ITEM 1. FINANCIAL STATEMENTS    

See Notes to Consolidated Financial Statements.

See Notes to Consolidated Financial Statements.

 

See Notes to Consolidated Financial Statements.

See Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements (Unaudited)

Note 1 — Nature of Business and Significant Accounting Policies

Nature of Business  — UFI Acquisition, Inc. (UFI), a Delaware corporation, was formed on January 14, 2013, for the purpose of acquiring Unique Fabricating, Inc. and its subsidiaries (Unique Fabricating) (collectively, the “Company” or “Unique”) on March 18, 2013. The Company operates as one operating and reportable segment to fabricate and broker foam and rubber products, which are primarily sold to original equipment manufacturers (OEMs) and tiered suppliers in the automotive, appliance, water heater and heating, ventilation and air conditioning (HVAC) industries. In September 2014, UFI changed its name to Unique Fabricating, Inc. which is now the parent company of the consolidated group. As a result of the name change, the subsidiary previously named Unique Fabricating, Inc. became Unique Fabricating NA, Inc.

Basis of Presentation  — The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying Consolidated Financial Statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The information furnished in the Consolidated Financial Statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for the fair presentation of such financial statements. The interim results for the periods presented may not be indicative of the Company's actual annual results.

Principles of Consolidation  — The Consolidated Financial Statements include the accounts of the Company and all subsidiaries over which the Company exercises control. All intercompany transactions and balances have been eliminated upon consolidation.

Initial Public Offering —On July 7, 2015, the Company completed its initial public offering of 2,702,500 shares of common stock at a price to the public of $9.50 per share (the "IPO"), including 352,500 shares subject to an over-allotment option granted to the underwriters. After underwriting discounts, commissions, and approximate fees and expenses of the offering, as set forth in our registration statement for the IPO on Form S-1, the Company received net IPO proceeds of approximately $22.2 million. Of these proceeds the Company used a portion to pay all of the $13.1 million principal amount of our 16% senior subordinated note, together with accrued interest through the date of payment. The Company used the remaining proceeds to temporarily reduce borrowings under the revolver portion of its senior secured credit facility. The Company also issued to the underwriters warrants to purchase up to 141,000 shares of common stock, as additional compensation in the IPO. The warrants are exercisable at a per share exercise price equal to 125% of the initial public offering price of $9.50 per share, and can be exercised commencing 1 year from the date of the IPO, until the date 5 years from the date of the IPO. The warrants have an aggregate grant date fair value of $336,300 and have been classified as equity and incremental direct costs associated with the IPO.

Fiscal Years  — The Company’s quarterly periods end on the Sunday closest to the end of the quarterly period. The quarterly and year to date period, which was 13 and 26 weeks, respectively, during 2016, ended on July 3, 2016, and the quarterly and year to date period, which was 13 and 25 weeks, respectively, during 2015, ended on June 28, 2015. Fiscal year 2015 ended on Sunday, January 3, 2016.

Cash and Cash Equivalents  — The Company considers all highly liquid investments with an original maturity of three months or less to be cash and cash equivalents.

Accounts Receivable  — Accounts receivable are stated at the invoiced amount and do not bear interest. The allowance for doubtful accounts is management’s best estimate of the amount of probable credit losses in the existing accounts receivable. Management determines the allowance based on historical write-off experience and an understanding of individual customer payment history and financial condition. Management reviews the allowance for doubtful accounts at regular intervals. Account balances are charged off against the allowance when management determines it is probable the receivable will not be recovered. The allowance for doubtful accounts was $716,502 and $734,230 at July 3, 2016 and January 3, 2016 , respectively.

Inventory  — Inventory is stated at the lower of cost or market, with cost determined on the first in, first out method (FIFO). Inventory acquired as part of a business combination is recorded at its estimated fair value at the time of the business combination. The Company periodically evaluates inventory for obsolescence, excess quantities, slow moving goods and other impairments of value and establishes reserves for any identified impairments.

Valuation of Long-Lived Assets —  The carrying value of long-lived assets held for use is periodically evaluated when events or circumstances warrant such a review. The carrying value of a long-lived asset held for use is considered impaired when the anticipated separately identifiable undiscounted cash flows from the asset are less than the carrying value of the asset. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. The Company determined that no impairment indicators were present and all originally assigned useful lives remained appropriate during the 13 and 26 weeks ended July 3, 2016 and 13 and 25 weeks ended June 28, 2015 , respectively.

Property, Plant, and Equipment  — Property, plant, and equipment purchases are recorded at cost. Property, plant, and equipment acquired as part of a business combination are recorded at estimated fair value at the time of the business combination. Depreciation is calculated using the straight line method over the estimated useful life of each asset. Leasehold improvements are depreciated over the shorter of the estimated useful life of the asset or the period of the related leases. Upon retirement or disposal, the initial cost or valuation and accumulated depreciation are removed from the accounts, and any gain or loss is included in net income. Repair and maintenance costs are expensed as incurred.

Intangible Assets  — The Company does not hold any intangible assets with indefinite lives. Identifiable intangible assets recognized as part of a business combination are recorded at their estimated fair value at the time of the business combination. Acquired intangible assets subject to amortization are amortized on a straight line basis, which approximates the pattern in which the economic benefit of the respective intangible is realized, over their respective estimated useful lives. Amortizable intangible assets are reviewed for impairment whenever events or circumstances indicate that the related carrying amount may be impaired. The remaining useful lives of intangible assets are reviewed to determine whether events and circumstances warrant a revision to the remaining period of amortization. The Company determined that no impairment indicators were present and all originally assigned useful lives remained appropriate during the 13 and 26 weeks ended July 3, 2016 and 13 and 25 weeks ended June 28, 2015 , respectively.

