporting. The financial position and results of operations of the Company’s UK-based operations are measured using the British Pound Sterling as the functional currency. See Note 5, Foreign Currency Translation.
 
2.
Noncash Transactions and Supplemental Disclosure of Cash Flow Information
 
During the six months ended July 2, 2017 and July 3, 2016, the Company paid down its term loans using available borrowings on its various lines of credit of $198,518 and $230,189, respectively.
 
During the six months ended July 2, 2017 and July 3, 2016, the Company entered into new equipment financing arrangements with a value of $678,148 and $595,740, respectively. The fair value was added to property and equipment and a corresponding amount to long-term debt or capital lease obligations.
 
 
Supplemental disclosure of cash paid for:
 
 
 
July 2, 2017
   
July 3, 2016
 
 
           
Interest
 
$
808,983
   
$
876,055
 
                 
Tax payments
 
$
-
   
$
-
 
 
3.
Derivatives

The Company recognizes all of its derivative instruments as either assets or liabilities in the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, as to whether the hedge is a cash flow hedge or a fair value hedge.

The Company incurs foreign currency risk on sales and purchases denominated in other currencies, primarily the British Pound Sterling and the Euro. Foreign currency exchange contracts are used by the Company principally to limit the exchange rate fluctuations of the Euro. The Euro risk is partially limited due to natural cash flow offsets. Currency exchange contracts are purchased for approximately 25% of the net risk. These contracts are not designated as cash flow hedges for accounting purposes. Changes in fair value of these contracts are reported in net earnings as part of other income and expense.
 
4.
Fair Value of Financial Instruments
 
The Company’s short term financial instruments consist of cash and cash equivalents, receivables, accounts payable and the lines of credit. The Company adjusts the carrying value of financial instruments denominated in other currencies such as cash, receivables, accounts payable and the lines of credit using the appropriate exchange rates at the balance sheet date. The Company believes that the carrying values of these short term financial instruments approximate their estimated fair values.

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

The Company uses foreign currency exchange contracts which are recorded at their estimated fair values in the accompanying Consolidated Balance Sheets. The fair values of the contracts at July 2, 2017 and January 1, 2017 were liabilities of $32,467 and assets of $9,718, respectively, and were included in accrued expenses and other current assets, respectively. The fair values of the currency exchange contracts are based upon observable market transactions of spot and forward rates.

For the six months ended July 2, 2017, there have been no changes in the application of valuation methods applied to similar assets and liabilities.
 
5.
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 our foreign operations are included in Other Income (Expense) in the accompanying Consolidated Statements of Operations.
 
 
6.
Inventories
 
Inventories consist of the following:
 
 
 
July 2, 2017
   
January 1, 2017
 
 
           
Raw materials
 
$
6,182,103
   
$
5,199,632
 
Work-in-process
   
4,592,445
     
4,491,250
 
Finished goods
   
9,838,452
     
8,669,625
 
 
   
20,613,000
     
18,360,507
 
Less:  Allowance for inventory obsolescence
   
(1,316,089
)
   
(1,314,336
)
 
               
Total Inventories
 
$
19,296,911
   
$
17,046,171
 
 
7.
Other Long-term Assets
 
Other long-term assets consist of the following:
 
 
 
July 2, 2017
   
January 1, 2017
 
 
           
Non-current deferred tax asset
 
$
5,672,156
   
$
5,689,000
 
Other
   
1,231,350
     
976,375
 
 
               
Total Other Long-term Assets
 
$
6,903,506
   
$
6,665,375
 
 
8.
Other Long-term Liabilities
 
Other long-term liabilities consist of the following:
 
 
 
July 2, 2017
   
January 1, 2017
 
 
           
Non-current deferred tax liability
 
$
756,928
   
$
743,971
 
Other
   
36,161
     
48,056
 
 
               
Total Other Long-term Liabilities
 
$
793,089
   
$
792,027
 
 
9.
Lines of Credit
 
The Company’s Uniroyal subsidiary has available a $30,000,000 revolving line of credit financing agreement with Wells Fargo Capital Finance, LLC, which matures on October 17, 2019. Interest is payable monthly at the Eurodollar rate plus 2.25% or Wells Fargo Capital Finance, LLC's prime rate at the Company's election on outstanding balances up to $6,000,000 and prime rate on amounts in excess of $6,000,000. 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 outstanding balance on the line of credit (“Uniroyal Line of Credit”) was $9,920,280 and $9,668,388 as of July 2, 2017 and January 1, 2017, respectively. The Company has classified the outstanding balance on this line of credit within current liabilities in the accompanying Consolidated Balance Sheets.

The Company’s U.K. subsidiary has available a £8,500,000 (approximately $11.0 million) revolving line of credit financing agreement with Lloyds Bank Commercial Finance Limited (“UK Line of Credit”) which is subject to a six-month notice by either party. The line has several tranches based on currency or underlying security. Interest is payable monthly at the base rate (UK LIBOR or Lloyds Bank Base Rate as published) plus 1.95% to 2.45% depending on the tranche. Borrowings on the line of credit are subject to the underlying borrowing base specified in the agreement. The underlying borrowing base is currently determined based upon eligible accounts receivable and inventories. The line of credit is secured by substantially all of the subsidiary's assets and includes certain financial and restrictive covenants.
 
 
The outstanding balance on the UK Line of Credit was £6,244,790 and £5,792,236 ($8,104,526 and $7,131,204) as of July 2, 2017 and January 1, 2017, respectively. The Company has classified the outstanding balance on this line of credit within current liabilities in the accompanying Consolidated Balance Sheets. 

10.
Long-term Debt
 
Long-term debt consists of the following:
 
 
 
Interest Rate
   
July 2, 2017
   
January 1, 2017
 
 
                 
Wells Fargo Capital Finance LLC
 
Prime
   
$
941,122
   
$
1,089,721
 
Lloyds Bank Commercial Finance Limited
 
LIBOR + 3.15%
     
139,731
     
181,392
 
Kennet Equipment Leasing Limited
 
10.90%
 
   
757,180
     
801,153
 
Balboa Capital Corporation
 
5.72%
 
   
144,170
     
213,230
 
Regents Capital Corporation
 
7.40%
 
   
295,094
     
350,000
 
De Lage Landen Financial Services
 
7.35%
 
   
108,278
     
118,073
 
Ford Motor Credit
 
4.30%
 
   
40,914
     
44,387
 
Byline Financial Group
 
8.56%
 
   
38,862
     
48,942
 
Regents Capital Corporation
 
6.20%
 
   
314,357
     
-
 
Regents Capital Corporation
 
6.47%
 
   
336,228
     
-
 
 
         
3,115,936
     
2,846,898
 
Current portion
         
(1,007,494
)
   
(851,988
)
 
       
$
2,108,442
   
$
1,994,910
 
 
11.
Related Party Obligations
 
Long-term debt to related parties consists of the following:
 
 
 
Interest Rate
   
July 2, 2017
   
January 1, 2017
 
 
                 
Senior subordinated promissory note
 
9.25%
 
 
$
2,000,000
   
$
2,000,000
 
Senior secured promissory note
 
10.00%
 
   
1,010,664
     
1,194,421
 
 
         
3,010,664
     
3,194,421
 
Current portion
         
(367,514
)
   
(367,514
)
 
       
$
2,643,150
   
$
2,826,907
 

The Company has a lease financing obligation under which it leases its main U.S. manufacturing facility and certain other property from a related party lessor entity, accrues interest at 18.20% and currently requires monthly principal and interest payments of $32,439, which are adjusted annually based on the consumer price index. The lease financing obligation matures on October 31, 2033. The Company has security deposits aggregating $267,500 held by the lessor entity. This obligation is shown in the accompanying Consolidated Balance Sheets as Related Party Lease Financing Obligation which consists of the following:
 
 
 
July 2, 2017
   
January 1, 2017
 
 
           
Related party lease financing obligation
 
$
2,164,345
   
$
2,165,798
 
Less: current portion
   
(6,265
)
   
(3,647
)
 
               
Long-term Portion
 
$
2,158,080
   
$
2,162,151
 
 
 
The current portions of the long-term debt to related parties and the related party lease financing obligation are combined and are shown in current liabilities as related party obligations.

   
July 2, 2017
   
January 1, 2017
 
Current portion of long-term debt to related parties
 
$
367,514
   
$
367,514
 
Current portion related party lease financing obligation
   
6,265
     
3,647
 
                 
Related Party Obligation
 
$
373,779
   
$
371,161
 

12.
Capital Leases
 
The Company has several capital leases on equipment which expire from July 3, 2017 through January 2021 with monthly lease payments ranging from approximately $1,119 to $31,120 per month. The capital lease obligations are secured by the related equipment. As of July 2, 2017 and January 1, 2017, assets recorded under capital leases are included in property and equipment in the accompanying Consolidated Balance Sheets. Amortization of items under capital lease obligations has been included with depreciation expense on owned property and equipment in the accompanying Consolidated Statements of Operations. Interest rates on these obligations range from 3.84% to 19.15%
 
Capital lease obligations consist of the following:

 
 
July 2, 2017
   
January 1, 2017
 
 
           
Capital lease obligation
 
$
1,090,323
   
$
1,224,889
 
Less: current portion
   
(381,316
)
   
(368,718
)
 
               
Long-term Portion
 
$
709,007
   
$
856,171
 

 
13.
Accumulated Other Comprehensive Loss
 
The changes in accumulated other comprehensive loss were as follows:
 
 
 
Minimum
Benefit
Liability
Adjustments
   
Foreign
Currency
Translation
Adjustment
   
Total
 
 
                 
Balance at January 1, 2017
 
$
233,877
   
$
(1,912,363
)
 
$
(1,678,486
)
 
                       
Other comprehensive losses before
reclassifications, net
   
-
     
542,154
     
542,154
 
 
                       
Balance at July 2, 2017
 
$
233,877
   
$
(1,370,209
)
 
$
(1,136,332
)
 
The gain (loss) reclassified from accumulated other comprehensive income (loss) into income is recorded to the following income statement line items:
 
Other Comprehensive Income (Loss)
Component
 
Income Statement Line Item
 
 
 
Minimum Benefit Liability Adjustments
 
General and administrative expense
 
 
14.
Stock Option Plan
 
On June 25, 2015, the Company’s stockholders approved the adoption of the 2015 Stock Option Plan. This plan provides for the granting of options to purchase the Company’s common stock to employees and directors. The options granted are subject to a vesting schedule as set forth in each individual option agreement. Each option expires on the tenth anniversary of its date of grant unless an earlier termination date is provided in the grant agreement. The maximum aggregate number of shares of common stock that may be optioned and sold under the plan shall be 6% of the shares outstanding on the date of grant. The shares that may be optioned under the plan may be authorized but unissued or may be treasury shares.

Compensation expense is recognized on a straight-line basis over a three-year vesting period from date of grant.

 
Stock option activity for the six months ended July 2, 2017 and July 3, 2016 is as follows:
 
   
Stock Options
 
   
Total
   
Weighted
Average
Exercise
Price
   
Exercis-
able
   
Weighted
Average
Exercise
Price
   
Non-Vested
   
Weighted
Average
Exercise
Price
 
Outstanding at January 3, 2016
   
665,000
   
$
2.37
     
-
     
-
     
665,000
   
$
2.37
 
Granted
   
360,250
     
3.57
     
-
     
-
     
360,250
     
3.57
 
Vested
   
-
     
-
     
-
     
-
     
-
     
-
 
Exercised
   
-
     
-
     
-
     
-
     
-
     
-
 
Forfeited or cancelled
   
-
     
-
     
-
     
-
     
-
     
-
 
Outstanding at July 3, 2016
   
1,025,250
   
$
2.79
     
-
             
1,025,250
   
$
2.79
 
                                                 
Outstanding at January 1, 2017
   
997,750
   
$
2.80
     
217,501
   
$
2.37
     
780,249
   
$
2.92
 
Granted
   
-
     
-
     
-
     
-
     
-
     
-
 
Vested
   
-
     
-
     
118,415
     
3.57
     
(118,415
)
   
3.57
 
Exercised
   
-
     
-
     
-
     
-
     
-
     
-
 
Forfeited or cancelled
   
(5,000
)
   
2.37
     
(5,000
)
   
2.37
     
-
     
-
 
                                                 
Outstanding July 2, 2017
   
992,750
   
$
2.80
     
330,916
   
$
2.80
     
661,834
   
$
2.80
 
                                                 
Aggregate Intrinsic Value
                                               
July 3, 2016
 
$
1,495,170
           
$
-
           
$
1,495,170
         
                                                 
Aggregate Intrinsic Value
                                               
 July 2, 2017
 
$
535,500
           
$
178,501
           
$
356,999
         


 
Option expense recognized was $103,323 and $106,424 for the three months ended July 2, 2017 and July 3, 2016, respectively and $206,645 and $165,565 for the six months ended July 2, 2017 and July 3, 2016, respectively. As of July 2, 2017, there was $572,073 in unrecognized compensation cost related to the options granted under the 2015 Stock Option Plan. We expect to recognize those costs over the remaining vesting term of 21 months.
 
