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TSR INC - Quarter Report: 2013 August (Form 10-Q)

f10q083113_tsrinc.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549

FORM 10-Q

x           Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the period ended August 31, 2013

o           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: 0-8656

TSR, Inc.

(Exact name of registrant as specified in its charter)

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

400 Oser Avenue, Hauppauge, NY  11788

 (Address of principal executive offices)

631-231-0333

 (Registrant’s telephone number)
 
 

 (Former name, former address and former fiscal year, if changed since last report)

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.
x Yes     o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).        x Yes    o No

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

Large Accelerated Filer
o
Accelerated Filer
o
Non-Accelerated filer
o (Do not check if a smaller reporting company)
Smaller Reporting Company
x

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

As of September 30, 2013, there were 1,962,062 shares of common stock, par value $.01 per share, issued and outstanding.
 


 
 

 
 
TSR, INC. AND SUBSIDIARIES
INDEX

     
Page
Number
 
       
   
       
     
   
3
       
     
   
4
       
     
   
5
       
     
   
6
       
   
7
       
 
11
       
 
14
     
15
       
 
15
   
15

 
Page 2

 
 
Part I.          Financial Information
     Item 1. Financial Statements
 
TSR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

   
August 31,
2013
   
May 31,
2013
 
    (Unaudited)     (Note 1)  
ASSETS
           
Current Assets:
           
       Cash and cash equivalents
  $ 1,656,290     $ 1,881,161  
       Certificates of deposit and marketable securities
    1,760,584       2,008,424  
       Accounts receivable, net of allowance for doubtful accounts of $193,000
    9,238,264       9,146,283  
       Other receivables
    1,407       5,016  
       Prepaid expenses
    97,572       70,926  
       Prepaid and recoverable income taxes
    205,699       208,579  
       Deferred income taxes
    86,000       86,000  
              Total Current Assets
    13,045,816       13,406,389  
                 
Certificates of deposit
    249,000       -  
Equipment and leasehold improvements, net of accumulated depreciation and amortization of $248,245 and $244,868
    17,260       16,784  
Other assets
    49,653       49,653  
Deferred income taxes
    132,000       146,000  
Total Assets
 
13,493,729
   
13,618,826
 
                 
LIABILITIES AND EQUITY
               
                 
Current Liabilities:
               
       Accounts and other payables
  $ 857,889     $ 852,228  
       Accrued expenses and other current liabilities
    2,246,618       2,389,006  
       Advances from customers
    1,424,814       1,448,255  
              Total Current Liabilities
    4,529,321       4,689,489  
                 
Commitments and contingencies
               
                 
Equity:                
       TSR, Inc.:
               
       Preferred stock, $1 par value, authorized 500,000 shares; none issued
    -       -  
       Common stock, $.01 par value, authorized 12,500,000 shares; issued 3,114,163 shares, 1,962,062 outstanding
    31,142       31,142  
       Additional paid-in capital
    5,102,868       5,102,868  
       Retained earnings
    17,316,801       17,305,883  
      22,450,811       22,439,893  
       Less: Treasury stock, 1,152,101 shares, at cost
    13,514,003       13,514,003  
              Total TSR, Inc. Equity
    8,936,808       8,925,890  
Noncontrolling Interest    
27,600
     
3,447
 
              Total Equity    
8,964,408
      8,929,337  
Total Liabilities and Equity   $
13,493,729
    $
13,618,826
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 
Page 3

 

TSR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For The Three Months Ended August 31, 2013 and 2012
(UNAUDITED)
 
   
Three Months Ended
August 31,
 
   
2013
   
2012
 
Revenue, net
  $ 12,086,697     $ 11,288,445  
                 
Cost of sales
    9,988,849       9,438,746  
Selling, general and administrative expenses
    2,039,429       1,962,826  
      12,028,278       11,401,572  
Income (loss) from operations
    58,419       (113,127 )
                 
Other income (expense):
               
    Interest and dividend income
    1,704       3,063  
    Unrealized loss on marketable securities, net
    (1,840 )     (808 )
                 