Goodwill  — Goodwill represents the excess of the acquisition cost of consideration transferred over the fair value of the identifiable assets acquired and liabilities assumed from business combinations at the date of acquisition. Goodwill is not amortized, but rather is assessed at least on an annual basis for impairment. If it is determined that it is more likely than not that the fair value is greater than the carrying value of a reporting unit then a qualitative assessment may be used for the annual impairment test. Otherwise, a two-step process is used. The first step requires estimating the fair value of each reporting unit compared to its carrying value. If the carrying value exceeds the estimated fair value, a second step is performed in order to determine the implied fair value of the goodwill. If the carrying value of the goodwill exceeds its implied fair value then goodwill is deemed impaired and is written down to its implied fair value.

There were no impairment charges recognized during the 13 and 26 weeks ended July 3, 2016 and 13 and 25 weeks ended June 28, 2015 , respectively.

Debt Issuance Costs  — Debt issuance costs represent legal, consulting, and other financial costs associated with debt financing and are reported netted against the related debt instrument. Amounts paid to or on behalf of lenders are presented as debt discount, as a reduction of the noted debt instrument. Debt issuance costs on term debt are amortized using the straight line basis over the term of the related debt (which is immaterially different from the required effective interest method) while those related to revolving debt are amortized using a straight line basis over the term of the related debt.

At July 3, 2016 and January 3, 2016 , debt issuance costs were $336,408 and $192,098 , respectively, while amounts paid to or on behalf of lenders presented as debt discounts were $302,210 and $98,452 , respectively. On April 29, 2016, the Company refinanced its existing term loan and revolving debt facility with new term loans and a new revolving debt facility which are further described in Note 6. The Company reviewed this refinancing for extinguishment accounting and concluded that $60,202 of the $160,111 remaining issuance costs not amortized on the old revolving debt facility qualified for extinguishment and were recognized as a loss on extinguishment immediately. The remaining $99,909 of unamortized issuance costs not extinguished on the old revolving debt facility and all of the $92,508 of remaining unamortized debt discounts on the old term loan did not meet extinguishment accounting and were therefore carried forward to the new revolving debt facility and term loans.

In July of 2015, the 16% senior subordinated note was entirely paid off with the IPO proceeds. On the date paid off, $386,552 of debt discounts remained to be amortized. The Company concluded that the 16% senior subordinated note and related debt discounts qualified for extinguishment accounting and the debt discounts were recognized as a loss on extinguishment immediately in the third quarter of 2015. The extinguishment was recognized as part of interest expense in the consolidated statements of operations.

Amortization expense has been recognized as a component of interest expense which includes both debt issuance costs and debt discounts in the amounts of $36,737 and $61,517 for the 13 and 26 weeks ended July 3, 2016 , respectively, and $80,956 and $155,226 for the 13 and 25 weeks ended June 28, 2015 , respectively.

Investments  — Investments in entities in which the Company has less than a 20 percent interest or is not able to exercise significant influence are carried at cost. Dividends received are included in income, except for those dividends received in excess of the Company’s proportionate share of accumulated earnings, which are applied as a reduction of the cost of the investment. Impairment losses due to a decline in the value of the investment that is other than temporary are recognized when incurred. No dividend income or impairment loss was recognized for the 13 and 26 weeks ended July 3, 2016 , respectively, and 13 and 25 weeks ended June 28, 2015 , respectively.

Accounts Payable  — Under the Company’s cash management system, checks issued but not yet presented to the Company’s bank frequently result in overdraft balances for accounting purposes and are classified as accounts payable on the consolidated balance sheets. Accounts payable included $2,050,139 and $2,403,498 of checks issued in excess of available cash balances at July 3, 2016 and January 3, 2016 , respectively.

Stock Based Compensation  — The Company accounts for its stock based compensation using the fair value of the award estimated at the grant date of the award. The Company estimates the fair value of awards, consisting of stock options, using the Black Scholes option pricing model. Compensation expense is recognized in earnings using the straight line method over the vesting period, which represents the requisite service period.

Revenue Recognition  — Revenue is recognized by the Company upon shipment to customers when the customer takes ownership and assumes the risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists, and the sale price is fixed and determinable. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.

Shipping and Handling  — Shipping and handling costs are included in costs of sales as they are incurred.

Income Taxes  — A current tax liability or asset is recognized for the estimated taxes payable or refundable on tax returns for the period. Deferred tax liabilities or assets are recognized for the estimated future tax effects of temporary differences between financial reporting and tax accounting measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company also evaluates the need for valuation allowances to reduce the deferred tax assets to realizable amounts. Management evaluates all positive and negative evidence and uses judgment regarding past and future events, including operating results, to help determine when it is more likely than not that all or some portion of the deferred tax assets may not be realized. When appropriate, a valuation allowance is recorded against deferred tax assets to reserve for future tax benefits that may not be realized.

The Company recognizes the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon settlement with the relevant tax authority. The Company assesses all tax positions for which the statute of limitations remain open. The Company had no unrecognized tax benefits as of July 3, 2016 and January 3, 2016 . The Company recognizes any penalties and interest when necessary as income tax expense. There were no penalties or interest recorded during the 13 and 26 and 13 and 25 weeks ended July 3, 2016 and June 28, 2015 , respectively.

