UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

☒ Quarterly Report Pursuant to Section 13 or

15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended February 28, 2022

 

☐ Transition report Pursuant to Section 13 or

15(d) of the Securities Exchange Act of 1934

 

For the transition period from __ to __

 

Commission File Number: 001-38838

 

TSR, Inc. 

 

(Exact name of registrant as specified in its charter)

 

Delaware   13-2635899
(State or other jurisdiction of   (I.R.S. Employer Identification No.)
Incorporation or organization)    

 

400 Oser Avenue, Hauppauge, NY 11788

 

(Address of principal executive offices)

 

631-231-0333

 

(Registrant’s telephone number)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, par value $0.01 per share   TSRI   NASDAQ Capital Market

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

 

Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated Filer Accelerated Filer
Non-Accelerated Filer Smaller Reporting Company
Emerging Growth Company    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☒ No

 

As of April 7, 2022, there were 2,146,448 shares of common stock, par value $0.01 per share, issued and outstanding. Additionally, there were 120,834 unvested shares of restricted common stock awarded under the TSR, Inc. 2020 Equity Incentive Plan, subject to certain vesting criteria described herein.

 

 

 

 

 

 

TSR, INC. AND SUBSIDIARIES

INDEX

 

    Page
Number
     
Part I. Financial Information:  
     
  Item 1. Financial Statements: 1
       
    Condensed Consolidated Balance Sheets – February 28, 2022 and May 31, 2021 1
       
    Condensed Consolidated Statements of Operations – For the three months and nine months ended February 28, 2022 and February 28, 2021  2
       
    Condensed Consolidated Statements of Equity – For the three months and nine months ended February 28, 2022 and February 28, 2021 3
       
    Condensed Consolidated Statements of Cash Flows – For the nine months ended February 28, 2022 and February 28, 2021  5
       
    Notes to Condensed Consolidated Financial Statements 6
       
  Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 17
       
  Item 3. Quantitative and Qualitative Disclosures about Market Risk. 22
       
  Item 4. Controls and Procedures 22
       
Part II. Other Information 23
       
  Item 1. Legal proceedings 23
       
  Item 1A. Risk Factors 24
       
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 24
       
  Item 3. Defaults upon Senior Securities. 24
       
  Item 4. Mine Safety Disclosures. 24
       
  Item 5. Other Information. 24
       
  Item 6. Exhibits 25
     
Signatures 26

 

i

 

 

Part I. Financial Information

 

Item 1. Financial Statements

 

TSR, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

    February 28,
2022
    May 31,
2021
 
ASSETS   (Unaudited)     (see Note 1)  
Current Assets:            
Cash and cash equivalents   $ 6,486,205     $ 7,370,646  
Marketable securities     38,160       45,696  
Accounts receivable, net of allowance for doubtful accounts of $181,000     12,419,021       9,660,742  
Other receivables     37,990       32,508  
Prepaid expenses     297,425       253,694  
Prepaid and recoverable income taxes     50,394       8,671  
Total Current Assets     19,329,195       17,371,957  
Equipment and leasehold improvements, net of accumulated depreciation and amortization of $172,973 and $155,006     155,240       116,238  
Other assets     46,259       47,663  
Right-of-use assets     713,413       895,573  
Intangible assets, net     1,543,500       1,671,750  
Goodwill     785,883       785,883  
Deferred income taxes     940,000       941,000  
                 
Total Assets   $ 23,513,490     $ 21,830,064  
                 
LIABILITIES AND EQUITY                
Current Liabilities:                
Accounts payable and other payables   $ 1,446,416     $ 2,083,140  
Accrued expenses and other current liabilities     5,152,259       4,519,416  
Advances from customers     1,188,402       1,170,500  
Credit facility     59,799       92,527  
Operating lease liabilities - current     249,688       309,731  
Legal settlement payable - current     590,266       298,370  
Total Current Liabilities     8,686,830       8,473,684  
                 
Operating lease liabilities, net of current portion     537,698       707,369  
Legal settlement payable, net of current portion    
-
      568,739  
SBA Paycheck Protection Program loan payable    
-
      6,659,220  
Total Liabilities     9,224,528       16,409,012  
                 
Commitments and contingencies    
 
     
 
 
                 
Equity:                
TSR, Inc.:                
Preferred stock, $1 par value, authorized 500,000 shares; none issued    
-
     
-
 
Common stock, $.01 par value, authorized 12,500,000 shares; issued 3,298,549 and
3,114,163 shares, 2,146,448 and 1,962,062 outstanding
    32,986       31,142  
Additional paid-in capital     7,562,278       5,339,200  
Retained earnings     20,138,790       13,540,822  
      27,734,054       18,911,164  
                 
Less: Treasury stock, 1,152,101 shares, at cost     13,514,003       13,514,003  
Total TSR, Inc. Equity     14,220,051       5,397,161  
                 
Noncontrolling interest     68,911       23,891  
Total Equity     14,288,962       5,421,052  
                 
Total Liabilities and Equity   $ 23,513,490     $ 21,830,064  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

Page 1

 

 

TSR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months and Nine Months Ended February 28, 2022 and February 28, 2021

(UNAUDITED)

 

    Three Months Ended
February 28,
    Nine Months Ended
February 28,
 
    2022     2021     2022     2021  
Revenue, net   $ 24,383,217     $ 17,160,494     $ 71,112,784     $ 47,743,077  
                                 
Cost of sales     20,590,154       14,414,611       59,461,322       39,831,025  
Selling, general and administrative expenses     3,829,819       3,084,495       11,628,284       8,414,414  
      24,419,973       17,499,106       71,089,606       48,245,439  
Income (loss) from operations     (36,756 )     (338,612 )     23,178       (502,362 )
                                 
Other income (expense):                                
Interest expense, net     (19,526 )     (51,297 )     (81,510 )     (155,270 )
Gain on PPP Loan and interest forgiveness    
-
     
-
      6,735,246      
-
 
Unrealized gain (loss) on marketable securities, net     (1,200 )     9,944       (7,536 )     (1,720 )
Income (loss) before income taxes     (57,482 )     (379,965 )     6,669,378       (659,352 )
Benefit from income taxes     (14,000 )     (79,000 )     (1,000 )     (114,000 )
                                 
Consolidated net income (loss)     (43,482 )     (300,965 )     6,670,378       (545,352 )
Less: Net income attributable to noncontrolling interest     3,129       3,964       72,410       9,335  
Net income (loss) attributable to TSR, Inc.   $ (46,611 )   $ (304,929 )   $ 6,597,968     $ (554,687 )
Basic net income (loss) per TSR, Inc. common share   $ (0.02 )   $ (0.16 )   $ 3.33     $ (0.28 )
Diluted net income (loss) per TSR, Inc. common share   $ (0.02 )   $ (0.16 )   $ 3.19     $ (0.28 )
Basic weighted average number of common shares outstanding     2,027,494       1,962,062       1,983,146       1,962,062  
Diluted weighted average number of common shares outstanding     2,027,494       1,962,062       2,066,976       1,962,062  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

Page 2

 

 

TSR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Three Months and Nine Months Ended February 28, 2022 and February 28, 2021

(UNAUDITED)

 

    Shares of
common
stock
    Common
stock
    Additional
paid-in
capital
    Retained
earnings
    Treasury
stock
    TSR, Inc.
equity
    Non-
controlling
interest
    Total
equity
 
Balance at May 31, 2020     3,114,163     $ 31,142     $ 5,102,868     $ 14,141,796     $ (13,514,003 )   $ 5,761,803     $ 28,380     $ 5,790,183  
                                                                 
