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 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,
2016
|
|
|
May
31,
2015
|
|
|
May
31,
2014
|
|
|
May
31,
2013
|
|
|
May
31,
2012
|
|
Revenue,
Net
|
|
$
|
60,998
|
|
|
$
|
57,403
|
|
|
$
|
49,530
|
|
|
$
|
44,914
|
|
|
$
|
45,215
|
|
Income
(Loss) From Operations
|
|
|
839
|
|
|
|
432
|
|
|
|
25
|
|
|
|
(716
|
)
|
|
|
(2
|
)
|
Net
Income (Loss) Attributable to TSR, Inc.
|
|
|
399
|
|
|
|
193
|
|
|
|
(86
|
)
|
|
|
(520
|
)
|
|
|
(62
|
)
|
Basic
Net Income (Loss) Per TSR, Inc. Common Share
|
|
|
0.20
|
|
|
|
0.10
|
|
|
|
(0.04
|
)
|
|
|
(0.26
|
)
|
|
|
(0.03
|
)
|
Working
Capital
|
|
|
9,391
|
|
|
|
8,986
|
|
|
|
8,706
|
|
|
|
8,717
|
|
|
|
12,402
|
|
Total
Assets
|
|
|
14,090
|
|
|
|
14,051
|
|
|
|
13,563
|
|
|
|
13,619
|
|
|
|
17,165
|
|
Total
TSR, Inc. Equity
|
|
|
9,432
|
|
|
|
9,033
|
|
|
|
8,840
|
|
|
|
8,926
|
|
|
|
12,498
|
|
Book
Value Per TSR, Inc. Common Share (Total TSR Equity Divided by Common Shares Outstanding)
|
|
|
4.81
|
|
|
|
4.60
|
|
|
|
4.51
|
|
|
|
4.55
|
|
|
|
6.30
|
|
Cash
Dividends Declared Per TSR, Inc. Common Share
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
1.50
|
|
|
$
|
0.00
|
|
LETTER FROM
THE CHAIRMAN
Dear
Stockholders:
The
past year marked a challenging stretch for businesses and investors alike. Against this demanding backdrop, I am pleased to report
that TSR continued to yield profitable results from our multi-year strategic investment initiative in our people and processes.
For the year ended May 31
st
, 2016, revenue increased 6.3% from last year to $61.0 million. Net income attributable
to TSR increased from $193,000 in the prior year to net income of $399,000 in the current year. Additionally, net income per share
increased from $0.10 to $0.20 per share.
We
attribute the increase in revenue largely to two encouraging dynamics. First, the capabilities of our salesforce and technical
recruiters – after several years as new hires – have started to mature and blossom. Our focus on organic growth has
been another critical driver, with our marketing efforts fixed primarily on increasing business from our existing clients, many
of whom we have served for decades.
While
we have experienced increases in revenue and profitability, there continue to be new challenges. Rapidly changing computer technologies
and evolving standards are the new normal of the IT business world. This means finding and hiring the right IT talent for our
clients is requiring ever greater effort and investment. Speed to market matters: “It’s the fast fish which eats the
slow fish.”
Another
on-going challenge we face (along with the rest of the business world) is that the cost of our health insurance and other employee
benefits continues to increase, primarily due to government mandates.
In
sum, TSR’s strong culture is built on a foundation of trust, service and hard work. The days are long, often stretching
into nights and weekends. Yet we remain relentless in our dedication to listening closely to our customers and their needs, and
working smartly on their behalf. We hope and believe that our dedication will also best serve you, our shareholders.
