0000104897
2016-08-29
2017-05-28
0000104897
2017-06-23
0000104897
2017-05-28
0000104897
2015-08-28
0000104897
2017-02-28
2017-05-28
0000104897
2016-08-28
0000104897
us-gaap:RevolvingCreditFacilityMember
WSCI:RevolvingLoanAgreementMember
2017-02-25
2017-02-26
0000104897
us-gaap:RevolvingCreditFacilityMember
WSCI:RevolvingLoanAgreementMember
2017-02-26
0000104897
us-gaap:RevolvingCreditFacilityMember
WSCI:RevolvingLoanAgreementMember
us-gaap:LondonInterbankOfferedRateLIBORMember
2017-02-25
2017-02-26
0000104897
2016-02-28
2016-05-29
0000104897
2015-08-29
2016-05-29
0000104897
2016-05-29
0000104897
2015-08-30
2016-05-29
iso4217:USD
xbrli:shares
iso4217:USD
xbrli:shares
xbrli:pure
WSI INDUSTRIES, INC.
10-Q
2017-05-28
false
Smaller Reporting Company
Q3
0.10
0.10
10000000
10000000
2959775
2919500
2959775
2919500
2959775
-904228
-219673
78306
216381
-0.31
-0.08
.03
.07
-0.31
-0.08
0.03
0.07
2920828
2923483
2925247
2929218
1361510
1381216
7667
3008
-579326
22100
220204
133317
-808158
-1263979
-257474
-2154936
34197
150139
1183832
-1123729
2468596
3886069
15000
-785705
-276108
4745057
1147147
233560
165607
-1380707
1848498
2229254
5587822
4149645
3739324
6378899
203680
237189
4200
757
WSCI
1165954
1598874
1190169
913494
433915
535144
6684
13368
-0.391
-0.429
0.249
-2.519
2920828
2923483
2919500
2919500
5747
9718
24819658
25982586
13265450
13979233
8934571
9838799
4111402
3848484
295977
291950
823409
1402735
5795847
6785432
4934952
3815186
1463976
1557801
426379
133477
797656
394657
2246941
1729251
24819658
25982586
2368452
2375136
1250000
10737511
11460818
11713695
10896632
320448
286251
2790038
3047512
3015387
3823545
2920828
2923483
2919500
2919500
.08
-579326
-165323
25979
-154884
-1483554
-384996
104285
61497
10127
6870
16252
20189
2684676
1202533
788040
2208560
1545134
1030679
951701
2486233
20692334
8563262
7934304
24619492
22237468
9593941
8886005
27105725
39336
3700000
0.0275
0.020
2018-02-15
3700000
1500000
-1250000
0000104897
206637
72510
75628
236365
0.0399
P5Y
22511
P20Y
matures in May 2027
--08-28
2368452
344812
147502
147502
29759
785705
291108
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif">1.</font></td>
<td style="font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif"><u>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:</u></font></td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.5in">The condensed
consolidated balance sheet as of May 28, 2017, the condensed consolidated statements of income for the thirteen and thirty-nine
weeks ended May 28, 2017 and May 29, 2016 and the condensed consolidated statements of cash flows for the thirty-nine weeks then
ended, respectively, have been prepared by the Company without audit. In the opinion of management, all adjustments (which include
normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all
periods presented have been made.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.5in">The condensed
consolidated balance sheet at August 28, 2016 is derived from the audited consolidated balance sheet as of that date. Certain information
and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. Therefore, these condensed consolidated financial statements
should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on
Form 10-K for the year ended August 28, 2016. The results of operations for interim periods are not necessarily indicative of the
operating results for the full year.</p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif">2.</font></td>
<td style="font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif"><u>INVENTORIES</u></font></td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: 0.5in">Inventories consist primarily
of raw material, work-in-progress (WIP) and finished goods and are valued at the lower of cost or market:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 28pt; text-indent: -28pt"><b> </b></p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">May 28, 2017</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">August 28, 2016</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 62%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Raw material</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 16%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,165,954</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 16%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,598,874</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">WIP</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,190,169</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">913,494</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Finished goods</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">433,915</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">535,144</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,790,038</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">3,047,512</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif">3.</font></td>
<td style="font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif"><u>OTHER ASSETS</u></font></td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.5in">Goodwill
and other assets consist of costs resulting from business acquisitions which total $2,368,452 at May 28, 2017 (net of accumulated
amortization of $344,812 recorded prior to the adoption of ASC 350 <i>Goodwill and Other Intangible Assets</i>). At August 28,
2016, the Company also had deferred financing costs of $6,684 (net of accumulated amortization of $13,368) incurred in connection
with a prior mortgage discussed in Note 4. These deferred financing costs were written off during the Company’s fiscal 2017
second quarter when the prior mortgage was paid off.</p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif">4.</font></td>
<td style="font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif"><u>DEBT AND LINE OF CREDIT:</u></font></td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.5in">During
the quarter ended February 26, 2017, the Company entered into a new mortgage agreement with a new bank. The new mortgage paid off
the prior mortgage in its entirety and released all obligations in connection with that mortgage including the requirement to maintain
a restricted cash balance of $1.25 million. The new mortgage was for $3.7 million and carries an interest rate of 3.99% fixed for
five years after which the interest rate will reset at a fixed rate for the subsequent five years. The mortgage requires monthly
payments of $22,511 based on a 20 year amortization schedule and matures in May 2027. The mortgage is secured by all assets of
the Company.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.5in">  </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.5in">The Company
also entered into a revolving credit agreement with the new bank. The revolving credit agreement provides for a maximum loan of
$1,500,000 with interest at the thirty day LIBOR rate plus 2.0% with a base rate of 2.75%. The revolver has a maturity date of