Net income attributable to noncontrolling interest     -      
-
     
-
     
-
     
-
     
-
      5,923       5,923  
                                                                 
Net loss attributable to TSR, Inc.     -      
-
     
-
      (3,000 )    
-
      (3,000 )    
-
      (3,000 )
                                                                 
Balance at Aug. 31, 2020     3,114,163     $ 31,142     $ 5,102,868     $ 14,138,796     $ (13,514,003 )   $ 5,758,803     $ 34,303     $ 5,793,106  
                                                                 
Net loss attributable to noncontrolling interest     -      
-
     
-
     
-
     
-
     
-
      (552 )     (552 )
                                                                 
Net loss attributable to TSR, Inc.     -      
-
     
-
      (246,758 )    
-
      (246,758 )    
-
      (246,758 )
                                                                 
Balance at Nov. 30, 2020     3,114,163     $ 31,142     $ 5,102,868     $ 13,892,038     $ (13,514,003 )   $ 5,512,045     $ 33,751     $ 5,545,796  
                                                                 
Net income attributable to noncontrolling interest     -      
-
     
-
     
-
     
-
     
-
      3,964       3,964  
                                                                 
Non-cash stock compensation     -      
-
      59,083      
-
     
-
      59,083      
-
      59,083  
                                                                 
Net loss attributable to TSR, Inc.     -      
-
     
-
      (304,929 )    
-
      (304,929 )    
-
      (304,929 )
                                                                 
Balance at Feb. 28, 2021     3,114,163     $ 31,142     $ 5,161,951     $ 13,587,109     $ (13,514,003 )   $ 5,266,199     $ 37,715     $ 5,303,914  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

Page 3

 

 

TSR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Three Months and Nine Months Ended February 28, 2022 and February 28, 2021

(UNAUDITED)

 

    Shares of
common
stock
    Common
stock
    Additional
paid-in
capital
    Retained
earnings
    Treasury
stock
    TSR, Inc.
equity
    Non-
controlling
interest
    Total
equity
 
Balance at May 31, 2021     3,114,163     $ 31,142     $ 5,339,200     $ 13,540,822     $ (13,514,003 )   $ 5,397,161     $ 23,891     $ 5,421,052  
                                                                 
Net income attributable to noncontrolling interest     -      
-
     
-
     
-
     
-
     
-
      57,492       57,492  
                                                                 
Distribution to noncontrolling interest     -      
-
     
-
     
-
     
-
     
-
      (1,750 )     (1,750 )
Non-cash stock compensation     -      
-
      177,249      
-
     
-
      177,249      
-
      177,249  
                                                                 
Net income attributable to TSR, Inc.     -      
-
     
-
      6,401,543      
-
      6,401,543      
-
      6,401,543  
                                                                 
Balance at Aug. 31, 2021     3,114,163     $ 31,142     $ 5,516,449     $ 19,942,365     $ (13,514,003 )   $ 11,975,953     $ 79,633     $ 12,055,586  
                                                                 
Net income attributable to noncontrolling interest     -      
-
     
-
     
-
     
-
     
-
      11,789       11,789  
                                                                 
Distribution to noncontrolling interest     -      
-
     
-
     
-
     
-
     
-
      (25,640 )     (25,640 )
                                                                 
Non-cash stock compensation     -      
-
      177,249      
-
     
-
      177,249      
-
      177,249  
                                                                 
Net income attributable to TSR, Inc.     -      
-
     
-
      243,036      
-
      243,036      
-
      243,036  
                                                                 
Balance at Nov. 30, 2021     3,114,163     $ 31,142     $ 5,693,698     $ 20,185,401     $ (13,514,003 )   $ 12,396,238     $ 65,782     $ 12,462,020  
                                                                 
Net income attributable to noncontrolling interest     -      
-
     
-
     
-
     
-
     
-
      3,129       3,129  
                                                                 
Proceeds of sales of stock through ATM     142,500       1,425       1,819,665      
-
      -       1,821,090      
-
      1,821,090  
                                                                 
Non-cash stock compensation     -      
-
      141,238      
-
     
-
      141,238      
-
      141,238  
                                                                 
Vested stock awards and taxes paid     41,886       419       (92,323 )    
-
      -       (91,904 )    
-
      (91,904 )
                                                                 
Net loss attributable to TSR, Inc.     -      
-
     
-
      (46,611 )    
-
      (46,611 )    
-
      (46,611 )
                                                                 
Balance at Feb. 28, 2022     3,298,549     $ 32,986     $ 7,562,278     $ 20,138,790     $ (13,514,003 )   $ 14,220,051     $ 68,911     $ 14,288,962  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

Page 4

 

 

TSR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Nine Months Ended February 28, 2022 and February 28, 2021
(UNAUDITED)

 

    Nine Months Ended
February 28,
 
    2022     2021  
Cash flows from operating activities:            
Consolidated net income (loss)   $ 6,670,378     $ (545,352 )
Adjustments to reconcile consolidated net income (loss) to net cash (used in) provided by operating activities:                
Depreciation and amortization     170,259       95,183  
Unrealized loss on marketable securities, net     7,536       1,720  
Deferred income taxes     1,000       (183,000 )
Non-cash lease recovery     (47,554 )     (34,785 )
Non-cash Right-of-use asset impairment charge    
-
      136,599  
Forgiveness of principal and accrued interest on SBA PPP loan     (6,735,246 )    
-
 
Non-cash stock-based compensation expense     495,736       59,083  
                 
Changes in operating assets and liabilities:                
Accounts receivable     (2,758,279 )     (1,036,758 )
Other receivables     (5,482 )     (24,568 )
Prepaid expenses     (43,731 )     (142,664 )
Prepaid and recoverable income taxes     (41,723 )     57,642  
Other assets     1,404       (12,119 )
Accounts payable, other payables, accrued expenses and other current liabilities     72,145       2,121,404  
Advances from customers     17,902       (11,402 )
Legal settlement payable     (276,843 )     29,465  
                 
Net cash (used in) provided by operating activities     (2,472,498 )     510,448  
                 
Cash flows from investing activities:                
Purchase of Geneva Consulting Group, Inc., net of cash acquired of $241,946    
-
      (3,100,114 )
Purchases of equipment and leasehold improvements     (81,011 )     (33,315 )
                 
Net cash used in investing activities     (81,011 )     (3,133,429 )
                 
Cash flows from financing activities:                
Net repayments on Credit Facility     (32,728 )     (473,496 )
Net proceeds from ATM stock sales     1,821,090      
-
 
Tax withholding from vested stock awards     (91,904 )    
-
 
Distribution to noncontrolling interest     (27,390 )    
-
 
                 
Net cash provided by (used in) financing activities     1,669,068       (473,496 )
                 
Net decrease in cash and cash equivalents     (884,441 )     (3,096,477 )
Cash and cash equivalents at beginning of period     7,370,646       9,730,022  
                 
Cash and cash equivalents at end of period   $ 6,486,205     $ 6,633,545  
                 
Supplemental disclosures of cash flow data:                
Income taxes paid   $ 41,000     $ 12,000  
Non-cash investing and financing activities:                
Right-of-use asset and operating lease liability   $
-
    $ 846,000  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

Page 5

 

 

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2022

(Unaudited)

 

1. Basis of Presentation

 

The accompanying condensed consolidated interim financial statements include the accounts of TSR, Inc. and its subsidiaries. Unless otherwise stated or the context otherwise requires, the terms “we,” “us,” “our,” and the “Company” refer to TSR, Inc. and its subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation. The condensed balance sheet as of May 31, 2021, 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 (the “SEC”). 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 28, 2022 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, 2022. 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, 2021.

