The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
Note- The Company has issued 3,114,163 of common stock and
has acquired 1,152,101 treasury shares, resulting in 1,962,062 shares outstanding at February 29, 2020.
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February
29, 2020
(Unaudited)
The
accompanying condensed consolidated interim financial statements include the accounts of TSR, Inc. and its subsidiaries (the “Company”).
All significant inter-company balances and transactions have been eliminated in consolidation. The condensed balance sheet as
of May 31, 2019, which has been derived from audited financial statements, and the unaudited interim financial statements have
been prepared in accordance with accounting principles generally accepted in the United States of America applying to interim
financial information and with the instructions to Form 10-Q of Regulation S-X of the Securities and Exchange Commission. Accordingly,
certain information and footnote disclosures required by accounting principles generally accepted in the United States of America
and normally included in the Company’s annual financial statements have been condensed or omitted. These condensed consolidated
interim financial statements as of and for the three months and nine months ended February 29, 2020 are unaudited; however, in
the opinion of management, such statements include all adjustments (consisting of normal recurring adjustments) necessary to present
fairly the consolidated financial position, results of operations and cash flows of the Company for the periods presented. The
results of operations for the interim periods presented are not necessarily indicative of the results that might be expected for
future interim periods or for the full year ending May 31, 2020. These condensed consolidated interim financial statements should
be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s
Annual Report on Form 10-K for the year ended May 31, 2019.
|
2.
|
Net
Loss Per Common Share
|
Basic
net loss per common share is computed by dividing net loss 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 any
of the periods presented.
|
3.
|
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 February 29, 2020 and May 31, 2019:
|
|
February 29,
2020
|
|
|
May 31,
2019
|
|
Cash in banks
|
|
$
|
3,171,564
|
|
|
$
|
3,072,218
|
|
Money market funds
|
|
|
301,718
|
|
|
|
622,771
|
|
|
|
$
|
3,473,282
|
|
|
$
|
3,694,989
|
|
Effective
June 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with
Customers (Topic 606), using the modified retrospective method. This update outlined a comprehensive new revenue recognition
model designed to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. The new standard also requires additional
quantitative and qualitative disclosures. The adoption allows companies to apply the new revenue standard to reporting periods
beginning in the year the standard is first implemented, while prior periods continue to be reported in accordance with previous
accounting guidance. Since the adoption of Accounting Standards Codification (“ASC”) 606 did not have a significant
impact on the recognition of revenue, the Company did not have an opening retained earnings adjustment.
TSR,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February
29, 2020
(Unaudited)
In
March 2016, the Financial Accounting Standards Board (“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. The Company adopted this ASU on June 1,
2018 as part of the adoption of ASC 606 and it did not have a significant impact.
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. The Company adopted this ASU on June 1, 2018 as part of the adoption of ASC 606 and it did not have a significant impact.
Revenues
are recognized as control of the promised service is transferred to customers, in an amount that reflects the consideration expected
in exchange for the services. Revenues from contract assignments are recognized over time, based on hours worked by the Company’s
contract professionals. The performance of the requested service over time is the single performance obligation for assignment
revenues. Certain customers may receive discounts (e.g., volume discounts, rebates, prompt-pay discounts) and adjustments to the
amounts billed. These discounts, rebates and adjustments are considered variable consideration. Volume discounts are the largest
component of variable consideration and are estimated using the most likely amount method prescribed by ASC 606, contracts terms
and estimates of revenue. Revenues are recognized net of variable consideration to the extent that it is probable that a significant
reversal of revenues will not occur in subsequent periods. Payment terms vary and the time between invoicing and when payment
is due is not significant. There are no financing components to the Company’s arrangements. There are no incremental costs
to obtain contracts and costs to fulfill contracts are expensed as incurred. The Company’s operations are primarily located
in the United States.
The
Company recognizes most of its revenue on a gross basis when it acts as a principal in its transactions. The Company has direct
contractual relationships with its customers, bears the risks and rewards of its arrangements, has the discretion to select the
contract professionals and establish the price for the services to be provided. Additionally, the Company retains control over
its contract professionals based on its contractual arrangements. The Company primarily provides services through its employees
and to a lesser extent, through subcontractors; the related costs are included in cost of sales. The Company includes billable
expenses (out-of-pocket reimbursable expenses) in revenue and the associated expenses are included in cost of sales.
|
5.
|
Certificates
of Deposit and Marketable Securities
|
The
Company has characterized its investments in certificates of deposit and 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 condensed 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February
29, 2020
(Unaudited)
The
following are the major categories of assets measured at fair value on a recurring basis as of February 29, 2020 and May 31, 2019
using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2) and significant
unobservable inputs (Level 3):
February 29, 2020
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Equity Securities
|
|
$
|
44,416
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
44,416
|
|
|
|
$
|
44,416
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
44,416
|
|
May 31, 2019
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Certificates of Deposit
|
|
$
|
-
|
|
|
$
|
492,000
|
|
|
$
|
-
|
|
|
$
|
492,000
|
|
Equity Securities
|
|
|
35,232
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35,232
|
|
|
|
$
|
35,232
|
|
|
$
|
492,000
|
|
|
$
|
-
|
|
|
$
|
527,232
|
|
Based
upon the Company’s intent and ability to hold its certificates of deposit 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 February 29,
2020 and May 31, 2019 are summarized as follows:
February 29, 2020
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Holding
Gains
|
|
|
Gross
Unrealized
Holding
Losses
|
|
|
Recorded
Value
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities
|
|
$
|
16,866
|
|
|
$
|
27,550
|
|
|
$
|
-
|
|
|
$
|
44,416
|
|
|
|
$
|
16,866
|
|
|
$
|
27,550
|
|
|
$
|
-
|
|
|
$
|
44,416
|
|
May 31, 2019
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Holding
Gains
|
|
|
Gross
Unrealized
Holding
Losses
|
|
|
Recorded
Value
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of Deposit
|
|
$
|
492,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
492,000
|
|
Equity Securities
|
|
|
16,866
|
|
|
|
18,366
|
|
|
|
-
|
|
|
|
35,232
|
|
|
|
$
|
508,866
|
|
|
$
|
18,366
|
|
|
$
|
-
|
|
|
$
|
527,232
|
|
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.