Foreign Currency Adjustments  — The Company’s functional currency for all operations worldwide is the United States dollar. Nonmonetary assets and liabilities of foreign operations are remeasured at historical rates and monetary assets and liabilities are remeasured at exchange rates in effect at the end of each reporting period. Income statement accounts are remeasured at average exchange rates for the year. Gains and losses from remeasurement of foreign currency financial statements into United States dollars are classified in operating income in the consolidated statements of operations.

Concentration Risks  — The Company is exposed to various significant concentration risks as follows:

Customer and Credit  — During the 13 and 26 weeks ended July 3, 2016 and 13 and 25 weeks ended June 28, 2015 , respectively, the Company’s sales were derived from customers principally engaged in the North American automotive industry. Company sales directly and indirectly to General Motors Company (GM), FCA US, LLC (Chrysler), and Ford Motor Company

(Ford) as a percentage of total net sales were: 12 , 11 , and 13 percent, respectively during the 13 weeks ended July 3, 2016; 12 , 12 , and 13 percent, respectively, during the 26 weeks ended July 3, 2016 ; 15 , 15 , and 15 percent, respectively during the 13 weeks ended June 28, 2015; and 15 , 16 , and 15 percent, respectively, during the 25 weeks ended June 28, 2015 . No Tier 1 supplier represented more than 10 percent of direct Company sales for any period noted above. No suppliers accounted for more than 10 percent of direct accounts receivable as of July 3, 2016 and January 3, 2016 .

Labor Markets  — At July 3, 2016 , of the Company’s hourly plant employees working in the United States manufacturing facilities, 29 percent were covered under a collective bargaining agreement which expires in August 2016 while another 5 percent were covered under a separate agreement that expires in January 2017.

Foreign Currency Exchange  — The expression of assets and liabilities in a currency other than the Company's functional currency, which is the United States dollar, gives rise to exchange gains and losses when such assets and obligations are paid in another currency. Foreign currency exchange rate adjustments (i.e., differences between amounts recorded and actual amounts owed or paid) are reported in the consolidated statements of operations as the foreign currency fluctuations occur. Foreign currency exchange rate adjustments are reported in the consolidated statements of cash flows using the exchange rates in effect at the time of the cash flows. At July 3, 2016 , the Company’s exposure to assets and liabilities denominated in another currency was not significant. To the extent there is a fluctuation in the exchange rates, the amount of local currency to be paid or received to satisfy foreign currency obligations in 2016 may increase or decrease.

International Operations  — The Company manufactures and sells products outside of the United States primarily in Mexico and Canada. Foreign operations are subject to various political, economic and other risks and uncertainties inherent in foreign countries. Among other risks, the Company’s operations are subject to the risks of: restrictions on transfers of funds; export duties, quotas, and embargoes; domestic and international customs and tariffs; changing taxation policies; foreign exchange restrictions; political conditions; and governmental regulations. During the 13 and 26 weeks ended July 3, 2016 and 13 and 25 weeks ended June 28, 2015 , 11 , 11 , 12 and 12 percent, respectively, of the Company’s production occurred in Mexico. During the 13 and 26 weeks ended July 3, 2016 and 13 and 25 weeks ended June 28, 2015 , 8 , 4 , 0 , and 0 percent, respectively, of the Company's production occurred in Canada. Sales derived from customers located in Mexico, Canada, and other foreign countries were 12 , 8 , and 2 percent, respectively during the 13 weeks ended July 3, 2016, 12 , 6 , and 1 percent, respectively during the 26 weeks ended July 3, 2016 , 13 , 4 , and 2 percent, respectively during the 13 weeks ended June 28, 2015, and 13 , 4 , and 1 percent, respectively, during the 25 weeks ended June 28, 2015 , of the Company’s total sales.

Derivative Financial Instruments  — All derivative instruments are required to be reported on the consolidated balance sheets at fair value unless the transactions qualify and are designated as normal purchases or sales. Changes in fair value are reported currently through earnings unless they meet hedge accounting criteria. See Note 7 for further information regarding the Company's derivative instrument makeup.

Use of Estimates  — The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (the “FASB”) issued ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (the “ASU”). Previously, such costs were required to be presented as a non-current asset in an entity's balance sheet and amortized into interest expense over the term of the related debt instrument. The changes implemented by the ASU require that debt issuance costs be presented in the entity's balance sheet as a direct deduction from the carrying value of the related debt liability. The amortization of debt issuance costs remains unchanged per the ASU. The Company adopted this ASU during the 13 and 26 weeks ended July 3, 2016 and applied this change to the current and prior periods in the financial statements for comparable purposes. Debt issuance costs are no longer disclosed separately by the Company in the balance sheet and are now shown as a direct deduction from the carrying value of the related debt liability.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers . This ASU supersedes most of the existing guidance on revenue recognition in ASC Topic 605, Revenue Recognition, and establishes a broad principle that would require an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that

reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this principle, an entity identifies the contract with a customer, identifies the separate performance obligations in the contract, determines the transaction price, allocates the transaction price to the separate performance obligations and recognizes revenue when each separate performance obligation is satisfied. In August 2015, the FASB issued ASU 2015-14, Revenue From Contracts with Customers (Topic 606): Deferral of the Effective Date, to defer implementation of ASU 2014-09 by one year. The guidance is now currently effective for fiscal years beginning after December 15, 2018 and is to be applied retrospectively at the entity's election either to each prior reporting period presented or with the cumulative effect of application recognized at the date of initial application. The ASU allows for early adoption for fiscal years beginning after December 15, 2016, and the Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The ASU requires an entity to measure inventory at the lower of cost and net realizable value, simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. The ASU defines net realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The ASU is effective for the Company for financial statements issued for fiscal years beginning after December 15, 2016, an d is to be applied prospectively with early adoption permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. Currently, deferred income tax liabilities and assets are required to be separated into current and non-current amounts in an entity's balance sheet. The changes implemented by the ASU require that all deferred income tax liabilities and assets are to be classified as non-current on the balance sheet. The ASU is effective for the Company for financial statements issued for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company adopted this ASU during the 13 and 26 weeks ended July 3, 2016 and applied the change to these periods only in the consolidated financial statements. Deferred taxes are now shown as non-current by the Company in the balance sheet.