 

2. Net Income (Loss) Per Common Share

 

Basic net income (loss) per common share is computed by dividing net income (loss) available to common stockholders of TSR by the weighted average number of common shares outstanding during the reporting period, excluding the effects of any potentially dilutive securities. During the quarter ended February 28, 2021, the Company granted time and performance vesting restricted stock awards under its 2020 Equity Incentive Plan (see Note 17 for further information). Diluted earnings per share gives effect to all potentially dilutive common shares outstanding during the reporting period. The common stock equivalents associated with these restricted stock awards of 84,293 and 83,830 in the three months and nine months ended February 28, 2022 have only been included for dilutive shares outstanding for the nine months ended February 28, 2022 since there was a loss for the three month period ended February 28, 2022.

 

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 28, 2022 and May 31, 2021:

 

    February 28,
2022
    May 31,
2021
 
             
Cash in banks   $ 5,941,186     $ 7,317,517  
Money market funds     545,019       53,129  
                 
    $ 6,486,205     $ 7,370,646  

 

Page 6

 

 

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2022

(Unaudited)

 

4. Fair Value of Financial Instruments

 

Accounting Standards Codification (“ASC”) 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”), defines fair value, establishes a framework for measuring fair value under accounting principles generally accepted in the United States of America (“GAAP”) and provides for expanded disclosure about fair value measurements. ASC 820-10 applies to all other accounting pronouncements that require or permit fair value measurements.

 

The Company determines or calculates the fair value of financial instruments using quoted market prices in active markets when such information is available or using appropriate present value or other valuation techniques, such as discounted cash flow analyses, incorporating available market discount rate information for similar types of instruments while estimating for non-performance and liquidity risk. These techniques are significantly affected by the assumptions used, including the discount rate, credit spreads and estimates of future cash flows.

 

Assets and liabilities typically recorded at fair value on a non-recurring basis to which ASC 820-10 applies include:

 

non-financial assets and liabilities initially measured at fair value in an acquisition or business combination, and
     
long-lived assets measured at fair value due to an impairment assessment under ASC 360-10-15, Impairment or Disposal of Long-Lived Assets.

 

This topic defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a three-level hierarchy, which encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820-10 requires that assets and liabilities recorded at fair value be classified and disclosed in one of the following three categories:

 

Level 1 - inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.
     
Level 2 - inputs utilize other-than-quoted prices that are observable, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs such as interest rates and yield curves that are observable at commonly quoted intervals.
     
Level 3 - inputs are unobservable and are typically based on the Company’s own assumptions, including situations where there is little, if any, market activity. Both observable and unobservable inputs may be used to determine the fair value of positions that are classified within the Level 3 classification.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the Company classifies such financial assets or liabilities based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

 

ASC Topic 825, Financial Instruments, requires disclosure of the fair value of certain financial instruments. For cash and cash equivalents, accounts receivable, accounts and other payables, accrued liabilities and advances from customers, the amounts presented in the condensed consolidated financial statements approximate fair value because of the short-term maturities of these instruments.

 

5. Marketable Securities

 

The Company has characterized its investments in marketable securities, based on the priority of the inputs used to value the investments, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and lowest priority to unobservable inputs (Level 3). If the inputs used to measure the investments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

Investments recorded in the accompanying 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.

 

Page 7

 

 

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2022

(Unaudited)

 

The following are the major categories of assets measured at fair value on a recurring basis as of February 28, 2022 and May 31, 2021 using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2) and significant unobservable inputs (Level 3):

 

February 28, 2022   Level 1     Level 2     Level 3     Total  
Equity Securities   $ 38,160     $
-
    $
-
    $ 38,160  
                                 
May 31, 2021    

Level 1

     

Level 2

     

Level 3

     

Total

 
Equity Securities   $ 45,696     $ -     $ -     $ 45,696  

 

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 marketable securities at February 28, 2022 and May 31, 2021 are summarized as follows:

 

February 28, 2022   Amortized
Cost
    Gross
Unrealized
Holding
Gains
    Gross
Unrealized
Holding
Losses
    Recorded
Value
 
Equity Securities   $ 16,866     $ 21,294     $
-
    $ 38,160  

 

May 31, 2021   Amortized
Cost
    Gross
Unrealized
Holding
Gains
    Gross
Unrealized
Holding
Losses
    Recorded
Value
 
Equity Securities   $ 16,866     $ 28,830     $
-
    $ 45,696  

 

The Company’s investments in marketable securities consist primarily of investments in 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.

 

Page 8

 

 

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2022

(Unaudited)

 

6. Other Matters

 

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 except for the litigation disclosed elsewhere in the report, including Notes 9, 10, 16 and 19 to the Condensed Consolidated Financial Statements and in the section titled “Item 1, Legal Proceedings” in Part II of this report.

 

7. Leases

 

The Company leases the space for its three offices in New York City, Hauppauge and New Jersey. 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 are in our condensed consolidated balance sheets.

 

The Company’s leases for its three offices are classified as operating leases.

 

The lease agreements for New York City, Hauppauge and New Jersey expire on August 31, 2022, December 31, 2023 and May 31, 2027, respectively, and do not include any renewal options. During the fiscal year ended May 31, 2021, the Company extended its lease in Hauppauge, entered into a lease in a new location for its New Jersey office expiring May 31, 2027 and entered into an agreement to sublease the space in New York City expiring August 31, 2022. Due to the fact that the future sublease cash inflows will be less than the carrying value of the corresponding right-of-use asset, the Company recorded a right-of-use asset impairment charge of $136,599 in the quarter ended November 30, 2020.

 

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 nine months ended February 28, 2022 and 2021, the Company’s operating lease expense for these leases was $240,000 and $352,000, respectively.

 

Future minimum lease payments under non-cancellable operating leases as of February 28, 2022 were as follows:

 

Twelve Months Ending February 28,      
2023   $ 295,519  
2024     203,248  
2025     123,085  
2026     126,162  
2027     129,316  
Thereafter     32,527  
         
Total undiscounted operating lease payments     909,857  
Less imputed interest     122,471  
         
Present value of operating lease payments   $ 787,386  

 

Page 9

 

 

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2022

(Unaudited)

 

The following table sets forth the right-of-use assets and operating lease liabilities as of February 28, 2022:

 

Assets      
Right-of-use assets, net   $ 713,413  
         
Liabilities        
Current operating lease liabilities   $ 249,688  
Long-term operating lease liabilities     537,698  
         
Total operating lease liabilities   $ 787,386  

 

The weighted average remaining lease term for the Company’s operating leases is 2.9 years.

 

8. Credit Facility

 

On November 27, 2019, TSR closed on a revolving credit facility (the “Credit Facility”) pursuant to a Loan and Security Agreement with Access Capital, Inc. (the “Lender”) that initially provided 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. The maximum amount that may now 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 28, 2022 was 3.25%, indicating an interest rate of 5.0% on the line of credit. The initial term of the Credit Facility is five years, which shall automatically renew for successive five-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 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. The Company was in compliance with all applicable covenants at February 28, 2022.

 

As of February 28, 2022, the net borrowings outstanding against this line of credit facility were $60,000. The amount the Company has borrowed fluctuates and, at times, it has utilized the maximum amount of $2,000,000 available under the facility to fund its payroll and other obligations.