TSR,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February
29, 2020
(Unaudited)
|
6.
|
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, revolving line of credit and advances
from customers, the amounts presented in the condensed consolidated financial statements approximate fair value because of the
short-term maturities of these instruments.
Common
Stock Transactions
On
July 24, 2018, the Company became aware that Joseph F. Hughes and Winifred Hughes filed Amendments to Schedule 13D (the “Schedules
13D”) with the United States Securities and Exchange Commission (the “SEC”) on that date, in which Joseph F.
Hughes and Winifred Hughes disclosed that they had collectively sold 819,491 shares of the Company’s Common Stock jointly
held by them in a privately-negotiated transaction to Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC. The
Schedules 13D stated that the sale closed on July 23, 2018. Joseph F. Hughes was the former Chairman and Chief Executive Officer
of the Company. Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC acquired, in the aggregate, 41.8% of the Company’s
issued and outstanding Common Stock from Joseph F. Hughes and Winifred Hughes in this transaction. Amendments to Schedule 13D
previously filed by Joseph F. Hughes and Winifred Hughes on July 17, 2018 attached an exhibit wherein it was stated that prior
to the transaction described above, Zeff Capital, L.P. owned 77,615 shares or approximately 4% of the Company’s issued and
outstanding Common Stock.
The
Company became aware on July 30, 2018 that Fintech Consulting LLC and Tajuddin Haslani filed a Schedule 13D with the SEC disclosing
beneficial ownership of 376,100 shares of Common Stock, which represents approximately 19.2% of the Company’s issued and
outstanding Common Stock.
The
Company became aware on August 23, 2018 that Zeff Capital, L.P., Zeff Holding Company, LLC and Daniel Zeff filed an Amendment
to Schedule 13D with the SEC disclosing the additional purchase by Zeff Capital, L.P. of an aggregate of 55,680 shares of Common
Stock. As a result of these additional purchases of Common Stock, Zeff Capital, L.P., Zeff Holding Company, LLC and Daniel Zeff
beneficially own a total of 437,774 shares of Common Stock, which represents approximately 22.3% of the Company’s issued
and outstanding Common Stock.
The
Company became aware on August 28, 2018 that QAR Industries, Inc. and Robert Fitzgerald filed an Amendment to Schedule 13D with
the SEC disclosing the additional purchase by QAR Industries, Inc. of an aggregate of 4,070 shares of Common Stock. As a result
of these additional purchases of Common Stock, QAR Industries, Inc. and Robert Fitzgerald beneficially own a total of 143,900
shares of Common Stock, which represents approximately 7.3% of the Company’s issued and outstanding Common Stock. The Company
became aware on September 10, 2019 that QAR Industries, Inc. and Robert Fitzgerald filed an Amendment to Schedule 13D with the
SEC disclosing beneficial ownership of an aggregate of 139,200 shares of Common Stock, which represents approximately 7.1% of
the Company’s issued and outstanding Common Stock.
As
a result of the transactions described above, Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC are the beneficial
owners of an aggregate of 953,074 shares of Common Stock, which represents approximately 48.6% of the Company’s issued and
outstanding Common Stock.
TSR,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February
29, 2020
(Unaudited)
Rights
Plan / Preferred Stock
On
August 29, 2018, the Board of Directors of the Company declared a dividend of one preferred share purchase right (a “Right”)
for each share of Common Stock, par value $0.01 per share (“Common Stock”), of the Company outstanding on August 29,
2018 (the “Record Date”) to the stockholders of record on that date. In connection with the distribution of the Rights,
the Company entered into a Rights Agreement (the “Rights Agreement”), dated as of August 29, 2018, between the Company
and Continental Stock Transfer & Trust Company, as Rights Agent. Each Right entitles the registered holder to purchase from
the Company one one-hundredth of a share of Class A Preferred Stock, Series One, par value $0.01 per share (“Preferred Stock”),
of the Company at a price of $24.78 per one one-hundredth of a share of Preferred Stock represented by a Right (the “Purchase
Price”), subject to adjustment.
On
August 30, 2019, the Company entered into a settlement and release agreement (the “Settlement Agreement”) with Zeff
Capital, L.P., Zeff Holding Company, LLC, Daniel Zeff, QAR Industries, Inc., Robert Fitzgerald, Fintech Consulting LLC and Tajuddin
Haslani (collectively, the “Investor Parties”), pursuant to which the Company agreed to, among other things, amend
and restate the Rights Agreement to provide that a “Distribution Date” (as defined below) shall not occur as a result
of any request by any of the Investor Parties calling for a special meeting pursuant to Article II, Section 5 of the Amended and
Restated By-Laws of the Company in accordance with the terms of the Settlement Agreement. (See Note 8, “Other Matters.”)
