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 period ended November 30, 2016

☐   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 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)

(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.  ☒  Yes  ☐  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).  ☒  Yes  ☐  No

Indicate by check mark whether the registrant is a 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	☐		Accelerated Filer	☐
Non-Accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller Reporting Company	☒

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 December 31, 2016, there were 1,962,062 shares of common stock, par value $.01 per share, issued and outstanding.

Page 1

TSR, INC. AND SUBSIDIARIES

INDEX

			Page Number
Part I.	Financial Information:
	Item 1.	Financial Statements:
		Condensed Consolidated Balance Sheets – November 30, 2016 and May 31, 2016	3
		Condensed Consolidated Statements of Income – For the three months and six months ended November 30, 2016 and 2015	4
		Condensed Consolidated Statements of Equity – For the six months ended November 30, 2016 and 2015	5
		Condensed Consolidated Statements of Cash Flows – For the six months ended November 30, 2016 and 2015	6
		Notes to Condensed Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
	Item 4.	Controls and Procedures	18
Part II.	Other Information		18
	Item 6.	Exhibits	18
Signatures			19

Page 2

Part I. Financial Information

Item 1. Financial Statements

TSR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	November 30, 2016		May 31, 2016
ASSETS	(Unaudited)		(see Note 1)
Current Assets:
Cash and cash equivalents	$	4,697,065	$	4,514,157
Certificates of deposit and marketable securities		1,538,760		1,553,272
Accounts receivable, net of allowance for doubtful accounts of $185,000		7,065,679		7,703,680
Other receivables		20,537		10,853
Prepaid expenses		218,605		99,069
Prepaid and recoverable income taxes		55,269		-
Deferred income taxes		118,000		128,000
Total Current Assets		13,713,915		14,009,031
Equipment and leasehold improvements, net of accumulated depreciation and amortization of $272,795 and $262,076		19,614		27,998
Prepaid expenses		47,228		-
Other assets		49,653		49,653
Deferred income taxes		1,000		3,000
Total Assets	$	13,831,410	$	14,089,682
LIABILITIES AND EQUITY
Current Liabilities:
Accounts and other payables	$	544,869	$	723,705
Accrued expenses and other current liabilities		2,379,379		2,634,110
Income taxes payable		-		14,810
Advances from customers		1,198,937		1,245,563
Total Liabilities		4,123,185		4,618,188
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		18,085,978		17,811,884
		23,219,988		22,945,894
Less: Treasury stock, 1,152,101 shares, at cost		13,514,003		13,514,003
Total TSR, Inc. Equity		9,705,985		9,431,891
Noncontrolling Interest		2,240		39,603
Total Equity		9,708,225		9,471,494
Total Liabilities and Equity	$	13,831,410	$	14,089,682

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

Page 3

TSR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For The Three and Six Months Ended November 30, 2016 and 2015

(UNAUDITED)

	Three Months Ended November 30,					Six Months Ended  November 30,
	2016			2015		2016		2015
Revenue, net	$	15,042,789		$	15,185,006	$	30,285,172	$	30,419,794
Cost of sales		12,452,751			12,679,391		25,093,651		25,394,583
Selling, general and administrative expenses		2,344,682			2,241,693		4,660,422		4,473,315
		14,797,433			14,921,084		29,754,073		29,867,898
Income from operations		245,356			263,922		531,099		551,896
Other income (loss):
Interest and dividend income		2,682			1,920		5,418		3,749
Unrealized gain (loss) on marketable securities, net		(952	)		4,984		2,488		248
Income before income taxes		247,086			270,826		539,005		555,893
Provision for income taxes		110,000			137,000		246,000		277,000
Consolidated net income		137,086			133,826		293,005		278,893
Less: Net income attributable to noncontrolling interest		10,769			13,761		18,911		25,080
Net income attributable to TSR, Inc.	$	126,317		$	120,065	$	274,094	$	253,813
Net income per TSR, Inc. common share	$	0.06		$	0.06	$	0.14	$	0.13
Weighted average number 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 4

TSR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For The Six Months Ended November 30, 2016 and 2015

(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, 2015		3,114,163	$	31,142	$	5,102,868	$	17,412,658	$	(13,514,003	)	$	9,032,665	$	70,269		$	9,102,934
Net income attributable to noncontrolling interest		-		-		-		-		-			-		25,080			25,080
Distribution to noncontrolling interest		-		-		-		-		-			-		(7,800	)		(7,800	)
Net income attributable to TSR, Inc.		-		-		-		253,813		-			253,813		-			253,813
Balance at November 30, 2015		3,114,163	$	31,142	$	5,102,868	$	17,666,471	$	(13,514,003	)	$	9,286,478	$	87,549		$	9,374,027
Balance at May 31, 2016		3,114,163	$	31,142	$	5,102,868	$	17,811,884	$	(13,514,003	)	$	9,431,891	$	39,603		$	9,471,494
Net income attributable to noncontrolling interest		-		-		-		-		-			-		18,911			18,911
Distribution to noncontrolling interest		-		-		-		-		-			-		(56,274	)		(56,274	)
Net income attributable to TSR, Inc		-		-		-		274,094		-			274,094		-			274,094
Balance at November 30, 2016		3,114,163	$	31,142	$	5,102,868	$	18,085,978	$	(13,514,003	)	$	9,705,985	$	2,240		$	9,708,225

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 Six Months Ended November 30, 2016 and 2015

(UNAUDITED)

