0000104897
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2017-11-26
0000104897
2017-08-27
0000104897
2017-11-26
0000104897
2016-08-27
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2017-12-22
0000104897
2016-08-28
2016-11-27
0000104897
2016-11-27
iso4217:USD
xbrli:shares
iso4217:USD
xbrli:shares
xbrli:pure
WSI INDUSTRIES, INC.
10-Q
2017-11-26
false
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0000104897
--08-26
26196
973095
15093
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 12pt Times New Roman, Times, Serif"><font style="font-size: 10pt">2.</font></td>
<td style="font: 12pt Times New Roman, Times, Serif"><font style="font-size: 10pt"><u>INVENTORIES</u></font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.35in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.35in">Inventories
consist primarily of raw material, work-in-progress (WIP) and finished goods and are valued at the lower of cost or market value:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.35in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">November 26, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">August 27, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">Raw material</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,706,248</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,047,931</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">WIP</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,021,703</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,448,282</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Finished goods</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,027,844</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">635,466</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">4,755,795</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,131,679</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"></p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 12pt Times New Roman, Times, Serif"><font style="font-size: 10pt">4.</font></td>
<td style="font: 12pt Times New Roman, Times, Serif"><font style="font-size: 10pt"><u>DEBT AND LINE OF CREDIT:</u></font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.35in">During fiscal
2017, the Company placed purchase orders for two new pieces of equipment for approximately $2,055,000 that will be delivered and
put into service during fiscal 2018. The Company also made advance deposits on that equipment totaling $687,000 which has been
classified as machinery and equipment on the balance sheet at August 27, 2017. During the first quarter of fiscal 2018, the Company
made additional deposits of $807,000 which have also been classified as machinery and equipment.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.35in">In addition,
during fiscal 2017, the Company entered into a debt agreement related to one of the pieces of equipment. During the fiscal 2018
first quarter, the Company entered into a debt agreement on the second piece of equipment. Also during the fiscal 2018 first quarter,
the Company received loan advances on the two debt agreements totaling $1,092,000 which was also the amount outstanding at November
26, 2017. Until the commencement of the loan agreements upon final installation and approval of the equipment, the Company will
pay interest only on the amounts loaned. There were no amounts outstanding related to either debt agreement at August 27, 2017.
Upon commencement, both agreements will be for five years. The interest rate on one debt agreement is fixed at 4.25% while the
interest rate on the second agreement will be fixed at commencement and will be based on a spread over a base reference rate.</p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 12pt Times New Roman, Times, Serif"><font style="font-size: 10pt">5.</font></td>
<td style="font: 12pt Times New Roman, Times, Serif"><font style="font-size: 10pt"><u>INCOME TAXES:</u></font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.35in">The Company’s
effective tax rate for its quarter ended November 26, 2017 was 38.1% as compared to a negative (37.9)% for the quarter ended November
27, 2016. In March 2016, the FASB issued ASU No. 2016-09, <i>Compensation – Stock Compensation </i>which applied to the
Company beginning with its fiscal year 2018. With ASU No. 2016-09, the Company is required to recognize as income tax expense
the tax effect of options that have been cancelled or forfeited. This change could lead to variations in the effective tax rate
in any particular quarter. The Company recognized $22,500 of income tax expense related to cancelled stock options during the
quarter ended November 26, 2017. Prior to the implementation of ASU No. 2016-09, the tax effect would have been recognized as
a reduction to paid-in-capital to the extent that a sufficient paid-in-capital pool existed and therefore not flow through income
tax expense. The Company has also 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 which reduces the effective tax rate from
the statutory rates.</p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 12pt Times New Roman, Times, Serif"><font style="font-size: 10pt">7.</font></td>
<td style="font: 12pt Times New Roman, Times, Serif"><font style="font-size: 10pt"><u>CLAIMS AND CONTINGENCIES:</u></font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.35in">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>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font-family: Times New Roman, Times, Serif">
<tr style="vertical-align: top">
<td style="width: 48px; font-size: 12pt"><font style="font-size: 10pt">6.</font></td>
<td style="font-size: 12pt"><font style="font-size: 10pt"><u>EARNINGS PER SHARE:</u></font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">The following table sets forth the computation of basic
and diluted earnings per share:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td>
<td style="text-align: center"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Thirteen weeks ended</font></td>
<td style="text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td>
<td style="text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">November 26, 2017</font></td>
<td style="text-align: center"> </td>
<td style="text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">November 27, 2016</font></td>
<td style="text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Numerator for earnings per share:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 58%"><font style="font-size: 10pt">Net income (loss)</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">85,721</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(322,363</font></td>
<td style="width: 1%"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Denominator:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Denominator for basic earnings</font><br />