Income (loss) before income taxes
    58,283       (110,872 )
Provision (benefit) for income taxes
    20,000       (37,000 )
Consolidated net income (loss)
    38,283       (73,872 )
Less: Net income attributable to noncontrolling interest
    (27,365 )     (19,562 )
Net income (loss) attributable to TSR, Inc.
  $ 10,918     $ (93,434 )
Basic and diluted net income (loss) per TSR, Inc. common share
  $ 0.01     $ (0.05 )
Weighted average number of basic and diluted common shares outstanding
    1,962,062       1,981,350  

                The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
Page 4

 
 
TSR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
 For The Three Months Ended August 31, 2013 and 2012
(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, 2012
    3,114,163     $ 31,142     $ 5,102,868     $ 20,796,104     $ (13,432,092 )   $ 12,498,022     $ 21,270     $ 12,519,292  
                                                                 
Purchases of treasury stock
    -       -       -       -       (16,571 )     (16,571 )     -       (16,571 )
                                                                 
Net income attributable to noncontrolling interest
    -       -       -       -       -       -       19,562       19,562  
                                                                 
Distribution to noncontrolling interest
    -       -       -       -       -       -       (3,500 )     (3,500 )
                                                                 
Net loss attributable to TSR, Inc.
    -       -       -       (93,434 )     -       (93,434 )     -       (93,434 )
                                                                 
Balance at August 31, 2012
    3,114,163     $ 31,142     $ 5,102,868     $ 20,702,670     $ (13,448,663 )   $ 12,388,017     $ 37,332     $ 12,425,349  
                                                                 
Balance at May 31, 2013
    3,114,163     $ 31,142     $ 5,102,868     $ 17,305,883     $ (13,514,003 )   $ 8,925,890     $ 3,447     $ 8,929,337  
                                                                 
Net income attributable to noncontrolling interest
    -       -       -       -       -       -       27,365       27,365  
                                                                 
Distribution to noncontrolling interest
    -       -       -       -       -       -       (3,212 )     (3,212 )
                                                                 
Net income attributable to TSR, Inc.
    -       -       -       10,918       -       10,918       -       10,918  
                                                                 
Balance at August 31, 2013
    3,114,163     $ 31,142     $ 5,102,868     $ 17,316,801     $ (13,514,003 )   $ 8,936,808     $ 27,600     $ 8,964,408  
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 
Page 5

 
 
TSR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Three Months Ended August 31, 2013 and 2012
(UNAUDITED)

   
Three Months Ended
August 31,
 
 
 
2013
   
2012
 
Cash flows from operating activities:
           
       Consolidated net income (loss)
  $ 38,283     $ (73,872 )
       Adjustments to reconcile consolidated net income (loss) to net cash provided by  (used in) operating activities:
               
              Depreciation and amortization
    3,377       2,697  
              Unrealized loss on marketable securities, net
    1,840       808  
              Deferred income taxes
    14,000       1,000  
                 
       Changes in operating assets and liabilities:
               
              Accounts receivable
    (91,981 )     138,998  
              Other receivables
    3,609       160  
              Prepaid expenses
    (26,646 )     55  
              Prepaid and recoverable income taxes
    2,880       (39,580 )
              Accounts and other payables and accrued expenses and other current liabilities
    (136,727 )     173,177  
              Advances from customers
    (23,441 )     (15,000 )
    Net cash provided by (used in) operating activities
    (214,806 )     188,443  
                 
Cash flows from investing activities:
               
       Proceeds from maturities of marketable securities
    993,000       500,000  
       Purchases of marketable securities
    (996,000 )     (3,237,267 )
       Purchases of equipment and leasehold improvements
    (3,853 )     -  
    Net cash used in investing activities
    (6,853 )     (2,737,267 )
                 
Cash flows from financing activities:
               
       Purchases of treasury stock
    -       (16,571 )
       Distribution to noncontrolling interest
    (3,212 )     (3,500 )
    Net cash used in financing activities
    (3,212 )     (20,071 )
Net decrease in cash and cash equivalents
    (224,871 )     (2,568,895 )
Cash and cash equivalents at beginning of period
    1,881,161       7,514,749  
Cash and cash equivalents at end of period
  $ 1,656,290     $ 4,945,854  
                 
Supplemental disclosures of cash flow data:
               
       Income taxes paid
  $ 3,000     $ 1,000  
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 
Page 6

 
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2013
(Unaudited)
 
1.
Basis of Presentation

The accompanying condensed consolidated interim financial statements include the accounts of TSR, Inc. and its subsidiaries (the “Company”).  All significant inter-company balances and transactions have been eliminated in consolidation.  These 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 ended August 31, 2013 are unaudited; however, in the opinion of management, such statements include all adjustments (consisting of normal recurring accruals) 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, 2014.  The balance sheet at May 31, 2013 has been derived from the audited financial statements at that date.  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, 2013.