15.
Recent Accounting Pronouncements
 
In May 2014, the Financial Accounting Standards Board issued a new standard ASU No. 2014-09, "Revenue from Contracts with Customers." Under ASU 2014-09 recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The new standard will be effective for the Company January 1, 2018. The Company is currently evaluating the effects this standard will have, if any, on its consolidated financial position, results of operations and cash flows together with evaluating the adoption date.
 
 
On July 22, 2015, the Financial Accounting Standards Board issued a new standard ASU No. 2015-11, “Simplifying the Measurement of Inventory”. The new standard requires entities to measure most inventory at the lower of cost and net realizable value, which is a change from the current guidance under which an entity must measure inventory at the lower of cost or market with market defined as replacement cost, net realizable value or net realizable value less a normal profit margin. The ASU will not apply to inventories that are measured by using either the last-in, first-out (LIFO) method or the retail inventory method. It became effective for the Company on January 2, 2017. The adoption of this standard for the year ending December 31, 2017 will not have a significant effect on its consolidated financial position, results of operations and cash flows.

On November 20, 2015, the Financial Accounting Standards Board issued a new standard ASU No. 2015-17, “Income Taxes - Balance Sheet Classification of Deferred Taxes”. Under the new guidance deferred tax liabilities and assets will be classified as noncurrent in a classified statement of financial position. It became effective for the Company on January 2, 2017. The adoption of this standard for the year ending December 31, 2017 will not have a significant effect on its consolidated financial position, results of operations and cash flows. The Company is applying the change retrospectively for all periods presented. Thus, current deferred tax assets in the amount of $1,301,280 which had been included in Other Current Asset in the accompanying Consolidated Balance Sheets at January 1, 2017 were reclassified to Other Long-term Assets or Other Long-term liabilities at that date.

On February 25, 2016, the Financial Accounting Standards Board issued a new standard ASU No. 2016-02, “Leases”. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current Generally Accepted Accounting Principles (GAAP), the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP which requires only capital leases to be recognized on the balance sheet, the new ASU will require both types of leases to be recognized on the balance sheet. It will be effective for the Company on December 31, 2018. The Company is currently evaluating the effects this standard will have, if any, on its consolidated financial position, results of operations and cash flows together with evaluating the adoption date.

On March 30, 2016, the Financial Accounting Standards Board issued a new standard ASU No. 2016-09, “Compensation – Stock Compensation.” The new standard involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. It became effective for the Company on January 2, 2017. The adoption of this standard for the year ending December 31, 2017 will not have a significant effect on its consolidated financial position, results of operations and cash flows.

On August 26, 2016, the Financial Accounting Standards Board issued a new standard ASU No. 2016-15, “Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments.” The new standard applies to how certain cash receipts and cash payments are presented and classified in the statement of cash flows. It will be effective for the Company on January 1, 2018. The Company is currently evaluating the effects this standard will have, if any, on its consolidated financial position, results of operations and cash flows together with evaluating the adoption date.

On January 26, 2017, the Financial Accounting Standards Board issued a new standard ASU No. 2017-04, “Intangibles – Goodwill and Other – Simplifying the Test for Goodwill Impairment.” The new standard modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. It will be effective for the Company on December 30, 2019. The Company is currently evaluating the effects this standard will have, if any, on its consolidated financial position, results of operations and cash flows together with evaluating the adoption date.

On May 10, 2017, the Financial Accounting Standards Board issued a new standard ASU No. 2017-09, “Compensation – Stock Compensation – Scope of Modification Accounting.” The new standard clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. It will be effective for the Company on January 1, 2018. Although the Company currently does not have any plans to change any of the terms or conditions of its stock compensation plan, the Company is evaluating this standard to understand the effects various changes, if made, could have on its consolidated financial position, results of operations and cash flows together with evaluating the adoption date.
 
 
16.
Earnings per Common Share

 The following table sets forth the computation of earnings per common share - basic and earnings per common share – diluted for the three and six months ended July 2, 2017 and July 3, 2016:

   
Three Months Ended
   
Six Months Ended
 
   
July 2, 2017
   
July 3, 2016
   
July 2, 2017
   
July 3, 2016
 
Numerator
                       
 Net income available to
 common shareholders
 
$
214,466
   
$
1,181,726
   
$
685,242
   
$
1,615,829
 
                                 
Denominator
                               
Denominator for basic
earnings per share -
weighted average shares
outstanding
   
18,704,024
     
18,838,608
     
18,713,625
     
18,851,014
 
Weighted average effect
of dilutive securities
   
105,574
     
55,341
     
96,566
     
55,341
 
Denominator for dilutive
earnings per share -
weighted average shares
outstanding
   
18,809,598
     
18,893,949
     
18,810,191
     
18,906,355
 
                                 
Basic and Diluted Income
Per Share
                               
Net income available to
common shareholders
 
$
0.01
   
$
0.06
   
$
0.04
   
$
0.09
 
Effect of dilutive
securities
   
-
     
-
     
-
     
-
 
Net income available to
common shareholders
 
$
0.01
   
$
0.06
   
$
0.04
   
$
0.09
 


The dilutive securities related to stock options included in the calculation of diluted earnings per common share.
 
 
17.
Subsequent Events

The Company has evaluated subsequent events occurring through the date that the financial statements were issued, for events requiring recording or disclosure in the July 2, 2017 financial statements. There were no material events or transactions occurring during this period requiring recognition or disclosure.
 
 
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 600 SKUs with combinations of colors, textures, patterns and other properties. Our products are differentiated by unique protective top finishes, adhesive back coatings and transfer print capabilities. Additional process capabilities include embossing grains and patterns, and rotogravure printing, which imparts 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, healthcare facilities and athletic equipment. We manufacture materials in a wide range of colors and textures. They can be hand or machine sewn, laminated to an underlying structure, thermoformed to cover various substrates or made into a variety of shapes for diverse end-uses. We are a long-established supplier to the global automotive industry and manufacture products for interior trim components from floor to headliner which are produced to meet specific component production requirements such as cut and sew, vacuum forming/covering, compression molding, and high frequency welding. Some products are supplied with micro perforations, which are necessary on most compression molding processes. Materials can also be combined with polyurethane or polypropylene 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 durability and weatherability is used. We also manufacture a line of products called BeautyGard®, with water-based topcoats that contain agents to protect against bacterial and fungal microorganisms and can withstand repeated cleaning, a necessity in the restaurant and health care industries. These topcoats are environmentally friendlier than solvent-based topcoats. The line is widely used in hospitals and other healthcare facilities. Flame and smoke retardant vinyl coated fabrics are used for a variety of commercial and institutional furniture applications, including hospitals, restaurants and residential care centers and seats for school buses 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 of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and assumptions based upon historical 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 – “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 and Estimates” in our Annual Report on Form 10-K/A for the fiscal year ended January 1, 2017.
 
Recent Accounting Pronouncements
 
See Note 15 – “Recent Accounting Pronouncements” to the Consolidated Financial Statements for a discussion of recent accounting guidance.
 
 
Overview:
 
The Company and its subsidiaries have adopted a 52/53-week fiscal year ending on the Sunday nearest to December 31. The current year ending December 31, 2017 and the prior year ended January 1, 2017 are 52-week years.

Our Earby, England operation’s functional currency is the British Pound Sterling and has sales and purchases transactions that are denominated in currencies other than its functional currency, principally the Euro. Approximately 32% of the Company’s global revenues and 34% of its global raw material purchases are derived from these transactions. The average year-to-date exchange rate for the Pound Sterling to the U.S. Dollar was approximately 12.2% lower and the average exchange rate for the Euro to the Pound Sterling was approximately 9.5% higher in 2017 compared to 2016. These exchange rate changes had the net effect of decreasing net sales by approximately $2.0 million for the six months ended July 2, 2017. Since the Pound Sterling exchange rate change also reduced the fixed expenses, the overall effect on net income was a positive amount of approximately $391,000 for the six months ended July 2, 2017 compared to the corresponding period of 2016.
 
Three Months Ended July 2, 2017 Compared to the Three Months Ended July 3, 2016
 
The following table sets forth, for the three months ended July 2, 2017 (“three months 2017”) and July 3, 2016 (“three months 2016”), certain operations data including their respective percentage of net sales: 

   
Three Months Ended 
   
July 2, 2017
   
July 3, 2016
   
Change
   
%
Change 
                                 
Net Sales
 
$
26,077,549
 
100.0
%
 
$
27,333,869
 
100.0
%
 
$
(1,256,320
)
 
-4.6
%
Cost of Sales
   
20,740,966
 
79.5
%
   
20,674,715
 
75.6
%
   
66,251
   
0.3
%
Gross Profit
   
5,336,583
 
20.5
%
   
6,659,154
 
24.4
%
   
(1,322,571
)
 
-19.9
%
Operating Expenses:
                                     
Selling
   
1,325,397
 
5.1
%
   
1,390,339
 
5.1
%
   
(64,942
)
 
-4.7
%
General and administrative
   
1,929,780
 
7.4
%
   
2,179,088
 
8.0
%
   
(249,308
)
 
-11.4
%
Research and development
   
437,104
 
1.7
%
   
475,313
 
1.7
%
   
(38,209
)
 
-8.0
%
Total operating expenses
   
3,692,281
 
14.2
%
   
4,044,740
 
14.8
%
   
(352,459
)
 
-8.7
%
Operating Income
   
1,644,302
 
6.3
%
   
2,614,414
 
9.6
%
   
(970,112
)
 
-37.1
%
Interest expense
   
(408,794
)
-1.6
%
   
(421,225
)
-1.5
%
   
12,431
   
-3.0
%
Other expense
   
(92,379
)
-0.4
%
   
(88,564
)
-0.3
%
   
(3,815
)
 
4.3
%
Income before taxes
   
1,143,129
 
4.4
%
   
2,104,625
 
7.7
%
   
(961,496
)
 
-45.7
%
Tax provision
   
191,343
 
0.7
%
   
198,134
 
0.7
%
   
(6,791
)
 
-3.4
%
Net income
   
951,786
 
3.6
%
   
1,906,491
 
7.0
%
   
(954,705
)
 
-50.1
%
Preferred dividends
   
(737,320
)
-2.8
%
   
(724,765
)
-2.7
%
   
(12,555
)
 
1.7
%
Net income available to
common shareholders
 
$
214,466
 
0.8
%
 
$
1,181,726
 
4.3
%
 
$
(967,260
)
 
-81.9
%
 
 
Revenue:
    
Total revenue for the three months 2017 decreased $1,256,320 or 4.6% to $26,077,549 from $27,333,869 for the three months 2016.  Automotive sales for the three months 2017 decreased 5.4% compared to the three months 2016 as the increase in sales of several new programs in the European market was offset by a decline in the US as automotive manufacturers adjusted their production due to a softening in the US market. Industrial sales for the three months 2017 were down 2.9% compared to the prior year period. Contributing to the decline was the net currency effect of the exchange rate change of approximately $880,000.
    
 
Gross Profit:
 
Total gross profit for the three months 2017 decreased $1,322,571 or 19.9% to $5,336,583 from $6,659,154 for the three months 2016. The gross profit percentage was 20.5% of sales for the three months 2017 compared to 24.4% for the three months 2016. The lower gross profit percentage was partially due to a higher mix of lower margin automotive sales to higher margin industrial sales for the three months 2017 compared to the three months 2016. Gross profit was also negatively impacted by rising raw material prices and operating inefficiencies resulting from newly awarded automotive platforms ramping up in Europe.
 
Operating Expenses:
 
Selling expenses for the three months 2017 decreased $64,942 or 4.7% to $1,325,397 from $1,390,339 for the three months 2016. The decrease resulted primarily from the net currency effect of the exchange rate change.
 
General and administrative expenses for the three months 2017 decreased by $249,308 or 11.4% to $1,929,780 from $2,179,088 for the three months 2016. This decrease was due to lower employee benefit costs and professional fees for the three months 2017 compared to the three months 2016. Also contributing to the decrease was the net currency effect of $81,000.
 