 

Page 10

 

 

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2022

(Unaudited)

 

9. 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 dated August 9, 2018 (the “Employment Agreement”). Despite having already been terminated from employment, 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 Hughes alleged that he was terminated without cause or in the alternative that he resigned for good reason and therefore, pursuant to the Employment Agreement, Hughes sought severance pay in the amount of $1,000,000 and reasonable costs and attorney’s fees. The Company denied Plaintiff’s allegations in their entirety and filed counterclaims against Plaintiff for (1) declaratory relief; (2) breach of confidence/non-compete agreement; (3) declaratory and injunctive relief – confidence/non-compete; (4) tortious interference with current and prospective contractual and economic relations; (5) breach of fiduciary duty; (6) misappropriation of trade secrets; (7) declaratory and injunctive relief – unfair competition; and (8) conversion. 

 

In October 2021, the Company and Hughes agreed through mediation to settle this matter. In order to avoid lengthy and costly litigation and discovery expenses, the Company has paid Hughes $705,000 to settle all claims. After adjusting for insurance reimbursement, the Company accrued a charge of $580,000 to selling, general and administrative expenses in the quarter ended August 31, 2021 and nine months ended February 28, 2022.

 

10. 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 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 and Release Agreement, dated as of August 30, 2019, by and between the Company, Zeff and certain other parties. In exchange for certain 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 $300,000 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 June 30, 2021 was paid during the quarter ended August 31, 2021. 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. The estimated present value of the remaining payments is $590,000 at February 28, 2022.

 

11. COVID-19

 

The COVID-19 outbreak in the United States has caused business disruption including mandated and voluntary closing of various businesses. While the disruption is currently expected to be temporary, there is considerable uncertainty around the duration of the closings and the impact of the pandemic on our business. Therefore, the Company expects this matter to continue to negatively impact its operating results in future periods. The full financial impact and duration cannot be reasonably estimated at this time.

 

Page 11

 

 

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2022

(Unaudited)

 

12. Paycheck Protection Program Loan

 

On April 15, 2020, the Company received loan proceeds of $6,659,220 under the Paycheck Protection Program (the “PPP Loan”). The Paycheck Protection Program (“PPP”) was established under the congressionally-approved Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration (“SBA”). The PPP Loan to the Company was made through JPMorgan Chase Bank, N.A., a national banking association.

 

In March 2021, the Company submitted a PPP Loan Forgiveness application to the SBA through the PPP Lender. On July 7, 2021, the Company received notification from the PPP Lender that the SBA approved the Company’s application for forgiveness of the entire principal amount of the PPP Loan plus accrued interest. The PPP Lender will apply the forgiveness amount to satisfy the PPP Loan. The Company has no further obligations with respect to the PPP Loan. The Company recognized “Other Income” of $6,735,246 in the quarter ended August 31, 2021 and nine months ended February 28, 2022 related to the forgiveness of the loan principal and accrued interest.

 

13. Geneva Consulting Group Acquisition

 

On September 1, 2020, the Company completed the acquisition of all of the outstanding stock of Geneva Consulting Group, Inc., a New York corporation (“Geneva”) and provider of temporary and permanent information technology personnel based in Port Washington, New York. The stock of Geneva was purchased from the three shareholders of Geneva (the “Sellers”), none of which had, or will have following the acquisition, a material relationship with the Company or its affiliates.

 

The purchase price for the shares of Geneva was comprised of the following: (i) $1,452,000 in cash paid to Sellers at the closing of the acquisition, (ii) an amount of $748,000, which was equal to the amount of Geneva’s loan under the PPP that was not assumed by the Company and was substantially forgiven by the SBA, (iii) an amount up to $300,000, originally payable paid as an earnout payment in part in February 2021 and in part in August 2021 (the “Earnout Payments”), (iv) bonus payments payable in $10,000 increments, (v) $747,000 for the net working capital of Geneva as of closing and (vi) other purchase price adjustments of which $36,000 has been paid to date. Any Earnout Payments and bonus payments were to be determined based upon the achievement of certain criteria relating to the number the Company’s contractors working full-time at the Company’s client locations on such dates.

 

The initial Earnout Payments and bonus payment liability was valued at its fair value using an option pricing based approach with a risk-neutral framework using Black Scholes due to the option-like nature of the earnout payment structure (Level 3 of the fair value hierarchy). The Earnout Payments were revalued quarterly prior to the resolution discussed below, using a present value approach and any resulting increase or decrease was recorded into selling, general and administrative expenses. Any changes in the amount of the actual results and forecasted scenarios could impact the fair value. Significant judgment was employed in determining the appropriateness of the assumptions used in calculating the fair value of the Earnout Payments as of the acquisition date and subsequent period ends.

 

On March 17, 2021, the Company entered into an agreement with the Sellers’ representatives pursuant to which the parties agreed to resolve certain interpretive differences regarding the Sellers’ entitlement to the bonus payments described above. Pursuant to this agreement, and in full satisfaction of the Company’s obligations for deferred payments under the purchase agreement for the Geneva acquisition, the Sellers’ representative acknowledged receipt of the first Earnout Payment in the amount of $100,000, the parties agreed that the Company would make aggregate bonus payments to the Sellers’ representatives in the amount of $260,000, and the Company agreed to instruct the escrow agent to release to the Sellers’ representatives the second Earnout Payment in the amount of $200,000. All amounts relating to the Earnout Payments and bonus payments that had not been paid as of the date of the agreement were either paid by the Company or released by the escrow agent on March 18, 2021. This agreement resulted in a charge to selling, general and administrative expenses of $210,000 in the quarter ended February 28, 2021. No further earnout or bonus amounts can be earned or will be paid subsequent to March 18, 2021.

 

Page 12

 

 

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2022

(Unaudited)

 

The acquisition was accounted for as an acquisition of a business in accordance with the acquisition method of accounting. The acquired assets and assumed liabilities were recorded at their fair values. The Company determined the fair values with the assistance of valuations performed by an independent third-party specialist.

 

The Company incurred approximately $498,000 in legal fees, business broker fees, valuation services, accounting fees and other expenses to complete the Geneva acquisition. Included in this amount is additional bonus payments to the Sellers of $210,000 related to the March 17, 2021 agreement discussed above. All acquisition related costs have been expensed as incurred and included in selling, general and administrative expenses for the nine months ended February 28, 2021.

 

The following table summarizes the components of the purchase price at fair values at September 1, 2020:

 

Cash consideration paid to date   $ 2,983,264  
Estimated earnout and other liabilities     358,796  
Total purchase price   $ 3,342,060  

 

The following table summarizes the allocation of purchase price at estimated fair values at September 1, 2020:

 

Cash   $ 241,946  
Accounts receivable     778,930  
Prepaid expenses     5,249  
Intangible assets (see Note 15)     1,800,000  
Goodwill     785,883  
Accrued expenses     (269,948 )
Net assets   $ 3,342,060  

 

The following unaudited pro forma financial information presents the combined operating results of the Company and Geneva as if the acquisition had occurred as of the beginning of the earliest period presented. Pro forma data is subject to various assumptions and estimates and is presented for informational purposes only. This pro forma data does not purport to represent or be indicative of the consolidated operating results that would have been reported had the transaction been completed as described herein, and the data should not be taken as indicative of future operating results.

 

Unaudited pro forma financial information assuming the acquisition of Geneva as of June 1, 2020 is presented in the following table (in thousands):

 

    Nine Months Ended  
    February 28, 2021  
       
Revenue   $ 49,180  
Net loss   $ (779 )
Diluted loss per share   $ (0.40 )

 

Page 13

 

 

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2022

(Unaudited)

 

14. Goodwill

 

Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. Goodwill is not amortized but is subject to impairment analysis at least once annually or more frequently upon the occurrence of an event or when circumstances indicate that the carrying amount of a unit is greater than its fair value. The annual test of goodwill was performed as of September 1, 2021 and no impairment was found.

 

15. Intangible Assets

 

The Company amortizes its intangible assets over their estimated useful lives and will review these assets for impairment when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If intangible assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair market value.