	Six Months Ended November 30,
	2016			2015
Cash flows from operating activities:
Consolidated net income	$	293,005		$	278,893
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization		10,719			11,127
Unrealized gain on marketable securities, net		(2,488	)		(248	)
Deferred income taxes		12,000			15,000
Changes in operating assets and liabilities:
Accounts receivable		638,001			1,169,514
Other receivables		(9,684	)		(5,573	)
Prepaid expenses		(166,764	)		(49,003	)
Prepaid and recoverable income taxes		(55,269	)		-
Accounts and other payables and accrued expenses and other current liabilities		(433,567	)		(98,056	)
Income taxes payable		(14,810	)		54,000
Advances from customers		(46,626	)		(63,808	)
Net cash provided by operating activities		224,517			1,311,846
Cash flows from investing activities:
Proceeds from maturities of marketable securities		1,012,000			996,000
Purchases of marketable securities		(995,000	)		(1,282,000	)
Purchases of equipment and leasehold improvements		(2,335	)		(7,609	)
Net cash provided by (used in) investing activities		14,665			(293,609	)
Cash flows from financing activities:
Distribution to noncontrolling interest		(56,274	)		(7,800	)
Net cash used in financing activities		(56,274	)		(7,800	)
Net increase in cash and cash equivalents		182,908			1,010,437
Cash and cash equivalents at beginning of period		4,514,157			3,669,790
Cash and cash equivalents at end of period	$	4,697,065		$	4,680,227
Supplemental disclosures of cash flow data:
Income taxes paid	$	304,000		$	208,000

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

Page 6

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2016

(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. The condensed balance sheet as of May 31, 2016, 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, 2016 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, 2017. 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, 2016.

2. Net Income Per Common Share

Basic net income per common share is computed by dividing net income 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, 2016 and May 31, 2016:

	November 30, 2016		May 31, 2016
Cash in banks	$	4,134,320	$	3,974,007
Money market funds		562,745		540,150
	$	4,697,065	$	4,514,157

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.

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TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2016

(Unaudited)

5. Certificates of Deposit and Marketable Securities

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

Investments recorded in the accompanying condensed consolidated balance sheets are categorized based on the inputs to valuation techniques as follows:

Level 1- These are investments where values are based on unadjusted quoted prices for identical assets in an active market the Company has the ability to access.

Level 2- These are investments where values are based on quoted market prices that are not active or model derived valuations in which all significant inputs are observable in active markets.

Level 3- These are investments where values are derived from techniques in which one or more significant inputs are unobservable.

The following are the major categories of assets measured at fair value on a recurring basis as of November 30, 2016 and May 31, 2016 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, 2016	Level 1		Level 2		Level 3		Total
Certificates of Deposit	$	-	$	1,511,000	$	-	$	1,511,000
Equity Securities		27,760		-		-		27,760
	$	27,760	$	1,511,000	$	-	$	1,538,760

May 31, 2016	Level 1		Level 2		Level 3		Total
Certificates of Deposit	$	-	$	1,528,000	$	-	$	1,528,000
Equity Securities		25,272		-		-		25,272
	$	25,272	$	1,528,000	$	-	$	1,553,272

Based upon the Company’s intent and ability to hold its certificates of deposit to maturity (which maturities range up to twelve months at purchase), such securities have been classified as held-to-maturity and are carried at amortized cost, which approximates market value. The Company’s equity securities are classified as trading securities, which are carried at fair value, as determined by quoted market prices, which is a Level 1 input, as established by the fair value hierarchy. The related unrealized gains and losses are included in earnings. The Company’s certificates of deposit and marketable securities at November 30, 2016 and May 31, 2016 are summarized as follows:

Page 8

TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2016

(Unaudited)

November 30, 2016	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Recorded Value
Current
Certificates of Deposit	$	1,511,000	$	-	$	-	$	1,511,000
Equity Securities		16,866		10,894		-		27,760
	$	1,527,866	$	10,894	$	-	$	1 ,538,760

May 31, 2016	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Recorded Value
Current
Certificates of Deposit	$	1,528,000	$	-	$	-	$	1,528,000
Equity Securities		16,866		8,406		-		25,272
	$	1,544,866	$	8,406	$	-	$	1,553,272

The Company’s investments in marketable securities consist primarily of investments in certificates of deposit and equity securities. Market values were determined for each individual security in the investment portfolio. When evaluating the investments for other-than-temporary impairment, the Company reviews factors such as length of time and extent to which fair value has been below cost basis, the financial condition of the issuer, and the Company’s ability and intent to hold the investment for a period of time, which may be sufficient for anticipated recovery in market values.

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

November 30, 2016

(Unaudited)

7. Equity

During the six months ended November 30, 2016 and 2015, the Company did not purchase any shares of its common stock. As of April 7, 2016, the previously announced repurchase plan was terminated with 56,318 shares remaining available for purchase.

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

In May 2014, the FASB issued an update to ASC 606, “Revenue from Contracts with Customers.” This update to ASC 606 provides a five-step process to determine when and how revenue is recognized. The core principle of the guidance is that a company should recognize revenue upon transfer of promised goods or services to customers in an amount that reflects the expected consideration to be received in exchange for those goods or services. This update to ASC 606 will also result in enhanced disclosures about revenue, providing guidance for transactions that were not previously addressed comprehensively, and improving guidance for multiple-element arrangements. This update to ASC 606 is effective for the Company in the fiscal year ending May 31, 2018. The Company expects the impact of the update, if any, to be immaterial on its consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” which applies to the classification of deferred tax assets and liabilities. The update eliminates the requirement to classify deferred tax assets and liabilities as noncurrent or current within a classified statement of financial position. This ASU is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. This ASU should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company will classify any deferred tax assets and liabilities as noncurrent beginning with the first quarter of fiscal 2018.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in this update require all equity investments to be measured at fair value with changes in the fair value recognized through net income. The amendments in this update also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the amendments in this update eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. This update is effective for the Company in the fiscal year ending May 31, 2019. The Company is currently evaluating the impact, if any, of this update on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This update includes a lease accounting model that recognizes two types of leases – finance leases and operating leases. The standard requires that a lessee recognize on the balance sheet assets and liabilities relating to leases with terms of more than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on its classification as a finance or operating lease. This update is effective for the Company in the fiscal year ending May 31, 2020. The Company is currently evaluating the impact, if any, of this update on its consolidated financial statements.

