Amendment No. 1
☒ Annual Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
☐ Transition Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
Indicate by check mark if the Registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No
Indicate by check mark if the Registrant is not
required to file reports pursuant to Section 13 or Section 15 (d) of the Exchange Act. ☐ Yes ☒ No
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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Yes ☐ No
Indicate by check mark whether the Registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check
mark if the Registrant has elected not to use extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
Indicate by check mark whether the Registrant
is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of voting and non-voting
common equity held by non-affiliates of the Registrant based upon the closing price of $8.69 at November 30, 2021 was $8,474,000.
The number of shares of the Registrant’s
common stock (“Common Stock”) outstanding as of September 14, 2022 was 2,146,448.
TSR, Inc. (“TSR”
or the “Company”) is filing this Amendment No. 1 on Form 10-K/A (this “Amendment”) to its Form 10-K for the fiscal
year ended May 31, 2022, which was filed with the SEC on August 15, 2022 (the “Original Filing”).
This
Amendment is being filed for the purpose of providing the information required by Items 10 through 14 of Part III of Form 10-K. This
information was previously omitted from the Original Filing in reliance on General Instruction G(3) to Form 10-K, which permits the
above-referenced Items to be incorporated in the Annual Report on Form 10-K by reference from a definitive proxy statement,
if such definitive proxy statement is filed no later than 120 days after the last day of the Company’s fiscal year on May 31, 2022.
In
accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the cover
page to the Original Filing and Items 10 through 14 of Part III of the Original Filing are hereby amended and restated in their entirety.
In addition, pursuant to Rule 12b-15 under the Exchange Act, the Company is including Item 15 of Part IV, solely to file the
certifications required under Section 302 of the Sarbanes-Oxley Act of 2002 with this Amendment.
Certain statements included
in this Amendment, and other filings of the Registrant under the Securities Act of 1933, as amended (the “Securities Act”),
and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements as to the Registrant’s
plans, future prospects and 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 set forth in the forward-looking statements due to known and unknown
risks and uncertainties, including but not limited to, the following: the statements concerning the success of the Registrant’s
plan for growth, both internal and through the previously announced pursuit of suitable acquisition candidates; the successful integration
of announced acquisitions and any anticipated benefits therefrom; the impact of adverse economic conditions on client spending which have
a negative impact on the Registrant’s business, which includes, but is not limited to, the current adverse economic conditions associated
with the COVID-19 global health pandemic and the associated financial crisis, stay-at-home and other orders; risks relating to the competitive
nature of the markets for contract computer programming services; the extent to which market conditions for the Registrant’s contract
computer programming services will continue to adversely affect the Registrant’s business; the concentration of the Registrant’s
business with certain customers; uncertainty as to the Registrant’s ability to maintain its relations with existing customers and
expand its business; the impact of changes in the industry such as the use of vendor management companies in connection with the consultant
procurement process; the increase in customers moving IT operations offshore; the Registrant’s ability to adapt to changing market
conditions; the risks, uncertainties and expense of the legal proceedings to which the Registrant is a party; and other risks and uncertainties
described in the Registrant’s filings under the Exchange Act.
In some cases, forward-looking statements can
be identified by terminology such as “may,” “will,” “should,” “could,” “expects,”
“plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential”
or “continue” or the negative of such terms or other comparable terminology. Although the Registrant believes that the expectations
reflected in the forward-looking statements contained herein are reasonable, the Registrant cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither the Registrant, nor any other person, assumes responsibility for the accuracy
and completeness of such statements. The Registrant is under no duty to update any of the forward-looking statements contained herein
after the date of this Amendment.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
Set forth below are the names,
ages and positions and offices held with the Company of each director and executive officer of the Company. Directors are classified as
either Class I, Class II or Class III directors, with each class serving for a term of three (3) years. The term of Class III directors
is set to expire at the 2022 annual meeting of stockholders of the Company. The term of Class II directors is set to expire at the 2023
annual meeting of stockholders, and the term of Class I directors is set to expire at the 2024 annual meeting of stockholders. There is
currently no Class III director on the Board of Directors of the Company (the “Board”). Executive officers serve until such
time as their successor is duly elected and qualified.