Research and development expenses for the three months 2017 decreased by $38,209 or 8.0% to $437,104 from $475,313 for the three months 2016. The decrease resulted primarily from the net currency effect of the exchange rate change.
 
Operating Income:
 
Operating income for the three months 2017 decreased by $970,112 or 37.1% to $1,644,302 from $2,614,414 for the three months 2016. The operating income percentage was 6.3% of sales for the three months 2017 compared to 9.6% for the three months 2016. Operating income decreased primarily from the decrease in gross profit which was partially offset by the decrease in operating expenses.
 
Interest Expense:
 
Interest expense for the three months 2017 decreased by $12,431 or 3.0% to $408,794 from $421,225 for the three months 2016. The decrease was primarily due to debt repayment partially offset by new capital leases for equipment purchases and higher interest rates on LIBOR and prime during the three months 2017 compared to the three months 2016.
 
Other Expense:
 
Other expense for the three months 2017 increased by $3,815 or 4.3% to $92,379 from $88,564 for the three months 2016. The amount in other expense principally is the currency gains and losses recognized by the UK operations on foreign currency transactions and the change in the fair value of financial assets and liabilities that are denominated in Euros and U.S. Dollars. The Company also recognizes gains and losses from the change in fair values on its foreign currency exchange contracts.
  
Tax Provision:
 
The Company files income tax returns in the United States as a C-Corporation, and in several state jurisdictions and in the United Kingdom. The Company’s subsidiary, Uniroyal, is a limited liability company (LLC) for federal and state income tax purposes and as such, its income, losses, and credits are allocated to its member. Uniroyal’s income is allocated entirely to UEPH as its sole member. Uniroyal Global then receives this income allocation as a member of UEPH less the dividends paid on the preferred units held by the former members of Uniroyal. For federal income tax purposes UEPH is a pass through entity and the Company’s share of its taxable income is reported on its tax return. The taxable income applicable to the distribution for the preferred ownership interests is reported to the members who report it on their respective individual tax returns.
 
For the three months 2016, the tax provision was comprised of U.K. tax plus a state and local tax provision on the Company’s U.S. income. There was no U.S. Federal tax provision for the 2016 period due to a reduction of deferred tax asset valuation allowances that offset the provision. At January 1, 2017, the Company concluded after an analysis that it was more likely than not that all of the deferred tax asset would be realized and accordingly eliminated the valuation allowance. Therefore, the provisions for the three months ended July 2, 2017 included, in addition to the U.K. tax and state and local tax, a provision for Federal tax on the Company’s income less the income applicable to the distribution for the preferred ownership interests.
 
 
Preferred Stock Dividend:
 
The terms of the acquisitions in November 2014 resulted in the issuance of preferred ownership units/stock of UEP Holdings, LLC and UGEL (formerly EPAL) to the sellers. These preferred units carry quarterly dividend requirements on a total value of $55,000,000 at rates ranging from 5.0% to 6.5%. The dividend rate on the Series B UEP Holdings preferred units which started at 5.5% increases by 0.5% on the anniversary of the issuance up to a maximum of 8.0%.

Six Months Ended July 2, 2017 Compared to the Six Months Ended July 3, 2016
 
The following table sets forth, for the six months ended July 2, 2017 (“six months 2017”) and July 3, 2016 (“six months 2016”), certain operations data including their respective percentage of net sales: 

   
Six Months Ended 
   
July 2, 2017
   
July 3, 2016
   
Change
   
%
Change 
                                 
Net Sales
 
$
51,835,978
 
100.0
%
 
$
52,301,464
 
100.0
%
 
$
(465,486
)
 
-0.9
%
Cost of Sales
   
41,123,248
 
79.3
%
   
39,915,850
 
76.3
%
   
1,207,398
   
3.0
%
Gross Profit
   
10,712,730
 
20.7
%
   
12,385,614
 
23.7
%
   
(1,672,884
)
 
-13.5
%
Operating Expenses:
                                     
Selling
   
2,610,344
 
5.0
%
   
2,772,982
 
5.3
%
   
(162,638
)
 
-5.9
%
General and administrative
   
3,751,246
 
7.2
%
   
4,220,922
 
8.1
%
   
(469,676
)
 
-11.1
%
Research and development
   
970,958
 
1.9
%
   
903,842
 
1.7
%
   
67,116
   
7.4
%
Total operating expenses
   
7,332,548
 
14.1
%
   
7,897,746
 
15.1
%
   
(565,198
)
 
-7.2
%
Operating Income
   
3,380,182
 
6.5
%
   
4,487,868
 
8.6
%
   
(1,107,686
)
 
-24.7
%
Interest expense
   
(798,650
)
-1.5
%
   
(838,413
)
-1.6
%
   
39,763
   
-4.7
%
Other income (expense)
   
6,875
 
0.0
%
   
(262,060
)
-0.5
%
   
268,935
   
<-100%
 
Income before taxes
   
2,588,407
 
5.0
%
   
3,387,395
 
6.5
%
   
(798,988
)
 
-23.6
%
Tax provision
   
425,929
 
0.8
%
   
327,900
 
0.6
%
   
98,029
   
29.9
%
Net income
   
2,162,478
 
4.2
%
   
3,059,495
 
5.8
%
   
(897,017
)
 
-29.3
%
Preferred dividends
   
(1,477,236
)
-2.8
%
   
(1,443,666
)
-2.8
%
   
(33,570
)
 
2.3
%
Net income available to
common shareholders
 
$
685,242
 
1.3
%
 
$
1,615,829
 
3.1
%
 
$
(930,587
)
 
-57.6
%
 
Revenue:

Total revenue for the six months 2017 decreased $465,486 or 0.9% to $51,835,978 from $52,301,464 for the six months 2016. Automotive sales for the six months 2017 increased 2.0% compared to the six months 2016 as the increase in sales of several new programs in the European market was partially offset by a decline in the US as automotive manufacturers adjusted their production due to a softening in the US market. Industrial sales for the six months 2017 were down 6.4% compared to the prior year period. Contributing to the decline was the net currency effect of the exchange rate change of approximately $2,035,000. Without the effect of the exchange rate change, total revenue would have increased by 3.0%.
    
Gross Profit:
 
Total gross profit for the six months 2017 decreased $1,672,884 or 13.5% to $10,712,730 from $12,385,614 for the six months 2016. The gross profit percentage was 20.7% of sales for the six months 2017 compared to 23.7% for the six months 2016. The lower gross profit percentage was partially due to mix as lower margin automotive sales increased and higher margin industrial sales decreased for the six months 2017 compared to the six months 2016. Gross profit was also negatively impacted by rising raw material prices and operating inefficiencies resulting from newly awarded automotive platforms ramping up in Europe.  The decrease was partially offset by a positive net currency effect in the amount of $38,000.
 
 
Operating Expenses:
 
Selling expenses for the six months 2017 decreased $162,638 or 5.9% to $2,610,344 from $2,772,982 for the six months 2016. The decrease resulted primarily from the net currency effect of the exchange rate change.
 
General and administrative expenses for the six months 2017 decreased by $469,676 or 11.1% to $3,751,246 from $4,220,922 for the six months 2016. This decrease was due to lower employee benefit costs and professional fees for the six months 2017 compared to the six months 2016. Also contributing to the decrease was the net currency effect of $174,000.
 
Research and development expenses for the six months 2017 increased by $67,116 or 7.4% to $970,958 from $903,842 for the six months 2016. The increase resulted from additional staffing and increased expenditures for new product development. This was partially offset by the net currency effect of the exchange rate change in the amount of $44,000.
 
Operating Income:
 
Operating income for the six months 2017 decreased by $1,107,686 or 24.7% to $3,380,182 from $4,487,868 for the six months 2016. The operating income percentage was 6.5% of sales for the six months 2017 compared to 8.6% for the six months 2016. Operating income decreased primarily from the decrease in gross profit. This was partially offset by the reduction in operating expenses for the six month 2017 compared to 2016 and a positive net currency effect of $385,000.
 
Interest Expense:
 
Interest expense for the six months 2017 decreased by $39,763 or 4.7% to $798,650 from $838,413 for the six months 2016. The decrease was primarily due to debt repayment partially offset by new capital leases for equipment purchases and higher interest rates on LIBOR and prime during the six months 2017 compared to the six months 2016.
 
Other Income (Expense):
 
Other income (expense) for the six months 2017 increased $268,935 to a gain of $6,875 from a loss of $262,060 for the six months 2016. The amount in other income (expense) principally is the currency gains and losses recognized by the UK operations on foreign currency transactions and the change in the fair value of financial assets and liabilities that are denominated in Euros and U.S. Dollars. The Company also recognizes gains and losses from the change in fair values on its foreign currency exchange contracts.
  
Tax Provision:
 
The Company files income tax returns in the United States as a C-Corporation, and in several state jurisdictions and in the United Kingdom. The Company’s subsidiary, Uniroyal, is a limited liability company (LLC) for federal and state income tax purposes and as such, its income, losses, and credits are allocated to its member. Uniroyal’s income is allocated entirely to UEPH as its sole member. Uniroyal Global then receives this income allocation as a member of UEPH less the dividends paid on the preferred units held by the former members of Uniroyal. For federal income tax purposes UEPH is a pass-through entity and the Company’s share of its taxable income is reported on its tax return. The taxable income applicable to the distribution for the preferred ownership interests is reported to the members who report it on their respective individual tax returns.
 
For the six months 2016, the tax provision was comprised of U.K. tax plus a state and local tax provision on the Company’s U.S. income. There was no U.S. Federal tax provision for the 2016 period due to a reduction of deferred tax asset valuation allowances that offset the provision. At January 1, 2017, the Company concluded after an analysis that it was more likely than not that all of the deferred tax asset would be realized and accordingly eliminated the valuation allowance. Therefore, the provisions for the six months ended July 2, 2017 included, in addition to the U.K. tax and state and local tax, a provision for Federal tax on the Company’s income less the income applicable to the distribution for the preferred ownership interests.
 
 
Preferred Stock Dividend:
 
The terms of the acquisitions in November 2014 resulted in the issuance of preferred ownership units/stock of UEP Holdings, LLC and UGEL (formerly EPAL) to the sellers. These preferred units carry quarterly dividend requirements on a total value of $55,000,000 at rates ranging from 5.0% to 6.5%. The dividend rate on the Series B UEP Holdings preferred units which started at 5.5% increases by 0.5% on the anniversary of the issuance up to a maximum of 8.0%.

Liquidity and Sources of Capital

Cash, as it is needed, is provided by using the Company’s lines of credit. These lines provide for a total borrowing commitment in excess of $40,000,000 subject to the underlying borrowing base specified in the agreements. Of the total outstanding borrowings of $18,024,806 at July 2, 2017, $14.1 million of the lines bears interest at LIBOR plus a range of 1.95% to 2.45%, depending on the underlying borrowing base and $3.9 million bears interest at the bank’s prime or base lending rate which was 4.25% at July 2, 2017. At July 2, 2017, the lines provided an additional availability of approximately $3.4 million. We plan to use this availability to help finance our cash needs for the remaining months of fiscal 2017 and future periods. The balances due under the lines of credit are recorded as current liabilities on the balance sheet.
 
Given our capital resources in the U.S. and the potential for increased investment and acquisitions in foreign jurisdictions, we do not have a history of repatriating a significant portion of our foreign cash. Accordingly, we have not recognized a deferred tax liability for these unremitted earnings. In the event that circumstances should change in the future and we decide to repatriate these foreign amounts to fund U.S. operations, the Company would record a tax expense and pay the applicable U.S. taxes on these repatriated foreign amounts.

The ratio of current assets to current liabilities, including the amount due under our lines of credit, was 1.10 at July 2, 2017 and 1.13 at January 1, 2017.
 
Cash balances decreased $217,825, after the effects of currency translation of $48,112, to $1,103,761 at July 2, 2017 from $1,321,586 at January 1, 2017. Of the above noted amounts, $877,270 and $970,327 were held outside the U.S. by our foreign subsidiaries as of July 2, 2017 and January 1, 2017, respectively.
 
Cash provided by operations was $2,448,025 for the six months 2017 compared to $2,148,415 for the six months 2016. Cash provided by operations came from net income of $2,162,478 and $3,059,495 for the six months 2017 and 2016, respectively, as adjusted by cash flows related to changes in assets and liabilities of $(781,903) and $(1,948,022) for the six months 2017 and 2016, respectively.  Collections from accounts receivable and other receivables and timing of payments to vendors contributed to the increase compared to 2016.