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TSR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2016

(Unaudited)

In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Consideration (Topic 606).” This update contains guidance on principal versus agent assessments when a third party is involved in providing goods or services to a customer. It specifies that an entity is a principal, and thus records revenue on a gross basis, if it controls a good or service before transferring the good or service to the customer. An entity is an agent, and thus records revenue on a net basis, if it arranges for a good or service to be provided by another entity. This update is effective for the Company in the fiscal year ending May 31, 2019. The Company is currently evaluating the impact, if any, of this update on its consolidated financial statements.

In May 2016, the FASB issued ASU 2016-12, “Narrow-Scope Improvements and Practical Expedients (Topic 606).” This update provides certain clarifications to reduce potential diversity and to simplify the standard. The amendments in ASU 2016-12 clarify the following key areas: assessing collectibilty; presenting sales taxes and other similar taxes collected from customers; noncash consideration; contract modifications at transition; completed contracts at transition; and disclosing the accounting change in the period of adoption. This update is effective for the Company in the fiscal year ending May 31, 2019. The Company is currently evaluating the impact, if any, of this update on its consolidated financial statements.

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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 success of the Company’s plan for internal growth; the impact of adverse economic conditions on client spending which has 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 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; the Company’s ability to adapt to changing market conditions; 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, 2016 compared with three months ended November 30, 2015

	(Dollar amounts in thousands)
	Three Months Ended
	November 30,					November 30,
	2016					2015
	Amount		% of Revenue			Amount		% of Revenue
Revenue, net	$	15,043		100.0	%	$	15,185		100.0	%
Cost of sales		12,453		82.8	%		12,679		83.5	%
Gross profit		2,590		17.2	%		2,506		16.5	%
Selling, general and administrative expenses		2,345		15.6	%		2,242		14.8	%
Income from operations		245		1.6	%		264		1.7	%
Other income, net		2		0.0	%		7		0.1	%
Income before income taxes		247		1.6	%		271		1.8	%
Provision for income taxes		110		0.7	%		137		0.9	%
Consolidated net income		137		0.9	%		134		0.9	%
Less: Net income attributable to noncontrolling interest		11		0.1	%		14		0.1	%
Net income attributable to TSR, Inc.	$	126		0.8	%	$	120		0.8	%

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TSR, INC. AND SUBSIDIARIES

Revenue

Revenue consists primarily of revenue from computer programming consulting services. Revenue for the quarter ended November 30, 2016 decreased $142,000 from the prior year quarter. While the overall average number of consultants on billing with customers increased from approximately 350 for the quarter ended November 30, 2015 to 368 for the quarter ended November 30, 2016, the average number of computer programming consultants decreased from 350 for the quarter ended November 30, 2015 to 326 in the quarter ended November 30, 2016. The 368 consultants on billing for the current quarter include 42 administrative workers that the Company placed with two large customers at billing rates 67.7% lower than those charged for computer programming consultants. The Company did not make any placements of administrative workers in the prior year quarter. The Company made these placements of administrative workers in the current quarter at the customers’ specific requests. The Company charges lower daily billing rates for administrative workers, but also pays lower rates to the administrative workers. The Company has not yet determined whether it will provide administrative placements on a more widespread basis in the future.

Cost of Sales

Cost of sales for the quarter ended November 30, 2016 decreased $226,000 or 1.8% to $12,453,000 from $12,679,000 in the prior year period. The decrease in cost of sales resulted primarily from a reduction of computer programming consultants placed with customers, offset by the placement of lower paid administrative workers at two major customers. Cost of sales as a percentage of revenue decreased from 83.5% in the quarter ended November 30, 2015 to 82.8% in the quarter ended November 30, 2016. The decrease in cost of sales as a percentage of revenue was primarily attributable to the placement of administrative workers at higher average markups than the Company’s computer programming consultants. However, because their pay rates averaged 71.3% lower than the computer programming consultants, the daily gross profit in dollars is still lower for the administrative workers than the computer programming consultants.

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 $103,000 or 4.6% from $2,242,000 in the quarter ended November 30, 2015 to $2,345,000 in the quarter ended November 30, 2016. The increase in these expenses primarily resulted from hiring additional recruiters to support the administrative placement opportunities. 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, increased from 14.8% in the quarter ended November 30, 2015 to 15.6% in the quarter ended November 30, 2016 as a result of the additional recruiters hired.

Other Income

Other income for the quarter ended November 30, 2016 resulted primarily from interest and dividend income of $3,000 and a mark to market loss of $1,000 on the Company’s equity securities. Other income for the quarter ended November 30, 2015 resulted primarily from a mark to market gain of $5,000 on the Company’s equity securities and interest and dividend income of $2,000.

Income Taxes

The income tax provision included in the Company’s results of operations for the quarters ended November 30, 2016 and 2015 reflect the Company’s estimated effective tax rate for the years ending May 31, 2017 and 2016, respectively. These rates were 44.5% for the quarter ended November 30, 2016 and 50.6% for the quarter ended November 30, 2015.

Net Income Attributable to TSR, Inc.

Net income attributable to TSR, Inc. increased $6,000 from $120,000 in the quarter ended November 30, 2015 to $126,000 in the quarter ended November 30, 2016. This increase was primarily attributable to a lower effective income tax rate.