2.
Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing 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 August 31, 2013 and May 31, 2013:
 
   
August 31,
2013
   
May 31,
2013
 
Cash in banks
  $ 1,336,647     $ 1,562,939  
Money market funds
    319,643       318,222  
    $ 1,656,290     $ 1,881,161  
 
4.
Revenue Recognition
 
The Company’s contract computer programming services are generally provided under time and materials arrangements with its customers.  Revenue is recognized in accordance with Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition,” when persuasive evidence of an arrangement exists, the services have been rendered, the price is fixed or determinable, and collectability is reasonably assured.  These conditions occur when a customer agreement is effected and the consultant performs the authorized services.  Revenue is recorded net of all discounts and processing fees. Advances from customers represent amounts received from customers prior to the Company’s provision of the related services and credit balances from overpayments.

Reimbursements received by the Company for out-of-pocket expenses are characterized as revenue.

 
Page 7

 
 
TSR, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
August 31, 2013
(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 August 31, 2013 and May 31, 2013 using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2) and significant unobservable inputs (Level 3):

August 31, 2013
 
Level 1
   
Level 2
   
Level 3
   
Total
 
Certificates of Deposit
  $ -     $ 1,992,000     $ -     $ 1,992,000  
Equity Securities
    17,584       -       -       17,584  
    $ 17,584     $ 1,992,000     $ -     $ 2,009,584  
                                 
May 31, 2013
 
Level 1
   
Level 2
   
Level 3
   
Total
 
Certificates of Deposit
  $ -     $ 1,989,000     $ -     $ 1,989,000  
Equity Securities
    19,424       -       -       19,424  
    $ 19,424     $ 1,989,000     $ -     $ 2,008,424  
 
Based upon the Company’s intent and ability to hold its certificates of deposit to maturity (which maturities range up to twenty four months at purchase), such securities have been classified as held-to-maturity and are carried at amortized cost, which approximates market value. The Company’s equity securities are classified as trading securities, which are carried at fair value, as determined by quoted market prices, which is a Level 1 input, as established by the fair value hierarchy. The related unrealized gains and losses are included in earnings.  The Company’s marketable securities at August 31, 2013 and May 31, 2013 are summarized as follows:
 
 
Page 8

 
 
TSR, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
August 31, 2013
(Unaudited)
 
 
August 31, 2013
 
 
 Amortized
 Cost
   
Gross
Unrealized
 Holding
 Gains
   
Gross
Unrealized
 Holding
 Losses
   
 
 Recorded
 Value
 
Current
                       
Certificates of Deposit
  $ 1,743,000     $ -     $ -     $ 1,743,000  
Equity Securities
    16,866       718       -       17,584  
    $ 1,759,866     $ 718     $ -     $ 1,760,584  
Long-Term
                               
Certificates of Deposit
  $ 249,000     $ -     $ -     $ 249,000  
 
 
May 31, 2013
 
 
 Amortized
 Cost
   
Gross
Unrealized
 Holding
 Gains
   
Gross
Unrealized
 Holding
 Losses
   
 
 Recorded
 Value
 
Current
                       
Certificates of Deposit
  $ 1,989,000     $ -     $ -     $ 1,989,000  
Equity Securities
    16,866       2,558       -       19,424  
    $ 2,005,866     $ 2,558     $ -     $ 2,008,424  
 
The Company’s investments in marketable securities consist primarily of investments in certificates of deposit. 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.

6.
Fair Value of Financial Instruments
 
ASC Topic 825, “Financial Instruments”, requires disclosure of the fair value of certain financial instruments. For cash and cash equivalents, accounts receivable, accounts and other payables, accrued liabilities 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 9

 
 
TSR, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
August 31, 2013
(Unaudited)

7.
Stockholders’ Equity
 
During the three months ended August 31, 2013, the Company did not purchase any shares of its common stock. During the three months ended August 31, 2012, the Company purchased a total of 3,600 shares of its common stock for $16,571. These shares were purchased in various transactions on the open market under a previously announced repurchase plan of 150,000 shares.  As of September 30, 2013, 56,318 shares remain available for purchase under the plan.