As
always, I thank you for your ongoing support.
|
Sincerely
|
|
|
|
/s/
Joe Hughes
|
|
Joe
Hughes
|
TSR
INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
May
31, 2016 and 2015
|
|
2016
|
|
|
2015
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
4,514,157
|
|
|
$
|
3,669,790
|
|
Certificates of
deposit and marketable securities
|
|
|
1,553,272
|
|
|
|
1,271,568
|
|
Accounts receivable:
|
|
|
|
|
|
|
|
|
Trade, net of allowance
for doubtful accounts of $185,000 in 2016 and $193,000 in 2015
|
|
|
7,703,680
|
|
|
|
8,754,784
|
|
Other
|
|
|
10,853
|
|
|
|
2,458
|
|
|
|
|
7,714,533
|
|
|
|
8,757,242
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
99,069
|
|
|
|
116,096
|
|
Deferred
income taxes
|
|
|
128,000
|
|
|
|
120,000
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
14,009,031
|
|
|
|
13,934,696
|
|
|
|
|
|
|
|
|
|
|
Equipment and leasehold
improvements, at cost:
|
|
|
|
|
|
|
|
|
Equipment
|
|
|
99,244
|
|
|
|
102,833
|
|
Furniture and fixtures
|
|
|
111,107
|
|
|
|
111,107
|
|
Automobiles
|
|
|
19,665
|
|
|
|
19,665
|
|
Leasehold
improvements
|
|
|
60,058
|
|
|
|
60,058
|
|
|
|
|
290,074
|
|
|
|
293,663
|
|
Less
accumulated depreciation and amortization
|
|
|
262,076
|
|
|
|
254,732
|
|
|
|
|
27,998
|
|
|
|
38,931
|
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
49,653
|
|
|
|
49,653
|
|
Deferred
income taxes
|
|
|
3,000
|
|
|
|
28,000
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
14,089,682
|
|
|
$
|
14,051,280
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts and other
payables
|
|
$
|
723,705
|
|
|
$
|
1,129,105
|
|
Accrued expenses
and other current liabilities:
|
|
|
|
|
|
|
|
|
Salaries, wages
and commissions
|
|
|
2,481,436
|
|
|
|
2,237,628
|
|
Other
|
|
|
152,674
|
|
|
|
146,214
|
|
|
|
|
2,634,110
|
|
|
|
2,383,842
|
|
|
|
|
|
|
|
|
|
|
Income taxes payable
|
|
|
14,810
|
|
|
|
3,877
|
|
Advances
from customers
|
|
|
1,245,563
|
|
|
|
1,431,522
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
4,618,188
|
|
|
|
4,948,346
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
31,142
|
|
|
|
31,142
|
|
Additional paid-in
capital
|
|
|
5,102,868
|
|
|
|
5,102,868
|
|
Retained
earnings
|
|
|
17,811,884
|
|
|
|
17,412,658
|
|
|
|
|
22,945,894
|
|
|
|
22,546,668
|
|
Less: Treasury
stock, 1,152,101 shares, at cost
|
|
|
13,514,003
|
|
|
|
13,514,003
|
|
Total
TSR, Inc. Equity
|
|
|
9,431,891
|
|
|
|
9,032,665
|
|
Noncontrolling
Interest
|
|
|
39,603
|
|
|
|
70,269
|
|
Total
Equity
|
|
|
9,471,494
|
|
|
|
9,102,934
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Equity
|
|
$
|
14,089,682
|
|
|
$
|
14,051,280
|
|
See
accompanying notes to consolidated financial statements.
TSR INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME
Years ended May 31, 2016 and 201
5
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Revenue,
net
|
|
$
|
60,998,281
|
|
|
$
|
57,402,896
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
51,038,879
|
|
|
|
48,087,428
|
|
Selling,
general and administrative expenses
|
|
|
9,120,526
|
|
|
|
8,883,003
|
|
|
|
|
60,159,405
|
|
|
|
56,970,431
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
838,876
|
|
|
|
432,465
|
|
|
|
|
|
|
|
|
|
|
Other
income:
|
|
|
|
|
|
|
|
|
Interest and dividend
income
|
|
|
8,621
|
|
|
|
6,114
|
|
Unrealized
gain (loss) from marketable securities, net
|
|
|
(2,296
|
)
|
|
|
5,712
|
|
|
|
|
6,325
|
|
|
|
11,826
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
845,201
|
|
|
|
444,291
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
389,000
|
|
|
|
152,000
|
|
|
|
|
|
|
|
|
|
|
Consolidated
net income
|
|
|
456,201
|
|
|
|
292,291
|
|
Less:
Net income attributable to noncontrolling interest
|
|
|
56,975
|
|
|
|
99,580
|
|
|
|
|
|
|
|
|
|
|
Net
income attributable to TSR, Inc.
|
|
$
|
399,226
|
|
|
$
|
192,711
|
|
|
|
|
|
|
|
|
|
|
Net
income per TSR, Inc. common share
|
|
$
|
0.20
|
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding
|
|
|
1,962,062
|
|
|
|
1,962,062
|
|
See
accompanying notes to consolidated financial statements.
