10-Q

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 November 30, 2020

☐ 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 Incorporation or organization)	(I.R.S. Employer Identification No.)

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
Preferred Share Purchase Rights1	--	--

¹ Registered pursuant to Section 12(b) of the Act pursuant to a Form 8-A filed by the registrant on March 15, 2019. Until the Distribution Date (as defined in the registrant’s Amended and Restated Rights Agreement dated as of September 3, 2019), the Preferred Share Purchase Rights will be transferred with and only with the shares of the registrant’s Common Stock to which the Preferred Share Purchase Rights are attached.

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 January 13, 2021, there were 1,962,062 shares of common stock, par value $0.01 per share, issued and outstanding.

TSR, INC. AND SUBSIDIARIES

INDEX

			Page Number
Part I.	Financial Information:		1
	Item 1.	Financial Statements:	1
		Condensed Consolidated Balance Sheets – November 30, 2020 and May 31, 2020	1
		Condensed Consolidated Statements of Operations – For the three months and six months ended November 30, 2020 and 2019	2
		Condensed Consolidated Statements of Equity – For the three months and six months ended November 30, 2020 and 2019	3
		Condensed Consolidated Statements of Cash Flows – For the six months ended November 30, 2020 and 2019	4
		Notes to Condensed Consolidated Financial Statements	5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Item 4.	Controls and Procedures	25
Part II.	Other Information		26
	Item 1.	Legal proceedings	26
	Item 1A.	Risk Factors	26
	Item 6.	Exhibits	28
Signatures			29

i

Part I. Financial Information

Item 1. Financial Statements

TSR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	November 30, 2020		May 31, 2020
	(Unaudited)		(see Note 1)
ASSETS
Current Assets:
Cash and cash equivalents	$	7,192,748	$	9,730,022
Marketable securities		38,680		50,344
Accounts receivable, net of allowance for doubtful accounts of $181,000		8,007,737		7,057,365
Other receivables		29,224		5,088
Prepaid expenses		351,419		202,862
Prepaid and recoverable income taxes		567,251		598,893
Total Current Assets		16,187,059		17,644,574
Equipment and leasehold improvements, net of accumulated depreciation and amortization of $281,466 and $276,673		38,057		20,191
Other assets		76,442		49,653
Right-of-use assets		391,212		377,182
Intangible assets, net		1,757,250		-
Goodwill		785,883		-
Deferred income taxes		858,000		784,000
Total Assets	$	20,093,903	$	18,875,600
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable and other payables	$	1,675,144	$	503,166
Accrued expenses and other current liabilities		3,564,589		3,031,633
Advances from customers		1,169,833		1,181,234
Revolving line of credit		100,037		501,134
Operating lease liabilities - current		224,256		188,799
Legal settlement payable - current		291,822		-
Total Current Liabilities		7,025,681		5,405,966
Operating lease liabilities, net of current portion		307,563		192,409
Legal settlement payable, net of current portion		555,643		827,822
SBA Paycheck Protection Program loan payable		6,659,220		6,659,220
Total Liabilities		14,548,107		13,085,417
Commitments and contingencies
Equity:
TSR, Inc.:
Preferred stock, $1 par value, authorized 500,000 shares; none issued		-		-
Class A Preferred Stock, Series One, authorized 30,000 and 0 shares; none issued		-		-
Common stock, $.01 par value, authorized 12,500,000 shares; issued 3,114,163 shares, 1,962,062 outstanding		31,142		31,142
Additional paid-in capital		5,102,868		5,102,868
Retained earnings		13,892,038		14,141,796
		19,026,048		19,275,806
Less: Treasury stock, 1,152,101 shares, at cost		13,514,003		13,514,003
Total TSR, Inc. Equity		5,512,045		5,761,803
Noncontrolling interest		33,751		28,380
Total Equity		5,545,796		5,790,183
Total Liabilities and Equity	$	20,093,903	$	18,875,600

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 Six Months Ended November 30, 2020 and 2019
(UNAUDITED)

	Three Months Ended November 30,					Six Months Ended November 30,
	2020			2019		2020			2019
Revenue, net	$	16,068,577		$	15,233,869	$	30,582,583		$	30,180,431
Cost of sales		13,233,492			12,784,085		25,416,414			25,455,137
Selling, general and administrative expenses		3,058,618			2,385,530		5,329,919			5,574,993
		16,292,110			15,169,615		30,746,333			31,030,130
Income (loss) from operations		(223,533	)		64,254		(163,750	)		(849,699	)
Other income (loss):
Interest income and (expense), net		(51,697	)		2,992		(103,973	)		7,907
Unrealized gain (loss) on marketable securities, net		(2,080	)		8,512		(11,664	)		11,208
Income (loss) before income taxes		(277,310	)		75,758		(279,387	)		(830,584	)
Provision for (benefit from) income taxes		(30,000	)		8,000		(35,000	)		(239,000	)
Consolidated net income (loss)		(247,310	)		67,758		(244,387	)		(591,584	)
Less: Net income (loss) attributable to noncontrolling interest		(552	)		6,246		5,371			9,918
Net income (loss) attributable to TSR, Inc.	$	(246,758	)	$	61,512	$	(249,758	)	$	(601,502	)
Basic and diluted net income (loss) per TSR, Inc. common share	$	(0.13	)	$	0.03	$	(0.13	)	$	(0.31	)
Basic and diluted weighted average number of common shares outstanding		1,962,062			1,962,062		1,962,062			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 Six Months Ended November 30, 2020 and 2019
(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, 2019		3,114,163	$	31,142	$	5,102,868	$	15,268,224		$	(13,514,003	)	$	6,888,231		$	28,792		$	6,917,023
Net income attributable to noncontrolling interest		-		-		-		-			-			-			3,672			3,672
Net loss attributable to TSR, Inc.		-		-		-		(663,014	)		-			(663,014	)		-			(663,014	)
Balance at Aug. 31, 2019		3,114,163	$	31,142	$	5,102,868	$	14,605,210		$	(13,514,003	)	$	6,225,217		$	32,464		$	6,257,681
Net income attributable to noncontrolling interest		-		-		-		-			-			-			6,246			6,246
Distribution to noncontrolling interest		-		-		-		-			-			-			(11,000	)		(11,000	)
Net income attributable to TSR, Inc.		-		-		-		61,512			-			61,512			-			61,512
Balance at November 30, 2019		3,114,163	$	31,142	$	5,102,868	$	14,666,722		$	(13,514,003	)	$	6,286,729		$	27,710		$	6,314,439
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 November 30, 2020		3,114,163	$	31,142	$	5,102,868	$	13,892,038		$	(13,514,003	)	$	5,512,045		$	33,751		$	5,545,796

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

Page 3

TSR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For The Six Months Ended November 30, 2020 and 2019

(UNAUDITED)

	Six Months Ended November 30,
	2020			2019
Cash flows from operating activities:
Consolidated net loss	$	(244,387	)	$	(591,584	)
Adjustments to reconcile consolidated net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		47,543			2,995
Unrealized (gain) loss on marketable securities, net		11,664			(11,208	)
Deferred income taxes		(74,000	)		(252,000	)
Non-cash lease expense		(18	)		2,797
Non-cash Right-of-use asset impairment charge		136,599			-
Changes in operating assets and liabilities:
Accounts receivable		(171,442	)		375,524
Other receivables		(24,136	)		(3,267	)
Prepaid expenses		(143,308	)		(143,899	)
Prepaid and recoverable income taxes		31,642			14,445
Other assets		(26,789	)		-
Accounts payable, other payables, accrued expenses and other current liabilities		1,434,986			(633,458	)
Advances from customers		(11,401	)		5,542
Legal settlement payable		19,643			-
Net cash provided by (used in) operating activities		986,596			(1,234,113	)
Cash flows from investing activities:
Proceeds from maturities of marketable securities		-			247,000
Purchase of Geneva Consulting Group, Inc., net of cash acquired of $241,946		(3,100,114	)		-
Purchases of equipment and leasehold improvements		(22,659	)		-
Net cash provided by (used in) investing activities		(3,122,773	)		247,000
Cash flows from financing activities:
Net repayments on line of credit		(401,097	)		-
Distribution to noncontrolling interest		-			(11,000	)
Net cash used in financing activities		(401,097	)		(11,000	)
Net decrease in cash and cash equivalents		(2,537,274	)		(998,113	)
Cash and cash equivalents at beginning of period		9,730,022			3,694,989
Cash and cash equivalents at end of period	$	7,192,748		$	2,696,876
Supplemental disclosures of cash flow data:
Income taxes paid	$	8,000		$	17,000
Non-cash investing and finance activities:
Right-of-use asset and operating lease liability	$	261,000		$	-

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

Page 4

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2020

(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, 2020, which has been derived from audited financial statements, and the unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America applying to interim financial information and with the instructions to Form 10-Q of Regulation S-X of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures required by accounting principles generally accepted in the United States of America and normally included in the Company’s annual financial statements have been condensed or omitted. These condensed consolidated interim financial statements as of and for the three months and six months ended November 30, 2020 are unaudited; however, in the opinion of management, such statements include all adjustments (consisting of normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations and cash flows of the Company for the periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year ending May 31, 2021. 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, 2020.

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, Inc. by the weighted average number of common shares outstanding. The Company had no stock options or other common stock equivalents outstanding during any of the periods presented.

3. Cash and Cash Equivalents

The Company considers short-term highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. Cash and cash equivalents were comprised of the following as of November 30, 2020 and May 31, 2020:

	November 30, 2020		May 31, 2020
Cash in banks	$	7,140,043	$	9,677,848
Money market funds		52,705		52,174
	$	7,192,748	$	9,730,022

Page 5

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2020

(Unaudited)

4. Fair Value of Financial Instruments

ASC 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”), defines fair value, establishes a framework for measuring fair value under 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.

Page 6

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2020

(Unaudited)

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.

The following are the major categories of assets measured at fair value on a recurring basis as of November 30, 2020 and May 31, 2020 using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2) and significant unobservable inputs (Level 3):

November 30, 2020	Level 1		Level 2		Level 3		Total
Equity Securities	$	38,680	$	-	$	-	$	38,680
	$	38,680	$	-	$	-	$	38,680

May 31, 2020	Level 1		Level 2		Level 3		Total
Equity Securities	$	50,344	$	-	$	-	$	50,344
	$	50,344	$	-	$	-	$	50,344

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 November 30, 2020 and May 31, 2020 are summarized as follows:

November 30, 2020 Current	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Recorded Value
Equity Securities	$	16,866	$	21,814	$	-	$	38,680
	$	16,866	$	21,814	$	-	$	38,680

May 31, 2020 Current	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Recorded Value
Equity Securities	$	16,866	$	33,478	$	-	$	50,344
	$	16,866	$	33,478	$	-	$	50,344

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 7

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2020

(Unaudited)

6. Equity

Rights Plan / Preferred Stock

On August 29, 2018, the Board of Directors of the Company declared a dividend of one preferred share purchase right (a “Right”) for each share of common stock, par value $0.01 per share (“Common Stock”), of the Company outstanding on August 29, 2018 (the “Record Date”) to the stockholders of record on that date. In connection with the distribution of the Rights, the Company entered into a Rights Agreement (the “Rights Agreement”), dated as of August 29, 2018, between the Company and Continental Stock Transfer & Trust Company, as Rights Agent. Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share of Class A Preferred Stock, Series One, par value $0.01 per share (“Preferred Stock”), of the Company at a price of $24.78 per one one-hundredth of a share of Preferred Stock represented by a Right (the “Purchase Price”), subject to adjustment.

On August 30, 2019, the Company entered into a settlement and release agreement (the “Settlement Agreement”) with Zeff Capital, L.P., Zeff Holding Company, LLC, Daniel Zeff, QAR Industries, Inc., Robert Fitzgerald, Fintech Consulting LLC and Tajuddin Haslani (collectively, the “Investor Parties”), pursuant to which the Company agreed to, among other things, amend and restate the Rights Agreement to provide that a “Distribution Date” (as defined below) shall not occur as a result of any request by any of the Investor Parties calling for a special meeting pursuant to Article II, Section 5 of the Amended and Restated By-Laws of the Company in accordance with the terms of the Settlement Agreement. (See Note 7, “Other Matters.”)

Distribution Date; Exercisability; Expiration

Initially, the Rights will be attached to all certificates for shares of Common Stock and no separate certificates evidencing the Rights (“Rights Certificates”) will be issued. Until the Distribution Date (as defined below), the Rights will be transferred with and only with shares of Common Stock. As long as the Rights are attached to the shares of Common Stock, the Company will issue one Right with each new share of Common Stock so that all such shares of Common Stock will have Rights attached.

The Rights will separate and begin trading separately from the Common Stock, and Rights Certificates will be issued to evidence the Rights, on the earlier to occur of (a) the Close of Business (as such term is defined in the Rights Agreement) on the tenth day following a public announcement, or the public disclosure of facts indicating, that a Person (as such term is defined in the Rights Agreement), group of affiliated or associated Persons or any other Person with whom such Person is Acting in Concert (as defined in the Rights Agreement) has acquired Beneficial Ownership (as defined in the Rights Agreement) of 5% or more of the outstanding Common Stock (an “Acquiring Person”) (or, in the event an exchange is effected in accordance with Section 27 of the Rights Agreement and the Board of Directors determines that a later date is advisable, then such later date) or (b) the Close of Business on the tenth Business Day (as such term is defined in the Rights Agreement) (or such later date as may be determined by action of the Board of Directors prior to such time as any Person becomes an Acquiring Person) following the commencement of a tender offer or exchange offer the consummation of which would result in the Beneficial Ownership by a Person or group of 5% or more of the outstanding Common Stock (the earlier of such dates, the “Distribution Date”). As soon as practicable after the Distribution Date, unless the Rights are recorded in book-entry or other uncertificated form, the Company will prepare and cause the Right Certificates to be sent to each record holder of Common Stock as of the Close of Business on the Distribution Date.

Page 8

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2020

(Unaudited)

An “Acquiring Person” will not include (i) the Company, (ii) any Subsidiary (as such term is defined in the Rights Agreement) of the Company, (iii) any employee benefit plan or employee stock plan of the Company or any Subsidiary of the Company, or any trust or other entity organized, appointed, established or holding Common Stock for or pursuant to the terms of any such plan, or (iv) any Person who or which, at the time of the first public announcement of the Rights Agreement, is a Beneficial Owner of 5% or more of the Common Shares then outstanding (a “Grandfathered Stockholder”). However, if a Grandfathered Stockholder becomes, after such time, the Beneficial Owner of any additional shares of Common Stock (regardless of whether, thereafter or as a result thereof, there is an increase, decrease or no change in the percentage of shares of Common Stock then outstanding beneficially owned by such Grandfathered Stockholder) then such Grandfathered Stockholder shall be deemed to be an Acquiring Person unless, upon such acquisition of Beneficial Ownership of additional shares of Common Stock, such Person is not the Beneficial Owner of 5% or more of the Common Stock then outstanding. In addition, upon the first decrease of a Grandfathered Stockholder’s Beneficial Ownership below 5%, such Grandfathered Stockholder will cease to be a Grandfathered Stockholder. In the event that after the time of the first public announcement of the Rights Agreement, any agreement, arrangement or understanding pursuant to which any Grandfathered Stockholder is deemed to be the Beneficial Owner of Common Stock expires, terminates or no longer confers any benefit to or imposes any obligation on the Grandfathered Stockholder, any direct or indirect replacement, extension or substitution of such agreement, arrangement or understanding with respect to the same or different shares of Common Stock that confers Beneficial Ownership of Common Stock shall be considered the acquisition of Beneficial Ownership of additional shares of Common Stock by the Grandfathered Stockholder and render such Grandfathered Stockholder an Acquiring Person for purposes of the Rights Agreement unless, upon such acquisition of Beneficial Ownership of additional shares of Common Stock, such Person is not the Beneficial Owner of 5% or more of the Common Stock then outstanding. The Rights are not exercisable until the Distribution Date. The Rights will expire on the Close of Business on August 29, 2021 (the “Expiration Date”).