 

Intangible assets are as follows:

 

    May 31,           February 28,  
    2021     Amortization     2022  
Database (estimated life 5 years)   $ 195,500     $ 34,500     $ 161,000  
Non-compete agreement (estimated life 2 years)     6,250       3,750       2,500  
Trademark (estimated life 3 years)     45,000       15,000       30,000  
Customer relationships (estimated life 15 years)     1,425,000       75,000       1,350,000  
Total   $ 1,671,750     $ 128,250     $ 1,543,500  

 

No instances of triggering events or impairment indicators were identified at February 28, 2022.

 

16. Related Party Transactions

 

On January 5, 2021, the members of the Board of Directors of the Company 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 then existing rights agreement (which covered a now non-existent class of Class A preferred stock) so that a distribution date would not occur under such agreement 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 transaction was completed and QAR Industries, Inc. purchased 348,414 shares of TSR’s 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’s common stock from Fintech Consulting LLC at a price of $7.25 per share. The foregoing transaction is currently the subject of litigation due to a complaint filed by Fintech Consulting LLC on December 1, 2021. For more information about the foregoing complaint and litigation, please see Note 19 to the Condensed Consolidated Financial Statements and, section titled “Item 1, Legal Proceedings” in Part II of this report and the Company’s Current Report on Form 8-K filed with the SEC on December 21, 2021.

 

Page 14

 

 

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2022

(Unaudited)

 

17. Stock-based Compensation Expense

 

On January 28, 2021, the Company granted 108,333 shares in time vesting restricted stock awards and 69,167 shares in time and performance vesting restricted stock awards to officers, directors and key employees under the TSR, Inc. 2020 Equity Incentive Plan (the “Plan”). The time vesting shares vest in tranches at the one, two and three-year anniversaries of the grants (“service condition”). These shares had a grant date fair value of $826,000 based on the closing price of TSR’s common stock on the day prior to the grants. The associated compensation expense is recognized on a straight-line basis over the time between grant date and the date the shares vest (the “service period”). The time and performance vesting shares also vest in tranches at or after the two- and three-year anniversaries of the grants. The performance condition is defined in the grant agreements and relates to the market price of the Company’s common stock over a stated period of time (“market condition”). These shares had a grant date value of $262,000 based on the closing price of TSR common shares on the day prior to the grants discounted by an estimated forfeiture rate of 40-60%. The Company took into account the historical volatility of its common stock to assess the probability of satisfying the market condition. The associated compensation expense is recognized on a straight-line basis between the time the achievement of the performance criteria is deemed probable and the time the shares may vest. The market condition for the shares that vest on the two-year anniversary was met in October 2021. During the three and nine months ended February 28, 2022, $141,000 and $496,000, respectively, has been record as stock-based compensation expense and included in selling, general and administrative expenses. As of February 28, 2022, there is approximately $356,000 of unearned compensation expense that will be expensed through February 2024; 142,666 stock awards expected to vest; 56,666 awards vested to date, of which 14,780 were forfeited to pay taxes applicable to the stock awards.

 

18. Common Stock

 

Our certificate of incorporation, as amended, authorizes the issuance of up to 12,500,000 shares of common stock, $0.01 par value per share.

 

On October 8, 2021, the Company filed an automatic shelf registration statement on Form S-3 (File No. 333-260152) (the “2021 TSRI Shelf”) which contains (i) a base prospectus, which covers the offering, issuance and sale by the Company of up to $5,000,000 in the aggregate of shares of common stock from time to time in one or more offerings; and (ii) a sales agreement prospectus, which covers the offering, issuance and sale by the Company of up to $4,167,000 in the aggregate of shares of common stock that may be issued and sold from time to time under an at-the-market sales agreement (the “2021 ATM”) by and between the Company and A.G.P./Alliance Global Partners, as sales agent (the “2021 Agent”). The $4,167,000 of common stock that may be offered, issued and sold under the sales agreement prospectus is included in the $5,000,000 of shares of common stock that may be offered, issued and sold by the Company under the base prospectus. Upon termination of the sales agreement, any portion of the $4,167,000 included in the sales agreement prospectus that is not sold pursuant to the sales agreement will be available for sale in other offerings pursuant to the base prospectus and if no shares are sold under the agreement, the full $4,167,000 of securities may be sold in other offerings pursuant to the base prospectus. Under the 2021 ATM, we pay the 2021 Agent a commission rate equal to 3.0% of the gross sales price per share of all shares sold through the 2021 Agent under the sales agreement.

 

During the three months and nine months ended February 28, 2022, we sold an aggregate of 142,500 shares of common stock pursuant to the 2021 ATM for total gross proceeds of $1,965,623 at an average selling price of $13.79 per share, resulting in net proceeds of approximately $1,821,090 after deducting $144,533 in commissions and other transactions costs.

 

The 2021 TSRI Shelf is currently our only active shelf-registration statement. We may offer TSR common stock registered under the 2021 TSRI Shelf from time to time in response to market conditions or other circumstances if we believe such a plan of financing is in the best interests of our stockholders. We believe that the 2021 TSRI Shelf provides us with the flexibility to raise additional capital to finance our operations as needed. However, there is no assurance we will be successful in doing so.

 

Page 15

 

 

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

February 28, 2022

(Unaudited)

 

19. Pending Legal Issue

 

On December 1, 2021, Fintech Consulting LLC filed a complaint against the Company in the United States District Court for the District of New Jersey. The named Defendants in the complaint are the Company, QAR Industries, Inc., a shareholder of TSR (“QAR”), Robert E. Fitzgerald, a director and shareholder of TSR and the President, director and a shareholder of QAR (“Fitzgerald”), and Bradley Tirpak, a shareholder and the chairman of the board of directors of TSR (“Tirpak”). The complaint purports to assert claims against the Defendants under state law and Section 10(b) of the Exchange Act in connection with a Share Purchase Agreement, dated January 31, 2021, by and between the Plaintiff, as the seller of shares of TSR’s common stock, and QAR and Tirpak, as the purchasers of such shares (the “SPA”). The plaintiff seeks (i) judgment declaring the transactions represented by the SPA null and avoid and returning the shares; (ii) judgment cancelling the SPA and returning the shares in exchange for return of the purchase price; (iii) judgement unwinding the transaction; (iv) compensatory damages; (v) punitive damages; (vi) pre-judgment interest; (vii) costs of suit including attorneys’ fees; and (viii) such other relief as the Court may find appropriate. See Note 16 to the Condensed Consolidated Unaudited Financial Statements elsewhere in this report and the Company’s Current Report on Form 8-K filed with the SEC on December 21, 2021 for more information.

 

The Company believes the action described above to be without merit and intends to vigorously defend its interests. However, the Company may incur significant additional legal expenses as it pursues a vigorous defense against this action.

 

While the Company believes the action to be without merit, no assurances can be given as to: (i) the outcome of this or other legal proceedings and (ii) the related impact of an unanticipated adverse outcome of these proceedings on the Company’s financial condition, results of operations or near-term liquidity.

 

Page 16

 

 

TSR, INC. AND SUBSIDIARIES

MANAGEMENT DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and the notes to such financial statements.