Cash used in investing activities was $1,179,257 for the six months 2017 compared to $874,862 for the six months 2016. During 2017 and 2016, cash used in investing activities was principally for purchases of machinery and equipment at our manufacturing locations.
 
For the six months 2017, cash used in financing activities was $1,534,705 as compared to $1,645,313 used in financing activities for the six months 2016.  The Company paid $1,455,942 and $1,174,463 of preferred dividends for the six months 2017 and 2016, respectively. The Company had net advances on its lines of credit of $622,911 and $1,085,914 for the six months 2017 and 2016, respectively. In May 2016, the Company modified the terms of the secured promissory note in the amount of $1,285,593 related to the Wardle Storeys acquisition and paid the note in full on May 31, 2016.

Our credit agreements contain customary affirmative and negative covenants. We were in compliance with our debt covenants as of July 2, 2017 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 material off balance sheet arrangements.
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
None.
 
 
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 July 2, 2017 and concluded that our disclosure controls and procedures were effective as of July 2, 2017.
 
Changes in Internal Controls over Financial Reporting
 
During the six months ended July 2, 2017, 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 Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
 
PART II.
 OTHER INFORMATION
 
Item 1.
Legal Proceedings
 
None.
 
Item 1A.
Risk Factors
 
There have been no material changes from the risk factors as previously disclosed in our annual report on Form 10-K/A for the fiscal year ended January 1, 2017.
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
Issuer Purchases of Equity Securities
 
On April 29, 2015, the Board of Directors of the Registrant authorized the Chief Executive Officer to cause the Company to repurchase shares of the Company’s common stock in the open market or in private transactions at such times as cash of the Company is available and the Chief Executive Officer deems such purchases to be in the long-term interests of the Company.  The Chief Executive Officer is required to report such purchases at the next meeting of the Board of Directors.  The authorization has no expiration date. 
 
Second Quarter 2017
For the Period
 
Total
number of
shares
purchased
 
Average
price
paid per
share
 
Total
number of
shares
purchased
as part of
publicly
announced
plans or
programs
 
Maximum
number (or
approximate
dollar value)
of shares that
may yet be
purchased
under the
plans or
programs
                 
April 3, 2017 to April 30, 2017
 
7,362
 
$3.34
 
-
 
-
May 1, 2017 to May 28, 2017
 
6,650
 
$3.42
 
-
 
-
May 29, 2017 to July 2, 2017
 
2,100
 
$3.32
 
-
 
-
Total
 
16,112
 
$3.33
 
-
 
-


 
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
 
 
 
31.1 *
 
31.2 *
 
32.1 *
 
32.2 *
 
101.INS * +
 
XBRL Instance Document
101.CAL * +
 
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF * +
 
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB * +
 
XBRL Taxonomy Extension Label Linkbase Document
101.PRE * +
 
XBRL Taxonomy Extension Presentation Linkbase Document
101.SCH * +
 
XBRL Taxonomy Extension Schema Document
_______________
*
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.
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:   August 7, 2017
By:
/s/  Howard R. Curd
 
 
 
Howard R. Curd
Chief Executive Officer
 
 
 
 
 
 
Dated:   August 7, 2017
By:
/s/  Edmund C. King
 
 
 
Edmund C. King
Chief Financial Officer
 
 
 
25
EX-31.1 2 ex31_1.htm EXHIBIT 31.1
EXHIBIT 31.1

CERTIFICATION

I, Howard R. Curd, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Uniroyal Global Engineered Products, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of and for the periods presented in this report;

4. The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d)
Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer ’s internal control over financial reporting.

5. The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

 
Date: August 7, 2017
/s/ Howard R. Curd
 
Howard R. Curd
 
Chief Executive Officer
 
 
 

EX-31.2 3 ex31_2.htm EXHIBIT 31.2
EXHIBIT 31.2

CERTIFICATION

I, Edmund C. King, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Uniroyal Global Engineered Products, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of and for the periods presented in this report;

4. The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
Evaluated the effectiveness of the issuer ’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d)
Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the issuer’s most recent fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting.

5. The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.
 
 
Date: August 7, 2017
/s/ Edmund C. King
 
Edmund C. King
 
Chief Financial Officer
 
 
 

EX-32.1 4 ex32_1.htm EXHIBIT 32.1
Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
 
In connection with the Quarterly Report of Uniroyal Global Engineered Products, Inc. (the “Company” or “Uniroyal Global”) on Form 10-Q for the period ended July 2, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Howard R. Curd, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
 
 
Date: August 7, 2017
/s/ Howard R. Curd
 
Howard R. Curd
 
Chief Executive Officer
 
 
 

EX-32.2 5 ex32_2.htm EXHIBIT 32.2
Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Uniroyal Global Engineered Products, Inc. (the “Company” or “Uniroyal Global”) on Form 10-Q for the period ended July 2, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Edmund C. King, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
 
 
Date: August 7, 2017
/s/ Edmund C. King
 
Edmund C. King
 
Chief Financial Officer
 
 
 

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Document and Entity Information - shares
6 Months Ended
Jul. 02, 2017
Aug. 01, 2017
Entity Registrant Name UNIROYAL GLOBAL ENGINEERED PRODUCTS, INC.  
Entity Trading Symbol UNIR  
Document Type 10-Q  
Document Period End Date Jul. 02, 2017  
Amendment Flag false  
Entity Central Index Key 0001172706  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Current Reporting Status Yes  
Entity Voluntary Filers No  
Entity Well-known Seasoned Issuer No  
Document Fiscal Year Focus 2017  
Document Fiscal Period Focus Q2  
Ordinary Common Stock [Member]    
Entity Common Stock, Shares Outstanding   17,078,928
Common Class B [Member]    
Entity Common Stock, Shares Outstanding   1,619,102
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Consolidated Balance Sheets - USD ($)
Jul. 02, 2017
Jan. 01, 2017
CURRENT ASSETS    
Cash and cash equivalents $ 1,103,761 $ 1,321,586
Accounts receivable, net 17,161,964 14,555,463
Inventories, net 19,296,911 17,046,171
Other current assets 1,357,898 1,183,932
Related party receivable 24,750 25,456
Total Current Assets 38,945,284 34,132,608
PROPERTY AND EQUIPMENT, NET 14,756,079 13,611,494
OTHER ASSETS    
Intangible assets 3,224,341 3,133,564
Goodwill 1,079,175 1,079,175
Other long-term assets 6,903,506 6,665,375
Total Other Assets 11,207,022 10,878,114
TOTAL ASSETS 64,908,385 58,622,216
CURRENT LIABILITIES    
Checks issued in excess of bank balance 717,220 679,494
Lines of credit 18,024,806 16,799,592
Current maturities of long-term debt 1,007,494 851,988
Current maturities of capital lease obligations 381,316 368,718
Accounts payable 10,263,688 7,331,213
Accrued expenses 4,457,360 3,645,526
Related party obligation 373,779 371,161
Current portion of postretirement benefit liability - health and life 158,527 158,527
Total Current Liabilities 35,384,190 30,206,219
LONG-TERM LIABILITIES    
Long-term debt, less current portion 2,108,442 1,994,910
Capital lease obligations, less current portion 709,007 856,171
Related party lease financing obligations 2,158,080 2,162,151
Long-term debt to related parties 2,643,150 2,826,907
Postretirement benefit liability - health and life, less current portion 2,878,079 2,883,684
Other long-term liabilities 793,089 792,027
Total Long-Term Liabilities 11,289,847 11,515,850
Total Liabilities 46,674,037 41,722,069
STOCKHOLDERS' EQUITY    
Preferred units, Series A UEP Holdings, LLC, 200,000 units issued and outstanding ($100 issue price) 617,571 617,571
Preferred units, Series B UEP Holdings, LLC, 150,000 units issued and outstanding ($100 issue price) 463,179 463,179
Preferred stock, Uniroyal Global (Europe) Limited, 50 shares issued and outstanding ($1.51 stated value) 75 75
Common stock, 95,000,000 shares authorized ($.001 par value) 18,698,030 and 18,727,782 shares issued and outstanding as of July 2, 2017 and January 1, 2017, respectively 18,698 18,728
Additional paid-in capital 34,760,729 34,653,894
Accumulated deficit (16,489,572) (17,174,814)
Accumulated other comprehensive loss (1,136,332) (1,678,486)
Total Stockholders' Equity 18,234,348 16,900,147
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 64,908,385 $ 58,622,216
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.7.0.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Jul. 02, 2017
Jan. 01, 2017
Assets [Abstract]    
Preferred Stock Par value $ 100 $ 100
Series A UEP Holdings LLC par value $ 100 $ 100
Series A UEP Holdings LLC shares issued 200,000 200,000
Series A UEP Holdings LLC shares outstanding 200,000 200,000
Series B UEP Holdings LLC par value $ 100 $ 100
Series B UEP Holdings LLC shares issued 150,000 150,000
Series B UEP Holdings LLC shares outstanding 150,000 150,000
Preferred stock, Uniroyal Global (Europe) Limited shares Par value $ 1.51 $ 1.51
Preferred stock, Uniroyal Global (Europe) Limited shares issued 50 50
Preferred stock, Uniroyal Global (Europe) Limited shares outstanding 50 50
Common Stock, par value $ 0.001 $ 0.001
Common Stock, shares authorized 95,000,000 95,000,000
Common Stock, shares issued 18,698,030 18,727,782
Common Stock, shares outstanding 18,698,030 18,727,782
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.7.0.1
Consolidated Statements of Operations - USD ($)
3 Months Ended 6 Months Ended
Jul. 02, 2017
Jul. 03, 2016
Jul. 02, 2017
Jul. 03, 2016
Revenues [Abstract]        
NET SALES $ 26,077,549 $ 27,333,869 $ 51,835,978 $ 52,301,464
COST OF GOODS SOLD 20,740,966 20,674,715 41,123,248 39,915,850
Gross Profit 5,336,583 6,659,154 10,712,730 12,385,614
OPERATING EXPENSES:        
Selling 1,325,397 1,390,339 2,610,344 2,772,982
General and administrative 1,929,780 2,179,088 3,751,246 4,220,922
Research and development 437,104 475,313 970,958 903,842
OPERATING EXPENSES 3,692,281 4,044,740 7,332,548 7,897,746
Operating Income 1,644,302 2,614,414 3,380,182 4,487,868
OTHER INCOME (EXPENSE):        
Interest and other debt related expense (408,794) (421,225) (798,650) (838,413)
Other income (expense) (92,379) (88,564) 6,875 (262,060)
Net Other Expense (501,173) (509,789) (791,775) (1,100,473)
INCOME BEFORE TAX PROVISION 1,143,129 2,104,625 2,588,407 3,387,395
TAX PROVISION 191,343 198,134 425,929 327,900
NET INCOME 951,786 1,906,491 2,162,478 3,059,495
Preferred stock dividend (737,320) (724,765) (1,477,236) (1,443,666)
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 214,466 $ 1,181,726 $ 685,242 $ 1,615,829
EARNINGS PER COMMON SHARE:        
Basic $ 0.01 $ 0.06 $ 0.04 $ 0.09
Diluted $ 0.01 $ 0.06 $ 0.04 $ 0.09
WEIGHTED AVERAGE SHARES OUTSTANDING:        
Basic 18,704,024 18,838,608 18,713,625 18,851,014
Diluted 18,809,598 18,893,949 18,810,191 18,906,355
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.7.0.1
Consolidated Statements of Comprehensive Income - USD ($)
3 Months Ended 6 Months Ended
Jul. 02, 2017
Jul. 03, 2016
Jul. 02, 2017
Jul. 03, 2016
COMPREHENSIVE INCOME        
NET INCOME $ 951,786 $ 1,906,491 $ 2,162,478 $ 3,059,495
OTHER COMPREHENSIVE INCOME (LOSS):        
Minimum benefit liability adjustment (1,173) (2,346)
Foreign currency translation adjustment 397,035 (633,195) 542,154 (919,204)
OTHER COMPREHENSIVE INCOME (LOSS) 397,035 (634,368) 542,154 (921,550)
COMPREHENSIVE INCOME 1,348,821 1,272,123 2,704,632 2,137,945
Preferred stock dividend (737,320) (724,765) (1,477,236) (1,443,666)
COMPREHENSIVE INCOME TO COMMON SHAREHOLDERS $ 611,501 $ 547,358 $ 1,227,396 $ 694,279
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.7.0.1
Consolidated Statements of Changes in Stockholders' Equity - 6 months ended Jul. 02, 2017 - USD ($)
Ueph Series A Units [Member]
UEPH Series B Units [Member]
EPAL Preferred Shares [Member]
Common Stock [Member]
Additional Paid-In Capital [Member]
Accmulated Deficit [Member]
Accumulated Other Comprehensive Income [Member]
Total
Balance at Jan. 01, 2017 $ 617,571 $ 463,179 $ 75 $ 18,728 $ 34,653,894 $ (17,174,814) $ (1,678,486) $ 16,900,147
Balance, shares at Jan. 01, 2017 200,000 150,000 50 18,727,782        
Net Income 2,162,478 2,162,478
Other comprehensive loss 542,154 542,154
Stock-based compensation expense 206,645 206,645
Purchase treasury shares at cost $ (30) (99,810) (99,840)
Purchase treasury shares at cost, shares       (29,752)        
Preferred stock dividend (1,477,236) (1,477,236)
Balance at Jul. 02, 2017 $ 617,571 $ 463,179 $ 75 $ 18,698 $ 34,760,729 $ (16,489,572) $ (1,136,332) $ 18,234,348
Balance, shares at Jul. 02, 2017 200,000 150,000 50 18,698,030        
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.7.0.1
Consolidated Statements of Cash Flows - USD ($)
6 Months Ended
Jul. 02, 2017
Jul. 03, 2016
Net Cash Provided by (Used in) Operating Activities, Continuing Operations [Abstract]    
Net income $ 2,162,478 $ 3,059,495
Adjustments to reconcile net income to net cash flows from operating activities:    
Depreciation 849,968 860,977
Stock-based compensation expense 206,645 165,565
Amortization of intangible assets 10,002 10,002
Loss on disposal of property and equipment 835 2,744
Noncash postemployment health and life benefit (2,346)
Changes in assets and liabilities:    
Accounts receivable (2,059,187) (2,820,250)
Inventories (1,854,617) (1,471,097)
Other current assets (118,244) 540,611
Related party receivable 28,507 (48,921)
Other long-term assets (10,387) (86,992)
Accounts payable 2,609,639 1,571,067
Accrued expenses 666,371 311,406
Postretirement benefit liability - health and life (5,605) 2,463
Other long-term liabilities (38,380) 53,691
Cash provided by Operating Activities 2,448,025 2,148,415
CASH FLOWS FROM INVESTING ACTIVITIES    
Capital expenditures (955,496) (698,485)
Net payments on life insurance policies (223,761) (176,377)
Cash used in Investing Activities (1,179,257) (874,862)
CASH FLOWS FROM FINANCING ACTIVITIES    
Checks issued in excess of bank balance, net 37,726 337,115
Net advances on line of credit 622,911 1,085,914
Payments on long-term debt (259,569) (165,390)
Payments on capital lease obligations (194,782) (249,336)
Payments on related party obligation (185,209) (1,303,504)
Payment of preferred stock dividends (1,455,942) (1,174,463)
Purchase and retirement of treasury stock (99,840) (175,649)
Cash used in Financing Activities (1,534,705) (1,645,313)
Net Change in Cash and Cash Equivalents (265,937) (371,760)
Cash and Cash Equivalents - Beginning of Period 1,321,586 1,910,112
Effects of currency translation on cash and cash equivalents 48,112 (68,749)
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 1,103,761 $ 1,469,603
XML 19 R8.htm IDEA: XBRL DOCUMENT v3.7.0.1
Basis of Presentation
6 Months Ended
Jul. 02, 2017
Accounting Policies [Abstract]  
Basis of Presentation
1.
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 Uniroyal Global Engineered Products, Inc.’s financial position, results of operations and cash flows, in conformity with generally accepted accounting principles. Uniroyal Global Engineered Products, Inc. (the “Company,” “Uniroyal Global,” “we,” or “us”) filed audited consolidated financial statements as of and for the fiscal years ended January 1, 2017 and January 3, 2016 which included all information and notes necessary for such complete presentation in conjunction with its 2016 Annual Report on Form 10-K/A.
 