Page 13

TSR, INC. AND SUBSIDIARIES

Six months ended November 30, 2016 compared with six months ended November 30, 2015

	(Dollar amounts in thousands)
	Six Months Ended
	November 30,					November 30,
	2016					2015
	Amount		% of Revenue			Amount		% of Revenue
Revenue, net	$	30,285		100.0	%	$	30,420		100.0	%
Cost of sales		25,094		82.8	%		25,395		83.5	%
Gross profit		5,191		17.2	%		5,025		16.5	%
Selling, general and administrative expenses		4,660		15.4	%		4,473		14.7	%
Income from operations		531		1.8	%		552		1.8	%
Other income, net.		8		0.0	%		4		0.0	%
Income before income taxes		539		1.8	%		556		1.8	%
Provision for income taxes		246		0.8	%		277		0.9	%
Consolidated net income		293		1.0	%		279		0.9	%
Less: Net income attributable to noncontrolling interest		19		0.1	%		25		0.1	%
Net income attributable to TSR, Inc.	$	274		0.9	%	$	254		0.8	%

Revenue

Revenue consists primarily of revenue from computer programming consulting services. Revenue for the six months ended November 30, 2016 decreased $135,000 from the prior year period. While the overall average number of consultants on billing with customers increased from approximately 340 for the six months ended November 30, 2015 to 365 for the six months ended November 30, 2016, the average number of computer programming consultants decreased from 340 for the six months ended November 30, 2015 to 323 in the six months ended November 30, 2016. The 365 consultants on billing for the current six month period include 42 administrative workers that the Company placed with two large customers at billing rates 65.0% lower than those charged for computer programming consultants. The Company did not make any placements of administrative workers in the prior year period. The Company made these placements of administrative workers in the current period at the customers’ specific requests. The Company charges lower daily billing rates for administrative workers, but also pays lower rates to the administrative workers. The Company has not yet determined whether it will provide administrative placements on a more widespread basis in the future.

Cost of Sales

Cost of sales for the six months ended November 30, 2016 decreased $301,000 or 1.2% to $25,094,000 from $25,395,000 in the prior year period. The decrease in cost of sales resulted primarily from a reduction of computer programming consultants placed with customers, offset by the placement of lower paid administrative workers at two major customers. Cost of sales as a percentage of revenue decreased from 83.5% in the six months ended November 30, 2015 to 82.8% in the six months ended November 30, 2016. The decrease in cost of sales as a percentage of revenue was primarily attributable to the placement of administrative workers at higher average markups than the Company’s computer programming consultants. However, because their pay rates averaged 69.5% lower than the computer programming consultants, the daily gross profit in dollars is still lower for the administrative workers than the computer programming consultants.

Page 14

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 increased $187,000 or 4.2% from $4,473,000 in the six months ended November 30, 2015 to $4,660,000 in the six months ended November 30, 2016. The increase in these expenses primarily resulted from hiring additional recruiters to support the administrative placement opportunities. 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, increased from 14.7% in the six months ended November 30, 2015 to 15.4% in the six months ended November 30, 2016 as a result of the additional recruiters hired.

Other Income

Other income for the six months ended November 30, 2016 resulted primarily from a mark to market gain of $3,000 on the Company’s equity securities and interest and dividend income of $5,000. Other income for the six months ended November 30, 2015 resulted primarily from interest and dividend income of $4,000.

Income Taxes

The income tax provision included in the Company’s results of operations for the six month periods ended November 30, 2016 and 2015 reflect the Company’s estimated effective tax rate for the years ending May 31, 2017 and 2016, respectively. These rates were 45.6% for the six months ended November 30, 2016 and 49.8% for the six months ended November 30, 2015.

Net Income Attributable to TSR, Inc.

Net income attributable to TSR, Inc. increased $20,000 from $254,000 in the six months ended November 30, 2015 to $274,000 in the six months ended November 30, 2016. This increase was primarily attributable to a lower effective income tax rate.

Page 15

TSR, INC. AND SUBSIDIARIES

Liquidity and Capital Resources

The Company expects that its cash and cash equivalents, certificates of deposit and marketable securities and cash flow provided by operations will be sufficient to provide the Company with adequate resources to meet its liquidity requirements for at least the next 12 months. The Company does not maintain a line of credit facility with any banking institution.

At November 30, 2016, the Company had working capital (total current assets in excess of total current liabilities) of $9,591,000 including cash and cash equivalents and certificates of deposit and marketable securities of $6,236,000 as compared to working capital of $9,391,000 including cash and cash equivalents and certificates of deposit and marketable securities of $6,067,000 at May 31, 2016.

For the six months ended November 30, 2016, net cash provided by operating activities was $225,000 compared to net cash provided by operating activities of $1,312,000 for the six months ended November 30, 2015. The cash provided by operating activities in the six months ended November 30, 2016 resulted primarily from consolidated net income of $293,000 and a decrease in accounts receivable of $638,000 offset by a decrease in accounts and other payables and accrued expenses and other liabilities of $434,000 and an increase in prepaid expenses of $167,000. The cash provided by operating activities in the six months ended November 30, 2015 resulted primarily from consolidated net income of $279,000 and a decrease in accounts receivable of $1,170,000 offset by a decrease in accounts and other payables and accrued expenses and other liabilities of $98,000.

Net cash provided by investing activities of $15,000 for the six months ended November 30, 2016 primarily resulted from not reinvesting a certificate of deposit. Net cash used in investing activities of $294,000 for the six months ended November 30, 2015 primarily resulted from investing in additional certificates of deposit.

In the six months ended November 30, 2016, net cash used in financing activities resulted from a distribution to the noncontrolling interest of $56,000, resulting primarily from the distribution of fiscal 2016 earnings from that entity. In the six months ended November 30, 2015, net cash used in financing activities resulted from a distribution to the noncontrolling interest of $8,000.