 

Forward-Looking Statements

 

Certain statements contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations, including statements concerning the Company’s plans, future prospects and the Company’s future cash flow requirements are forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projections in the forward-looking statements due to known and unknown risks and uncertainties, including but not limited to the following: the statements concerning the success of the Company’s plan for growth, both internally and through the previously announced pursuit of suitable acquisition candidates; the successful integration of announced and completed acquisitions and any anticipated benefits therefrom; the impact of adverse economic conditions on client spending which has a negative impact on the Company’s business, which includes, but is not limited to, the current adverse economic conditions associated with the COVID-19 global health pandemic and the associated financial crisis, stay-at-home and other orders, which may significantly reduce client spending and which may have a negative impact on the Company’s business; risks relating to the competitive nature of the markets for contract computer programming services; the extent to which market conditions for the Company’s contract computer programming services will continue to adversely affect the Company’s business; the concentration of the Company’s business with certain customers; uncertainty as to the Company’s ability to maintain its relations with existing customers and expand its business; the impact of changes in the industry, such as the use of vendor management companies in connection with the consultant procurement process; the increase in customers moving IT operations offshore; the Company’s ability to adapt to changing market conditions; the risks, uncertainties and expense of the legal proceedings to which the Company is a party; and other risks and uncertainties set forth in the Company’s filings with the Securities and Exchange Commission. The Company is under no obligation to publicly update or revise forward-looking statements.

 

Results of Operations

 

The following table sets forth, for the periods indicated, certain financial information derived from the Company’s condensed consolidated statements of operations. There can be no assurance that trends in operating results will continue in the future.

 

Three months ended February 28, 2022 compared with three months ended February 28, 2021:

 

    (Dollar amounts in thousands)
Three Months Ended
 
    February 28,
2022
    February 28,
2021
 
    Amount     % of
Revenue
    Amount     % of
Revenue
 
Revenue, net   $ 24,383       100.0 %   $ 17,160       100.0 %
Cost of sales     20,590       84.4 %     14,415       84.0 %
Gross profit     3,793       15.6 %     2,745       16.0 %
Selling, general and administrative expenses     3,830       15.7 %     3,084       18.0 %
Loss from operations     (37 )     (0.1 )%     (339 )     (2.0 )%
Other expense, net     (21 )     (0.1 )%     (41 )     (0.2 )%
Loss before income taxes     (58 )     (0.2 )%     (380 )     (2.2 )%
Benefit from income taxes     (14 )     (0.0 )%     (79 )     (0.4 )%
Consolidated net loss     (44 )     (0.2 )%     (301 )     (1.8 )%
Less: Net income attributable to noncontrolling interest     3       0.0 %     4       0.0 %
Net loss attributable to TSR, Inc.   $ (47 )     (0.2 )%   $ (305 )     (1.8 )%

 

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TSR, INC. AND SUBSIDIARIES

 

Revenue

 

Revenue consists primarily of revenue from computer programming consulting services. Revenue for the quarter ended February 28, 2022 increased approximately $7,223,000 or 42.1% from the quarter ended February 28, 2021, primarily due to new business development, organic growth and expanded activity with Geneva clients. The average number of consultants on billing with customers increased from 486 for the quarter ended February 28, 2021 to 721 for the quarter ended February 28, 2022. There were 358 and 443 IT contractors at February 28, 2021 and 2022, respectively; while there were 128 and 278 clerical and administrative contractors at February 28, 2021 and 2022, respectively.

 

We experienced terminated assignments and a decrease in demand for new assignments during fiscal 2021 due to the COVID-19 pandemic, which led to the lower number of consultant placements during the year and negatively impacted the Company’s revenues. Additionally, the COVID-19 pandemic created operational challenges. The start of certain new assignments was delayed in the quarter ended February 28,2021 due to delays in obtaining necessary clearances, as many of the agencies required to be contacted in obtaining the information needed for background checks have been fully or partially closed. By the end of the first quarter of fiscal 2021, the Company had used 100% of the $6,659,000 proceeds from the PPP Loan (as defined in Note 12 to the Condensed Consolidated Unaudited Financial Statements elsewhere in this report) it received in April 2020 to fund its payroll and other allowable expenses, which was fully forgiven in July 2021. The use of these proceeds allowed the Company to avoid certain salary reductions, furloughs and layoffs of employees during the covered period.

 

Cost of Sales

 

Cost of sales for the quarter ended February 28, 2022 increased approximately $6,175,000 or 42.8% to $20,590,000 from $14,415,000 in the prior year period. The increase in cost of sales resulted primarily from an increase in consultants placed with customers, primarily from the new business development activity, organic growth and expanded activity with Geneva clients. Cost of sales as a percentage of revenue increased from 84.0% in the quarter ended February 28, 2021 to 84.4% in the quarter ended February 28, 2022. The percentage increase in cost of sales for the quarter ended February 28, 2022 as compared to the prior year period (42.8% increase) was higher than the percentage increase in revenue for the quarter ended February 28, 2022 as compared to the prior year period (42.1% increase), causing a decrease in gross margins percent.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses consist primarily of expenses relating to account executives, technical recruiters, facilities costs, management and corporate overhead. These expenses increased approximately $746,000 or 24.2% from $3,084,000 in the quarter ended February 28, 2021 to $3,830,000 in the quarter ended February 28, 2022. The increase in these expenses primarily resulted from an additional $465,000 in selling, general and administrative expenses for the Geneva accounts. The Company has invested in developing both on shore and offshore recruiting teams to support the potential of the Geneva accounts. The Company also has invested in expanding the on shore and offshore recruiting teams for the existing TSR accounts. Additionally, the Company incurred non-cash compensation expenses of $141,000 in the current quarter related to the Plan. Selling, general and administrative expenses, as a percentage of revenue decreased to 15.7% in the quarter ended February 28, 2022 from 18.0% in the quarter ended February 28, 2021.

 

Other Expense

 

Other expense for the quarter ended February 28, 2022 resulted primarily from net interest expense of approximately $20,000 and a mark-to-market loss of approximately $1,000 on the Company’s marketable equity securities. Other expense for the quarter ended February 28, 2021 resulted primarily from net interest expense of $51,000 and a mark-to-market gain of approximately $10,000 on the Company’s marketable equity securities. The decrease in interest expense is primarily attributed to the forgiveness of the PPP Loan principal and interest in July 2021.

 

Income Tax Benefit

 

The income tax benefit included in the Company’s results of operations for the quarters ended February 28, 2022 and 2021 reflect the Company’s estimated effective tax rate for the fiscal years ending May 31, 2022 and 2021, respectively. These rates resulted in a benefit of 24.1% for the quarter ended February 28, 2022 and a benefit of 20.8% for the quarter ended February 28, 2021. The difference between the rates is that for fiscal 2022 a full year profit is projected and in fiscal 2021 a taxable loss was projected and the expected tax benefit was reduced by certain non-deductible expenses.

 

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TSR, INC. AND SUBSIDIARIES

 

Net Loss Attributable to TSR

 

Net loss attributable to TSR was approximately $47,000 in the quarter ended February 28, 2022 compared to a net loss of $305,000 in the quarter ended February 28, 2021. The reduction in net loss in the current quarter was primarily attributable to the increase in revenue resulting from the increase in consultants on billing with customers.

 

Impact of Inflation and Changing Prices

 

For the quarters ended February 28, 2022 and 2021, inflation and changing prices did not have a material effect on the Company’s revenue or income from continuing operations.

