================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                    FORM 10-Q


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

                    For the period ended August 31, 2003


           [_]      Transition Report Pursuant to Section 13 or
                    15(d) of the Securities Exchange Act of 1934

                    For the transition period from           to
                                                       -----    -----



Commission File Number:                    0-8656
                        --------------------------------------------




                                    TSR, Inc.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


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


                      400 Oser Avenue, Hauppauge, NY 11788
--------------------------------------------------------------------------------
                    (Address of principal executive offices)


                                  631-231-0333
--------------------------------------------------------------------------------
                         (Registrant's telephone number)


                                      None
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)



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

Indicate by check mark whether the Registrant is an accelerated filer (as
defined by Rule 12b-2 of the Exchange Act). [_] Yes    [X] No

                               SHARES OUTSTANDING

4,544,012 shares of common stock, par value $.01 per share, as of September 30,
2003
================================================================================
<PAGE>



                           TSR, INC. AND SUBSIDIARIES
                                      INDEX




                                                                            Page
                                                                          Number
                                                                          ------
PART I.   FINANCIAL INFORMATION:


          Item 1.  Financial Statements:


                   Condensed Consolidated Balance Sheets -
                   August 31, 2003 and May 31, 2003..........................  3


                   Condensed Consolidated Statements of Income -
                   For the three months ended August 31, 2003 and 2002.......  4


                   Condensed Consolidated Statements of Cash Flows -
                   For the three months ended August 31, 2003 and 2002.......  5


                   Notes to Condensed Consolidated Financial Statements......  6


          Item 2.  Management's Discussion and Analysis of Financial
                   Condition and Results of Operations....................... 10


          Item 3.  Quantitative and Qualitative Disclosure About Market Risk. 14


          Item 4.  Procedures and Controls................................... 15





PART II.  OTHER INFORMATION.................................................. 15

          Item 6.  Exhibits and Reports on Form 8-K.......................... 15



Signatures................................................................... 15






                                     Page 2
<PAGE>
                           TSR, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

PART I.  FINANCIAL INFORMATION

         ITEM 1.  FINANCIAL STATEMENTS
<TABLE><CAPTION>
                                                         AUGUST 31,        MAY 31,
ASSETS                                                      2003            2003
                                                        ------------    ------------
                                                        (Unaudited)
<S>                                                     <C>             <C>
Current Assets:
     Cash and cash equivalents (Note 3) ............    $  4,290,919    $  5,063,098
     Marketable securities (Note 5) ................       5,997,700      12,949,174
     Accounts receivable (net of allowance for
        doubtful accounts of $430,000) .............       9,120,424       9,238,037
     Other receivables .............................          32,031          50,828
     Prepaid expenses ..............................          26,656          39,857
     Prepaid and recoverable income taxes ..........          26,576          60,739
     Deferred income taxes .........................         180,000         180,000
                                                        ------------    ------------
        Total current assets .......................      19,674,306      27,581,733

Equipment and leasehold improvements, at cost (net
     of accumulated depreciation and amortization
     of $715,000 and $708,000) .....................          19,405          24,955
Other assets .......................................          49,653          50,804
Deferred income taxes ..............................         123,000         123,000
Acquired client relationships, (net of accumulated
     amorization of $114,406 and $100,105) .........          57,202          71,503
                                                        ------------    ------------
                                                        $ 19,923,566    $ 27,851,995
                                                        ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
     Accounts and other payables ...................    $    176,397    $    230,632
     Accrued expenses and other current liabilities.       2,131,568       2,286,282
     Advances from customers .......................       1,714,567       1,793,496
     Income taxes payable ..........................         421,842         242,981
                                                        ------------    ------------
        Total current liabilities ..................       4,444,374       4,553,391
                                                        ------------    ------------

Minority Interest ..................................          58,807          40,902
                                                        ------------    ------------

Stockholders' Equity:
     Preferred stock, $1 par value, authorized
        1,000,000 shares; none issued ..............              --              --
     Common stock, $.01 par value, authorized
        25,000,000 shares; issued 6,204,326 and
        6,078,326 shares ...........................          62,043          60,783
     Additional paid-in capital ....................       4,879,711       4,134,053
     Retained earnings .............................      22,509,932      31,094,167
                                                        ------------    ------------
                                                          27,451,686      35,289,003
     Less: Treasury Stock, 1,660,314 shares, at cost      12,031,301      12,031,301
                                                        ------------    ------------
                                                          15,420,385      23,257,702
                                                        ------------    ------------
                                                        $ 19,923,566    $ 27,851,995
                                                        ============    ============
</TABLE>