8.
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.

9.
Recent Accounting Pronouncements
 
The Company is not aware of any new accounting pronouncements that would have a material impact on its condensed consolidated financial statements.
 
 
Page 10

 
 
TSR, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Part I.      Financial Information

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 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 which statements involve risks and uncertainties, including but not limited to the following:  the success of the Company’s plan for internal growth, the impact of adverse economic conditions on the Company’s business; risks relating to the competitive nature of the markets for contract computer programming services; the extent to which market conditions for the Company’s contract computer consulting services will continue to adversely affect the Company’s business; the concentration of the Company’s business with certain customers; uncertainty as to the Company’s ability to maintain its relations with existing customers and expand its contract computer consulting services business; the impact of changes in the industry, such as the use of vendor management companies in connection with the consultant procurement process, the increase in customers moving IT operations offshore 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 August 31, 2013 compared with three months ended August 31, 2012
 
   
(Dollar amounts in thousands)
Three Months Ended
 
   
August 31, 2013
   
August 31, 2012
 
   
Amount
   
% of Revenue
   
Amount
   
% of Revenue
 
Revenue, net
  $ 12,087       100.0 %   $ 11,289       100.0 %
Cost of sales
    9,989       82.6 %     9,439       83.6 %
                                 
Gross profit
    2,098       17.4 %     1,850       16.4 %
                                 
Selling, general and administrative expenses
    2,040       16.9 %     1,963       17.4 %
                                 
Income (loss) from operations
    58       0.5 %     (113 )     (1.0 )%
                                 
Other income, net
    0       0.0 %     2       0.0 %
                                 
Income (loss) before income taxes
    58       0.5 %     (111 )     (1.0 )%
Provision (benefit) for income taxes
    20       0.2 %     (37 )     (0.3 )%
                                 
Consolidated net income (loss)
  $ 38       0.3 %   $ (74 )     (0.7 )%
                                                                                                                                 

 
Page 11

 
 
TSR, INC. AND SUBSIDIARIES

Revenue
 
Revenue consists primarily of revenue from computer programming consulting services.  Revenue for the quarter ended August 31, 2013 increased $798,000 or 7.1% from the prior year quarter.  The average number of consultants on billing with customers increased from approximately 254 for the quarter ended August 31, 2012 to 300 for the quarter ended August 31, 2013.  The revenue increase was somewhat muted due to reduced average billing rates for the consultants on billing with customers compared with the prior year quarter.  This resulted from a shift in the business mix as a higher percentage of new placements have been with customers where there is stronger competition due to managed vendor services programs.

Cost of Sales
 
Cost of sales for the quarter ended August 31, 2013, increased $550,000 or 5.8% to $9,989,000 from $9,439,000 in the prior year period.  The increase in cost of sales resulted primarily from the increase in the number of consultants on billing with clients.  Cost of sales as a percentage of revenue decreased from 83.6% in the quarter ended August 31, 2012 to 82.6% in the quarter ended August 31, 2013.  The decrease in cost of sales as a percentage of revenue was primarily attributable to increased revenue from full time placement fees which do not have associated direct costs.

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 $77,000 or 3.9% from $1,963,000 in the quarter ended August 31, 2012 to $2,040,000 in the quarter ended August 31, 2013.  This increase was primarily attributable to an increase in the number of sales personnel and expenses associated with hiring them.  Hiring new sales executives requires a significant investment to cover their costs while their non-compete agreements, which typically last a year, expire.  The Company expects selling, general and administrative expenses to continue to increase as more recruiters and sales executives are hired to stimulate growth.  Selling, general and administrative expenses, as a percentage of revenue, decreased from 17.4% in the quarter ended August 31, 2012 to 16.9% in the quarter ended August 31, 2013 as a result of the additional technical recruiters and sales executives beginning to contribute additional revenue.

Other Income
 
Other income for the quarter ended August 31, 2013 resulted primarily from interest and dividend income of $2,000, which decreased by $1,000 from the level realized in the quarter ended August 31, 2012 due to lower interest rates earned on the Company’s  certificates of deposit and money market accounts. The interest and dividend income was offset by a mark to market loss of $2,000 on the Company’s equity securities.