Distribution
Date; Exercisability; Expiration
Initially,
the Rights will be attached to all certificates for shares of Common Stock and no separate certificates evidencing the Rights
(“Rights Certificates”) will be issued. Until the Distribution Date, the Rights will be transferred with and only
with shares of Common Stock. As long as the Rights are attached to the shares of Common Stock, the Company will issue one Right
with each new share of Common Stock so that all such shares of Common Stock will have Rights attached.
The
Rights will separate and begin trading separately from the Common Stock, and Rights Certificates will be issued to evidence the
Rights, on the earlier to occur of (a) the Close of Business (as such term is defined in the Rights Agreement) on the tenth
day following a public announcement, or the public disclosure of facts indicating, that a Person (as such term is defined in the
Rights Agreement), group of affiliated or associated Persons or any other Person with whom such Person is Acting in Concert (as
defined below) has acquired Beneficial Ownership (as defined below) of 5% or more of the outstanding Common Stock (an “Acquiring
Person”) (or, in the event an exchange is effected in accordance with Section 27 of the Rights Agreement and the Board
of Directors determines that a later date is advisable, then such later date) or (b) the Close of Business on the tenth Business
Day (as such term is defined in the Rights Agreement) (or such later date as may be determined by action of the Board of Directors
prior to such time as any Person becomes an Acquiring Person) following the commencement of a tender offer or exchange offer the
consummation of which would result in the Beneficial Ownership by a Person or group of 5% or more of the outstanding Common Stock
(the earlier of such dates, the “Distribution Date”). As soon as practicable after the Distribution Date, unless the
Rights are recorded in book-entry or other uncertificated form, the Company will prepare and cause the Right Certificates to be
sent to each record holder of Common Stock as of the Close of Business on the Distribution Date.
An
“Acquiring Person” will not include (i) the Company, (ii) any Subsidiary (as such term is defined in the
Rights Agreement) of the Company, (iii) any employee benefit plan or employee stock plan of the Company or any Subsidiary of the
Company, or any trust or other entity organized, appointed, established or holding Common Stock for or pursuant to the terms of
any such plan, or (iv) any Person who or which, at the time of the first public announcement of the Rights Agreement, is
a Beneficial Owner of 5% or more of the Common Shares then outstanding (a “Grandfathered Stockholder”). However, if
a Grandfathered Stockholder becomes, after such time, the Beneficial Owner of any additional shares of Common Stock (regardless
of whether, thereafter or as a result thereof, there is an increase, decrease or no change in the percentage of shares of Common
Stock then outstanding beneficially owned by such Grandfathered Stockholder) then such Grandfathered Stockholder shall be deemed
to be an Acquiring Person unless, upon such acquisition of Beneficial Ownership of additional shares of Common Stock, such Person
is not the Beneficial Owner of 5% or more of the Common Stock then outstanding. In addition, upon the first decrease of a Grandfathered
Stockholder’s Beneficial Ownership below 5%, such Grandfathered Stockholder will cease to be a Grandfathered Stockholder.
In the event that after the time of the first public announcement
of the Rights Agreement, any agreement, arrangement or understanding pursuant to which any Grandfathered Stockholder is
deemed to be the Beneficial Owner of Common Stock expires, terminates or no longer confers any benefit to or imposes any
obligation on the Grandfathered Stockholder, any direct or indirect replacement, extension or substitution of such agreement,
arrangement or understanding with respect to the same or different shares of Common Stock that confers Beneficial Ownership
of Common Stock shall be considered the acquisition of Beneficial Ownership of additional shares of Common Stock by the
Grandfathered Stockholder and render such Grandfathered Stockholder an Acquiring Person for purposes of the Rights Agreement
unless, upon such acquisition of Beneficial Ownership of additional shares of Common Stock, such Person is not the Beneficial
Owner of 5% or more of the Common Stock then outstanding.
TSR,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February
29, 2020
(Unaudited)
The
Rights are not exercisable until the Distribution Date. The Rights will expire on the Close of Business on August 29, 2021 (the
“Expiration Date”).
Redemption
At
any time prior to the Close of Business on the earlier of (a) the tenth day following the Stock Acquisition Date or (b) the Expiration
Date, the Board of Directors may redeem the Rights in whole, but not in part, at a price of $0.01 per Right (the “Redemption
Price”). The “Stock Acquisition Date” is the first date on which there is a public announcement by the Company
or an Acquiring Person that an Acquiring Person has become such, or such earlier date as a majority of the Board of Directors
becomes aware of the existence of an Acquiring Person. The redemption of the Rights may be made effective at such time, on such
basis and with such conditions as the Board of Directors in its sole discretion may establish. Immediately upon the action of
the Board of Directors ordering the redemption of the Rights, the right to exercise the Rights will terminate and the only right
of the holders of Rights will be to receive the Redemption Price.
Preferred
Stock Rights
The
Preferred Stock will not be redeemable. Each share of Preferred Stock will be entitled to receive, when, as and if declared by
the Board of Directors, (a) cash dividends in an amount per share (rounded to the nearest cent) equal to 100 times the aggregate
per share amount of all cash dividends declared or paid on the Common Stock and (b) a preferential quarterly cash dividend (the
“Preferential Dividends”) in an amount equal to $50.00 per share of Preferred Stock less the per share amount of all
cash dividends declared on the Preferred Stock pursuant to clause (a) of this sentence. Each share of Preferred Stock will entitle
the holder thereof to 100 votes per share, voting together with the holders of the Common Stock as a single class, except as otherwise
provided in the Certificate of Designations of Class A Preferred Stock Series One filed by the Company with the Delaware Secretary
of State or the Company’s Amended and Restated Certificate of Incorporation, as amended, or Amended and Restated By-laws.