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

                                     Page 3
<PAGE>
                           TSR, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
               FOR THE THREE MONTHS ENDED AUGUST 31, 2003 AND 2002
                                   (UNAUDITED)



<TABLE><CAPTION>
                                                                                 THREE MONTHS ENDED AUGUST 31,
                                                                                ------------------------------
                                                                                    2003              2002
                                                                                ------------      ------------
<S>                                                                             <C>               <C>
Revenues, net ...............................................................   $ 12,736,819      $ 13,680,766

Cost of sales ...............................................................      9,872,859        10,699,608

Selling, general and administrative expenses ................................      1,986,542         1,851,031
                                                                                ------------      ------------
                                                                                  11,859,401        12,550,639

Income from operations ......................................................        877,418         1,130,127

Other income:
     Interest and dividend income ...........................................         41,610            61,991
     Unrealized gain (loss) from marketable securities, net .................          6,666           (10,437)
     Minority interest in subsidiary operating profits ......................        (17,905)           (1,908)
                                                                                ------------      ------------
Income before income taxes ..................................................        907,789         1,179,773

Provision for income taxes ..................................................        404,000           516,000
                                                                                ------------      ------------
     Net income .............................................................   $    503,789      $    663,773
                                                                                ============      ============

Basic and diluted net income per common share ...............................   $       0.11      $       0.15
                                                                                ============      ============

Weighted average number of common shares outstanding ........................      4,523,012         4,418,012
                                                                                ============      ============

Weighted average number of diluted common shares outstanding ................      4,530,841         4,418,012
                                                                                ============      ============
</TABLE>

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

                                     Page 4
<PAGE>
                           TSR, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED AUGUST 31, 2003 AND 2002
                                   (UNAUDITED)


<TABLE><CAPTION>
                                                                                          THREE MONTHS ENDED AUGUST 31,
                                                                                         -------------------------------
                                                                                             2003               2002
                                                                                         ------------       ------------
<S>                                                                                      <C>                <C>
Cash flows from operating activities:
     Net income .....................................................................    $    503,789       $    663,773
     Adjustments to reconcile net income to net cash
        provided by (used in) operating activities:
     Depreciation and amortization ..................................................          21,618             35,004
     Noncash compensation expense ...................................................          49,980                 --
     Unrealized (gain) loss from marketable securities, net .........................          (6,666)            10,437
     Minority interest in subsidiary operating profits ..............................          17,905              1,908
Changes in assets and liabilities:
     Accounts receivable ............................................................         117,613         (1,339,038)
     Other receivables ..............................................................          18,797             (4,403)
     Prepaid expenses ...............................................................          13,201              5,144
     Prepaid and recoverable income taxes ...........................................          34,163             53,500
     Other assets ...................................................................           1,151                 --
     Accounts payable and accrued expenses ..........................................        (208,949)            (7,015)
     Income taxes payable ...........................................................         178,861            327,019
     Advances from customers ........................................................         (78,929)           (59,384)
                                                                                         ------------       ------------

Net cash provided by (used in) operating activities .................................         662,534           (313,055)
                                                                                         ------------       ------------
Cash flows from investing activities:
     Proceeds from maturities and sales of marketable securities ....................       7,953,190          3,964,590
     Purchases of marketable securities .............................................        (995,050)        (3,973,499)
     Purchase of fixed assets .......................................................          (1,767)                --
                                                                                         ------------       ------------

Net cash provided by (used in) investing activities .................................       6,956,373             (8,909)
                                                                                         ------------       ------------
Cash flows from financing activities
     Proceeds from exercise of stock options ........................................         696,938                 --
     Cash dividends paid ............................................................      (9,088,024)                --
                                                                                         ------------       ------------

Net cash used in financing activities ...............................................      (8,391,086)                --
                                                                                         ------------       ------------

Net decrease in cash and cash equivalents ...........................................        (772,179)          (321,964)
Cash and cash equivalents at beginning of period ....................................       5,063,098          5,793,896
                                                                                         ------------       ------------

Cash and cash equivalents at end of period ..........................................    $  4,290,919       $  5,471,932
                                                                                         ============       ============
Supplemental Disclosures:
     Income tax payments ............................................................    $    159,000       $    135,000
                                                                                         ============       ============
</TABLE>