The results of operations for the interim period ended July 2, 2017 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 1, 2017, which are contained in the Company’s 2016 Annual Report on Form 10-K/A.

The Company owns all of the ownership interests in Uniroyal Engineered Products, LLC (“Uniroyal”) and its holding company UEP Holdings, LLC (“UEPH”), a U.S. manufacturer of textured coatings, and all of the ordinary common stock of Uniroyal Global (Europe) Limited (“UGEL”) formerly known as Engineered Products Acquisition Limited (“EPAL”), the holding company for Uniroyal Global Limited (“UGL”) formerly Wardle Storeys (Group) Limited (“Wardle Storeys”), a European manufacturer of textured coatings and polymer films.
 
The Company and its subsidiaries have adopted a 52/53-week fiscal year ending on the Sunday nearest to December 31. The current year ending December 31, 2017 and the prior year ended January 1, 2017 are 52-week years.
 
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 statement of the Company’s financial position as of July 2, 2017 and the results of operations, comprehensive income and cash flows for the interim periods ended July 2, 2017 and July 3, 2016.
 
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 US dollar as the reporting currency for financial reporting. The financial position and results of operations of the Company’s UK-based operations are measured using the British Pound Sterling as the functional currency. See Note 5, Foreign Currency Translation.
XML 20 R9.htm IDEA: XBRL DOCUMENT v3.7.0.1
Noncash Transactions and Supplemental Disclosure of Cash Flow Information
6 Months Ended
Jul. 02, 2017
Supplemental Cash Flow Elements [Abstract]  
Noncash Transactions and Supplemental Disclosure of Cash Flow Information
2.
Noncash Transactions and Supplemental Disclosure of Cash Flow Information
 
During the six months ended July 2, 2017 and July 3, 2016, the Company paid down its term loans using available borrowings on its various lines of credit of $198,518 and $230,189, respectively.
 
During the six months ended July 2, 2017 and July 3, 2016, the Company entered into new equipment financing arrangements with a value of $678,148 and $595,740, respectively. The fair value was added to property and equipment and a corresponding amount to long-term debt or capital lease obligations.
 
Supplemental disclosure of cash paid for:
 
 
 
July 2, 2017
   
July 3, 2016
 
 
           
Interest
 
$
808,983
   
$
876,055
 
                 
Tax payments
 
$
-
   
$
-
 
XML 21 R10.htm IDEA: XBRL DOCUMENT v3.7.0.1
Derivatives
6 Months Ended
Jul. 02, 2017
Derivatives  
Derivatives
3.
Derivatives

The Company recognizes all of its derivative instruments as either assets or liabilities in the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, as to whether the hedge is a cash flow hedge or a fair value hedge.

The Company incurs foreign currency risk on sales and purchases denominated in other currencies, primarily the British Pound Sterling and the Euro. Foreign currency exchange contracts are used by the Company principally to limit the exchange rate fluctuations of the Euro. The Euro risk is partially limited due to natural cash flow offsets. Currency exchange contracts are purchased for approximately 25% of the net risk. These contracts are not designated as cash flow hedges for accounting purposes. Changes in fair value of these contracts are reported in net earnings as part of other income and expense.
XML 22 R11.htm IDEA: XBRL DOCUMENT v3.7.0.1
Fair Value of Financial Instruments
6 Months Ended
Jul. 02, 2017
Fair Value Of Financial Instruments  
Fair Value of Financial Instruments
4.
Fair Value of Financial Instruments
 
The Company’s short term financial instruments consist of cash and cash equivalents, receivables, accounts payable and the lines of credit. The Company adjusts the carrying value of financial instruments denominated in other currencies such as cash, receivables, accounts payable and the lines of credit using the appropriate exchange rates at the balance sheet date. The Company believes that the carrying values of these short term financial instruments approximate their estimated fair values.

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

The Company uses foreign currency exchange contracts which are recorded at their estimated fair values in the accompanying Consolidated Balance Sheets. The fair values of the contracts at July 2, 2017 and January 1, 2017 were liabilities of $32,467 and assets of $9,718, respectively, and were included in accrued expenses and other current assets, respectively. The fair values of the currency exchange contracts are based upon observable market transactions of spot and forward rates.

For the six months ended July 2, 2017, there have been no changes in the application of valuation methods applied to similar assets and liabilities.
XML 23 R12.htm IDEA: XBRL DOCUMENT v3.7.0.1
Foreign Currency Translation
6 Months Ended
Jul. 02, 2017
Foreign Currency Translation [Abstract]  
Foreign Currency Translation
5.
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 our foreign operations are included in Other Income (Expense) in the accompanying Consolidated Statements of Operations.
XML 24 R13.htm IDEA: XBRL DOCUMENT v3.7.0.1
Inventories
6 Months Ended
Jul. 02, 2017
Inventory Disclosure [Abstract]  
Inventories
6.
Inventories
 
Inventories consist of the following:
 
 
 
July 2, 2017
   
January 1, 2017
 
 
           
Raw materials
 
$
6,182,103
   
$
5,199,632
 
Work-in-process
   
4,592,445
     
4,491,250
 
Finished goods
   
9,838,452
     
8,669,625
 
 
   
20,613,000
     
18,360,507
 
Less:  Allowance for inventory obsolescence
   
(1,316,089
)
   
(1,314,336
)
 
               
Total Inventories
 
$
19,296,911
   
$
17,046,171
 
XML 25 R14.htm IDEA: XBRL DOCUMENT v3.7.0.1
Other Long-term Assets
6 Months Ended
Jul. 02, 2017
Other Assets, Noncurrent [Abstract]  
Other Long-term Assets
7.
Other Long-term Assets
 
Other long-term assets consist of the following:
 
 
 
July 2, 2017
   
January 1, 2017
 
 
           
Non-current deferred tax asset
 
$
5,672,156
   
$
5,689,000
 
Other
   
1,231,350
     
976,375
 
 
               
Total Other Long-term Assets
 
$
6,903,506
   
$
6,665,375
 
XML 26 R15.htm IDEA: XBRL DOCUMENT v3.7.0.1
Other Long-term Liabilities
6 Months Ended
Jul. 02, 2017
Other Liabilities, Noncurrent [Abstract]  
Other Long-term Liabilities
8.
Other Long-term Liabilities
 
Other long-term liabilities consist of the following:
 
 
 
July 2, 2017
   
January 1, 2017
 
 
           
Non-current deferred tax liability
 
$
756,928
   
$
743,971
 
Other
   
36,161
     
48,056
 
 
               
Total Other Long-term Liabilities
 
$
793,089
   
$
792,027
 
XML 27 R16.htm IDEA: XBRL DOCUMENT v3.7.0.1
Lines of Credit
6 Months Ended
Jul. 02, 2017
Line of Credit Facility [Abstract]  
Line of Credit
9.
Lines of Credit
 
The Company’s Uniroyal subsidiary has available a $30,000,000 revolving line of credit financing agreement with Wells Fargo Capital Finance, LLC, which matures on October 17, 2019. Interest is payable monthly at the Eurodollar rate plus 2.25% or Wells Fargo Capital Finance, LLC's prime rate at the Company's election on outstanding balances up to $6,000,000 and prime rate on amounts in excess of $6,000,000. 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 outstanding balance on the line of credit (“Uniroyal Line of Credit”) was $9,920,280 and $9,668,388 as of July 2, 2017 and January 1, 2017, respectively. The Company has classified the outstanding balance on this line of credit within current liabilities in the accompanying Consolidated Balance Sheets.

The Company’s U.K. subsidiary has available a £8,500,000 (approximately $11.0 million) revolving line of credit financing agreement with Lloyds Bank Commercial Finance Limited (“UK Line of Credit”) which is subject to a six-month notice by either party. The line has several tranches based on currency or underlying security. Interest is payable monthly at the base rate (UK LIBOR or Lloyds Bank Base Rate as published) plus 1.95% to 2.45% depending on the tranche. Borrowings on the line of credit are subject to the underlying borrowing base specified in the agreement. The underlying borrowing base is currently determined based upon eligible accounts receivable and inventories. The line of credit is secured by substantially all of the subsidiary's assets and includes certain financial and restrictive covenants.
 