Redemption

At any time prior to the Close of Business on the earlier of (a) the tenth day following the Stock Acquisition Date or (b) the Expiration Date, the Board of Directors may redeem the Rights in whole, but not in part, at a price of $0.01 per Right (the “Redemption Price”). The “Stock Acquisition Date” is the first date on which there is a public announcement by the Company or an Acquiring Person that an Acquiring Person has become such, or such earlier date as a majority of the Board of Directors becomes aware of the existence of an Acquiring Person. The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish. Immediately upon the action of the Board of Directors ordering the redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.

Preferred Stock Rights

The Preferred Stock will not be redeemable. Each share of Preferred Stock will be entitled to receive, when, as and if declared by the Board of Directors, (a) cash dividends in an amount per share (rounded to the nearest cent) equal to 100 times the aggregate per share amount of all cash dividends declared or paid on the Common Stock and (b) a preferential quarterly cash dividend (the “Preferential Dividends”) in an amount equal to $50.00 per share of Preferred Stock less the per share amount of all cash dividends declared on the Preferred Stock pursuant to clause (a) of this sentence. Each share of Preferred Stock will entitle the holder thereof to 100 votes per share, voting together with the holders of the Common Stock as a single class, except as otherwise provided in the Certificate of Designations of Class A Preferred Stock Series One filed by the Company with the Delaware Secretary of State or the Company’s Amended and Restated Certificate of Incorporation, as amended, or Amended and Restated By-laws. In the event of any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each outstanding share of Preferred Stock shall at the same time be similarly exchanged for or changed into the aggregate amount of stock, securities, cash and/or other property (payable in like kind), as the case may be, for which or into which each share of Common Stock is changed or exchanged, multiplied by 100. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, (a) no distribution shall be made to the holders of shares of stock ranking junior to the Preferred Stock unless the holders of the Preferred Stock shall have received the greater of (i) $100 per share of Preferred Stock plus an amount equal to accrued and unpaid dividends and distributions thereon or (ii) an amount equal to 100 times the aggregate amount to be distributed per share to holders of the Common Stock, and (b) no distribution shall be made to the holders of stock ranking on a parity upon liquidation, dissolution or winding up with the Preferred Stock unless simultaneously therewith distributions are made ratably on the holders of the Preferred Stock and all other shares of such parity stock in proportion to the total amounts to which the holders of shares of Preferred Stock are entitled under clause (a)(i) of this sentence and to which the holders of such parity shares are entitled, in each case upon such liquidation, dissolution or winding up.

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The foregoing rights are protected by customary anti-dilution provisions.

The foregoing description of the rights of the Preferred Stock does not purport to be complete and is qualified in its entirety by reference to the Certificate of Designations of Class A Preferred Stock Series One.

Rights of Holders

Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends.

Amended and Restated Rights Agreement

Pursuant to the Settlement Agreement, the Company amended and restated the Rights Agreement on September 3, 2019 to confirm that a Distribution Date (as defined in the Amended and Restated Rights Agreement) shall not occur as a result of any request by any of the Investor Parties for a special meeting of the Company’s stockholders.

7. 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 below.

On October 16, 2018, the Company was served with a complaint filed on October 11, 2018 in the Supreme Court of the State of New York, Queens County, by Susan Paskowitz, a stockholder of the Company, against the Company; Joseph F. Hughes and Winifred M. Hughes; former directors Christopher Hughes, Raymond A. Roel, Brian J. Mangan, Regina Dowd, James J. Hill, William Kelly, and Eric Stein; as well as stockholders Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC (the “Stockholder Litigation”). The complaint purports to be a class action lawsuit asserting claims on behalf of all minority stockholders of the Company. Ms. Paskowitz alleges the following: the sale by Joseph F. Hughes and Winifred M. Hughes of an aggregate of 819,491 shares of the Company’s common stock (“controlling interest”) to Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC was in breach of Joseph F. Hughes’ and Winifred M. Hughes’ fiduciary duties and to the detriment of the Company’s minority stockholders; the former members of the Board of Directors of the Company named in the complaint breached their fiduciary duties by failing to immediately adopt a rights plan that would have prevented Joseph F. Hughes and Winifred M. Hughes from selling their shares and preserved a higher premium for all stockholders; Zeff, QAR, and Fintech are “partners” and constitute a “group.” Ms. Paskowitz also asserts that Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC aided and abetted Joseph F. Hughes’ and Winifred M. Hughes’ conduct, and ultimately sought to buy out the remaining shares of the Company at an unfair price.

On June 14, 2019, Ms. Paskowitz filed an amended complaint in the Stockholder Litigation in the Supreme Court of the State of New York, Queens County against the members of the Board of Directors and Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC, which asserts substantially similar allegations to those contained in the October 11, 2018 complaint, but omits Regina Dowd, Joseph F. Hughes and Winifred M. Hughes as defendants. In addition to the former members of the Board of Directors named in the original complaint, the amended complaint names former directors Ira Cohen, Joseph Pennacchio, and William Kelly as defendants. The amended complaint also asserts a derivative claim purportedly on behalf of the Company against the named former members of the Board of Directors. The amended complaint seeks declaratory judgment and unspecified monetary damages. The complaint requests: (1) a declaration from the court that the former members of the Board of Directors named in the complaint breached their fiduciary duties by failing to timely adopt a stockholder rights plan, which resulted in the loss of the ability to auction the Company off to the highest bidder without interference from Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC; (2) damages derivatively on behalf of the Company for unspecified harm caused by the former Directors’ alleged breaches of fiduciary duties; (3) damages and equitable relief derivatively on behalf of the Company for the former Directors’ alleged failure to adopt proper corporate governance practices; and (4) damages and injunctive relief against Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC based on their knowing dissemination of false or misleading public statements concerning their status as a group. The complaint has not assigned any monetary values to alleged damages.

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On July 15, 2019, the Company filed an answer to the amended complaint in the Stockholder Litigation and cross-claims against Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC for breaches of their fiduciary duties, aiding and abetting breaches of fiduciary duties, and indemnification and contribution based on their misappropriation of material nonpublic information and their failure to disclose complete and accurate information in SEC filings concerning their group actions to attempt a creeping takeover of the Company, which was thereafter amended on July 26, 2019.

In addition, on December 21, 2018, the Company filed a complaint in the United States District Court, Southern District of New York, against Zeff Capital, L.P., Zeff Holding Company, LLC, Daniel Zeff, QAR Industries, Inc., Robert Fitzgerald, Fintech Consulting LLC, and Tajuddin Haslani for violations of the disclosure and anti-fraud requirements of the federal securities laws under Sections 13(d) and 14(a) of the Securities Exchange Act of 1934 (“Exchange Act”), and the related rules and regulations promulgated by the SEC, for failing to disclose to the Company and its stockholders their formation of a group and the group’s intention to seize control of the Company (the “SDNY Action”). The complaint requests that the court, among other things, declare that the defendants have solicited proxies without filing timely, accurate and complete reports on Schedule 13D and Schedule 14A in violation of Sections 13(d) and 14(a) of the Exchange Act, direct the defendants to file with the SEC complete and accurate disclosures, enjoin the defendants from voting any of their shares prior to such time as complete and accurate disclosures have been filed, and enjoin the defendants from further violations of the Exchange Act with respect to the securities of the Company.

On January 7, 2019, Ms. Paskowitz filed a related action against Zeff Capital, L.P., Zeff Holding Company, LLC, Daniel Zeff, QAR Industries, Inc., Robert Fitzgerald, Fintech Consulting LLC, and Tajuddin Haslani in the Southern District of New York, which asserts claims against them for breach of fiduciary duty and under federal securities laws similar to those asserted in the Company’s action. Although the Company is not a party to Ms. Paskowitz’s action, the court has determined to treat the Company’s and Ms. Paskowitz’s respective actions as related.

On August 7, 2019, following the Company’s initial rescheduling of the 2018 annual meeting of stockholders (the “2018 Annual Meeting”) for September 13, 2019 and the filing of Preliminary Proxy Statements by the Company and Zeff Capital, L.P., Zeff Capital, L.P. filed a complaint in the Delaware Court of Chancery against the Company seeking an order requiring the Company to hold its next annual meeting of stockholders on or around September 13, 2019, and obligating the Company to elect Class I and Class III directors at that annual meeting. 

On August 13, 2019, the Company filed a motion for preliminary injunction in the SDNY Action in advance of the Company’s 2018 Annual Meeting originally scheduled for September 13, 2019, and requested leave to file a motion for expedited discovery. The Court denied the Company’s motion for preliminary injunction but ordered Zeff Capital, L.P. to “make clear that the second set of directors” described by Zeff Capital, L.P. in its preliminary proxy statement “is contingent upon the resolution of a proceeding in Delaware Chancery Court.”

On August, 30, 2019, the Company entered into the Settlement Agreement with the Investor Parties with respect to the proxy contest pertaining to the election of directors at the 2018 Annual Meeting, which was held on October 22, 2019. Pursuant to the Settlement Agreement, the parties agreed to forever settle and resolve any and all disputes between the parties, including without limitation disputes arising out of or relating to the following litigations:

(i) The complaint relating to alleged breaches of fiduciary duties filed on November 1, 2018 by Fintech Consulting LLC against the Company in the Delaware Court of Chancery, which was previously dismissed voluntarily;

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(ii) The complaint for declaratory and injunctive relief for violations of the federal securities laws filed on December 21, 2018 by the Company against the Investor Parties in the United States District Court in the Southern District of New York;

(iii) Cross-claims relating to alleged breaches of fiduciary duties and for indemnification and contribution filed on July 26, 2019 by the Company against the Investor Parties in New York Supreme Court, Queens County; and

(iv) The complaint to compel annual meeting of stockholders filed on August 7, 2019 by Zeff Capital, L.P. against the Company in the Delaware Court of Chancery.

No party admitted any liability by entering into the Settlement Agreement. The Settlement Agreement did not resolve the Stockholder Litigation filed by Susan Paskowitz against the Company, Joseph F. Hughes, Winifred M. Hughes and certain former directors of the Company in the Supreme Court of the State of New York on October 11, 2018.

Concurrently with the Settlement Agreement, the parties entered into a share repurchase agreement (the “Repurchase Agreement”) which provided for the purchase by the Company and Christopher Hughes, the Company’s former President and Chief Executive Officer, of the shares of the Company’s Common Stock held by the Investor Parties (the “Repurchase”). The Settlement Agreement also contemplated that, if the Repurchase was completed, the Company would make a settlement payment to the Investor Parties at the closing of the Repurchase in an amount of approximately $1,500,000 (the “Settlement Payment”). However, the Repurchase and Settlement Payment were not completed by the deadline of December 30, 2019.

Pursuant to the Settlement Agreement, (1) the Company agreed to adopt an amendment to the Company’s Amended and Restated By-Laws, dated April 9, 2015 (the “By-Laws Amendment”), providing that stockholders of the Company owning at least forty percent (40%) of the issued and outstanding Common Stock may request a special meeting of stockholders; (2) the Investor Parties agreed not to take any action to call or otherwise cause a special meeting of stockholders to occur prior to December 30, 2019 (unless the Company had failed to hold the 2018 Annual Meeting); (3) the Company agreed to amend and restate the Company’s Rights Agreement, dated August 29, 2018 (the “Amended Rights Agreement”), to confirm that a Distribution Date (as defined in the Amended Rights Agreement) shall not occur as a result of any request by any of the Investor Parties for a special meeting; (4) the Company agreed that prior to the earlier of (A) the completion of the Repurchase and the payment of the Settlement Payment and (B) January 1, 2020, the Board of Directors shall not consist of more than seven (7) directors.

Pursuant to the terms of the Settlement Agreement, the two nominees for director made by Zeff Capital, L.P. were elected as directors at the Company’s 2018 Annual Meeting held on October 22, 2019. Please see the Company’s current Report on Form 8-K filed with the SEC on October 21, 2019 for more information about the background of the election of directors at the Company’s 2018 Annual Meeting.

Pursuant to the terms of the Settlement Agreement, inasmuch as the Repurchase was not completed and the Settlement Payment was not made by December 30, 2019, the members of the Board of Directors (other than the two directors who were nominated by Zeff Capital, L.P. and elected as directors at the 2018 Annual Meeting) resigned from the Board effective 5:00 p.m. Eastern Time on December 30, 2019. Immediately thereafter, the two remaining directors appointed Robert Fitzgerald to the Board of Directors. Please see the Company’s Current Report on Form 8-K filed with the SEC on December 31, 2019 for more information about the background and the appointment of Robert Fitzgerald.

The foregoing is not a complete description of the terms of the Settlement Agreement and the Share Repurchase Agreement. For a further description of the terms of the Settlement Agreement and the Share Repurchase Agreement, including copies of the Settlement Agreement and Share Repurchase Agreement, please see the Company’s Current Report on Form 8-K filed by the Company with the SEC on September 3, 2019.

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On October 21, 2019, the Company entered into a Memorandum of Understanding (the “MOU”) with Susan Paskowitz providing for the settlement of the Stockholder Litigation filed by Ms. Paskowitz on October 11, 2018. The MOU provides for the settlement of the claims by Ms. Paskowitz that (1) the former members of the Board named in the original complaint allegedly breached their fiduciary duties by failing to immediately adopt a rights plan that would have prevented the sale by Joseph F. Hughes and Winifred M. Hughes of an aggregate of 819,491 shares of the Company’s common stock to the Investor Parties; (2) the former members of the Board named in the amended complaint allegedly breached their fiduciary duties and failed to adopt proper corporate governance practices; and (3) the Investor Parties acted as “partners” and constituted a “group” in their purchase of shares from Joseph F. Hughes and Winifred M. Hughes and knowingly disseminated false or misleading public statements concerning their status as a group.

Pursuant to the terms of the MOU, the Company will (1) implement certain corporate governance reforms described in the MOU within 30 days of a final order and judgment entered by the court, and keep these corporate governance reforms in place for 5 years from the time of the final order and judgment; and (2) acknowledge that the plaintiff, Ms. Paskowitz, and her counsel provided a substantial benefit to the Company and its stockholders through the prosecution of the Stockholder Litigation and other related actions filed by Ms. Paskowitz described above.

On December 16, 2019, the Company entered into a Stipulation and Agreement of Settlement (the “Stipulation”) with Susan Paskowitz in the Stockholder Litigation. The Stipulation retains the terms and conditions of settlement of the Stockholder Litigation contained in the MOU described in the preceding paragraph, with the addition that the Company will pay to plaintiff’s counsel an award of attorneys’ fees and reimbursement of expenses in the amount of $260,000 (collectively, the “Stockholder Litigation Settlement”). The Stockholder Litigation Settlement is intended to fully, finally, and forever compromise, settle, release, resolve, and dismiss with prejudice the Stockholder Litigation and all claims asserted therein directly against all present and former defendants and derivatively against them on behalf of the Company. The Stockholder Litigation Settlement does not contain any admission of liability, wrongdoing or responsibility by any of the parties, and provides for mutual releases by all parties. Each stockholder of the Company is a member of the plaintiff class unless such stockholder opts out of the class. The Company expects that the full amount of the $260,000 settlement payment will be covered by insurance proceeds. The Stipulation remains subject to approval by the court. The Stipulation is independent of the Settlement Agreement and Share Repurchase Agreement that the Company had entered into with the Investor Parties.

On December 24, 2019, Ms. Paskowitz moved for preliminary approval of the Stockholder Litigation Settlement. On May 21, 2020, the Court entered an order preliminarily approving the Stockholder Litigation Settlement. On July 9, 2020, the parties submitted an agreed upon proposed scheduling order for final approval of the Stockholder Litigation Settlement and a proposed mailing notice of the Stockholder Litigation Settlement to the Company’s stockholders. On December 16, 2020, the Court entered a scheduling order, which approved the form of the parties’ mailing notice, and provided that the hearing for final approval of the Stockholder Litigation Settlement will be held on April 20, 2021. Among other deadlines, the scheduling order provided that TSR must provide notice of the Stockholder Litigation Settlement to applicable stockholders by December 31, 2021, and that any objections to the Stockholder Litigation Settlement must be filed by April 5, 2021. Although the Company believes that the Stockholder Litigation Settlement represents a fair and reasonable compromise of the matters in dispute in the Stockholder Litigation, there can be no assurance that the court will approve the Stockholder Litigation Settlement as proposed, or at all.