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

                                     Page 5
<PAGE>
                           TSR, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 AUGUST 31, 2003
                                   (UNAUDITED)

1.   Basis of Presentation
     ---------------------
     The accompanying condensed consolidated interim financial statements
     include the accounts of TSR, Inc. and its subsidiaries (the "Company"). All
     significant inter-company balances and transactions have been eliminated in
     consolidation. These interim financial statements have been prepared in
     accordance with accounting principles generally accepted in the United
     States of America applying to interim financial information and with the
     instructions to Form 10-Q of Regulation S-X of the Securities and Exchange
     Commission. Accordingly, certain information and footnote disclosures
     required by accounting principles generally accepted in the United States
     of America and normally included in the Company's annual financial
     statements have been condensed or omitted. These interim financial
     statements as of and for the three months ended August 31, 2003, are
     unaudited; however, in the opinion of management, such statements include
     all adjustments (consisting of normal recurring accruals) necessary to
     present fairly the consolidated financial position, results of operations,
     and cash flows of the Company for the periods presented. The results of
     operations for the interim periods presented are not necessarily indicative
     of the results that might be expected for future interim periods or for the
     full year ending May 31, 2004. These 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, 2003.

2.   Net Income Per Common Share
     ---------------------------
     Basic net income per common share is computed by dividing income available
     to common stockholders (which for the Company equals its net income) by the
     weighted average number of common shares outstanding, and diluted net
     income per common share adds the dilutive effect of stock options and other
     common stock equivalents. Options covering 26,171 and 160,000 shares of
     common stock have been omitted from the calculations of diluted net income
     per common share for the three month periods ended August 31, 2003 and
     August 31, 2002, respectively, as their effect would have been
     antidilutive.

3    Cash and Cash Equivalents
     -------------------------
     The Company considers short-term highly liquid investments with maturities
     of three months or less at the time of purchase to be cash equivalents.
     Cash and cash equivalents were comprised of the following as of August 31,
     2003:

                 Cash in banks ...........................  $ 1,611,691
                 Money Market Funds ......................      684,108
                 US Treasury Funds .......................    1,995,120
                                                            -----------
                                                            $ 4,290,919
                                                            ===========

4.   Revenue Recognition
     -------------------
     The Company's contract computer programming services are generally provided
     under time and materials agreements with customers. Accordingly, the
     Company recognizes such revenues as services are provided. Advances from
     customers represent amounts received from customers prior to the Company's
     provision of the related services and credit balances from overpayments.


                                     Page 6
<PAGE>
                           TSR, INC. AND SUBSIDIARIES
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                                 AUGUST 31, 2003
                                   (UNAUDITED)





5.   Marketable Securities
     ---------------------
     The Company accounts for its marketable securities in Accordance with
     Statement of Financial Accounting Standards No. 115 "Accounting for Certain
     Investments in Debt and Equity Securities." Accordingly, the Company
     classifies its marketable securities at acquisition as either (i)
     held-to-maturity, (ii) trading, or (iii) available-for-sale. Based upon the
     Company's intent and ability to hold its US Treasury securities to maturity
     (which maturities range between three months and two years), such
     securities have been classified as held-to -maturity and are carried at
     amortized cost. The Company's equity securities are classified as trading
     securities, which are carried at fair value with unrealized gains and
     losses included in earnings. The Company's marketable securities are
     summarized as follows:



<TABLE><CAPTION>
                                                            Gross          Gross
                                                         Unrealized      Unrealized
                                           Amortized       Holding         Holding          Fair
                                              Cost          Gains          Losses           Value
                                          -----------    -----------     -----------     -----------
     <S>                                  <C>            <C>             <C>             <C>
     United States Treasury Securities... $ 5,970,268             --              --       5,970,268
     Equity Securities ..................      28,287          6,005          (6,860)         27,432
                                          -----------    -----------     -----------     -----------
                                          $ 5,998,555    $     6,005     $    (6,860)    $ 5,997,700
                                          ===========    ===========     ===========     ===========
</TABLE>








                                     Page 7
<PAGE>
                           TSR, INC. AND SUBSIDIARIES
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                                 AUGUST 31, 2003
                                   (UNAUDITED)