The outstanding balance on the UK Line of Credit was £6,244,790 and £5,792,236 ($8,104,526 and $7,131,204) as of July 2, 2017 and January 1, 2017, respectively. The Company has classified the outstanding balance on this line of credit within current liabilities in the accompanying Consolidated Balance Sheets.
XML 28 R17.htm IDEA: XBRL DOCUMENT v3.7.0.1
Long-Term Debt
6 Months Ended
Jul. 02, 2017
Long-term Debt, by Current and Noncurrent [Abstract]  
Long-Term Debt
10.
Long-term Debt
 
Long-term debt consists of the following:
 
 
 
Interest Rate
   
July 2, 2017
   
January 1, 2017
 
 
                 
Wells Fargo Capital Finance LLC
 
Prime
   
$
941,122
   
$
1,089,721
 
Lloyds Bank Commercial Finance Limited
 
LIBOR + 3.15%
     
139,731
     
181,392
 
Kennet Equipment Leasing Limited
 
10.90%
 
   
757,180
     
801,153
 
Balboa Capital Corporation
 
5.72%
 
   
144,170
     
213,230
 
Regents Capital Corporation
 
7.40%
 
   
295,094
     
350,000
 
De Lage Landen Financial Services
 
7.35%
 
   
108,278
     
118,073
 
Ford Motor Credit
 
4.30%
 
   
40,914
     
44,387
 
Byline Financial Group
 
8.56%
 
   
38,862
     
48,942
 
Regents Capital Corporation
 
6.20%
 
   
314,357
     
-
 
Regents Capital Corporation
 
6.47%
 
   
336,228
     
-
 
 
         
3,115,936
     
2,846,898
 
Current portion
         
(1,007,494
)
   
(851,988
)
 
       
$
2,108,442
   
$
1,994,910
 
XML 29 R18.htm IDEA: XBRL DOCUMENT v3.7.0.1
Related Party Obligations
6 Months Ended
Jul. 02, 2017
Related Party Obligations  
Related Party Obligations
11.
Related Party Obligations
 
Long-term debt to related parties consists of the following:
 
 
 
Interest Rate
   
July 2, 2017
   
January 1, 2017
 
 
                 
Senior subordinated promissory note
 
9.25%
 
 
$
2,000,000
   
$
2,000,000
 
Senior secured promissory note
 
10.00%
 
   
1,010,664
     
1,194,421
 
 
         
3,010,664
     
3,194,421
 
Current portion
         
(367,514
)
   
(367,514
)
 
       
$
2,643,150
   
$
2,826,907
 

The Company has a lease financing obligation under which it leases its main U.S. manufacturing facility and certain other property from a related party lessor entity, accrues interest at 18.20% and currently requires monthly principal and interest payments of $32,439, which are adjusted annually based on the consumer price index. The lease financing obligation matures on October 31, 2033. The Company has security deposits aggregating $267,500 held by the lessor entity. This obligation is shown in the accompanying Consolidated Balance Sheets as Related Party Lease Financing Obligation which consists of the following:
 
 
 
July 2, 2017
   
January 1, 2017
 
 
           
Related party lease financing obligation
 
$
2,164,345
   
$
2,165,798
 
Less: current portion
   
(6,265
)
   
(3,647
)
 
               
Long-term Portion
 
$
2,158,080
   
$
2,162,151
 
The current portions of the long-term debt to related parties and the related party lease financing obligation are combined and are shown in current liabilities as related party obligations.

   
July 2, 2017
   
January 1, 2017
 
Current portion of long-term debt to related parties
 
$
367,514
   
$
367,514
 
Current portion related party lease financing obligation
   
6,265
     
3,647
 
                 
Related Party Obligation
 
$
373,779
   
$
371,161
 
XML 30 R19.htm IDEA: XBRL DOCUMENT v3.7.0.1
Capital Leases
6 Months Ended
Jul. 02, 2017
Capital Leases  
Capital Leases
12.
Capital Leases
 
The Company has several capital leases on equipment which expire from July 3, 2017 through January 2021 with monthly lease payments ranging from approximately $1,119 to $31,120 per month. The capital lease obligations are secured by the related equipment. As of July 2, 2017 and January 1, 2017, assets recorded under capital leases are included in property and equipment in the accompanying Consolidated Balance Sheets. Amortization of items under capital lease obligations has been included with depreciation expense on owned property and equipment in the accompanying Consolidated Statements of Operations. Interest rates on these obligations range from 3.84% to 19.15%
 
Capital lease obligations consist of the following:

 
 
July 2, 2017
   
January 1, 2017
 
 
           
Capital lease obligation
 
$
1,090,323
   
$
1,224,889
 
Less: current portion
   
(381,316
)
   
(368,718
)
 
               
Long-term Portion
 
$
709,007
   
$
856,171
 
XML 31 R20.htm IDEA: XBRL DOCUMENT v3.7.0.1
Accumulated Other Comprehensive Loss
6 Months Ended
Jul. 02, 2017
AOCI Attributable to Parent [Abstract]  
Accumulated Other Comprehensive Income
13.
Accumulated Other Comprehensive Loss
 
The changes in accumulated other comprehensive loss were as follows:
 
 
 
Minimum
Benefit
Liability
Adjustments
   
Foreign
Currency
Translation
Adjustment
   
Total
 
 
                 
Balance at January 1, 2017
 
$
233,877
   
$
(1,912,363
)
 
$
(1,678,486
)
 
                       
Other comprehensive losses before
reclassifications, net
   
-
     
542,154
     
542,154
 
 
                       
Balance at July 2, 2017
 
$
233,877
   
$
(1,370,209
)
 
$
(1,136,332
)
 
The gain (loss) reclassified from accumulated other comprehensive income (loss) into income is recorded to the following income statement line items:
 
Other Comprehensive Income (Loss)
Component
 
Income Statement Line Item
 
 
 
Minimum Benefit Liability Adjustments
 
General and administrative expense
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Option Plan
6 Months Ended
Jul. 02, 2017
Stock Options or Stock Based Compensation  
Stock Option Plan
14.
Stock Option Plan
 
On June 25, 2015, the Company’s stockholders approved the adoption of the 2015 Stock Option Plan. This plan provides for the granting of options to purchase the Company’s common stock to employees and directors. The options granted are subject to a vesting schedule as set forth in each individual option agreement. Each option expires on the tenth anniversary of its date of grant unless an earlier termination date is provided in the grant agreement. The maximum aggregate number of shares of common stock that may be optioned and sold under the plan shall be 6% of the shares outstanding on the date of grant. The shares that may be optioned under the plan may be authorized but unissued or may be treasury shares.

Compensation expense is recognized on a straight-line basis over a three-year vesting period from date of grant.

 
Stock option activity for the six months ended July 2, 2017 and July 3, 2016 is as follows:
 
   
Stock Options
 
   
Total
   
Weighted
Average
Exercise
Price
   
Exercis-
able
   
Weighted
Average
Exercise
Price
   
Non-Vested
   
Weighted
Average
Exercise
Price
 
Outstanding at January 3, 2016
   
665,000
   
$
2.37
     
-
     
-
     
665,000
   
$
2.37
 
Granted
   
360,250
     
3.57
     
-
     
-
     
360,250
     
3.57
 
Vested
   
-
     
-
     
-
     
-
     
-
     
-
 
Exercised
   
-
     
-
     
-
     
-
     
-
     
-
 
Forfeited or cancelled
   
-
     
-
     
-
     
-
     
-
     
-
 
Outstanding at July 3, 2016
   
1,025,250
   
$
2.79
     
-
             
1,025,250
   
$
2.79
 
                                                 
Outstanding at January 1, 2017
   
997,750
   
$
2.80
     
217,501
   
$
2.37
     
780,249
   
$
2.92
 
Granted
   
-
     
-
     
-
     
-
     
-
     
-
 
Vested
   
-
     
-
     
118,415
     
3.57
     
(118,415
)
   
3.57
 
Exercised
   
-
     
-
     
-
     
-
     
-
     
-
 
Forfeited or cancelled
   
(5,000
)
   
2.37
     
(5,000
)
   
2.37
     
-
     
-
 
                                                 
Outstanding July 2, 2017
   
992,750
   
$
2.80
     
330,916
   
$
2.80
     
661,834
   
$
2.80
 
                                                 
Aggregate Intrinsic Value
                                               
July 3, 2016
 
$
1,495,170
           
$
-
           
$
1,495,170
         
                                                 
Aggregate Intrinsic Value
                                               
 July 2, 2017
 
$
535,500
           
$
178,501
           
$
356,999
         


 
Option expense recognized was $103,323 and $106,424 for the three months ended July 2, 2017 and July 3, 2016, respectively and $206,645 and $165,565 for the six months ended July 2, 2017 and July 3, 2016, respectively. As of July 2, 2017, there was $572,073 in unrecognized compensation cost related to the options granted under the 2015 Stock Option Plan. We expect to recognize those costs over the remaining vesting term of 21 months.
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.7.0.1
Recent Accounting Pronouncements
6 Months Ended
Jul. 02, 2017
Recent Accounting Pronouncements  
Recent Accounting Pronouncement
15.
Recent Accounting Pronouncements
 
In May 2014, the Financial Accounting Standards Board issued a new standard ASU No. 2014-09, "Revenue from Contracts with Customers." Under ASU 2014-09 recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The new standard will be effective for the Company January 1, 2018. The Company is currently evaluating the effects this standard will have, if any, on its consolidated financial position, results of operations and cash flows together with evaluating the adoption date.
 
On July 22, 2015, the Financial Accounting Standards Board issued a new standard ASU No. 2015-11, “Simplifying the Measurement of Inventory”. The new standard requires entities to measure most inventory at the lower of cost and net realizable value, which is a change from the current guidance under which an entity must measure inventory at the lower of cost or market with market defined as replacement cost, net realizable value or net realizable value less a normal profit margin. The ASU will not apply to inventories that are measured by using either the last-in, first-out (LIFO) method or the retail inventory method. It became effective for the Company on January 2, 2017. The adoption of this standard for the year ending December 31, 2017 will not have a significant effect on its consolidated financial position, results of operations and cash flows.

On November 20, 2015, the Financial Accounting Standards Board issued a new standard ASU No. 2015-17, “Income Taxes - Balance Sheet Classification of Deferred Taxes”. Under the new guidance deferred tax liabilities and assets will be classified as noncurrent in a classified statement of financial position. It became effective for the Company on January 2, 2017. The adoption of this standard for the year ending December 31, 2017 will not have a significant effect on its consolidated financial position, results of operations and cash flows. The Company is applying the change retrospectively for all periods presented. Thus, current deferred tax assets in the amount of $1,301,280 which had been included in Other Current Asset in the accompanying Consolidated Balance Sheets at January 1, 2017 were reclassified to Other Long-term Assets or Other Long-term liabilities at that date.

On February 25, 2016, the Financial Accounting Standards Board issued a new standard ASU No. 2016-02, “Leases”. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current Generally Accepted Accounting Principles (GAAP), the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP which requires only capital leases to be recognized on the balance sheet, the new ASU will require both types of leases to be recognized on the balance sheet. It will be effective for the Company on December 31, 2018. The Company is currently evaluating the effects this standard will have, if any, on its consolidated financial position, results of operations and cash flows together with evaluating the adoption date.

On March 30, 2016, the Financial Accounting Standards Board issued a new standard ASU No. 2016-09, “Compensation – Stock Compensation.” The new standard involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. It became effective for the Company on January 2, 2017. The adoption of this standard for the year ending December 31, 2017 will not have a significant effect on its consolidated financial position, results of operations and cash flows.

On August 26, 2016, the Financial Accounting Standards Board issued a new standard ASU No. 2016-15, “Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments.” The new standard applies to how certain cash receipts and cash payments are presented and classified in the statement of cash flows. It will be effective for the Company on January 1, 2018. The Company is currently evaluating the effects this standard will have, if any, on its consolidated financial position, results of operations and cash flows together with evaluating the adoption date.

On January 26, 2017, the Financial Accounting Standards Board issued a new standard ASU No. 2017-04, “Intangibles – Goodwill and Other – Simplifying the Test for Goodwill Impairment.” The new standard modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. It will be effective for the Company on December 30, 2019. The Company is currently evaluating the effects this standard will have, if any, on its consolidated financial position, results of operations and cash flows together with evaluating the adoption date.

