A N N U A L
R E P O R T
2
1
8
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TSR AT A GLANCE
TSR is engaged in the business of providing contract computer programming services to its customers. The Company
provides its customers with technical computer personnel to supplement their in-house information technology (“IT”)
capabilities. TSR’s customers for its contract computer programming services consist primarily of Fortune 1000
companies with significant technology budgets. With more than 40 years of experience in the information services
business, TSR is positioned to fulfill virtually any information technology temporary staffing contract requirement.
Extensive recruiting efforts are employed to create and maintain a database of highly qualified professionals who are well-
versed in the latest technological advances. TSR’s professional staff has extensive experience across a broad range of
industries from telecommunications and pharmaceuticals to banking and insurance.
FINANCIAL HIGHLIGHTS
(Amounts in Thousands, Except Per Share Data)
May 31,
2018
May 31,
2017
May 31,
2016
May 31,
2015
May 31,
2014
Revenue, Net ........................................................................
$ 64,990
$ 62,573
$ 60,998
$ 57,403
$ 49,530
Income From Operations .....................................................
Net Income (Loss) Attributable to TSR, Inc. .......................
Basic Net Income (Loss) Per TSR, Inc. Common Share .....
909
486
0.25
562
268
0.14
839
399
0.20
432
193
25
(86 )
0.10
(0.04 )
Working Capital ...................................................................
8,113
7,689
9,391
8,986
8,706
Total Assets ..........................................................................
13,372
14,535
14,090
14,051
13,563
Total TSR, Inc. Equity .........................................................
Book Value Per TSR, Inc. Common Share ..........................
(Total TSR Equity Divided by Common Shares Outstanding)
8,224
4.19
7,738
9,432
9,033
8,840
3.94
4.81
4.60
4.51
Cash Dividends Declared Per TSR, Inc. Common Share ....
$
0.00
$
1.00
$
0.00
$
0.00
$
0.00
LETTER FROM THE CHAIRMAN
Dear Stockholders:
My first full year as Chairman and CEO of TSR has been a rewarding one in several respects.
Overall, for the year ended May 31st, the Company’s net revenue increased 3.9% from last year to $64.99
million. Net income attributable to TSR increased 81% from $268,000 in the prior year to $486,000 in the
current year. Additionally, net income per share increased from $0.14 to $0.25 per share.
We attribute these increases in net income and net income per share to the increase in revenue and to a
decrease in selling, general and administrative expenses compared with the prior year, resulting primarily
from consolidating certain management responsibilities following the retirement of our former chairman,
which decrease was offset, to an extent, by additional investments in recruiting resources.
IT talent is scarce in certain categories
Here’s the new normal for the IT staffing industry:
Economic uncertainty reverberates among many clients
There is unremitting pressure to squeeze margins by some customers
Throughout it all, TSR continues to strive to outcompete in the marketplace.
The three fundamental pillars of the IT staffing business continue to be: sales and marketing; recruiting;
and administrative or “back office” capabilities. At TSR, we don’t believe that our “back office” performs
a separate and isolated function – it is imperative that all three groups work together as a team. This
approach helps make us nimble and smarter in a world where speed to market is just the first cost of entry.
But then top quality and right fit trump all.
Serving customers is our primary focus. This includes assisting our existing clients, many of whom we
have served for decades, and new clients, whom we cultivate by learning and understanding their needs.
This year we had particular success in growing our business across several industries.
Computer technologies and IT needs continue to evolve and increase rapidly worldwide. TSR’s ability to
adapt and evolve for more than 40 years has been the cornerstone for our success. We will continue to
pivot as needed to be among the leading service providers for architects and developers in many nascent IT
areas. This includes: cloud based computing, mobile based financial technology, robotic process
automation, information security, ethical hacking, and penetration testing. Delivering talent in these and
other new technologies as they develop will fuel our growth.
As always, we remain relentless in our dedication to listening closely to our customers and their needs, and
working smartly on their behalf. We believe that this dedication will best serve all of our stockholders.
I thank you for your ongoing support.
Sincerely
Chris Hughes
President
1
TSR INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
May 31, 2018 and 2017
Current assets:
Cash and cash equivalents ................................................................................................ $
Certificates of deposit and marketable securities ..............................................................
Accounts receivable:
Trade, net of allowance for doubtful accounts of $185,000 in 2018 and 2017 ..............
Other ............................................................................................................................
Prepaid expenses ...............................................................................................................
Prepaid and recoverable income taxes ..............................................................................
Deferred income taxes ......................................................................................................
2018
2017
5,323,437
537,160
$
5,723,976
1,020,888
7,227,823
2,094
7,229,917
98,344
28,214
-
7,324,291
18,455
7,342,746
176,397
94,833
106,000
Total Current Assets ........................................................................................
13,217,072
14,464,840
Equipment and leasehold improvements, at cost:
Equipment .........................................................................................................................
Furniture and fixtures ........................................................................................................
Automobiles ......................................................................................................................
Leasehold improvements ..................................................................................................
Less accumulated depreciation and amortization..............................................................
Other assets .........................................................................................................................
Deferred income taxes ........................................................................................................
100,980
111,107
19,323
60,058
291,468
263,742
27,726
49,653
78,000
98,889
111,107
19,665
60,058
289,719
269,069
20,650
49,653
-
Total Assets ....................................................................................................... $ 13,372,451
$ 14,535,143
LIABILITIES AND EQUITY
Current liabilities:
Accounts and other payables............................................................................................. $
Accrued expenses and other current liabilities:
Salaries, wages and commissions ..................................................................................
Other ............................................................................................................................
Dividends payable .............................................................................................................
Advances from customers .................................................................................................
559,428
$
644,834
3,136,023
196,990
3,333,013
-
1,211,232
2,699,686
138,372
2,838,058
1,962,062
1,330,714
Total Liabilities .................................................................................................
5,103,673
6,775,668
Commitments and contingencies
Equity:
TSR, Inc.
Preferred stock, $1.00 par value, authorized 500,000 shares; none issued .......................
Common stock, $0.01 par value, authorized 12,500,000 shares;
issued 3,114,163 shares; 1,962,062 outstanding ............................................................
Additional paid-in capital .................................................................................................
Retained earnings ..............................................................................................................