In February 2016, the FASB issued ASU 2016-02, Leases, which will supersede the current lease requirements in Topic 850. The ASU requires lessees to recognize a right of use asset and related lease liability for all leases, with a limited exception for short-term leases. Leases will be classified as either finance or operating, with the classification affecting the pattern of expense recognition in the statement of operations. Currently, leases are classified as either capital or operating, with only capital leases recognized on the balance sheet. The reporting of lease related expenses in the statements of operations and cash flows will be generally consistent with current guidance. The ASU is effective for the Company for financial statements issued for fiscal years beginning after December 15, 2019. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting (ASU 2016-09), to simplify the accounting for share-based payment transactions. The ASU is effective for the Company for financial statements issued for fiscal years beginning after December 15, 2017. The Company early adopted this ASU during the 13 and 26 weeks ended July 3, 2016 and applied the change to these periods in the consolidated financial statements. Excess tax benefits are no longer disclosed in the consolidated statements of cash flows as a result of this early adoption.

We do not expect that any other recently issued accounting pronouncements will have a material impact on our consolidated financial statements.

Note 2 — Business Combinations

2016

On April 29, 2016, Unique-Intasco Canada, Inc. (the “Canadian Buyer”), a newly formed subsidiary of the Company, acquired the business and substantially all of the assets of Intasco Corporation , a Canadian based tape manufacturer, for a purchase price of $21,049,045 in cash at closing. On the same date, Unique Fabricating NA, Inc. (the “US Buyer”), an existing subsidiary of the Company, purchased 100% of the outstanding capital stock of Intasco USA, Inc., a United States based tape manufacturer, for a purchase price of $890,726 paid by the issuance of 70,797 shares of the Company's common stock. These shares were issued in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended. A portion of the purchase price is being held in escrow to fund the obligations of Intasco Corporation and Intasco USA, Inc., (together “Intasco”) and a related party to indemnify the Canadian Buyer and US Buyer against certain claims, losses, and

liabilities. The purchase agreement included a potential purchase price adjustment provision based on the actual working capital acquired on the day of closing as compared to what was originally estimated at closing. On the date of closing, the Company paid an estimated working capital adjustment of $126,047 to Intasco, which is included in the total cash consideration paid above. Subsequent to the end of the quarter, during August 2016, Intasco paid the Company $212,823 for the actual final working capital adjustment. This final actual working capital settlement is included in the table below. The cash purchase price was paid with borrowings under a new senior credit facility which replaced the Company's existing facility as further described in Note 6. The Company incurred transaction costs of $848,252 related to the acquisition of Intasco. The acquisition significantly broadens the Company's solution offering, production capabilities, and potentially expands its reach into new markets.

In connection with the business combination, Intasco terminated the leases it had with an affiliated entity for its operating facilities in the United States and Canada and the Company entered into new leases for the same facilities. The terms of the Company's lease in the United States provides for a term of two years with monthly rental payments of $4,000 beginning on May 1, 2016 and $4,080 beginning on May 1, 2017. The terms of the Company's lease in Canada provides for a term of five years with monthly rental payments of $16,750 CAD beginning on May 1, 2016, $17,085 CAD beginning on May 1, 2017, and $17,427 CAD beginning on May 1, 2019.

The following table summarizes the preliminary acquisition date fair values of the assets acquired and liabilities assumed.

The goodwill arising from the acquisition consists largely of Intasco's reputation, trained employees, and other unique features that cannot be associated with a specific identifiable asset. Of the total amount of goodwill recognized, $7,267,507 is expected to be deductible for tax purposes. The Company also recognized intangible assets as part of the acquisition which consisted of customer contracts, trade names, and unpatented technology. For further detail of the Company's intangibles please refer to Note 5.

The consolidated operating results for the 13 and 26 weeks ended July 3, 2016 included the operating results of Intasco from April 29, 2016. Intasco's revenue included in the accompanying statement of operations for both the 13 and 26 weeks ended July 3, 2016 , totaled $3,684,008 , from the date of the acquisition. Intasco's net income included in the accompanying statement of operations for both the 13 and 26 weeks ended July 3, 2016 , totaled $(302,411) , from the date of acquisition. The loss is primarily due to $521,071 of transaction costs incurred by the Company being recorded on Intasco's financial statements.

2015

On August 31, 2015, the Company, through a newly created subsidiary, Unique Molded Foam Technologies, Inc., acquired substantially all of the assets of Great Lakes Foam Technologies, Inc. (“Great Lakes”) for total cash consideration of $11,947,392 , after all adjustments described below. The purchase agreement included a potential purchase price adjustment provision based on the actual working capital acquired on the day of closing as compared to what was originally estimated at closing. On the date of closing, the Company paid a total purchase price of $12,000,000 less the estimated working capital adjustment of $180,009 owed to the Company by Great Lakes. During November 2015, the Company paid Great Lakes $127,401 for the actual working capital adjustment true-up once the actual working capital was determined. This acquisition was financed through the Company's revolving line of credit without the need for further revisions to any debt or equity agreements. The Company incurred costs of $415,849 related to the acquisition of Great Lakes. The acquisition allows the Company to strengthen its existing product offerings and potentially enable it to access new customers and increase sales to certain of its existing customers.