On May 10, 2017, the Financial Accounting Standards Board issued a new standard ASU No. 2017-09, “Compensation – Stock Compensation – Scope of Modification Accounting.” The new standard clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. It will be effective for the Company on January 1, 2018. Although the Company currently does not have any plans to change any of the terms or conditions of its stock compensation plan, the Company is evaluating this standard to understand the effects various changes, if made, could have on its consolidated financial position, results of operations and cash flows together with evaluating the adoption date.
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.7.0.1
Earnings Per Common Share
6 Months Ended
Jul. 02, 2017
EARNINGS PER COMMON SHARE:  
Earnings Per Common Share
16.
Earnings per Common Share

 The following table sets forth the computation of earnings per common share - basic and earnings per common share – diluted for the three and six months ended July 2, 2017 and July 3, 2016:

   
Three Months Ended
   
Six Months Ended
 
   
July 2, 2017
   
July 3, 2016
   
July 2, 2017
   
July 3, 2016
 
Numerator
                       
 Net income available to
 common shareholders
 
$
214,466
   
$
1,181,726
   
$
685,242
   
$
1,615,829
 
                                 
Denominator
                               
Denominator for basic
earnings per share -
weighted average shares
outstanding
   
18,704,024
     
18,838,608
     
18,713,625
     
18,851,014
 
Weighted average effect
of dilutive securities
   
105,574
     
55,341
     
96,566
     
55,341
 
Denominator for dilutive
earnings per share -
weighted average shares
outstanding
   
18,809,598
     
18,893,949
     
18,810,191
     
18,906,355
 
                                 
Basic and Diluted Income
Per Share
                               
Net income available to
common shareholders
 
$
0.01
   
$
0.06
   
$
0.04
   
$
0.09
 
Effect of dilutive
securities
   
-
     
-
     
-
     
-
 
Net income available to
common shareholders
 
$
0.01
   
$
0.06
   
$
0.04
   
$
0.09
 


The dilutive securities related to stock options included in the calculation of diluted earnings per common share.
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.7.0.1
Subsequent Events
6 Months Ended
Jul. 02, 2017
Subsequent Events [Abstract]  
Subsequent Events
17.
Subsequent Events

The Company has evaluated subsequent events occurring through the date that the financial statements were issued, for events requiring recording or disclosure in the July 2, 2017 financial statements. There were no material events or transactions occurring during this period requiring recognition or disclosure.
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.7.0.1
Noncash Transactions and Supplemental Disclosure of Cash Flow Information (Tables)
6 Months Ended
Jul. 02, 2017
Supplemental Cash Flow Elements [Abstract]  
Schedule of Noncash Transactions and Supplemental Disclosure of Cash Flow Information Text Block
Supplemental disclosure of cash paid for:
 
 
 
July 2, 2017
   
July 3, 2016
 
 
           
Interest
 
$
808,983
   
$
876,055
 
                 
Tax payments
 
$
-
   
$
-
 
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.7.0.1
Inventories (Tables)
6 Months Ended
Jul. 02, 2017
Inventory Disclosure [Abstract]  
Schedule of Inventories
Inventories consist of the following:
 
 
 
July 2, 2017
   
January 1, 2017
 
 
           
Raw materials
 
$
6,182,103
   
$
5,199,632
 
Work-in-process
   
4,592,445
     
4,491,250
 
Finished goods
   
9,838,452
     
8,669,625
 
 
   
20,613,000
     
18,360,507
 
Less:  Allowance for inventory obsolescence
   
(1,316,089
)
   
(1,314,336
)
 
               
Total Inventories
 
$
19,296,911
   
$
17,046,171
 
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.7.0.1
Other Long-term Assets (Tables)
6 Months Ended
Jul. 02, 2017
Other Assets, Noncurrent [Abstract]  
Schedule of Other Long-term Assets
Other long-term assets consist of the following:
 
 
 
July 2, 2017
   
January 1, 2017
 
 
           
Non-current deferred tax asset
 
$
5,672,156
   
$
5,689,000
 
Other
   
1,231,350
     
976,375
 
 
               
Total Other Long-term Assets
 
$
6,903,506
   
$
6,665,375
 
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.7.0.1
Other Long-term Liabilities (Tables)
6 Months Ended
Jul. 02, 2017
Other Liabilities, Noncurrent [Abstract]  
Schedule of Other Long-term Liabilities
Other long-term liabilities consist of the following:
 
 
 
July 2, 2017
   
January 1, 2017
 
 
           
Non-current deferred tax liability
 
$
756,928
   
$
743,971
 
Other
   
36,161
     
48,056
 
 
               
Total Other Long-term Liabilities
 
$
793,089
   
$
792,027
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.7.0.1
Long-Term Debt (Tables)
6 Months Ended
Jul. 02, 2017
Long-term Debt, by Current and Noncurrent [Abstract]  
Schedule of Long-Term Debt
Long-term debt consists of the following:
 
 
 
Interest Rate
   
July 2, 2017
   
January 1, 2017
 
 
                 
Wells Fargo Capital Finance LLC
 
Prime
   
$
941,122
   
$
1,089,721
 
Lloyds Bank Commercial Finance Limited
 
LIBOR + 3.15%
     
139,731
     
181,392
 
Kennet Equipment Leasing Limited
 
10.90%
 
   
757,180
     
801,153
 
Balboa Capital Corporation
 
5.72%
 
   
144,170
     
213,230
 
Regents Capital Corporation
 
7.40%
 
   
295,094
     
350,000
 
De Lage Landen Financial Services
 
7.35%
 
   
108,278
     
118,073
 
Ford Motor Credit
 
4.30%
 
   
40,914
     
44,387
 
Byline Financial Group
 
8.56%
 
   
38,862
     
48,942
 
Regents Capital Corporation
 
6.20%
 
   
314,357
     
-
 
Regents Capital Corporation
 
6.47%
 
   
336,228
     
-
 
 
         
3,115,936
     
2,846,898
 
Current portion
         
(1,007,494
)
   
(851,988
)
 
       
$
2,108,442
   
$
1,994,910
 
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.7.0.1
Related Party Obligations (Tables)
6 Months Ended
Jul. 02, 2017
Related Party Obligations Tables  
Schedule of Long-term Debt to Related Parties
Long-term debt to related parties consists of the following:
 
 
 
Interest Rate
   
July 2, 2017
   
January 1, 2017
 
 
                 
Senior subordinated promissory note
 
9.25%
 
 
$
2,000,000
   
$
2,000,000
 
Senior secured promissory note
 
10.00%
 
   
1,010,664
     
1,194,421
 
 
         
3,010,664
     
3,194,421
 
Current portion
         
(367,514
)
   
(367,514
)
 
       
$
2,643,150
   
$
2,826,907
 
Schedule of Related Party Lease Obligation
This obligation is shown in the accompanying Consolidated Balance Sheets as Related Party Lease Financing Obligation which consists of the following:
 
 
 
July 2, 2017
   
January 1, 2017
 
 
           
Related party lease financing obligation
 
$
2,164,345
   
$
2,165,798
 
Less: current portion
   
(6,265
)
   
(3,647
)
 
               
Long-term Portion
 
$
2,158,080
   
$
2,162,151
 
Schedule of Related Party Obligations, Current
The current portions of the long-term debt to related parties and the related party lease financing obligation are combined and are shown in current liabilities as related party obligations.

   
July 2, 2017
   
January 1, 2017
 
Current portion of long-term debt to related parties
 
$
367,514
   
$
367,514
 
Current portion related party lease financing obligation
   
6,265
     
3,647
 
                 
Related Party Obligation
 
$
373,779
   
$
371,161
 
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.7.0.1
Capital Leases (Tables)
6 Months Ended
Jul. 02, 2017
Capital Leases Tables  
Schedule of Capital Leases Principal Requirements
Capital lease obligations consist of the following:

 
 
July 2, 2017
   
January 1, 2017
 
 
           
Capital lease obligation
 
$
1,090,323
   
$
1,224,889
 
Less: current portion
   
(381,316
)
   
(368,718
)
 
               
Long-term Portion
 
$
709,007
   
$
856,171
 
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.7.0.1
Accumulated Other Comprehensive Loss (Tables)
6 Months Ended
Jul. 02, 2017
AOCI Attributable to Parent [Abstract]  
Schedule of Accumulated Other Comprehensive Income (Loss)
The changes in accumulated other comprehensive loss were as follows:
 
 
 
Minimum
Benefit
Liability
Adjustments
   
Foreign
Currency
Translation
Adjustment
   
Total
 
 
                 
Balance at January 1, 2017
 
$
233,877
   
$
(1,912,363
)
 
$
(1,678,486
)
 
                       
Other comprehensive losses before
reclassifications, net
   
-
     
542,154
     
542,154
 
 
                       
Balance at July 2, 2017
 
$
233,877
   
$
(1,370,209
)
 
$
(1,136,332
)
Gain (Loss) Reclassified from AOCI
The gain (loss) reclassified from accumulated other comprehensive income (loss) into income is recorded to the following income statement line items:
 
Other Comprehensive Income (Loss)
Component
 
Income Statement Line Item
 
 
 
Minimum Benefit Liability Adjustments
 
General and administrative expense
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Option Plan (Tables)
6 Months Ended
Jul. 02, 2017
Schedule of Stock Option Plan:  
Schedule of Stock Options Activity
Stock option activity for the six months ended July 2, 2017 and July 3, 2016 is as follows:
 
   
Stock Options
 
   
Total
   
Weighted
Average
Exercise
Price
   
Exercis-
able
   
Weighted
Average
Exercise
Price
   
Non-Vested
   
Weighted
Average
Exercise
Price
 
Outstanding at January 3, 2016
   
665,000
   
$
2.37
     
-
     
-
     
665,000
   
$
2.37
 
Granted
   
360,250
     
3.57
     
-
     
-
     
360,250
     
3.57
 
Vested
   
-
     
-
     
-
     
-
     
-
     
-
 
Exercised
   
-
     
-
     
-
     
-
     
-
     
-
 
Forfeited or cancelled
   
-
     
-
     
-
     
-
     
-
     
-
 
Outstanding at July 3, 2016
   
1,025,250
   
$
2.79
     
-
             
1,025,250
   
$
2.79
 
                                                 
Outstanding at January 1, 2017
   
997,750
   
$
2.80
     
217,501
   
$
2.37
     
780,249
   
$
2.92
 
Granted
   
-
     
-
     
-
     
-
     
-
     
-
 
Vested
   
-
     
-
     
118,415
     
3.57
     
(118,415
)
   
3.57
 
Exercised
   
-
     
-
     
-
     
-
     
-
     
-
 
Forfeited or cancelled
   
(5,000
)
   
2.37
     
(5,000
)
   
2.37
     
-
     
-
 
                                                 
Outstanding July 2, 2017
   
992,750
   
$
2.80
     
330,916
   
$
2.80
     
661,834
   
$
2.80
 
                                                 
Aggregate Intrinsic Value
                                               
July 3, 2016
 
$
1,495,170
           
$
-
           
$
1,495,170
         
                                                 
Aggregate Intrinsic Value
                                               
 July 2, 2017
 
$
535,500
           
$
178,501
           
$
356,999
         
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.7.0.1
Earnings Per Common Share (Tables)
6 Months Ended
Jul. 02, 2017
Earnings Per Common Share Tables  
Schedule of Earnings Per Common Share
The following table sets forth the computation of earnings per common share - basic and earnings per common share – diluted for the three and six months ended July 2, 2017 and July 3, 2016:

   
Three Months Ended
   
Six Months Ended
 
   
July 2, 2017
   
July 3, 2016
   
July 2, 2017
   
July 3, 2016
 
Numerator
                       
 Net income available to
 common shareholders
 
$
214,466
   
$
1,181,726
   
$
685,242
   
$
1,615,829
 
                                 
Denominator
                               
Denominator for basic
earnings per share -
weighted average shares
outstanding
   
18,704,024
     
18,838,608
     
18,713,625
     
18,851,014
 
Weighted average effect
of dilutive securities
   
105,574
     
55,341
     
96,566
     
55,341
 
Denominator for dilutive
earnings per share -
weighted average shares
outstanding
   