TSR INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF EQUITY
Years ended May 31, 2016 and 201
5
|
|
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, 2014
|
|
|
3,114,163
|
|
|
$
|
31,142
|
|
|
$
|
5,102,868
|
|
|
$
|
17,219,947
|
|
|
$
|
(13,514,003
|
)
|
|
$
|
8,839,954
|
|
|
$
|
80,124
|
|
|
$
|
8,920,078
|
|
Net
income attributable to noncontrolling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
99,580
|
|
|
|
99,580
|
|
Distribution
to noncontrolling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(109,435
|
)
|
|
|
(109,435
|
)
|
Net
income attributable to TSR, Inc.
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
192,711
|
|
|
|
-
|
|
|
|
192,711
|
|
|
|
-
|
|
|
|
192,711
|
|
Balance at May
31, 2015
|
|
|
3,114,163
|
|
|
|
31,142
|
|
|
|
5,102,868
|
|
|
|
17,412,658
|
|
|
|
(13,514,003
|
)
|
|
|
9,032,665
|
|
|
|
70,269
|
|
|
|
9,102,934
|
|
Net
income attributable to noncontrolling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56,975
|
|
|
|
56,975
|
|
Distribution
to noncontrolling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(87,641
|
)
|
|
|
(87,641
|
)
|
Net
income attributable to TSR, Inc.
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
399,226
|
|
|
|
-
|
|
|
|
399,226
|
|
|
|
-
|
|
|
|
399,226
|
|
Balance
at May 31, 2016
|
|
|
3,114,163
|
|
|
$
|
31,142
|
|
|
$
|
5,102,868
|
|
|
$
|
17,811,884
|
|
|
$
|
(13,514,003
|
)
|
|
$
|
9,431,891
|
|
|
$
|
39,603
|
|
|
$
|
9,471,494
|
|
See
accompanying notes to consolidated financial statements.
TSR INC.
AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
Years ended May 31, 2016 and 201
5
|
|
2016
|
|
|
2015
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
net income
|
|
$
|
456,201
|
|
|
$
|
292,291
|
|
Adjustments
to reconcile consolidated net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
22,765
|
|
|
|
20,428
|
|
Provision for bad
debts
|
|
|
15,000
|
|
|
|
-
|
|
Unrealized (gain)
loss from marketable securities, net
|
|
|
2,296
|
|
|
|
(5,712
|
)
|
Deferred income
taxes
|
|
|
17,000
|
|
|
|
68,000
|
|
|
|
|
|
|
|
|
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable-trade
|
|
|
1,036,104
|
|
|
|
35,554
|
|
Other receivables
|
|
|
(8,395
|
)
|
|
|
6,872
|
|
Prepaid expenses
|
|
|
17,027
|
|
|
|
(41,908
|
)
|
Prepaid and recoverable
income taxes
|
|
|
-
|
|
|
|
32,159
|
|
Accounts and other
payables and accrued expenses and other current liabilities
|
|
|
(155,132
|
)
|
|
|
362,385
|
|
Income taxes payable
|
|
|
10,933
|
|
|
|
3,877
|
|
Advances
from customers
|
|
|
(185,959
|
)
|
|
|
(60,424
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
|
1,227,840
|
|
|
|
713,522
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
Proceeds from maturities
of marketable securities
|
|
|
1,762,000
|
|
|
|
2,487,000
|
|
Purchases of marketable
securities
|
|
|
(2,046,000
|
)
|
|
|
(2,238,000
|
)
|
Purchases
of equipment and leasehold improvements
|
|
|
(11,832
|
)
|
|
|
(25,264
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) investing activities
|
|
|
(295,832
|
)
|
|
|
223,736
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
Distributions
to noncontrolling interest
|
|
|
(87,641
|
)
|
|
|
(109,435
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash used in financing activities
|
|
|
(87,641
|
)
|
|
|
(109,435
|
)
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
844,367
|
|
|
|
827,823
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents at beginning of year
|
|
|
3,669,790
|
|
|
|
2,841,967
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of year
|
|
$
|
4,514,157
|
|
|
$
|
3,669,790
|
|
Supplemental disclosures
of cash flow data:
|
|
|
|
|
|
|
|
|
Income
taxes paid
|
|
$
|
361,000
|
|
|
$
|
49,000
|
|
See
accompanying notes to consolidated financial statements.