Less: Treasury stock, 1,152,101 shares, at cost ...............................................................
Total TSR, Inc. Equity .....................................................................................
Noncontrolling Interest .....................................................................................................
Total Equity .........................................................................................................................
-
-
31,142
5,102,868
16,604,219
21,738,229
13,514,003
8,224,226
44,552
8,268,778
31,142
5,102,868
16,118,011
21,252,021
13,514,003
7,738,018
21,457
7,759,475
Total Liabilities and Equity ............................................................................. $ 13,372,451
$ 14,535,143
See accompanying notes to consolidated financial statements.
2
TSR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years ended May 31, 2018 and 2017
2018
2017
Revenue, net ......................................................................................................................... $ 64,989,995
$ 62,572,585
Cost of sales ..........................................................................................................................
Selling, general and administrative expenses ....................................................................
54,609,095
9,471,523
64,080,618
52,326,521
9,683,601
62,010,122
Income from operations ......................................................................................................
909,377
562,463
Other income:
Interest and dividend income ............................................................................................
Unrealized gain from marketable securities, net ..............................................................
Income before income taxes ................................................................................................
Provision for income taxes ..................................................................................................
Consolidated net income .....................................................................................................
Less: Net income attributable to noncontrolling interest .................................................
12,381
15,272
27,653
937,030
381,000
556,030
69,822
10,888
3,616
14,504
576,967
263,000
313,967
45,778
Net income attributable to TSR, Inc. ................................................................................ $
486,208
$
268,189
Net income per TSR, Inc. common share .......................................................................... $
0.25
$
0.14
Weighted average number of common shares outstanding ..............................................
1,962,062
1,962,062
See accompanying notes to consolidated financial statements.
3
TSR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
Years ended May 31, 2018 and 2017
Shares of
common
stock
Common
stock
Additional
paid-in
capital
Retained
earnings
Treasury
stock
TSR Inc.
equity
Non-
controlling
interest
Total
equity
Balance at
June 1, 2016 ..................................
3,114,163
Net income
attributable to
noncontrolling
interest ...........................................
-
Distribution to
noncontrolling
interest ...........................................
-
Cash dividend
declared .........................................
-
Net income
attributable to
TSR, Inc. ......................................
-
Balance at
May 31, 2017 .................................
3,114,163
Net income
attributable to
noncontrolling
interest ...........................................
-
Distribution to
noncontrolling
interest ...........................................
-
Net income
attributable to
TSR, Inc. ......................................
-
Balance at
May 31, 2018 .................................
3,114,163
$ 31,142
$ 5,102,868
$ 17,811,884
$(13,514,003)
$ 9,431,891
$ 39,603
$ 9,471,494
-
-
-
-
-
-
-
-
-
-
(1,962,062)
268,189
-
-
-
-
-
-
45,778
45,778
(63,924)
(63,924)
(1,962,062)
268,189
-
-
(1,962,062)
268,189
31,142
5,102,868
16,118,011
(13,514,003)
7,738,018
21,457
7,759,475
-
-
-
-
-
-
-
-
486,208
-
-
-
-
-
69,822
69,822
(46,727)
(46,727)
486,208
-
486,208
$ 31,142
$ 5,102,868 $ 16,604,219
$ (13,514,003)
$ 8,224,226
$ 44,552
$ 8,268,778
See accompanying notes to consolidated financial statements.
4
TSR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended May 31, 2018 and 2017
Cash flows from operating activities:
2018
2017
Consolidated net income ..................................................................................................
Adjustments to reconcile consolidated net income to net cash provided by
$
556,030
$
313,967
operating activities:
Depreciation and amortization ......................................................................................
Unrealized gain from marketable securities, net ...........................................................
Deferred income taxes ..................................................................................................
Changes in operating assets and liabilities:
Accounts receivable-trade .........................................................................................
Other receivables .......................................................................................................
Prepaid expenses .......................................................................................................
Prepaid and recoverable income taxes .......................................................................
Accounts and other payables and accrued expenses and other current liabilities ......
Income taxes payable ................................................................................................
Advances from customers .........................................................................................
14,339
(15,272)
28,000
96,468
16,361
78,053
66,619
409,549
-
(119,482)
19,976
(3,616)
25,000
379,389
(7,602)
(77,328)
(94,833)
125,077
(14,810)
85,151
Net cash provided by operating activities ........................................................................
1,130,665
750,371
Cash flows from investing activities:
Proceeds from maturities of marketable securities ........................................................
Purchases of marketable securities ................................................................................
Purchases of equipment and leasehold improvements ..................................................
992,000
(493,000)
(21,415)
2,523,000
(1,987,000)
(12,628)
Net cash provided by investing activities .........................................................................
477,585
523,372
Cash flows from financing activities:
Cash dividend paid ........................................................................................................
Distributions to noncontrolling interest.........................................................................
(1,962,062)
(46,727)
-
(63,924)
Net cash used in financing activities ................................................................................
(2,008,789)
(63,924)
Net increase (decrease) in cash and cash equivalents ...........................................................
(400,539)
1,209,819
Cash and cash equivalents at beginning of year ...................................................................
5,723,976
4,514,157
Cash and cash equivalents at end of year .........................................................................
$
5,323,437
$
5,723,976
Supplemental disclosures of cash flow data:
Income taxes paid .............................................................................................................
$
286,000
$
348,000
Non-cash:
Dividends declared and payable .......................................................................................
$
-
$
1,962,000
See accompanying notes to consolidated financial statements.
5
TSR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2018 and 2017
(1) Summary of Significant Accounting Policies
(a) Business, Nature of Operations and Customer Concentrations
TSR, Inc. and Subsidiaries (the “Company”) are primarily engaged in providing contract computer programming services to
commercial customers located primarily in the Metropolitan New York area. The Company provides its customers with
technical computer personnel to supplement their in-house information technology (“IT”) capabilities. In addition, beginning
in fiscal 2017, the Company has provided and continues to provide administrative (non-IT) workers on a contract basis to two
of its existing customers. In fiscal 2018, three customers each accounted for more than 10% of the Company’s consolidated
revenue, constituting a combined 48.7%. The largest of these constituted 20.7% of consolidated revenue. In fiscal 2017, three
customers each accounted for more than 10% of the Company’s consolidated revenue, constituting a combined 44.9%. The
largest of these constituted 19.4% of consolidated revenue. The accounts receivable balances associated with the Company’s
largest customers were $3,692,000 for three customers at May 31, 2018 and $3,340,000 for three customers at May 31, 2017.