<font style="font-size: 10pt">per share - weighted average shares</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,936,227</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,919,500</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Effect of dilutive securities:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Employee and non-employee options</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2,661</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Dilutive common shares</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Denominator for diluted earnings  per share</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,938,888</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,919,500</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Basic earnings (loss) per share</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">.03</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(.11</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Diluted earnings (loss) per share</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">.03</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(.11</font></td>
<td>)</td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.35in">Inventories
consist primarily of raw material, work-in-progress (WIP) and finished goods and are valued at the lower of cost or market value:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.35in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">November 26, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">August 27, 2017</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 54%"><font style="font-size: 10pt">Raw material</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,706,248</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 20%; text-align: right"><font style="font-size: 10pt">1,047,931</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">WIP</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,021,703</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,448,282</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt"><font style="font-size: 10pt">Finished goods</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">1,027,844</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">635,466</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">4,755,795</font></td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,131,679</font></td>
<td style="padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">The following table sets forth the computation of basic
and diluted earnings per share:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td>
<td style="text-align: center"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">Thirteen weeks ended</font></td>
<td style="text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td>
<td style="text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">November 26, 2017</font></td>
<td style="text-align: center"> </td>
<td style="text-align: center"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt">November 27, 2016</font></td>
<td style="text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Numerator for earnings per share:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 58%"><font style="font-size: 10pt">Net income (loss)</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">85,721</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%; border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="width: 18%; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(322,363</font></td>
<td style="width: 1%"><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Denominator:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Denominator for basic earnings</font><br />
<font style="font-size: 10pt">per share - weighted average shares</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,936,227</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2,919,500</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Effect of dilutive securities:</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Employee and non-employee options</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2,661</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">-</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Dilutive common shares</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Denominator for diluted earnings  per share</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,938,888</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,919,500</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Basic earnings (loss) per share</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">.03</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(.11</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Diluted earnings (loss) per share</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">.03</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">(.11</font></td>
<td>)</td></tr>
</table>
<p style="margin: 0pt"></p>
1091722
WSCI
Q1
2018
Smaller Reporting Company
2055000
687000
807000
0.0425
52783
-196511
77425
68603
76500
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 12pt Times New Roman, Times, Serif"><font style="font-size: 10pt">1.</font></td>
<td style="font: 12pt Times New Roman, Times, Serif"><font style="font-size: 10pt"><u>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:</u></font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.35in">The condensed
consolidated balance sheet as of November 26, 2017, the condensed consolidated statements of income for the thirteen weeks ended
November 26, 2017 and November 27, 2016 and the condensed consolidated statements of cash flows for the thirteen 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 Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.35in">The condensed
consolidated balance sheet at August 27, 2017 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 27, 2017. The results of operations for interim periods are not necessarily indicative
of the operating results for the full year.</p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 12pt Times New Roman, Times, Serif"><font style="font-size: 10pt">8.</font></td>
<td style="font: 12pt Times New Roman, Times, Serif"><font style="font-size: 10pt"><u>RECENT ACCOUNTING PRONOUNCEMENTS:</u></font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.35in">In May 2014,
the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,
“<i>Revenue from Contracts with Customers</i>”. 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 Times New Roman, Times, Serif; margin: 0 0 0 27pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.35in">In March 2016,
FASB issued ASU No. 2016-02, <i>“Leases (Topic 842)</i>”. 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>
77755
67670
-23719
-18231
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 48px; font: 12pt Times New Roman, Times, Serif"><font style="font-size: 10pt">3.</font></td>
<td style="font: 12pt Times New Roman, Times, Serif"><font style="font-size: 10pt"><u>GOODWILL AND OTHER ASSETS</u></font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: -0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: 0.35in">Goodwill and
other assets consist of costs resulting from business acquisitions which total $2,368,452 at November 26, 2017 (net of accumulated
amortization of $344,812 recorded prior to the adoption of ASC 350 <i>Goodwill and Other Intangible Assets</i>).</p>
344812
1091722
22500