Name | |
Age | | |
Position | |
Year First
Officer or
Director | |
Bradley M. Tirpak(1)(2)(3)(4) | |
| 52 | | |
Chairman of the Board and Class I Director | |
| 2019 | |
Thomas Salerno | |
| 54 | | |
Chief Executive Officer, President and Treasurer | |
| 2020 | |
John G. Sharkey | |
| 63 | | |
Senior Vice President, Chief Financial Officer and Secretary | |
| 1990 | |
H. Timothy Eriksen(1)(2)(3)(4)(5)(7) | |
| 53 | | |
Class I Director | |
| 2019 | |
Robert Fitzgerald(1)(2)(3)(4)(6) | |
| 58 | | |
Class II Director | |
| 2019 | |
(1) | Member of the Compensation
Committee of the Board. |
(2) | Member of the Audit Committee
of the Board. |
(3) |
Member of the Nominating Committee of the Board. |
(4) |
Member of the Special Committee of the Board. |
(5) |
Mr. Eriksen is the Chairman of the Audit Committee of the Board and the Chairman of the Nominating Committee of the Board. |
(6) |
Mr. Fitzgerald is the Chairman of the Compensation
Committee of the Board and the Chairman of the Special Committee of the Board. |
(7) | Lead independent director. |
There are no family relationships between any
of the Company’s executive officers and directors. None of the Company’s directors currently serves, or has served during
the past five years, as a director of any company with a class of securities registered pursuant to Section 12 of the Exchange Act or
subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment
Company Act of 1940. There is no arrangement between any director or director nominee and any other person pursuant to which he was or
is to be selected as a director or director nominee except that Mr. Eriksen and Mr. Tirpak were nominated by Zeff Capital, L.P. as Class
I directors at the Company’s 2018 annual meeting of stockholders held on October 22, 2019 in accordance with the terms and conditions
of that certain settlement and release agreement, dated August 30, 2019, between the Company and certain investor parties, including Zeff
Capital, L.P., Zeff Holding Company, LLC and Daniel Zeff, QAR Industries, Inc. and Robert Fitzgerald, and Fintech Consulting, LLC and
Tajuddin Haslani (the “Settlement Agreement”). The terms of the Settlement Agreement are more fully described in the Company’s
Current Report on Form 8-K filed with the Securities and Exchange Commission on September 3, 2019. Mr. Eriksen and Mr. Tirpak were subsequently
elected as directors at the annual meeting of shareholders on October 22, 2019.
Biographical Information
Mr. Bradly M. Tirpak was elected as
a Class I director of the Company at the 2018 annual meeting of stockholders on October 22, 2019. He was appointed as the Chairman
of the Board on December 30, 2019. Mr. Tirpak is a professional investor with more than 25 years of investing experience. Since
November of 2021, Mr. Tirpak has served as the CEO of Liberated Syndication Inc., a leading provider of podcast hosting and advertising
services. Since September of 2016, he has served as a portfolio manager and Managing Director of Palm Active Partners, LLC, a private
investment company. He also previously served as a portfolio manager at Credit Suisse First Boston, Caxton Associates, Sigma Capital Management,
Chilton Investment Company and Locke Partners. Mr. Tirpak served as a director of Full House Resorts, Inc., a publicly trading gaming
and lodging company, from December of 2014 through January of 2021, as a director at Applied Minerals, Inc., a publicly traded specialty
materials company, from April 2015 to March 2017, as a director at Flowgroup plc, an energy supply and services business in the United
Kingdom, from June 2017 to October 2018 and as a director at Birner Dental Management Services, Inc., a publicly traded dental service
organization, from December 2017 to January 2019. Since October of 2019, he has served as a director of Liberated Syndication Inc.,
and since April of 2020, he has served as a director of Barnwell Industries Inc., a publicly traded company engaged in real estate development
and oil and gas exploration. Mr. Tirpak also currently serves as trustee of The Halo Trust, the world’s largest humanitarian mine
clearance organization focused on clearing the debris of war which currently operates in over 25 countries including Afghanistan, Ukraine
and Iraq. Mr. Tirpak earned a B.S.M.E. from Tufts University and an M.B.A. from Georgetown University.
The Company believes that Mr. Tirpak is a valuable member of the Board due to his knowledge and experience in investing, capital allocation
and corporate governance, as well as his experience serving on the boards of publicly traded companies.
Mr. H. Timothy Eriksen was elected
as a Class I director of the Company at the 2018 annual meeting of stockholders on October 22, 2019. He was appointed by the Board as
the Chairman of the Audit Committee of the Board on December 30, 2019. Mr. Eriksen founded Eriksen Capital Management, an investment advisory
firm (“ECM”), in 2005. Mr. Eriksen is the President of ECM. Mr. Eriksen is the Chief Executive Officer and Chief
Financial Officer of, and since July 2015 has been a director of, Solitron Devices, Inc. (“Solitron”). Solitron designs, develops,
manufactures and markets solid-state semiconductor components and related devices primarily for the military and aerospace markets.
From April 2018 through August 2021, Mr. Eriksen was a director of Novation Companies, Inc. (“Novation”). Novation owns
Healthcare Staffing, Inc., which, among other activities, provides outsourced healthcare staffing and related services. On August 31,
2021, Mr. Eriksen was elected to the Board of PharmChem, Inc., which offers a sweat patch device to test for drug abuse. Prior to founding
ECM, Mr. Eriksen worked for Walker’s Manual, Inc., a publisher of books and newsletters on micro-cap stocks, unlisted
stocks and community banks. Earlier in his career, Mr. Eriksen worked for Kiewit Pacific Co, a subsidiary of Peter Kiewit Sons, as
an administrative engineer on the Benicia Martinez Bridge project. Mr. Eriksen received a B.A. from The Master’s University
and an M.B.A. from Texas A&M University.