The Company operates in one business segment, contract staffing services.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of TSR, Inc. and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
(c) Revenue Recognition
The Company’s contract computer programming and administrative staffing services are generally provided under time and
materials arrangements with its customers. Revenue is recognized in accordance with Accounting Standards Codification
(“ASC”) Topic 605, “Revenue Recognition”, when persuasive evidence of an arrangement exists, the services have been
rendered, the price is fixed or determinable, and collectibility is reasonably assured. These conditions occur when a customer
agreement is effected and the consultant performs the authorized services. Revenue is recorded net of all discounts and
processing fees. Advances from customers represent amounts received from customers prior to the Company’s completion of
the related services and credit balances from overpayments.
Reimbursements received by the Company for out-of-pocket expenses are characterized as revenue.
(d) Cash and Cash Equivalents
The Company considers short-term highly liquid investments with maturities of three months or less at the time of purchase
to be cash equivalents. Cash and cash equivalents were comprised of the following as of May 31, 2018 and 2017:
Cash in banks ......................
Money market funds ...........
Certificates of deposit .........
2018
4,723,700
599,737
-
5,323,437
$
$
2017
4,634,245
840,731
249,000
5,723,976
$
$
(e) Certificates of Deposit and Marketable Securities
The Company has characterized its investments in marketable securities, based on the priority of the inputs used to value the
investments, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in
active markets for identical assets or liabilities (Level 1), and lowest priority to unobservable inputs (Level 3). If the inputs
used to measure the investments fall within different levels of the hierarchy, the categorization is based on the lowest level
input that is significant to the fair value measurement of the instrument.
Investments recorded in the accompanying consolidated balance sheets are categorized based on the inputs to valuation
techniques as follows:
Level 1 - These are investments where values are based on unadjusted quoted prices for identical assets in an active market
the Company has the ability to access.
6
TSR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2018 and 2017
Level 2 - These are investments where values are based on quoted market prices that are not active or model derived
valuations in which all significant inputs are observable in active markets.
Level 3 - These are investments where values are derived from techniques in which one or more significant inputs are
unobservable.
The following are the major categories of assets measured at fair value on a recurring basis as of May 31, 2018 and 2017
using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and
significant unobservable inputs (Level 3):
May 31, 2018
Level 1
Level 2
Level 3
Total
Certificates of deposit....................................................
-
44,160
Equity securities ............................................................
44,160
$
$
$
$
493,000
-
493,000
$
$
-
-
-
$
$
493,000
44,160
537,160
May 31, 2017
Level 1
Level 2
Level 3
Total
Certificates of deposit......................................................
-
Equity securities ..............................................................
28,888
28,888
$
$
$
$
992,000
-
992,000
$
$
-
-
-
$
$
992,000
28,888
1,020,888
Based upon the Company’s intent and ability to hold its certificates of deposit to maturity (which maturities range up to 12
months at purchase), such securities have been classified as held-to-maturity and are carried at amortized cost, which
approximates market value. The Company’s equity securities are classified as trading securities, which are carried at fair
value, as determined by quoted market prices, which is a Level 1 input, as established by the fair value hierarchy. The related
unrealized gains and losses are included in earnings. The Company’s certificates of deposit and marketable securities at May
31, 2018 and 2017 are summarized as follows:
May 31, 2018
Current
Amortized
Cost
Gross
Unrealized
Holding
Gains
Gross
Unrealized
Holding
Losses
Certificates of deposit ....................................................
493,000
Equity securities ............................................................
16,866
509,866
$
$
May 31, 2017
Current
Certificates of deposit ......................................................
992,000
Equity securities ..............................................................
16,866
1,008,866
$
$
$
$
$
$
-
27,294
27,294
-
12,022
12,022
$
$
$
$
-
-
-
-
-
-
Recorded
Value
$
$
$
$
493,000
44,160
537,160
992,000
28,888
1,020,888
The Company’s investments in marketable securities consist primarily of investments in certificates of deposit and equity
securities. Market values were determined for each individual security in the investment portfolio. When evaluating the
investments for other-than-temporary impairment, the Company reviews factors such as length of time and extent to which
fair value has been below cost basis, the financial condition of the issuer, and the Company’s ability and intent to hold the
investment for a period of time, which may be sufficient for anticipated recovery in market values.
(f) Accounts Receivable and Credit Policies:
The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management’s best estimate of
the amounts that will not be collected. In addition to reviewing delinquent accounts receivable, management considers many
factors in estimating its general allowance, including historical data, experience, customer types, creditworthiness and
economic trends. From time-to-time, management may adjust its assumptions for anticipated changes in any of those or other
factors expected to affect collectibility.
7
TSR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2018 and 2017
(g) Depreciation and Amortization
Depreciation and amortization of equipment and leasehold improvements has been computed using the straight-line method
over the following useful lives:
Equipment ..............................................
Furniture and fixtures ............................
Automobiles ...........................................
Leasehold improvements ....................... Lesser of lease term or useful life
3 years
3 years
3 years
(h) Net Income Per Common Share
Basic net income per common share is computed by dividing income available to common stockholders of TSR, Inc. by the
weighted average number of common shares outstanding. The Company had no stock options or other common stock
equivalents outstanding during the fiscal years ended May 31, 2018 or 2017.
(i) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences
between the financial reporting and tax bases of the Company’s assets and liabilities at enacted rates expected to be in effect
when such amounts are realized or settled. The effect of enacted tax law or rate changes is reflected in income in the period
of enactment.
(j) Fair Value of Financial Instruments
ASC Topic 825, “Financial Instruments,” requires disclosure of the fair value of certain financial instruments. For cash and
cash equivalents, accounts receivable, accounts and other payables, accrued liabilities and advances from customers, the
amounts presented in the consolidated financial statements approximate fair value because of the short-term maturities of
these instruments.
(k) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue
and expenses during the reporting period. Such estimates include, but are not limited to, provisions for doubtful accounts
receivable and assessments of the recoverability of the Company’s deferred tax assets. Actual results could differ from those
estimates.