Inasmuch as the Company did not complete the Repurchase and make the Settlement Payment prior to the December 30, 2019 deadline, the members of the Board of Directors (other than the two directors who were elected as directors at the 2018 Annual Meeting) resigned from the Board effective at 5:00 p.m. Eastern Time on December 30, 2019. Immediately thereafter, the two remaining directors, Bradley M. Tirpak and H. Timothy Eriksen, appointed Robert Fitzgerald as a new director. Each of Messrs. Tirpak, Eriksen and Fitzgerald qualifies as an “independent director” under the NASDAQ Stock Market Rules. These three individuals were also appointed to the Audit Committee, Nominating Committee, Compensation Committee and Special Committee. The Board appointed Mr. Tirpak as Chairman of the Board to succeed Christopher Hughes. Mr. Hughes continued to serve as the Chief Executive Officer, President and Treasurer of the Company until January 17, 2020. Additionally, the Board appointed Mr. Eriksen as Lead Independent Director, Chairman of the Audit Committee and Chairman of the Nominating Committee. The Board also appointed Mr. Fitzgerald as the Chairman of the Compensation Committee and Chairman of the Special Committee.

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November 30, 2020

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During the quarter ended February 29, 2020, the Company negotiated a settlement with Zeff Capital, L.P. to reimburse it for legal expenses of $900,000 (net present value of $818,000 accrued at February 29, 2020) by entering into a binding term sheet on April 1, 2020. The parties entered into a final agreement reflecting these terms on August 13, 2020. For additional information about this matter, please refer to Note 12, Legal Settlement with Investor.

Please also refer to Note 11, Termination of Former CEO, regarding an ongoing lawsuit originally filed by the Company’s former Chief Executive Officer against the Company in the Supreme Court of the State of New York in March 2020.

8. Recently Adopted Accounting Pronouncements

Effective June 1, 2019, the Company adopted ASU No. 2016-02, Leases, which sets out the principle for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to classify leases as either finance or operating leases and record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. An accounting policy election may be made to account for leases with a term of 12 months or less similar to existing guidance for operating leases today. ASU No. 2016-02 supersedes the existing guidance on accounting for leases. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which allows for an optional transition method for the adoption of Topic 842. The two permitted transition methods are now the modified retrospective approach, which applies the new lease requirements at the beginning of the earliest period presented, and the optional transition method, which applies the new lease requirements through a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2016-02 is effective for our fiscal year ended May 31, 2020 and the interim periods within that year. The Company adopted this standard in the first quarter of fiscal 2020 using the optional transition method. The Company also elected the practical expedients that allow us to carry forward the historical lease classification. The Company has established an inventory of existing leases and implemented a new process of evaluating the classification of each lease. The financial impact of the adoption of the new standard at June 1, 2019 increased total assets and total liabilities by approximately $690,000. The financial impact of the adoption primarily relates to the capitalization of right-of-use assets and recognition of lease liabilities related to operating leases.

9. Leases

The Company leases the space for its three offices. Under ASC 842, at contract inception we determine whether the contract is or contains a lease and whether the lease should be classified as an operating or finance lease. Operating leases are in right-of-use assets and operating lease liabilities are in our consolidated condensed balance sheets.

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

The lease agreements expire on December 31, 2020, February 28, 2021 and August 31, 2022, respectively, and do not include any renewal options. During the current quarter, the Company extended its lease expiring December 31, 2020 to December 31, 2023. Additionally, the Company entered into a sublease agreement on its lease 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 three months ended November 30, 2020 and 2019, the Company’s operating lease expense for these leases was $230,922 and $198,803, respectively.

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November 30, 2020

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Future minimum lease payments under non-cancellable operating leases as of November 30, 2020 were as follows:

(note: payments related to the lease expiring February 28, 2021 are not included below because it is a one-year lease)

Twelve Months Ending November 30,
2021	$	252,848
2022		218,006
2023		99,557
2024		8,317
Total undiscounted operating lease payments		578,728
Less imputed interest		46,909
Present value of operating lease payments	$	531,819

The following table sets forth the right-of-use assets and operating lease liabilities as of November 30, 2020:

Assets
Right-of-use assets, net	$	391,212

Liabilities
Current operating lease liabilities	$	224,256
Long-term operating lease liabilities		307,563
Total operating lease liabilities	$	531,819

The weighted average remaining lease term for the Company’s operating leases is 1.9 years.

10. Line of Credit

On November 27, 2019, TSR, Inc. (“TSR”) closed on a revolving credit facility (the “Credit Facility”) pursuant to a Loan and Security Agreement with Access Capital, Inc. (the “Lender”) that 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. TSR had also expected to utilize the Credit Facility to complete the Repurchase and make the Settlement Payment; however, TSR did not complete the Repurchase and make the Settlement Payment prior to the December 30, 2019 deadline established in the Credit Facility for such use.

Because TSR did not complete the Repurchase and make the Settlement Payment prior to the December 30, 2019 deadline, 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 November 30, 2020 was 3.25%, indicating an interest rate of 5.0% on the line of credit. The initial term of the Credit Facility is 5 years, which shall automatically renew for successive 5-year periods unless either TSR or the Lender gives written notice to the other of termination at least 60 days prior to the expiration date of the then-current term.

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November 30, 2020

(Unaudited)

TSR is obliged to satisfy certain financial covenants and minimum borrowing requirements under the Credit Facility, and to pay certain fees, including prepayment fees, and provide certain financial information to the Lender. The Company was in compliance with all covenants as of November 30, 2020 and through the date of this filing.

As of November 30, 2020, the net borrowings outstanding against this line of credit facility were $100,037. The amount the Company has borrowed fluctuates and, at times in the prior fiscal year, it has utilized the maximum amount of $2,000,000 available under the facility to fund its payroll and other obligations.

11. 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 alleges that he was terminated without cause or in the alternative that he resigned for good reason and therefore, pursuant to the Employment Agreement, Hughes 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. 

12. 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. (See Note 7) 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 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 these payments is $847,000 at November 30, 2020.

13. COVID-19

The COVID-19 outbreak in the United States has caused business disruption through 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. Therefore, the Company expects this matter to negatively impact its operating results in future periods. However, the full financial impact and duration cannot be reasonably estimated at this time.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2020

(Unaudited)

14. Payroll 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 recent 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 is being made through JPMorgan Chase Bank, N.A., a national banking association.

The original term of the PPP Loan was two years. The term may be extended to five years by the SBA and the lender. The annual interest rate on the PPP Loan is 0.98%. Payments of principal and interest on the loan will be deferred for the first six months of the term of the loan. The promissory note evidencing the PPP Loan contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may trigger the immediate repayment of all amounts outstanding, collection of all amounts owing from the Company, and/or filing suit and obtaining a judgment against the Company.

Under the terms of the CARES Act, PPP Loan recipients may apply for and be granted forgiveness for all or a portion of loans granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payroll costs and mortgage interest, rent or utility costs and the maintenance of employee and compensation levels. While the Company believes that it has acted in compliance with the program and plans to seek forgiveness of the PPP Loan, no assurance can be provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.

15. 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 is 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, that is equal to the amount of Geneva’s loan under the PPP that was not assumed by the Company and is expected to be substantially forgiven by the SBA, (iii) an amount, up to $300,000 which may be 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 will be determined based upon the achievement of certain criteria relating to the number the Company’s contractors working full-time at Company clients on such dates.

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 have been recorded at their preliminary estimated fair values. The Company determined the preliminary estimated fair values with the assistance of valuations performed by an independent third-party specialist. We expect to complete the valuation of the net assets in the third quarter of fiscal 2021.

The Company has incurred approximately $278,000 in legal fees, business broker fees, valuation services, accounting fees and other expenses to complete the Geneva acquisition, of which $122,000 of these expenses were recorded in the quarter ended August 31, 2020 and $156,000 in the quarter ended November 30, 2020. All acquisition related costs have been expensed as incurred and included in selling, general and administrative expenses.

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TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2020

(Unaudited)

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 preliminary estimated fair values at September 1, 2020:

Cash	$	241,946
Accounts receivable		778,930
Prepaid expenses		5,249
Intangible assets (see Note 17)		1,800,000
Goodwill		785,883
Accrued expenses		(269,948	)
Net assets	$	3,342,060

The purchase agreement for the Geneva acquisition provides for earn-out payments of up to $300,000 plus bonus amounts in $10,000 increments which are earned through August 2021. The initial earn-out 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 earn-out payout structure (Level 3 of the fair value hierarchy). The earn-out was and will continue to be revalued quarterly using a present value approach and any resulting increase or decrease will be 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 judgement is employed in determining the appropriateness of the assumptions used in calculating the fair value of the earn-out as of the acquisition date and subsequent period ends. Accordingly, significant variances between actual and forecasted results or changes in the assumptions can materially impact the amount of contingent consideration expense we record in future periods.

The following unaudited pro forma financial information presents the combined operating results of the Company and Geneva Consulting Group 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 Consulting group as of June 1, 2019 is presented in the following table (in thousands):

	Three Months Ended November 30,					Six Months Ended November 30,
	2020			2019		2020			2019
Revenue	$	16,069		$	17,889	$	32,020		$	34,990
Net income (loss)	$	(247	)	$	193	$	(488	)	$	(482	)
Earnings (loss) per share	$	(0.13	)	$	0.10	$	(0.25	)	$	(0.25	)

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TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2020
(Unaudited)

16. 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.

17. 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 identified in the Geneva Consulting Group acquisition are as follows:

	September 1, 2020		Amortization		November 30, 2020
Database (estimated life 5 years)	$	230,000	$	11,500	$	218,500
Non-compete agreement (estimated life 2 years)		10,000		1,250		8,750
Trademark (estimated life 3 years)		60,000		5,000		55,000
Customer relationships (estimated life 15 years)		1,500,000		25,000		1,475,000
Total	$	1,800,000	$	42,750	$	1,757,250

No instances of triggering events or impairment indicators were identified at November 30, 2020.

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TSR, INC. AND SUBSIDIARIES

MANAGEMENT’S 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 internal and through the previously announced pursuit of suitable acquisition candidates; the successful integration of announced 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 November 30, 2020 compared with three months ended November 30, 2019

	(Dollar amounts in thousands) Three Months Ended
	November 30, 2020						November 30, 2019
	Amount			% of Revenue			Amount		% of Revenue
Revenue, net	$	16,069			100.0	%	$	15,234		100.0	%
Cost of sales		13,234			82.4	%		12,784		83.9	%
Gross profit		2,835			17.6	%		2,450		16.1	%
Selling, general and administrative expenses		3,059			19.0	%		2,386		15.7	%
Income (loss) from operations		(224	)		(1.4	)%		64		0.4	%
Other income (expense), net		(54	)		(0.3	)%		12		0.1	%
Income (loss) before income taxes		(278	)		(1.7	)%		76		0.5	%
Provision for (benefit from) income taxes		(30	)		(0.2	)%		8		0.1	%
Consolidated net income (loss)		(248	)		(1.5	)%		68		0.4	%
Less: Net income (loss) attributable to noncontrolling interest		(1	)		(0.0	)%		6		0.0	%
Net income (loss) attributable to TSR, Inc.	$	(247	)		(1.5	)%	$	62		0.4	%

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TSR, INC. AND SUBSIDIARIES

Revenue

Revenue consists primarily of revenue from computer programming consulting services. Revenue for the quarter ended November 30, 2020 increased approximately $835,000 or 5.5% from the quarter ended November 30, 2019. Without revenue of $1,962,000 from the Geneva acquisition, revenue would have decreased $1,127,000 or 7.4%. Revenue for the current quarter increased due to higher overall average number of consultants on billing with customers which increased from 378 for the quarter ended November 30, 2019 to 383 for the quarter ended November 31, 2020, with Geneva contributing 44 of the 383 average number of consultants on billing.

We have experienced and continue to experience terminated assignments and a decrease in demand for new assignments due to the COVID-19 pandemic, which has led to a lower number of consultant placements and negatively impacted the Company’s revenues. Additionally, the COVID-19 pandemic has created operational challenges. The start of certain new assignments has been and continues to be delayed 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. As of November 30, 2020, the Company had used 100% of the PPP loan funds to fund its payroll and other allowable expenses. The use of these funds 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 November 30, 2020 increased approximately $450,000 or 3.5% to $13,234,000 from $12,784,000 in the prior year period. The increase in cost of sales resulted primarily from an increase in consultants on billing with customers resulting from the Geneva acquisition. Cost of sales as a percentage of revenue decreased from 83.9% in the quarter ended November 30, 2019 to 82.4% in the quarter ended November 30, 2020. The percentage increase in cost of sales for the current quarter as compared to the prior year quarter (3.5% increase) was lower than the percentage increase in revenue for the current quarter as compared to the prior year quarter (5.5% increase), causing an increase in gross margins.

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 $673,000 or 28.2% from $2,386,000 in the quarter ended November 30, 2019 to $3,059,000 in the quarter ended November 30, 2020. The increase in these expenses primarily resulted from $491,000 in expenses from the newly acquired Geneva operation. These expenses are expected to decrease going forward as we combine operations. The Company also incurred approximately $156,000 of expenses in the quarter related to the acquisition. Additionally, the Company recorded an asset impairment charge of $137,000 in the current quarter due to the signing of a subletting agreement for one of its offices. Selling, general and administrative expenses, as a percentage of revenue, increased from 15.7% in the quarter ended November 30, 2019 to 19.0% in the quarter ended November 30, 2020.

Other Income (Expense)

Other income (expense) for the quarter ended November 30, 2020 resulted primarily from interest expense of approximately $52,000 and a mark to market loss of approximately $2,000 on the Company’s marketable equity securities. Other income for the quarter ended November 30, 2019 resulted primarily from interest and dividend income of $3,000 and a mark to market gain of approximately $9,000 on the Company’s marketable equity securities.

Income Tax Provision (Benefit)

The income tax benefit included in the Company’s results of operations for the quarters ended November 30, 2020 and 2019 reflects the Company’s estimated effective tax rate for the years ending May 31, 2021 and 2020, respectively. These rates resulted in a benefit of 10.8% for the quarter ended November 30, 2020 and a provision of 10.5% for the quarter ended November 30, 2019. The effective tax rates for these periods are not meaningful due to the small amount of pre-tax income and loss.

Net Income (Loss) Attributable to TSR, Inc.

Net loss attributable to TSR, Inc. was approximately $247,000 in the quarter ended November 30, 2020 compared to net income of $62,000 in the quarter ended November 30, 2019. The net loss in the current quarter was primarily attributable to an increase in selling, general and administrative expenses due to the Geneva acquisition and the impairment charge resulting from the subletting of one of the Company’s offices.

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TSR, INC. AND SUBSIDIARIES

Six months ended November 30, 2020 compared with six months ended November 30, 2019

	(Dollar amounts in thousands) Six Months Ended
	November 30, 2020						November 30, 2019
	Amount			% of Revenue			Amount			% of Revenue
Revenue, net	$	30,583			100.0	%	$	30,180			100.0	%
Cost of sales		25,417			83.1	%		25,455			84.3	%
Gross profit		5,166			16.9	%		4,725			15.7	%
Selling, general and administrative expenses		5,330			17.4	%		5,575			18.5	%
Loss from operations		(164	)		(0.5	)%		(850	)		(2.8	)%
Other income (expense), net		(116	)		(0.4	)%		19			0.0	%
Loss before income taxes		(280	)		(0.9	)%		(831	)		(2.8	)%
Benefit from income taxes		(35	)		0.1	%		(239	)		0.8	%
Consolidated net loss		(245	)		(0.8	)%		(592	)		(2.0	)%
Less: Net income attributable to noncontrolling interest		5			0.0	%		10			0.0	%
Net loss attributable to TSR, Inc.	$	(250	)		(0.8	)%	$	(602	)		(2.0	)%

Revenue

Revenue consists primarily of revenue from computer programming consulting services. Revenue for the six months ended November 30, 2020 increased approximately $403,000 or 1.3% from the six month period ended November 30, 2019. Without revenue of $1,962,000 from the Geneva acquisition, revenue would have decreased $1,559,000 or 5.2%. Revenue for the current six months increased primarily due to higher average billing rates. These increased rates resulted from placements in higher level positions, not higher rates for similar positions from the prior year period. The increase in rates overcame a lower overall average number of consultants on billing with customers which decreased from 377 for the six months ended November 30, 2019 to 359 for the six months ended November 30, 2020, with Geneva contributing 22 of the 359 average number of consultants on billing for the six month period.