The Company believes that Mr. Eriksen is a valuable
member of the Board based on his strong business and financial background, and his experience serving in leadership- and management-level
roles with responsibility for formulating business and operational strategy.
Mr. Robert Fitzgerald was appointed as
a Class II director of the Company by the Board on December 30, 2019. Mr. Fitzgerald is a seasoned business executive with over 25 years
of experience helping companies grow. From 1999 through 2008, he served as the CEO of YDI/Proxim Wireless, an early pioneer of the wireless
networking equipment industry. From 2009 through 2010, he served as a consultant and later the President of Ubiquiti Networks, now Ubiquiti,
Inc. (NYSE: UI), a world leading provider of wireless and non-wireless networking equipment. He currently serves as the CEO of QAR Industries,
Inc., an investment company that holds interests in a portfolio of public and private companies, including Antenna Products Corporation
and SeeView Securities, Inc. Mr. Fitzgerald earned a B.A. in Economics and a J.D. from the University of California, Los Angeles.
The Company believes that Mr. Fitzgerald’s
extensive experience in and knowledge of the information technology (“IT”) industry and career serving in management-level
positions for public and private companies make him a valuable member of the Board.
Thomas Salerno was appointed President,
Chief Executive Officer and Treasurer of the Company effective as of March 23, 2020. Since 2011, Mr. Salerno had served as the Managing
Director of TSR Consulting Services, Inc., the Company’s IT consulting services subsidiary and largest business unit. Mr. Salerno
has over 20 years of experience in the technology consulting industry. Prior to joining the Company, Mr. Salerno spent eight years at
Open Systems Technology as Associate Director, two years as Vice President of Sales and Recruiting for Versatech Consulting, and three
years as an Account Representative for Robert Half Technologies. Mr. Salerno holds a Bachelor’s Degree from Johnson and Wales University.
Mr. John G. Sharkey was appointed Senior
Vice President, Chief Financial Officer and Secretary of the Company effective June 1, 2019. He had served as the Vice President, Finance,
Controller and Secretary of the Company since 1990. Mr. Sharkey received a Master’s Degree in Finance from Adelphi University and
received his Certified Public Accountant certification from the State of New York. From 1987 until joining the Company in October 1990,
Mr. Sharkey was Controller of a publicly-held electronics manufacturer. From 1984 to 1987, he served as Deputy Auditor of a commercial
bank, having responsibility over the internal audit department. Prior to 1984, Mr. Sharkey was employed by KPMG LLP as a senior accountant.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange
Act requires the Company’s officers and directors and persons who beneficially own more than ten percent of a registered class of
the Company’s equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission
(the “SEC”). Officers, directors and greater than ten percent Stockholders are required by regulation of the SEC to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on its review
of the copies of such forms received by it, or written representations from certain reporting persons that no Forms 5 were required for
those persons, the Company believes that all of its officers, directors and greater than ten percent beneficial owners complied with all
filing requirements applicable to them with respect to reports required to be filed by Section 16(a) of the Exchange Act during the fiscal
year ended May 31, 2022.
Code of Ethics
The Company has adopted a
code of ethics that applies to all of its employees, including the chief executive officer and chief financial and accounting officer.
The code of ethics is available on the Investor Relations page of the Company’s website at www.tsrconsulting.com. The Company intends
to post on its website all disclosures that are required by law or NASDAQ Capital Market listing standards concerning any amendments to,
or waivers from, the Company’s code of ethics. Stockholders may request a free copy of the code of ethics by writing to Corporate
Secretary, TSR, Inc., 400 Oser Avenue, Suite 150, Hauppauge, NY 11788. Disclosure regarding any amendments to, or waivers from, provisions
of the code of ethics that apply to the Company’s directors or principal executive and financial officers will be included in a
Current Report on Form 8-K filed with the SEC within four business days following the date of the amendment or waiver, unless website
posting of such amendments or waivers is then permitted by the rules of the NASDAQ Capital Market and the SEC.
Audit Committee
The Audit Committee’s
current members are H. Timothy Eriksen, Bradly M. Tirpak and Robert Fitzgerald. Each of the members of the Audit Committee is an independent
director under the rules of the NASDAQ Capital Market. The Audit Committee’s primary functions are to assist the Board in monitoring
the integrity of the Company’s financial statements and systems of internal control. The Audit Committee has direct responsibility
for the appointment, independence and performance of the Company’s independent auditors. The Audit Committee is responsible for
pre-approving any engagements of the Company’s independent auditors. The Audit Committee operates under a written charter approved
by the Board on September 16, 2004, and amended as of October 10, 2008. A copy of the Audit Committee Charter is available on the Investor
Relations page of the Company’s website at www.tsrconsulting.com.
The Board has determined that
H. Timothy Eriksen, the Chairman of the Audit Committee, Bradley M. Tirpak and Robert Fitzgerald all meet the requirements of an “audit
committee financial expert” as such term is defined in applicable regulations of the SEC.
Item 11. Executive Compensation.