(l) Long-Lived Assets
The Company reviews its long-lived assets for possible impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows undiscounted and without
interest, is less than the carrying amount of the asset, an impairment loss is recognized for the amount by which the carrying
amount of the asset exceeds its fair value.
(m) Impact of New Accounting Standards
In May 2014, the FASB issued an update to ASC 606, “Revenue from Contracts with Customers.” This update to ASC 606
provides a five-step process to determine when and how revenue is recognized. The core principle of the guidance is that a
Company should recognize revenue upon transfer of promised goods or services to customers in an amount that reflects the
expected consideration to be received in exchange for those goods or services. This update to ASC 606 will also result in
enhanced disclosures about revenue, providing guidance for
that were not previously addressed
comprehensively, and improving guidance for multiple-element arrangements. This update to ASC 606 is effective for the
Company in the fiscal year ending May 31, 2019. The Company expects the impact of the update, if any, to be immaterial on
its consolidated financial statements.
transactions
In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred
Taxes,” which applies to the classification of deferred tax assets and liabilities. The update eliminates the requirement to
classify deferred tax assets and liabilities as noncurrent or current within a classified statement of financial position. This
8
TSR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2018 and 2017
ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods and
should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The
Company adopted this guidance in the first quarter of fiscal 2018. The Company’s deferred tax assets and liabilities have
been classified as noncurrent.
In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall: Recognition and Measurement of
Financial Assets and Financial Liabilities.” The amendments in this update require all equity investments to be measured at
fair value with changes in the fair value recognized through net income. The amendments in this update also require an entity
to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting
from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in
accordance with the fair value option for financial instruments. In addition, the amendments in this update eliminate the
requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public
business entities and the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that
is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business
entities. This update is effective for the Company in the fiscal year ending May 31, 2019. The Company expects the impact
of the update, if any, to be immaterial on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This update includes a lease accounting model that
recognizes two types of leases – finance leases and operating leases. The standard requires that a lessee recognize on the
balance sheet assets and liabilities relating to leases with terms of more than 12 months. The recognition, measurement, and
presentation of expenses and cash flows arising from a lease by a lessee will depend on its classification as a finance or
operating lease. This update is effective for the Company in the fiscal year ending May 31, 2020. The Company is currently
evaluating the impact, if any, of this update on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Consideration (Topic 606).” This update contains
guidance on principal versus agent assessments when a third party is involved in providing goods or services to a customer. It
specifies that an entity is a principal, and thus records revenue on a gross basis, if it controls a good or service before
transferring the good or service to the customer. An entity is an agent, and thus records revenue on a net basis, if it arranges
for a good or service to be provided by another entity. This update is effective for the Company in the fiscal year ending May
31, 2019. The Company expects the impact of the update, if any, to be immaterial on its consolidated financial statements.
In May 2016, the FASB issued ASU 2016-12, “Narrow-Scope Improvements and Practical Expedients (Topic 606).” This
update provides certain clarifications to reduce potential diversity and to simplify the standard. The amendments in ASU
2016-12 clarify the following key areas: assessing collectibility; presenting sales taxes and other similar taxes collected from
customers; noncash consideration; contract modifications at transition; completed contracts at transition; and disclosing the
accounting change in the period of adoption. This update is effective for the Company in the fiscal year ending May 31,
2019. The Company expects the impact of the update, if any, to be immaterial on its consolidated financial statements.
(n) Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash
equivalents, certificates of deposit, marketable securities and accounts receivable. The Company places its cash equivalents
with high-credit quality financial institutions and brokerage houses. The Company has substantially all of its cash in four
bank accounts. At times, such amounts may exceed federally insured limits. The Company holds its marketable securities in
brokerage accounts. The Company has not experienced losses in any such accounts. The Company’s accounts receivable
represent 43 accounts with open balances as of May 31, 2018. As a percentage of revenue, the three largest customers among
these 43 accounts consisted of 51.1% of the net accounts receivable balance at May 31, 2018.
9
TSR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2018 and 2017
(2) Income Taxes
A reconciliation of the provision for income taxes computed at the federal statutory rates of 28.6% (blended) for fiscal 2018 and
34.0% for fiscal 2017 to the reported amounts is as follows:
2018
2017
Amount
%
Amount
%
Amounts at statutory federal tax rate ..................
$ 268,000
Noncontrolling interest .......................................
(20,000)
28.6%
(2.1)
$ 196,000
34.0%
(16,000)
(2.8)
State and local taxes, net of federal
income tax effect ................................
Effect of rate change on deferred asset ...............
83,000
32,000
Non-deductible expenses and other ....................
18,000
8.9
3.4
1.9
56,000
-
27,000
9.7
-
4.7
$ 381,000
40.7%
$ 263,000
45.6%
The components of the provision for income taxes are as follows:
2018:
Current .............................................
$
236,000
$
117,000
$
353,000
Deferred ............................................
28,000
-
28,000
$
264,000
$
117,000
$
381,000
Federal
State
Total
2017:
Current ...............................................
$
170,000
$
Deferred .............................................
8,000
$
178,000
$
68,000
17,000
85,000
$
238,000
25,000
$
263,000
The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets at May 31, 2018
and 2017 are as follows:
Allowance for doubtful accounts receivable ...................
Accrued compensation and other accrued expenses .......
Equipment and leasehold improvement
depreciation and amortization .....................................
Acquired client relationships ..........................................
Unrealized gains .............................................................
Total deferred income tax assets ..................
2018
2017
$
53,000
37,000
$
75,000
38,000
(3,000)
(1,000)
(8,000)
78,000
(4,000)
2,000
(5,000)
$ 106,000
$
The Company believes that it is more likely than not that it will realize the benefits of its deferred tax assets based primarily on
the Company’s history of and projections for taxable income in the future.
10
TSR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2018 and 2017
The Company recognizes interest and penalties associated with tax matters as selling, general and administrative expenses and
includes accrued interest and penalties with accrued and other liabilities in the consolidated balance sheets.
In the third quarter of fiscal 2018, the Company revised its estimated annual effective income tax rate to reflect a change in the
federal statutory corporate income tax rate from 34% to 21%, resulting from legislation that was enacted on December 22, 2017.