TSR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2016 and 2015
(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 capabilities. In fiscal
2016, four customers each accounted for more than 10% of the Company’s consolidated
revenue, constituting a combined 55.0%. The largest of these constituted 17.7% of consolidated
revenue. In fiscal 2015, two customers each accounted for more than 10% of the Company’s
consolidated revenue, constituting a combined 34.9%. The largest of these constituted
19.2% of consolidated revenue. The accounts receivable balances associated with the Company’s
largest customers were $3,735,000 for four customers at May 31, 2016 and $2,109,000 for
two customers at May 31, 2015. The Company operates in one business segment, computer
programming 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 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 collectability 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, 2016 and 2015:
|
|
|
|
2016
|
|
|
2015
|
|
|
Cash in banks
|
|
$
|
3,974,007
|
|
|
$
|
2,851,802
|
|
|
Money market
funds
|
|
|
540,150
|
|
|
|
817,988
|
|
|
|
|
$
|
4,514,157
|
|
|
$
|
3,669,790
|
|
|
(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.
|
|
|
|
|
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.
|
TSR
INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2016 and 2015
The
following are the major categories of assets measured at fair value on a recurring basis as of May 31, 2016 and 2015 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, 2016
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of
deposit
|
|
$
|
-
|
|
|
$
|
1,528,000
|
|
|
$
|
-
|
|
|
$
|
1,528,000
|
|
|
Equity
securities
|
|
|
25,272
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,272
|
|
|
|
|
$
|
25,272
|
|
|
$
|
1,528,000
|
|
|
$
|
-
|
|
|
$
|
1,553,272
|
|
|
May 31, 2015
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
$
|
-
|
|
|
$
|
1,244,000
|
|
|
$
|
-
|
|
|
$
|
1,244,000
|
|
|
Equity
securities
|
|
|
27,568
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27,568
|
|
|
|
|
$
|
27,568
|
|
|
$
|
1,244,000
|
|
|
$
|
-
|
|
|
$
|
1,271,568
|
|
Based
upon the Company’s intent and ability to hold its certificates of deposits to maturity (which maturities range up to twelve
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, 2016
and 2015 are summarized as follows:
|
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Holding
Gains
|
|
|
Gross
Unrealized
Holding
Losses
|
|
|
Recorded
Value
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016:
|
|
Certificates of deposit
|
|
$
|
1,528,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,528,000
|
|
|
|
|
Equity
securities
|
|
|
16,866
|
|
|
|
8,406
|
|
|
|
-
|
|
|
|
25,272
|
|
|
|
|
|
|
$
|
1,544,866
|
|
|
$
|
8,406
|
|
|
$
|
-
|
|
|
$
|
1,553,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
1,244,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,244,000
|
|
|
2015:
|
|
Certificates of deposit
|
|
|
16,866
|
|
|
|
10,702
|
|
|
|
-
|
|
|
|
27,568
|
|
|
|
|
Equity securities
|
|
$
|
1,260,866
|
|
|
$
|
10,702
|
|
|
$
|
-
|
|
|
$
|
1,271,568
|
|
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 collectability.
TSR
INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2016 and 2015
|
(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
|
|
3 years
|
|
Furniture and fixtures
|
|
3 years
|
|
Automobiles
|
|
3 years
|
|
Leasehold improvements
|
|
Lesser of lease term or useful life
|
|
(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, 2016 or 2015.
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.
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.
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 transactions 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, 2018. The Company expects
the impact of the update, if any, to be immaterial on its consolidated financial statements.