In connection with the business combination, Great Lakes terminated the lease it had with an affiliated entity for its operating facility and the Company entered into a new lease for the same facility. The terms of the Company's lease provide for monthly rental payments of $7,500 for five years beginning on August 31, 2015.

The following table summarizes the acquisition date fair values of the assets acquired and liabilities assumed.

The goodwill arising from the acquisition consists largely of Great Lakes reputation, trained employees, and other unique features that cannot be associated with a specific identifiable asset. The Company also recognized intangible assets as part of the acquisition which consisted of customer contracts and non-compete agreements. For further detail of the Company's intangibles please refer to Note 5.

The consolidated operating results for the 13 and 25 weeks ended June 28, 2015 does not include any operating results for Great Lakes as the acquisition did not take place until August 31, 2015.

The following pro forma supplementary data for the 13 and 26 weeks ended July 3, 2016 and 13 and 25 weeks ended June 28, 2015 gives effect to the acquisition of Intasco as if it had occurred on January 5, 2015 (the first day of the Company's 2015 fiscal year) and Great Lakes as if it had occurred on December 30, 2013 (the first day of the Company’s 2014 fiscal year). The pro forma supplementary data is provided for informational purposes only and should not be construed to be indicative of the Company’s results of operations had the acquisition been consummated on the date assumed and does not project the Company’s results of operations for any future date.

UNIQUE FABRICATING, INC.

Notes to Consolidated Financial Statements (Unaudited)

Included in inventory are assets located in Mexico with a carrying amount of $2,218,703 at July 3, 2016 and $1,788,902 at January 3, 2016 , and assets located in Canada with a carrying amount of $1,578,314 at July 3, 2016 and $0 at January 3, 2016 .

The inventory acquired in the 2016 acquisition of Intasco included a fair value adjustment of $318,518 . At July 3, 2016 $39,352 of this fair value adjustment remained in inventory while $279,166 was included in cost of goods sold during the 13 and 26 weeks ended July 3, 2016 .

The inventory acquired in the 2015 acquisition of Great Lakes included a fair value adjustment of $146,191 . At July 3, 2016 and January 3, 2016 , $0 of this fair value adjustment remained in inventory while $0 was included in cost of goods sold during the 13 and 26 weeks ended July 3, 2016 . Also, $0 was included in cost of goods sold during the 13 and 25 weeks ended June 28, 2015 .

Depreciation expense was $445,108 and $872,463 for the 13 and 26 weeks ended July 3, 2016 , respectively, and $319,547 and $635,266 for the 13 and 25 weeks ended June 28, 2015 .

Included in property, plant, and equipment are assets located in Mexico with a carrying amount of $1,152,718 and $637,435 at July 3, 2016 and January 3, 2016 , respectively, and assets located in Canada with a carrying amount of $771,069 and $0 at July 3, 2016 and January 3, 2016 , respectively.

Intangible assets of the Company consist of the following at January 3, 2016 :

The weighted average amortization period for all intangible assets is 8.96 years . Amortization expense for intangible assets totaled $930,286 and $1,635,287 for the 13 and 26 weeks ended July 3, 2016 , and $572,954 and $1,104,275 for the 13 and 25 weeks ended June 28, 2015 .

Estimated amortization expense is as follows:

Note 6 — Long-term Debt

Old Senior Credit Facility

The Company had a senior credit facility with a bank it entered into on March 18, 2013, in conjunction with the acquisition of Unique Fabricating, and subsequently amended. The facility initially provided for a $12.5 million revolving line of credit (“Revolver”) and an $11.0 million term loan facility (“Term Loan”). On December 18, 2013, in conjunction with the acquisition of Prescotech Holdings Inc. (“PTI”), the Company entered into an amendment with its bank under this senior credit facility. The amendment increased the Revolver to $15.0 million and the Term Loan to $20.0 million . In October 2014, an additional amendment increased the Revolver to $19.5 million , and the increased amount available was used to construct a second facility in LaFayette, Georgia. The total construction costs were $4.4 million which was all funded by the Revolver. The total amount was capitalized, including interest costs of $0.1 million , and depreciated over the useful lives of the various assets. In December 2015, an additional amendment increased the Revolver capacity to $25.0 million. On April 29, 2016, in conjunction with the acquisition of Intasco, this senior credit facility was repaid and terminated and replaced with a new senior credit facility which is described below. On the date of termination, $15.4 million outstanding under the Term Loan, and $17.3 million outstanding under the Revolver were repaid.

As of January 3, 2016 , $14,787,191 was outstanding under the Revolver. This amount was gross of debt issuance costs which are further disclosed in Note 1. Borrowings under the Revolver were subject to a borrowing base, bore interest at the 30 day LIBOR plus a margin that ranged from 2.75 percent to 3.25 percent (an effective rate of 3.5000 percent at January 3, 2016 ), and were secured by substantially all of the Company’s assets. The half percent range per annum on the Term Loan, as noted in the table below, and Revolver was determined quarterly based on the senior leverage ratio. The Revolver was going to mature on December 18, 2017.