The rate change is administratively effective at the beginning of our fiscal year 2018, using a blended rate for the annual period.
As a result, the blended statutory rate for the fiscal year ending May 31, 2018 is 28.6%.
In addition, the Company was required in the current year to recognize the change related to adjusting the deferred tax asset to
reflect the new corporate tax rate. As a result, income tax expense reported for the year ended May 31, 2018 was adjusted to
reflect the effects of the change in the tax law and resulting in a decrease in income tax expense of $21,000. This amount
comprises a reduction of $53,000 in income tax expense for the year ended May 31, 2018 related to the lower corporate rate and a
charge of $32,000 from the application of the newly enacted reduced rates to the existing net deferred tax asset balances.
In the third quarter of fiscal 2018, the Company discovered it had not filed required information returns related to a foreign bank
account opened by a subsidiary in fiscal 2016 with contributions totaling approximately $25,000. The Company has accrued an
expense of $30,000 with a charge to selling, general and administrative expenses for potential penalties that may be assessed. The
Company will monitor this reserve periodically to determine if it is more-likely–than–not that penalties will be assessed. Changes
to the reserve may occur due to changes in judgment, abatement, negotiation or expiration of the statute of limitations on the
returns.
A reconciliation of the beginning and ending amount of unrecognized tax benefit as follows:
Amount
-
Balance at June 1, 2017 ...................................................... $
-
Additions based on tax positions related to current year ....
Additions for tax positions of prior years ........................... 30,000
-
Reductions for tax positions of prior years.........................
Settlements .........................................................................
-
Balance at May 31, 2018 .................................................... $ 30,000
The Company’s federal and state income tax returns prior to fiscal year 2015 are closed.
(3) Commitments and Contingencies
A summary of noncancellable long-term operating lease commitments for facilities as of May 31, 2018 follows:
Fiscal Year
Amount
2019 ..............
2020 ..............
2021 ..............
2022 ..............
2023 ..............
thereafter .......
Total
$
$
342,000
241,000
209,000
161,000
41,000
-
994,000
Total rent expenses under all lease agreements amounted to $369,000 and $372,000 in fiscal 2018 and 2017, respectively.
The Company has entered into employment agreements with two of its executive officers expiring in 2020 and 2022, respectively.
The total remaining payments under these agreements is $1,900,000 at May 31, 2018.
From time-to-time, the Company is party to various lawsuits, some involving substantial amounts. Management is not aware of
any lawsuits that would have a material adverse impact on the consolidated financial position of the Company.
11
TSR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2018 and 2017
(4) Stockholder’s Equity
On May 25, 2017, the Company declared a special cash dividend of $1.00 per common share payable on July 14, 2017 to
shareholders of record on June 16, 2017. This dividend totaled $1,962,062. The Company has no current plans to implement a
quarterly dividend program or pay any other special cash dividend.
(5) Retirement Arrangement
Joseph F. Hughes, Chairman of the Board, Chief Executive Officer, President and Treasurer, retired on July 5, 2017. The Board
of Directors of the Company elected Christopher Hughes, formerly Senior Vice President of TSR, Inc., to succeed Joseph F.
Hughes as Chairman of the Board, Chief Executive Officer, President and Treasurer. Upon his retirement, the Board awarded
Joseph F. Hughes a one-time founder’s bonus of $100,000. The Board also approved the continued payment by the Company of
the remaining payments of the lease for the automobile used by Joseph F. Hughes until the lease expired in May 2018. Further,
the Board approved the continued payment by the Company for health insurance coverage for Joseph F. Hughes and his spouse
under the Company’s executive medical plan until May 31, 2018 and payments in lieu of the insurance coverage for two years
thereafter. Joseph F. Hughes and his spouse have remained on the executive medical plan subsequent to May 31, 2018 at the
Company’s expense in lieu of the direct payments to them for this coverage, saving the Company a small amount monthly. The
total amount of these retirement benefits were accrued in the quarter ended August 31, 2017, resulting in charges amounting to
$180,000, which were included in selling, general and administrative expenses for fiscal 2018.
(6) Subsequent Event
Through an amendment to filings with the United States Securities and Exchange Commission on Schedule 13D by Joseph F.
Hughes and Winifred M. Hughes, the Company has been informed that on July 20, 2018, Zeff Capital, LP, QAR Industries, Inc.
and Fintech Consulting LLC entered an agreement to purchase 819,491 shares of the Company’s Common Stock (the “Shares”)
which were held by Joseph F. Hughes and Winifred M. Hughes. Joseph F. Hughes is the former Chairman and Chief Executive
Officer of the Company. The Shares were sold in a privately negotiated transaction for a purchase price of $6.25 per share, or
$5,121,819 in the aggregate, and the Shares collectively represent 41.8% of the Company’s issued and outstanding Common
Stock. It had also been disclosed that Zeff Capital, LP owned 77,615 shares of the Company’s Common Stock, which
represented approximately 4.0% of the Company’s issued and outstanding Common Stock. Each of the purchasers of the Shares
has significant voting power on all matters subject to a vote of the Company’s stockholders.
Prior to the sale of the Shares by Joseph F. Hughes and Winifred M. Hughes to Zeff Capital, LP, QAR Industries, Inc. and Fintech
Consulting LLC described above, the Company had received a letter on June 25, 2018 from James Hughes on behalf of Joseph F.
Hughes and Winifred M. Hughes, in which Joseph F. Hughes and Winifred M. Hughes requested that the Board pursue a sale of
the Company. On July 9, 2018, by resolution, the Board established a Special Committee of the Board to review this request, and
to consider and evaluate other strategic alternatives available to the Company in the context of that review, including (a) potential
opportunities for a sale of the Company by way of merger, consolidation, sale of equity securities (including the Company’s
outstanding Common Stock), sale of all or substantially all of the Company’s assets, or other strategic transactions;
(b) recapitalization of the Company; (c) the sale or exchange of the shares of Common Stock held (at that time) by Mr. Hughes
and Mrs. Hughes in a transaction involving the Company; or (d) remaining independent and continuing to execute the Company’s
business plans on a standalone basis, and to review, consider and evaluate, for purposes of advising the full Board, whether any of
the potential strategic alternatives is in the best interests of the Company’s stockholders. The Special Committee has remained in
place following the acquisition of the Shares by Zeff Capital, LP, QAR Industries, Inc. and Fintech Consulting LLC from Joseph
F. Hughes and Winifred M. Hughes described above.
12
TSR INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and notes
thereto presented elsewhere in this report.