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 and interim periods beginning after December 15, 2016 and should be applied prospectively with early adoption
permitted at the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of adopting
this guidance.
TSR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2016 and 2015
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 is currently evaluating the impact, if any, of this update
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.
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 46 accounts with open balances
as of May 31, 2016. As a percentage of revenue, the four largest customers among these 46 accounts consisted of 48.5% of the net
accounts receivable balance at May 31, 2016.
A
reconciliation of the provision for income taxes computed at the Federal statutory rates for fiscal 2016 and 2015 to the reported
amounts is as follows:
|
|
|
2016
|
|
|
2015
|
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amounts at statutory
Federal tax rate
|
|
$
|
287,000
|
|
|
|
34.0
|
%
|
|
$
|
151,000
|
|
|
|
34.0
|
%
|
|
Noncontrolling interest
|
|
|
(19,000
|
)
|
|
|
(2.3
|
)
|
|
|
(34,000
|
)
|
|
|
(7.6
|
)
|
|
State and local taxes,
net of Federal income tax effect
|
|
|
88,000
|
|
|
|
10.4
|
|
|
|
13,000
|
|
|
|
2.9
|
|
|
Non-deductible
expenses and other
|
|
|
33,000
|
|
|
|
3.9
|
|
|
|
22,000
|
|
|
|
4.9
|
|
|
|
|
$
|
389,000
|
|
|
|
46.0
|
%
|
|
$
|
152,000
|
|
|
|
34.2
|
%
|
The
components of the provision for income taxes are as follows:
|
|
|
|
Federal
|
|
|
State
|
|
|
Total
|
|
|
2016:
|
Current
|
|
$
|
253,000
|
|
|
$
|
119,000
|
|
|
$
|
372,000
|
|
|
|
Deferred
|
|
|
3,000
|
|
|
|
14,000
|
|
|
|
17,000
|
|
|
|
|
|
$
|
256,000
|
|
|
$
|
133,000
|
|
|
$
|
389,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015:
|
Current
|
|
$
|
32,000
|
|
|
$
|
52,000
|
|
|
$
|
84,000
|
|
|
|
Deferred
|
|
|
100,000
|
|
|
|
(32,000
|
)
|
|
|
68,000
|
|
|
|
|
|
$
|
132,000
|
|
|
$
|
20,000
|
|
|
$
|
152,000
|
|
TSR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2016 and 2015
The
tax effects of temporary differences that give rise to significant portions of the deferred income tax assets at May 31, 2016
and 2015 are as follows:
|
|
|
2016
|
|
|
2015
|
|
|
Allowance for doubtful accounts receivable
|
|
$
|
78,000
|
|
|
$
|
86,000
|
|
|
Accrued compensation and other accrued
expenses
|
|
|
50,000
|
|
|
|
34,000
|
|
|
Net operating loss carryforward
|
|
|
10,000
|
|
|
|
25,000
|
|
|
Equipment and leasehold improvement
depreciation and amortization
|
|
|
(6,000
|
)
|
|
|
1,000
|
|
|
Acquired client relationships
|
|
|
2,000
|
|
|
|
5,000
|
|
|
Unrealized gains
|
|
|
(3,000
|
)
|
|
|
(3,000
|
)
|
|
Total
deferred income tax assets
|
|
$
|
131,000
|
|
|
$
|
148,000
|
|
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.
The
Company has no unrecognized tax benefits at May 31, 2016 and 2015. The Company’s Federal and state income tax returns prior
to fiscal year 2013 are closed.
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.
(3)
|
Commitments
and Contingencies
|
A
summary of noncancellable long-term operating lease commitments for facilities as of May 31, 2016 follows:
|
Fiscal
Year
|
|
Amount
|
|
|
2017
|
|
$
|
363,000
|
|
|
2018
|
|
|
248,000
|
|
|
2019
|
|
|
191,000
|
|
|
2020
|
|
|
86,000
|
|
|
2021
|
|
|
51,000
|
|
|
Total
|
|
$
|
939,000
|
|
Total
rent expenses under all lease agreements amounted to $379,000 and $390,000 in fiscal 2016 and 2015, respectively.