Executive Compensation
The following table sets forth
information concerning the annual and long-term compensation of the Named Executive Officers (as defined below) for services in all capacities
to the Company for the fiscal years ended May 31, 2022 and 2021. The Named Executive Officers for the fiscal years ended May 31, 2022
and 2021 are (1) Thomas Salerno, our President and Chief Executive Officer; and (2) John G. Sharkey, our Senior Vice President and Chief
Financial Officer (the “Named Executive Officers”).
SUMMARY COMPENSATION TABLE
Name and Principal Position | |
Fiscal Year | | |
Salary | | |
Bonus | | |
Stock Awards | | |
Option Awards | | |
Non-Equity Incentive Plan Compen-sation | | |
Nonqualified
Deferred
Compensation
Earnings | | |
All Other
Compensation | | |
Total | |
Thomas Salerno, | |
| 2022 | | |
$ | 350,000 | | |
$ | 64,000 | | |
$ | 102,000 | (3) | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 2,000 | (4) | |
$ | 518,000 | |
President and Chief Executive Officer (1) | |
| 2021 | | |
$ | 350,000 | | |
$ | 63,000 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 12,000 | (4) | |
$ | 425,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
John G. Sharkey, | |
| 2022 | | |
$ | 310,000 | | |
$ | 41,000 | | |
$ | 64,000 | (3) | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 8,000 | (5) | |
$ | 423,000 | |
Senior
Vice President and Chief Financial Officer (2) | |
| 2021 | | |
$ | 310,000 | | |
$ | 40,000 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 6,000 | (5) | |
$ | 356,000 | |
| (1) | Thomas Salerno was appointed as President and Chief Executive Officer of the Company effective March 23,
2020. |
| (2) | John G. Sharkey was appointed as Senior Vice President and Chief Financial Officer effective June 1, 2019.
Previously, Mr. Sharkey served as Vice President, Finance. |
| (3) | Represents 13,333 and 8,333 vested shares of the Company’s common stock for Mr. Salerno and Mr.
Sharkey, respectively, from Restricted Shares awarded in fiscal 2021. The shares had a grant date fair value of $7.63. |
| (4) | Amount related to Mr. Salerno’s personal use of an automobile provided by the Company. |
| (5) | Amounts related to Mr. Sharkey’s personal use of an automobile provided by the Company. |
Outstanding Equity Awards at Fiscal Year End
In October of 2020, the Company adopted the TSR,
Inc. 2020 Equity Incentive Plan (“the Plan”) which was subsequently approved by the Shareholders at the combined 2019 and
2020 Annual Meeting held on November 19, 2020. The Plan allows for a maximum of 200,000 shares in the form of non-qualified stock options,
incentive stock options, restricted awards, stock appreciation rights, cash awards, performance share awards and other equity based awards
to employees, consultants, directors and those individuals whom the Board determines are reasonably expected to become employees, consultants
or directors following the date of grant. The table below sets forth the outstanding equity awards issued under the Plan as of May 31,
2022 with respect to the Named Executive Officers.
| |
Option Awards | | |
Stock Awards | |
Name | |
Number of
securities
underlying
unexercised
options (#)
exercisable | | |
Number of
securities
underlying
unexercised
options (#)
unexercisable | | |
Equity
incentive
plan
awards:
Number of
securities
underlying
unexercised
unearned
options (#) | | |
Option
exercise
price ($) | | |
Option
expirat-ion
date | | |
Number
of shares
or units
of stock
that have
not
vested
(#) | | |
Market
value of
shares
or units
of stock
that
have
not
vested
($) | | |
Equity
incentive
plan
awards:
Number
of
unearned
shares,
units or
other
rights
that have
not
vested
(#) | | |
Equity
incentive
plan
awards:
Market or
payout
value of
unearned
shares,
units or
other
rights
that have
not
vested
($) | |
Thomas Salerno | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,000 | (1)(2) | |
$ | 40,550 | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,000 | (1)(3) | |
$ | 40,550 | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 8,333 | (4)(2) | |
$ | 67,581 | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 8,334 | (4)(3) | |
$ | 67,589 | |
John G. Sharkey | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,333 | (1)(2) | |
$ | 27,031 | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,334 | (1)(3) | |
$ | 27,039 | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,000 | (4)(2) | |
$ | 40,550 | |
| |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,000 | (4)(3) | |
$ | 40,550 | |
(1) | Representing shares of common stock under time vesting stock awards, issued on January 28, 2021, which
fully vest on the applicable vesting date, so long as the grantee remains an employee of the Company. |
| |
(2) | The vesting date for these shares is January 28, 2023. |
| |
(3) | The vesting date for these shares is January 28, 2024. |
| |
(4) | Representing shares of common stock under performance vesting stock awards, issued on January 28, 2021,
which, so long as the grantee remains an employee of the Company, will (i) fully vest upon the satisfaction of the “performance
condition” defined in the grant agreements, which relates to the market price of the Company’s common stock over a stated
period of time, and (ii) expire on January 28, 2023 and 2024, respectively, if the performance condition is not satisfied. The “performance
condition” entails the common stock share price trading above the applicable share target for 30 consecutive trading days between
the issue date and the expiration date. If the applicable share target (a) is reached for 30 consecutive days before the vesting date
and (b) the stock is above the applicable share target on the vesting date, the award shares shall vest on the vesting date. If the applicable
share target is reached after the vesting and before the expiration date, the shares vest upon the stock trading for 30 consecutive days
above the applicable share target. |
Employment Agreements and Arrangements
On November 3, 2020, TSR entered into an Employment
Agreement with its Chief Executive Officer, Thomas C. Salerno (the “CEO Employment Agreement”) and an Amended and Restated
Employment Agreement with its Chief Financial Officer, John Sharkey (the “CFO Employment Agreement”, collectively with the
CEO Employment Agreement, the “Employment Agreements”), both effective as of November 2, 2020. The CFO Employment Agreement
superseded the Amended and Restated Employment Agreement dated May 24, 2019 between the Company and Mr. Sharkey in its entirety.