The Company’s capital resource commitments at November 30, 2016 consisted of lease obligations on its branch and corporate facilities. The Company intends to finance these lease commitments from cash flows provided by operations, available cash and short-term marketable securities.

Recent Accounting Pronouncements

In May 2014, the FASB issued an update to ASC 606, “Revenue from Contracts with Customers.” This update to ASC 606 provides a five-step process to determine when and how revenue is recognized. The core principle of the guidance is that a company should recognize revenue upon transfer of promised goods or services to customers in an amount that reflects the expected consideration to be received in exchange for those goods or services. This update to ASC 606 will also result in enhanced disclosures about revenue, providing guidance for transactions that were not previously addressed comprehensively, and improving guidance for multiple-element arrangements. This update to ASC 606 is effective for the Company beginning in the fiscal year ending May 31, 2018. The Company expects the impact of the update, if any, to be immaterial on its consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” which applies to the classification of deferred tax assets and liabilities. The update eliminates the requirement to classify deferred tax assets and liabilities as noncurrent or current within a classified statement of financial position. This ASU is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. This ASU should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company will classify any deferred tax assets and liabilities as noncurrent beginning with the first quarter of fiscal 2018.

Page 16

TSR, INC. AND SUBSIDIARIES

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in this update require all equity investments to be measured at fair value with changes in the fair value recognized through net income. The amendments in this update also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the amendments in this update eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. This update is effective for the Company in the fiscal year ending May 31, 2019. The Company is currently evaluating the impact, if any, of this update on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This update includes a lease accounting model that recognizes two types of leases – finance leases and operating leases. The standard requires that a lessee recognize on the balance sheet assets and liabilities relating to leases with terms of more than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on its classification as a finance or operating lease. This update is effective for the Company in the fiscal year ending May 31, 2020. The Company is currently evaluating the impact, if any, of this update on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Consideration (Topic 606).” This update contains guidance on principal versus agent assessments when a third party is involved in providing goods or services to a customer. It specifies that an entity is a principal, and thus records revenue on a gross basis, if it controls a good or service before transferring the good or service to the customer. An entity is an agent, and thus records revenue on a net basis, if it arranges for a good or service to be provided by another entity. This update is effective for the Company in the fiscal year ending May 31, 2019. The Company is currently evaluating the impact, if any, of this update on its consolidated financial statements.

In May 2016, the FASB issued ASU 2016-12, “Narrow-Scope Improvements and Practical Expedients (Topic 606).” This update provides certain clarifications to reduce potential diversity and to simplify the standard. The amendments in ASU 2016-12 clarify the following key areas: assessing collectibilty; presenting sales taxes and other similar taxes collected from customers; noncash consideration; contract modifications at transition; completed contracts at transition; and disclosing the accounting change in the period of adoption. This update is effective for the Company in the fiscal year ending May 31, 2019. The Company is currently evaluating the impact, if any, of this update on its consolidated financial statements.

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, 2016 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission. The Company believes that those accounting policies require the application of management’s most difficult, subjective or complex judgments. There have been no changes in the Company’s significant accounting policies as of November 30, 2016.

Page 17

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 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.

Part II. Other Information

Item 6. Exhibits

(a)	Exhibit 31.1 – Certification by J.F. Hughes 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 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 November 30, 2016, 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.

Page 18

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 10, 2017	/s/ J.F. Hughes
		J.F. Hughes, Chairman of the Board, Chief Executive Officer and President
Date:	January 10, 2017	/s/ John G. Sharkey
		John G. Sharkey, Vice President-Finance and Principal Accounting Officer

 Page 19

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, J.F. Hughes, Chairman of the Board, Chief Executive Officer and President, 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 or 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 10, 2017	/s/ J.F. Hughes
	Chairman of the Board,
	Chief Executive Officer and President

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, Vice President-Finance 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 or 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 10, 2017	/s/ John G. Sharkey
	Vice President-Finance
	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, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J.F. Hughes, 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.

January 10, 2017	/s/ J.F. Hughes
	Chairman of the Board,
	Chief Executive Officer and President

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, 2016 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.

January 10, 2017	/s/ John G. Sharkey
	Vice President-Finance
	and Principal Accounting Officer

XML

Document and Entity Information - shares	6 Months Ended
	Nov. 30, 2016	Dec. 31, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	TSR INC
Entity Central Index Key	0000098338
Amendment Flag	false
Current Fiscal Year End Date	--05-31
Document Type	10-Q
Document Period End Date	Nov. 30, 2016
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2017
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		1,962,062

XML

Condensed Consolidated Balance Sheets - USD ($)	Nov. 30, 2016	May 31, 2016
Current Assets:
Cash and cash equivalents	$ 4,697,065	$ 4,514,157
Certificates of deposit and marketable securities	1,538,760	1,553,272
Accounts receivable, net of allowance for doubtful accounts of $185,000	7,065,679	7,703,680
Other receivables	20,537	10,853
Prepaid expenses	218,605	99,069
Prepaid and recoverable income taxes	55,269
Deferred income taxes	118,000	128,000
Total Current Assets	13,713,915	14,009,031
Equipment and leasehold improvements, net of accumulated depreciation and amortization of $272,795 and $262,076	19,614	27,998
Prepaid expenses	47,228
Other assets	49,653	49,653
Deferred income taxes	1,000	3,000
Total Assets	13,831,410	14,089,682
Current Liabilities:
Accounts and other payables	544,869	723,705
Accrued expenses and other current liabilities	2,379,379	2,634,110
Income taxes payable		14,810
Advances from customers	1,198,937	1,245,563
Total Liabilities	4,123,185	4,618,188
Commitments and contingencies
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	18,085,978	17,811,884
Shareholder's equity before treasury stock	23,219,988	22,945,894
Less: Treasury stock, 1,152,101 shares, at cost	13,514,003	13,514,003
Total TSR, Inc. Equity	9,705,985	9,431,891
Noncontrolling Interest	2,240	39,603
Total Equity	9,708,225	9,471,494
Total Liabilities and Equity	$ 13,831,410	$ 14,089,682