The
Company has entered into employment agreements with two of its officers expiring through 2020. The total remaining payments under
these agreements is $1,225,000 at May 31, 2016.
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.
During
the years ended May 31, 2016 and 2015, the Company did not purchase any of its common stock on the open market under the previously
announced plan. As of April 7, 2016, the previously announced plan was terminated with 56,318 shares remaining available for purchase.
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)
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Amount
|
|
|
%
of
Revenue
|
|
|
Amount
|
|
|
%
of
Revenue
|
|
Revenue, Net
|
|
$
|
60,998
|
|
|
|
100.0
|
%
|
|
$
|
57,403
|
|
|
|
100.0
|
%
|
Cost of Sales
|
|
|
51,039
|
|
|
|
83.7
|
|
|
|
48,088
|
|
|
|
83.8
|
|
Gross Profit
|
|
|
9,959
|
|
|
|
16.3
|
|
|
|
9,315
|
|
|
|
16.2
|
|
Selling, General
and Administrative Expenses
|
|
|
9,120
|
|
|
|
14.9
|
|
|
|
8,883
|
|
|
|
15.5
|
|
Income from Operations
|
|
|
839
|
|
|
|
1.4
|
|
|
|
432
|
|
|
|
0.7
|
|
Other Income,
Net
|
|
|
6
|
|
|
|
0.0
|
|
|
|
12
|
|
|
|
0.1
|
|
Income Before Income Taxes
|
|
|
845
|
|
|
|
1.4
|
|
|
|
444
|
|
|
|
0.8
|
|
Provision for
Income Taxes
|
|
|
389
|
|
|
|
0.6
|
|
|
|
152
|
|
|
|
0.3
|
|
Consolidated Net Income
|
|
|
456
|
|
|
|
0.8
|
|
|
|
292
|
|
|
|
0.5
|
|
Net Income Attributable
to Noncontrolling Interest
|
|
|
57
|
|
|
|
0.1
|
|
|
|
99
|
|
|
|
0.2
|
|
Net Income Attributable
to TSR, Inc.
|
|
$
|
399
|
|
|
|
0.7
|
%
|
|
$
|
193
|
|
|
|
0.3
|
%
|
Revenue
Revenue
consists primarily of revenue from computer programming consulting services. Revenue for the fiscal year ended May 31, 2016 increased
$3,595,000 or 6.3% from fiscal 2015. This increase in revenue resulted primarily from the average daily rates charged for the
consultants on billing with customers increasing approximately 5.5% in the current year compared with the prior fiscal year. This
rate increase is primarily the result of placing more consultants in higher level positions. The increase in revenue also resulted
from the average number of consultants on billing with customers increasing from approximately 346 for the fiscal year ended May
31, 2015 to approximately 350 for the fiscal year ended May 31, 2016.
Cost
of Sales
Cost
of sales for the fiscal year ended May 31, 2016 increased $2,951,000 or 6.1% to $51,039,000 from $48,088,000 in the prior fiscal
year. The increase in cost of sales resulted primarily from the average daily rates paid to the consultants on billing with customers
increasing approximately 4.5% in the current fiscal year compared with the prior fiscal year. The increase in cost of sales also
resulted from the increase in the number of consultants on billing with clients. Cost of sales as a percentage of revenue decreased
from 83.8% in the fiscal year ended May 31, 2015 to 83.7% in the fiscal year ended May 31, 2016.
|
|
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 increased $237,000 or 2.7% from $8,883,000 in the fiscal year ended May
31, 2015 to $9,120,000 in the fiscal year ended May 31, 2016. This increase was primarily attributable to an increase in incentive
compensation paid to account executives. Several of the account executives hired in recent years contributed increased revenues
and earned incentive compensation in excess of their guaranteed incentive compensation for the first time. The Company expects
selling, general and administrative expenses to continue to increase as more recruiters and sales executives are hired to stimulate
growth. Selling, general and administrative expenses, as a percentage of revenue, decreased from 15.5% in the fiscal year ended
May 31, 2015 to 14.9% in the fiscal year ended May 31, 2016 as a result of the additional revenue from the increase in the average
daily rates charged for the consultants on billing with customers.
|
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, 2016 resulted primarily from interest and dividend income of $9,000 decreased by a mark
to market loss of approximately $3,000 on the Company’s marketable equity securities. Other income for the fiscal year ended
May 31, 2015 resulted primarily from interest and dividend income of $6,000 and a mark to market gain of approximately $6,000
on the Company’s marketable equity securities.