Employment Term and Position. The term
of employment of each of Messrs. Salerno and Sharkey will be three years from November 2, 2020 to November 2, 2023, and any continued
employment will be on an “at-will” basis. During their respective terms of employment, Mr. Salerno will serve as Chief Executive
Officer of the Company and Mr. Sharkey will serve as Chief Financial Officer of the Company.
Base Salary, Annual Bonus Equity Compensation
and Other Benefits. Pursuant to their Employment Agreements, Messrs. Salerno and Sharkey are entitled to annual base salaries of $350,000
and $310,000, respectively, as may be adjusted by the Board. In addition, Messrs. Salerno and Sharkey will be eligible to receive annual
cash bonuses up to 35% and 25% of their respective base salaries, respectively, based on the Company’s financial information and
established by the Board, upon the condition that Messrs. Salerno and Sharkey are active employees on the last day of the related fiscal
year and there are no publicly reportable audit findings for the fiscal year. Any annual bonus will be paid in two installments, i.e.,
50% of the estimated annual bonus will be advanced within 30 days of the end of the fiscal year and the balance equal to the final annual
bonus determined by the Board minus the estimate advanced after the filing of the Company’s 10-K for the fiscal year. Messrs. Salerno
and Sharkey will also be eligible to receive equity awards under the Company’s equity incentive plan, certain benefits including
vacation, group medical health, group insurance and similar benefits, a monthly car allowance of $1,800 and $800, respectively, and reimbursement
of approved business expenses.
Termination Entitlement and Severance.
In the event that the Company terminates Mr. Salerno or Mr. Sharkey’s employment (a) for “Cause” (as defined in their
Employment Agreements) or (b) upon Mr. Salerno or Mr. Sharkey’s death or disability or, (c) if Mr. Salerno or Mr. Sharkey terminates
his employment for any reason other than due to material breach by the Company as described in scenario (y) below, then the Company’s
sole obligations to Mr. Salerno or Mr. Sharkey shall be: (i) the payment of any accrued but unpaid base salary, (ii) the payment of any
approved but not reimbursed business expenses and (iii) compliance with the Company’s benefits plans (collectively, the “Termination
Entitlement”). If Mr. Salerno or Mr. Sharkey is terminated for “Cause” or resigns for any reason prior to the date the
annual bonus is paid out in its entirety, he shall forfeit any and all annual bonus including returning any advanced bonus portion paid.
In the event that (x) the Company terminates Mr.
Salerno or Mr. Sharkey’s employment for reasons other than the above-enumerated reasons and in Mr. Sharkey’s case, if he is
forced to relocate more than 25 miles from his current residence and he resigns due to this reason, both subject to the Company or its
affiliate’s offer of comparable employment meeting certain conditions or, (y) Mr. Salerno or Mr. Sharkey provides notice to the
Company of its material breach of its obligations under his Employment Agreement and the Company fails to cure such breach within the
required period of time, in addition to the Termination Entitlement, Mr. Salerno or Mr. Sharkey will be entitled to a severance payment
consisting of (i) one year of base salary, (ii) one year of car allowance and (iii) 50% of the annual bonus awarded in the fiscal year
prior to the employee’s termination if his employment is terminated without Cause (collectively, the “Severance Payment”)
as well as a health benefit comprising continued participation in the Company’s group health plan for one year for Mr. Salerno and
until March 31, 2025 for Mr. Sharkey, respectively, subject to certain conditions provided in their respective Employment Agreements (the
“Health Benefit”).
If, prior to the expiration of their respective
term of employment and within 12 months following a Change in Control (as defined in their Employment Agreements), Mr. Salerno or Mr.
Sharkey is subject to termination other than for Cause, then the Company will pay “Change in Control Severance Benefits” consisting
of (i) a payment equivalent to one year of base salary (as in effect immediately prior to the Change in Control, or the date of the termination
of the employee’s employment, whichever is greater), (ii) 100% of the employee’s annual bonus as paid in the previous year,
(iii) taxable cash payments for COBRA coverage for 18 months and (iv) acceleration of vesting of 100% of the employee’s unvested
equity award compensation.