We have experienced and continue to experience terminated assignments and a decrease in demand for new assignments due to the COVID-19 pandemic, which has led to the lower number of consultant placements and negatively impacted the Company’s revenues. Additionally, the COVID-19 pandemic has created operational challenges. The start of certain new assignments has been and continues to be delayed 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. As of November 30, 2020, the Company had used 100% of the PPP loan funds to fund its payroll and other allowable expenses. The use of these funds 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 six months ended November 30, 2020 decreased approximately $38,000 or 0.1% to $25,417,000 from $25,455,000 in the prior year period. The decrease in cost of sales resulted primarily from a decrease in consultants placed with customers. Cost of sales as a percentage of revenue decreased from 84.3% in the six months ended November 30, 2019 to 83.1% in the six months ended November 30, 2020. The percentage decrease in cost of sales for the current period as compared to the prior year period (0.1% decrease) added to the percentage increase in revenue for the current period as compared to the prior year period (1.3% increase), caused an increase in gross margins.

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TSR, INC. AND SUBSIDIARIES

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of expenses relating to account executives, technical recruiters, facilities costs, management and corporate overhead. These expenses decreased approximately $245,000 or 4.4% from $5,575,000 in the six months ended November 30, 2019 to $5,330,000 in the six months ended November 30, 2020. The decrease in these expenses primarily resulted from a decrease of $847,000 in amounts paid for legal services and advisory from the prior year related to shareholder litigation and increased costs surrounding our proxy and annual meeting. There were an additional $491,000 in selling, general and administrative expenses from the newly acquired Geneva operation in fiscal 2021. The Company also incurred approximately $278,000 of expenses in the current six month period related to the acquisition. Additionally, the Company recorded an asset impairment charge of $137,000 in the current period due to the signing of a subletting agreement for one of its offices. Selling, general and administrative expenses, as a percentage of revenue, decreased from 18.5% in the six months ended November 30, 2019 to 17.4% in the six months ended November 30, 2020.

Other Income (Expense)

Other income (expense) for the six months ended November 30, 2020 resulted primarily from interest expense of approximately $104,000 and a mark to market loss of approximately $12,000 on the Company’s marketable equity securities. Other income for the six months ended November 30, 2019 resulted primarily from interest and dividend income of $8,000 and a mark to market gain of approximately $11,000 on the Company’s marketable equity securities.

Income Tax Benefit

The income tax benefit included in the Company’s results of operations for the six months ended November 30, 2020 and 2019 reflects the Company’s estimated effective tax rate for the years ending May 31, 2021 and 2020, respectively. These rates resulted in a benefit of 12.5% for the six months ended November 30, 2020 and a benefit of 28.8% for the six months ended November 30, 2019. The effective rate for the current period is not meaningful due to the small amount of the pre-tax loss.

Net Loss Attributable to TSR, Inc.

Net loss attributable to TSR, Inc. was approximately $250,000 in the six months ended November 30, 2020 compared to a loss of $602,000 in the six months ended November 30, 2019. The decrease in net loss was primarily attributable to a decrease in selling, general and administrative expenses due to the decreased legal services and advisory fees described above.

Liquidity and Capital Resources

The Company’s cash was sufficient to enable it to meet its liquidity requirements during the six months ended November 30, 2020. The Company expects that its cash and cash equivalents and the Company’s line of credit pursuant to a Loan and Security Agreement with Access Capital, Inc. 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 the line of credit to increase its liquidity as necessary. As of November 30, 2020, the net borrowings outstanding against this line of credit facility were approximately $100,000. The amount the Company has borrowed fluctuates and, at times, it has utilized the maximum amount of $2,000,000 available under this facility in the prior fiscal year to fund its payroll and other obligations. The Company was in compliance with all covenants under the line of credit facility as of November 30, 2020 and through the date of this filing. Additionally, in April 2020, the Company secured a PPP Loan in the amount of $6,659,000. At the time of application, the Company determined that the loan was necessary in order to secure the Company’s ability to meet its obligations in the face of potential disruptions in it business operations and the potential inability of its customers to pay their accounts when due. As of November 30, 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. While there is no guarantee that the Company will receive forgiveness for any outstanding amounts under the PPP Loan, it believes that it has acted in compliance with the terms of the program and plans to seek forgiveness of the PPP Loan.

At November 30, 2020, the Company had working capital (total current assets in excess of total current liabilities) of approximately $9,161,000 including cash and cash equivalents and marketable securities of $7,231,000 as compared to working capital of $12,239,000 including cash and cash equivalents and marketable securities of $9,780,000 at May 31, 2020.

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TSR, INC. AND SUBSIDIARIES

Net cash flow of approximately $987,000 was provided by operations during the six months ended November 30, 2020 as compared to $1,234,000 of net cash flow used in operations in the prior year period. The cash provided by operations for the six months ended November 30, 2020 primarily resulted from an increase in accounts payable and other payables and accrued expenses of $1,435,000 offset by the consolidated net loss of $244,000 and increases in accounts receivable and prepaid expenses of $171,000 and $143,000, respectively. The increase in accounts payable and accrued expenses primarily resulted from the deferral of $1,132,000 in payroll taxes as allowed by the Cares Act. The cash used in operations for the six months ended November 30, 2019 primarily resulted from the consolidated net loss of $592,000, a decrease in accounts payable and accrued expenses of $633,000 and an increase in deferred taxes of $252,000, which were offset, to an extent, by a decrease in accounts receivable of $376,000.

Net cash used in investing activities of approximately $3,123,000 for the six months ended November 30, 2020 primarily resulted from the acquisition of Geneva Consulting Group, Inc. in the amount of $3,100,000. Net cash provided by investing activities of $247,000 for the six months ended November 30, 2019 primarily resulted from the proceeds of a matured certificate of deposit not being reinvested.

Net cash used in financing activities of approximately $401,000 during the six months ended November 30, 2020 resulted from net payments on the Company’s line of credit with Access Capital. Net cash used in financing activities during the six months ended November 30, 2019 resulted from distributions to the minority interest of $11,000.

The Company’s capital resource commitments at November 30, 2020 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 $532,000 and $847,000, respectively, as of November 30, 2020. The Company intends to finance these commitments primarily from the Company’s available cash and line of credit.

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.

Recently Adopted Accounting Pronouncements

Effective June 1, 2019, the Company adopted ASU No. 2016-02, Leases, which sets out the principle for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to classify leases as either finance or operating leases and record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. An accounting policy election may be made to account for leases with a term of 12 months or less similar to existing guidance for operating leases today. ASU No. 2016-02 supersedes the existing guidance on accounting for leases. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which allows for an optional transition method for the adoption of Topic 842. The two permitted transition methods are now the modified retrospective approach, which applies the new lease requirements at the beginning of the earliest period presented, and the optional transition method, which applies the new lease requirements through a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2016-02 is effective for our fiscal year ended May 31, 2020 and the interim periods within that year. The Company adopted this standard in the first quarter of fiscal 2020 using the optional transition method. The Company also elected the practical expedients that allow us to carry forward the historical lease classification. The Company has established an inventory of existing leases and implemented a new process of evaluating the classification of each lease. The financial impact of the adoption of the new standard at June 1, 2019 increased total assets and total liabilities by approximately $690,000. The financial impact of the adoption primarily relates to the capitalization of right-of-use assets and recognition of lease liabilities related to operating leases.

Critical Accounting Policies

The Securities and Exchange Commission defines “critical accounting policies” as those that require the application of management’s most difficult subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

The Company’s significant accounting policies are described in Note 1 to the Company’s consolidated financial statements, contained in its May 31, 2020 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. Other than the consideration of the policies disclosed in Notes 16 and 17 to the condensed consolidated financial statements regarding the accounting for goodwill and intangible assets, there have been no changes in the Company’s significant accounting policies as of November 30, 2020.

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TSR, INC. AND SUBSIDIARIES

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 reported completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting, except such change as noted below.

On September 1, 2020, the Company acquired Geneva Consulting Group, Inc., which is now a wholly owned subsidiary of TSR, Inc. The Company is currently integrating policies, processes, technology and operations for the consolidated company and will continue to evaluate our internal control over financial reporting as we develop and execute our integration plans. Until we are fully integrated, we will maintain the operational integrity of each operating unit’s internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

Legal Settlement with Investor

During the quarter ended February 29, 2020, the Company negotiated a settlement with the Company’s largest stockholder to reimburse it for legal expenses of $900,000 (net present value of $818,000 as of February 29, 2020), by entering into a binding term sheet on April 1, 2020. The parties entered into a final agreement reflecting these terms on August 13, 2020. (See Note 12 to the Condensed Consolidated Financial Statements elsewhere in this report.)

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.

At this time, it is not possible to predict the outcome of this litigation matter or its effect on the Company and the Company’s consolidated financial position.

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, 2020, as filed with the Securities and Exchange Commission.

The Company is currently subject to ongoing litigation with its former CEO which, like other future lawsuits or investigations, could divert our resources or result in substantial liabilities.

The Company is currently subject to a litigation involving the Company’s former Chief Executive Officer, as discussed in the “Legal Proceedings” section. In connection with this litigation, the Company may enter into a settlement of claims for significant monetary damages. The Company may also be subject to a judgement for significant monetary damages. Defending against the current litigation may be time-consuming, expensive and cause diversion of management’s attention.

We may be additionally in the future subject to legal or administrative proceedings and litigation which may be costly to defend and could materially harm our business, financial conditions and operations. With respect to any litigation, the Company’s insurance may not reimburse it or may not be sufficient to reimburse it for the self-insured retention that the Company is required to satisfy before any insurance applies to a claim, unreimbursed legal fees or an adverse result in any litigation may adversely impact the Company’s business, operating results or financial condition.

Page 26

TSR, INC. AND SUBSIDIARIES

Our business, financial condition and results of operations have been negatively impacted by global health epidemics, including the recent COVID-19 outbreak.

Outbreaks of epidemic, pandemic, or contagious diseases such as COVID-19 have and may continue to have an adverse effect on our business, financial condition, and results of operations. The spread of COVID-19 across the world has resulted in the World Health Organization declaring the outbreak of COVID-19 as a global pandemic. As the extent and duration of the COVID-19 outbreak is still unknown, international stock markets have experienced volatility reflecting the uncertainty associated with the slow-down in the global economy and the resulting governmental responses to the pandemic. If COVID-19 continues to progress in ways that disrupt our customers’ demand for computer programing services or staffing needs or otherwise continues to disrupt our operations, such disruptions may continue to negatively affect, and may in the future materially affect, our operating results. The majority of our workforce and customer base is located in New Jersey and New York and typically works on-site at client locations. However, on March 20, 2020 New York Governor Cuomo signed the New York State on PAUSE executive order, which includes a new directive that all non-essential businesses statewide close in-office personnel functions effective March 22 to mitigate the impact of the COVID-19 pandemic and we determined that the Company is a non-essential business. In response to these public health directives and orders, we have implemented and maintained work-from-home policies for certain employees. The effects of continued executive orders, stay at home orders and our work-from-home policies may negatively impact productivity, disrupt our business and impact our ability to service our clients and our clients need for our services, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. Similar, and perhaps more severe, disruptions in our operations could negatively impact, and may materially negatively impact, our business, operating results and financial condition. Quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could resume or continue to occur, related to COVID-19 or other infectious diseases could impact us and the business operations of our vendors and customers. Additionally, if the spread of COVID-19 limits our ability to make workers available either because they are ill or due to work-from-home orders, this likely would negatively affect, and may materially negatively affect, our operating results, cash flow and business.

The full financial impact of the pandemic cannot be reasonably estimated at this time. The extent to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 pandemic and the actions taken globally to contain the COVID-19 pandemic or treat its impact, among others. Existing insurance coverage may not provide protection for all costs that may arise from all such possible events. We continue to assess our business operations and system supports and the impact COVID-19 may have on our results and financial condition, but there can be no assurance that this analysis will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or in our sector in particular. 

We recently 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.

Page 27

TSR, INC. AND SUBSIDIARIES

Item 6. Exhibits

(a)	Exhibit 10.1 – Employment Agreement, dated as of November 2, 2020, by and between Thomas C. Salerno and TSR, Inc. (incorporated by reference to our current report on Form 8-K filed with the SEC on November 6, 2020 as Exhibit 10.1)
	Exhibit 10.2 – Amended and Restated Employment Agreement, dated as of November 2, 2020, by and between John G. Sharkey and TSR, Inc. (incorporated by reference to our current report on Form 8-K filed with the SEC on November 6, 2020 as Exhibit 10.2)
	Exhibit 10.3 – TSR, Inc. 2020 Equity Incentive Plan (incorporated by reference to our current report on Form S-8 filed with the SEC on December 18, 2020 as Exhibit 4.6)
	Exhibit 31.1 – Certification by Thomas Salerno pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 31.2 – Certification by John G. Sharkey pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Exhibit 32.1 – Certification by Thomas Salerno pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	Exhibit 32.2 – Certification by John G. Sharkey pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	Exhibit 101 – The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2020, formatted in Extensible Business Reporting Language (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.

Page 28

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: January 19, 2021	/s/ Thomas Salerno
	Thomas Salerno, Chief Executive Officer, President, Treasurer and Principal Executive Officer
Date: January 19, 2021	/s/ John G. Sharkey
	John G. Sharkey, Sr. Vice President and Principal Accounting Officer

Page 29

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas Salerno, Chief Executive Officer, President, Treasurer and Principal Executive Officer certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of TSR, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 19, 2021

/s/ Thomas Salerno

Chief Executive Officer,
President, Treasurer and
Principal Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John G. Sharkey, Sr. Vice President and Principal Accounting Officer, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of TSR, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 19, 2021

/s/ John G. Sharkey

Sr. Vice President and

Principal Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of TSR, Inc. (the “Company”) on Form 10-Q for the quarter ended November 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas Salerno, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

The foregoing certification is incorporated solely for the purposes of complying with the provisions of Section 906 of the Sarbanes-Oxley Act and is not intended to be used for any other purpose.

/s/ Thomas Salerno

Chief Executive Officer,
President, Treasurer and
Principal Executive Officer

January 19, 2021

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of TSR, Inc. (the “Company”) on Form 10-Q for the quarter ended November 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John G. Sharkey, Principal Accounting Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

The foregoing certification is incorporated solely for the purposes of complying with the provisions of Section 906 of the Sarbanes-Oxley Act and is not intended to be used for any other purpose.