Income Taxes
 
The income tax provision (benefit) included in the Company’s results of operations for the quarters ended August 31, 2013 and 2012 reflect the Company’s estimated effective tax rate for the years ending May 31, 2014 and 2013, respectively. These rates were (33.3) % for the quarter ended August 31, 2012 and 34.5% for the quarter ended August 31, 2013.

Consolidated Net Income (Loss)
 
Consolidated net income increased $112,000 from a loss of $74,000 in the quarter ended August 31, 2012 to net income of $38,000 in the quarter ended August 31, 2013.  This increase was primarily attributable to the increase in revenue as a result of the additional recruiters and sales executives contributing additional revenue.  Gradual improvement is expected to continue as the Company’s plan for internal growth begins to generate a sufficient increase in revenue.

 
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TSR, INC. AND SUBSIDIARIES

Liquidity and Capital Resources
 
The Company expects that its cash and marketable securities will be sufficient to provide the Company with adequate resources to meet its liquidity requirements for at least the next 12 months.

At August 31, 2013, the Company had working capital (total current assets in excess of total current liabilities) of $8,516,000 including cash and cash equivalents and certificates of deposit and marketable securities of $3,417,000 as compared to working capital of $8,717,000 including cash and cash equivalents and certificates of deposit and marketable securities of $3,890,000 at May 31, 2013.

For the three months ended August 31, 2013, net cash used in operating activities was $215,000 compared to net cash provided by operating activities of $188,000 for the three months ended August 31, 2012.  The cash used in operating activities in the three months ended August 31, 2013 resulted primarily from an increase in accounts receivable of $92,000 and a decrease in accounts and other payables and accrued expenses and other current liabilities of $137,000.  The increase in accounts receivable is attributable to the increased revenue.  The decrease in accounts and other payable and accrued expenses and other current liabilities is attributable to a decrease in the accrued payroll at the end of the current quarter. The cash provided by operating activities in the three months ended August 31, 2012 primarily resulted from a decrease in accounts receivable of $139,000 and an increase in accounts and other payables and accrued expenses and other current liabilities of $173,000 which were offset, to some extent, by the consolidated net loss of $74,000.

Net cash used in investing activities of $7,000 for the three months ended August 31, 2013 resulted primarily from the purchase of fixed assets.  Net cash used in investing activities of $2,737,000 for the three months ended August 31, 2012 primarily resulted from new investments in US Treasury securities and certificates of deposit.

Net cash used in financing activities resulted from distributions to the noncontrolling interest of $3,000 in the three months ended August 31, 2013.   Net cash used in financing activities resulted from distributions to the noncontrolling interest of $3,500 and the purchases of 3,600 shares of common stock for $17,000 in the three months ended August 31, 2012.

The Company’s capital resource commitments at August 31, 2013 consisted of lease obligations on its branch and corporate facilities.  The Company intends to satisfy these lease commitments from cash flow provided by operations, available cash and short-term marketable securities.
 
 
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TSR, INC. AND SUBSIDIARIES

Recent Accounting Pronouncements
 
The Company is not aware of any new accounting pronouncements that would have a material impact on its condensed consolidated financial statements.

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

The Company’s significant accounting policies are described in Note 1 to the Company’s consolidated financial statements, contained in its May 31, 2013 Annual Report on Form 10-K, as filed with the SEC.  The Company believes that those accounting policies require the application of management’s most difficult, subjective or complex judgments.  There have been no changes in the Company’s significant accounting policies as of August 31, 2013.


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 Securities Exchange Act of 1934, as amended (the “Exchange Act”)).  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.
 
 
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TSR, INC. AND SUBSIDIARIES



 
(a).   
Exhibit 31.1 – Certification by J.F. Hughes pursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 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 J.F. Hughes 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 August 31, 2013, formatted in Extensible Business Reporting Language (XBRL): (i) the Balance Sheets, (ii) the Statements of Income, (iii) the Statements of Equity, (iv) the Statements of Cash Flows, and (v) the Notes to Financial Statements. *

* Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for the purpose of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 

 

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:       October 8, 2013
 
/s/ J.F. Hughes
 
   
J.F. Hughes, Chairman and President
 
       
Date:       October 8, 2013
 
/s/ John G. Sharkey
 
   
John G. Sharkey, Vice President Finance and Principal Accounting Officer
 
 
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