Pursuant to the Employment Agreements, the Company’s
obligation to pay any Severance Payment, Health Benefit, Change in Control Severance Benefits (collectively, “Severance Payments”)
or any related benefits to which Mr. Salerno or Mr. Sharkey is not automatically entitled under the law will be subject to the employee’s
execution of an effective release of claims in favor of the Company, its affiliates and their related persons, in a form to be provided
by the Company. In addition, in the event that Mr. Salerno or Mr. Sharkey breaches the restrictive covenants under his Employment Agreement,
any remaining Severance Payments due to him will be forfeited.
Restrictive Covenants. Pursuant to their
respective Employment Agreements, Messrs. Salerno and Sharkey are subject to certain restrictive covenants including (i) protection of
confidential information, (ii) non-disparagement, (iii) non-solicitation of employees for a period of 24 months after the termination
of employment, (iv) noncompetition for a period of 12 months after the termination of employment and (v) non-solicitation of the Company’s
clients for a period of 24 months after the termination of employment.
Director Compensation
The following table sets forth
information concerning the compensation of the non-officer directors of the Company who served as directors during the fiscal year ended
May 31, 2022. Directors of the Company who also serve as executive officers of the Company are not paid any compensation for their service
as directors. There are currently no executive officers also serving as directors.
Name | |
Fees Earned Or Paid In Cash | | |
Stock Awards | | |
Option Awards | | |
Non-Equity Incentive Plan Compensation | | |
Nonqualified Deferred Compensation Earnings | | |
All Other
Compensation | | |
Total | |
Bradley M. Tirpak (1) | |
$ | 20,000 | | |
$ | 76,000 | (3) | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 96,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
H. Timothy Eriksen (1) | |
$ | 20,000 | | |
$ | 76,000 | (3) | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 96,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Robert Fitzgerald (2) | |
$ | 20,000 | | |
$ | 76,000 | (3) | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 96,000 | |
(1) | Elected to serve as a director of the Company at the annual
meeting of stockholders on October 22, 2019. |
(2) | Appointed to serve as a director of the Company by the Board
on December 30, 2019. |
(3) | Represents 10,000 vested shares of the Company’s common
stock each for Mr. Tirpak, Mr. Eriksen and Mr. Fitzgerald, from Restricted Shares awarded in fiscal 2021. The shares had a grant date
fair value of $7.63. |
For their service, members
of the Board who are not officers of the Company received a pro-rated amount of an annual retainer of $10,000, payable quarterly, based
on period of time they respectively served during fiscal 2022.
Bradley M. Tirpak received
an additional annual retainer of $10,000 for his service as Chairman of the Board during fiscal 2022.
H. Timothy Eriksen received
an additional annual retainer of $10,000 for his service as Chairman of the Audit Committee during fiscal 2022. Mr. Eriksen did not receive
any additional retainer for his service as Chairman of the Nominating Committee of the Board or lead independent director during fiscal
2022.
Robert Fitzgerald received
an additional annual retainer of $10,000 for his service as Chairman of the Compensation Committee during fiscal 2022. Mr. Fitzgerald
did not receive any additional retainer for his service as Chairman of the Special Committee of the Board during fiscal 2022.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table presents information with
respect to the Plan as of May 31, 2022:
| |
Number
of
securities to
be issued
upon
exercise of
outstanding
options,
warrants
and rights (1) | | |
Weighted-average
exercise price of
outstanding
options, warrants
and rights | | |
Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a)) | |
Plan Category | |
(a) | | |
(b) | | |
(c) | |
Equity compensation plans approved
by security holders | |
| - | | |
$ | - | | |
| 22,500 | |
| |
| | | |
| | | |
| | |
Equity compensation
plans not approved by security holders | |
| - | | |
| - | | |
| - | |
Total | |
| - | | |
| - | | |
| 22,500 | |
(1) | The securities available under the Plans for issuance
and issuable pursuant to exercises of outstanding options may be adjusted in the event of a change in outstanding stock by reason of
stock dividend, stock splits, reverse stock splits, etc. |
Principal Stockholders and Security Ownership of Management
The outstanding voting stock
of the Company as of September 14, 2022 consisted of 2,146,448 shares of Common Stock. The table below sets forth the beneficial ownership
of the Common Stock of the Company’s directors, executive officers and persons known to the Company to be the beneficial owner of
more than five percent (5%) of the outstanding shares of Common Stock as of September 14, 2022:
| |
Beneficial
Ownership of
Common Stock | |
Name of Beneficial Owner –
Directors, Officers and 5% Stockholders | |
No.