/s/ John G. Sharkey

Sr. Vice President and

Principal Accounting Officer

January 19, 2021

XML

Document And Entity Information - shares	6 Months Ended
	Nov. 30, 2020	Jan. 13, 2021
Document Information Line Items
Entity Registrant Name	TSR INC
Document Type	10-Q
Current Fiscal Year End Date	--05-31
Entity Common Stock, Shares Outstanding		1,962,062
Amendment Flag	false
Entity Central Index Key	0000098338
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Document Period End Date	Nov. 30, 2020
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity File Number	001-38838
Entity Incorporation, State or Country Code	DE
Entity Interactive Data Current	Yes

XML

Condensed Consolidated Balance Sheets - USD ($)	Nov. 30, 2020	May 31, 2020
Current Assets:
Cash and cash equivalents	$ 7,192,748	$ 9,730,022
Marketable securities	38,680	50,344
Accounts receivable, net of allowance for doubtful accounts of $181,000	8,007,737	7,057,365
Other receivables	29,224	5,088
Prepaid expenses	351,419	202,862
Prepaid and recoverable income taxes	567,251	598,893
Total Current Assets	16,187,059	17,644,574
Equipment and leasehold improvements, net of accumulated depreciation and amortization of $281,466 and $276,673	38,057	20,191
Other assets	76,442	49,653
Right-of-use assets	391,212	377,182
Intangible assets, net	1,757,250
Goodwill	785,883
Deferred income taxes	858,000	784,000
Total Assets	20,093,903	18,875,600
Current Liabilities:
Accounts payable and other payables	1,675,144	503,166
Accrued expenses and other current liabilities	3,564,589	3,031,633
Advances from customers	1,169,833	1,181,234
Revolving line of credit	100,037	501,134
Operating lease liabilities - current	224,256	188,799
Legal settlement payable - current	291,822
Total Current Liabilities	7,025,681	5,405,966
Operating lease liabilities, net of current portion	307,563	192,409
Legal settlement payable, net of current portion	555,643	827,822
SBA Paycheck Protection Program loan payable	6,659,220	6,659,220
Total Liabilities	14,548,107	13,085,417
Commitments and contingencies
TSR, Inc.:
Preferred stock, value
Common stock, $.01 par value, authorized 12,500,000 shares; issued 3,114,163 shares, 1,962,062 outstanding	31,142	31,142
Additional paid-in capital	5,102,868	5,102,868
Retained earnings	13,892,038	14,141,796
Shareholder's equity before treasury stock	19,026,048	19,275,806
Less: Treasury stock, 1,152,101 shares, at cost	13,514,003	13,514,003
Total TSR, Inc. Equity	5,512,045	5,761,803
Noncontrolling interest	33,751	28,380
Total Equity	5,545,796	5,790,183
Total Liabilities and Equity	20,093,903	18,875,600
Class A Preferred Stock
TSR, Inc.:
Preferred stock, value

XML

Condensed Consolidated Balance Sheets (Parentheticals) - USD ($)	Nov. 30, 2020	May 31, 2020
Allowance for doubtful accounts related to accounts receivable (in Dollars)	$ 181,000	$ 181,000
Equipment and leasehold improvements, net of accumulated depreciation and amortization (in Dollars)	$ 281,466	$ 276,673
Preferred stock par value (in Dollars per share)	$ 1	$ 1
Preferred stock, shares authorized	500,000	500,000
Preferred stock, shares issued
Common stock par value (in Dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	12,500,000	12,500,000
Common stock, shares issued	3,114,163	3,114,163
Common stock, shares outstanding	1,962,062	1,962,062
Treasury stock, shares	1,152,101	1,152,101
Class A Preferred Stock
Preferred stock, shares authorized	30,000	0
Preferred stock, shares issued

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Nov. 30, 2020	Nov. 30, 2019	Nov. 30, 2020	Nov. 30, 2019
Income Statement [Abstract]
Revenue, net	$ 16,068,577	$ 15,233,869	$ 30,582,583	$ 30,180,431
Cost of sales	13,233,492	12,784,085	25,416,414	25,455,137
Selling, general and administrative expenses	3,058,618	2,385,530	5,329,919	5,574,993
Cost and expenses, total	16,292,110	15,169,615	30,746,333	31,030,130
Income (loss) from operations	(223,533)	64,254	(163,750)	(849,699)
Other income (loss):
Interest income and (expense), net	(51,697)	2,992	(103,973)	7,907
Unrealized gain (loss) on marketable securities, net	(2,080)	8,512	(11,664)	11,208
Income (loss) before income taxes	(277,310)	75,758	(279,387)	(830,584)
Provision for (benefit from) income taxes	(30,000)	8,000	(35,000)	(239,000)
Consolidated net income (loss)	(247,310)	67,758	(244,387)	(591,584)
Less: Net income (loss) attributable to noncontrolling interest	(552)	6,246	5,371	9,918
Net income (loss) attributable to TSR, Inc.	$ (246,758)	$ 61,512	$ (249,758)	$ (601,502)
Basic and diluted net income (loss) per TSR, Inc. common share (in Dollars per share)	$ (0.13)	$ 0.03	$ (0.13)	$ (0.31)
Basic and diluted weighted average number of common shares outstanding (in Shares)	1,962,062	1,962,062	1,962,062	1,962,062

XML

Condensed Consolidated Statements of Equity (Unaudited) - USD ($)	Total	Common Stock	Additional paid-in capital	Retained earnings	Treasury stock	TSR, Inc. equity	Non-controlling interest
Balance at May. 31, 2019	$ 6,917,023	$ 31,142	$ 5,102,868	$ 15,268,224	$ (13,514,003)	$ 6,888,231	$ 28,792
Balance (in Shares) at May. 31, 2019		3,114,163
Net income (loss) attributable to noncontrolling interest	3,672						3,672
Net income (loss) attributable to TSR, Inc.	(663,014)			(663,014)		(663,014)
Balance at Aug. 31, 2019	6,257,681	$ 31,142	5,102,868	14,605,210	(13,514,003)	6,225,217	32,464
Balance (in Shares) at Aug. 31, 2019		3,114,163
Net income (loss) attributable to noncontrolling interest	6,246						6,246
Distribution to noncontrolling interest	(11,000)						(11,000)
Net income (loss) attributable to TSR, Inc.	61,512			61,512		61,512
Balance at Nov. 30, 2019	6,314,439	$ 31,142	5,102,868	14,666,722	(13,514,003)	6,286,729	27,710
Balance (in Shares) at Nov. 30, 2019		3,114,163
Balance at May. 31, 2020	5,790,183	$ 31,142	5,102,868	14,141,796	(13,514,003)	5,761,803	28,380
Balance (in Shares) at May. 31, 2020		3,114,163
Net income (loss) attributable to noncontrolling interest	5,923						5,923
Net income (loss) attributable to TSR, Inc.	(3,000)			(3,000)		(3,000)
Balance at Aug. 31, 2020	5,793,106	$ 31,142	5,102,868	14,138,796	(13,514,003)	5,758,803	34,303
Balance (in Shares) at Aug. 31, 2020		3,114,163
Net income (loss) attributable to noncontrolling interest	(552)						(552)
Net income (loss) attributable to TSR, Inc.	(246,758)			(246,758)		(246,758)
Balance at Nov. 30, 2020	$ 5,545,796	$ 31,142	$ 5,102,868	$ 13,892,038	$ (13,514,003)	$ 5,512,045	$ 33,751
Balance (in Shares) at Nov. 30, 2020		3,114,163

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Nov. 30, 2020	Nov. 30, 2019
Cash flows from operating activities:
Consolidated net loss	$ (244,387)	$ (591,584)
Adjustments to reconcile consolidated net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	47,543	2,995
Unrealized (gain) loss on marketable securities, net	11,664	(11,208)
Deferred income taxes	(74,000)	(252,000)
Non-cash lease expense	(18)	2,797
Non-cash Right-of-use asset impairment charge	136,599
Changes in operating assets and liabilities:
Accounts receivable	(171,442)	375,524
Other receivables	(24,136)	(3,267)
Prepaid expenses	(143,308)	(143,899)
Prepaid and recoverable income taxes	31,642	14,445
Other assets	(26,789)
Accounts payable, other payables, accrued expenses and other current liabilities	1,434,986	(633,458)
Advances from customers	(11,401)	5,542
Legal settlement payable	19,643
Net cash provided by (used in) operating activities	986,596	(1,234,113)
Cash flows from investing activities:
Proceeds from maturities of marketable securities		247,000
Purchase of Geneva Consulting Group, Inc., net of cash acquired of $241,946	(3,100,114)
Purchases of equipment and leasehold improvements	(22,659)
Net cash provided by (used in) investing activities	(3,122,773)	247,000
Cash flows from financing activities:
Net repayments on line of credit	(401,097)
Distribution to noncontrolling interest		(11,000)
Net cash used in financing activities	(401,097)	(11,000)
Net decrease in cash and cash equivalents	(2,537,274)	(998,113)
Cash and cash equivalents at beginning of period	9,730,022	3,694,989
Cash and cash equivalents at end of period	7,192,748	2,696,876
Supplemental disclosures of cash flow data:
Income taxes paid	8,000	17,000
Non-cash investing and finance activities:
Right-of-use asset and operating lease liability	$ 261,000

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) (Parentheticals)	6 Months Ended
	Nov. 30, 2020 USD ($)
Statement of Cash Flows [Abstract]
Net of cash acquired	$ 241,946

XML

Basis of Presentation

6 Months Ended

Nov. 30, 2020

Accounting Policies [Abstract]

Basis of Presentation

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, 2020, which has been derived from audited financial statements, and the unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America applying to interim financial information and with the instructions to Form 10-Q of Regulation S-X of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures required by accounting principles generally accepted in the United States of America and normally included in the Company’s annual financial statements have been condensed or omitted. These condensed consolidated interim financial statements as of and for the three months and six months ended November 30, 2020 are unaudited; however, in the opinion of management, such statements include all adjustments (consisting of normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations and cash flows of the Company for the periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results that might be expected for future interim periods or for the full year ending May 31, 2021. 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, 2020.

XML

Net Income (Loss) Per Common Share

6 Months Ended

Nov. 30, 2020

Earnings Per Share [Abstract]

Net Income (Loss) Per Common Share

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, Inc. by the weighted average number of common shares outstanding. The Company had no stock options or other common stock equivalents outstanding during any of the periods presented.

XML

Cash and Cash Equivalents

6 Months Ended

Nov. 30, 2020

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents

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 November 30, 2020 and May 31, 2020:

	November 30, 2020		May 31, 2020
Cash in banks	$	7,140,043	$	9,677,848
Money market funds		52,705		52,174
	$	7,192,748	$	9,730,022

XML

Fair Value of Financial Instruments

6 Months Ended

Nov. 30, 2020

Disclosure Text Block Supplement [Abstract]

Fair Value of Financial Instruments

4. Fair Value of Financial Instruments

ASC 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”), defines fair value, establishes a framework for measuring fair value under 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.

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Marketable Securities

6 Months Ended

Nov. 30, 2020

Marketable Securitie [Abstract]

Marketable Securities

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.

The following are the major categories of assets measured at fair value on a recurring basis as of November 30, 2020 and May 31, 2020 using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2) and significant unobservable inputs (Level 3):

November 30, 2020	Level 1		Level 2		Level 3		Total
Equity Securities	$	38,680	$	-	$	-	$	38,680
	$	38,680	$	-	$	-	$	38,680

May 31, 2020	Level 1		Level 2		Level 3		Total
Equity Securities	$	50,344	$	-	$	-	$	50,344
	$	50,344	$	-	$	-	$	50,344

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 November 30, 2020 and May 31, 2020 are summarized as follows:

November 30, 2020 Current	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Recorded Value
Equity Securities	$	16,866	$	21,814	$	-	$	38,680
	$	16,866	$	21,814	$	-	$	38,680

May 31, 2020 Current	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Recorded Value
Equity Securities	$	16,866	$	33,478	$	-	$	50,344
	$	16,866	$	33,478	$	-	$	50,344

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.

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Equity

6 Months Ended

Nov. 30, 2020

Stockholders' Equity Note [Abstract]

Equity

6. Equity

Rights Plan / Preferred Stock

On August 29, 2018, the Board of Directors of the Company declared a dividend of one preferred share purchase right (a “Right”) for each share of common stock, par value $0.01 per share (“Common Stock”), of the Company outstanding on August 29, 2018 (the “Record Date”) to the stockholders of record on that date. In connection with the distribution of the Rights, the Company entered into a Rights Agreement (the “Rights Agreement”), dated as of August 29, 2018, between the Company and Continental Stock Transfer & Trust Company, as Rights Agent. Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share of Class A Preferred Stock, Series One, par value $0.01 per share (“Preferred Stock”), of the Company at a price of $24.78 per one one-hundredth of a share of Preferred Stock represented by a Right (the “Purchase Price”), subject to adjustment.

On August 30, 2019, the Company entered into a settlement and release agreement (the “Settlement Agreement”) with Zeff Capital, L.P., Zeff Holding Company, LLC, Daniel Zeff, QAR Industries, Inc., Robert Fitzgerald, Fintech Consulting LLC and Tajuddin Haslani (collectively, the “Investor Parties”), pursuant to which the Company agreed to, among other things, amend and restate the Rights Agreement to provide that a “Distribution Date” (as defined below) shall not occur as a result of any request by any of the Investor Parties calling for a special meeting pursuant to Article II, Section 5 of the Amended and Restated By-Laws of the Company in accordance with the terms of the Settlement Agreement. (See Note 7, “Other Matters.”)

Distribution Date; Exercisability; Expiration

Initially, the Rights will be attached to all certificates for shares of Common Stock and no separate certificates evidencing the Rights (“Rights Certificates”) will be issued. Until the Distribution Date (as defined below), the Rights will be transferred with and only with shares of Common Stock. As long as the Rights are attached to the shares of Common Stock, the Company will issue one Right with each new share of Common Stock so that all such shares of Common Stock will have Rights attached.

The Rights will separate and begin trading separately from the Common Stock, and Rights Certificates will be issued to evidence the Rights, on the earlier to occur of (a) the Close of Business (as such term is defined in the Rights Agreement) on the tenth day following a public announcement, or the public disclosure of facts indicating, that a Person (as such term is defined in the Rights Agreement), group of affiliated or associated Persons or any other Person with whom such Person is Acting in Concert (as defined in the Rights Agreement) has acquired Beneficial Ownership (as defined in the Rights Agreement) of 5% or more of the outstanding Common Stock (an “Acquiring Person”) (or, in the event an exchange is effected in accordance with Section 27 of the Rights Agreement and the Board of Directors determines that a later date is advisable, then such later date) or (b) the Close of Business on the tenth Business Day (as such term is defined in the Rights Agreement) (or such later date as may be determined by action of the Board of Directors prior to such time as any Person becomes an Acquiring Person) following the commencement of a tender offer or exchange offer the consummation of which would result in the Beneficial Ownership by a Person or group of 5% or more of the outstanding Common Stock (the earlier of such dates, the “Distribution Date”). As soon as practicable after the Distribution Date, unless the Rights are recorded in book-entry or other uncertificated form, the Company will prepare and cause the Right Certificates to be sent to each record holder of Common Stock as of the Close of Business on the Distribution Date.

An “Acquiring Person” will not include (i) the Company, (ii) any Subsidiary (as such term is defined in the Rights Agreement) of the Company, (iii) any employee benefit plan or employee stock plan of the Company or any Subsidiary of the Company, or any trust or other entity organized, appointed, established or holding Common Stock for or pursuant to the terms of any such plan, or (iv) any Person who or which, at the time of the first public announcement of the Rights Agreement, is a Beneficial Owner of 5% or more of the Common Shares then outstanding (a “Grandfathered Stockholder”). However, if a Grandfathered Stockholder becomes, after such time, the Beneficial Owner of any additional shares of Common Stock (regardless of whether, thereafter or as a result thereof, there is an increase, decrease or no change in the percentage of shares of Common Stock then outstanding beneficially owned by such Grandfathered Stockholder) then such Grandfathered Stockholder shall be deemed to be an Acquiring Person unless, upon such acquisition of Beneficial Ownership of additional shares of Common Stock, such Person is not the Beneficial Owner of 5% or more of the Common Stock then outstanding. In addition, upon the first decrease of a Grandfathered Stockholder’s Beneficial Ownership below 5%, such Grandfathered Stockholder will cease to be a Grandfathered Stockholder. In the event that after the time of the first public announcement of the Rights Agreement, any agreement, arrangement or understanding pursuant to which any Grandfathered Stockholder is deemed to be the Beneficial Owner of Common Stock expires, terminates or no longer confers any benefit to or imposes any obligation on the Grandfathered Stockholder, any direct or indirect replacement, extension or substitution of such agreement, arrangement or understanding with respect to the same or different shares of Common Stock that confers Beneficial Ownership of Common Stock shall be considered the acquisition of Beneficial Ownership of additional shares of Common Stock by the Grandfathered Stockholder and render such Grandfathered Stockholder an Acquiring Person for purposes of the Rights Agreement unless, upon such acquisition of Beneficial Ownership of additional shares of Common Stock, such Person is not the Beneficial Owner of 5% or more of the Common Stock then outstanding. The Rights are not exercisable until the Distribution Date. The Rights will expire on the Close of Business on August 29, 2021 (the “Expiration Date”).