18,809,598
     
18,893,949
     
18,810,191
     
18,906,355
 
                                 
Basic and Diluted Income
Per Share
                               
Net income available to
common shareholders
 
$
0.01
   
$
0.06
   
$
0.04
   
$
0.09
 
Effect of dilutive
securities
   
-
     
-
     
-
     
-
 
Net income available to
common shareholders
 
$
0.01
   
$
0.06
   
$
0.04
   
$
0.09
 
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.7.0.1
Noncash Transactions and Supplemental Disclosure of Cash Flow Information (Details) - USD ($)
6 Months Ended
Jul. 02, 2017
Jul. 03, 2016
Line of Credit Facility [Line Items]    
Payments on term loans $ 198,518 $ 230,189
New equipment leases during the year 678,148 595,740
Interest 808,983 876,055
Tax payments
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.7.0.1
Derivatives (Details)
6 Months Ended
Jul. 02, 2017
Derivatives Details  
Percentage of risk on currency exchange contracts 25.00%
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.7.0.1
Fair Value of Financial Instruments (Details) - EUR (€)
Jul. 02, 2017
Jan. 01, 2017
Fair Value Of Financial Instruments Details    
Fair value of foreign currency exchange contracts € 32,467 € 9,718
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.7.0.1
Inventories (Details) - USD ($)
Jul. 02, 2017
Jan. 01, 2017
Inventory Disclosure [Abstract]    
Raw materials $ 6,182,103 $ 5,199,632
Work-in-process 4,592,445 4,491,250
Finished goods 9,838,452 8,669,625
Inventories gross 20,613,000 18,360,507
Less: Allowance for inventory obsolescence (1,316,089) (1,314,336)
Total Inventories $ 19,296,911 $ 17,046,171
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.7.0.1
Other Long-term Assets (Details) - USD ($)
Jul. 02, 2017
Jan. 01, 2017
Other Assets, Noncurrent [Abstract]    
Non-current deferred tax asset $ 5,672,156 $ 5,689,000
Other 1,231,350 976,375
Total Other Long-term Assets $ 6,903,506 $ 6,665,375
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.7.0.1
Other Long-term Liabilities (Details) - USD ($)
Jul. 02, 2017
Jan. 01, 2017
Other Liabilities, Noncurrent [Abstract]    
Non-current deferred tax liability $ 756,928 $ 743,971
Other 36,161 48,056
Total Other Long-term Liabilities $ 793,089 $ 792,027
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.7.0.1
Lines of Credit (Details)
6 Months Ended
Jul. 02, 2017
USD ($)
Jul. 02, 2017
GBP (£)
Jan. 01, 2017
USD ($)
Jan. 01, 2017
GBP (£)
Lloyds Bank Commercial Finance Limited [Member] | Wardle Storeys [Member]        
Line of credit interest rate description The line has several tranches based on currency or underlying security. Interest is payable monthly at the base rate (UK LIBOR) plus 1.95% to 2.45% depending on the tranche.      
Line of credit amount outstanding $ 8,104,526   $ 7,131,204  
Lloyds Bank Commercial Finance Limited [Member] | Wardle Storeys [Member] | British Pound Sterling [Member]        
Line of credit maximum amount | £   £ 8,500,000    
Line of credit amount outstanding | £   £ 6,244,790   £ 5,792,236
Lloyds Bank Commercial Finance Limited [Member] | Wardle Storeys [Member] | Minimum [Member]        
Line of credit premium over base rate 1.95%      
Lloyds Bank Commercial Finance Limited [Member] | Wardle Storeys [Member] | Maximum [Member]        
Line of credit premium over base rate 2.45%      
Wells Fargo Capital Finance, LLC [Member]        
Line of credit maximum amount $ 30,000,000      
Line of credit premium over base rate 2.25%      
Line of credit interest rate description Interest is payable monthly at the Euro dollar rate plus 2.25% or Wells Fargo Capital Finance, LLC’s prime rate at the Company’s election on outstanding balances up to $6,000,000 and prime rate on amounts in excess of $6,000,000.      
Line of credit amount outstanding $ 9,920,280   $ 9,668,388  
Line of credit, maturity date Oct. 17, 2019      
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.7.0.1
Long-Term Debt (Schedule of Long-term debt) (Details) - USD ($)
Jul. 02, 2017
Jan. 01, 2017
Debt Instrument [Line Items]    
Long-term debt $ 3,115,936 $ 2,846,898
Less: Current portion (1,007,494) (851,988)
Long-Term Portion 2,108,442 1,994,910
Wells Fargo Capital Finance LLC Loan [Member]    
Debt Instrument [Line Items]    
Long-term debt 941,122 1,089,721
Lloyds Bank Commercial Finance Limited [Member] | Wardle Storeys [Member]    
Debt Instrument [Line Items]    
Long-term debt 139,731 181,392
Kennet Equipment Leasing Financing Obligation [Member]    
Debt Instrument [Line Items]    
Long-term debt 757,180 801,153
Balboa Capital Corporation Note Payable [Member]    
Debt Instrument [Line Items]    
Long-term debt 144,170 213,230
Regents Capital Corporation Note Payable [Member]    
Debt Instrument [Line Items]    
Long-term debt 295,094 350,000
De Lage Landen Financial Services Note Payable [Member]    
Debt Instrument [Line Items]    
Long-term debt 108,278 118,073
Ford Motor Credit Note Payable [Member]    
Debt Instrument [Line Items]    
Long-term debt 40,914 44,387
Byline Financial Group Note Payable [Member]    
Debt Instrument [Line Items]    
Long-term debt 38,862 48,942
Regents Capital Corporation Note Payable 1 [Member]    
Debt Instrument [Line Items]    
Long-term debt 314,357
Regents Capital Corporation Note Payable 2 [Member]    
Debt Instrument [Line Items]    
Long-term debt $ 336,228
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.7.0.1
Long-Term Debt (Schedule of Long-term debt Interest Rate) (Details)
6 Months Ended
Jul. 02, 2017
Kennet Equipment Leasing Financing Obligation [Member]  
Debt Instrument [Line Items]  
Long term debt, interest rate 10.90%
Balboa Capital Corporation Note Payable [Member]  
Debt Instrument [Line Items]  
Long term debt, interest rate 5.72%
Regents Capital Corporation Note Payable [Member]  
Debt Instrument [Line Items]  
Long term debt, interest rate 7.40%
De Lage Landen Financial Services Note Payable [Member]  
Debt Instrument [Line Items]  
Long term debt, interest rate 7.35%
Ford Motor Credit Note Payable [Member]  
Debt Instrument [Line Items]  
Long term debt, interest rate 4.30%
Byline Financial Group Note Payable [Member]  
Debt Instrument [Line Items]  
Long term debt, interest rate 8.56%
Regents Capital Corporation Note Payable 1 [Member]  
Debt Instrument [Line Items]  
Long term debt, interest rate 6.20%
Regents Capital Corporation Note Payable 2 [Member]  
Debt Instrument [Line Items]  
Long term debt, interest rate 6.47%
Lloyds Bank Commercial Finance Limited [Member] | Wardle Storeys [Member] | LIBOR [Member]  
Debt Instrument [Line Items]  
Long-term debt, interest rate above basis 3.15%
Long-term debt, interest rate basis LIBOR
Wells Fargo Capital Finance LLC Loan [Member]  
Debt Instrument [Line Items]  
Long-term debt, interest rate basis Prime
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.7.0.1
Related Party Obligations (Narrative) (Details) - Company's Majority Owners [Member] - USD ($)
6 Months Ended
Jul. 02, 2017
Jan. 01, 2017
Long-term debt, interest rate 18.20%  
Long-term debt, periodic payment $ 32,439  
Long-term debt, security deposit   $ 267,500
XML 56 R45.htm IDEA: XBRL DOCUMENT v3.7.0.1
Related Party Obligations (Long-term debt to related parties) (Details) - USD ($)
6 Months Ended
Jul. 02, 2017
Jan. 01, 2017
Total debt to related parties $ 3,010,664 $ 3,194,421
Less: Current portion of debt to related parties (367,514) (367,514)
Total Long-term Debt to Related Parties 2,643,150 2,826,907
Senior subordinated promissory note [Member]    
Total debt to related parties $ 2,000,000 2,000,000
Long-term debt, interest rate 9.25%  
Senior secured promissory note [Member]    
Total debt to related parties $ 1,010,664 $ 1,194,421
Long-term debt, interest rate 10.00%  
XML 57 R46.htm IDEA: XBRL DOCUMENT v3.7.0.1
Related Party Obligations (Lease Financing Obligation) (Details) - USD ($)
Jul. 02, 2017
Jan. 01, 2017
Related Party Lease Financing Obligation Details    
Related party lease financing obligation $ 2,164,345 $ 2,165,798
Less: Current portion (6,265) (3,647)
Long-Term Portion $ 2,158,080 $ 2,162,151
XML 58 R47.htm IDEA: XBRL DOCUMENT v3.7.0.1
Related Party Obligations (Schedule of Current Portions) (Details) - USD ($)
Jul. 02, 2017
Jan. 01, 2017
Related Party Obligations Schedule Of Current Portions Details    
Current portion of long-term debt to related parties $ 367,514 $ 367,514
Current portion related party lease financing obligation 6,265 3,647
Related Party Obligation $ 373,779 $ 371,161
XML 59 R48.htm IDEA: XBRL DOCUMENT v3.7.0.1
Capital Leases (Details) - USD ($)
Jul. 02, 2017
Jan. 01, 2017
Capital Leases Details    
Capital Leases on equipment - Monthly lease payments minimum $ 1,119  
Capital Leases on equipment - Monthly lease payments maximum $ 31,120  
Capital Leases on equipment -Interest rates minimum 3.84%  
Capital Leases on equipment -Interest rates maximum 19.15%  
Capital lease obligation $ 1,090,323 $ 1,224,889
Less: current portion (381,316) (368,718)
Long-term Portion $ 709,007 $ 856,171
XML 60 R49.htm IDEA: XBRL DOCUMENT v3.7.0.1
Accumulated Other Comprehensive Income (Details)
6 Months Ended
Jul. 02, 2017
USD ($)
Accumulated Other Comprehensive Income (Loss) [Line Items]  
Balance $ (1,678,486)
Other comprehensive losses before reclassifications, net 542,154
Balance (1,136,332)
Minimum Benefit Liability Adjustments [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
Balance 233,877
Other comprehensive losses before reclassifications, net
Balance 233,877
Foreign Currency Translation Adjustment [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
Balance (1,912,363)
Other comprehensive losses before reclassifications, net 542,154
Balance $ (1,370,209)
XML 61 R50.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Option Plan (Narrative) (Details) - USD ($)
3 Months Ended 6 Months Ended
Jul. 02, 2017
Jul. 03, 2016
Jul. 02, 2017
Jul. 03, 2016
Stock Option Plan Narrative Details        
Stock-based compensation expense $ 103,323 $ 106,424 $ 206,645 $ 165,565
Unrecognized compensation cost $ 572,073   $ 572,073  
Unrecognized compensation cost, recognition period     21 months  
XML 62 R51.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stock Option Plan (Option Activity) (Details) - USD ($)
6 Months Ended
Jul. 02, 2017
Jul. 03, 2016
Total Stock Options    
Outstanding 997,950 665,000
Granted 360,250
Vested (118,415)
Exercised
Cancelled (5,000)
Outstanding 992,750 1,025,250
Total Weighted Average Exercise Price    
Outstanding $ 2.80 $ 2.37
Granted 3.57
Vested 3.57
Exercised
Cancelled 2.37
Outstanding $ 2.80 $ 2.79
Exercisable    
Outstanding 217,501
Granted
Vested 118,415
Exercised
Forfeited or cancelled (5,000)
Outstanding 330,916
Exercisable Weighted Average Exercise Price    
Outstanding $ 2.37
Granted
Vested 3.57
Exercised
Forfeited or cancelled 2.37
Outstanding $ 2.80  
Nonvested    
Outstanding 780,249 665,000
Granted 360,250
Vested (118,415)
Forfeited or cancelled
Outstanding 661,834 1,025,250
Nonvested Weighted Average Exercise Price    
Outstanding $ 2.92 $ 2.37
Granted 3.57
Vested 3.57
Forfeited or cancelled
Outstanding $ 2.80 $ 2.79
Aggregate intrinsic value    
Outstanding $ 535,500 $ 1,495,170
Exercisable 178,501
Nonvested $ 356,999 $ 1,495,170
XML 63 R52.htm IDEA: XBRL DOCUMENT v3.7.0.1
Recent Accounting Pronouncements (Details)
Jul. 02, 2017
USD ($)
Recent Accounting Pronouncements Details  
Current deferred tax assets amount $ 1,301,280
XML 64 R53.htm IDEA: XBRL DOCUMENT v3.7.0.1
Earnings Per Common Share (Details) - USD ($)
3 Months Ended 6 Months Ended
Jul. 02, 2017
Jul. 03, 2016
Jul. 02, 2017
Jul. 03, 2016
Numerator        
Net income available to common shareholders $ 214,466 $ 1,181,726 $ 685,242 $ 1,615,829
Denominator        
Denominator for basic earnings per share - weighted average shares outstanding 18,704,024 18,838,608 18,713,625 18,851,014
Weighted average effect of dilutive securities 105,574 55,341 96,566 55,341
Denominator for dilutive earnings per share - weighted average shares outstanding 18,809,598 18,893,949 18,810,191 18,906,355
Basic and Diluted Income Per Share        
Net income available to common shareholders $ 0.01 $ 0.06 $ 0.04 $ 0.09
Effect of dilutive securities
Net income available to common shareholders $ 0.01 $ 0.06 $ 0.04 $ 0.09
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