Results of Operations
The following table sets forth for the periods indicated certain financial information derived from the Company’s consolidated
statements of income. There can be no assurance that historical trends in operating results will continue in the future:
Year Ended May 31,
(Dollar Amounts in Thousands)
2018
2017
Amount
% of
Revenue
Amount
% of
Revenue
Revenue, Net ...............................................................
$ 64,990
100.0%
$ 62,573
100.0%
Cost of Sales ................................................................
Gross Profit ..................................................................
Selling, General and Administrative Expenses ............
Income from Operations ..............................................
Other Income, Net .......................................................
Income Before Income Taxes ......................................
Provision for Income Taxes .........................................
Consolidated Net Income ...........................................
Net Income Attributable to Noncontrolling Interest ....
Net Income Attributable to TSR, Inc. ..........................
$
revenue
Revenue
Revenue consists primarily of
from computer
programming consulting services. Revenue for the fiscal year
ended May 31, 2018 increased $2,417,000 or 3.9% from fiscal
2017. The increase in revenue resulted primarily from an
increase in billing rates and an increase in the average number
of consultants on billing with customers. The overall average
number of consultants on billing with customers increased
slightly from 379 for the fiscal ended May 31, 2017 to 383 for
the fiscal year ended May 31, 2018, while the average number
of computer programming consultants also increased from 328
for the fiscal year ended May 31, 2017 to 332 in the fiscal year
ended May 31, 2018. The 383 consultants on billing for the
current period include 51 administrative (non-IT) workers that
the Company placed with two large customers at the customers’
requests at billing rates 69.3% lower than those charged for
computer programming consultants. The Company also placed
an average of 51 administrative (non-IT) workers in the prior
fiscal year at billing rates 67.6% lower than those charged for
computer programming consultants. The Company charges
lower daily billing rates for administrative (non-IT) workers, but
also pays lower rates to the administrative (non-IT) workers.
Cost of Sales
Cost of sales for the fiscal year ended May 31, 2018 increased
$2,282,000 or 4.4% to $54,609,000 from $52,327,000 in the
13
54,609
10,381
9,472
84.0
16.0
14.6
52,327
10,246
9,684
83.6
16.4
15.5
909
28
937
381
556
70
486
1.4
0.0
1.4
0.6
0.8
0.1
0.7%
$
562
15
577
263
314
46
268
0.9
0.0
0.9
0.4
0.5
0.1
0.4%
prior fiscal year. The increase in cost of sales resulted primarily
from an increase in consultants pay rates and benefits. Cost of
sales as a percentage of revenue increased from 83.6% in the
fiscal year ended May 31, 2017 to 84.0% in the fiscal year
ended May 31, 2018. The increase in cost of sales as a
percentage of revenue was primarily attributable to lower gross
margins on the placement of administrative (non-IT) workers
due to a shift in the business mix between the two non-IT
customers towards the customer with lower markup limits.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of
expenses relating to account executives, technical recruiters,
facilities costs, management and corporate overhead. These
expenses decreased $212,000 or 2.2% from $9,684,000 in the
fiscal year ended May 31, 2017 to $9,472,000 in the fiscal year
ended May 31, 2018. The decrease in these expenses resulted
primarily from the retirement of the former Chairman offset by
an increase in amounts paid for offshore recruiting services to
support the hiring of both contract IT and administrative (non-
IT) workers. Selling, general and administrative expenses, as a
percentage of revenue, decreased from 15.5% in the fiscal year
ended May 31, 2017 to 14.6% in the fiscal year ended May 31,
2018 as a result of the reduction in these expenses.
TSR INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Other Income
Other income for the fiscal year ended May 31, 2018 resulted
primarily from interest and dividend income of $12,000 and a
mark
the
to market gain of approximately $15,000 on
Company’s marketable equity securities. Other income for the
fiscal year ended May 31, 2017 resulted primarily from interest
and dividend income of $11,000 and a mark to market gain of
approximately $4,000 on the Company’s marketable equity
securities.
by an increase in prepaid expenses of $77,000 and an increase in
prepaid and recoverable income taxes of $95,000.
Net cash provided by investing activities amounted to $478,000
for fiscal 2018, compared to $523,000 in net cash provided by
investing activities in fiscal 2017. The cash provided by
investing activities in both 2018 and 2017 primarily resulted
from maturing certificates of deposit, a portion of which were
not rolled over.
Income Taxes
The effective income tax rates were 40.7% for the fiscal year
ended May 31, 2018 and 45.6% for the fiscal year ended May
31, 2017. The rate for fiscal 2018 is impacted by the effects of
the new lower federal corporate tax rates effective January 1,
2018. The current tax provision for fiscal 2018 includes a
blended federal statutory rate of 28.6%. However, this lower
rate is offset, to an extent, by the devaluation of the Company’s
deferred tax asset. The benefit of the deferred tax asset will be
limited to 21% for federal income tax purposes in fiscal years
going forward.
Net Income Attributable to TSR, Inc.
Net income attributable to TSR, Inc. increased $218,000 from
$268,000 in the fiscal year ended May 31, 2017 to net income of
$486,000 in the fiscal year ended May 31, 2018. The increase in
net income was primarily attributable to the decrease in selling,
general and administrative expenses as well as the increase in
gross profit generated by the revenue increase.
Liquidity, Capital Resources and Changes in Financial
Condition
The Company expects that its available cash, certificates of
deposit and marketable securities will be sufficient to provide
the Company with adequate resources to meet its liquidity
requirements for the 12 month period following the issuance of
these financial statements. The Company does not maintain a
line of credit facility with any financial institution.
At May 31, 2018, the Company had working capital (total
current assets in excess of total current liabilities) of $8,113,000
including cash and cash equivalents and certificates of deposit
and marketable securities of $5,861,000 as compared to working
capital of $7,689,000 including cash and cash equivalents and
certificates of deposit and marketable securities of $6,745,000 at
May 31, 2017.