In the event of any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged
for or changed into other stock or securities, cash and/or any other property, then in any such case each outstanding share of
Preferred Stock shall at the same time be similarly exchanged for or changed into the aggregate amount of stock, securities, cash
and/or other property (payable in like kind), as the case may be, for which or into which each share of Common Stock is changed
or exchanged, multiplied by 100. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, (a)
no distribution shall be made to the holders of shares of stock ranking junior to the Preferred Stock unless the holders of the
Preferred Stock shall have received the greater of (i) $100 per share of Preferred Stock plus an amount equal to accrued and unpaid
dividends and distributions thereon or (ii) an amount equal to 100 times the aggregate amount to be distributed per share to holders
of the Common Stock, and (b) no distribution shall be made to the holders of stock ranking on a parity upon liquidation, dissolution
or winding up with the Preferred Stock unless simultaneously therewith distributions are made ratably on the holders of the Preferred
Stock and all other shares of such parity stock in proportion to the total amounts to which the holders of shares of Preferred
Stock are entitled under clause (a)(i) of this sentence and to which the holders of such parity shares are entitled, in each case
upon such liquidation, dissolution or winding up.
The
foregoing rights are protected by customary anti-dilution provisions.
TSR,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February
29, 2020
(Unaudited)
The
foregoing description of the rights of the Preferred Stock does not purport to be complete and is qualified in its entirety by
reference to the Certificate of Designations of Class A Preferred Stock Series One.
Rights
of Holders
Until
a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends.
Amended
and Restated Rights Agreement
Pursuant
to the Settlement Agreement, the Company amended and restated the Rights Agreement on September 3, 2019 to confirm that a Distribution
Date (as defined in the Amended and Restated Rights Agreement) shall not occur as a result of any request by any of the Investor
Parties for a special meeting of the Company’s stockholders.
From
time to time, the Company is party to various lawsuits, some involving material amounts. Management is not aware of any lawsuits
that would have a material adverse impact on the consolidated financial position of the Company.
On
October 16, 2018, the Company was served with a complaint filed on October 11, 2018 in the Supreme Court of the State of New York,
Queens County, by Susan Paskowitz, a stockholder of the Company, against the Company; Joseph F. Hughes and Winifred M. Hughes;
former directors Christopher Hughes, Raymond A. Roel, Brian J. Mangan, Regina Dowd, James J. Hill, William Kelly, and Eric Stein;
as well as stockholders Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC (the “Stockholder Litigation”).
The complaint purports to be a class action lawsuit asserting claims on behalf of all minority stockholders of the Company. Ms.
Paskowitz alleges the following: the sale by Joseph F. Hughes and Winifred M. Hughes of an aggregate of 819,491 shares of the
Company’s common stock (“controlling interest”) to Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting
LLC was in breach of Joseph F. Hughes’ and Winifred M. Hughes’ fiduciary duties and to the detriment of the Company’s
minority stockholders; the members of the Board of Directors of the Company named in the complaint breached their fiduciary duties
by failing to immediately adopt a rights plan that would have prevented Joseph F. Hughes and Winifred M. Hughes from selling their
shares and preserved a higher premium for all stockholders; Zeff, QAR, and Fintech are “partners” and constitute a
“group.” Ms. Paskowitz also asserts that Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC aided
and abetted Joseph F. Hughes’ and Winifred M. Hughes’ conduct, and ultimately sought to buy out the remaining shares
of the Company at an unfair price. The complaint requests declarations from the court that: (1) Joseph F. Hughes’ and Winifred
M. Hughes’ sale of their controlling interest to Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC was
in breach of their fiduciary duties, and that those shares may not be voted or sold back to the Company pending further court
order, (2) the members of the Board of Directors named in the complaint breached their fiduciary duties by failing to timely adopt
a stockholder rights plan, which resulted in the loss of the ability to auction the Company off to the highest bidder without
interference from Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC, and (3) Zeff Capital, L.P., QAR Industries,
Inc. and Fintech Consulting LLC must make a number of disclosures regarding their plans for the Company, their relationships with
one another, and any agreements with Joseph F. Hughes and Winifred M. Hughes. The complaint has not assigned any monetary values
to alleged damages, but it seeks: (1) for Joseph F. Hughes and Winifred M. Hughes, and Zeff Capital, L.P., QAR Industries, Inc.
and Fintech Consulting LLC, to disgorge any benefit they received from the sale of the Hughes’ controlling interest, (2)
for the Board of Directors to pay damages equal to the reduced value of the class members’ shares as auctionable assets,
and (3) reasonable attorneys’ fees and costs. Although the Company is named as a defendant, there are no claims or damage
allegations against the Company, and the complaint states that it names the Company solely to effectuate equitable relief if granted.
On
May 6, 2019, a stipulation of dismissal was filed in the Stockholder Litigation with respect to defendants Joseph F. Hughes, Winifred
M. Hughes, and Regina Dowd, in which the plaintiff and these defendants agreed to the dismissal of all claims asserted by and
against them, without prejudice. On July 26, 2019, the Company filed cross-claims against Zeff Capital, L.P., QAR Industries,
Inc. and Fintech Consulting LLC relating to alleged breaches of fiduciary duties and for indemnification and contribution filed.