6.   Stock Options
     -------------
     On July 28, 2003 the Company paid a large nonrecurring cash dividend of
     $2.00 per share to shareholders of record as of July 11, 2003. The dividend
     paid amounted to $9,088,024. Guidance under Emerging Issues Task Force
     (EITF) 00-23, ISSUES RELATED TO THE ACCOUNTING FOR STOCK COMPENSATION UNDER
     APB OPINION NO.25 AND FASB INTERPRETATION NO.44, requires modification for
     outstanding stock options by adjusting the price and/or the number of
     shares under a fixed stock option award as a result of a large nonrecurring
     cash dividend. The Company did not adjust the terms of any outstanding
     stock options and, given the circumstances, a new measurement date and
     variable accounting treatment was required for its outstanding options at
     the dividend payment date. The Company had 34,000 such outstanding options,
     all of which were vested, as of August 31, 2003 which are now subject to
     variable accounting treatment. Accordingly, the Company recorded a non-cash
     compensation charge for $49,980 and will continue to adjust the
     compensation charge associated with these options through the earlier of
     their exercise, forfeiture or expiration dates.

     The Company has one stock-based employee compensation plan in effect. The
     Company accounts for all transactions under which employees receive shares
     of stock or other equity instruments in the Company based on the price of
     its stock in accordance with the provisions of Accounting Principles Board
     Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. All options
     granted under the plan had an exercise price equal to the market value of
     the underlying common stock, and the number of shares represented by such
     options were known and fixed, on the date of grant. However, as a result of
     the large nonrecurring cash dividend, the remaining outstanding 34,000
     options are now treated as variable options. The following table
     illustrates the effect on net income and earnings per share if the Company
     had applied the fair value recognition provisions of Statement of Financial
     Accounting Standards (SFAS) No. 123 ACCOUNTING FOR STOCK-BASED
     COMPENSATION.

                                            QUARTER ENDED AUGUST 31,
                                          ----------------------------
                                             2003              2002
                                          ----------        ----------
     Net income:
       As reported.....................   $  503,789        $  663,773
     Deduct: Total stock-based employee
     compensation expense determined
     under fair value method for all
     awards, net of minority interest
     and related tax effects...........           --            (3,773)
                                          ----------        ----------
           Proforma net income.........   $  503,789        $  660,000
                                          ==========        ==========
     Basic net income per share:
       As reported.....................   $     0.11        $     0.15
                                          ==========        ==========
       Proforma........................   $     0.11        $     0.15
                                          ==========        ==========


There were no options granted in fiscal 2004 and 2003.



                                     Page 8
<PAGE>
                           TSR, INC. AND SUBSIDIARIES
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                                 AUGUST 31, 2003
                                   (UNAUDITED)




7.   Recent Accounting Pronouncements
     --------------------------------
     In December 2002, the Financial Accounting Standards Board (FASB) issued
     Statement of Financial Accounting Standards (SFAS) No. 148, "Accounting for
     Stock-Based Compensation - Transition and Disclosure." SFAS No. 148
     provides alternative methods of transition for a voluntary change to the
     fair value method of accounting for stock-based employee compensation as
     originally provided by SFAS No. 123 "Accounting for Stock-Based
     Compensation". Additionally, SFAS No. 148 amends the disclosure
     requirements of SFAS No. 123 in both annual and interim financial
     statements. The Company intends on continuing to apply the intrinsic value
     method of accounting for stock-based employee compensation, and will
     provide the required disclosures of SFAS No. 148 in all its filings.

     In November 2002, the FASB issued Interpretation No. 45 "Guarantor's
     Accounting and Disclosure Requirements for Guarantees, Including Indirect
     Guarantees of Indebtedness of Others", ("Interpretation 45").
     Interpretation 45 requires a guarantor to include disclosure of certain
     obligations, and if applicable, at the inception of the guarantee,
     recognize a liability for the fair value of other certain obligations
     undertaken in issuing a guarantee. The recognition requirement is effective
     for guarantees issued or modified after December 31, 2002. The Company has
     no obligations regarding Interpretation No. 45.

     In January 2003, the FASB issued Interpretation No. 46 "Consolidation of
     Variable Interest Entities" ("Interpretation 46"). Interpretation 46
     clarifies the application of Accounting Research Bulletin No. 54
     "Consolidated Financial Statements", and applies immediately to any
     variable interest entities created after January 31, 2003 and to variable
     interest entities in which an interest is obtained after the date. The
     Company holds no interest in variable interest entities.