of
Shares (1) | | |
| |
Bradley M. Tirpak (2)(3) | |
| 53,446 | (4) | |
| 2.5 | % |
H. Timothy Eriksen (2)(3) | |
| 6,800 | (5) | |
| 0.3 | % |
Thomas Salerno (2)(6) | |
| 8,980 | (6) | |
| 0.4 | % |
John G. Sharkey (2)(7) | |
| 12,362 | (7) | |
| 0.6 | % |
Robert Fitzgerald (2)(3)(8) | |
| 540,499 | (9) | |
| 25.2 | % |
Philip J. LaBlonde (10) | |
| 135,000 | | |
| 6.3 | % |
QAR Industries, Inc. (8) | |
| 498,884 | | |
| 23.2 | % |
Zeff Capital, L.P. (11) | |
| 437,774 | | |
| 20.4 | % |
Zeff Holding Company, LLC (11) | |
| 437,774 | (12) | |
| 20.4 | % |
Daniel Zeff (11) | |
| 437,774 | (12) | |
| 20.4 | % |
All Directors and Executive Officers as a Group (5 persons) | |
| 622,087 | | |
| 28.9 | % |
(1) | In accordance with Rule 13d-3 of the Exchange Act, a person is deemed to be the beneficial owner, for
purposes of this table, of any shares of the Company’s Common Stock if such person has voting or investment power with respect to
such shares. This includes shares of Common Stock (a) subject to options exercisable within sixty (60) days, and (b) (1) owned by a person’s
spouse, (2) owned by other immediate family members who share a household with such person, or (3) held in trust or held in retirement
accounts or funds for the benefit of the such person, over which shares the person named in the table may possess voting and/or investment
power. Unless otherwise stated herein, each beneficial owner has sole voting power and sole investment power. |
(2) | This executive officer and/or director maintains a mailing address at 400 Oser Avenue, Suite 150, Hauppauge,
New York 11788. |
(3) | Such person currently serves as a director of the Company. |
(4) | Based on the Form 4 filed by Bradley M. Tirpak with the SEC on May 28, 2021. The amount does not include
20,000 unvested restricted stock awards. |
(5) | The amount does not include 20,000 unvested restricted stock awards. |
(6) | Mr. Thomas Salerno served as the Managing Director of TSR Consulting Services, Inc., the Company’s
IT consulting services subsidiary and largest business unit, since 2011. He was appointed as President and Chief Executive Officer of
the Company effective March 23, 2020. The amount does not include 26,667 unvested restricted stock awards. |
(7) | John G. Sharkey served as the Vice President, Finance, Controller and Secretary of the Company until June
1, 2019. Effective June 1, 2019, Mr. Sharkey was appointed Senior Vice President, Chief Financial Officer and Secretary of the Company.
The amount does not include 16,667 unvested restricted stock awards. |
(8) | Based on the Form 4 filed by Robert Fitzgerald with the SEC on February 1, 2022. Robert Fitzgerald is
the President of QAR Industries, Inc. and the reporting persons maintain a mailing address at 101 SE 25th Avenue, Mineral Wells,
Texas 76067. The amount does not include 20,000 unvested restricted stock awards. |
(9) | Represents the same shares owned by QAR Industries, Inc. |
(10) | Based on a Schedule 13D filed by Philip J. LaBlonde with the SEC on August 12, 2016. Based on the Schedule
13D, Philip J. LaBlonde maintains a mailing address at 15120 Honors Circle, Carmel, Indiana 46033. |
(11) | Based on an Amendment to Schedule 13D filed by Zeff Capital, L.P., Zeff Holding Company, LLC and Daniel
Zeff with the SEC on August 17, 2020. Based on the Amendment to Schedule 13D, Zeff Capital, L.P. is the owner of the 437,774 shares reported
on the Amendment; Zeff Holding Company, LLC is the general partner of Zeff Capital, L.P.; Daniel Zeff is the sole manager of Zeff Holding
Company, LLC; and all of the reporting persons maintain a mailing address at 885 Sixth Avenue, New York, New York 10001. |
(12) | Represents the same shares owned by Zeff Capital, L.P. |
Item 13. Certain Relationships and Related Transactions and Director Independence.
Related Party Transactions
The Audit Committee is responsible
for reviewing and approving all transactions between the Company and any related party pursuant to the Audit Committee’s charter.
Except as described below, the Company was not a participant in any transaction since the beginning of the 2022 fiscal year in which any
related person had a direct or indirect material interest and in which the amount involved exceeded the lesser of $120,000 or 1% of the
average of the Company’s total assets at the end of each of the Company’s two prior fiscal years, and no such transactions
are currently proposed.
On January 5, 2021, the members
of the Board of Directors of TSR other than Robert Fitzgerald approved providing a waiver to QAR Industries, Inc. for its contemplated
acquisition of shares owned by Fintech Consulting LLC under the Company’s prior Amended and Restated Rights Agreement so that a
distribution date would not occur as a result of the acquisition. QAR Industries, Inc. and Fintech Consulting LLC were both principal
stockholders of the Company, each owning more than 5% of the Company’s outstanding common stock prior to the consummation of the
acquisition. Robert Fitzgerald is the President and majority shareholder of QAR Industries, Inc. The other directors of the Company are
not affiliated with QAR Industries, Inc.