Redemption

At any time prior to the Close of Business on the earlier of (a) the tenth day following the Stock Acquisition Date or (b) the Expiration Date, the Board of Directors may redeem the Rights in whole, but not in part, at a price of $0.01 per Right (the “Redemption Price”). The “Stock Acquisition Date” is the first date on which there is a public announcement by the Company or an Acquiring Person that an Acquiring Person has become such, or such earlier date as a majority of the Board of Directors becomes aware of the existence of an Acquiring Person. The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish. Immediately upon the action of the Board of Directors ordering the redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.

Preferred Stock Rights

The Preferred Stock will not be redeemable. Each share of Preferred Stock will be entitled to receive, when, as and if declared by the Board of Directors, (a) cash dividends in an amount per share (rounded to the nearest cent) equal to 100 times the aggregate per share amount of all cash dividends declared or paid on the Common Stock and (b) a preferential quarterly cash dividend (the “Preferential Dividends”) in an amount equal to $50.00 per share of Preferred Stock less the per share amount of all cash dividends declared on the Preferred Stock pursuant to clause (a) of this sentence. Each share of Preferred Stock will entitle the holder thereof to 100 votes per share, voting together with the holders of the Common Stock as a single class, except as otherwise provided in the Certificate of Designations of Class A Preferred Stock Series One filed by the Company with the Delaware Secretary of State or the Company’s Amended and Restated Certificate of Incorporation, as amended, or Amended and Restated By-laws. In the event of any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each outstanding share of Preferred Stock shall at the same time be similarly exchanged for or changed into the aggregate amount of stock, securities, cash and/or other property (payable in like kind), as the case may be, for which or into which each share of Common Stock is changed or exchanged, multiplied by 100. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, (a) no distribution shall be made to the holders of shares of stock ranking junior to the Preferred Stock unless the holders of the Preferred Stock shall have received the greater of (i) $100 per share of Preferred Stock plus an amount equal to accrued and unpaid dividends and distributions thereon or (ii) an amount equal to 100 times the aggregate amount to be distributed per share to holders of the Common Stock, and (b) no distribution shall be made to the holders of stock ranking on a parity upon liquidation, dissolution or winding up with the Preferred Stock unless simultaneously therewith distributions are made ratably on the holders of the Preferred Stock and all other shares of such parity stock in proportion to the total amounts to which the holders of shares of Preferred Stock are entitled under clause (a)(i) of this sentence and to which the holders of such parity shares are entitled, in each case upon such liquidation, dissolution or winding up.

The foregoing rights are protected by customary anti-dilution provisions.

The foregoing description of the rights of the Preferred Stock does not purport to be complete and is qualified in its entirety by reference to the Certificate of Designations of Class A Preferred Stock Series One.

Rights of Holders

Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends.

Amended and Restated Rights Agreement

Pursuant to the Settlement Agreement, the Company amended and restated the Rights Agreement on September 3, 2019 to confirm that a Distribution Date (as defined in the Amended and Restated Rights Agreement) shall not occur as a result of any request by any of the Investor Parties for a special meeting of the Company’s stockholders.

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Other Matters

6 Months Ended

Nov. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Other Matters

7. 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 below.

On October 16, 2018, the Company was served with a complaint filed on October 11, 2018 in the Supreme Court of the State of New York, Queens County, by Susan Paskowitz, a stockholder of the Company, against the Company; Joseph F. Hughes and Winifred M. Hughes; former directors Christopher Hughes, Raymond A. Roel, Brian J. Mangan, Regina Dowd, James J. Hill, William Kelly, and Eric Stein; as well as stockholders Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC (the “Stockholder Litigation”). The complaint purports to be a class action lawsuit asserting claims on behalf of all minority stockholders of the Company. Ms. Paskowitz alleges the following: the sale by Joseph F. Hughes and Winifred M. Hughes of an aggregate of 819,491 shares of the Company’s common stock (“controlling interest”) to Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC was in breach of Joseph F. Hughes’ and Winifred M. Hughes’ fiduciary duties and to the detriment of the Company’s minority stockholders; the former members of the Board of Directors of the Company named in the complaint breached their fiduciary duties by failing to immediately adopt a rights plan that would have prevented Joseph F. Hughes and Winifred M. Hughes from selling their shares and preserved a higher premium for all stockholders; Zeff, QAR, and Fintech are “partners” and constitute a “group.” Ms. Paskowitz also asserts that Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC aided and abetted Joseph F. Hughes’ and Winifred M. Hughes’ conduct, and ultimately sought to buy out the remaining shares of the Company at an unfair price.

On June 14, 2019, Ms. Paskowitz filed an amended complaint in the Stockholder Litigation in the Supreme Court of the State of New York, Queens County against the members of the Board of Directors and Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC, which asserts substantially similar allegations to those contained in the October 11, 2018 complaint, but omits Regina Dowd, Joseph F. Hughes and Winifred M. Hughes as defendants. In addition to the former members of the Board of Directors named in the original complaint, the amended complaint names former directors Ira Cohen, Joseph Pennacchio, and William Kelly as defendants. The amended complaint also asserts a derivative claim purportedly on behalf of the Company against the named former members of the Board of Directors. The amended complaint seeks declaratory judgment and unspecified monetary damages. The complaint requests: (1) a declaration from the court that the former members of the Board of Directors named in the complaint breached their fiduciary duties by failing to timely adopt a stockholder rights plan, which resulted in the loss of the ability to auction the Company off to the highest bidder without interference from Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC; (2) damages derivatively on behalf of the Company for unspecified harm caused by the former Directors’ alleged breaches of fiduciary duties; (3) damages and equitable relief derivatively on behalf of the Company for the former Directors’ alleged failure to adopt proper corporate governance practices; and (4) damages and injunctive relief against Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC based on their knowing dissemination of false or misleading public statements concerning their status as a group. The complaint has not assigned any monetary values to alleged damages.

On July 15, 2019, the Company filed an answer to the amended complaint in the Stockholder Litigation and cross-claims against Zeff Capital, L.P., QAR Industries, Inc. and Fintech Consulting LLC for breaches of their fiduciary duties, aiding and abetting breaches of fiduciary duties, and indemnification and contribution based on their misappropriation of material nonpublic information and their failure to disclose complete and accurate information in SEC filings concerning their group actions to attempt a creeping takeover of the Company, which was thereafter amended on July 26, 2019.

In addition, on December 21, 2018, the Company filed a complaint in the United States District Court, Southern District of New York, against Zeff Capital, L.P., Zeff Holding Company, LLC, Daniel Zeff, QAR Industries, Inc., Robert Fitzgerald, Fintech Consulting LLC, and Tajuddin Haslani for violations of the disclosure and anti-fraud requirements of the federal securities laws under Sections 13(d) and 14(a) of the Securities Exchange Act of 1934 (“Exchange Act”), and the related rules and regulations promulgated by the SEC, for failing to disclose to the Company and its stockholders their formation of a group and the group’s intention to seize control of the Company (the “SDNY Action”). The complaint requests that the court, among other things, declare that the defendants have solicited proxies without filing timely, accurate and complete reports on Schedule 13D and Schedule 14A in violation of Sections 13(d) and 14(a) of the Exchange Act, direct the defendants to file with the SEC complete and accurate disclosures, enjoin the defendants from voting any of their shares prior to such time as complete and accurate disclosures have been filed, and enjoin the defendants from further violations of the Exchange Act with respect to the securities of the Company.

On January 7, 2019, Ms. Paskowitz filed a related action against Zeff Capital, L.P., Zeff Holding Company, LLC, Daniel Zeff, QAR Industries, Inc., Robert Fitzgerald, Fintech Consulting LLC, and Tajuddin Haslani in the Southern District of New York, which asserts claims against them for breach of fiduciary duty and under federal securities laws similar to those asserted in the Company’s action. Although the Company is not a party to Ms. Paskowitz’s action, the court has determined to treat the Company’s and Ms. Paskowitz’s respective actions as related.

On August 7, 2019, following the Company’s initial rescheduling of the 2018 annual meeting of stockholders (the “2018 Annual Meeting”) for September 13, 2019 and the filing of Preliminary Proxy Statements by the Company and Zeff Capital, L.P., Zeff Capital, L.P. filed a complaint in the Delaware Court of Chancery against the Company seeking an order requiring the Company to hold its next annual meeting of stockholders on or around September 13, 2019, and obligating the Company to elect Class I and Class III directors at that annual meeting. 

On August 13, 2019, the Company filed a motion for preliminary injunction in the SDNY Action in advance of the Company’s 2018 Annual Meeting originally scheduled for September 13, 2019, and requested leave to file a motion for expedited discovery. The Court denied the Company’s motion for preliminary injunction but ordered Zeff Capital, L.P. to “make clear that the second set of directors” described by Zeff Capital, L.P. in its preliminary proxy statement “is contingent upon the resolution of a proceeding in Delaware Chancery Court.”

On August, 30, 2019, the Company entered into the Settlement Agreement with the Investor Parties with respect to the proxy contest pertaining to the election of directors at the 2018 Annual Meeting, which was held on October 22, 2019. Pursuant to the Settlement Agreement, the parties agreed to forever settle and resolve any and all disputes between the parties, including without limitation disputes arising out of or relating to the following litigations:

(i) The complaint relating to alleged breaches of fiduciary duties filed on November 1, 2018 by Fintech Consulting LLC against the Company in the Delaware Court of Chancery, which was previously dismissed voluntarily;

(ii) The complaint for declaratory and injunctive relief for violations of the federal securities laws filed on December 21, 2018 by the Company against the Investor Parties in the United States District Court in the Southern District of New York;

(iii) Cross-claims relating to alleged breaches of fiduciary duties and for indemnification and contribution filed on July 26, 2019 by the Company against the Investor Parties in New York Supreme Court, Queens County; and

(iv) The complaint to compel annual meeting of stockholders filed on August 7, 2019 by Zeff Capital, L.P. against the Company in the Delaware Court of Chancery.

No party admitted any liability by entering into the Settlement Agreement. The Settlement Agreement did not resolve the Stockholder Litigation filed by Susan Paskowitz against the Company, Joseph F. Hughes, Winifred M. Hughes and certain former directors of the Company in the Supreme Court of the State of New York on October 11, 2018.

Concurrently with the Settlement Agreement, the parties entered into a share repurchase agreement (the “Repurchase Agreement”) which provided for the purchase by the Company and Christopher Hughes, the Company’s former President and Chief Executive Officer, of the shares of the Company’s Common Stock held by the Investor Parties (the “Repurchase”). The Settlement Agreement also contemplated that, if the Repurchase was completed, the Company would make a settlement payment to the Investor Parties at the closing of the Repurchase in an amount of approximately $1,500,000 (the “Settlement Payment”). However, the Repurchase and Settlement Payment were not completed by the deadline of December 30, 2019.

Pursuant to the Settlement Agreement, (1) the Company agreed to adopt an amendment to the Company’s Amended and Restated By-Laws, dated April 9, 2015 (the “By-Laws Amendment”), providing that stockholders of the Company owning at least forty percent (40%) of the issued and outstanding Common Stock may request a special meeting of stockholders; (2) the Investor Parties agreed not to take any action to call or otherwise cause a special meeting of stockholders to occur prior to December 30, 2019 (unless the Company had failed to hold the 2018 Annual Meeting); (3) the Company agreed to amend and restate the Company’s Rights Agreement, dated August 29, 2018 (the “Amended Rights Agreement”), to confirm that a Distribution Date (as defined in the Amended Rights Agreement) shall not occur as a result of any request by any of the Investor Parties for a special meeting; (4) the Company agreed that prior to the earlier of (A) the completion of the Repurchase and the payment of the Settlement Payment and (B) January 1, 2020, the Board of Directors shall not consist of more than seven (7) directors.

Pursuant to the terms of the Settlement Agreement, the two nominees for director made by Zeff Capital, L.P. were elected as directors at the Company’s 2018 Annual Meeting held on October 22, 2019. Please see the Company’s current Report on Form 8-K filed with the SEC on October 21, 2019 for more information about the background of the election of directors at the Company’s 2018 Annual Meeting.

Pursuant to the terms of the Settlement Agreement, inasmuch as the Repurchase was not completed and the Settlement Payment was not made by December 30, 2019, the members of the Board of Directors (other than the two directors who were nominated by Zeff Capital, L.P. and elected as directors at the 2018 Annual Meeting) resigned from the Board effective 5:00 p.m. Eastern Time on December 30, 2019. Immediately thereafter, the two remaining directors appointed Robert Fitzgerald to the Board of Directors. Please see the Company’s Current Report on Form 8-K filed with the SEC on December 31, 2019 for more information about the background and the appointment of Robert Fitzgerald.

The foregoing is not a complete description of the terms of the Settlement Agreement and the Share Repurchase Agreement. For a further description of the terms of the Settlement Agreement and the Share Repurchase Agreement, including copies of the Settlement Agreement and Share Repurchase Agreement, please see the Company’s Current Report on Form 8-K filed by the Company with the SEC on September 3, 2019.

On October 21, 2019, the Company entered into a Memorandum of Understanding (the “MOU”) with Susan Paskowitz providing for the settlement of the Stockholder Litigation filed by Ms. Paskowitz on October 11, 2018. The MOU provides for the settlement of the claims by Ms. Paskowitz that (1) the former members of the Board named in the original complaint allegedly breached their fiduciary duties by failing to immediately adopt a rights plan that would have prevented the sale by Joseph F. Hughes and Winifred M. Hughes of an aggregate of 819,491 shares of the Company’s common stock to the Investor Parties; (2) the former members of the Board named in the amended complaint allegedly breached their fiduciary duties and failed to adopt proper corporate governance practices; and (3) the Investor Parties acted as “partners” and constituted a “group” in their purchase of shares from Joseph F. Hughes and Winifred M. Hughes and knowingly disseminated false or misleading public statements concerning their status as a group.

Pursuant to the terms of the MOU, the Company will (1) implement certain corporate governance reforms described in the MOU within 30 days of a final order and judgment entered by the court, and keep these corporate governance reforms in place for 5 years from the time of the final order and judgment; and (2) acknowledge that the plaintiff, Ms. Paskowitz, and her counsel provided a substantial benefit to the Company and its stockholders through the prosecution of the Stockholder Litigation and other related actions filed by Ms. Paskowitz described above.

On December 16, 2019, the Company entered into a Stipulation and Agreement of Settlement (the “Stipulation”) with Susan Paskowitz in the Stockholder Litigation. The Stipulation retains the terms and conditions of settlement of the Stockholder Litigation contained in the MOU described in the preceding paragraph, with the addition that the Company will pay to plaintiff’s counsel an award of attorneys’ fees and reimbursement of expenses in the amount of $260,000 (collectively, the “Stockholder Litigation Settlement”). The Stockholder Litigation Settlement is intended to fully, finally, and forever compromise, settle, release, resolve, and dismiss with prejudice the Stockholder Litigation and all claims asserted therein directly against all present and former defendants and derivatively against them on behalf of the Company. The Stockholder Litigation Settlement does not contain any admission of liability, wrongdoing or responsibility by any of the parties, and provides for mutual releases by all parties. Each stockholder of the Company is a member of the plaintiff class unless such stockholder opts out of the class. The Company expects that the full amount of the $260,000 settlement payment will be covered by insurance proceeds. The Stipulation remains subject to approval by the court. The Stipulation is independent of the Settlement Agreement and Share Repurchase Agreement that the Company had entered into with the Investor Parties.

On December 24, 2019, Ms. Paskowitz moved for preliminary approval of the Stockholder Litigation Settlement. On May 21, 2020, the Court entered an order preliminarily approving the Stockholder Litigation Settlement. On July 9, 2020, the parties submitted an agreed upon proposed scheduling order for final approval of the Stockholder Litigation Settlement and a proposed mailing notice of the Stockholder Litigation Settlement to the Company’s stockholders. On December 16, 2020, the Court entered a scheduling order, which approved the form of the parties’ mailing notice, and provided that the hearing for final approval of the Stockholder Litigation Settlement will be held on April 20, 2021. Among other deadlines, the scheduling order provided that TSR must provide notice of the Stockholder Litigation Settlement to applicable stockholders by December 31, 2021, and that any objections to the Stockholder Litigation Settlement must be filed by April 5, 2021. Although the Company believes that the Stockholder Litigation Settlement represents a fair and reasonable compromise of the matters in dispute in the Stockholder Litigation, there can be no assurance that the court will approve the Stockholder Litigation Settlement as proposed, or at all.