February 15, 2018.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.5in">Both agreements
provide for certain restrictive covenants including a minimum tangible net worth and a minimum working capital. At May 28, 2017,
the Company was in compliance with these covenants.</p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif">5.</font></td>
<td style="font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif"><u>INCOME TAXES:</u></font></td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.5in">The Company’s
effective tax rate for its fiscal third quarter ended May 28, 2017 was a negative (42.9)% as compared to 24.9% for the quarter
ended May 29, 2016. The year-to-date effective tax rate was a negative (39.1)% in the current year as compared to a negative (251.9)%
for the prior year. The Company has determined that certain of its activities the Company performs qualify for the Research &
Development tax credit (R&D credit) as defined by Internal Revenue Code Section 41. During the fiscal 2016 first quarter the
Company recognized tax benefits related to R&D tax credits which were generated in a prior year which lowered the overall effective
tax rate. In addition, during the Company’s fiscal 2016 second quarter, the Federal R&D tax credit law was retroactively
renewed for calendar year 2015 and also made permanent going forward. Since for calendar year 2015 the law was enacted retroactively,
any effects are recognized as a component of income tax expense or benefit from continuing operations in the financial statements
in the interim period that the law was enacted, which in this case was the Company’s fiscal 2016 second quarter.</p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif">6.</font></td>
<td style="font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif"><u>EQUIPMENT IMPAIRMENT:</u></font></td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -28pt"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.5in">The Company
evaluates long-term assets on a periodic basis in compliance with Accounting Standards Codification (“ASC”) 360, Accounting
for the Impairment of Long-lived Assets when indicators of impairment are present and the undiscounted cash flows estimated to
be generated by those assets are less than the assets carrying amount. If the undiscounted cash flows are less than the carrying
amount, the impairment recognized is measured by the amount the carrying value of the assets exceeds their fair value determined
primarily through the present value of estimated future cash flows. During the quarter ended May 28, 2017, the Company determined
that one of its pieces of equipment was impaired and recognized an expense of approximately $148,000.</p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif">7.</font></td>
<td style="font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif"><u>CLAIMS AND CONTINGENCIES:</u></font></td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -28pt"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.5in">The Company
is exposed to a number of asserted and unasserted claims encountered in the ordinary course of business. Although the outcome of
any such claim cannot be predicted, management believes that there are no pending legal proceedings or claims against or involving
the Company for which the outcome is likely to have a material adverse effect upon its financial position or results of operations.</p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif">8.</font></td>
<td style="font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif"><u>EARNINGS PER SHARE</u>:</font></td></tr>
</table>
<p style="font: 10pt/115% Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The following table sets forth the computation
of basic and diluted earnings per share:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Thirteen weeks ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Thirty-nine weeks ended</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">May 28, 2017</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">May 29, 2016</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"> May 28, 2017</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">May 29, 2016</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Numerator for basic and diluted earnings per share:</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 40%; padding-left: 10pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Net income (loss)</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(219,673</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">78,306</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(904,228</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">216,381</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Denominator</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Denominator for basic earnings per share – weighted average shares</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,923,483</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,919,500</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,920,828</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,919,500</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Effect of dilutive securities:</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Employee and non-employee options</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">5,747</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">9,718</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Dilutive common shares</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Denominator for diluted earnings per share</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,923,483</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,925,247</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,920,828</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,929,218</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Basic earnings (loss) per share</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(.08</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">.03</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(.31</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">.07</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Diluted earnings (loss) per share</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(.08</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">.03</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(.31</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">.07</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 48px; font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif">9.</font></td>
<td style="font: 11pt/115% Calibri, Helvetica, Sans-Serif"><font style="font: 10pt Times New Roman, Times, Serif"><u>RECENT ACCOUNTING PRONOUNCEMENTS:</u></font></td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.5in">In May
2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.