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Nov. 30, 2016	May 31, 2016
Balance Sheets [Abstract]
Allowance for doubtful accounts related to accounts receivable	$ 185,000	$ 185,000
Accumulated depreciation and amortization related to equipment and leasehold improvements	$ 272,795	$ 262,076
Preferred stock, par value	$ 1	$ 1
Preferred stock, shares authorized	500,000	500,000
Preferred stock, shares issued
Common stock, par value	$ 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

XML

Condensed Consolidated Statements of Income (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Nov. 30, 2016	Nov. 30, 2015	Nov. 30, 2016	Nov. 30, 2015
Statements of Operations [Abstract]
Revenue, net	$ 15,042,789	$ 15,185,006	$ 30,285,172	$ 30,419,794
Cost of sales	12,452,751	12,679,391	25,093,651	25,394,583
Selling, general and administrative expenses	2,344,682	2,241,693	4,660,422	4,473,315
Operating expenses	14,797,433	14,921,084	29,754,073	29,867,898
Income from operations	245,356	263,922	531,099	551,896
Other income (loss):
Interest and dividend income	2,682	1,920	5,418	3,749
Unrealized gain (loss) on marketable securities, net	(952)	4,984	2,488	248
Income before income taxes	247,086	270,826	539,005	555,893
Provision for income taxes	110,000	137,000	246,000	277,000
Consolidated net income	137,086	133,826	293,005	278,893
Less: Net income attributable to noncontrolling interest	10,769	13,761	18,911	25,080
Net income attributable to TSR, Inc.	$ 126,317	$ 120,065	$ 274,094	$ 253,813
Net income per TSR, Inc. common share	$ 0.06	$ 0.06	$ 0.14	$ 0.13
Weighted average number common shares outstanding	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, 2015	$ 9,102,934	$ 31,142	$ 5,102,868	$ 17,412,658	$ (13,514,003)	$ 9,032,665	$ 70,269
Balance, shares at May. 31, 2015		3,114,163
Net income attributable to noncontrolling interest	25,080						25,080
Distribution to noncontrolling interest	(7,800)						(7,800)
Net income attributable to TSR, Inc.	253,813			253,813		253,813
Balance at Nov. 30, 2015	9,374,027	$ 31,142	5,102,868	17,666,471	(13,514,003)	9,286,478	87,549
Balance, shares at Nov. 30, 2015		3,114,163
Balance at May. 31, 2016	9,471,494	$ 31,142	5,102,868	17,811,884	(13,514,003)	9,431,891	39,603
Balance, shares at May. 31, 2016		3,114,163
Net income attributable to noncontrolling interest	18,911						18,911
Distribution to noncontrolling interest	(56,274)						(56,274)
Net income attributable to TSR, Inc.	274,094			274,094		274,094
Balance at Nov. 30, 2016	$ 9,708,225	$ 31,142	$ 5,102,868	$ 18,085,978	$ (13,514,003)	$ 9,705,985	$ 2,240
Balance, shares at Nov. 30, 2016		3,114,163

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Nov. 30, 2016	Nov. 30, 2015
Cash flows from operating activities:
Consolidated net income	$ 293,005	$ 278,893
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization	10,719	11,127
Unrealized gain on marketable securities, net	(2,488)	(248)
Deferred income taxes	12,000	15,000
Changes in operating assets and liabilities:
Accounts receivable	638,001	1,169,514
Other receivables	(9,684)	(5,573)
Prepaid expenses	(166,764)	(49,003)
Prepaid and recoverable income taxes	(55,269)
Accounts and other payables and accrued expenses and other current liabilities	(433,567)	(98,056)
Income taxes payable	(14,810)	54,000
Advances from customers	(46,626)	(63,808)
Net cash provided by operating activities	224,517	1,311,846
Cash flows from investing activities:
Proceeds from maturities of marketable securities	1,012,000	996,000
Purchases of marketable securities	(995,000)	(1,282,000)
Purchases of equipment and leasehold improvements	(2,335)	(7,609)
Net cash provided by (used in) investing activities	14,665	(293,609)
Cash flows from financing activities:
Distribution to noncontrolling interest	(56,274)	(7,800)
Net cash used in financing activities	(56,274)	(7,800)
Net increase in cash and cash equivalents	182,908	1,010,437
Cash and cash equivalents at beginning of period	4,514,157	3,669,790
Cash and cash equivalents at end of period	4,697,065	4,680,227
Supplemental disclosures of cash flow data:
Income taxes paid	$ 304,000	$ 208,000

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Basis of Presentation

6 Months Ended

Nov. 30, 2016

Basis of Presentation [Abstract]

Basis of Presentation

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. The condensed balance sheet as of May 31, 2016, 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, 2016 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, 2017. 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, 2016.

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Net Income Per Common Share

6 Months Ended

Nov. 30, 2016

Net Income Per Common Share [Abstract]

Net Income Per Common Share

2. Net Income Per Common Share

Basic net income per common share is computed by dividing net income 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.

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Cash and Cash Equivalents

6 Months Ended

Nov. 30, 2016

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, 2016 and May 31, 2016:

	November 30,  2016		May 31,  2016
Cash in banks	$	4,134,320	$	3,974,007
Money market funds		562,745		540,150
	$	4,697,065	$	4,514,157

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Revenue Recognition

6 Months Ended

Nov. 30, 2016

Revenue Recognition [Abstract]

Revenue Recognition

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.