Inasmuch as the Company did not complete the Repurchase and make the Settlement Payment prior to the December 30, 2019 deadline, the members of the Board of Directors (other than the two directors who were elected as directors at the 2018 Annual Meeting) resigned from the Board effective at 5:00 p.m. Eastern Time on December 30, 2019. Immediately thereafter, the two remaining directors, Bradley M. Tirpak and H. Timothy Eriksen, appointed Robert Fitzgerald as a new director. Each of Messrs. Tirpak, Eriksen and Fitzgerald qualifies as an “independent director” under the NASDAQ Stock Market Rules. These three individuals were also appointed to the Audit Committee, Nominating Committee, Compensation Committee and Special Committee. The Board appointed Mr. Tirpak as Chairman of the Board to succeed Christopher Hughes. Mr. Hughes continued to serve as the Chief Executive Officer, President and Treasurer of the Company until January 17, 2020. Additionally, the Board appointed Mr. Eriksen as Lead Independent Director, Chairman of the Audit Committee and Chairman of the Nominating Committee. The Board also appointed Mr. Fitzgerald as the Chairman of the Compensation Committee and Chairman of the Special Committee.

During the quarter ended February 29, 2020, the Company negotiated a settlement with Zeff Capital, L.P. to reimburse it for legal expenses of $900,000 (net present value of $818,000 accrued at February 29, 2020) by entering into a binding term sheet on April 1, 2020. The parties entered into a final agreement reflecting these terms on August 13, 2020. For additional information about this matter, please refer to Note 12, Legal Settlement with Investor.

Please also refer to Note 11, Termination of Former CEO, regarding an ongoing lawsuit originally filed by the Company’s former Chief Executive Officer against the Company in the Supreme Court of the State of New York in March 2020.

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Recently Adopted Accounting Pronouncements

6 Months Ended

Nov. 30, 2020

Accounting Standards Update and Change in Accounting Principle [Abstract]

Recently Adopted Accounting Pronouncements

8. Recently Adopted Accounting Pronouncements

Effective June 1, 2019, the Company adopted ASU No. 2016-02, Leases, which sets out the principle for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to classify leases as either finance or operating leases and record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. An accounting policy election may be made to account for leases with a term of 12 months or less similar to existing guidance for operating leases today. ASU No. 2016-02 supersedes the existing guidance on accounting for leases. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which allows for an optional transition method for the adoption of Topic 842. The two permitted transition methods are now the modified retrospective approach, which applies the new lease requirements at the beginning of the earliest period presented, and the optional transition method, which applies the new lease requirements through a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2016-02 is effective for our fiscal year ended May 31, 2020 and the interim periods within that year. The Company adopted this standard in the first quarter of fiscal 2020 using the optional transition method. The Company also elected the practical expedients that allow us to carry forward the historical lease classification. The Company has established an inventory of existing leases and implemented a new process of evaluating the classification of each lease. The financial impact of the adoption of the new standard at June 1, 2019 increased total assets and total liabilities by approximately $690,000. The financial impact of the adoption primarily relates to the capitalization of right-of-use assets and recognition of lease liabilities related to operating leases.

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Leases

6 Months Ended

Nov. 30, 2020

Leases [Abstract]

Leases

9. Leases

The Company leases the space for its three offices. Under ASC 842, at contract inception we determine whether the contract is or contains a lease and whether the lease should be classified as an operating or finance lease. Operating leases are in right-of-use assets and operating lease liabilities are in our consolidated condensed balance sheets.

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

The lease agreements expire on December 31, 2020, February 28, 2021 and August 31, 2022, respectively, and do not include any renewal options. During the current quarter, the Company extended its lease expiring December 31, 2020 to December 31, 2023. Additionally, the Company entered into a sublease agreement on its lease 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 three months ended November 30, 2020 and 2019, the Company’s operating lease expense for these leases was $230,922 and $198,803, respectively.

Future minimum lease payments under non-cancellable operating leases as of November 30, 2020 were as follows:

(note: payments related to the lease expiring February 28, 2021 are not included below because it is a one-year lease)

Twelve Months Ending November 30,
2021	$	252,848
2022		218,006
2023		99,557
2024		8,317
Total undiscounted operating lease payments		578,728
Less imputed interest		46,909
Present value of operating lease payments	$	531,819

The following table sets forth the right-of-use assets and operating lease liabilities as of November 30, 2020:

Assets
Right-of-use assets, net	$	391,212

Liabilities
Current operating lease liabilities	$	224,256
Long-term operating lease liabilities		307,563
Total operating lease liabilities	$	531,819

The weighted average remaining lease term for the Company’s operating leases is 1.9 years.

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Line of Credit

6 Months Ended

Nov. 30, 2020

Line Of Credit [Abstract]

Line of Credit

10. Line of Credit

On November 27, 2019, TSR, Inc. (“TSR”) closed on a revolving credit facility (the “Credit Facility”) pursuant to a Loan and Security Agreement with Access Capital, Inc. (the “Lender”) that 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. TSR had also expected to utilize the Credit Facility to complete the Repurchase and make the Settlement Payment; however, TSR did not complete the Repurchase and make the Settlement Payment prior to the December 30, 2019 deadline established in the Credit Facility for such use.

Because TSR did not complete the Repurchase and make the Settlement Payment prior to the December 30, 2019 deadline, 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 November 30, 2020 was 3.25%, indicating an interest rate of 5.0% on the line of credit. The initial term of the Credit Facility is 5 years, which shall automatically renew for successive 5-year periods unless either TSR or the Lender gives written notice to the other of termination at least 60 days prior to the expiration date of the then-current term.

TSR 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 covenants as of November 30, 2020 and through the date of this filing.

As of November 30, 2020, the net borrowings outstanding against this line of credit facility were $100,037. The amount the Company has borrowed fluctuates and, at times in the prior fiscal year, it has utilized the maximum amount of $2,000,000 available under the facility to fund its payroll and other obligations.

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Termination of Former CEO

6 Months Ended

Nov. 30, 2020

Termination Of Former Ceo [Abstract]

Termination of Former CEO

11. 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 alleges that he was terminated without cause or in the alternative that he resigned for good reason and therefore, pursuant to the Employment Agreement, Hughes 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. 

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Legal Settlement with Investor

6 Months Ended

Nov. 30, 2020

Legal Settlement With Investor Disclosure [Abstract]

Legal Settlement with Investor

12. 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. (See Note 7) 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 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 these payments is $847,000 at November 30, 2020.

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COVID-19

6 Months Ended

Nov. 30, 2020

Covid Nineteen [Abstract]

COVID-19

13. COVID-19

The COVID-19 outbreak in the United States has caused business disruption through 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. Therefore, the Company expects this matter to negatively impact its operating results in future periods. However, the full financial impact and duration cannot be reasonably estimated at this time.

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Payroll Protection Program Loan

6 Months Ended

Nov. 30, 2020

Payroll Protection Program Loan [Abstract]

Payroll Protection Program Loan

14. Payroll 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 recent 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 is being made through JPMorgan Chase Bank, N.A., a national banking association.

The original term of the PPP Loan was two years. The term may be extended to five years by the SBA and the lender. The annual interest rate on the PPP Loan is 0.98%. Payments of principal and interest on the loan will be deferred for the first six months of the term of the loan. The promissory note evidencing the PPP Loan contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may trigger the immediate repayment of all amounts outstanding, collection of all amounts owing from the Company, and/or filing suit and obtaining a judgment against the Company.

Under the terms of the CARES Act, PPP Loan recipients may apply for and be granted forgiveness for all or a portion of loans granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payroll costs and mortgage interest, rent or utility costs and the maintenance of employee and compensation levels. While the Company believes that it has acted in compliance with the program and plans to seek forgiveness of the PPP Loan, no assurance can be provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.

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Geneva Consulting Group Acquisition

6 Months Ended

Nov. 30, 2020

Business Combinations [Abstract]

Geneva Consulting Group Acquisition

15. 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 is 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, that is equal to the amount of Geneva’s loan under the PPP that was not assumed by the Company and is expected to be substantially forgiven by the SBA, (iii) an amount, up to $300,000 which may be 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 will be determined based upon the achievement of certain criteria relating to the number the Company’s contractors working full-time at Company clients on such dates.

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 have been recorded at their preliminary estimated fair values. The Company determined the preliminary estimated fair values with the assistance of valuations performed by an independent third-party specialist. We expect to complete the valuation of the net assets in the third quarter of fiscal 2021.

The Company has incurred approximately $278,000 in legal fees, business broker fees, valuation services, accounting fees and other expenses to complete the Geneva acquisition, of which $122,000 of these expenses were recorded in the quarter ended August 31, 2020 and $156,000 in the quarter ended November 30, 2020. All acquisition related costs have been expensed as incurred and included in selling, general and administrative expenses.

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 preliminary estimated fair values at September 1, 2020:

Cash	$	241,946
Accounts receivable		778,930
Prepaid expenses		5,249
Intangible assets (see Note 17)		1,800,000
Goodwill		785,883
Accrued expenses		(269,948	)
Net assets	$	3,342,060

The purchase agreement for the Geneva acquisition provides for earn-out payments of up to $300,000 plus bonus amounts in $10,000 increments which are earned through August 2021. The initial earn-out 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 earn-out payout structure (Level 3 of the fair value hierarchy). The earn-out was and will continue to be revalued quarterly using a present value approach and any resulting increase or decrease will be 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 judgement is employed in determining the appropriateness of the assumptions used in calculating the fair value of the earn-out as of the acquisition date and subsequent period ends. Accordingly, significant variances between actual and forecasted results or changes in the assumptions can materially impact the amount of contingent consideration expense we record in future periods.

The following unaudited pro forma financial information presents the combined operating results of the Company and Geneva Consulting Group 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 Consulting group as of June 1, 2019 is presented in the following table (in thousands):

	Three Months Ended November 30,					Six Months Ended November 30,
	2020			2019		2020			2019
Revenue	$	16,069		$	17,889	$	32,020		$	34,990
Net income (loss)	$	(247	)	$	193	$	(488	)	$	(482	)
Earnings (loss) per share	$	(0.13	)	$	0.10	$	(0.25	)	$	(0.25	)

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Goodwill

6 Months Ended

Nov. 30, 2020

Disclosure Text Block Supplement [Abstract]

Goodwill

16. 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.

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Intangible assets

6 Months Ended

Nov. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible assets

17. 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 identified in the Geneva Consulting Group acquisition are as follows:

	September 1, 2020		Amortization		November 30, 2020
Database (estimated life 5 years)	$	230,000	$	11,500	$	218,500
Non-compete agreement (estimated life 2 years)		10,000		1,250		8,750
Trademark (estimated life 3 years)		60,000		5,000		55,000
Customer relationships (estimated life 15 years)		1,500,000		25,000		1,475,000
Total	$	1,800,000	$	42,750	$	1,757,250

No instances of triggering events or impairment indicators were identified at November 30, 2020.

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Cash and Cash Equivalents (Tables)

6 Months Ended

Nov. 30, 2020

Cash and Cash Equivalents [Abstract]

Schedule of cash and cash equivalents

	November 30, 2020		May 31, 2020
Cash in banks	$	7,140,043	$	9,677,848
Money market funds		52,705		52,174
	$	7,192,748	$	9,730,022

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Marketable Securities (Tables)

6 Months Ended

Nov. 30, 2020

Marketable Securitie [Abstract]

Schedule of assets measured at fair value on recurring basis

November 30, 2020	Level 1		Level 2		Level 3		Total
Equity Securities	$	38,680	$	-	$	-	$	38,680
	$	38,680	$	-	$	-	$	38,680

May 31, 2020	Level 1		Level 2		Level 3		Total
Equity Securities	$	50,344	$	-	$	-	$	50,344
	$	50,344	$	-	$	-	$	50,344

Schedule of certificates of deposit and marketable securities

November 30, 2020 Current	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Recorded Value
Equity Securities	$	16,866	$	21,814	$	-	$	38,680
	$	16,866	$	21,814	$	-	$	38,680

May 31, 2020 Current	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Recorded Value
Equity Securities	$	16,866	$	33,478	$	-	$	50,344
	$	16,866	$	33,478	$	-	$	50,344

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Leases (Tables)

6 Months Ended

Nov. 30, 2020

Leases [Abstract]

Schedule of future minimum lease payments under non-cancellable operating leases

Twelve Months Ending November 30,
2021	$	252,848
2022		218,006
2023		99,557
2024		8,317
Total undiscounted operating lease payments		578,728
Less imputed interest		46,909
Present value of operating lease payments	$	531,819

Schedule of right-of-use assets and operating lease liabilities

Assets
Right-of-use assets, net	$	391,212

Liabilities
Current operating lease liabilities	$	224,256
Long-term operating lease liabilities		307,563
Total operating lease liabilities	$	531,819

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Geneva Consulting Group Acquisition (Tables)

6 Months Ended

Nov. 30, 2020

Business Combinations [Abstract]

Schedule of purchase price at fair values

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

Schedule of allocation of purchase price at preliminary estimated fair values

Cash	$	241,946
Accounts receivable		778,930
Prepaid expenses		5,249
Intangible assets (see Note 17)		1,800,000
Goodwill		785,883
Accrued expenses		(269,948	)
Net assets	$	3,342,060

Schedule of unaudited pro forma financial information

	Three Months Ended November 30,					Six Months Ended November 30,
	2020			2019		2020			2019
Revenue	$	16,069		$	17,889	$	32,020		$	34,990
Net income (loss)	$	(247	)	$	193	$	(488	)	$	(482	)
Earnings (loss) per share	$	(0.13	)	$	0.10	$	(0.25	)	$	(0.25	)

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Intangible assets (Tables)

6 Months Ended

Nov. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of intangible assets identified in the Geneva Consulting Group acquisition

	September 1, 2020		Amortization		November 30, 2020
Database (estimated life 5 years)	$	230,000	$	11,500	$	218,500
Non-compete agreement (estimated life 2 years)		10,000		1,250		8,750
Trademark (estimated life 3 years)		60,000		5,000		55,000
Customer relationships (estimated life 15 years)		1,500,000		25,000		1,475,000
Total	$	1,800,000	$	42,750	$	1,757,250

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Cash and Cash Equivalents (Details) - Schedule of cash and cash equivalents - USD ($)	Nov. 30, 2020	May 31, 2020	Nov. 30, 2019	May 31, 2019
Schedule of cash and cash equivalents [Abstract]
Cash in banks	$ 7,140,043	$ 9,677,848
Money market funds	52,705	52,174
Total	$ 7,192,748	$ 9,730,022	$ 2,696,876	$ 3,694,989

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Marketable Securities (Details) - Schedule of assets measured at fair value on recurring basis - Equity Securities [Member] - USD ($)	Nov. 30, 2020	May 31, 2020
Marketable Securities (Details) - Schedule of assets measured at fair value on recurring basis [Line Items]
Assets measured at fair value, Total	$ 38,680	$ 50,344
Level 1 [Member]
Marketable Securities (Details) - Schedule of assets measured at fair value on recurring basis [Line Items]
Assets measured at fair value, Total	38,680	50,344
Level 2 [Member]
Marketable Securities (Details) - Schedule of assets measured at fair value on recurring basis [Line Items]
Assets measured at fair value, Total
Level 3 [Member]
Marketable Securities (Details) - Schedule of assets measured at fair value on recurring basis [Line Items]
Assets measured at fair value, Total

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Marketable Securities (Details) - Schedule of certificates of deposit and marketable securities - USD ($)	6 Months Ended	12 Months Ended
	Nov. 30, 2020	May 31, 2020
Marketable Securities [Line Items]
Amortized Cost	$ 16,866	$ 16,866
Gross Unrealized Holding Gains	21,814	33,478
Gross Unrealized Holding Losses
Recorded Value	38,680	50,344
Equity Securities [Member]
Marketable Securities [Line Items]
Amortized Cost	16,866	16,866
Gross Unrealized Holding Gains	21,814	33,478
Gross Unrealized Holding Losses
Recorded Value	$ 38,680	$ 50,344