On February 3, 2021, the acquisition
was completed and QAR Industries, Inc. purchased 348,414 shares of TSR common stock from Fintech Consulting LLC at a price of $7.25 per
share. At the same time, Bradley M. Tirpak, Chairman of TSR, purchased 27,586 shares of TSR common stock from Fintech Consulting LLC at
a price of $7.25 per share.
On December 1, 2021, Fintech
Consulting LLC filed a complaint against the Company in the United States District Court for the District of New Jersey, related to the
foregoing transaction. The named Defendants in the complaint are the Company, QAR Industries, Inc., Robert E. Fitzgerald, a director
and a shareholder of QAR Industries, Inc., and Bradley Tirpak. The complaint purports to assert claims against the Defendants under
state law and Section 10(b) of the Exchange Act in connection with a Share Purchase Agreement, dated January 31, 2021, by and between
the Plaintiff, as the seller of shares of TSR’s common stock, and QAR Industries, Inc. and Mr. Tirpak, as the purchasers of such shares
(the “SPA”). The plaintiff seeks (i) judgment declaring the transactions represented by the SPA null and avoid and returning
the shares; (ii) judgment cancelling the SPA and returning the shares in exchange for return of the purchase price; (iii) judgement unwinding
the transaction; (iv) compensatory damages; (v) punitive damages; (vi) pre-judgment interest; (vii) costs of suit including attorneys’
fees; and (viii) such other relief as the Court may find appropriate. See the Company’s Current Report on Form 8-K filed with the
SEC on December 21, 2021 for more information. The Company believes the action described above to be without merit and intends to vigorously
defend its interests. However, the Company may incur significant additional legal expenses as it pursues a vigorous defense against this
action
On April 1, 2020, the Company
entered into a binding term sheet (“Term Sheet”) with Zeff Capital, L.P. (“Zeff”) pursuant to which it agreed
to pay Zeff an amount of $900,000 over a period of three years in cash or cash and stock in settlement of expenses incurred by Zeff during
its solicitations in 2018 and 2019 in connection with the annual meetings of the Company, the costs incurred in connection with the litigation
initiated by and against the Company as well as negotiation, execution and enforcement of the Settlement and Release Agreement. In exchange
for certain mutual releases, the Term Sheet calls for a cash payment of $300,000 on June 30, 2021, a second cash payment of $300,000 on
June 30, 2022 and a third payment of $300,000 also on June 30, 2022, which can be paid in cash or common stock at the Company’s
option. There is no interest due on these payments. The $300,000 payment due on June 30, 2021 was paid by the due date. The agreement
also has protections to defer such payment dates so that the debt covenants with the Company’s lender are not breached. On August
13, 2020, the Company, Zeff, Zeff Holding Company, LLC and Daniel Zeff entered into a settlement agreement to reflect these terms. Any
installment payment which is deferred as permitted above will accrue interest at the prime rate plus 3.75%, and Zeff shall thereby have
the option to convert such deferred amounts (plus accrued interest if any) into shares of the Company’s stock. The Company accrued
$818,000, the estimated present value of these payments using an effective interest rate of 5%, in the quarter ended February 29, 2020,
as the events relating to the expense occurred prior to such date. The two cash payments of $300,000 each were made by June 30, 2022 in
full satisfaction of the settlement.
Board of Directors and Director Independence
The Board of Directors for
the 2022 fiscal year consisted of Bradley M. Tirpak (Chairman), H. Timothy Eriksen and Robert Fitzgerald.
Bradley M. Tirpak, H. Timothy
Eriksen and Robert Fitzgerald qualify as “independent directors” under the NASDAQ rules.
Item 14. Principal Accounting Fees and Services.
Audit Fees
The aggregate fees billed
by CohnReznick LLP for professional services related to the audit of the Company’s annual consolidated financial statements and
the review of the interim consolidated condensed financial statements included in the Company’s quarterly reports on Form 10-Q for
the fiscal years ended May 31, 2022 and 2021 were $86,000 and $102,000, respectively.
Audit-Related Fees
In the fiscal year ended May
31, 2022, fees billed by CohnReznick LLP for audit-related services were $25,000 related to giving consent to re-issue their audit report
in connection with a Form S-3 Registration Statement. In the fiscal year ended May 31, 2021, fees billed by CohnReznick LLP for audit-related
services were $24,000 related to the acquisition of Geneva Consulting Group, Inc.
Tax Fees
There were no fees billed
by CohnReznick LLP for tax services during the fiscal years ended May 31, 2022 or 2021.
All Other Fees
There were no fees billed
by CohnReznick LLP related to any other non-audit services for the fiscal years ended May 31, 2022 or 2021.
Policy on Pre-Approval of Audit and Permissible
Non-Audit Services
The Audit Committee is responsible
for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. In accordance with
its charter, the Audit Committee approves, in advance, all audit and permissible non-audit services to be performed by the independent
registered public accounting firm. Such approval process ensures that the independent registered public accounting firm does not provide
any non-audit services to the Company that are prohibited by law or regulation.