The Company also had a senior subordinated note payable with a private lender effective March 18, 2013, as amended. The holder of the senior subordinated note payable also held equity interests of the Company, and therefore, was a related party. As disclosed in Note 1, the Company used the net proceeds from the IPO to repay on July 7, 2015, the $13.1 million principal amount of the senior subordinated note, together with accrued interest through the date of payment.

New Credit Agreement

On April 29, 2016, Unique Fabricating NA, Inc. (the “US Borrower”) and Unique-Intasco Canada, Inc. (the “CA Borrower”) and Citizens Bank, National Association (“Citizens”), acting as syndication agent, and other lenders, entered into a credit agreement (the “New Credit Agreement”) providing for borrowings of up to the aggregate principal amount of $62.0 million. The New Credit Agreement is a senior secured credit facility and consists of a revolving line of credit of up to $30.0 million (the “New Revolver”) to the US Borrower, a $17.0 million principal amount Term Loan (the “US Term Loan”) to the US Borrower, and a $15.0 million principal amount Term Loan (the “CA Term Loan”) to the CA Borrower. At Closing, the US Term Loan and the CA Term Loan were fully funded and the US Borrower borrowed approximately $22.9 million under the New Revolver. The borrowings were used to finance the acquisition of Intasco, including working capital adjustments and amounts paid into escrow, and to repay the Company’s existing senior credit facility, which was terminated as noted above.

The New Revolver, US Term Loan, and CA Term Loan all mature on April 29, 2021 and bear interest at the Company's election of either (i) the greater of the Prime Rate or the Federal Funds Effective Rate (the “Base Rate”) or ii) the LIBOR rate, plus an applicable margin ranging from 1.75% to 2.50% in the case of the Base Rate and 2.75% to 3.50% in the case of the LIBOR rate, in each case, based on senior leverage ratio thresholds measured quarterly.

In addition, the New Credit Agreement allows for increases in the principal amount of the New Revolver and US and CA Term Loans not to exceed a $10.0 million principal amount, in the aggregate, provided that before and after giving effect to the proposed increase (and any transactions to be consummated using proceeds of the increase) the total leverage and debt service coverage ratio do not exceed specified amounts. The New Credit Agreement also provides for the issuance of letters of credit with, a face amount of up to a $2.0 million in the aggregate, provided that any letter of credit that is issued will reduce availability under the New Revolver.

As of July 3, 2016 , $22,421,821 was outstanding under the New Revolver. This amount is gross of debt issuance costs which are further described in Note 1. The New Revolver had an effective interest rate of 3.9603% percent per annum at July 3, 2016 , and is secured by substantially all of the Company’s assets. At July 3, 2016 , the maximum additional available borrowings under the Revolver were $7,478,179 , which includes a reduction for a $100,000 letter of credit issued for the benefit of the landlord of one of the Company’s leased facilities. The maximum amount available was further subject to borrowing base restrictions.

UNIQUE FABRICATING, INC.

Notes to Consolidated Financial Statements (Unaudited)

Long term debt consists of the following:

The New Credit Agreement contains customary negative covenants and requires that the Company comply with various financial covenants including a total leverage ratio and debt service coverage ratio, as defined. As of July 3, 2016 , the Company was in compliance with these financial covenants. As of January 3, 2016, the Company was in compliance with all financial covenants under the old senior credit facility. Additionally, the US Term Loan and CA Term Loan contains a clause, effective January 1, 2017, that requires an excess cash flow payment to be made if the Company’s cash flow exceeds certain thresholds as defined by the New Credit Agreement and certain performance thresholds are not met.

Maturities on the Company’s New Revolver and other long term debt obligations for the remainder of the current fiscal year and future fiscal years are as follows:

Note 7 — Derivative Financial Instruments

Interest Rate Swap

The Company holds a derivative financial instrument, in the form of an interest rate swap, as required by its New Credit Agreement, for the purpose of hedging certain identifiable transactions in order to mitigate risks relating to the variability of future earnings and cash flows caused by interest rate fluctuations. The Company has elected not to apply hedge accounting for financial reporting purposes. The interest rate swap is recognized in the accompanying consolidated balance sheets at its fair value. Monthly settlement payments due on the interest rate swap and changes in its fair value are recognized currently in net income as interest expense in the consolidated statements of operations.

Effective January 17, 2014, in connection with the refinancing of the old senior credit facility during December 2013, the Company entered into an interest rate swap which required the Company to pay a fixed rate of 1.27 percent while receiving a variable rate based on the one month LIBOR for a net monthly settlement based on the notional amount which began immediately. The notional amount began at $10,000,000 and decreased by $250,000 each quarter until March 31, 2016, when it began decreasing by $312,500 per quarter until the stated expiration date on January 31, 2017. At January 3, 2016 , the fair value of this old interest rate swap was ($46,874) , and was included in other long-term liabilities in the consolidated balance sheets. The Company paid $16,113 and $33,094 in net monthly settlements in the 13 and 26 weeks ended July 3, 2016 , respectively, and $30,760 and $46,712 for the 13 and 25 weeks ended June 28, 2015 , respectively. Both the change in fair value and the monthly settlements were included in interest expense in the consolidated statements of operations.