Net cash flow of $1,131,000 was provided by operations during
fiscal 2018 as compared to $750,000 of net cash flow provided
by operations in fiscal 2017. The cash provided by operations
for fiscal 2018 primarily resulted from consolidated net income
of $556,000 and an increase in accounts and other payables and
accrued and other liabilities of $410,000. The cash provided by
operations for fiscal 2017 primarily resulted from consolidated
net income of $314,000, a decrease in accounts receivable of
$379,000 and an increase in accounts and other payables and
accrued and other liabilities of $125,000, offset, to some extent,
Net cash used in financing activities of $2,009,000 during the
fiscal years ended May 31, 2018 resulted primarily from the
payment of a cash dividend of $1,962,000 and a distribution to
the holder of the noncontrolling interest in the Company’s
subsidiary, Logixtech Solutions, LLC of $47,000. The
distribution to the noncontrolling interest in fiscal 2017 was
$64,000.
The Company’s capital resource commitments at May 31, 2018
consisted of lease obligations on its branch and corporate
facilities. The Company
lease
intends
commitments from cash flow provided by operations, available
cash and short-term marketable securities.
to finance
these
The Company’s cash and marketable securities were sufficient
to enable it to meet its liquidity requirements during fiscal 2018.
Impact of New Accounting Standards
In May 2014, the FASB issued an update to ASC 606, “Revenue
from Contracts with Customers.” This update to ASC 606
provides a five-step process to determine when and how revenue
is recognized. The core principle of the guidance is that a
company should recognize revenue upon transfer of promised
goods or services to customers in an amount that reflects the
expected consideration to be received in exchange for those
goods or services. This update to ASC 606 will also result in
enhanced disclosures about revenue, providing guidance for
addressed
transactions
comprehensively, and improving guidance for multiple-element
arrangements. This update to ASC 606 is effective for the
Company in the fiscal year ending May 31, 2019. The Company
expects the impact of this update, if any, to be immaterial on its
consolidated financial statements.
that were
previously
not
In November 2015, the FASB issued ASU 2015-17, “Income
Taxes (Topic 740): Balance Sheet Classification of Deferred
Taxes,” which applies to the classification of deferred tax assets
and liabilities. The update eliminates the requirement to classify
deferred tax assets and liabilities as noncurrent or current within
a classified statement of financial position. This ASU is
effective for annual periods beginning after December 15, 2016,
and interim periods within those annual periods and should be
applied prospectively with early adoption permitted at the
beginning of an interim or annual reporting period. The
Company adopted this guidance in the first quarter of fiscal
2018. The Company’s deferred tax assets and liabilities have
been classified as noncurrent.
14
TSR INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
In January 2016, the FASB issued ASU 2016-01, “Financial
Instruments – Overall: Recognition and Measurement of
Financial Assets and Financial Liabilities.” The amendments in
this update require all equity investments to be measured at fair
value with changes in the fair value recognized through net
income. The amendments in this update also require an entity to
present separately in other comprehensive income the portion of
the total change in the fair value of a liability resulting from a
change in the instrument-specific credit risk when the entity has
elected to measure the liability at fair value in accordance with
the fair value option for financial instruments. In addition, the
amendments in this update eliminate the requirement to disclose
the fair value of financial instruments measured at amortized
cost for entities that are not public business entities and the
requirement
significant
assumptions used to estimate the fair value that is required to be
disclosed for financial instruments measured at amortized cost
on the balance sheet for public business entities. This update is
effective for the Company in the fiscal year ending May 31,
2019. The Company expects the impact of this update, if any, to
be immaterial on its consolidated financial statements.
the method(s) and
to disclose
In February 2016, the FASB issued ASU 2016-02, “Leases
(Topic 842).” This update includes a lease accounting model
that recognizes two types of leases – finance leases and
operating leases. The standard requires that a lessee recognize
on the balance sheet assets and liabilities relating to leases with
terms of more than 12 months. The recognition, measurement,
and presentation of expenses and cash flows arising from a lease
by a lessee will depend on its classification as a finance or
operating lease. This update is effective for the Company in the
fiscal year ending May 31, 2020. The Company is currently
evaluating the impact, if any, of this update on its consolidated
financial statements.
In March 2016, the FASB issued ASU 2016-08, “Principal
versus Agent Consideration (Topic 606).” This update contains
guidance on principal versus agent assessments when a third
party is involved in providing goods or services to a customer. It
specifies that an entity is a principal, and thus records revenue
on a gross basis, if it controls a good or service before
transferring the good or service to the customer. An entity is an
agent, and thus records revenue on a net basis, if it arranges for
a good or service to be provided by another entity. This update
is effective for the Company in the fiscal year ending May 31,
2019. The Company expects the impact of this update, if any, to
be immaterial on its consolidated financial statements.
In May 2016, the FASB issued ASU 2016-12, “Narrow-Scope
Improvements and Practical Expedients (Topic 606).” This
to reduce potential
update provides certain clarifications
diversity and to simplify the standard. The amendments in ASU
2016-12 clarify the following key areas: assessing collectibility;
presenting sales taxes and other similar taxes collected from
customers; noncash consideration; contract modifications at
transition; completed contracts at transition; and disclosing the
accounting change in the period of adoption. This update is
effective for the Company in the fiscal year ending May 31,
2019. The Company expects the impact of this update, if any, to
be immaterial on its consolidated financial statements.
Critical Accounting Policies
The SEC defines “critical accounting policies” as those that
require
the application of management’s most difficult,
subjective or complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently
uncertain and may change in subsequent periods.