Income
Taxes
The
effective income tax rates were 46.0% for the fiscal year ended May 31, 2016 and 34.2% for the fiscal year ended May 31, 2015.
The effective rate for the fiscal year ended May 31, 2016 increased primarily due to additional state taxes.
Net
Income Attributable to TSR, Inc.
Net
income attributable to TSR, Inc. increased $206,000 from $193,000 in the fiscal year ended May 31, 2015 to net income of $399,000
in the fiscal year ended May 31, 2016. This increase in net income was primarily attributable to the increase in revenue as a
result of the increase in the average daily rates charged for the consultants on billing with customers.
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 next 12 months.
At
May 31, 2016, the Company had working capital (total current assets in excess of total current liabilities) of $9,391,000 including
cash and cash equivalents and certificates of deposit and marketable securities of $6,067,000 as compared to working capital of
$8,986,000 including cash and cash equivalents and certificates of deposit and marketable securities of $4,941,000 at May 31,
2015.
Net
cash flow of $1,228,000 was provided by operations during fiscal 2016 as compared to $714,000 of net cash flow provided by operations
in fiscal 2015. The cash provided by operations for fiscal 2016 primarily resulted from consolidated net income of $456,000 and
a decrease in accounts receivable of $1,036,000, offset, to some extent, by a decrease in accounts and other payables and accrued
and other liabilities of $155,000 and a decrease in advances from customers of $186,000. The decrease in accounts receivable primarily
resulted from a greater number of clients instituting prompt payment discounts. The cash provided by operations for fiscal 2015
primarily resulted from consolidated net income of $292,000 and an increase in accounts payable and accrued expenses of $362,000.
Net
cash used in investing activities amounted to $296,000 for fiscal 2016, compared to $224,000 in net cash provided by investing
activities in fiscal 2015. The net cash used in investing activities for fiscal 2016 primarily resulted from investing in additional
certificates of deposit. The cash provided in 2015 primarily resulted from maturing certificates of deposit, a portion of which
were not rolled over.
Net
cash used in financing activities of $88,000 and $109,000 during the fiscal years ended May 31, 2016 and 2015, respectively, resulted
from distributions to the holder of the noncontrolling interest in the Company’s subsidiary, Logixtech Solutions, LLC.
|
|
The
Company’s capital resource commitments at May 31, 2016 consisted of lease obligations on its branch and corporate facilities.
The Company intends to finance these lease commitments from cash flow provided by operations, available cash and short-term marketable
securities.
The
Company’s cash and marketable securities were sufficient to enable it to meet its liquidity requirements during fiscal 2016.
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 transactions 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, 2018. The Company expects
the impact of this update, if any, to be immaterial on its consolidated financial statements.
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 and interim periods beginning after December 15, 2016 and should be applied prospectively with early adoption
permitted at the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of adopting
this guidance.
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 is currently evaluating the impact, if any, of this update
on its consolidated financial statements.
|
TSR INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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.
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
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 historical experience,
customer types, creditworthiness, 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.
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 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 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 contract computer programming services 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
Board of Directors and Stockholders
TSR,
Inc.
Hauppauge,
New York
We
have audited the accompanying consolidated balance sheets of TSR, Inc. and Subsidiaries as of May 31, 2016 and 2015, and the related
consolidated statements of income, equity, and cash flows for the years then ended. TSR, Inc.’s management is responsible
for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements
based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, 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. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of TSR, Inc. and Subsidiaries as of May 31, 2016 and 2015 and the results of their operations and their cash flows for the years
then ended in conformity with accounting principles generally accepted in the United States of America.