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Certificates of Deposit and Marketable Securities

6 Months Ended

Nov. 30, 2016

Certificates of Deposit and Marketable Securities [Abstract]

Certificates of Deposit and Marketable Securities

5. Certificates of Deposit and Marketable Securities

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

Investments recorded in the accompanying condensed consolidated balance sheets are categorized based on the inputs to valuation techniques as follows:

Level 1- These are investments where values are based on unadjusted quoted prices for identical assets in an active market the Company has the ability to access.

Level 2- These are investments where values are based on quoted market prices that are not active or model derived valuations in which all significant inputs are observable in active markets.

Level 3- These are investments where values are derived from techniques in which one or more significant inputs are unobservable.

The following are the major categories of assets measured at fair value on a recurring basis as of November 30, 2016 and May 31, 2016 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, 2016	Level 1		Level 2		Level 3		Total
Certificates of Deposit	$	-	$	1,511,000	$	-	$	1,511,000
Equity Securities		27,760		-		-		27,760
	$	27,760	$	1,511,000	$	-	$	1,538,760

May 31, 2016	Level 1		Level 2		Level 3		Total
Certificates of Deposit	$	-	$	1,528,000	$	-	$	1,528,000
Equity Securities		25,272		-		-		25,272
	$	25,272	$	1,528,000	$	-	$	1,553,272

Based upon the Company’s intent and ability to hold its certificates of deposit to maturity (which maturities range up to twelve months at purchase), such securities have been classified as held-to-maturity and are carried at amortized cost, which approximates market value. The Company’s equity securities are classified as trading securities, which are carried at fair value, as determined by quoted market prices, which is a Level 1 input, as established by the fair value hierarchy. The related unrealized gains and losses are included in earnings. The Company’s certificates of deposit and marketable securities at November 30, 2016 and May 31, 2016 are summarized as follows:

November 30, 2016	Amortized  Cost		Gross  Unrealized  Holding  Gains		Gross  Unrealized  Holding  Losses		Recorded  Value
Current
Certificates of Deposit	$	1,511,000	$	-	$	-	$	1,511,000
Equity Securities		16,866		10,894		-		27,760
	$	1,527,866	$	10,894	$	-	$	1 ,538,760

May 31, 2016	Amortized  Cost		Gross  Unrealized  Holding  Gains		Gross  Unrealized  Holding  Losses		Recorded  Value
Current
Certificates of Deposit	$	1,528,000	$	-	$	-	$	1,528,000
Equity Securities		16,866		8,406		-		25,272
	$	1,544,866	$	8,406	$	-	$	1,553,272

The Company’s investments in marketable securities consist primarily of investments in certificates of deposit and equity securities. Market values were determined for each individual security in the investment portfolio. When evaluating the investments for other-than-temporary impairment, the Company reviews factors such as length of time and extent to which fair value has been below cost basis, the financial condition of the issuer, and the Company’s ability and intent to hold the investment for a period of time, which may be sufficient for anticipated recovery in market values.

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Fair Value of Financial Instruments

6 Months Ended

Nov. 30, 2016

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

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.

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Equity

6 Months Ended

Nov. 30, 2016

Equity [Abstract]

Equity

7. Equity

During the six months ended November 30, 2016 and 2015, the Company did not purchase any shares of its common stock. As of April 7, 2016, the previously announced repurchase plan was terminated with 56,318 shares remaining available for purchase.

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Other Matters

6 Months Ended

Nov. 30, 2016

Other Matters [Abstract]

Other Matters

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.

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Recent Accounting Pronouncements

6 Months Ended

Nov. 30, 2016

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

9. Recent Accounting Pronouncements

In May 2014, the FASB issued an update to ASC 606, “Revenue from Contracts with Customers.” This update to ASC 606 provides a five-step process to determine when and how revenue is recognized. The core principle of the guidance is that a company should recognize revenue upon transfer of promised goods or services to customers in an amount that reflects the expected consideration to be received in exchange for those goods or services. This update to ASC 606 will also result in enhanced disclosures about revenue, providing guidance for transactions that were not previously addressed comprehensively, and improving guidance for multiple-element arrangements. This update to ASC 606 is effective for the Company in the fiscal year ending May 31, 2018. The Company expects the impact of the update, if any, to be immaterial on its consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” which applies to the classification of deferred tax assets and liabilities. The update eliminates the requirement to classify deferred tax assets and liabilities as noncurrent or current within a classified statement of financial position. This ASU is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. This ASU should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company will classify any deferred tax assets and liabilities as noncurrent beginning with the first quarter of fiscal 2018.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in this update require all equity investments to be measured at fair value with changes in the fair value recognized through net income. The amendments in this update also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the amendments in this update eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. This update is effective for the Company in the fiscal year ending May 31, 2019. The Company is currently evaluating the impact, if any, of this update on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This update includes a lease accounting model that recognizes two types of leases – finance leases and operating leases. The standard requires that a lessee recognize on the balance sheet assets and liabilities relating to leases with terms of more than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on its classification as a finance or operating lease. This update is effective for the Company in the fiscal year ending May 31, 2020. The Company is currently evaluating the impact, if any, of this update on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Consideration (Topic 606).” This update contains guidance on principal versus agent assessments when a third party is involved in providing goods or services to a customer. It specifies that an entity is a principal, and thus records revenue on a gross basis, if it controls a good or service before transferring the good or service to the customer. An entity is an agent, and thus records revenue on a net basis, if it arranges for a good or service to be provided by another entity. This update is effective for the Company in the fiscal year ending May 31, 2019. The Company is currently evaluating the impact, if any, of this update on its consolidated financial statements.