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
     Financial Instruments with Characteristics of both Liabilities and Equity",
     ("SFAS 150"). This Statement establishes standards for how an issuer
     classifies and measures in its statement of financial position certain
     financial instruments with characteristics of both liabilities and equity.
     In accordance with the standard, financial instruments that embody
     obligations for the issuer are required to be classified as liabilities.
     This Statement is effective for financial instruments entered into or
     modified after May 31, 2003, and otherwise is effective at the beginning of
     the first interim period beginning after June 15, 2003. The Company does
     not expect the provision of this statement to have a significant impact on
     the Company's consolidated financial statements.















                                     Page 9
<PAGE>
                           TSR, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PART I.  FINANCIAL INFORMATION

         ITEM 2.

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

Forward-Looking Statements
--------------------------

Certain statements contained in Management's Discussion and Analysis of
Financial Condition and Results of Operations, including statements concerning
the Company's future prospects and the Company's future cash flow requirements
are forward looking statements, as defined in the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially from those projections
in the forward looking statements which statements involve risks and
uncertainties, including but not limited to the following: risks relating to the
competitive nature of the markets for contract computer programming services;
the extent to which market conditions for the Company's contract computer
consulting services will continue to adversely affect the Company's business;
the concentration of the Company's business with certain customers; uncertainty
as to the Company's ability to maintain its relations with existing customers
and expand its contract computer consulting services business; the impact of
changes in the industry, such as the use of vendor management companies in
connection with the consulting procurement process, on the Company's business,
and other risks and uncertainties set forth in the Company's filings with the
Securities and Exchange Commission.

Results of Operations
---------------------

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

Three months ended August 31, 2003 compared with three months ended August 31,
------------------------------------------------------------------------------
2002
----
<TABLE><CAPTION>
                                                                     Three Months Ended August 31,
                                                                     (Dollar amounts in Thousands)
                                                                       2003                  2002
                                                               -------------------   -------------------
                                                                             %of                   % of
                                                                Amount    Revenues    Amount    Revenues
                                                               --------   --------   --------   --------
<S>                                                            <C>        <C>        <C>        <C>
Revenues ...................................................   $ 12,737      100.0   $ 13,681      100.0
Cost of sales ..............................................      9,873       77.5     10,700       78.2
                                                               --------   --------   --------   --------
Gross profit ...............................................      2,864       22.5      2,981       21.8

Selling, general, and administrative expenses ..............      1,986       15.6      1,851       13.5
                                                               --------   --------   --------   --------
Income from operations .....................................        878        6.9      1,130        8.3

Other income ...............................................         30        0.2         50        0.3
                                                               --------   --------   --------   --------
Income before income taxes .................................        908        7.1      1,180        8.6
Provision for income taxes .................................        404        3.1        516        3.8
                                                               --------   --------   --------   --------
Net income .................................................   $    504        4.0   $    664        4.8
                                                               ========   ========   ========   ========
</TABLE>

                                     Page 10
<PAGE>
                           TSR, INC. AND SUBSIDIARIES



Revenues
--------

Revenues consist primarily of revenues from computer programming consulting
services. Revenues for the quarter ended August 31, 2003 decreased $944,000 or
6.9% from the comparable period in fiscal 2003. The continuing weak economic
environment has caused almost all of our customers to severely cut back on their
IT spending, limiting opportunities to place new consultants on billing. The
economic environment and an increasing use of offshore development companies has
decreased demand for placements resulting in an overall decrease in rates
charged for computer programmer services. Although we have experienced a slight
increase in the average number of consultants on billing from approximately 356
for the quarter ended August 31, 2002 to 372 for the quarter ended August 31,
2003, the current economic environment has caused customers to require the
Company to decrease the rates charged for its services resulting in decreased
revenue. As a result, the Company has also decreased the rates paid to its
consultants for their services. Additionally, during the current quarter,
billable hours were lost for most consultants due to the electrical blackout in
the New York Metropolitan area.

Cost of Sales
-------------

Cost of sales for the quarter ended August 31, 2003, decreased $827,000 or 7.7%
to $9,873,000 from $10,700,000 in the prior year period. Cost of sales as a
percentage of revenues decreased from 78.2% in the quarter ended August 31, 2002
to 77.5% in the quarter ended August 31, 2003. These decreases are primarily
attributable to rate reductions in the amounts paid to 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 $135,000 or 7.3%
from $1,851,000 in the quarter August 31, 2002 to $1,986,000 in the quarter
ended August 31, 2003. This increase was primarily attributable to increased
technical recruiting and legal expenses.