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Equity (Details) - $ / shares	1 Months Ended	6 Months Ended
	Aug. 29, 2018	Nov. 30, 2020
Stockholders' Equity Note [Abstract]
Preferred stock rights, description	the Board of Directors of the Company declared a dividend of one preferred share purchase right (a “Right”) for each share of common stock, par value $0.01 per share (“Common Stock”), of the Company outstanding on August 29, 2018 (the “Record Date”) to the stockholders of record on that date. In connection with the distribution of the Rights, the Company entered into a Rights Agreement (the “Rights Agreement”), dated as of August 29, 2018, between the Company and Continental Stock Transfer & Trust Company, as Rights Agent. Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share of Class A Preferred Stock, Series One, par value $0.01 per share (“Preferred Stock”), of the Company at a price of $24.78 per one one-hundredth of a share of Preferred Stock represented by a Right (the “Purchase Price”), subject to adjustment.	Each share of Preferred Stock will be entitled to receive, when, as and if declared by the Board of Directors, (a) cash dividends in an amount per share (rounded to the nearest cent) equal to 100 times the aggregate per share amount of all cash dividends declared or paid on the Common Stock and (b) a preferential quarterly cash dividend (the “Preferential Dividends”) in an amount equal to $50.00 per share of Preferred Stock less the per share amount of all cash dividends declared on the Preferred Stock pursuant to clause (a) of this sentence. Each share of Preferred Stock will entitle the holder thereof to 100 votes per share, voting together with the holders of the Common Stock as a single class, except as otherwise provided in the Certificate of Designations of Class A Preferred Stock Series One filed by the Company with the Delaware Secretary of State or the Company’s Amended and Restated Certificate of Incorporation, as amended, or Amended and Restated By-laws. In the event of any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each outstanding share of Preferred Stock shall at the same time be similarly exchanged for or changed into the aggregate amount of stock, securities, cash and/or other property (payable in like kind), as the case may be, for which or into which each share of Common Stock is changed or exchanged, multiplied by 100. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, (a) no distribution shall be made to the holders of shares of stock ranking junior to the Preferred Stock unless the holders of the Preferred Stock shall have received the greater of (i) $100 per share of Preferred Stock plus an amount equal to accrued and unpaid dividends and distributions thereon or (ii) an amount equal to 100 times the aggregate amount to be distributed per share to holders of the Common Stock, and (b) no distribution shall be made to the holders of stock ranking on a parity upon liquidation, dissolution or winding up with the Preferred Stock unless simultaneously therewith distributions are made ratably on the holders of the Preferred Stock and all other shares of such parity stock in proportion to the total amounts to which the holders of shares of Preferred Stock are entitled under clause (a)(i) of this sentence and to which the holders of such parity shares are entitled, in each case upon such liquidation, dissolution or winding up.
Rights agreement, description		(a) the Close of Business (as such term is defined in the Rights Agreement) on the tenth day following a public announcement, or the public disclosure of facts indicating, that a Person (as such term is defined in the Rights Agreement), group of affiliated or associated Persons or any other Person with whom such Person is Acting in Concert (as defined in the Rights Agreement) has acquired Beneficial Ownership (as defined in the Rights Agreement) of 5% or more of the outstanding Common Stock (an “Acquiring Person”) (or, in the event an exchange is effected in accordance with Section 27 of the Rights Agreement and the Board of Directors determines that a later date is advisable, then such later date) or (b) the Close of Business on the tenth Business Day (as such term is defined in the Rights Agreement) (or such later date as may be determined by action of the Board of Directors prior to such time as any Person becomes an Acquiring Person) following the commencement of a tender offer or exchange offer the consummation of which would result in the Beneficial Ownership by a Person or group of 5% or more of the outstanding Common Stock (the earlier of such dates, the “Distribution Date”).
Beneficial ownership percentage, description		Beneficial Owner of 5% or more of the Common Shares then outstanding (a “Grandfathered Stockholder”). However, if a Grandfathered Stockholder becomes, after such time, the Beneficial Owner of any additional shares of Common Stock (regardless of whether, thereafter or as a result thereof, there is an increase, decrease or no change in the percentage of shares of Common Stock then outstanding beneficially owned by such Grandfathered Stockholder) then such Grandfathered Stockholder shall be deemed to be an Acquiring Person unless, upon such acquisition of Beneficial Ownership of additional shares of Common Stock, such Person is not the Beneficial Owner of 5% or more of the Common Stock then outstanding. In addition, upon the first decrease of a Grandfathered Stockholder’s Beneficial Ownership below 5%, such Grandfathered Stockholder will cease to be a Grandfathered Stockholder. In the event that after the time of the first public announcement of the Rights Agreement, any agreement, arrangement or understanding pursuant to which any Grandfathered Stockholder is deemed to be the Beneficial Owner of Common Stock expires, terminates or no longer confers any benefit to or imposes any obligation on the Grandfathered Stockholder, any direct or indirect replacement, extension or substitution of such agreement, arrangement or understanding with respect to the same or different shares of Common Stock that confers Beneficial Ownership of Common Stock shall be considered the acquisition of Beneficial Ownership of additional shares of Common Stock by the Grandfathered Stockholder and render such Grandfathered Stockholder an Acquiring Person for purposes of the Rights Agreement unless, upon such acquisition of Beneficial Ownership of additional shares of Common Stock, such Person is not the Beneficial Owner of 5% or more of the Common Stock then outstanding.
Redemption price per share		$ 0.01

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Other Matters (Details) - USD ($)			1 Months Ended		6 Months Ended
	Dec. 16, 2019	Oct. 16, 2018	Feb. 29, 2020	Oct. 21, 2019	Nov. 30, 2020
Commitments and Contingencies Disclosure [Abstract]
Aggregate of common stock, shares		819,491
Settlement payment					$ 1,500,000
Settlement agreement, description					Pursuant to the Settlement Agreement, (1) the Company agreed to adopt an amendment to the Company’s Amended and Restated By-Laws, dated April 9, 2015 (the “By-Laws Amendment”), providing that stockholders of the Company owning at least forty percent (40%) of the issued and outstanding Common Stock may request a special meeting of stockholders; (2) the Investor Parties agreed not to take any action to call or otherwise cause a special meeting of stockholders to occur prior to December 30, 2019 (unless the Company had failed to hold the 2018 Annual Meeting); (3) the Company agreed to amend and restate the Company’s Rights Agreement, dated August 29, 2018 (the “Amended Rights Agreement”), to confirm that a Distribution Date (as defined in the Amended Rights Agreement) shall not occur as a result of any request by any of the Investor Parties for a special meeting; (4) the Company agreed that prior to the earlier of (A) the completion of the Repurchase and the payment of the Settlement Payment and (B) January 1, 2020, the Board of Directors shall not consist of more than seven (7) directors.
Memorandum of understanding, description				the Company entered into a Memorandum of Understanding (the “MOU”) with Susan Paskowitz providing for the settlement of the Stockholder Litigation filed by Ms. Paskowitz on October 11, 2018. The MOU provides for the settlement of the claims by Ms. Paskowitz that (1) the former members of the Board named in the original complaint allegedly breached their fiduciary duties by failing to immediately adopt a rights plan that would have prevented the sale by Joseph F. Hughes and Winifred M. Hughes of an aggregate of 819,491 shares of the Company’s common stock to the Investor Parties; (2) the former members of the Board named in the amended complaint allegedly breached their fiduciary duties and failed to adopt proper corporate governance practices; and (3) the Investor Parties acted as “partners” and constituted a “group” in their purchase of shares from Joseph F. Hughes and Winifred M. Hughes and knowingly disseminated false or misleading public statements concerning their status as a group.
Corporate governance reforms period year					5 years
Stipulation and agreement of settlement, description	the Company entered into a Stipulation and Agreement of Settlement (the “Stipulation”) with Susan Paskowitz in the Stockholder Litigation. The Stipulation retains the terms and conditions of settlement of the Stockholder Litigation contained in the MOU described in the preceding paragraph, with the addition that the Company will pay to plaintiff’s counsel an award of attorneys’ fees and reimbursement of expenses in the amount of $260,000 (collectively, the “Stockholder Litigation Settlement”). The Stockholder Litigation Settlement is intended to fully, finally, and forever compromise, settle, release, resolve, and dismiss with prejudice the Stockholder Litigation and all claims asserted therein directly against all present and former defendants and derivatively against them on behalf of the Company. The Stockholder Litigation Settlement does not contain any admission of liability, wrongdoing or responsibility by any of the parties, and provides for mutual releases by all parties. Each stockholder of the Company is a member of the plaintiff class unless such stockholder opts out of the class. The Company expects that the full amount of the $260,000 settlement payment will be covered by insurance proceeds. The Stipulation remains subject to approval by the court. The Stipulation is independent of the Settlement Agreement and Share Repurchase Agreement that the Company had entered into with the Investor Parties.
Legal expenses			$ 900,000
Accrued net present value			$ 818,000

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Recently Adopted Accounting Pronouncements (Details)	Jun. 02, 2019 USD ($)
Accounting Standards Update and Change in Accounting Principle [Abstract]
Increase in total assets and total liabilities	$ 690,000

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Leases (Details) - USD ($)	3 Months Ended		6 Months Ended
	Nov. 30, 2020	Nov. 30, 2019	Nov. 30, 2020	Nov. 30, 2019
Leases [Abstract]
Lease expiration, description			The lease agreements expire on December 31, 2020, February 28, 2021 and August 31, 2022, respectively, and do not include any renewal options. During the current quarter, the Company extended its lease expiring December 31, 2020 to December 31, 2023. Additionally, the Company entered into a sublease agreement on its lease expiring August 31, 2022.
Right-of-use asset impairment charge			$ 136,599
Operating lease expense	$ 230,922	$ 198,803
Operating lease, weighted average remaining lease term	1 year 328 days		1 year 328 days

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Leases (Details) - Schedule of future minimum lease payments under non-cancellable operating leases	Nov. 30, 2020 USD ($)
Schedule of future minimum lease payments under non-cancellable operating leases [Abstract]
2021	$ 252,848
2022	218,006
2023	99,557
2024	8,317
Total undiscounted operating lease payments	578,728
Less imputed interest	46,909
Present value of operating lease payments	$ 531,819

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Leases (Details) - Schedule of right-of-use assets and operating lease liabilities - USD ($)	Nov. 30, 2020	May 31, 2020
Assets
Right-of-use assets, net	$ 391,212	$ 377,182
Liabilities
Current operating lease liabilities	224,256
Long-term operating lease liabilities	307,563	$ 192,409
Total operating lease liabilities	$ 531,819

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Line of Credit (Details) - USD ($)	1 Months Ended		6 Months Ended
	Dec. 30, 2019	Nov. 27, 2019	Nov. 30, 2020
Line of Credit (Details) [Line Items]
Borrowed amount under credit facility			$ 2,000,000
Line of credit facility, description			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 November 30, 2020 was 3.25%, indicating an interest rate of 5.0% on the line of credit. The initial term of the Credit Facility is 5 years, which shall automatically renew for successive 5-year periods unless either TSR or the Lender gives written notice to the other of termination at least 60 days prior to the expiration date of the then-current term.
Net borrowings outstanding			$ 100,037
Loan and Security Agreement [Member]
Line of Credit (Details) [Line Items]
Borrowed amount under credit facility		$ 7,000,000
Credit Facility [Member]
Line of Credit (Details) [Line Items]
Borrowed amount under credit facility	$ 2,000,000

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Termination of Former CEO (Details)	1 Months Ended
	Feb. 29, 2020
Termination Of Former Ceo [Abstract]
Enhanced severance amount, description	(1) breach of his employment contract; and (2) breach of duty of good faith and fair dealing. Plaintiff Hughes alleges that he was terminated without cause or in the alternative that he resigned for good reason and therefore, pursuant to the Employment Agreement, Hughes 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.

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Legal Settlement with Investor (Details) - USD ($)	1 Months Ended			6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Apr. 01, 2020	Nov. 30, 2020	Aug. 13, 2020	Feb. 29, 2020
Legal Settlement with Investor (Details) [Line Items]
Legal settlement amount payable			$ 900,000
Settlement period			3 years
Accrued interest rate, percentage					3.75%
Accrued liabilities						$ 818,000
Effective interest rate						5.00%
Estimated present value of payments				$ 847,000
Forecast [Member]
Legal Settlement with Investor (Details) [Line Items]
Cash payment		$ 300,000
Forecast [Member] | Third Cash Payment [Member]
Legal Settlement with Investor (Details) [Line Items]
Cash payment	$ 300,000
Forecast [Member] | Second Cash Payment [Member]
Legal Settlement with Investor (Details) [Line Items]
Cash payment	$ 300,000

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Payroll Protection Program Loan (Details) - Paycheck Protection Program [Member]	Apr. 15, 2020 USD ($)
Payroll Protection Program Loan (Details) [Line Items]
Proceeds from loan	$ 6,659,220
Annual interest rate	0.98%
Loan term	6 months
PPP Loan, description	The original term of the PPP Loan was two years. The term may be extended to five years by the SBA and the lender.

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Geneva Consulting Group Acquisition (Details) - USD ($)		3 Months Ended		6 Months Ended
	Sep. 02, 2020	Nov. 30, 2020	Aug. 31, 2020	Nov. 30, 2020
Business Combinations [Abstract]
Acquisition, description	The purchase price for the shares of Geneva is 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, that is equal to the amount of Geneva’s loan under the PPP that was not assumed by the Company and is expected to be substantially forgiven by the SBA, (iii) an amount, up to $300,000 which may be 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 will be determined based upon the achievement of certain criteria relating to the number the Company’s contractors working full-time at Company clients on such dates.
Other expenses		$ 156,000	$ 122,000	$ 278,000
Earnout payments, description				The purchase agreement for the Geneva acquisition provides for earn-out payments of up to $300,000 plus bonus amounts in $10,000 increments which are earned through August 2021.

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Geneva Consulting Group Acquisition (Details) - Schedule of purchase price at fair values	3 Months Ended
	Aug. 31, 2020 USD ($)
Schedule of purchase price at fair values [Abstract]
Cash consideration paid to date:	$ 2,983,264
Estimated earnout and other liabilities:	358,796
Total purchase price	$ 3,342,060

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Geneva Consulting Group Acquisition (Details) - Schedule of allocation of purchase price at preliminary estimated fair values	Sep. 01, 2020 USD ($)
Schedule of allocation of purchase price at preliminary estimated fair values [Abstract]
Cash	$ 241,946
Accounts receivable	778,930
Prepaid expenses	5,249
Intangible assets (see Note 17)	1,800,000
Goodwill	785,883
Accrued expenses	(269,948)
Net assets	$ 3,342,060

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Geneva Consulting Group Acquisition (Details) - Schedule of unaudited pro forma financial information - USD ($)	3 Months Ended		6 Months Ended
	Nov. 30, 2020	Nov. 30, 2019	Nov. 30, 2020	Nov. 30, 2019
Schedule of unaudited pro forma financial information [Abstract]
Revenue	$ 16,069	$ 17,889	$ 32,020	$ 34,990
Net income (loss)	$ (247)	$ 193	$ (488)	$ (482)
Earnings (loss) per share (in Dollars per share)	$ (0.13)	$ 0.10	$ (0.25)	$ (0.25)

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Intangible assets (Details) - Schedule of intangible assets identified in the Geneva Consulting Group acquisition	6 Months Ended
	Nov. 30, 2020 USD ($)
Finite-Lived Intangible Assets [Line Items]
Intangible assets identified at beginning	$ 1,800,000
Amortization	42,750
Intangible assets identified at ending	$ 1,757,250
Database [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated life	5 years
Intangible assets identified at beginning	$ 230,000
Amortization	11,500
Intangible assets identified at ending	$ 218,500
Non-compete agreement [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated life	2 years
Intangible assets identified at beginning	$ 10,000
Amortization	1,250
Intangible assets identified at ending	$ 8,750
Trademark [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated life	3 years
Intangible assets identified at beginning	$ 60,000
Amortization	5,000
Intangible assets identified at ending	$ 55,000
Customer relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated life	15 years
Intangible assets identified at beginning	$ 1,500,000
Amortization	25,000
Intangible assets identified at ending	$ 1,475,000