/s/
CohnReznick LLP
|
|
CohnReznick
LLP
|
|
Jericho,
New York
|
|
July
28, 2016
|
|
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, 2016 and 2015:
June
1, 2015 – May 31, 2016
|
|
1st
Quarter
|
|
|
2nd
Quarter
|
|
|
3rd
Quarter
|
|
|
4th
Quarter
|
|
High Sales Price
|
|
$
|
4.77
|
|
|
$
|
4.83
|
|
|
$
|
5.03
|
|
|
$
|
4.12
|
|
Low Sales Price
|
|
|
3.51
|
|
|
|
4.00
|
|
|
|
3.49
|
|
|
|
3.37
|
|
June
1, 2014 – May 31, 2015
|
|
1st
Quarter
|
|
|
2nd
Quarter
|
|
|
3rd
Quarter
|
|
|
4th
Quarter
|
|
High Sales Price
|
|
$
|
3.88
|
|
|
$
|
3.59
|
|
|
$
|
4.84
|
|
|
$
|
5.50
|
|
Low Sales Price
|
|
|
2.90
|
|
|
|
3.05
|
|
|
|
3.34
|
|
|
|
3.66
|
|
There were 67 holders of record of the Company’s
Common Stock as of June 30, 2016. Additionally, the Company estimates that there were approximately 800 beneficial holders as
of that date. There were no dividends declared or paid by the Company with respect to its shares of Common Stock during the last
two fiscal years. The Company has no current plans to implement a quarterly dividend program or pay any other special cash dividend.
DIRECTORS
|
CORPORATE
|
TRANSFER
AGENT
|
|
HEADQUARTERS
|
|
Joseph
F. Hughes
|
|
Continental
Stock Transfer
|
Chairman
of the Board
|
400
Oser Avenue
|
17
Battery Place
|
Chief
Executive Officer
|
Suite
150
|
New
York, NY 10004
|
President
and Treasurer
|
Hauppauge,
NY 11788
|
212-509-4000
|
|
631-231-0333
|
|
Christopher
Hughes
|
|
|
Senior
Vice President and
|
|
AUDITORS
|
President
TSR Consulting Services, Inc.
|
SUBSIDIARY
|
|
|
|
CohnReznick
LLP
|
James
J. Hill
|
TSR
Consulting
|
100
Jericho Quadrangle
|
Director
|
Services,
Inc.
|
Suite
223
|
Retired
Executive Vice President Sales & Marketing,
|
|
Jericho,
NY 11753
|
MRA
Publications, Inc.
|
New
York City
|
|
|
420
Lexington Avenue
|
|
Brian
J. Mangan
|
Suite
#835
|
COUNSEL
|
Director
|
New
York, NY 10170
|
|
Retired
Senior Vice President Finance,
|
212-986-4600
|
Giordano,
Halleran & Ciesla, P.C.
|
ABC
Television Network
|
E-mail:
tsrny@tsrconsulting.com
|
125
Half Mile Road
|
|
|
Suite
300
|
Raymond
A. Roel
|
New
Jersey
|
Red
Bank, NJ 07701
|
Director
|
379
Thornall Street
|
|
Principal,
|
6th
Floor
|
|
Ray
Roel Consulting LLC
|
Edison,
NJ 08837
|
|
|
732-321-9000
|
|
|
E-mail:
tsrnj@tsrconsulting.com
|
|
OFFICERS
|
|
|
|
Long
Island
|
|
Joseph
F. Hughes
|
400
Oser Avenue
|
|
Chairman
of the Board
|
Suite
150
|
|
Chief
Executive Officer
|
Hauppauge,
NY 11788
|
|
President
and Treasurer
|
631-231-0333
|
|
|
E-mail:
tsrli@tsrconsulting.com
|
|
Christopher
Hughes
|
|
|
Senior
Vice President and
|
|
|
President
TSR Consulting Services, Inc.
|
|
|
|
|
|
John
G. Sharkey
|
|
|
Vice
President, Finance
|
|
|
and
Secretary
|
|
|
Copies of the Company’s Form 10-K are available,
without charge, to shareholders upon written request to: John G. Sharkey, Vice President, Finance, TSR, Inc., 400 Oser Avenue,
Suite 150, Hauppauge, NY 11788
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