Other Income
------------

Other income resulted primarily from interest and dividend income, which
decreased by $20,000 to $42,000 due to lower interest rates and lower investable
balances in the quarter ended August 31, 2003. Additionally, the Company had a
net unrealized gain of $7,000 in the quarter ended August 31, 2003 versus a loss
of $10,000 in the quarter ended August 31, 2002 from marketable securities due
to mark to market adjustments of its trading securities equity portfolio.

Income Taxes
------------

The effective income tax rate of 44.5% for the quarter ended August 31, 2003
increased from a rate of 43.7% in the quarter ended August 31, 2002.









                                     Page 11
<PAGE>
                           TSR, INC. AND SUBSIDIARIES




Liquidity and Capital Resources
-------------------------------

The Company expects that cash flow generated from operations together with its
cash and marketable securities will be sufficient to provide the Company with
adequate resources to meet its liquidity requirements for the foreseeable
future.

At August 31, 2003, the Company had working capital of $15,230,000 and cash and
cash equivalents of $4,291,000 as compared to working capital of $23,028,000 and
cash and cash equivalents of $5,063,000 at May 31, 2003. Working capital
decreased primarily due to the large nonrecurring cash dividend of $2.00 per
share, totalling $9,088,000, paid in the current quarter. The Company has also
announced a policy of declaring dividends at the rate of $0.15 per quarter for
its 2004 fiscal year and beyond, provided it is able to maintain cash flow from
operations.

Net cash provided by operating activities amounted to $663,000 for the three
months ended August 31, 2003, compared to cash used of $313,000 for the three
months ended August 31, 2002. The cash provided by operating activities resulted
primarily from the Company's net income. The cash used in the fiscal year
resulted from an increase in accounts receivables.

Net cash provided by investing activities amounted to $6,956,000 for the three
months ended August 31, 2003, primarily resulted from allowing U.S. Treasury
Bills to mature and not reinvesting them.

Net cash used in financing activities resulted primarily for the payment of a
cash dividend of $9,088,000 offset, to some extent, by the proceeds increased
for the exercise of stock options in the amount of $697,000.

The Company's capital resource commitments at August 31, 2003 consisted of lease
obligations on its branch and corporate facilities. The Company intends to
finance these lease commitments from cash flow provided by operations, available
cash and short-term marketable securities. A summary of non-cancelable long-term
operating lease commitments as of August 31, 2003 follows:

                    FY 04      FY 05      FY 06      FY 07   Thereafter   Total
Operating Leases  $258,000   $349,000   $170,000   $101,000   $17,000   $895,000

The Company's cash and marketable securities were sufficient to enable it to
meet its cash requirements during the three months ended August 31, 2003. The
Company has available a revolving line of credit of $5,000,000 with a major
money center bank through October 6, 2003. As of August 31, 2003, no amounts
were outstanding under this line of credit.








                                     Page 12
<PAGE>
                           TSR, INC. AND SUBSIDIARIES


Recent Accounting Pronouncements
--------------------------------

In December 2002, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure." SFAS No. 148 provides alternative methods of transition for a
voluntary change to the fair value method of accounting for stock-based employee
compensation as originally provided by SFAS No. 123 "Accounting for Stock-Based
Compensation". Additionally, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 in both annual and interim financial statements. The Company
intends on continuing to apply the intrinsic value method of accounting for
stock-based employee compensation, and will provide the required disclosures of
SFAS No. 148 in all its filings.

In November 2002, the FASB issued Interpretation No. 45 "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others", ("Interpretation 45"). Interpretation 45 requires a
guarantor to include disclosure of certain obligations, and if applicable, at
the inception of the guarantee, recognize a liability for the fair value of
other certain obligations undertaken in issuing a guarantee. The recognition
requirement is effective for guarantees issued or modified after December 31,
2002. The Company has no obligations regarding Interpretation No. 45.

In January 2003, the FASB issued Interpretation No. 46 "Consolidation of
Variable Interest Entities" ("Interpretation 46"). Interpretation 46 clarifies
the application of Accounting Research Bulletin No. 54 "Consolidated Financial
Statements", and applies immediately to any variable interest entities created
after January 31, 2003 and to variable interest entities in which an interest is
obtained after the date. The Company holds no interest in variable interest
entities.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity", ("SFAS 150").
This Statement establishes standards for how an issuer classifies and measures
in its statement of financial position certain financial instruments with
characteristics of both liabilities and equity. In accordance with the standard,
financial instruments that embody obligations for the issuer are required to be
classified as liabilities. This Statement is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. The Company
does not expect the provision of this statement to have a significant impact on
the Company's consolidated financial statements.