TSR,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February
29, 2020
(Unaudited)
On
June 14, 2019, Ms. Paskowitz filed an amended complaint in the Stockholder Litigation in the Supreme Court of the State of New
York, Queens County against the members of the Board of Directors and Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting
LLC, which asserts substantially similar allegations to those contained in the October 11, 2018 complaint. In addition to the
members of the Board of Directors named in the original complaint, the amended complaint names current and former directors Ira
Cohen, Joseph Pennacchio, and William Kelly as defendants. The amended complaint also asserts a derivative claim purportedly on
behalf of the Company against the named members of the Board of Directors. The amended complaint seeks declaratory judgment and
unspecified monetary damages. The complaint requests: (1) a declaration from the court that the members of the Board of Directors
named in the complaint breached their fiduciary duties by failing to timely adopt a stockholder rights plan, which resulted in
the loss of the ability to auction the Company off to the highest bidder without interference from Zeff Capital, L.P., QAR Industries,
Inc. and Fintech Consulting LLC; (2) damages derivatively on behalf of the Company for unspecified harm caused by the Directors’
alleged breaches of fiduciary duties; (3) damages and equitable relief derivatively on behalf of the Company for the Directors’
alleged failure to adopt proper corporate governance practices; and (4) damages and injunctive relief against Zeff Capital, L.P.,
QAR Industries, Inc. and Fintech Consulting LLC based on their knowing dissemination of false or misleading public statements
concerning their status as a group. The complaint has not assigned any monetary values to alleged damages.
On
July 15, 2019, the Company filed an answer to the amended complaint in the Stockholder Litigation and cross-claims against Zeff
Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC for breaches of their fiduciary duties, aiding and abetting breaches
of fiduciary duties, and indemnification and contribution based on their misappropriation of material nonpublic information and
their failure to disclose complete and accurate information in SEC filings concerning their group actions to attempt a creeping
takeover of the Company.
In
addition, on December 21, 2018, the Company filed a complaint in the United States District Court, Southern District of New York,
against Zeff Capital, L.P., Zeff Holding Company, LLC, Daniel Zeff, QAR Industries, Inc., Robert Fitzgerald, Fintech Consulting
LLC, and Tajuddin Haslani for violations of the disclosure and anti-fraud requirements of the federal securities laws under Sections
13(d) and 14(a) of the Securities Exchange Act of 1934 (“Exchange Act”), and the related rules and regulations promulgated
by the SEC, for failing to disclose to the Company and its stockholders their formation of a group and the group’s intention
to seize control of the Company. The complaint requests that the court, among other things, declare that the defendants have solicited
proxies without filing timely, accurate and complete reports on Schedule 13D and Schedule 14A in violation of Sections 13(d) and
14(a) of the Exchange Act, direct the defendants to file with the SEC complete and accurate disclosures, enjoin the defendants
from voting any of their shares prior to such time as complete and accurate disclosures have been filed, and enjoin the defendants
from further violations of the Exchange Act with respect to the securities of the Company. The Company has filed motions for preliminary
injunction and expedited discovery. The court held an initial pretrial conference on April 23, 2019 during which it ordered the
parties to participate in a mediation of the claims raised in the action. The parties subsequently participated in mediation sessions
through the Court-annexed Mediation Program; however, no resolution was reached as a result of the mediation.
On
January 7, 2019, Ms. Paskowitz filed a related action against Zeff Capital, L.P., Zeff Holding Company, LLC, Daniel Zeff, QAR
Industries, Inc., Robert Fitzgerald, Fintech Consulting LLC, and Tajuddin Haslani in the Southern District of New York, which
asserts claims against them for breach of fiduciary duty and under federal securities laws similar to those asserted in the Company’s
action. Although the Company is not a party to Ms. Paskowitz’s action, the court has determined to treat the Company’s
and Ms. Paskowitz’s respective actions as related.
On
August 7, 2019, following the Company’s initial rescheduling of the 2018 Annual Meeting for September 13, 2019 and the filing
of Preliminary Proxy Statements by the Company and Zeff Capital, L.P., Zeff Capital, L.P. filed a complaint in the Delaware Court
of Chancery against the Company seeking an order requiring the Company to hold its next annual meeting of stockholders on or around
September 13, 2019, and obligating the Company to elect Class I and Class III directors at that annual meeting.
TSR,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February
29, 2020
(Unaudited)
On
August 30, 2019, the Company entered into the Settlement Agreement with the Investor Parties with respect to the proxy contest
pertaining to the election of directors at the 2018 Annual Meeting, which was held on October 22, 2019. Pursuant to the Settlement
Agreement, the parties have agreed to forever settle and resolve any and all disputes between the parties, including without limitation
disputes arising out of or relating to the following litigations:
(i)
The complaint relating to alleged breaches of fiduciary duties filed on November 1, 2018 by Fintech Consulting LLC against the
Company in the Delaware Court of Chancery, which was previously dismissed voluntarily;
(ii)
The complaint for declaratory and injunctive relief for violations of the federal securities laws filed on December 21, 2018 by
the Company against the Investor Parties in the United States District Court in the Southern District of New York;
(iii)
Cross-claims relating to alleged breaches of fiduciary duties and for indemnification and contribution filed on July 26, 2019
by the Company against the Investor Parties in New York Supreme Court, Queens County; and
(iv)
The complaint to compel annual meeting of stockholders filed on August 7, 2019 by Zeff Capital, L.P. against the Company in the
Delaware Court of Chancery.
No
party admitted any liability by entering into the Settlement Agreement. The Settlement Agreement did not resolve the Stockholder
Litigation filed by Susan Paskowitz against the Company, Joseph F. Hughes, Winifred M. Hughes and certain current and former directors
of the Company in the Supreme Court of the State of New York on October 11, 2018.