In May 2016, the FASB issued ASU 2016-12, “Narrow-Scope Improvements and Practical Expedients (Topic 606).” This update provides certain clarifications to reduce potential diversity and to simplify the standard. The amendments in ASU 2016-12 clarify the following key areas: assessing collectibilty; presenting sales taxes and other similar taxes collected from customers; noncash consideration; contract modifications at transition; completed contracts at transition; and disclosing the accounting change in the period of adoption. This update is effective for the Company in the fiscal year ending May 31, 2019. The Company is currently evaluating the impact, if any, of this update on its consolidated financial statements.

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Cash and Cash Equivalents (Tables)

6 Months Ended

Nov. 30, 2016

Cash and Cash Equivalents [Abstract]

Summary of cash and cash equivalents

	November 30,  2016		May 31,  2016
Cash in banks	$	4,134,320	$	3,974,007
Money market funds		562,745		540,150
	$	4,697,065	$	4,514,157

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Certificates of Deposit and Marketable Securities (Tables)

6 Months Ended

Nov. 30, 2016

Certificates of Deposit and Marketable Securities [Abstract]

Summary of assets measured at fair value on recurring basis

November 30, 2016	Level 1		Level 2		Level 3		Total
Certificates of Deposit	$	-	$	1,511,000	$	-	$	1,511,000
Equity Securities		27,760		-		-		27,760
	$	27,760	$	1,511,000	$	-	$	1,538,760

May 31, 2016	Level 1		Level 2		Level 3		Total
Certificates of Deposit	$	-	$	1,528,000	$	-	$	1,528,000
Equity Securities		25,272		-		-		25,272
	$	25,272	$	1,528,000	$	-	$	1,553,272

Summary of marketable securities

November 30, 2016	Amortized  Cost		Gross  Unrealized  Holding  Gains		Gross  Unrealized  Holding  Losses		Recorded  Value
Current
Certificates of Deposit	$	1,511,000	$	-	$	-	$	1,511,000
Equity Securities		16,866		10,894		-		27,760
	$	1,527,866	$	10,894	$	-	$	1 ,538,760

May 31, 2016	Amortized  Cost		Gross  Unrealized  Holding  Gains		Gross  Unrealized  Holding  Losses		Recorded  Value
Current
Certificates of Deposit	$	1,528,000	$	-	$	-	$	1,528,000
Equity Securities		16,866		8,406		-		25,272
	$	1,544,866	$	8,406	$	-	$	1,553,272

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Cash and Cash Equivalents (Details) - USD ($)	Nov. 30, 2016	May 31, 2016	Nov. 30, 2015	May 31, 2015
Summary of cash and cash equivalents
Cash in banks	$ 4,134,320	$ 3,974,007
Money market funds	562,745	540,150
Total	$ 4,697,065	$ 4,514,157	$ 4,680,227	$ 3,669,790

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Certificates of Deposit and Marketable Securities (Details) - USD ($)	Nov. 30, 2016	May 31, 2016
Summary of assets measured at fair value on recurring basis
Assets measured at fair value, Total	$ 1,538,760	$ 1,553,272
Fair Value, Measurements, Recurring [Member] | Certificates of Deposit [Member]
Summary of assets measured at fair value on recurring basis
Assets measured at fair value, Total	1,511,000	1,528,000
Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Summary of assets measured at fair value on recurring basis
Assets measured at fair value, Total	27,760	25,272
Fair Value, Measurements, Recurring [Member] | Level 1 [Member]
Summary of assets measured at fair value on recurring basis
Assets measured at fair value, Total	27,760	25,272
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Certificates of Deposit [Member]
Summary of assets measured at fair value on recurring basis
Assets measured at fair value, Total
Fair Value, Measurements, Recurring [Member] | Level 1 [Member] | Equity Securities [Member]
Summary of assets measured at fair value on recurring basis
Assets measured at fair value, Total	27,760	25,272
Fair Value, Measurements, Recurring [Member] | Level 2 [Member]
Summary of assets measured at fair value on recurring basis
Assets measured at fair value, Total	1,511,000	1,528,000
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Certificates of Deposit [Member]
Summary of assets measured at fair value on recurring basis
Assets measured at fair value, Total	1,511,000	1,528,000
Fair Value, Measurements, Recurring [Member] | Level 2 [Member] | Equity Securities [Member]
Summary of assets measured at fair value on recurring basis
Assets measured at fair value, Total
Fair Value, Measurements, Recurring [Member] | Level 3 [Member]
Summary of assets measured at fair value on recurring basis
Assets measured at fair value, Total
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Certificates of Deposit [Member]
Summary of assets measured at fair value on recurring basis
Assets measured at fair value, Total
Fair Value, Measurements, Recurring [Member] | Level 3 [Member] | Equity Securities [Member]
Summary of assets measured at fair value on recurring basis
Assets measured at fair value, Total

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Certificates of Deposit and Marketable Securities (Details 1) - USD ($)	6 Months Ended	12 Months Ended
	Nov. 30, 2016	May 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 1,527,866	$ 1,544,866
Gross Unrealized Holding Gains	10,894	8,406
Gross Unrealized Holding Losses
Recorded Value	1,538,760	1,553,272
Certificates of Deposit [Member] | Current [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,511,000	1,528,000
Gross Unrealized Holding Gains
Gross Unrealized Holding Losses
Recorded Value	1,511,000	1,528,000
Equity Securities [Member] | Current [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	16,866	16,866
Gross Unrealized Holding Gains	10,894	8,406
Gross Unrealized Holding Losses
Recorded Value	$ 27,760	$ 25,272

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Equity (Details)	Apr. 07, 2016 shares
Equity (Textual)
Shares remain available for purchase	56,318