 

Nine months ended February 28, 2022 compared with nine months ended February 28, 2021:

 

    (Dollar amounts in thousands)
Nine Months Ended
 
    February 28, 
2022
    February 28, 
2021
 
    Amount     % of
Revenue
    Amount     % of
Revenue
 
Revenue, net   $ 71,113       100.0 %   $ 47,743       100.0 %
Cost of sales     59,462       83.6 %     39,831       83.4 %
Gross profit     11,651       16.4 %     7,912       16.6 %
Selling, general and administrative expenses     11,628       16.3 %     8,414       17.6 %
Income (loss) from operations     23       0.1 %     (502 )     (1.0 )%
Other income (expense), net     6,646       9.3 %     (157 )     (0.3 )%
Income (loss) before income taxes     6,669       9.4 %     (659 )     (1.4 )%
Benefit from income taxes     (1 )     0.0 %     (114 )     0.2 %
Consolidated net income (loss)     6,670       9.4 %     (545 )     (1.2 )%
Less: Net income attributable to noncontrolling interest     72       0.1 %     10       0.0 %
Net income (loss) attributable to TSR, Inc.   $ 6,598       9.3 %   $ (555 )     (1.2 )%

 

Revenue

 

Revenue consists primarily of revenue from computer programming consulting services. Revenue for the nine months ended February 28, 2022 increased approximately $23,370,000 or 48.9% from the nine months ended February 28, 2021, primarily due to new business development, organic growth and expanded activity with Geneva clients. The average number of consultants on billing with customers increased from 443 for the nine months ended February 28, 2021 to 698 for the nine months ended February 28, 2022. There were 318 and 424 IT contractors at February 28, 2021 and 2022, respectively; while there were 125 and 274 clerical and administrative contractors at February 28, 2021 and 2022, respectively.

 

We experienced terminated assignments and a decrease in demand for new assignments during fiscal 2021 due to the COVID-19 pandemic, which led to the lower number of consultant placements during the year and negatively impacted the Company’s revenues. Additionally, the COVID-19 pandemic created operational challenges. The start of certain new assignments was delayed in the nine months ended February 28, 2021 due to delays in obtaining necessary clearances, as many of the agencies required to be contacted in obtaining the information needed for background checks have been fully or partially closed. By the end of the first quarter of fiscal 2021, the Company had used 100% of the $6,659,000 proceeds from the PPP Loan (as defined in Note 12 to the Condensed Consolidated Unaudited Financial Statements elsewhere in this report) it received in April 2020 to fund its payroll and other allowable expenses, which was fully forgiven in July 2021. The use of these proceeds allowed the Company to avoid certain salary reductions, furloughs and layoffs of employees during the covered period.

 

Page 19

 

 

TSR, INC. AND SUBSIDIARIES

 

Cost of Sales

 

Cost of sales for the nine months ended February 28, 2022 increased approximately $19,631,000 or 49.3% to $59,462,000 from $39,831,000 in the prior year period. The increase in cost of sales resulted primarily from an increase in consultants placed with customers, primarily from the new business development activity, organic growth and expanded activity with Geneva clients. Cost of sales as a percentage of revenue increased from 83.4% in the nine months ended February 28, 2021 to 83.6% in the nine months ended February 28, 2022. The percentage increase in cost of sales for the nine months ended February 28, 2022 as compared to the prior year period (49.3% increase) was higher than the percentage increase in revenue for the nine months ended February 28, 2022 as compared to the prior year period (48.9% increase), causing a decrease in gross margin percent.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses consist primarily of expenses relating to account executives, technical recruiters, facilities costs, management and corporate overhead. These expenses increased approximately $3,214,000 or 38.2% from $8,414,000 in the nine months ended February 28, 2021 to $11,628,000 in the nine months ended February 28, 2022. The increase in these expenses primarily resulted from an additional $1,884,000 in selling, general and administrative expenses for the Geneva accounts and a charge of $580,000 for the legal settlement with the former Chief Executive Officer. The Company has invested in developing both on shore and offshore recruiting teams to support the potential of the Geneva accounts. The Company has also invested in expanding the on shore and offshore recruiting teams for the existing TSR accounts. Additionally, the Company incurred non-cash compensation expenses of $496,000 in the current nine-month period related to the Plan. Selling, general and administrative expenses, as a percentage of revenue decreased to 16.3% in the nine months ended February 28, 2022 from 17.6% in the nine months ended February 28, 2021.

 

Other Income (Expense)

 

Other income for the nine months ended February 28, 2022 resulted primarily from the forgiveness of principal and interest on the PPP Loan of $6,735,000, offset by net interest expense of approximately $81,000 and a mark-to-market loss of approximately $8,000 on the Company’s marketable equity securities. Other expense for the nine months ended February 28, 2021 resulted primarily from net interest expense of $155,000 and a mark-to-market loss of approximately $2,000 on the Company’s marketable equity securities.

 

Income Tax Benefit

 

The income tax benefit included in the Company’s results of operations for the nine months ended February 28, 2022 and 2021 reflect the Company’s estimated effective tax rate for the fiscal years ending May 31, 2022 and 2021, respectively. These rates resulted in a benefit of less than 1% for the nine months ended February 28, 2022 and a benefit of 17.3% for the nine months ended February 28, 2021. The effective rate for the nine months ended February 28, 2022 is low because of the non-taxable gain on the forgiveness of the PPP Loan principal and accrued interest combined with low taxable income.

 

Net Income (Loss) Attributable to TSR

 

Net income attributable to TSR was approximately $6,598,000 in the nine months ended February 28, 2022 compared to a net loss of $555,000 in the nine months ended February 28, 2021. The net income in the current period was primarily attributable to the forgiveness of principal and accrued interest on the PPP Loan.

 

Impact of Inflation and Changing Prices

 

For the nine months ended February 28, 2022 and 2021, inflation and changing prices did not have a material effect on the Company’s revenue or income from continuing operations.

 

Liquidity and Capital Resources

 

The Company’s cash was sufficient to enable it to meet its liquidity requirements during the nine months ended February 28, 2022. The Company expects that its cash and cash equivalents and the Company’s Credit Facility pursuant to a Loan and Security Agreement with the Lender will be sufficient to provide the Company with adequate resources to meet its liquidity requirements for the 12-month period following the issuance of these financial statements. Utilizing its accounts receivable as collateral, the Company has secured this Credit Facility to increase its liquidity as necessary. As of February 28, 2022, the net borrowings outstanding against this Credit Facility were approximately $60,000. The amount the Company has borrowed fluctuates and, at times, it has utilized the maximum amount of $2,000,000 available under this facility to fund its payroll and other obligations. The Company was in compliance with all covenants under the Credit Facility as of February 28, 2022 and through the date of this filing. Additionally, in April 2020, the Company secured a PPP Loan in the amount of $6,659,000 to meet its obligations in the face of potential disruptions in its business operations and the potential inability of its customers to pay their accounts when due. As of August 31, 2020, the Company had used 100% of the PPP Loan funds to fund its payroll and for other allowable expenses under the PPP Loan. The use of these funds allowed the Company to avoid certain salary reductions, furloughs and layoffs of employees during the period. The Company applied for PPP Loan forgiveness and its application for forgiveness was accepted and approved; the PPP Loan and accrued interest were fully forgiven in July 2021.

 

Page 20

 

 

TSR, INC. AND SUBSIDIARIES

 

At February 28, 2022, the Company had working capital (total current assets in excess of total current liabilities) of approximately $10,642,000, including cash and cash equivalents and marketable securities of $6,524,000 as compared to working capital of $8,898,000, including cash and cash equivalents and marketable securities of $7,416,000 at May 31, 2021.

 

Net cash flow of approximately $2,472,000 was used in operations during the nine months ended February 28, 2022 as compared to $510,000 of net cash provided by operations in the prior year period. The cash used in operations for the nine months ended February 28, 2022 primarily resulted from consolidated net income of $6,670,000, offset by the forgiveness of the PPP Loan principal and accrued interest of $6,735,000, an increase in accounts receivable of $2,758,000 and a decrease in legal settlement payable of $277,000. The cash provided operations for the nine months ended February 28, 2021 primarily resulted from an increase in accounts payable and accrued expenses of $2,121,000, offset by the consolidated loss of $555,000 and increases in accounts receivable and prepaid expenses of $1,037,000 and $143,000, respectively.