Effective June 30, 2016, as required under the new credit facility entered into during April 2016 as discussed in Note 6, the Company entered into a new interest rate swap which requires the Company to pay a fixed rate of 1.055 percent per annum while receiving a variable rate per annum based on the one month LIBOR for a net monthly settlement based on the notional amount beginning immediately. This terminated the old swap entered into on January 17, 2014. The notional amount at the effective date was $16,681,250 and decreases by $318,750 each quarter until June 30, 2017, and begins decreasing by $425,000 per quarter until June 29, 2018, when it begins decreasing by $531,250 per quarter until it expires on June 28, 2019. At July 3, 2016 , the fair value of this new interest rate swap was $(181,179) , and was included in in other long-term liabilities in the consolidated balance sheets. There were no payments by the Company with respect to the interest rate swap for both the 13 and 26 weeks ended July 3, 2016 . Both the change in fair value and the monthly settlements were included in interest expense in the consolidated statements of operations.

Foreign Currency Forward Contract

Effective June 29, 2016, the Company entered into a foreign currency forward contract to hedge the Mexican Peso. The forward contract has an equivalent USD notional amount of $3,300,000 and expires on June 30, 2017. The Company is exposed to market risk, including fluctuations in foreign currency exchange rates which may result in cash flow risks, and as a result from time to time will enter into forward contracts to mitigate risks relating to the variability of future earnings and cash flows caused by foreign currency rate fluctuations. The Company has elected not to apply hedge accounting for financial reporting purposes. The foreign currency forward contract is recognized in the accompanying consolidated balance sheets at its fair value and monthly settlement payments due on the foreign currency forward contract and changes in its fair value are recognized currently in net income as gain/losses on foreign currency exchange (which is part of other income (expense), net) in the consolidated statements of operations. At July 3, 2016 , the fair value of this new foreign currency forward contract was $(10,848) , which at July 3, 2016 was included in other short-term liabilities in the consolidated balance sheets. There were no payments by the Company with respect to the foreign currency forward contract for both the 13 and 26 weeks ended July 3, 2016 .

Note 8 — Restructuring

Unique's restructuring activities are undertaken as necessary to implement management's strategy, streamline operations, take advantage of available capacity and resources, and achieve net cost reductions. The restructuring activities generally relate to realignment of existing manufacturing capacity and closure of facilities and other exit or disposal activities, either in the normal course of business or pursuant to specific restructuring programs.

On October 27, 2015, the Company announced the planned closure of its manufacturing facility located in Murfreesboro, Tennessee that resulted in a workforce reduction of approximately 30 employees. The planned closure of the Murfreesboro

facility was effective in the fourth quarter of 2015 and completed in January 2016. The action was necessary due to the tight labor market in Murfreesboro and the struggle to staff production levels to meet the ongoing growth strategy for Murfreesboro's respective products manufactured at the plant. In order to ensure the Company's ability to service its customers at the increasing volumes projected for the future, the Company decided to move existing Murfreesboro production including equipment to the Company's other manufacturing facilities in Evansville, Indiana and LaFayette, Georgia. The Company evaluated whether or not this closing met the criteria for discontinued operations and concluded that the closing did not meet the definition as the closing does not represent a strategic shift in the Company's operations and the Company will have continuing cash flows from the production being moved to other facilities within the Company.

The Company reversed severance related costs which had been previously recorded as a result of this plant closure in the amount of $0 in the 13 weeks ended July 3, 2016 and $(51,951) in the 26 weeks ended July 3, 2016 . The amount of other costs incurred associated with this plant closure, which primarily consisted of moving existing production equipment at Murfreesboro to other facilities was $0 in the 13 weeks ended July 3, 2016 and $87,005 in the 26 weeks ended July 3, 2016 . Further expected charges as of July 3, 2016, are $0.0 million related to severance costs and other costs. All of these costs were recorded to the restructuring expense line in continuing operations in the Company's consolidated statement of operations. The Company also intends to sell the building in Murfreesboro, which the Company owns, which has a current net book value of $2,033,327 and a current estimated selling price of approximately $2,750,000 . The building qualifies as held for sale, is expected to be sold in the next year, and is presented properly as such in the consolidated balance sheets as a current asset.

The table below summarizes the activity in the restructuring liability for the 26 weeks ended July 3, 2016 .

Note 9 — Redeemable Common Stock

On March 18, 2013, in conjunction with the acquisition of Unique Fabricating, and on December 18, 2013, in conjunction with the acquisition of PTI, the Company issued shares of common stock to its subordinated lender. The 1,415,400 shares issued to the subordinated lender included features for the shares to be redeemed at their fair value on the six th or seven th anniversary of the purchase or when the founders group no longer owned 75 percent of the shares originally purchased. These shares were accounted for as redeemable common stock due to the redemption feature being outside of the Company’s control. These shares were recorded initially using their net proceeds and were adjusted to their redemption value each period using a ratable allocation based on the Company’s estimate of the redemption date and fair value of the shares. The Company accreted the redemption value of these shares over the estimated redemption period to the earliest known redemption date with any changes in estimates accounted for prospectively. However, reductions in the redemption value were only recorded to the extent of previously recorded increases.

On January 14, 2013, the Company sold 999,999 shares of common stock for $0.167 per share to a group of founding shareholders. An agreement that existed before the closing of the Company's IPO required the Company to redeem these shares if the Company were sold, liquidated or completed an initial public offering for less than $4 per share. These shares were accounted for as redeemable common stock due to the redemption feature being outside of the Company’s control. These shares were recorded initially using their proceeds of $0.167 per share and there was not any accretion of these shares from this initial value because they were already recorded at their redemption value. The redemption value of the shares was $166,667 .