Concurrently
with the Settlement Agreement, the parties entered into a share repurchase agreement (the “Repurchase Agreement”)
which provided for the purchase by the Company and Christopher Hughes, the Company’s former President and Chief Executive
Officer, of the shares of the Company’s Common Stock held by the Investor Parties (the “Repurchase”). The Settlement
Agreement also contemplated that, if the Repurchase was completed, the Company would make a settlement payment to the Investor
Parties at the closing of the Repurchase in an amount of approximately $1,500,000 (the “Settlement Payment”). However,
the Repurchase and Settlement Payment were not completed by the deadline of December 30, 2019.
Pursuant
to the Settlement Agreement, (1) the Company agreed to adopt an amendment to the Company’s Amended and Restated By-Laws,
dated April 9, 2015 (the “By-Laws Amendment”), providing that stockholders of the Company owning at least forty percent
(40%) of the issued and outstanding Common Stock may request a special meeting of stockholders; (2) the Investor Parties agreed
not to take any action to call or otherwise cause a special meeting of stockholders to occur prior to December 30, 2019 (unless
the Company had failed to hold the 2018 Annual Meeting); (3) the Company agreed to amend and restate the Company’s Rights
Agreement, dated August 29, 2018 (the “Amended Rights Agreement”), to confirm that a Distribution Date (as defined
in the Amended Rights Agreement) shall not occur as a result of any request by any of the Investor Parties for a special meeting;
(4) the Company agreed that prior to the earlier of (A) the completion of the Repurchase and the payment of the Settlement Payment
and (B) January 1, 2020, the Board of Directors shall not consist of more than seven (7) directors.
Pursuant
to the terms of the Settlement Agreement, the two nominees for director made by Zeff Capital, L.P. were elected as directors at
the Company’s 2018 Annual Meeting held on October 22, 2019. Please see the Company’s current Report on Form 8-K filed
with the SEC on October 21, 2019 for more information about the background of the election of directors at the Company’s
2018 Annual Meeting.
Pursuant
to the terms of the Settlement Agreement, inasmuch as the Repurchase was not completed and the Settlement Payment was not made
by December 30, 2019, the members of the Board of Directors (other than the two directors who were nominated by Zeff Capital,
L.P. and elected as directors at the 2018 Annual Meeting) resigned from the Board effective 5:00 p.m. Eastern Time on December
30, 2019. Immediately thereafter, the two remaining directors appointed Robert Fitzgerald to the Board of Directors. Please see
the Company’s Current Report on Form 8-K filed with the SEC on December 31, 2019 for more information about the background
and the appointment of Robert Fitzgerald.
TSR,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February
29, 2020
(Unaudited)
In
addition, the Settlement Agreement provides for mutual releases between the Company and each of the Investor Parties and certain
of their affiliates. Each of the Investor Parties and certain of their affiliates also agreed to certain customary standstill
provisions, including without limitation, with regard to certain actions in connection with the 2018 Annual Meeting, Extraordinary
Transactions (as defined in the Settlement Agreement) with the Company, and the acquisition of any securities (or beneficial ownership
thereof) of the Company, each of which expired on December 30, 2019.
The
foregoing is not a complete description of the terms of the Settlement Agreement and the Share Repurchase Agreement. For a further
description of the terms of the Settlement Agreement and the Share Repurchase Agreement, including copies of the Settlement Agreement
and Share Repurchase Agreement, please see the Company’s Current Report on Form 8-K filed by the Company with the SEC on
September 3, 2019.
During the quarter ending February
29, 2020, the Company negotiated a settlement with the Company’s largest shareholder to reimburse it for legal expenses of
$900,000 (net present value of $818,000), subject to final documentation. (See Note 13)
On
October 21, 2019, the Company entered into a Memorandum of Understanding (the “MOU”) with Susan Paskowitz providing
for the settlement of the Stockholder Litigation filed by Ms. Paskowitz on October 11, 2018. The MOU provides for the settlement
of the claims by Ms. Paskowitz that (1) the members of the Board named in the original complaint allegedly breached their fiduciary
duties by failing to immediately adopt a rights plan that would have prevented the sale by Joseph F. Hughes and Winifred M. Hughes
of an aggregate of 819,491 shares of the Company’s common stock to the Investor Parties; (2) the members of the Board named
in the amended complaint allegedly breached their fiduciary duties and failed to adopt proper corporate governance practices;
and (3) the Investor Parties acted as “partners” and constituted a “group” in their purchase of shares
from Joseph F. Hughes and Winifred M. Hughes and knowingly disseminated false or misleading public statements concerning their
status as a group.
Pursuant
to the terms of the MOU, the Company will (1) implement certain corporate governance reforms described in the MOU within 30 days
of a final order and judgment entered by the court, and keep these corporate governance reforms in place for 5 years from the
time of the final order and judgment; and (2) acknowledge that the plaintiff, Ms. Paskowitz, and her counsel provided a substantial
benefit to the Company and its stockholders through the prosecution of the Stockholder Litigation and other related actions filed
by Ms. Paskowitz described above.
On
December 16, 2019, the Company entered into a Stipulation and Agreement of Settlement (the “Stipulation”) with Susan
Paskowitz in the Stockholder Litigation. The Stipulation retains the terms and conditions of settlement of the Stockholder Litigation
contained in the MOU described in the preceding paragraph, with the addition that the Company will pay to plaintiff’s counsel
an award of attorneys’ fees and reimbursement of expenses in the amount of $260,000 (collectively, the “Stockholder
Litigation Settlement”). The Stockholder Litigation Settlement is intended to fully, finally, and forever compromise, settle,
release, resolve, and dismiss with prejudice the Stockholder Litigation and all claims asserted therein directly against all present
and former defendants and derivatively against them on behalf of the Company. The Stockholder Litigation Settlement does not contain
any admission of liability, wrongdoing or responsibility by any of the parties, and provides for mutual releases by all parties.
Each stockholder of the Company is a member of the plaintiff class unless such stockholder opts out of the class. The Company
expects that the full amount of the $260,000 settlement payment will be covered by insurance proceeds. The Stipulation remains
subject to approval by the court. The Stipulation is independent of the Settlement Agreement and Share Repurchase Agreement that
the Company had entered into with the Investor Parties.
Although
the Company believes that the Stipulation represents a fair and reasonable compromise of the matters in dispute in the Stockholder
Litigation, there can be no assurance that the court will approve the Stipulation as proposed, or at all. Under the terms of the
Stipulation, plaintiff Ms. Paskowitz has filed the Stipulation with the court and has requested a date for a final hearing on
the approval of the Settlement and plaintiff’s application for an award of counsel fees and the reimbursement of expenses.
The Stipulation is filed as an exhibit to the Company’s Current Report on Form 8-K filed by the Company with the SEC on
December 17, 2019.
TSR,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February
29, 2020
(Unaudited)
Inasmuch
as the Company did not complete the Repurchase and make the Settlement Payment prior to the December 30, 2019 deadline, the members
of the Board of Directors (other than the two directors who were elected as directors at the 2018 Annual Meeting) resigned from
the Board effective at 5:00 p.m. Eastern Time on December 30, 2019. Immediately thereafter, the two remaining directors, Bradley
M. Tirpak and H. Timothy Eriksen, appointed Robert Fitzgerald as a new director. Each of Mr. Tirpak, Mr. Eriksen and Mr. Fitzgerald
qualifies as an “independent director” under the NASDAQ Stock Market Rules. These three individuals were also appointed
to the Audit Committee, Nominating Committee, Compensation Committee and Special Committee. The Board appointed Mr. Tirpak as
Chairman of the Board to succeed Christopher Hughes. Mr. Hughes continued to serve as the Chief Executive Officer, President and
Treasurer of the Company until January 17, 2020. Additionally, the Board appointed Mr. Eriksen as Lead Independent Director, Chairman
of the Audit Committee and Chairman of the Nominating Committee. The Board also appointed Mr. Fitzgerald as the Chairman of the
Compensation Committee and Chairman of the Special Committee.
|
9.
|
Recently
Adopted Accounting Pronouncements
|
Effective
June 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases, which sets out the
principle for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees
and lessors). The new standard requires lessees to classify leases as either finance or operating leases and record a right-of-use
asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. An accounting
policy election may be made to account for leases with a term of 12 months or less similar to existing guidance for operating
leases today. ASU No. 2016-02 supersedes the existing guidance on accounting for leases. In July 2018, the FASB issued ASU No.
2018-11, Leases (Topic 842): Targeted Improvements, which allows for an optional transition method for the adoption of
Topic 842. The two permitted transition methods are now the modified retrospective approach, which applies the new lease requirements
at the beginning of the earliest period presented, and the optional transition method, which applies the new lease requirements
through a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2016-02 is effective
for our fiscal year ending May 31, 2020 and the interim periods within that year. The Company adopted this standard in the first
quarter of fiscal 2020 using the optional transition method. The Company also intends to elect the practical expedients that allow
us to carry forward the historical lease classification. The Company has established an inventory of existing leases and implemented
a new process of evaluating the classification of each lease. The financial impact of the adoption of the new standard at June
1, 2019 increased total assets and total liabilities by approximately $690,000. The financial impact of the adoption primarily
relates to the capitalization of right-of-use assets and recognition of lease liabilities related to operating leases. The Company
will implement changes to its processes and internal controls, as necessary, to meet the reporting and disclosure requirements
of the new standard.
The
Company leases the space for its three offices. Under ASC 842, at contract inception we determine whether the contract is or contains
a lease and whether the lease should be classified as an operating or finance lease. Operating leases are in right-of-use assets
and operating lease liabilities in our consolidated condensed balance sheets.
The
Company’s leases for its three offices are classified as operating leases.
The
lease agreements expire on December 31, 2020, February 28, 2021 and August 31, 2022, respectively, and do not include any renewal
options.
In
addition to the monthly base amounts in the lease agreements, the Company is required to pay real estate taxes and operating expenses
during the lease terms.
For
the three months and nine months ended February 29, 2020, the Company’s operating lease expense for these leases was $98,000
and $294,000, respectively.
TSR,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February
29, 2020
(Unaudited)
Future
minimum lease payments under non-cancellable operating leases as of February 29, 2020 were as follows:
(note:
payments related to the lease expiring February 28, 2021 are not included below because it is a one year lease)
Twelve Months Ended February 28,
|
|
|
|
2021
|
|
$
|
229,867
|
|
2022
|
|
|
160,120
|
|
2023
|
|
|
80,990
|
|
Total undiscounted operating lease payments
|
|
|
470,977
|
|
Less imputed interest
|
|
|
36,405
|
|
Present value of operating lease payments
|
|
$
|
434,572
|
|
The
following table sets forth the right-of-use assets and operating lease liabilities as of February 29, 2020:
Assets
|
|
|
|
Right-of-use assets
|
|
$
|
431,054
|
|
Liabilities
|
|
|
|
|
Current operating lease liabilities
|
|
$
|
206,380
|
|
Long-term operating lease liabilities
|
|
|
228,192
|
|
Total operating lease liabilities
|
|
$
|
434,572
|
|
The
weighted average remaining lease term for the Company’s operating leases is 1.8 years.
On
November 27, 2019, TSR, Inc. (“TSR”) closed on a revolving credit facility (the “Credit Facility”) pursuant
to a Loan and Security Agreement with Access Capital, Inc. (the “Lender”) that may provide up to $7,000,000 in funding
to TSR and its direct and indirect subsidiaries, TSR Consulting Services, Inc., Logixtech Solutions, LLC and Eurologix, S.A.R.L.,
each of which together with TSR is a borrower under the Credit Facility. Each of the borrowers has provided a security interest
to the Lender in all of their respective assets to secure amounts borrowed under the Credit Facility.
TSR
expects to utilize the Credit Facility for working capital and general corporate purposes. TSR also expected to utilize the Credit
Facility to complete the Repurchase and make the Settlement Payment; however, TSR did not complete the Repurchase and make the
Settlement Payment prior to the December 30, 2019 deadline.
Inasmuch
as TSR did not complete the Repurchase and make the Settlement Payment prior to the December 30, 2019 deadline, the maximum amount
that may be advanced under the Credit Facility at any time shall not exceed $2,000,000.
Advances
under the Credit Facility accrue interest at a rate per annum equal to (x) the “base rate” or “prime rate”
announced by Citibank, N.A. from time to time, which shall be increased or decreased, as the case may be, in an amount equal to
each increase or decrease in such “base rate” or “prime rate,” plus (y) 1.75%. The prime rate as of February
29, 2020 was 4.75%, indicating a rate of 6.5% on the line of credit. The initial term of the Credit Facility is 5 years, which
shall automatically renew for successive 5-year periods unless either TSR or the Lender gives written notice to the other of termination
at least 60 days prior to the expiration date of the then-current term.
TSR,
INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February
29, 2020
(Unaudited)
TSR
is obliged to satisfy certain financial covenants and minimum borrowing requirements under the Credit Facility, and to pay certain
fees, including prepayment fees, and provide certain financial information to the Lender. There were no financial covenants applicable
for the period ended February 29, 2020.
As
of February 29, 2020, the net borrowings outstanding against this line of credit facility were $904,304. The amount the Company
has borrowed fluctuates and, at times, has utilized the maximum amount of $2,000,000 available under the facility to fund its
payroll and other obligations.
|
12.
|
Subsequent
Event - Termination of Former CEO
|
The
Company terminated Christopher Hughes, the former Chief Executive Officer of the Company (“Hughes”), effective
February 29, 2020 for “Cause” as defined in Section 6(a) of his Amended and Restated Employment Agreement (the
“Employment Agreement”), dated August 9, 2018 and on March 2, 2020, the Company received a letter from Mr.
Hughes, providing notice of his intent to resign for “Good Reason” as defined in Section 7(c) of the Employment
Agreement pursuant to which he claimed to be entitled to the “Enhanced Severance Amount” under the Employment
Agreement. Hughes filed a complaint against the Company in the Supreme Court of the State of New York in March 2020 alleging
two causes of action: (1) breach of his employment contract; and (2) breach of duty of good faith and fair dealing. Plaintiff
alleges that he was terminated without cause or in the alternative, that he resigned for good reason and therefore, pursuant
to the Amended and Restated Employment Agreement, dated August 9, 2018, between the Company and Plaintiff. Plaintiff seeks
contractual severance pay in the amount of $1,000,000 and reasonable costs and attorney’s fees. The Company denies
Plaintiff’s allegations in their entirety.
|
13.
|
Subsequent Event - Legal Settlement with Investor
|
On April 1, 2020, the Company entered
into a binding term sheet (“Term Sheet”) with Zeff Capital, L.P. (“Zeff”) pursuant to which they agreed
to pay Zeff an amount of $900,000 over a period of three years in cash or cash and stock in settlement of expenses incurred by
Zeff during its solicitations in 2018 and 2019 in connection with the annual meetings of the Company, the costs incurred in connection
with the litigation initiated by and against the Company as well as negotiation, execution and enforcement of the Settlement and
Release Agreement, dated as of August 30, 2019, by and between the Company, Zeff and certain other parties. The Term Sheet calls
for a cash payment of $300,000 on June 30, 2021, a second cash payment of $300,000 on June 30, 2022 and a third payment of $300,00
also on June 30, 2022, which can be paid in cash or common stock at the Company’s option. There is no interest due on these
payments. The agreement also has protections to limit the payments so that the debt covenants with the Company’s Lender are
not breached. The parties intend to enter into definitive documents for the settlement. However, the binding Term Sheet shall remain
in full force and effect until such time as the definitive documents are executed by the parties or until the Term Sheet is terminated
by mutual consent of the parties. The Company has accrued $818,000, the estimated present value of these payments using an effective
interest rate of 5%, in the quarter ended February 29, 2020.
|
14.
|
Subsequent
Event – COVID-19
|
The COVID-19 outbreak in the United
States has caused business disruption through mandated and voluntary closing of a various businesses. While the disruption is currently
expected to be temporary, there is considerable uncertainty around the duration of the closings. Therefore, the Company expects
this matter to negatively impact its operating results in future periods. However, the related financial impact and duration cannot
be reasonably estimated at this time.
TSR, INC. AND SUBSIDIARIES