 

Net cash used in investing activities of approximately $81,000 for the nine months ended February 28, 2022 primarily resulted from purchases of fixed assets. Net cash used in investing activities of $3,133,000 for the nine months ended February 28, 2021 primarily resulted from the acquisition of Geneva in the amount of $3,100,000.

 

Net cash provided by financing activities of approximately $1,669,000 during the nine months ended February 28, 2022 resulted from the net proceeds from the sales of the Company’s common stock in our ATM program of $1,821,000 offset by payments made for taxes related to vested stock awards of $92,000, net payments on the Company’s Credit Facility of $33,000 and distributions to the minority interest of $27,000. Net cash used in financing activities during the nine months ended February 28, 2021 of $473,000 primarily resulted from net repayments under the Company’s Credit Facility.

 

The Company’s capital resource commitments at February 28, 2022 consisted of lease obligations on its branch and corporate facilities and an accrued legal settlement payable. The net present value of its future lease and settlement payments were approximately $787,000 and $590,000, respectively, as of February 28, 2022. The Company intends to finance these commitments primarily from the Company’s available cash and Credit Facility.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Critical Accounting Estimates

 

The Securities Act regulations define “critical accounting estimates” as those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant. These estimates require the application of management’s most difficult subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

 

The Company’s significant accounting estimates and policies are described in Note 1 to the Company’s consolidated financial statements, contained in its May 31, 2021 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission. The Company believes that those accounting policies require the application of management’s most difficult, subjective or complex judgments. There have been no changes in the Company’s significant accounting policies as of February 28, 2022.

 

Page 21

 

 

TSR, INC. AND SUBSIDIARIES

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

As a smaller reporting company, we are not required to provide the information called for by this Item.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures. The Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal accounting officer, of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934). Based on this evaluation, the principal executive officer and principal accounting officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective.

 

Internal Control Over Financial Reporting. There was no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

Page 22

 

 

TSR, INC. AND SUBSIDIARIES

 

Part II. Other Information

 

Item 1. Legal Proceedings

 

Christopher Hughes v. TSR, Inc., Docket No. 651753-2020 (NY Supr. Ct., New York County)

 

Christopher Hughes, the former Chief Executive Officer of the Company (“Plaintiff”), 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 reason and therefore, pursuant to the Amended and Restated Employment Agreement, dated August 9, 2018, between the Company and Plaintiff, Plaintiff seeks 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 and has filed counterclaims against Plaintiff for (1) declaratory relief; (2) breach of confidence/non-compete agreement; (3) declaratory and injunctive relief – confidence/non-compete; (4) tortious interference with current and prospective contractual and economic relations; (5) breach of fiduciary duty; (6) misappropriation of trade secrets; (7) declaratory and injunctive relief – unfair competition; and (8) conversion.

 

In October 2021, the Company and Hughes agreed through mediation to settle this matter. In order to avoid lengthy and costly litigation and discovery expenses, the Company has paid Hughes $705,000 to settle all claims. After adjusting for estimated expected insurance reimbursement, the Company accrued a charge of $580,000 to selling, general and administrative expenses in the quarter ended August 31, 2021.

 

Fintech Consulting LLC v. TSR, Inc., et al., case number 2:21-cv-20181(KSH)(AME) (U.S. Dist. Ct., Dist. of New Jersey)

 

On December 1, 2021, Fintech Consulting LLC filed a complaint against the Company in the United States District Court for the District of New Jersey. The named Defendants in the complaint are the Company, QAR Industries, Inc., a shareholder of TSR (“QAR”), Robert E. Fitzgerald, a director and shareholder of TSR and the President, director and a shareholder of QAR (“Fitzgerald”), and Bradley Tirpak, a shareholder and the chairman of the board of directors of TSR (“Tirpak”). The complaint purports to assert claims against the Defendants under state law and Section 10(b) of the Exchange Act in connection with a Share Purchase Agreement, dated January 31, 2021, by and between the Plaintiff, as the seller of shares of TSR’s common stock, and QAR and Tirpak, as the purchasers of such shares (the “SPA”). The plaintiff seeks (i) judgment declaring the transactions represented by the SPA null and avoid and returning the shares; (ii) judgment cancelling the SPA and returning the shares in exchange for return of the purchase price; (iii) judgement unwinding the transaction; (iv) compensatory damages; (v) punitive damages; (vi) pre-judgment interest; (vii) costs of suit including attorneys’ fees; and (viii) such other relief as the Court may find appropriate. See Note 16 to the Condensed Consolidated Unaudited Financial Statements elsewhere in this report and the Company’s Current Report on Form 8-K filed with the SEC on December 21, 2021 for more information.

 

The Company believes the action described above to be without merit and intends to vigorously defend its interests. However, the Company may incur significant additional legal expenses as it pursues a vigorous defense against this action.

 

While the Company believes the action to be without merit, no assurances can be given as to: (i) the outcome of this or other legal proceedings and (ii) the related impact of an unanticipated adverse outcome of these proceedings on the Company’s financial condition, results of operations or near-term liquidity.

 

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TSR, INC. AND SUBSIDIARIES

 

Item 1A. Risk Factors

 

We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this Quarterly Report on Form 10-Q and the risk factors included below, you should carefully consider the factors in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2021, as filed with the Securities and Exchange Commission.

 

We completed the acquisition of Geneva Consulting Group, Inc. (“Geneva”) and may conduct additional acquisitions in the future. Due to the risks and uncertainties related to the acquisition of new businesses, any such acquisitions do not guarantee that we will be able to attain or maintain profitability.

 

On September 1, 2020, we completed the acquisition of all of the outstanding stock of Geneva, a provider of temporary and permanent information technology personnel based in Port Washington, New York, which we believe will help diversify our business and expand the scope of our services. As part of a potential growth strategy, we may attempt to acquire or merge with certain businesses. Whether we realize the potential benefits from any such transactions, including the acquisition of Geneva, will depend in part upon the integration of the acquired businesses, the performance of the acquired assets and services, and the personnel hired in connection therewith. Accordingly, our results of operations could be adversely impacted by transaction-related costs, amortization of intangible assets, and charges for impairment of long-term assets. While we believe that we have established appropriate and adequate procedures and processes to mitigate these risks, there can be no assurance that any potential transaction will be successful.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Page 24

 

 

TSR, INC. AND SUBSIDIARIES

 

Item 6. Exhibits

 

Exhibit   Document
Exhibit 31.1   Rule 13a-14(a)/15d-14(a) Certification by Thomas Salerno as principal executive officer
Exhibit 31.2   Rule 13a-14(a)/15d-14(a) Certification by John G. Sharkey as principal financial officer
Exhibit 32.1   Section 1350 Certification by Thomas Salerno as principal executive officer
Exhibit 32.2   Section 1350 Certification by John G. Sharkey as principal financial officer
Exhibit 101   Interactive Data File containing the following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2022, formatted in Inline Extensible Business Reporting Language (Inline XBRL): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) the Notes to the Condensed Consolidated Financial Statements.
Exhibit 104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

Page 25

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.

 

  TSR, Inc.
  (Registrant)

 

Date: April 11, 2022 /s/ Thomas Salerno
  Thomas Salerno, Chief Executive Officer, President, Treasurer and Principal Executive Officer
   
Date: April 11, 2022 /s/ John G. Sharkey
  John G. Sharkey, Sr. Vice President, Chief Financial Officer, Secretary, Principal Financial Officer and Principal Accounting Officer

 

 

Page 26

 
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