                                     Page 13
<PAGE>
                           TSR, INC. AND SUBSIDIARIES



Critical Accounting Policies
----------------------------

The Securities and Exchange Commission ("SEC") issued disclosure guidance for
"critical accounting policies." The SEC defines "critical accounting policies"
as those that require the application of management's most difficult, subjective
or complex judgments, often as a result of the need to make estimates about the
effect of matters that are inherently uncertain and may change in subsequent
periods.

The Company's significant accounting policies are described in Note 1 to the
Company's consolidated financial statements, contained in its May 31, 2003
Annual Report on Form 10-K, as filed with the SEC. The Company believes that the
following accounting policies require the application of management's most
difficult, subjective or complex judgments:

ESTIMATING ALLOWANCES FOR DOUBTFUL ACCOUNTS RECEIVABLE
We perform ongoing credit evaluations of our customers and adjust credit limits
based upon payment history and the customer's current credit worthiness, as
determined by our review of their current credit information. We continuously
monitor collections and payments from our customers and maintain a provision for
estimated credit losses based upon our historical experience and any specific
customer collection issues that we have identified. While such credit losses
have historically been within our expectations and the provisions established,
we cannot guarantee that we will continue to experience the same credit loss
rates that we have in the past. A significant change in the liquidity or
financial position of any of our significant customers could have a material
adverse effect on the collectibility of our accounts receivable and our future
operating results.

VALUATION OF DEFERRED TAX ASSETS
We regularly evaluate our ability to recover the reported amount of our deferred
income taxes considering several factors, including our estimate of the
likelihood of the Company generating sufficient taxable income in future years
during the period over which temporary differences reverse. Presently, the
Company believes that it is more likely than not that it will realize the
benefits of its deferred tax assets based primarily on the Company's history of
and projections for taxable income in the future. In the event that actual
results differ from our estimates or we adjust these estimates in future
periods, we may need to establish a valuation allowance against a portion or all
of our deferred tax assets, which could materially impact our financial position
or results of operations.

VALUATION OF LONG-LIVED AND INTANGIBLE ASSETS
We assess the recoverability of long-lived assets and intangible assets whenever
we determine that events or changes in circumstances indicate that their
carrying amount may not be recoverable. Our assessment is primarily based upon
our estimate of future cash flows associated with these assets. Although there
has been a sustained weakness in our operating results, through August 31, 2003,
we have continued to generate net income. Accordingly, we have not determined
that there has been an indication of impairment of any of our assets. However,
should our operating results deteriorate, we may determine that some portion of
our long-lived assets or intangible assets are impaired. Such determination
could result in non-cash charges to income that could materially affect our
financial position or results of operations for that period.


Item 3.  Quantitative and Qualitative Disclosure About Market Risk
         ---------------------------------------------------------
The Company's earnings and cash flows are subject to fluctuations due to (i)
changes in interest rates primarily affecting its income from the investment of
available cash balances in money market funds and (ii) changes in market values
of its investments in trading equity securities. Under its current policies, the
Company does not use interest rate derivative instruments to manage exposure to
interest rate changes. The Company's present exposure to changes in the market
value of its investments in equity securities is not significant.


                                     Page 14
<PAGE>
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 financial officer, of the Company's disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of
1934 (the "Exchange Act")). Based on this evaluation, the principal executive
officer and principal financial 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 Rule
13a-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 and Reports on Form 8K
         -------------------------------

         (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.

         (b).  Reports on Form 8K:
               --  On June 24, 2003, the Company filed a Form 8-K announcing the
                   declaration of a $2.00 per share cash dividend and the
                   establishment of a quarterly dividend policy.
               --  On July 22, 2003 the Company filed a Form 8-K announcing
                   financial results for the fourth quarter and fiscal year
                   ended May 31, 2003.



                                   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 thereunto duly authorized.

                                 TSR, Inc.
                                (Registrant)


Date:    October 1, 2003         /s/ J.F. Hughes
                                 ----------------------------------------------
                                 J.F. Hughes, Chairman, President and Treasurer


Date:    October 1, 2003         /s/ John G. Sharkey
                                 ----------------------------------------------
                                 John G. Sharkey, Vice President Finance



                                     Page 15