The Company’s significant accounting policies are described in
Note 1 to its consolidated financial statements, contained
elsewhere in this report. The Company believes that the
following accounting policies require
the application of
management’s most difficult, subjective or complex judgments:
Estimating Allowances for Doubtful Accounts Receivable
experience,
We perform ongoing credit evaluations of our customers and
adjust credit limits based upon payment history and the
customer’s current creditworthiness, as determined by our
review of their current credit information. We continuously
monitor collections and payments from our customers and
maintain a provision for estimated credit losses based on our
creditworthiness,
customer
historical
economic trends and any specific customer collection issues that
we have identified. While such credit losses have historically
been within our expectations and the provisions established, we
cannot guarantee that we will continue to experience the same
credit loss rates that we have in the past. A significant change in
the liquidity or financial position of any of our significant
customers, or in their willingness to pay, could have a material
adverse effect on the collectibility of our accounts receivable
and our future operating results.
types,
Valuation of Marketable Securities
The Company classifies its marketable securities at acquisition
as either (i) held-to-maturity, (ii) trading or (iii) available-for-
sale. Based upon the Company’s intent and ability to hold its
certificates of deposit to maturity (which maturities range up to
12 months), such securities have been classified as held-to-
maturity and are carried at amortized cost, which approximates
fair value. The Company’s equity securities are classified as
trading securities, which are carried at fair value, as determined
by quoted market price, which is Level 1 input, as established
by the fair value hierarchy. The related unrealized gains and
losses are included in earnings.
Valuation of Deferred Tax Assets
We regularly evaluate our ability to recover the reported amount
of our deferred income tax assets considering several factors,
including our estimate of the likelihood of the Company
generating sufficient taxable income in future years during the
period over which temporary differences reverse. Presently, the
Company believes that it is more likely than not that it will
realize the benefits of its deferred tax assets based primarily on
15
TSR INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
the Company’s history of and projections for taxable income in
the future. In the event that actual results differ from our
estimates or we adjust these estimates in future periods, we may
need to establish a valuation allowance against a portion or all
of our deferred tax assets, which could materially impact our
financial position or results of operations.
Forward-Looking Statements; Factors that Affect Future
Results
Certain statements contained herein,
including statements
concerning the Company’s plans, future prospects and future
cash flow requirements are forward-looking statements, as
defined in the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those set forth in the
forward-looking statements due to known and unknown risks
and uncertainties, including but not limited to, the following:
the success of the Company’s plan for internal growth, the
impact of adverse economic conditions on client spending
which has a negative impact on the Company’s business; risks
relating to the competitive nature of the markets for contract
computer programming services; the extent to which market
conditions for the Company’s contract computer programming
services will continue to adversely affect the Company’s
business; the concentration of the Company’s business with
certain customers; uncertainty as to the Company’s ability to
maintain its relations with existing customers and expand its
business; the impact of changes in the industry, such as the use
of vendor management companies in connection with the
consultant procurement process; the increase in customers
moving IT operations offshore; the Company’s ability to adapt
to changing market conditions; and other risks and uncertainties
described in the Company’s filings under the Securities
Exchange Act of 1934. The Company is under no obligation to
publicly update or revise forward-looking statements.
TSR INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of TSR, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of TSR, Inc. and Subsidiaries (the Company) as of May 31, 2018 and
2017, and the related consolidated statements of income, equity, and cash flows for each of the years then ended, and the related notes
(collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company as of May 31, 2018 and 2017, and the results of its operations and its cash flows for each of the
years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part
of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no
such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
CohnReznick LLP
We have served as the Company’s auditor since 2008.
Jericho, New York
August 21, 2018
16
TSR INC. AND SUBSIDIARIES
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company’s shares of Common Stock trade on the NASDAQ Capital Market under the symbol TSRI. The following are the high
and low sales prices for each quarter during the fiscal years ended May 31, 2018 and 2017:
June 1, 2017 – May 31, 2018
1st
Quarter
High Sales Price ............................ $ 11.10
4.05
Low Sales Price .............................
3rd
2nd
Quarter
Quarter
$ 7.45 $ 8.41
4.75
3.80
4th
Quarter
$ 6.64
4.95
June 1, 2016 – May 31, 2017
1st
Quarter
High Sales Price ............................ $ 6.80
3.42
Low Sales Price .............................
3rd
2nd
Quarter
Quarter
$ 9.50 $ 6.70
4.80
4.70
4th
Quarter
$ 8.00
4.34
There were 54 holders of record of the Company’s Common Stock as of June 30, 2018. Additionally, the Company estimates that
there were approximately 785 beneficial holders as of that date. On May 25, 2017, the Company declared a special cash dividend of
$1.00 per common share payable on July 14, 2017 to stockholders of record on June 16, 2017. The Company has no current plans to
implement a quarterly dividend program or pay any other special cash dividend.
There are no securities authorized for issuance under any equity compensation plans.
TRANSFER AGENT
Continental Stock Transfer
1 State Street Plaza
30th Floor
New York, NY 10004
212-509-4000
AUDITORS
CohnReznick LLP
100 Jericho Quadrangle
Suite 223
Jericho, NY 11753
COUNSEL
Giordano, Halleran & Ciesla, P.C.
125 Half Mile Road
Suite 300
Red Bank, NJ 07701
CORPORATE
HEADQUARTERS
400 Oser Avenue
Suite 150
Hauppauge, NY 11788
631-231-0333
SUBSIDIARY
TSR Consulting
Services, Inc.
New York City
420 Lexington Avenue
Suite #835
New York, NY 10170
212-986-4600
E-mail: tsrny@tsrconsulting.com
New Jersey
379 Thornall Street
6th Floor
Edison, NJ 08837
732-321-9000
E-mail: tsrnj@tsrconsulting.com
Long Island
400 Oser Avenue
Suite 150
Hauppauge, NY 11788
631-231-0333
E-mail: tsrli@tsrconsulting.com
DIRECTORS
Christopher Hughes
Chairman of the Board,
Chief Executive Officer,
President and Treasurer
Ira D. Cohen
Director
Operating Partner
Updata Partners
William J. Kelly
Director
Chief Information Officer
Robert Allen Duralee Group
Brian J. Mangan
Director
Retired Senior Vice President
Finance
ABC Television Network
Joseph Pennacchio
Director
Retired Chief Executive Officer
West Point Home, Inc.
Raymond A. Roel
Director
Principal
Ray Roel Consulting LLC
Eric M. Stein
Director
Regional Director of Sales
Fortinet
OFFICERS
Christopher Hughes
Chairman of the Board,
Chief Executive Officer,
President and Treasurer
John G. Sharkey
Vice President, Finance
and Secretary
Copies of the Company’s Form 10-K are available, without charge, to stockholders upon written request to:
John G. Sharkey, Vice President, Finance, TSR, Inc., 400 Oser Avenue, Suite 150, Hauppauge, NY 11788