2014-09, Revenue from Contracts with Customers. This guidance defines how companies report revenues from contracts with customers
and also requires enhanced disclosures. In July 2015, the Financial Accounting Standards Board voted to defer the effective date
by one year, with early adoption on the original effective date permitted. ASU 2014-09 was to be effective for annual reporting
periods beginning after December 15, 2016, including interim periods within the annual reporting period. In August 2015, FASB issued
ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606), Deferral of the Effective Date (“ASU 2015-14”).
The amendments in ASU 2015-14 defer the effective date of ASU 2014-09 for all entities by one year. The Company is currently evaluating
the potential effects of the adoption of this update on the consolidated financial statements.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.5in">In March
2016, FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize the assets and liabilities that
arise from most leases. The main difference between previous U.S. GAAP and ASU 2016-02 is the recognition of lease assets and lease
liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. For lessors, the guidance included
in ASU 2016-02 modifies the classification criteria and the accounting for sales-type and direct financing leases. ASU 2016-02
provides specific guidance for determining whether a contractual arrangement contains a lease, lease classification by lessees
and lessors, initial and subsequent measurement of leases by lessees and lessors, sale and leaseback transactions, transition,
and financial statement disclosures. ASU 2016-02 requires entities to use a modified retrospective approach to apply its guidance,
and includes a number of optional practical expedients that entities may elect to apply. For public entities, the amendments included
in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal
years. The Company is currently evaluating the potential effects of the adoption of this guidance on the consolidated financial
statements.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.5in">In April
2015, FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt
issuance costs in financial statements. Under the ASU, an entity presents such costs in the balance sheet as a direct deduction
from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. We adopted
this ASU in the second quarter of 2017. As a result of the adoption of this ASU, we recorded $39,336 in financing costs related
to our new mortgage, as described in footnote 4, as a contra-liability reducing Long-term debt on the balance sheets. This ASU
had no effect on our results of operations or liquidity.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: 0.5in">Inventories consist primarily
of raw material, work-in-progress (WIP) and finished goods and are valued at the lower of cost or market:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 28pt; text-indent: -28pt"><b> </b></p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">May 28, 2017</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">August 28, 2016</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 62%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Raw material</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 16%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,165,954</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 16%; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,598,874</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">WIP</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">1,190,169</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">913,494</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Finished goods</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">433,915</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">535,144</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,790,038</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">3,047,512</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The following table sets forth the computation
of basic and diluted earnings per share:</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 11pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Thirteen weeks ended</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Thirty-nine weeks ended</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">May 28, 2017</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">May 29, 2016</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif"> May 28, 2017</font></td>
<td style="text-align: center; line-height: 115%"> </td>
<td style="text-align: center; line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">May 29, 2016</font></td>
<td style="text-align: center; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Numerator for basic and diluted earnings per share:</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 40%; padding-left: 10pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Net income (loss)</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(219,673</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">78,306</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(904,228</font></td>
<td style="width: 1%; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="width: 12%; border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">216,381</font></td>
<td style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Denominator</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Denominator for basic earnings per share – weighted average shares</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,923,483</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,919,500</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,920,828</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,919,500</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Effect of dilutive securities:</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Employee and non-employee options</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">5,747</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">-</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">9,718</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 10pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Dilutive common shares</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 10pt; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Denominator for diluted earnings per share</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,923,483</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,925,247</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,920,828</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">2,929,218</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Basic earnings (loss) per share</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(.08</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">.03</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(.31</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">.07</font></td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="text-align: right; line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">Diluted earnings (loss) per share</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(.08</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">.03</font></td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">(.31</font></td>
<td style="line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%"><font style="font: 10pt Times New Roman, Times, Serif">.07</font></td>
<td style="line-height: 115%"> </td></tr>
</table>
-76500
15000
2017