Effective upon the closing of the IPO in July of 2015, the Company’s 999,999 shares issued to the founder group at $0.167 per share were no longer redeemable as the IPO was completed at a price of more than $4 per share and the Company was no longer required to purchase these shares. Furthermore, the 1,415,400 shares issued to the subordinated lender were also no longer redeemable, effective upon the closing of the IPO, as the subordinated lender agreed to terminate its right to require the Company to repurchase its shares in exchange for the Company granting it certain registration rights. As a result, all of the shares included in redeemable common stock were reclassified to common stock and amounts attributable to redeemable common stock were allocated to common stock at par value and additional paid-in-capital.

As of June 28, 2015 the redemption value of the redeemable shares was estimated to be $13,446,300 which was more than the initial proceeds. As a result, $1,364,031 of accretion was recorded in the period ended June 28, 2015. The redemption value was calculated based on an internal methodology, which was based on calculating Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) multiples based on enterprise values of selected public companies that are comparable to the Company. An estimated EBITDA multiple was then determined for the Company and used to calculate the enterprise value and thereby the per share value used in the redemption value.

Note 10 — Stock Incentive Plans

2013 Stock Incentive Plan

The Company’s board of directors approved a stock incentive plan (the “Plan”) in 2013. The Plan permits the Company to grant 495,000 non statutory or incentive stock options to the employees, directors and consultants of the Company. 495,000 shares of unissued common stock are required to be reserved for the Plan. The board of directors has the authority to determine the participants to whom stock options shall be awarded as well as any restrictions to be placed upon the awards. The exercise price cannot be less than the fair value of the underlying shares at the time the stock options are issued and the maximum length of an award is ten years .

On July 17, 2013 and January 1, 2014, the board of directors approved the issuance of 375,000 and 120,000 non statutory stock option awards, respectively to employees of the Company with an exercise price of $3.33 with a weighted average grant date fair value of $86,450 and $42,000 respectively. On April 29, 2016 the Company issued 7,200 non statutory stock option awards to employees of the Company with an exercise price of $12.58 with a weighted average grant date fair value of $20,160 . All 3 tranches of grants of the awards vest 20 percent on the grant date and an additional 20 percent on each of the first, second, third and fourth anniversaries thereafter. Vested awards can only be exercised while the participants are employed by the Company. Upon termination, the Company may repurchase the vested awards at their fair value (or their exercise price if terminated for cause) prior to their exercise.

The fair value of each option award is estimated on the grant date using a Black Scholes option pricing model that uses the weighted average assumptions noted in the following table. The expected volatility is based on the historical volatility of comparable companies. The Company estimated zero employee terminations based on the options granted being limited to a small pool of senior employees of which the Company has no historical turnover experience. The expected term of the awards was estimated based on findings from academic studies investigating the average holding period for options adjusted for the Company’s size and risk factors. The risk free rate for periods within the contractual life of the option is based on the United States Treasury yield curve in effect at the time of grant.

2014 Omnibus Performance Award Plan

In 2014 the board of directors and stockholders adopted the Unique Fabricating, Inc. 2014 Omnibus Performance Award Plan, or the 2014 Plan. The 2014 Plan provides for the grant of cash awards, stock options, stock appreciation rights, or SARs, shares of restricted stock and restricted stock units, or RSUs, performance shares and performance units. The 2014 Plan authorizes the grant of awards relating to 250,000 shares of our common stock. In the event of any transaction that causes a change in capitalization, the Compensation Committee, such other committee administering the 2014 Plan or the board of directors will make such adjustments to the number of shares of common stock delivered, and the number and/or price of shares of common stock subject to outstanding awards granted under the 2014 Plan, as it deems appropriate and equitable to prevent dilution or enlargement of participants’ rights. An amendment approved in March of 2016 by our board of directors which was included as a proposal and approved by our stockholders in our June 2016 proxy statement, increased the authorized grant of awards to a total of 450,000 shares of our common stock.

On August 17, 2015, the board of directors approved the issuance of a total of 230,000 stock option awards of which 45,000 non statutory awards were granted to the board of directors, and 185,000 incentive stock options were granted to employees of the Company. All of the awards had an exercise price of $12.50 with a weighted average grant date fair value of $625,600 . These awards vest 20 percent on the grant date and an additional 20 percent on each of the first, second, third and fourth anniversaries thereafter. Vested awards can only be exercised while the participants are employed by the Company.

On November 20, 2015, the board of directors approved the issuance of stock option awards for 15,000 shares to employees of the Company. All of the awards had an exercise price of $11.50 with a weighted average grant date fair value of $33,500 . The vesting schedule, vesting percentage, and capability of the employees to exercise these options have the exact same conditions as the August 17, 2015 grants discussed above.

On April 29, 2016, the board of directors approved the issuance of stock option awards for 5,000 shares to employees of the Company. All of the awards had an exercise price of $12.58 with a weighted average grant date fair value of $14,000 . The vesting schedule, vesting percentage, and capability of the employees to exercise these options have the exact same conditions as the November 20 and August 17, 2015 grants discussed above.

The fair value of each option award is estimated on the grant date using a Black Scholes option pricing model that uses the weighted average assumptions noted in the following table. The expected volatility is based on the historical volatility of comparable companies. The Company estimated zero employee terminations based on the options granted being limited to a small pool of senior employees of which the Company has no historical turnover experience. The expected term of the awards was estimated based on findings from academic studies investigating the average holding period for options for adjusted for the Company’s size and risk factors. The risk free rate for periods within the contractual life of the option is based on the United States Treasury yield curve in effect at the time of grant.

A summary of option activity under both plans is presented below: