PART
III
|
|
Item
10.
|
Directors,
Executive Officers and Corporate Governance.
|
Directors
and Executive Officers
Set
forth below are the names, ages and positions and offices held with the Company of each director and executive officer of the Company.
Directors are classified as either Class I, Class II or Class III directors, with each class serving for a term of three (3) years. The
term of Class I directors is set to expire at the 2021 annual meeting of stockholders of the Company. The term of Class II directors
is set to expire at the 2023 annual meeting of stockholders, and the term of Class III directors is set to expire at the 2022 annual
meeting of stockholders. There is currently no Class III director on the Board of Directors of the Company (the “Board”).
Executive officers serve until such time as their successor is duly elected and qualifies.
|
Name
|
|
Age
|
|
Position
|
|
Year First Officer or Director
|
|
Bradley M. Tirpak(1)(2)(3)(4)
|
|
51
|
|
Chairman of the Board and Class I Director
|
|
2019
|
|
|
|
|
|
|
|
|
|
Thomas Salerno
|
|
53
|
|
Chief Executive Officer, President and Treasurer
|
|
2020
|
|
|
|
|
|
|
|
|
|
John G. Sharkey
|
|
62
|
|
Senior Vice President, Chief Financial Officer and Secretary
|
|
1990
|
|
|
|
|
|
|
|
|
|
H. Timothy Eriksen(1)(2)(3)(4)(5)(7)
|
|
52
|
|
Class I Director
|
|
2019
|
|
|
|
|
|
|
|
|
|
Robert Fitzgerald(1)(2)(3)(4)(6)
|
|
57
|
|
Class II Director
|
|
2019
|
|
(1)
|
Member
of the Compensation Committee of the Board.
|
|
(2)
|
Member
of the Audit Committee of the Board.
|
|
(3)
|
Member
of the Nominating Committee of the Board.
|
|
(4)
|
Member
of the Special Committee of the Board.
|
|
(5)
|
Mr.
Eriksen is the Chairman of the Audit Committee of the Board and the Chairman of the Nominating Committee of the Board.
|
|
(6)
|
Mr. Fitzgerald is the Chairman of the Compensation Committee of the Board and the Chairman of the Special Committee of the Board.
|
|
|
|
|
(7)
|
Lead independent director.
|
There
are no family relationships between any of the Company’s executive officers and directors. None of the Company’s directors
currently serves, or has served during the past five years, as a director of any company with a class of securities registered pursuant
to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an
investment company under the Investment Company Act of 1940. There is no arrangement between any director or director nominee and any
other person pursuant to which he was or is to be selected as a director or director nominee except that Mr. Eriksen and Mr. Tirpak were
nominated by Zeff Capital, L.P. as Class I directors at the Company’s 2018 annual meeting of stockholders held on October 22, 2019
in accordance with the terms and conditions of that certain settlement and release agreement, dated August 30, 2019, between the Company
and certain investor parties, including Zeff Capital, L.P., Zeff Holding Company, LLC and Daniel Zeff, QAR Industries, Inc. and Robert
Fitzgerald, and Fintech Consulting, LLC and Tajuddin Haslani (the “Settlement Agreement”). The terms of the Settlement Agreement
are more fully described in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September
3, 2019. Mr. Eriksen and Mr. Tirpak were subsequently elected as directors at the annual meeting of shareholders on October 22, 2019.
Biographical
Information
Mr.
Bradly M. Tirpak was elected as a Class I director of the Company at the 2018 annual meeting of stockholders on October 22,
2019. He was appointed as the Chairman of the Board on December 30, 2019. Mr. Tirpak is a professional investor with more than 25 years
of investing experience. Since September 2016, he has served as a portfolio manager and Managing Director at Palm Active Partners, LLC,
a private investment company. From October 2008 to August 2016, Mr. Tirpak served as Managing Member of Locke Partners, LLC, a private
investment company. He also previously served as a portfolio manager at Credit Suisse First Boston, Caxton Associates and Sigma Capital
Management and Chilton Investment Company. Mr. Tirpak served as a director at Applied Minerals, Inc., a publicly traded specialty
materials company, from April 2015 to March 2017, as a director at Flowgroup plc, an energy supply and services business in the United
Kingdom, from June 2017 to October 2018 and as a director at Birner Dental Management Services, Inc., a dental service organization,
from December 2017 to January 2019. Since December of 2014, Mr. Tirpak has served as a director of Full House Resorts, Inc., a publicly
traded gaming company, and since October of 2019 as a director of Liberated Syndication Inc., a publicly traded provider of podcast and
webhosting services, and since April of 2020 as a director of Barnwell Industries Inc., a publicly traded company engaged in real estate
development and oil and gas exploration. Mr. Tirpak also currently serves as trustee of The Halo Trust, the world’s largest humanitarian
mine clearance organization focused on clearing the debris of war currently operating in over 25 countries. Mr. Tirpak earned a B.S.M.E.
from Tufts University and an M.B.A. from Georgetown University.
The Company believes that Mr. Tirpak is a valuable member of the Board due to his knowledge and experience in investing, capital allocation
and corporate governance, as well as his experience serving on the boards of publicly traded companies.
Mr.
H. Timothy Eriksen was elected as a Class I director of the Company at the 2018 annual meeting of stockholders on October 22,
2019. He was appointed by the Board as the Chairman of the Audit Committee of the Board on December 30, 2019. Mr. Eriksen founded Eriksen
Capital Management, an investment advisory firm (“ECM”), in 2005. Mr. Eriksen is the President of ECM. Mr. Eriksen
is the Chief Executive Officer and Chief Financial Officer of, and since July 2015 has been a director of, Solitron Devices, Inc. (“Solitron”).
Solitron designs, develops, manufactures and markets solid-state semiconductor components and related devices primarily for the
military and aerospace markets. From April 2018 through August 2021, Mr. Eriksen was a director of Novation Companies, Inc. (“Novation”).
Novation owns Healthcare Staffing, Inc., which, among other activities, provides outsourced healthcare staffing and related services.
On August 31, 2021, Mr. Eriksen was elected to the Board of PharmChem, Inc., which offers a sweat patch device to test for drug abuse.
Prior to founding ECM, Mr. Eriksen worked for Walker’s Manual, Inc., a publisher of books and newsletters on micro-cap stocks,
unlisted stocks and community banks. Earlier in his career, Mr. Eriksen worked for Kiewit Pacific Co, a subsidiary of Peter Kiewit
Sons, as an administrative engineer on the Benicia Martinez Bridge project. Mr. Eriksen received a B.A. from The Master’s
University and an M.B.A. from Texas A&M University.
The
Company believes that Mr. Eriksen is a valuable member of the Board based on his strong business and financial background, and his experience
serving in leadership- and management-level roles with responsibility for formulating business and operational strategy.
Mr.
Robert Fitzgerald was appointed as a Class II director of the Company by the Board on December 30, 2019. Mr. Fitzgerald is a seasoned
business executive with over 25 years of experience helping companies grow. From 1999 through 2008, he served as the CEO of YDI/Proxim
Wireless, an early pioneer of the wireless networking equipment industry. From 2009 through 2010, he served as a consultant and later
the President of Ubiquiti Networks, now Ubiquiti, Inc. (NYSE: UI), a world leading provider of wireless and non-wireless networking equipment.
He currently serves as the CEO of QAR Industries, Inc., an investment company that holds interests in a portfolio of public and private
companies, including Antenna Products Corporation and SeeView Securities, Inc. Mr. Fitzgerald earned a B.A. in Economics and a J.D. from
the University of California, Los Angeles.
The
Company believes that Mr. Fitzgerald’s extensive experience in and knowledge of the information technology (“IT”) industry
and career serving in management-level positions for public and private companies make him a valuable member of the Board.
Thomas
Salerno was appointed President, Chief Executive Officer and Treasurer of the Company effective as of March 23, 2020. Since
2011, Mr. Salerno had served as the Managing Director of TSR Consulting Services, Inc., the Company’s IT consulting services subsidiary
and largest business unit. Mr. Salerno has over 20 years of experience in the technology consulting industry. Prior to joining the Company,
Mr. Salerno spent eight years at Open Systems Technology as Associate Director, two years as Vice President of Sales and Recruiting for
Versatech Consulting, and three years as an Account Representative for Robert Half Technologies. Mr. Salerno holds a Bachelor’s
Degree from Johnson and Wales University.
Mr.
John G. Sharkey was appointed Senior Vice President, Chief Financial Officer and Secretary of the Company effective June 1, 2019.
He had served as the Vice President, Finance, Controller and Secretary of the Company since 1990. Mr. Sharkey received a Master’s
Degree in Finance from Adelphi University and received his Certified Public Accountant certification from the State of New York. From
1987 until joining the Company in October 1990, Mr. Sharkey was Controller of a publicly-held electronics manufacturer. From 1984 to
1987, he served as Deputy Auditor of a commercial bank, having responsibility over the internal audit department. Prior to 1984, Mr.
Sharkey was employed by KPMG LLP as a senior accountant.
Delinquent
Section 16(a) Reports
Section
16(a) of the Exchange Act requires the Company’s officers and directors and persons who beneficially own more than ten percent
of a registered class of the Company’s equity securities to file reports of ownership and changes in ownership with the Securities
and Exchange Commission (the “SEC”). Officers, directors and greater than ten percent Stockholders are required by regulation
of the SEC to furnish the Company with copies of all Section 16(a) forms they file.
Based
solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no Forms
5 were required for those persons, the Company believes that all of its officers, directors and greater than ten percent beneficial owners
complied with all filing requirements applicable to them with respect to reports required to be filed by Section 16(a) of the Exchange
Act during the fiscal year ended May 31, 2021.
Code
of Ethics
The
Company has adopted a code of ethics that applies to all of its employees, including the chief executive officer and chief financial
and accounting officer. The code of ethics is available on the Investor Relations page of the Company’s website at www.tsrconsulting.com.
The Company intends to post on its website all disclosures that are required by law or NASDAQ Capital Market listing standards concerning
any amendments to, or waivers from, the Company’s code of ethics. Stockholders may request a free copy of the code of ethics by
writing to Corporate Secretary, TSR, Inc., 400 Oser Avenue, Suite 150, Hauppauge, NY 11788. Disclosure regarding any amendments to, or
waivers from, provisions of the code of ethics that apply to the Company’s directors or principal executive and financial officers
will be included in a Current Report on Form 8-K filed with the SEC within four business days following the date of the amendment
or waiver, unless website posting of such amendments or waivers is then permitted by the rules of the NASDAQ Capital Market and the SEC.
Audit
Committee
The
Audit Committee’s current members are H. Timothy Eriksen, Bradly M. Tirpak and Robert Fitzgerald. Each of the members of the Audit
Committee is an independent director under the rules of the NASDAQ Capital Market. The Audit Committee’s primary functions are
to assist the Board in monitoring the integrity of the Company’s financial statements and systems of internal control. The Audit
Committee has direct responsibility for the appointment, independence and performance of the Company’s independent auditors. The
Audit Committee is responsible for pre-approving any engagements of the Company’s independent auditors. The Audit Committee operates
under a written charter approved by the Board on September 16, 2004, and amended as of October 10, 2008. A copy of the Audit Committee
Charter is available on the Investor Relations page of the Company’s website at www.tsrconsulting.com.
The
Board has determined that H. Timothy Eriksen, the Chairman of the Audit Committee, Bradley M. Tirpak and Robert Fitzgerald all meet the
requirements of an “audit committee financial expert” as such term is defined in applicable regulations of the SEC.
|
|
Item
11.
|
Executive
Compensation.
|
Executive
Compensation
The
following table sets forth information concerning the annual and long-term compensation of the Named Executive Officers (as defined below)
for services in all capacities to the Company for the fiscal years ended May 31, 2021 and 2020. The Named Executive Officers for the
fiscal years ended May 31, 2021 and 2020 are (1) Thomas Salerno, our President and Chief Executive Officer; (2) John G. Sharkey, our
Senior Vice President and Chief Financial Officer; and (3) Christopher Hughes, who served as President and Chief Executive Officer prior
to his removal effective February 29, 2020 (the “Named Executive Officers”).
SUMMARY
COMPENSATION TABLE
|
Name
and Principal Position
|
|
|
Fiscal
Year
|
|
|
|
Salary
|
|
|
|
Bonus
|
|
|
|
Stock
Awards
|
|
|
|
Option
Awards
|
|
|
|
Non-Equity
Incentive Plan Compensation
|
|
|
|
Change
in Pension Value and Nonqualified Deferred Compensation Earnings
|
|
|
|
All
Other Compensation
|
|
|
|
Total
|
|
|
Thomas
Salerno,
|
|
|
2021
|
|
|
$
|
350,000
|
|
|
$
|
63,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
12,000
|
(5)
|
|
$
|
425,000
|
|
|
President
and Chief Executive Officer (1)
|
|
|
2020
|
|
|
$
|
317,000
|
(4)
|
|
$
|
25,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,000
|
(5)
|
|
$
|
345,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
G. Sharkey,
|
|
|
2021
|
|
|
$
|
310,000
|
|
|
$
|
40,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,000
|
(6)
|
|
$
|
356,000
|
|
|
Senior
Vice President and Chief Financial Officer (2)
|
|
|
2020
|
|
|
$
|
295,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,000
|
(6)
|
|
$
|
301,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
Hughes,
|
|
|
2021
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Former
President and Chief Executive Officer (3)
|
|
|
2020
|
|
|
$
|
300,000
|
(7)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
22,000
|
(8)
|
|
$
|
322,000
|
|
|
|
(1)
|
Thomas
Salerno was appointed as President and Chief Executive Officer of the Company effective March
23, 2020 and served as Acting CEO of the Company from January 27, 2020 to March 23, 2020
due to a leave of absence by Mr. Hughes during this time. He has also served as the Managing
Director of TSR Consulting Services, Inc., the Company’s IT consulting services subsidiary
and largest business unit, in fiscal year 2020.
|
|
|
(2)
|
John
G. Sharkey was appointed as Senior Vice President and Chief Financial Officer effective June
1, 2019. Previously, Mr. Sharkey served as Vice President, Finance.
|
|
|
(3)
|
Christopher
Hughes served as President and Chief Executive Officer of the Company in a portion of the
2020 fiscal year until he was removed from his officer positions effective February 29, 2020.
|
|
|
(4)
|
Represents
the sum of the pro-rated amount of an annual base salary of $300,000 for the period from
June 1, 2019 to January 26, 2020 and the pro-rated amount of an annual base salary of $350,000
for the period beginning on January 27, 2020.
|
|
|
(5)
|
Amount
related to Mr. Salerno’s personal use of an automobile provided by the Company.
|
|
|
(6)
|
Amounts
related to Mr. Sharkey’s personal use of an automobile provided by the Company.
|
|
|
(7)
|
Represents
the pro-rated amount of an annual base salary of $400,000 for the period ended on February
29, 2020.
|
|
|
(8)
|
Of
this amount, $4,000 related to Mr. Christopher Hughes’ personal use of an automobile
provided by the Company for the period ended on February 29, 2020; and $18,000 was paid to
Mr. Christopher Hughes for premiums for medical insurance benefits for the period ended on
February 29, 2020. The nature of certain additional expenses incurred by Mr. Hughes is currently
the subject of litigation and thus, the Company cannot determine at this time what, if any,
amount of such additional expenses may constitute All Other Compensation.
|
Outstanding
Equity Awards at Fiscal Year End
In
October of 2020, the Company adopted the TSR, Inc. 2020 Equity Incentive Plan (“the Plan”) which was subsequently approved
by the Shareholders at the combined 2019 and 2020 Annual Meeting held on November 19, 2020. The Plan allows for a maximum of 200,000
shares in the form of non-qualified stock options, incentive stock options, restricted awards, stock appreciation rights, cash awards,
performance share awards and other equity based awards to employees, consultants, directors and those individuals whom the Board determines
are reasonably expected to become employees, consultants or directors following the date of grant. The table below sets forth the outstanding
equity awards issued under the Plan as of May 31, 2021 with respect to the Named Executive Officers.
|
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of securities underlying
unexercised options (#) exercisable
|
|
Number of securities underlying
unexercised options (#) unexercisable
|
|
Equity incentive plan
awards: Number of securities underlying unexercised unearned options (#)
|
|
Option exercise price
($)
|
|
Option expirat-ion date
|
|
Number of shares or units
of stock that have not vested (#)
|
|
Market value of shares
or units of stock that have not vested ($)
|
|
Equity incentive plan
awards: Number of unearned shares, units or other rights that have not vested (#)
|
|
|
Equity incentive plan
awards: Market or payout value of unearned shares, units or other rights that have not vested ($)
|
|
Thomas Salerno
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
13,333
|
(1)(2)
|
|
$
|
108,131
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,000
|
(1)(3)
|
|
$
|
40,550
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,000
|
(1)(4)
|
|
$
|
40,550
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8,333
|
(5)(3)
|
|
$
|
67,581
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8,334
|
(5)(4)
|
|
$
|
67,589
|
|
|
John G. Sharkey
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8,333
|
(1)(2)
|
|
$
|
67,581
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3,333
|
(1)(3)
|
|
$
|
27,031
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3,334
|
(1)(4)
|
|
$
|
27,039
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,000
|
(5)(3)
|
|
$
|
40,550
|
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5,000
|
(5)(4)
|
|
$
|
40,550
|
|
|
(1)
|
Representing
shares of common stock under time vesting stock awards, issued on January 28, 2021, which
fully vest on the applicable vesting date, so long as the grantee remains an employee of
the Company.
|
|
|
|
|
(2)
|
The
vesting date for these shares is January 28, 2022.
|
|
|
|
|
(3)
|
The
vesting date for these shares is January 28, 2023.
|
|
|
|
|
(4)
|
The
vesting date for these shares is January 28, 2024.
|
|
|
|
|
(5)
|
Representing
shares of common stock under performance vesting stock awards, issued on January 28, 2021,
which, so long as the grantee remains an employee of the Company, will (i) fully vest upon
the satisfaction of the “performance condition” defined in the grant agreements,
which relates to the market price of the Company’s common stock over a stated period
of time, and (ii) expire on January 28, 2023 and 2024, respectively, if the performance condition
is not satisfied. The “performance condition” entails the common stock share
price trading above the applicable share target for 30 consecutive trading days between the
issue date and the expiration date. If the applicable share target (a) is reached for 30
consecutive days before the vesting date and (b) the stock is above the applicable share
target on the vesting date, the award shares shall vest on the vesting date. If the applicable
share target is reached after the vesting and before the expiration date, the shares vest
upon the stock trading for 30 consecutive days above the applicable share target.
|
Employment
Agreements and Arrangements
On
November 3, 2020, TSR entered into an Employment Agreement with its Chief Executive Officer, Thomas C. Salerno (the “CEO Employment
Agreement”) and an Amended and Restated Employment Agreement with its Chief Financial Officer, John Sharkey (the “CFO Employment
Agreement”, collectively with the CEO Employment Agreement, the “Employment Agreements”), both effective as of November
2, 2020. The CFO Employment Agreement superseded the Amended and Restated Employment Agreement dated May 24, 2019 between the Company
and Mr. Sharkey in its entirety.
Employment
Term and Position. The term of employment of each of Messrs. Salerno and Sharkey will be three years from November 2, 2020 to November
2, 2023, and any continued employment will be on an “at-will” basis. During their respective terms of employment, Mr. Salerno
will serve as Chief Executive Officer of the Company and Mr. Sharkey will serve as Chief Financial Officer of the Company.
Base
Salary, Annual Bonus Equity Compensation and Other Benefits. Pursuant to their Employment Agreements, Messrs. Salerno and Sharkey
are entitled to annual base salaries of $350,000 and $310,000, respectively, as may be adjusted by the Board. In addition, Messrs. Salerno
and Sharkey will be eligible to receive annual cash bonuses up to 35% and 25% of their respective base salaries, respectively, based
on the Company’s financial information and established by the Board, upon the condition that Messrs. Salerno and Sharkey are active
employees on the last day of the related fiscal year and there are no publicly reportable audit findings for the fiscal year. Any annual
bonus will be paid in two installments, i.e., 50% of the estimated annual bonus will be advanced within 30 days of the end of the fiscal
year and the balance equal to the final annual bonus determined by the Board minus the estimate advanced after the filing of the Company’s
10-K for the fiscal year. Messrs. Salerno and Sharkey will also be eligible to receive equity awards under the Company’s equity
incentive plan, certain benefits including vacation, group medical health, group insurance and similar benefits, a monthly car allowance
of $1,800 and $800, respectively, and reimbursement of approved business expenses.
Termination
Entitlement and Severance. In the event that the Company terminates Mr. Salerno or Mr. Sharkey’s employment (a) for “Cause”
(as defined in their Employment Agreements) or (b) upon Mr. Salerno or Mr. Sharkey’s death or disability or, (c) if Mr. Salerno
or Mr. Sharkey terminates his employment for any reason other than due to material breach by the Company as described in scenario (y)
below, then the Company’s sole obligations to Mr. Salerno or Mr. Sharkey shall be: (i) the payment of any accrued but unpaid base
salary, (ii) the payment of any approved but not reimbursed business expenses and (iii) compliance with the Company’s benefits
plans (collectively, the “Termination Entitlement”). If Mr. Salerno or Mr. Sharkey is terminated for “Cause”
or resigns for any reason prior to the date the annual bonus is paid out in its entirety, he shall forfeit any and all annual bonus including
returning any advanced bonus portion paid.
In
the event that (x) the Company terminates Mr. Salerno or Mr. Sharkey’s employment for reasons other than the above-enumerated reasons
and in Mr. Sharkey’s case, if he is forced to relocate more than 25 miles from his current residence and he resigns due to this
reason, both subject to the Company or its affiliate’s offer of comparable employment meeting certain conditions or, (y) Mr. Salerno
or Mr. Sharkey provides notice to the Company of its material breach of its obligations under his Employment Agreement and the Company
fails to cure such breach within the required period of time, in addition to the Termination Entitlement, Mr. Salerno or Mr. Sharkey
will be entitled to a severance payment consisting of (i) one year of base salary, (ii) one year of car allowance and (iii) 50% of the
annual bonus awarded in the fiscal year prior to the employee’s termination if his employment is terminated without Cause (collectively,
the “Severance Payment”) as well as a health benefit comprising continued participation in the Company’s group health
plan for one year for Mr. Salerno and until March 31, 2025 for Mr. Sharkey, respectively, subject to certain conditions provided in their
respective Employment Agreements (the “Health Benefit”).
If,
prior to the expiration of their respective term of employment and within 12 months following a Change in Control (as defined in their
Employment Agreements), Mr. Salerno or Mr. Sharkey is subject to termination other than for Cause, then the Company will pay “Change
in Control Severance Benefits” consisting of (i) a payment equivalent to one year of base salary (as in effect immediately prior
to the Change in Control, or the date of the termination of the employee’s employment, whichever is greater), (ii) 100% of the
employee’s annual bonus as paid in the previous year, (iii) taxable cash payments for COBRA coverage for 18 months and (iv) acceleration
of vesting of 100% of the employee’s unvested equity award compensation.
Pursuant
to the Employment Agreements, the Company’s obligation to pay any Severance Payment, Health Benefit, Change in Control Severance
Benefits (collectively, “Severance Payments”) or any related benefits to which Mr. Salerno or Mr. Sharkey is not automatically
entitled under the law will be subject to the employee’s execution of an effective release of claims in favor of the Company, its
affiliates and their related persons, in a form to be provided by the Company. In addition, in the event that Mr. Salerno or Mr. Sharkey
breaches the restrictive covenants under his Employment Agreement, any remaining Severance Payments due to him will be forfeited.
Restrictive
Covenants. Pursuant to their respective Employment Agreements, Messrs. Salerno and Sharkey are subject to certain restrictive covenants
including (i) protection of confidential information, (ii) non-disparagement, (iii) non-solicitation of employees for a period of 24
months after the termination of employment, (iv) noncompetition for a period of 12 months after the termination of employment and (v)
non-solicitation of the Company’s clients for a period of 24 months after the termination of employment.
Director
Compensation
The
following table sets forth information concerning the compensation of the non-officer directors of the Company who served as directors
during the fiscal year ended May 31, 2021. Directors of the Company who also serve as executive officers of the Company are not paid
any compensation for their service as directors. There are currently no executive officers also serving as directors.
|
Name
|
|
Fees Earned Or Paid In Cash
|
|
Stock Awards
|
|
Option Awards
|
|
Non-Equity Incentive Plan Compensation
|
|
Change in Pension Value and Nonqualified Deferred Compensation
Earnings
|
|
All Other Compensation
|
|
Total
|
|
Bradley M. Tirpak (1)
|
|
$
|
20,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H. Timothy Eriksen (1)
|
|
$
|
20,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Fitzgerald (2)
|
|
$
|
20,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
20,000
|
|
|
(1)
|
Elected
to serve as a director of the Company at the annual meeting of stockholders on October 22, 2019.
|
|
|
|
|
(2)
|
Appointed
to serve as a director of the Company by the Board on December 30, 2019.
|
For
their service, members of the Board who are not officers of the Company received a pro-rated amount of an annual retainer of $10,000,
payable quarterly, based on period of time they respectively served during fiscal 2021.
Bradley
M. Tirpak received an additional annual retainer of $10,000 for his service as Chairman of the Board during fiscal 2021.
H.
Timothy Eriksen received an additional annual retainer of $10,000 for his service as Chairman of the Audit Committee during fiscal 2021.
Mr. Eriksen did not receive any additional retainer for his service as Chairman of the Nominating Committee of the Board or lead independent
director during fiscal 2021.
Robert
Fitzgerald received an additional annual retainer of $10,000 for his service as Chairman of the Compensation Committee during fiscal
2021. Mr. Fitzgerald did not receive any additional retainer for his service as Chairman of the Special Committee of the Board during
fiscal 2021.
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.
|
Securities Authorized for Issuance Under Equity Compensation Plans
The following table presents information with
respect to the Plan as of May 31, 2021:
|
Plan Category
|
|
Number of securities to
be issued upon
exercise of outstanding
options, warrants and
rights (1)
(a)
|
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
|
|
|
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
|
|
|
Equity compensation plans approved by security holders
|
|
|
-
|
|
|
$
|
-
|
|
|
|
22,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
|
-
|
|
|
|
-
|
|
|
|
22,500
|
|
|
|
(1)
|
The securities available under the Plans for issuance
and issuable pursuant to exercises of outstanding options may be adjusted in the event of a change in outstanding stock by reason of
stock dividend, stock splits, reverse stock splits, etc.
|
Principal Stockholders and Security Ownership of Management
The outstanding voting stock
of the Company as of September 27, 2021 consisted of 1,962,062 shares of Common Stock. The table below sets forth the beneficial ownership
of the Common Stock of the Company’s directors, executive officers and persons known to the Company to be the beneficial owner of
more than five percent (5%) of the outstanding shares of Common Stock as of September 27, 2021:
|
|
|
Beneficial
Ownership of
Common
Stock
|
|
|
Name
of Beneficial Owner – Directors, Officers and 5% Stockholders
|
|
No.
of Shares (1)
|
|
|
|
|
|
Bradley M. Tirpak (2)(3)
|
|
|
43,446
|
(4)
|
|
|
2.2
|
%
|
|
H. Timothy Eriksen (2)(3)
|
|
|
-
|
(5)
|
|
|
-
|
|
|
Thomas Salerno (2)(6)
|
|
|
-
|
|
|
|
-
|
|
|
John G. Sharkey (2)(7)
|
|
|
6,750
|
|
|
|
0.3
|
%
|
|
Robert Fitzgerald (2)(3)(8)
|
|
|
518,884
|
(9)
|
|
|
26.4
|
%
|
|
Philip J. LaBlonde (10)
|
|
|
135,000
|
|
|
|
6.9
|
%
|
|
QAR Industries, Inc. (8)
|
|
|
498,884
|
|
|
|
25.4
|
%
|
|
Zeff Capital, L.P. (11)
|
|
|
437,774
|
|
|
|
22.3
|
%
|
|
Zeff Holding Company, LLC (11)
|
|
|
437,774
|
(12)
|
|
|
22.3
|
%
|
|
Daniel Zeff (11)
|
|
|
437,774
|
(12)
|
|
|
22.3
|
%
|
|
All Directors and Executive Officers as a Group (5 persons)
|
|
|
569,080
|
|
|
|
29.0
|
%
|
|
|
(1)
|
In accordance with Rule 13d-3 of the Exchange Act, a person is deemed to be the beneficial owner, for
purposes of this table, of any shares of the Company’s Common Stock if such person has voting or investment power with respect to
such shares. This includes shares of Common Stock (a) subject to options exercisable within sixty (60) days, and (b) (1) owned by a person’s
spouse, (2) owned by other immediate family members who share a household with such person, or (3) held in trust or held in retirement
accounts or funds for the benefit of the such person, over which shares the person named in the table may possess voting and/or investment
power. Unless otherwise stated herein, each beneficial owner has sole voting power and sole investment power.
|
|
|
(2)
|
This executive officer and/or director maintains a mailing address at 400 Oser Avenue, Suite 150, Hauppauge,
New York 11788.
|
|
|
(3)
|
Such person currently serves as a director of the Company.
|
|
|
(4)
|
Based on the Form 4 filed by Bradley M. Tirpak with the SEC on May 28, 2021. The amount does not include
30,000 unvested restricted stock awards.
|
|
|
(5)
|
The amount does not include 30,000 unvested restricted stock awards.
|
|
|
(6)
|
Mr. Thomas Salerno served as the Managing Director of TSR Consulting Services, Inc., the Company’s
IT consulting services subsidiary and largest business unit, since 2011. He was appointed as President and Chief Executive Officer of
the Company effective March 23, 2020 and served as Acting CEO of the Company from January 27, 2020 to March 23, 2020. The amount does
not include 40,000 unvested restricted stock awards.
|
|
|
(7)
|
John G. Sharkey served as the Vice President, Finance, Controller and Secretary of the Company until June
1, 2019. Effective June 1, 2019, Mr. Sharkey was appointed Senior Vice President, Chief Financial Officer and Secretary of the Company.
The amount does not include 25,000 unvested restricted stock awards.
|
|
|
(8)
|
Based on the Form 4 filed by Robert Fitzgerald with the SEC on June 17, 2021. Robert Fitzgerald is the
President of QAR Industries, Inc. and the reporting persons maintain a mailing address at 101 SE 25th Avenue, Mineral Wells,
Texas 76067. The amount does not include 30,000 unvested restricted stock awards.
|
|
|
(9)
|
Represents the same shares owned by QAR Industries, Inc.
|
|
|
(10)
|
Based on a Schedule 13D filed by Philip J. LaBlonde with the SEC on August 12, 2016. Based on the Schedule
13D, Philip J. LaBlonde maintains a mailing address at 15120 Honors Circle, Carmel, Indiana 46033.
|
|
|
(11)
|
Based on an Amendment to Schedule 13D filed by Zeff Capital, L.P., Zeff Holding Company, LLC and Daniel
Zeff with the SEC on August 17, 2020. Based on the Amendment to Schedule 13D, Zeff Capital, L.P. is the owner of the 437,774 shares reported
on the Amendment; Zeff Holding Company, LLC is the general partner of Zeff Capital, L.P.; Daniel Zeff is the sole manager of Zeff Holding
Company, LLC; and all of the reporting persons maintain a mailing address at 885 Sixth Avenue, New York, New York 10001.
|
|
|
(12)
|
Represents the same shares owned by Zeff Capital, L.P.
|
|
|
Item 13.
|
Certain Relationships and Related Transactions and Director Independence.
|
Related Party Transactions
The Audit Committee is responsible
for reviewing and approving all transactions between the Company and any related party pursuant to the Audit Committee’s charter.
Except as described below, the Company was not a participant in any transaction since the beginning of the 2021 fiscal year in which any
related person had a direct or indirect material interest and in which the amount involved exceeded the lesser of $120,000 or 1% of the
average of the Company’s total assets at the end of each of the Company’s two prior fiscal years, and no such transactions
are currently proposed.
Regina Dowd, who served as
a director of the Company during fiscal 2019 until her resignation as a director on August 27, 2018, was also employed as a sales executive
of the Company for which she was paid compensation in the amount of $149,000 for the 2019 fiscal year. The Company and Ms. Dowd entered
into an employment agreement dated as of July 1, 2019, pursuant to which the Company employs Ms. Dowd as an Account Manager for a three-year
term expiring on June 30, 2022, and on an at-will basis thereafter, for an annual base salary of $60,000 and eligibility to earn commissions
pursuant to an incentive compensation/commission plan.
On January 5, 2021, the members
of the Board of Directors of TSR other than Robert Fitzgerald approved providing a waiver to QAR Industries, Inc. for its contemplated
acquisition of shares owned by Fintech Consulting LLC under the Company’s prior Amended and Restated Rights Agreement so that a
distribution date would not occur as a result of the acquisition. QAR Industries, Inc. and Fintech Consulting LLC were both principal
stockholders of the Company, each owning more than 5% of the Company’s outstanding common stock prior to the consummation of the
acquisition. Robert Fitzgerald is the President and majority shareholder of QAR Industries, Inc. The other directors of the Company are
not affiliated with QAR Industries, Inc.
On February 3, 2021, the acquisition
was completed and QAR Industries, Inc. purchased 348,414 shares of TSR common stock from Fintech Consulting LLC at a price of $7.25 per
share. At the same time, Bradley M. Tirpak, Chairman of TSR, purchased 27,586 shares of TSR common stock from Fintech Consulting LLC at
a price of $7.25 per share.
On April 1, 2020, the Company
entered into a binding term sheet (“Term Sheet”) with Zeff Capital, L.P. (“Zeff”) pursuant to which it 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 Agreement. In exchange for certain
mutual releases, 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 $300,000 payment due on June 30, 2021 was paid by the due date. The agreement also has protections
to defer such payment dates so that the debt covenants with the Company’s lender are not breached. On August 13, 2020, the Company,
Zeff, Zeff Holding Company, LLC and Daniel Zeff entered into a settlement agreement to reflect these terms. Any installment payment which
is deferred as permitted above will accrue interest at the prime rate plus 3.75%, and Zeff shall thereby have the option to convert such
deferred amounts (plus accrued interest if any) into shares of the Company’s stock. The Company accrued $818,000, the estimated
present value of these payments using an effective interest rate of 5%, in the quarter ended February 29, 2020, as the events relating
to the expense occurred prior to such date.
Board of Directors and Director Independence
The Board of Directors for
the 2021 fiscal year consisted of Bradley M. Tirpak (Chairman), H. Timothy Eriksen and Robert Fitzgerald.
Bradley M. Tirpak, H. Timothy
Eriksen and Robert Fitzgerald qualify as “independent directors” under the NASDAQ rules.
|
|
Item 14.
|
Principal Accounting Fees and Services.
|
Audit Fees
The aggregate fees billed
by CohnReznick LLP for professional services related to the audit of the Company’s annual consolidated financial statements and
the review of the interim consolidated condensed financial statements included in the Company’s quarterly reports on Form 10-Q for
the fiscal years ended May 31, 2021 and 2020 were $102,000 and $78,000, respectively.
Audit-Related Fees
In the fiscal year ended May 31, 2021, fees billed by CohnReznick for
audit-related services were $24,000 related to the acquisition of Geneva Consulting Group, Inc. There were no fees billed by CohnReznick
LLP for audit-related services for the fiscal years ended May 31, 2020.
Tax Fees
There were no fees billed
by CohnReznick LLP for tax services during the fiscal years ended May 31, 2021 or 2020.
All Other Fees
There were no fees billed by CohnReznick LLP related to any other non-audit
services for the fiscal years ended May 31, 2021 or 2020.
Policy on Pre-Approval of Audit and Permissible
Non-Audit Services
The Audit Committee is responsible
for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. In accordance with
its charter, the Audit Committee approves, in advance, all audit and permissible non-audit services to be performed by the independent
registered public accounting firm. Such approval process ensures that the independent registered public accounting firm does not provide
any non-audit services to the Company that are prohibited by law or regulation.